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My Dividend Income Portfolio Update

Six months ago , I decided to become a Dividend Growth Investor and become financially independent. Every month on the 8th and the 24th, I have invested €1000 in new stocks. If I keep this up, 15 years from now , my stock portfolio will grow large enough for me to be able to pay off all the monthly expenses with dividend income alone. On that day, my wife and I can retire. Today it’s February 16 . So how am I doing? Are we retired yet? Well, not yet. But my stock portfolio is doing very well. As of today, I am invested in 13 stocks with a market value of €16,741 . (click to enlarge) My portfolio is yielding a very healthy 14.46% (*) with a 3.78% yield on cost. The projected dividend for this year is €571.88, or €47.66 per month on average. (*) The total yield listed here is the sum of the capital gains yield and the yield on cost. This pretty much covers my gas bill, which is about €45 per month. So one way of looking at this income is to realize that for the entire year I will have free cooking and heating. Guess I don’t have to feel guilty about standing under the shower for more than 20 minutes. Let’s take a look at my last 3 purchases. Royal Dutch Shell (NYSE: RDS.A ) Shell caught my eye because of its high yield of 4.64% (one month ago) and low 13.8 P/E. It’s one of the cheaper high-yielding oil companies and provides me with a nice opportunity to raise the average dividend yield of my portfolio. Unfortunately, the dividend and earnings growth is not so good: respectively 2.21% and 4.56% . This is too low, as can be seen when calculating the Chowder number and Discount rate: respectively 6.49 (should be 12 or more) and 8.85 (should be 10 or more). Shell has a nice yield, but a very low dividend growth and not enough earnings growth to fund future dividend rises. So why go for this stock? I confess: I bought Shell partly out of nostalgia. My father worked at Shell for almost his entire career, and I have happy childhood memories of their bring your kids to work days at the KSLA building in Amsterdam. But another reason for buying Shell is that there is no indication that the company is in any kind of existential trouble. I take the long view and expect good results from this stock in the next 20-30 years, when worldwide oil reserves start to dry up. Oil prices will eventually rise again, Shell will flourish, and the company has a very good reputation of rewarding shareholders with dividend. I expect this stock to do fine. But it might take a few years. Philip Morris (NYSE: PM ) Now here is a stock with much better metrics. Philip Morris is the golden boy of many dividend growth investors right now. A 4.63% yield and a 17.29 P/E make this company an affordable high-yielder. But things get really interesting when looking at historic growth. PM has been growing its dividend at a healthy 18.38% (5-year CAGR), which contributes to an impressive Chowder value of 23.06 . But what about earnings? PM has got that covered too, with a 5-year EPS CAGR of 9.64% , which contributes to a discount rate of 14.32 . The DPR is 76.6% , which is in line with other tobacco companies. For example, British competitor BATS has a DPR of 74.3% . All metrics look good on this stock, and so I pulled the trigger and bought 14 shares. National Oilwell Varco (NYSE: NOV ) I bought NOV back in December at €55.90 per share, which gave me a dividend yield of 2.5%. One month later, the stock has dropped to a feeble €46.80. I lost 16% of my investment. Many people would panic at this point. Buying a stock and then seeing it drop in value is scary. You’re supposed to buy low and sell high, right? So when a stock drops after you buy, you need to get rid of it as quickly as possible, cut your losses, and try again. Actually, no. That’s a terrible strategy. At its new price, NOV has a yield of 3% , which is 0.5% higher than when I bought it. So if I buy more shares, the average yield of my NOV position actually rises to 2.75% , and I will receive €2.50 in extra dividend. This is called ‘averaging down’, and it is one of the golden rules of dividend growth investing. When the stock price drops, you buy more. Of course, this strategy fails completely if the company is going bust. So how are they doing? Well, fine actually. The 5-year DPS CAGR is an astounding 74.33% , and EPS growth a hefty 10.69% . This gives a Chowder value of 77.35 and a discount rate of 13.72 . And their DPR is only 23.50 , which is very low for an oil company. So there is more than enough earnings growth to finance NOV’s over the top dividend growth in the near future. In fact, my ranking formula places NOV just below Apple (NASDAQ: AAPL ). And remember, Apple has a 5-year dividend growth rate of 118.25% , which is just plain crazy. I don’t think you can go wrong with this stock. I bought 21 new shares. My portfolio today My portfolio today has a yield of 14.46% . The best-performing stock in my portfolio is Apple with a total yield of 39.97% . (click to enlarge) I rank my portfolio by ChowderDiscount (the sum of the Chowder number and the Discount value) and YDPR rank (which measures the spread between yield and payout ratio). My best ranking stock is Apple with a combined rank value of 2.61 . (click to enlarge) The market value of my portfolio today is €16,741 . (click to enlarge) My portfolio is well diversified over industry sectors, even though ‘Oil and gas’ is getting a bit large: I’m also diversified over three currencies. A good start, but it’s clear I need to buy more UK stock in the future:

ProShares Doubles Dividend Growth ETF Lineup

Summary ProShares recently launched two new dividend growth ETFs. A look at the methodology behind the underlying dividend indices. The ETFs include companies with a history of raising dividends. By Todd Shriber & Tom Lydon Looking to build on the success of the ProShares S&P 500 Aristocrats ETF (NYSEArca: NOBL ) , ProShares doubled the size of its dividend growth ETF suite today with the introduction of two new funds. Joining NOBL and the ProShares MSCI EAFE Dividend Growers ETF (NYSEArca: EFAD ) as ProShares dividend growth ETFs are the ProShares Russell 2000 Dividend Growers ETF (NYSEArca: SMDV ) and the ProShares S&P MidCap 400 Dividend Aristocrats ETF (NYSEArca: REGL ) . Like, NOBL, the ProShares S&P MidCap 400 Dividend Aristocrats ETF tracks a dividend aristocrats index. The midcap dividend aristocrats index requires 15 consecutive years of increased dividends for inclusion whereas NOBL’s underlying index requires a minimum dividend increase streak of 25 years. REGL’s index is equal-weighted. The new ETF allocates a combined 47.6% of its weight to the utilities and financial services sectors with industrials and consumer staples combining for another 28.7%, according to ProShares data . The ProShares Russell 2000 Dividend Growers ETF, a dividend spin on the Russell 2000, the benchmark U.S. small-cap index, tracks the Russell 2000 Dividend Growth Index. That index includes small-cap firms with dividend increase streaks of at least a decade. Index constituents are screened for liquidity and dividend status, then selected and equal weighted subject to a maximum sector weight of 30%, according to Russell Investments. SMDV allocates almost 30.2% of its weight to financial services stocks, an overweight of more than 600 basis points to that sector relative to the Russell 2000. The new ETF also features a combined 34.3% weight to materials and utilities stocks. Those sectors combine for just over 8% of the Russell 2000. “Over the past 28 years, U.S. equities that grew dividends year over year returned 13.9%, while those that paid them without growing them returned 10.1%, according to Ned Davis Research. The findings are based on an analysis of companies underlying the Russell 3000 Index, a measure of the broad U.S. equities market, from February 2, 1987 through December 31, 2014,” said ProShares in a statement. Investors have gravitated to dividend growth ETFs , including NOBL. NOBL is just 16 months old and is already home to over $600 million in assets. The ETF was named ETF Product of the Year at the William F. Sharpe Indexing Achievement Awards. REGL and SMDV, the new ProShares dividend ETFs, each charge 0.4% per year. ProShares Russell 2000 Dividend Growers ETF Sector Weights Table Courtesy: ProShares Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

Southern Company – Expect A Dividend Increase, But Not Much More

Recently the Southern Company announced fourth quarter earnings results. The company had higher revenues, income and earnings –- slightly offset by a larger share count. Expect a dividend increase in the next quarter, but perhaps not much more as an intermediate-term investment. Recently the Southern Company (NYSE: SO ) released fourth quarter and full year earnings results. Here’s a look at how 2014 compared to 2013: 2014 2013 % Change Revenue ($b) $18.50 $17.09 8.3% Net Income ($b) $1.98 $1.64 20.4% Basic EPS $2.21 $1.88 17.6% Basic EPS Excl Items $2.80 $2.71 3.3% Dividend/Share $2.08 $2.01 3.5% Shares Outstanding (-m) 906.0 885.0 2.4% As you can see above, Southern Company posted higher sales, income and earnings as compared to the previous year. Note that the earnings increase was offset slightly by the increase in common shares outstanding, as is typical with utility companies. Additionally, the company was able to increase its dividend for the 13th straight year. Earlier last month the company announced a $0.525 quarterly dividend , payable March 6th, which marks the 4th payout at this rate and 269th consecutive payment overall. Southern Company President and CEO Thomas Fanning said that the company had one of its “best years ever” as weather conditions were “closer-to-normal.” Adjusted earnings were quite a bit higher than basic earnings in both years due to increased cost estimates for the construction of the company’s Mississippi Power Kemper project. During 2013 these after-tax charges amounted to 83 cents per share, while they represented a 59-cent drag in 2014. In a previous article I indicated that, while utilities have had strong returns recently, it’s probably not prudent to expect this moving forward. The Southern Company was a prototypical example of this, having generated 14% yearly total returns over the past half decade. Today the company has a “current” yield around 4.1% — which would be expected to increase next quarter — and a trailing earnings multiple in the 18 to 23 range depending on whether you look at adjusted or basic earnings. This compares to a “normal” multiple closer to 16 or so. Analysts are expecting intermediate earnings growth around 3% per annum . Taken collectively, this could translate to 5% anticipated annual total returns — effectively matching the dividends received without much expected capital appreciation. Of course the company could grow faster or trade at a higher multiple in the future, but these might not be altogether prudent expectations given its history. The Southern Company remains a solid income-producing security, but perhaps not as compelling as it has previously been. Disclosure: The author is long SO. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. Are you Bullish or Bearish on ? Bullish Bearish Neutral Results for ( ) Thanks for sharing your thoughts. Submit & View Results Skip to results » Share this article with a colleague