Over the past month, I’ve continued to build my long-term dividend growth stock portfolio.
The goal is to build a compounding source of passive income, while matching and hopefully
beating the market total return.
With this in mind, I just made a sizable change to my portfolio.
I decided to sell 1 of my stocks and put a large amount of capital into a new stock that
many dividend growth investors love.
Today, I’ll explain the logic behind that decision and share an update on my overall
portfolio.
Let’s roll the intro!
My name is Zach, this is Dividend Data, and you should leave a like and subscribe if you
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Now let’s take a look at my portfolio.
The current value is $110,146 with $94,259 initial dollars invested, putting my total
return at 16.85%.
My holdings include Microsoft, ExxonMobil, Altria, Disney, T Rowe Price, Apple, Broadcom,
Texas Instruments, Kroger, PepsiCo, Visa, Chevron, and EPD.
These investments have varied greatly in success thus far.
Even in my top holdings, Exxon is up 208%, while Disney is down over 33%.
All of this part of the learning experience as I continue to increase my investing knowledge.
For those who don’t want to spend time analyzing individual stocks there are plenty of etfs
and mutual funds which follow a dividend growth strategy.
For example, SCHD is very popular among dividend investors.
So popular, that it seems like the dividend subreddit has become a cult for the etf.
Personally, I like to invest in individual stocks, as I enjoy the process of analyzing
companies.
My projected annual dividend income is $3,263.
My dividend yield on cost is 3.24% and from reinvested dividends this has boosted my yield
on cost to 3.46%.
Here you can see all my individual stocks and their dividend statistics.
Altria is my largest dividend payer with an annual income of $1,120.
My yield on cost is 8.64% and from reinvested dividends this has been boosted to 9.23%.
We call this a snowball effect of 0.59%.
I’ve owned Exxon stock since fall 2020 and I have a yield on cost of 8.9%.
From reinvesting dividends over those 2.5 years, my yield on initial cost has been boosted
1.21% to 10.11%.
This means I’m earning $10.11 each year on every $100 I invested in ExxonMobil from
the dividend alone.
Now those are my higher yield stocks, but earnings and dividend Growth is an extremely
important part of the equation when investing long-term.
Some of my highest growing dividend stocks include Microsoft, Broadcom, Texas Instruments,
Kroger, Apple, and Visa.
I would also include T Rowe Price in that, but they recently had a very small 1.7% increase.
However, that’s extremely understandable as their earnings move with the market and
we clearly have been in a bear market over the past year.
Overall, the diversification of my portfolio is heavily weighted towards technology, followed
by Energy, Consumer Defensive, Financial Services, and finally Communication Services.
As I mentioned earlier, my projected annual income is $3,263.
This is $815 every quarter, $271 every month, $8.94 every day, or $0.37 an hour.
Since all my stocks pay quarterly, they are distributed across these 3 month cycles.
This march is my highest paying month, April is second, and May is my low month.
Here you can see a projected calendar of the stocks, which make up each month.
On the upcoming dividends page, you can see my declared dividends coming up with their
declaration date, execution date, and payment date.
Ultimately, the plan with this account is to build a compounding source of dividend
income.
I will grow this over decades, with it eventually generating enough income that I theoretically
could live off it.
At that point, I can take those dividends as cash or continue to reinvest more growth.
That is true financial independence.
Since I started dividend investing, I’ve earned $7,994.
Year to date, I’ve earned $481.
My income has fluctuated overtime, as my portfolio has changed, and I’ve focused more on a
dividend growth strategy.
Last month was my smallest, with $103.59 in earned dividends.
It’s only March 1st, as of the making of this video, and I’ve already eclipsed it
with $113.65.
In February, EPD paid me $58.28, Texas Instruments $33.70, and Apple $11.61.
I reinvested these dividends to acquire more shares.
To start March, I earned $6.79 from Visa, $21.74 from Kroger, and $85.12 from Intel.
Now some of you may have noticed that Intel is no longer in my portfolio.
That is true and gets us to the main topic of the day.
Why I sold my Intel stock and what I bought to replace it.
Now I recently made an entire video, breaking that decision down in detail.
I recommend you watch it, but here is the short reasoning.
Intel’s earnings have collapsed over the past year and are projected to remain poor
throughout 2023.
On top of this, they are spending tens of billions on building out new chip fabrication
plants as they attempt to take on TSMC.
To help fund that business transformation, Intel decided to cut the dividend by over
66%.
All of this, along with other factors outlined in my video, completely eroded my initial
investment thesis with Intel.
For those reasons, I sold my Intel stock.
I sold at $26.11 per share, around a 20% loss, netting me $6,084.
As always, this mistake is a learning lesson.
From my poor prior experience with the AT&T dividend cut, I decided to sell right away
with this Intel news.
In fact, I’m starting to notice a trend around my worst investments.
With Disney, Intel, and AT&T they were all turnaround stories.
Each was going through a unique decline in earnings and costly transformation.
It doesn't mean it won’t eventually work out, but it’s smarter to wait until there
is evidence of success.
It’s much easier to invest in a business with a reliable business model, growing financials
and dividends.
So what did I buy to replace Intel?
I purchased 11 shares of Broadcom, ticker symbol AVGO, at a cost per share of $577.44.
Broadcom is loved by dividend growth investors, as they are a free cash flow machine with
fast growing dividends.
Over the past 10 years, the compound annual growth rate of the dividend is a massive 39.22%.
Now of course, this has slowed down significantly, but they are still growing at a high rate.
In fact, they just announced a 12.2% dividend increase.
While still a semiconductor stock, Broadcom is practically the opposite of Intel.
Intel is a costly manufacturing business.
Broadcom is a fabless company who focuses on design and can run to generate free cash
flow.
For context, in 2022 Broadcom generated $16.7 billion in operating cash flow.
With only $424 million in capital expenditures that put free cash flow at $16.31 billion.
This is pure cash that the business can use to reward shareholders and invest in acquisitions
to grow the business.
Meanwhile in 2022, Intel generated $15.4 billion in operating cash flow, while spending over
$25 billion in capital expenditures.
That put free cash flow at negative $9.6 billion.
While Intel may improve earnings in the coming years, they will still have to keep investment
high just in order to compete with the likes of TSMC.
This shows the massive difference between a company like Broadcom and Intel.
It’s clear that Broadcom fits the dividend growth strategy far better.
As long as Broadcom continues to grow free cash at a solid rate, dividend growth and
total return will be fantastic.
Even if growth slows down, I’ll expect returns to be very solid.
Over the past 5 years, free cash flow per share is growing at a 24.13% compound annual
growth rate.
In fiscal 2022, free cash flow per share grew at 22.75%.
This is crazy good.
On March 2nd, Broadcom is about to report earnings which will be a strong signal of
how they expect 2023 to go.
If the stock drops significantly, I may be buying more, depending on the cause.
I’m currently working on a full Broadcom stock review video, which will be coming out
soon.
Subscribe to make sure you see that.
Aside from this large AVGO stock purchase, I also bought 1 share of Microsoft at $246.67
and 2 shares of TROW at a cost per share of $111.21.
With TROW, I will buy as the price falls, but I am staying disciplined with my buying.
It’s important to keep in mind the risk of a prolonged bear market.
Microsoft is a core position of mine moving forward, so I will continue to dollar cost
average, and buy on dips.
However, all of this is just my opinion and be sure to do your own research before making
any investing decisions.
Thank you for watching Dividend Data.
You can sign up for DividendData.com to track your portfolio just like me and join a discord
community of like-minded investors.
Also, you can access the research tool I used throughout the video.
Follow me on twitter for real time dividend news and thank you for watching!