Kerim's Portfolio

[Kerim]

(02-15-2014, 04:26 PM)hendi_alex Wrote: Here is one thing that puzzles me about the DG model. When accumulating relatively slow growth stocks which only yield 2%-3% on the average, when does additional accumulation no longer make sense? I mean, it will take a 2.5% yielding stock about 8 years at 10% annual dividend growth rate to yield 5% against investment. During that period inflation will erode a significant portion of the purchasing power of those dividends. So counting inflation the yield is perhaps at best 3.5%-4% in inflation adjusted dollars. Who could survive on the paltry cash flow that results when using a safe withdrawal rate from those earnings? It would seem to me that a typical dividend growth investor would need to switch to higher yielding income stocks at some point, or would have achieve a huge portfolio in order to replace 50%-70% of current income. So going back to my original assertion, wouldn't one need to switch away from 2%-3% yielding stocks at least 12-15 years prior to retirement.

At 9 years into retirement and at age 63, I don't consider any buy to hold dividend stock that currently yields less than 5%. All lower yielding stocks are held in my IRA and are used strictly as covered call plays where they usually generate 10%-15% per year. I expect the portfolio to kick out at least 6%-8% in cash flow per year! but am actually striving for 10%-12%.

A LOT of meaty topics in there, Alex!

Off the top of my head, I'd mention that you are right about the income needed -- to completely replace income I think most DG'ers would indeed need to accumulate a huge portfolio. That was the idea I tried to explore in this thread. It is a touchy subject with many dividend growth investors, though.

If you can get comfortable with the fact that you might need to touch the principle, though, then you can also count on some good capital appreciation over the years. While it is true that a stock with an initial yield of 2.5 percent and 6 percent dividend growth will not be drowning you in money, even given a lot of time, it s reasonable to expect that, if the yield stays in a reasonable range, if the dividend does keep growing over the years, the share price will climb along with it. This will give you a much nicer nest egg from which to make any withdrawals needed to make up for the gap between income and spending.

[Be Here Now]

Alex,

I thought my current yield at 6.4% and YOC at 7.2% was pushing it. You are more ambitious that I can imagine myself being. That aside, I think you are correct in wanting to maximize current yield. As a retiree who depends to a certain extent on dividend income, I have developed spreadsheets that model comparative dividend dollars: high yield + low DGR vs medium-to-low yield + high DGR. In the number of years I can reasonably expect to live, the total dividends paid by the former are invariable greater than the latter.

This is a discussion that by necessity is not of immediate interest to pre-retirees. My first impression from the posts on this web site is that most are in the accumulation phase. I was not a DGI before I retired (see my profile on Seeking Alpha) so I cannot offer first hand experience, but I can discuss the psychology of investing with anyone, and I would like to discuss my immediate interest - dividend income now - with those who are facing the tradeoffs that mortality eventually forces us all to face.

[hendi_alex]

Advisors that I've heard seem to direct individuals toward replacing 70% of gross. To me that number is both difficult to achieve and unnecessary. I think that around 70%-80% of net take home pay is probably adequate to maintain one's lifestyle. That would be net of taxes as well as savings. My pension is about 52% of previous gross. Since the pension has no social security, no medicare, no retirement system payment, and no 401k savings deductions, the pension actually gives me greater net than my previous salary gave. This year SS kicked in and my net is now much, much larger than when working. And at the same time debt has been paid off so demands are lower. That situation leaves investment income free and clear for discretionary spending.

[Dividend Watcher]

Alex, I wish you would've started this in the investing section because I think this is a very important topic to discuss. I really value your and BHN's input since you are living it. But, c'est la vie.

I stand by what I said in the thread Kerim referred to. I'll adjust as necessary but I don't think I'll need a large income stream in retirement. Many of the things I want to do when retired take time (something I never seem to have enough of) rather than money. That being said, I do believe I'll adjust some of my holdings to higher yield, slower growth companies as I approach retirement but so far my income stream is on track with my estimates. I've got about 10 years to figure it out.

[Kerim]

It has been way too long since I did an update of my portfolio, so here goes:

My last update was in December 2013. Since then, the portfolio has grown from 22 to 27 positions, shown here in order of size (as a percentage of the total value of the portfolio).

   

Tickers in red indicate where the current share price is below the average price per share that I paid. (Though note that this only counts shares bought with “new” money; not reinvested dividends.) XOM is a relatively new position, so no surprise there, and I am comfortable with PM. The REITs in the red are a more troubling story, but those incredible yields are a calculated risk. Everything else is in the “

With 27 positions, equal weighting would be about 3.7 percent of total value per company. The black line shows the break point. Shares above that are “overweight” while shares below are “underweight.” I’ve said often and emphatically that this is not a big concern for me at this point.

This bad boy is throwing off an average of $29.44 in dividends each and every day. Not exactly Scrooge McDuck money, and way below my retirement needs, but it does give me great comfort – nobody I love should ever starve to death! And for now, it is all going back into buying more shares.

Any and all thoughts greatly appreciated.

[navyasw02]

Looks like a good set of stocks, but what's your weighting strategy?

[Roadmap2Retire]

My my. Look at those cost-basis numbers. Nicely done, Kerim. $29 in dividends every day is nothing to sneeze at. Kudos to you for building a great income stream.

Some massive positions in tobacco stocks - about 17% between MO and PM. Hmmm interesting...

[Kerim]

(04-12-2015, 05:53 PM)navyasw02 Wrote: Looks like a good set of stocks, but what's your weighting strategy?

I'll get more serious about weighting in 10 or 15 years, but for now, my strategy is to take advantage of the best opportunities available, even if that means my weightings are unbalanced. If, say, JNJ went on a massive sale today, I'd buy more, even though it is an outsized position for now. I want my eventual portfolio to be three or four times as large as it is now, so there seems no sense in buying inferior stocks just to keep the weightings artificially "balanced" while the portfolio is still deep in the accumulation phase.

Put differently, although JNJ is 10 percent of my current portfolio, I still want a lot more of it for my ultimate/eventual portfolio. So I'll buy it whenever it is attractively valued.

(04-13-2015, 08:35 AM)Roadmap2Retire Wrote: Some massive positions in tobacco stocks - about 17% between MO and PM. Hmmm interesting...

Yeah, I think the tobacco companies are great anchor tenants in my portfolio. I'm not sure if they will be viable for decades more, but I think the nearness of their demise is usually overstated.

[Kerim]

It has been forever since I posted an update on my portfolio! Here is a current snapshot:

   

[DividendGarden]

(12-11-2018, 03:39 PM)Kerim Wrote: It has been forever since I posted an update on my portfolio! Here is a current snapshot:

Looks extremely similar to mine.  I guess great minds think alike.

[fenders53]

I like it. JNJ is no longer my #1 holding due to valuation and almost certainly much slower growth going forward, but it's only 10% of your port so no harm IMO.

[RyanCMason]

I like your portfolio Kerim.  I will post mine someday but own 18 of the 28 you have.