DGI For The DIY

[EricL]

(07-30-2021, 08:53 AM)fenders53 Wrote:

(07-30-2021, 08:22 AM)EricL Wrote:

(07-30-2021, 07:45 AM)fenders53 Wrote: I was just about to ask where your update was but I see the website is updated. Looks like you are chugging along towards the 10% income growth goal this year.  It's going to remain challenging but now that you are pooling dividends I like your chances better.  In any event it's a good goal because it is difficult.

For those interested, here is the link to my latest update.

Dividend Growth Digest

The portfolio is doing well, but I'm not sure yet if I'll make the double-digit income growth. I'm finding that while I really enjoy the flexibility that pooling dividends gives me and the freedom to buy what I want, it is actually having a negative impact on my income growth.

I'm pooling dividends from the likes of 5%+ yielders CVX, KMI, XOM, T, OHI, and MO and reinvesting those dividends into other ideas yielding 2-3%, so the reinvestment effect on income is roughly halved. I still have 5 months left so there's time to make it up, but I'm trending more towards 9% growth right now.

The upside is those reinvestment dollars are generally going into higher growth names. So while I may end up missing my income mark, I'll probably end up better in total portfolio growth, which can be converted to income down the road.

So why not just put it all into FANG now and buy some MO in 20 years?  Did you even hear what you just typed?  

It's nothing provocative, it's simply math.

A 7% yielding stock growing at 2% is nearly assured to have smaller capital gains over the next 20 years than a stock yielding 2% and growing at 12%. Reinvesting dividends from this higher yielding stock into lower yielding stocks drops my income growth in the near-term, but should result in bigger capital gains down the road.

I'm not planning to sell those higher yielders now as they are providing nice funds to build out my portfolio, but in hindsight, I probably should have focused more on the 1-2% yielding stocks rather than the 4-6% yielders when I built the portfolio.

I own Facebook, Amazon, and Google as well in my trading account. Still no Netflix though...