DGI For The DIY

[fenders53]

(07-30-2021, 09:20 AM)EricL Wrote:

(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...

I got in just before you on that last post.  Yes you are correct focusing on the true DGI stocks at the outset would have made it easier. You did however collect some big yield and dripped quite a few new shares.  I do hope you keep your goals segregated between your ports.  I don't have the skills to present it but that is exactly what I am trying to do now.  XX% dollars are dedicated to income now, XX% towards pure growth, XX% in stocks I think will grow their Divs above market average for a decade.  It's just another form of diversifying my port.  You and I have no clue what style will reward only a few years from now.  It's so easy to get locked in on what has worked the past few years. XOM and MO might be the only place to make money the next few years. I don't expect that but we never know.