Dividend Growth Stocks

Money in the Trough – Building My Taxable Portfolio

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How to Build a PortfolioWhat a week!  The news about China and how it might affect the USA has really caused a roller coaster in the markets.   Its been an exciting week to say the least.  I hope everyone reading this post used the turmoil in the market to average down and add new positions to their portfolio.  

I have been in the process of building my new taxable portfolio with Interactive Brokers.  As I’ve mentioned several times, their low cost trading commissions have allowed me to build my portfolio by nibbling… a lot.

 

Building a Portfolio

In July, I allocated $32,000 to start my new taxable dividend growth portfolio.  I told myself, that I would start investing this money into high quality dividend stocks in small pieces.  To be more specific, I wanted to only invest roughly $3,000 a month over the next 10 months in an effort to practice money & risk management.  Also, I expect $3,000 will be the absolute maximum I will be able to contribute monthly.  The goal was to start buying in an effort to build a super diverse portfolio from the very beginning.  I went a little overboard this month and put almost $7,000 to work.  I just couldn’t help myself with all the deals that were popping up.

Anyway, the idea has been to buy in small blocks of $200 – $400 per buy.  This is only possible because of the low cost trades through my new broker.  It would be very unwise to implement this type of strategy if you are paying 10 bucks in fees per trade.

 

What I’ve Been Buying

I have made quite a few trades over the last week and averaged down on some of the positions several times.  So, instead of listing every buy, I’ll just list the stock once with the average price I paid.  This should keep it cleaner.

 

I purchased more:
Company: Disney (Ticker Symbol: DIS)
Average Buy price: $105.31
Shares bought: 7
Yield: 2.51%
Annual Dividend Income: $6.10
Total Cost: $243.46

I purchased:
Company: Digital Realty Trust (Ticker Symbol: DLR)
Average Buy price: $63.61
Shares bought: 5
Yield: 5.35%
Annual Dividend Income: $17.00
Total Cost: $318.05

I purchased:
Company: Hershey Co (Ticker Symbol: HSY)
Average Buy price: $92.03
Shares bought: 5
Yield: 2.52%
Annual Dividend Income: $11.60
Total Cost: $460.15

I purchased more:
Company: Johnson & Johnson (Ticker Symbol: JNJ)
Average Buy price: $95.93
Shares bought: 8
Yield: 3.13%
Annual Dividend Income: $24.00
Total Cost: $767.44

I purchased:
Company: Lockheed Martin (Ticker Symbol: LMT)
Average Buy price: $207.96
Shares bought: 3
Yield: 2.89%
Annual Dividend Income: $18.00
Total Cost: $623.88

I purchased more:
Company: Wells Fargo (Ticker Symbol: WFC)
Average Buy price: $52.30
Shares bought: 8
Yield: 2.5%
Annual Dividend Income: $12.16
Total Cost: $261.50

I purchased more:
Company: 3M (Ticker Symbol: MMM)
Average Buy price: $146.73
Shares bought: 2
Yield: 2.89%
Annual Dividend Income: $8.17
Total Cost: $293.46

I purchased more:
Company: Exxonmobil (Ticker Symbol: XOM)
Average Buy price: $77.49
Shares bought: 5
Yield: 3.77%
Annual Dividend Income: $8.57
Total Cost: $387.45

I purchased more:
Company: Realty Income (Ticker Symbol: O)
Average Buy price: $45.47
Shares bought: 5
Yield: 5.01%
Annual Dividend Income: $11.40
Total Cost: $227.35

I purchased more:
Company: Kinder Morgan (Ticker Symbol: KMI)
Average Buy price: $34.78
Shares bought: 7
Yield: 5.64%
Annual Dividend Income: $13.72
Total Cost: $243.46

As you can see, I’ve been doing a lot of nibbling.  This last week’s purchases totaled up to: $3,826.20 and adds an extra $130.73 of additional annual dividend income.  I believe I spent a total of $15.00 in trading fees.  Not a bad deal!

 

My Thoughts on the Market

We’ve all heard this before, this is my opinion, I don’t have a crystal ball, blah blah… Here are my thoughts.  

The people in the know seem to think China is going to be a problem for the USA.  Here’s the rub, if the big boys think it will be a problem, then it will be a problem.  They have the capital to manifest problems as they see fit.  If they are disappointed with China not growing at 7%+ a year ad nauseam then we might be in for another 2011.  China has been building ghost cities with literally blocks of apartments, streets, malls, shops, offices… and nobody living or using them to stimulate growth.  Overproduction of these cities has been a portion of the artificial growth in China over the last years.  This kind of government stimulation package can’t last forever.  

Regarding the Fed raising interest rates, your guess is as good as mine.  I can’t imagine how they would now.  However, they will have a hard time walking back on their 2015 timeline without loosing credibility.  If they do raise rates, I suspect we would see more moves like Monday.  

 

My Investing Plan Going Forward

I’m going to continue investing in companies I believe will relentlessly pay a healthy and growing dividend into the future.  For me, it’s about growing dividend income, not my account balance.  I suspect we’ll see a lot of bouncing around over the next few weeks… perhaps falling through the 2014 October lows (wouldn’t that be fun).  Keep some powder dry, you may have plenty of opportunities to shoot the buy cannon over the next few months. It can be fun to try and buy at the lows, but if you want to build up a powerful income generating portfolio, you do have to play the game and buy in at some point.

 

How did you do this week?  Did you buy up everything in sight during the dip?

I'm a dividend growth investor who is aiming to retire early in 6 years at the age of 45. My goal is to live off the income my dividend portfolio and rental property produce exclusively and leave the corporate rat race. I hope you will join me in this journey!

2 Comments

  1. I am in no way trying to offend – or be insulting but the question is a bit direct (i am dutch – we are known for it). I see a lot of people buying stocks which are at pretty high, and have therefore a low yield. The same goes for several of the stocks you bought (less 3%).

    I must assume you dont have any taxes on dividend (because if you do) combined with inflation rate you will barely make a profit?

    In the Netherlands you pay taxes on both dividend, and i pay a tax on capital. I couldnt even buy those low-yielders, i would be losing money. So is this a structurally different thing between Netherlands and the US?

    • Blake

      Hi Mr MB,

      Thank you for the question! It’s not an insulting question at all.

      You are correct, these buys are in my taxable account and I must indeed pay taxes on the dividends I receive. As a dividend growth investor, i’m not looking for short term anything, stock price gains or dividends received. I’m concerned about the “dividend growth”. I’m buying companies that are growing their dividend payments every year, so my yield on cost in 5 or 10 years will hopefully be 6 – 8% every year. While still paying me now cash today allowing me to further put that money to work.

      But specifically regarding taxes, I pay 15% tax on qualified dividends which is what the vast majority of the companies listed above pay. If I’m not mistaken, Netherland has some very high income and VAT taxes right?

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