Improving Your Cash Flow. In December of 2010, I posted a sample portfolio of stocks that paid decent dividends. As usual, I informed you that in order to collect these dividends you have to take some risk. Of course, you have to take some risk to get a bad return too. If you tried to supplement your income with interest from certificates of deposit, you would have to have a huge portfolio to get any return at all or extend the maturity of these deposits. Either way, in order to live on that most will have to cut their expenses drastically or invade principal. I didn't intend to update this portfolio because I thought most folks, including myself might find themselves bored hearing about this again. I couple of weeks ago, I actually became curious about how the portfolio had performed over some market ups and downs.
The Original Portfolio Was $199,795. The dividend rate was 5.98% or $11,950 per year. Nothing earth shattering but considerably more than 0.5% per year on a one year CD. The question is will the extra yield be worth it or is the risk of loss of principal too great to be justified by the extra cash flow. The results are as follows:
1. Ameron Corporation. AEE. The original investment was $17130 with annual dividends of $924. Current value is $19,380 and the dividend has increased to $960 per year.
2. Bristol Myers Squibb. BMY. The original investment was $18,380 with a dividend of $896 per year. Current value is $23,370 and the dividend has increased to $952 per year.
3. Duke Energy. DUK. The original investment was $19,300 with a dividend of $1098 per year. Current value is $24,866 with a dividend of $1100 per year.
4. Lockheed Martin Company. LMT. We invested $20,460 and our dividend was $900 per year. Current value is $24,246 with a yield of $1,200 per year.
5. Medical Properties Trust. MPW. We invested $20,240 and our dividend was $1,600 per year. Current value is $18,160 and the dividend is still 1,600 per year.
6. AT&T. ATT. We invested $17,526 and received a dividend of $1032 per year. Current value is $20,436 and the dividend is $1056 per year.
7. Health Care Properties. HCP. We invested $19,512 with a payout of $1116 per year. Current value is $24,048 and the dividend is $1200 per year.
8. Kinder Morgan Energy Partners. KMP. We invested $20,775 to get a dividend of $1332 per year. The current value is $22.137 and the dividend is $1380.
9. Fidelity National Financial. FNF. We invested $19,570 for a dividend of $1008 per year. Current value is $26,082 and the dividend has been reduced to $784 per year.
10. Winstream Partners. WIN. We invested $26,860 for dividends of $1900 per year. Current value is $17,100 and the dividend is still $1900 per year.
Summary. I have not monitored this portfolio during the year. My intention was to construct a dividend portfolio with a relatively stable income stream and stability of principal without requiring constant monitoring by the investor. In reality, I would recommend checking at least once a week and replacing those investments that do not appear to continue to fit your objective. The cash flow currently obtained from this investment portfolio is $12132 per year vs the original cash flow of $11950. This fits our criteria of income stability. Two companies have decreased their dividend while seven have increased. Those companies decreasing dividends have made substantial reductions which is common; however, these reductions were more than compensated by increases in the other seven. The current value of the postfolio is $220,184 or a capital gain of $20,431. If you liquidated the portfolio at the time this update was performed, you would have a gain of 10.23% plus cash flow of approximately 6% during the holding period. As I mentioned before, I tend to ignore capital gains unless I intend to sell. These gains could be here today and gone tomorrow. Selling just to harvest the gain is not recommended unless you can find a better investment. Still, a paper gain is more reassuring than a paper loss at this point.
This Portfolio Is An Example, Not a Recommendation. For one thing, there is no "one size fits all" portfolio. We might make changes in portfolio composition to assure that it fits the unique needs of each client. If you are considering buying any of these stocks for your own portfolio do your own due diligence to determine if the characteristics of the investment meets your needs.
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