Durable Dividends

Dividend Growth: A Simple, Easy, and Restful Portfolio Plan

Nick Ward

56 postsJune 3, 2022

Hello everyone! I want to apologize about the lack of an article last weekend…late Thursday night of last week I was working and developed stomach pains which persisted until the morning. One thing led to another, and I ended up with an appendicitis diagnosis which required an emergency surgery.

Needless to say, this procedure disrupted my work schedule (not only was I lying in a hospital bed for a day without access to my laptop, but I decided it probably wasn’t a good idea for me to perform serious equity analysis for a couple of days after because of the heavy duty painkillers I was on).

But, a week later, I’m back at it, getting caught up on everything…which includes Durable Dividends!

When thinking about this week’s article, I decided to focus on my recent appendicitis, being out of commission for a few days, not staying on top of the markets or my portfolio like I usually do, but resting easy all the same (or, at least, as easy that someone can with 4 freshly punctured holes in their abdomen, could).

Sleeping well at night (S.W.A.N.ing) is a constant theme of my writing when it comes to the dividend growth investing strategy.

Frankly, it’s probably the best part.

I know other investors/day traders who would be totally stressed out if they didn’t know what their holdings were doing on a day-to-day basis. I track the markets on a daily basis because of my profession; however, the fact of the matter is, I don’t need to.

The dividend growth machine that I’ve built would hum along nicely, regardless of whether or not I was checking in on it regularly.

Like I’ve said many times, by owning shares of the highest quality and most generous companies in the world, I’ve created a situation where the best and the brightest are working for me, 24/7, creating cash flows that trickle down to me in the form of passive income.

An old Warren Buffett quote, “If you don’t find a way to make money while you sleep, you will work until you die,” really stood out to me years ago and inspired me to pursue the dividend growth investing path.

The shares of wonderful DGI stocks that I own allow me to make money while I sleep.

Just about every day, regardless of whether I’m an early bird, working hard at the crack of dawn or if I sleep in because of the lingering effects of Oxycodone, I receive a dividend payment (or more).

And, this meant that while laying in a hospital bed and unable to track the markets, the performance of my portfolio wasn’t an additional stressor for me last week (which was nice, because I needed to focus on healing).

So, now that I’m back, I wanted to touch upon my holdings, and my portfolio monitoring/maintenance strategy – at a high level – so that others who do potentially worry about the health of their portfolio on a daily basis (especially during today’s volatile times in the market) might see that there is another (simpler and easier) path to take.

Looking at my personal portfolio at the moment, I currently own 85 equity positions…

This might seem like a lot to manage to some people; however, to me, the process doesn’t take all that much time (honestly, I spend most of my time focused on my watch list as I attempt to accumulate even more high quality companies).

I prefer to own so many individual stocks because I like to spread my risk around.

When accumulating equities, I focus on areas of the market that I really like over the long-term…industries that benefit from secular tailwinds…and then do my best to buy the best companies from within that industry when they’re trading at a discount to fair value.

Yes, by owning so many companies I am limiting my upside potential (by not taking concentrated bets). But, I’m also not in the market to swing for the fences. Instead, I’m most interested in creating an extremely durable and reliably increasing passive income stream.

And, as you can see below, I’ve been able to achieve this goal nicely (here is a chart highlighting the growth of my passive income stream over the years):

Another reason that I own so many stocks is because frankly, there are hundreds of extremely high quality dividend growth payers and I’m not partial as to which ones I end up owning (take a look at the Dividend Champions List and you’ll see that there are hundreds of stocks with 10+ year annual dividend growth streaks).

I’m always focused on two things when buying stocks…

Quality, first and foremost (with regard to top and bottom-line growth metrics, defensive moats, competitive positions, brand equity, and balance sheet strength), closely followed by valuation (regardless of how high a stock’s quality is, buying shares when they’re overvalued increases investment risk and limits one’s total return potential).

And, once I capitalize on an opportunity to buy shares of a wonderful company at a discounted price…well, I generally plan to hold onto those shares forever.

(No, this doesn’t always happen; from time to time, there are extenuating circumstances that require a sale…but in general, when I buy something I hold onto it for years and years and as time goes on, I believe that this sentence will change to decades and decades.)

My rule, when it comes to my buy and hold mindset, basically boils down to this: so long as a company that I own continues to pay a rising dividend that meets my expectations (as far as annual dividend growth and dividend safety scores go), I see no reason to sell.

Remember, my primary goal is to generate a reliably increasing passive income stream…so if a company is paying a growing dividend, they’re helping me achieve my primary goal. The way I see it, there’s no reason to part ways with a partner who is helping you achieve your goals.

Why do I prefer to buy and hold?

Well, because over the long-term, the very high quality blue chips that I own tend to outperform their peers and the broader markets at large.

No, this doesn’t always occur, but generally speaking, I’ve found that any time that I buy a blue chip with a significant margin of safety attached, I’m setting myself up to not only achieve my passive income goals, but to also post tremendous capital gains as well.

And therefore, I’m very hesitant to attempt to time the market in the short-term, trading in and out of positions. I believe that investors should own blue chip stocks, not trade them.

So, once I buy something and it rallies up above my fair value estimate…well, I simply move on to another, more attractively valued blue chip.

I’m never interested in chasing momentum higher in the markets. I don’t feel compelled to do so, because paying higher prices means that I’m locking in a lower margin of safety (resulting in higher risk). And, higher share prices equate to lower dividend yields and therefore, chasing momentum means that I’m locking in lower yields on cost.

When it comes to monitoring these 85 positions…the process is fairly straightforward.

Every earnings season, I read through the results (which generally takes about 10-15 minutes), the conference call transcripts (which takes another 10-15 minutes), and I take a close look at the primary metrics that relate directly to dividend safety.

Then, on a day-to-day basis, I track all of my holdings, looking for outsized volatility (because I tend to own relatively low beta stocks, any daily move over 2% warrants a closer inspection).

Oftentimes the catalyst for such a move is insignificant and requires just a few moments to look into. Yes, sometimes there is an important headline that I need to digest, but once again, it usually doesn’t take more than 15-20 minutes to look into near-term headwinds.

Over time, I’ve become intimately familiar with the companies that I own and therefore, performing portfolio maintenance doesn’t seem like a chore. Sometimes, I’ll go an entire quarter (from earnings report from earnings report) without having to check up on one of the mature blue chips that I own. And therefore, when the time comes to take a look at new operational data, forward guidance, or investor presentation, it’s like getting to know an old friend again.

…An old friend that sends me checks every few months; checks that grow larger every single year.

Oh, and for everyone’s information…I’m heading on vacation next week. I plan to write a Durable Dividends article while I’m traveling, but it won’t be published over the weekend like our usual target date. I hope you all are well.

Best wishes,

Nick

This article is intended to provide information to interested parties. As we have no knowledge of individual circumstances, goals and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended. It does not guarantee that securities mentioned in this newsletter will produce profits or that they will equal past performance. Additionally, we are not an investment advisor and do not offer securities or tax advice. Although all content is derived from data believed to be reliable, accuracy cannot be guaranteed. Nicholas Ward, contributors and staff members of Wide Moat Research may hold positions in some or all of the stocks listed.

Nick Ward

56 posts

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Nicholas Ward is a research analyst who currently writes for Seeking Alpha, The Dividend Kings, iREIT, and Forbes Real Estate Investor. Before that, he was Founder and Editor-in-Chief of The Dividend Growth Club, as well as the Income Minded Millennial. Nicholas has also contributed to Sure Dividend, Investing Daily, and The Street, where he covered stocks in Jim Cramer's Action Alerts PLUS Portfolio.

Nicholas holds a bachelor of arts from The University of Virginia, where he studied English and studio art. Prior to transitioning into the financial industry, he managed a vineyard in the foothills of the Blue Ridge Mountains.

Sorry, but Inflation Forced My Hand

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

Dividend Growth: A Simple, Easy, and Restful Portfolio Plan

Nick Ward

56 postsJune 3, 2022

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Dividend Growth: A Simple, Easy, and Restful Portfolio Plan

56 postsJune 3, 2022

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