Here is this month's update of the Buy and Hold Forever Dividend Portfolio. This and all future updates will be posted here. The spreadsheet tracking the portfolio is available on the original post and here.



In accordance with the results of a poll, where I asked whether Coors (TAP) should replace BUD in the portfolio, TAP has been added at Friday 12/12/08's closing price. The $350 that was originally used to buy BUD was used to buy TAP. The rest of the BUD sale proceeds ($41.47) will count as a dividend.



Here are the other dividends received since the last update:



BNI 10-Dec-08 $ 0.40 Dividend * 3.93 = 1.572

FRO 5-Dec-08 $ 0.50 Dividend * 11.006 = 5.503

JNJ 21-Nov-08 $ 0.46 Dividend * 5.706 = 2.62

KO 26-Nov-08 $ 0.38 Dividend * 7.944 = 3.0187

MCD 26-Nov-08 $ 0.50 Dividend * 6.042 = 3.021

PEP 3-Dec-08 $ 0.425 Dividend * 6.139 = 2.609

UNP 26-Nov-08 $ 0.27 Dividend * 5.242 = 1.415

WMT 11-Dec-08 $ 0.238 Dividend * 6.271 = 1.49

Update 1/6/09:

CPB 18-Dec-08 $ 0.25 Dividend * 9.223 = 2.30575 -1.194

DOW 29-Dec-08 $ 0.42 Dividend * 13.118 5.50956 2.0956

GE 24-Dec-08 $ 0.31 Dividend * 17.94 5.56 2.0614

KFT 23-Dec-08 $ 0.29 Dividend * 11.995 3.47855 -0.021

MO 22-Dec-08 $ 0.32 Dividend * 18.239 5.836 2.336

PM 23-Dec-08 $ 0.54 Dividend * 8.052 = 4.348 0.848

USB 29-Dec-08 $ 0.425 Dividend * 11.741 = 4.9899 1.4899

VNQ 24-Dec-08 $ 0.935 Dividend * 8.432 = 7.88 4.38

Update 2/9/09:

AXP 7-Jan-09 $ 0.18 Dividend * 12.727 = 2.29086 - 1.20914

BA 4-Feb-09 $ 0.42 Dividend * 6.677 = 2.80434 1.97434

CHD 5-Feb-09 $ 0.09 Dividend * 5.923 = 0.53307 -2.43693

INTC 4-Feb-09 $ 0.14 Dividend * 21.834 = 3.05676 2.61676

PFE 4-Feb-09 $ 0.32 Dividend * 19.763 = 6.32416

OKS 28-Jan-09 $ 1.08 Dividend * 6.356 = 6.86448 3.36448

PG 21-Jan-09 $ 0.40 Dividend * 5.423 = 2.1692 -1.3308

SI 23-Jan-09 $ 2.023 Dividend * 5.819 = 11.771837 8.271837

T 7-Jan-09 $ 0.41 Dividend * 13.074 = 5.36034 1.86034

VZ 7-Jan-09 $ 0.46 Dividend * 11.796 = 5.42616 1.92616

WFC 4-Feb-09 $ 0.34 Dividend * 10.279 = 3.49486 3.48486

XOM 6-Feb-09 $ 0.40 Dividend * 4.722 = 1.8888 0.2788

YUM 14-Jan-09 $ 0.19 Dividend * 12.065 =  2.29235 -1.20765

Disclosure: At the time of writing, I owned JNJ and have a limit order for FRO.

More information is always better than less. Click here for analysis on any stock, commodity, currency, or ETF.

As I might not have time later this month, and because Anheuser-Busch (BUD) was bought by InBev for $70 a share, I decided to update the Buy and Hold Forever Dividend Portfolio. This and all future updates will be posted here. The spreadsheet tracking the portfolio is available on the original post and here.

I didn't think BUD would be bought at all. And if it were bought, I didn't think it would happen so soon. I said in the original portfolio rules that if a holding was bought for cash, that would count as a dividend. That feels like cheating somehow now that it's actually happened. Should BUD be replaced by Molson Coors (TAP)?

The original criterion for including stocks in the portfolio was that they are dividend paying household names. Now that BUD is gone, and I like beer so much that all brewers are equally familiar to me, I don't really know what brewer to put in its place. International companies will probably have a bigger dividend payout, but they are much harder to track. Moreover, for many investors it can be difficult to buy stocks on the international markets. The best replacement, in my opinion, would be the new company Anheuser Busch-InBev, which trades in Brussels. Rather than having a headache doing currency conversions and tracking the daily price, however, I prefer to replace BUD with TAP, if it is replaced at all. (InBev trades on the Pink Sheets too, but the dividends are difficult to track.) (If BUD's replaced, $350 will be used to buy TAP. The rest, somewhere over $40, will count as a dividend.)

There is a poll addressing this question to the right of this post. If you're reading this by email or on some other site because the post has been reproduced there (without my permission, I might add, unless it's on Seeking Alpha), you'll find the poll here. It closes on December 1.

In addition to updating the spreadsheet for the dividends received so far, I've added "Share Price Value" and "Share Price Return." This is just to keep track of the great Ponzi scheme known as the stock market. Since we're keeping the stocks forever, "Total Dividend Return" is the preferred measure. You'll notice that the "Share Price Return" is currently greater than the "Total Return," which incorporates dividends. You'll also notice that the dividend return is negative. That's because commission costs were counted as dividends when the portfolio was started (it started with a negative one percent return). Over time, "Total Return" will be greater (and hopefully positive!) than "Share Price Return."

Here are the dividends received so far (ex div dates used):

3M (MMM)
19-Nov-08 $ 0.50 Dividend *5.443 = 2.7215

AFLAC (AFL)
17-Nov-08 $ 0.24 Dividend *7.904 = 1.89696

Boeing (BA)
5-Nov-08 $ 0.40 Dividend *6.677 = 2.67

Chevron (CVX)
14-Nov-08 $ 0.65 Dividend *4.692 = 3.0498

Church & Dwight (CHD)
6-Nov-08 $ 0.09 Dividend * 5.923 = 0.533

Con Ed (ED)
7-Nov-08 $ 0.585 Dividend * 8.079 = 4.726

Duke Energy (DUK)
12-Nov-08 $ 0.23 Dividend *21.368 = 4.9146

Du Pont (DD)
12-Nov-08 $ 0.41 Dividend *10.924 = 4.4788

Enbridge (ENB)
12-Nov-08 $ 0.282 Dividend *10.116 = 2.852712

Exxon Mobile (XOM)
7-Nov-08 $ 0.40 Dividend *4.722 = 1.8888

Intel (INTC)
5-Nov-08 $ 0.14 Dividend *21.834 = 3.05676

Microsoft (MSFT)
18-Nov-08 $ 0.13 Dividend *15.674 = 2.03762

Overseas Shipholding (OSG)
5-Nov-08 $ 0.438 Dividend *9.313 = 4.079

Pfizer (PFE)
5-Nov-08 $ 0.32 Dividend *19.763 = 6.32416

Target (TGT)
18-Nov-08 $ 0.16 Dividend *8.724 = 1.39584

United Technologies (UTX)
12-Nov-08 $ 0.385 Dividend *6.368 = 2.4517

Wells Fargo (WFC)
5-Nov-08 $ 0.34 Dividend *10.279 = 3.49

If you catch a mistake, please post a comment here or email me.

I've received several requests from people who would like to use the spreadsheet for their own purposes. That is, they want something that has all the formulas, so all they have to do is put in their own tickers, share numbers, and purchase prices. I'm happy to oblige. Email me and I'll send you an Excel spreadsheet.

Disclosure: At the time of writing, I owned WFC.

This year's market turbulence has many investors calling the buy and hold strategy dead. Let's prove them wrong. My musings (here and here) on holding dividend paying stocks forever have inspired me to make a new, all dividend paying stock model portfolio.

It's composed of 43 stocks and one ETF, and is based on minimal research (more research is always better, but the goal here is to show how it doesn't take an investing maven to succeed with a relatively diversified dividend stock portfolio). Almost all the stocks were selected because they're household names that pay dividends. The other criterion was to take a couple of companies from every industry that came to mind, so that they wouldn't be clustered in one area, as must dividend ETFs are. As far as energy pipeline companies go, I took the two that I've been hearing the most about. As REITs are not really household names, the portfolio will have a REIT ETF instead of separate stocks.

Here's a list of companies by type (note that some companies may be classified in a number of ways that aren't shown here, and I might be leaving out a few--they're all in the spreadsheet though):

Aerospace/Defense

Boeing (BA)

United Technologies (UTX)

Alcohol

Anheuser Busch (BUD)
Diageo (DEO)

Banks/Credit Cards
American Express (AXP)
General Electric (GE)
US Bancorp (USB)
Wells Fargo (WFC)

Beverage/Snacks
Coca Cola (KO)
Pepsi (PEP)

Chemicals
Du Pont (DD)
Dow Chemical (DOW)

Communications
AT&T (T)
Verizon (VZ)

Diversified
3M (MMM)
General Electric (GE)
Siemens (SI)

Food
Campbell Soup (CPB)
Kraft (KFT)
McDonald's (MCD)
Yum! Brands (YUM)

Healthcare
Johnson & Johnson (JNJ)
Pfizer (PFE)
Sanofi-Aventis (SNY)

Household Goods
Church & Dwight (CHD)
Johnson & Johnson (JNJ)
Procter & Gamble (PG)

Insurance
AFLAC (AFL)
China Life Insurance (LFC)

Oil
Chevron (CVX)
Exxon Mobile (XOM)

Pipelines/Energy Transport
Enbridge (ENB)
Frontline (FRO)
Oneok Partners (OKS)
Overseas Shipholding (OSG)

Railroads
Burlington Northern (BNI)
Union Pacific (UNP)

Real Estate
Vanguard REIT Index (VNQ)

Retail/Consumer
3M (MMM)
Target (TGT)
Walmart (WMT)

Technology
Intel (INTC)
Microsoft (MSFT)

Tobacco
Altria (MO)
Philip Morris International (PM)

Utility
Con Ed (ED)
Duke Energy (DUK)

The portfolio will work as follows. Three hundred fifty dollars worth of each stock was purchased at the close on Friday 10/31/08. Fractional shares were purchased, as can be done with discount brokers like SogoTrade (for $3.00 a trade), with the commission of $3.50 a trade. So, this portfolio starts out with around $15,400 worth of stock, and a loss of $154 for the 44 trades.

As this is a buy and hold forever portfolio, no position will be sold, even if it stops paying dividends. If there is a spinoff (e.g., Target spins off a REIT or Procter & Gamble gives some shares of Smuckers as a dividend) any new stock will be added to the portfolio's holdings and the cost basis of the original stock will be reduced by the amount of the dividend (for example, when Altria spun off Philip Morris International, the spin off was worth $51.06 a share. Had this portfolio existed then, Philip Morris International would be added, and the cost basis of Altria would be reduced by $51.06 a share). If one of the stocks is bought out for cash (e.g., BUD), that cash will count as a dividend (even though it's a capital gain). That's the only way a stock can be sold in this portfolio. If a company in the portfolio is bought with stock, or if there is a merger, the new entity will replace the old in the portfolio. The idea is, buy the stocks and leave them alone. Just get the dividend checks.

Although I think all the stocks in the portfolio are good for the long haul (or else I wouldn't pick them), no doubt some of them (hopefully only a few) will go out of business, decrease, or suspend their dividends in the next few decades (a decrease at GE and probably PFE will come soon, but I think both companies will do well over the long term). Others, I'm sure, will do very well. Although I believe reinvesting dividends regularly boosts returns (e.g., just have your broker buy you more shares for free when the dividend comes in), for sake of ease dividends here will be reinvested once a year--or when the portfolio accumulates $353.50, whichever is later. Dividends will be reinvested in the companies either with the lowest payout ratios or the lowest yields (depending on how lazy I am).

Since I'm taking the minimal research approach, such a simple rule would work better than trying to decide which stock to reinvest in by doing research. Lowest payout ratio seems to be the better approach, but it involves more mouse clicks. Lower yields are easier to find out, but reinvesting in these stocks might make me buy them when they're too expensive. Higher dividend yields mean lower investor confidence, so it's best (not necessarily for capital gains purposes) to add new money to the stocks that are in the best shape. (This approach is the opposite of one I'd take with a diversified portfolio of index funds. It makes sense to add new money to the fund performing the worst, as this enables you to buy more shares when they're cheap and avoid buying shares of the funds that are doing better while they may be too expensive. As index funds are baskets of stocks and their composition changes over time, unless the financial system collapses these funds will not go to zero. Underperforming individual stocks can go to zero, however, so I'd like to avoid throwing new money at them.) Dividend reinvestment will not alter the cost basis.

Total return (capital gains + dividends) is always important. But because nothing will be sold in this portfolio, what I'm calling "Dividend Return" (dividends received divided by total invested and expressed as a percentage) will be the better measure. The portfolio will start out with a negative 1% return (that's the $154 spent on commissions).

The portfolio will be tracked in the spreadsheet below (also available for easier viewing here). The dividends received will be updated at the end of every month (probably over the weekend) here. For sake of ease, the ex-dividend dates will be used rather than the dates dividends are paid. Should a dividend not be paid after an ex-date, it will be subtracted from the portfolio.

Since all things are relative, the portfolio will be measured for total and dividend returns against the S&P 500, represented by the ETF SPY. Since buying SPY involves only $3.50 in commissions, it starts out with only a negative 0.02% return. Its dividends will be reinvested annually. When I get around to it, I might add the total bond ETF BND as a measure. Note that if the portfolio or SPY do reasonably well (at least 8% annualized total return) compared to CD rates, buy and hold is not dead. If the portfolio and SPY grow less than rates offered on CDs, (the highest 5 year CD rate I could find is 5.25%--I'll track these as time goes by), then I'll concede that buy and hold is dead.

Of course, this will take a few years.



Disclaimer: The above is for educational and entertainment purposes only. Do your homework before investing.

Disclosure: At the time of writing, I owned JNJ, PG, and PM. Some may ask, if all the above stocks are so great and you believe in buy and hold, why don't you own all of them? The bulk of my investments are in a target allocation mutual fund to which I contribute regularly without looking at the statement (that's so I don't stop contributing). Individual stocks are for play.

Update 11/3/08: I made an error with the ticker for American Express. I had AXM (America Movil) instead of AXP for some reason (carelessness). This has now been corrected.