Hello Again!  This post marks my first post of my parents monthly dividends received at InvestorPeek.  My parents have graciously agreed to let me share the progress of their portfolio alongside mine as a real life academic case study for the investment community to benefit from.  My intentions are to educate folks on the power of Charlie Mungers “sit on your ass” investing technique, once you’ve accumulated a nice nest egg that’s filled with literally some of the best assets in the world.  Gut check time will occur during the next bear market sell off if market values decline 10 – 40%, and I’m patiently optimistic my parents will agree to sit still and let compounding work its magic.  Jeremy Siegel from his book The Future for Investors is famous for coining the phrase, “bear market protector and return accelerator” when referring to dividends.  The important lesson being, according to Siegel: “Market cycles, although difficult on investors’ psyches, generate wealth for long-term stockholders. These gains come not through timing the market but through reinvestment of dividends.”     The extra shares purchased while deeply discounted, will cause this portfolio to rocket ahead once prices begin to stabilize; so bear markets can be leveraged to accelerate your wealth.

I’m hopeful that my monthly updates of this portfolio will become a wonderful insight to the investment and DGI community.  This portfolio is large enough to accelerate at a nice pace all on its own, and is truly a rapidly growing dividend income machine!  

I hope this transparency will help expose and educate on the true nature of the compounding effect.  As time goes by, I urge you to pay close attention to the two components at work 1) dividend reinvestment, and 2) growing dividend income.  The dividend reinvestment provides more shares, such that the new shares payout their own dividends, and the growth of the dividend accelerates the compounding effect.  What is more apparent with a larger portfolio, that is sometimes missed with a small portfolio, is the remarkable nature of the reinvestment.  I’m currently forecasting this portfolio to pay out over $36,000 in dividends this year and every single dividend will be reinvested to earn even more dividends the following year.  The companies I’ve invested in for my parents typically increase their dividends annually as well.  

By focusing on the dividends rather than the portfolio value, I hope to help my readers become aware that being a long term owner of some of the most profitable businesses in the world really pays dividends in the long term.  All it takes is awareness, and a disciplined approach to accumulating these assets month after month, so that one day this money will fully fund your recurring and nonrecurring expenses in retirement.

Note: My Parents received free shares and $2.78 cash in lieu of fractional shares of Ingevity Corporation which was due from WestRock successfully completing the separation of its specialty chemicals business, Ingevity Corporation, as an independent public company whose shares are listed on the New York Stock Exchange (NYSE) under the symbol “NGVT”.  Under the terms of the separation, WestRock stockholders received one share of Ingevity common stock for every six common shares of WestRock stock held as of the close of business on May 4, 2016.  NGVT shares began trading on the NYSE as of May 16, 2016.

 

$1,466.36 represents a 44% increase from the dividends they received this time in 2015.  If you’d like to see the impact of these dividends being reinvested, I’ve structured the portfolio views of my parents IRA in a manner to highlight the 1) new shares acquired through reinvested dividends, and 2) increases in the dividends over time.  I’m using 5/22/2016 as my baseline date to track the progress from this point forward.  The bottom three rows sums up the totals and indicates the % change and absolute change.  Over time, you will be able to see the change in 1) shares, 2) the market value of their IRA, 3) declared dividends, 4) annual dividends received, and 5) even the yield on cost will increase over time.

 

I’d love to hear your thoughts about this portfolio and the dividends this portfolio produces.  Do you think it will last for the next 20 to 50 years?  Your comments are highly encouraged and welcomed.

 

I’ll update my parents Dividend Income page to reflect May’s dividends.