Last Friday, on February 01, I purchased 30 shares of General Mills (GIS
) for my Dividend Yield Passive Income Portfolio (DYPI).
The company manufactures and markets branded consumer foods worldwide. GIS also supplies branded and unbranded food products to the foodservice and commercial baking industries.
General Mills has managed to raise dividends over a period of 9 consecutive years and is a Dividend Challenger on the edge to become a Dividend Contender.
The full DYPI-Portfolio has now 18 members with a total cost of $24,984.45. Stocks from the portfolio are up 4.09 percent since October 05, 2012 – The date of funding. Total capital gain amounts to $1,021.30.
As a result, $75,147.55 of cash is still available for further stock purchases. With this money I plan to increase the total number of stock holdings to a figure of 50-70 by the end of the year 2013.
Income is king for the asset allocation: The current estimated portfolio income after the General Mills buy amounts to $963.04. If I complete the acquisition process, the total dividend portfolio income should grow to a value of $3,000 – $4,000 per year.
For the time being, it seems that it's getting harder to find cheap higher yielding stocks with solid growth perspectives. The market is hot and asset prices too. It could be possible that I need to look at stocks with a yield around the 2% mark.
The DYPI-Portfolio has a current yield of 3.66% and the yield on cost is slightly higher because of the capital gains - The amount is 3.82%. With growing stock holdings, the average yield should decrease to a value of around 3%.
Friday's pick of General Mills is not a cheap solution. The company has a P/E of 15.55 and forward P/E is expected at 14.53. A solid growth of 8.21% is estimated for the next year with a slightly lower mid-term forecast for the next five years (7.98%).
However, price ratios are ok for a high quality dividend growth stock. The only problem could be the low international diversification as well as the high debt amount. GIS generates only 17 percent of its revenue abroad. That's too low in a world were China is the only growth solution for many companies. The market position within the United States is solid.
Because of the high debt of $5.5 billion at $1.5 billion net income, the company must act careful when it wants to be consolidation winner.
The current portfolio performance is good but compared to the return of the whole market, it's a clear underperformance because the Dow Jones is up 5.12% and the S&P 500 gained 5.61%. What the heck - There are worse happenings.
The approach of the DYPI-Portfolio is not to show you how to get quick rich or to show how you can make fast money by trading stocks. There are so many other tools to realize a quick return. But those tools are also more risky and you need to take a steady look at your prices and assets.
With a passive income portfolio, you can place your money into solid dividend growth stocks and participate on the long-term business success. It's a strategy with an investment horizon of at least 10 years or more.
I personally invested money into dividend stocks and other assets for more than 10 years and my annualized return is on average in a double-digit range.
Dividend growth will not make you quick rich but it could hedge your assets against inflation and provide you a good return of at least 8%. All you need is a wise investment strategy and a long investment horizon.