How I Created A Monster Dividend Portfolio

welcome back everyone today on the Joseph Carlson show it's time we talk about dividends and how I grew this portfolio into a monster dividend portfolio we'll be going over how much money this $750,000 portfolio earns in dividends every single year how many dividends it will earn specifically in 2024 how many dividends it's earned all time and we'll be looking at each holding in my portfolio laying out which ones are the biggest dividend payers which ones have the highest and lowest dividend yield which of these companies are growing their dividend the fastest and what yield on cost is and which companies have the highest yield on cost every company in this portfolio pays a dividend and as these companies generate continual cash flow their dividends grow so we'll be looking at this overall and getting an idea of how to grow a dividend portfolio now of course we have some other news to get to as well in this episode adobe's getting hit today it's down nearly 9% after their Q3 earnings they beat on their earnings per share estimates and their revenue so the past quarter looked good but the problem is they gave week forecast Adobe is supposed to be growing in part because of AI tools they're developing all of these signature creative software AI tools but apparently that isn't enough to help the stock grow faster than expected this brings us back to the question of whether or not Adobe is being helped by AI or hurt by AI we have news that Uber and wh are once again teaming up and offering driverless ride sharing trips in Austin and Atlanta why is a company as big as Google that owns Google Maps it's as big as weo teaming up with Uber we've also heard the news recently that MasterCard is doing an acquisition and they're buying a company that's a cyber security company for a $2. 65 billion price tag we'll be looking into the details of this deal and also going over what this means for MasterCard and Visa so we have a lot to get to in this episode if you like this type of content just make sure you're subscribed to the channel and like the video both of those things are completely free now let's goad and jump into the portfolio here this portfolio the passive income portfolio is is a normal Equity portfolio I don't use any leverage I don't use any margin this is all money that I have contributed or earned in dividends the total value is $752,000 the total gains is $261,000 so we've pass the point of A4 million do primarily through gains which is just incredible looking back 6 years this seems like it would be impossible to do but through a history of steady contributions continually adding money dollar cost averaging buying every dip I could and getting continual dividend payouts that are quickly reinvested back into New Opportunities and having capital appreciation this portfolio has grown and grown and grown this portfolio's Origins are a dividend growth portfolio that's where things started off in fact if we go back to my oldest videos the very first ones that I made they're still live on this channel the very first one episode one was an introduction to my portfolio the current value at the time was $25 $5,000 I gave an update on my companies explaining why I thought apple and Microsoft Home Depot and Costco were good Investments 5 years ago I had a video called building a winning dividend portfolio it went over the core aspects of dividend growth portfolios the premise of it was to invest in quality companies that could grow their dividend over time I think the content was okay for the time but this was 5 years ago a lot has happened over half a decade I've learned a lot of lessons I've been through a lot of Market volatility I've seen a lot of investors do a lot of different things and with investing like any discipline if you actively work on it study it increase your vocabulary read about it learn from other great investors you get better at it over the past 5 years I think each consecutive year I've grown as an investor I've learned some things and I think most of my audience has as well I've gotten better at doing a lot of analysis on companies understanding the true fundamentals understanding long-term durable modes from weak modes understanding which businesses are likely to increase in value more than others I've also gotten a lot better at identifying quality dividend companies from ones that are dividend traps or value traps the accumulation of time and experience and knowledge over making hundreds of videos on investing learning from community members studying great investors has an accumulative effect of improving your investing philosophy overall and recently I've put all of what I've learned as the best investing lessons into a simple investment philosophy presentation this is only eight pages long and I think it goes over the most core basic lessons of how to create a very highquality portfolio in many ways my investing philosophy has changed from looking strictly at dividend growth companies to looking at compounding machines compounding machines is a more nuanced holistic term of looking at a company it doesn't just focus on the dividend payout it focuses on the core fundamental components of a company that allows for a company to pay a growing dividend but the interesting thing is in most cases compounding machines are dividend growth companies in most cases compounding machines make for the best dividend companies so this isn't a change of strategy shifting away from dividends to a different type of company this has been a shift of strategy of better identifying the best type of dividend growth companies as it stands right now every single company in the passive income portfolio pays a dividend and that's typically the case with compounding machines because in most cases when you find companies that are monopolies they have ample pricing power and operating leverage and organic Revenue growth and are capital efficient these are the type of companies that can afford to pay a dividend and they're also the type of companies that can grow a dividend over time so every single company in this portfolio is paying a dividend and growing it over time even though there's always a lot of talk about BuyBacks and companies buying back their own shares even though that's a great aspect of a company we shouldn't leave out the compounding impact of a stable and growing dividend that's continually reinvested back into a portfolio now we can better understand the role that a dividend plays in compounding a portfolio by looking at a breakdown of the returns for example in my portfolio right now we have $261,000 in alltime gains now the gains do not include contributions so none of this money in the green is because I put money in the portfolio gains only come from two things capital appreciation or dividends that's it so the alltime gain is another way of saying the capital appreciation plus the dividends now it's true that you have to buy stocks to have something to appreciate but this is from the appreciation or the dividends for example if I was to hypothetically deposit a million dollars into my portfolio today if I somehow had that money and I threw it into my portfolio the all-time gains would stay the exact same it wouldn't move a penny the only way that this number goes up or down if there's capital appreciation or if they pay me a dividend we can better understand this performance here if we look at a breakdown of my portfolio's performance as of right now it has a 158% money weighted return that's based off the inflows and outflows of capital meaning that since the beginning that is my rate of return of this portfolio we look at the market gain the market gain is another word for capital appreciation this is where the majority of gains come from right now the capital appreciation is $229,000 so that is the line share of the gains in this portfolio but we can't discount the effect that dividends have the entire time this is happening Dividends are being paid out every single month and so far a total of 32,000 $300 in dividends have been earned and paid by this portfolio this is money that's reinvest invested back into the portfolio so part of the net cash flow here includes the dividend payments the dividends continually being reinvested back into the portfolio buys more shares which also helps increase the market gains so this is what I first do I buy companies those companies pay me dividends those Dividends are reinvested back into the portfolio those reinvested dividends earn me more capital appreciation and over and over again this cycle grows now in my brokerage M1 they tell me how many dividends I'm earning every single month my projected earnings and what I've earned historically we can take a look at the dividend income over time for the full year of 2024 I'm going to earn $8,750 in dividends so if you think that Dividends are just a small part of the portfolio that's true but $8,700 is not a meaningless amount of money that is a significant amount of capital and keep in mind it's not like I get one payout at the end of the Year this is money that's paid out on average $700 per month that money gets reinvested back into the portfolio and have bigger and bigger dividend payments in the future now if we look at this on a month-by-month breakdown we can see better what's really contributing to this massive dividend payout a lot of it comes from January so January is the best month of dividends by about double for my portfolio why is January so big why do I earn over $2,000 in January well there's one company in particular that has a relatively large payout in January that company is Costco as you can see in the breakdown there we have three major companies that pay dividends in January Costco vich and Inuit in's the smalls making up an $84 dividend then you have vichi paying a staggering $755 vich is a real estate company the majority of returns from Real Estate typically comes from dividends or in the case if you own the real estate directly from the rent and then you have Costco Costco paid a $1,296 dividend in January does Costco really pay that big of a dividend or do I own so much Costco that it should be paying me $11,000 per quarter my Costco position is only $80,000 now that's a big position and the majority of that is from gains it's $44,000 in the green but an $80,000 position is not enough to earn $1,000 per quarter if we use qualum to look at the dividend history of Costco we can see this Illustrated the dividend is this one right here a $15 per share dividend that was paid out in q1 of 2024 notice how it's much larger than any other dividend before after it that is because this is a special dividend this one right here is a special dividend this one back in 2020 is a special dividend and this one and this one and this one these abnormally large Dividends are when Costco management says Hey shareholders we have way too much cash we can't distribute it through our normal dividends every quarter we're stockpiling this cash and we think that you should have it so we're just going to throw this money out to you the shareholder to give you an idea of how much a $15 dividend per share is that is the equivalent of Costco paying out a full year of earnings of the company a full calendar year earnings they paid out in a single dividend so this was a massive dividend they're paying I can tell whenever Costco's going to do this because you can see that the cash balance Rises way above their levels of debt we had it right there their cash was $17 billion their debt was 5 billion they had way too much money so what did they do they gave some of it back and that's why their cash went down from 17 billion to 10 billion then what happens after that Costco earns too much money it goes from 10 billion to 11 next quarter it's going to go up more and more and more and eventually they're going to have excess cash and they'll pay a special dividend again so $1300 of this year's earnings is because of the special dividend now we're probably not going to have a special dividend every single year but I think on average we'll have them around every 3 years based on the rate that Costco's growing and the amount of excess cash they generate if we move on to February we had an ETF called esav pay a dividend that's when I still owned a little bit of cash we have Master Card and Costco paying their normal dividend so Costco got done paying their special dividend then they paid their normal dividend we move on to march in March I earned $688 in dividends Texas Roadhouse paid $265 S&P Global paid $175 Microsoft paid 122 Texas Roadhouse has turned out to be a great dividend payer company if we glance at their dividend growth history over time they are growing their dividend far faster than the market average last quarter they only grew it by 11% which is still really fast but for the past 5 years they've averaged growth of 15% so that's really quick growth from a restaurant company like I said if you buy a compounding machine a company that can grow its free cash flow at a high rate they can afford to grow their dividend at a high rate so the best dividend growth companies are free cash flow growth companies the best free cash flow growth companies are compounding machines moving on to April we have another dividend payment from vich one from Union Pacific this is a company that I've since sold and then we have into which is an $84 dividend payment into it does not pay a lot and dividends right now they're mostly doing BuyBacks may we have MasterCard Costco again and apple in June we have Texas Roadhouse again S&P Global and Microsoft and then we start to see a little bit of cycling here where the same companies are paying out their quarterly dividends the new one in July is Salesforce that's a new holding to the portfolio they're also a dividend payer and then we have the projected dividends in September I'll be getting a $122 one from Microsoft S&P Global will be 188 Texas Roadhouse will be 265 the ones that are projected throughout the the rest of the year are $700 in October $263 in November and in December it will be $773 and again whenever these companies pay dividends that money immediately ends up in my cash balance right now I have $800 in cash 100% of that money is from dividends I'll look over the dipf finder and see which companies are doing well and doing poorly in my portfolio in terms of their performance when I look right now I see that the companies that have the most momentum the ones that are rocketing to the Moon are Costco Moody's S&P Global apple and vich this group of companies are just doing fantastic they're the ones that are carrying my portfolio right now Moody is crushing the market S&P Global is having a great year and of course Costco is up 40% year-to date not counting their massive dividends so these companies are doing so well that I typically look at them and I think you know what I'm just going to hold my share in these and focus on reinvesting my dividends and ones that haven't rocketed up quite as much when I look at the other end of things the only company that's not doing well right now is Salesforce this one is having a bad year the company has yet to gain any Market momentum I do analysis on the company and from the fundamentals everything looks really good so this is a company that I look at as a potential buy and of course if we look at my trade history in 2024 one of the companies that I've been buying the most with every dividend payment and with new contributions is Salesforce I'm buying into this company because it's not doing well right now it is a great company fundamentally that the stock price isn't following but Salesforce of course is not the only example the point is that dividends don't need to be reinvested right back into the company that paid them and in many cases the company that just paid a dividend is not the best one to reinvest the money back into for example again one of the biggest dividend payers this year has been Costco but Costco is trading at an all-time high multiple Costco is very expensive looking at its historical multiples so out of the companies that I have to pick from even though Costco is paying a lot in dividends it's not the one that I'm reinvesting the dividends back into I'm buying companies that have less positive sentiment like Salesforce and booking to better understand a dividend it's important to know where the dividend comes from what affords a company's ability to pay for a dividend that is called free cash flow free cash is the amount of money that's left over after a company pays for all its operational expenses and capital expenditures when you factor in operation expenses like paying employees paying for Logistics paying for all those random expenses a company has and then you also factor in paying for Capital expenditures buying warehouses paying for office space paying for vehicles to ship things back and forth It's the money left on the table after all those cash flows are accounted for that is your free cash flow we're running MasterCard and after we pay for basically everything to run this company we have 11 billion left over we're a very profitable company we have a lot of free cash flow left over well what can we do with that money companies do one of two things with their leftover free cash flow one of the things they do and they do it frequently is they buy their own stock buying their own stock reduces the amount of shares over time increasing investors Equity as the Share account goes down your value in the company increases so BuyBacks are one of the things they do with their extra cash but then some companies are so profitable that they also dish out money through dividends and this this is where the dividend payouts come from the free cash flow now knowing that we can look at the companies in my portfolio and see what they've paid out in dividends over the past 12 months the top one is vichi and that makes sense because again this company's required to pay out the majority of its profits in dividends so far in the past 12 months vich has paid me $2,742 in dividends V is not a flashy holding this company doesn't do anything too spectacular they just own a lot of iconic real estate and they collect rent checks it only takes a handful of employees to run this company they buy real estate they collect checks and then they look for other investment opportunities so the gains from this company aren't astronomical but they were never supposed to be this company was never going to be a growth monster company it was going to be one that paid a steady rate of return with continual dividends and continual reinvested dividends so far I've gained around $122,000 from this holding the dividend yield is 5. 15% today the yield on cost or what I got in my yield based on the price I paid for it is 5.

86% so it's very close to the current dividend yield meaning that I got this company on a discount but not an amazing discount the average price paid was $29524 dividend I've earned $1,673 from Costco in dividends in the past year my yield on cost is 1% So based on the price that I got Costco I paid half as much for the dividends that I'm getting as if you're going to buy it today my average price paid for Costco is $431 and that's for a company that's currently trading above $900 between the dividends paid and the low cost bases for this company this has been one amazing investment if we look at Texas Roadhouse this is the third largest dividend payer in my portfolio I have earned $1,011 in the past year from this company and they keep raising their dividend paying more every single year also like Costco I haven't sold any shares in this company so it just keeps stacking up and accumulating gains the current dividend yield is 1. 5% which I think is a bit low for this company right now my yield on cost is 2. 8% so I got a much better deal when I was buying this company and that's because of course my average share price paid is $86 for Texas Roadhouse today Texas Roadhouse trades for 164 so this is one of the opportunities that I went for I was pounding the table saying that I think this company is a great investment I made multiple videos on it and it's turned out to be a spectacular one between the doubling in capital appreciation the 2.

8% dividend yield on cost this has been one of my better Investments the fourth largest dividend payer in my portfolio is S&P Global this one's paid $718 over the past year now the current yield is only 7% my yield on cost is a bit higher because this stock has gone up my average cost on this one is 366 today a share will cost you $520 so I feel like I got a good deal on this one the interesting thing about S&P Global is this is one of the most through and through compounding machines it meets every characteristic it's a super highquality company that's incredibly efficient but it also happens to be a dividend growth machine the company has paid a growing dividend since 1985 you have 30 40 plus years of a company paying growing dividends that's incredible so again in many cases the best dividend payers are free cash flow growth machines the best free cash flow growth machines are compounding machines Microsoft of course shows up on the list as number five this company has been one with me for a long period of time I've had it since day one of my portfolio in the past trailing 12 months it's paid me $598 in dividends the current yield is 71 my yield on cost is 1. 11 my average share price for Microsoft in this portfolio is 271 so I've bought this company I believe at the right times I had videos going out when Microsoft and all of big Tech were trading down to unreasonably low territory around 220 and 250 I bought a lot of shares of the company during that time period And even added to it a little bit more later currently Microsoft trades at $429 so owning it at2 70 I think is a good deal I'm going to hold my shares ha but I think Microsoft shares today are a little steep in number six we have MasterCard this one's paid me $444 in dividends the past 12 months that's 0. 54% dividend yield my yield on cost is slightly higher my average share price for MasterCard is 3.

84 currently it trades at 4. 96 you'll see the common theme here where I try to buy high quality companies but I try to do it at times where there's opportunities earlier in the year and even in 2023 there were so many opportunities to pick up these companies at cheaper prices right now those opportunities are few and far between they're much more difficult to find so I'm looking elsewhere than companies like Microsoft Costco and MasterCard these ones were good a couple years ago and I believe they're holds today but I think there's better places to put money right now and number seven we have into it now it's paid me $329 in dividends into it's just not a big dividend payer right now and the current yield is only 64% my yield on cost is quite a bit higher at . 9% and I own the company at an average cost basis of $463 today a share of into it will cost you a sizable amount $656 the company is moving fast they have massive dominant platforms and they are severely underrated especially by retail investors we have applet number eight so we're getting down to the lower dividend payers here this one has only paid me $233 this year the dividend yield is a meager 45% which is just so small my yield on cost meaning the dividend yield I'm getting with the shares that I purchased is over double that at 1.

12% my average cost basis on Apple is $89 Apple today trades at $223 I consider my history with apple and the calls I've made on this channel with videos over and over again on this stock as one of the best calls I've made owning Apple has been a significant contributor to this portfolio in fact when we look at the holding now I have around $32,000 in gains from Apple and the current position size is $33,000 the $33,000 I have invested in apple is almost entirely gains I still like apple as an investment I think it's a dominant company it's a juggernaut and very difficult for other companies to compete against but I do see the growth path as more difficult looking for the next 5 years they need to grow through software and increasing prices and continually innovating which is going to be a challenge for the company the valuation is much higher now than it was 5 years ago and it seems like it's just a bit more limited in its growth than other opportunities so while Apple still is a great company I've reduced my position because I don't think it's quite as good of an investment as it was 5 years ago we look at some other smaller positions in the portfolio Canadian Pacific Kansas City Southern is one of the companies I've invested in in the past year and this one has been a bit of a snoozefest it's paid me $200 in dividends that's a 63% dividend yield my yield on cost is slightly higher as the stock price has gone up my average on the company is $77 the share price today is $86 so it's gone up a little bit we're in the green by a couple thousand but there's nothing to write home about here this one has not been that exciting of a holding I think that Canadian Pacific is still a great company it's growing its free cash flow quickly they're going to be growing their earnings quickly they have very low downside in terms of disruption or intrinsic value terminal risk I believe I have the ability to make better gains in identifying highquality tech companies in number 10 we have Moody's this is one of my favorite companies Moody's is one of these companies where it's really boring at first glance your eyes will just glaze over when you're reading their investor relations it's very mundane very stodgy looking of a company but the more you research this company the more you do analysis on the more you like it this is one of the ones that I guarantee the more time you spend reading about it the more you'll like it if we look at the dividend payment over the past year it's only $197 that's a 71% dividend yield my yield on cost is slightly higher at 87% the average price I've paid for it is$ 389 right now it's trading at $479 even though Moody's doesn't have the highest yield this company represents one of the best dividend growth companies over the past 30 years then at the very bottom here we have two of the newest additions now these companies are number 11 and 12 simply because they're newer additions and they haven't had a full year to even pay dividends for example Salesforce has only paid me one dividend the yield on it is 63% and my yield on cost is. 58% meaning that I'm in the red on this company my cost basis is 277 right now you can pick up Salesforce for $256 I currently have a $56,000 position and I'm in the red by $4,500 obviously it's a bummer to be in the red in any position but the truth is when you just buy into a company brand new like I've done with Salesforce this year it's very difficult to control which way the stock will trade within a single year Peter Lynch says his best stocks really happened 3 to 5 years after buying them so Salesforce being a brand new position it's much more difficult to get it right right away I'm going to give this one more time and I think with their continual Buy backs with their margin increases with their steady organic Revenue growth I see this one working its way above $300 per share in the future and that will put me well into the green the last one we have booking which is my newest addition to the portfolio and it's paid exactly 0 in dividends and that is simply because I haven't owned it long enough for it to even pay a first dividend but this company is a dividend payer in fact they have a decent yield for this good of a company a 9% dividend yield my yield on cost is 0.