Tax Refund Portfolio Update #4

We may earn money or products from the companies mentioned in this post.

The market has taken such a beating lately that I hesitated posting our most recent tax refund portfolio update. Even last month, our portfolio was down and that was before the market correction took place.

Although stocks have been knocked down, everything is going to be just fine. We are confident in our purchases and will enjoy picking up tons of shares at a discount while everyone else is panicking.

Now on to this months tax refund update.

What is the Tax Refund Portfolio?

Here is a quick review of our tax refund portfolio for those that are new here.

Instead of investing our tax refund into 529 college savings plans for our kids this year, we decided to do something different. This year we invested $5,000 of our tax refund into dividend stocks.

This type of investment will increase our dividend income earnings for this year and many years after. We have a goal this year to earn $1,500 in dividend income and in order to reach that goal, we need a little help from our tax refund dollars.

In order to show the growth of this $5,000 investment, we have started to track our – Tax Refund Portfolio each month.

Note – These results will also be included in our overall Money Sprout Index reports that are updated at the beginning of every month.

Tracking Our $5,000 Investment

We plan to track our $5,000 investment (from our tax return) here each month to show the power of investing in dividend stocks. This month was horrible for the value of the tax return portfolio.

The good news is that these losses are only on paper. We still own quality dividend paying stocks that will take good care of us years down the road.

All of the shares that are bought or sold with these funds will be tracked and highlighted each month. The goal is to show the progress over time (years not months) of how $5K can grow if invested properly in quality dividend stocks.

Here are all of the purchases we have made to date with our $5,000 investment –

  • BHP Billiton Ltd. (BHP) – 16 shares @ $44.76 = $716.18
  • Caterpillar Inc. (CAT) – 12 shares @ $86.82 = $1,041.84
  • Emerson Electric (EMR) – 9 shares @ $58.94 = $530.46
  • Realty Income Corp (O) – 31 shares @ $46.19 = $1,431.93
  • Omega Healthcare Investors (OHI) – 35 shares @ $35.96 = $1,258.70
  • Cash Balance – $20.89

Note – We have received $15.33 in dividends to date since starting the portfolio. These funds will be added to our cash balance and eventually used to purchase more stock.

At the time of this writing, these are the values of each stock that we have purchased along with the percentage increase or decrease.

  • BHP – $536.48 (16 shares @ $33.53) – down 25.1%
  • CAT – $875.28 (12 shares @ $72.94) – down 16.0%
  • EMR – $415.44 (9 shares @ $46.16) – down 21.7%
  • O – $1,389.42 (31 shares @ $44.82) – down 3.0%
  • OHI – $1,169.70 (35 shares @ $33.42) – down 7.1%
  • Cash Balance – $36.22

Note – Keep in mind the value of these stocks is at a point in time from the past and is already outdated.

As you can tell from the data above, we obviously invested this money at the wrong time. Only if we would have waited!

Well since I cannot predict the future, we are not all that worried about the declines. Sure it would have been great to time the market – but I am certainly not that smart.

I bet in a year or two from now these stocks will be churning out cash in the form of dividends and all will be well in the world of the stock market.

Total Starting Balance – $5,000.00
Total Updated Balance (August) – $4,422.54

Increase/Decrease = -11.6%

Am I concerned about the (11%+) loss so far? Not at all. It is actually a great opportunity to buy some quality stocks on discount as the market swings up and down. Buying great companies at a discount is actually a really good opportunity.

Once we get more dividends coming in, the money will be used to reinvest in additional stock.

Just remember that the best time to build a foundation of dividend stocks is when the market drops. Even though it may hurt to look at our portfolio in the short term, the benefits of buying and holding quality dividend stocks will eventually pay off.

Increase in Future Dividend Income

I am more interested in increases to our future dividend income over current value of the stocks. We are long term investors and have no plans to sell our stocks anytime soon. The losses noted above are simply those on paper.

By purchasing the 5 companies listed above, we have increased our 12 month forward dividend income by $241.24! The breakdown of stocks is shown below with any changes from last month –

  • BHP – $39.68 (16 shares @ $2.48) – no change
  • CAT – $36.96 (12 shares @ $3.08) – no change
  • EMR – $16.92 (9 shares @ $1.88) – no change
  • O – $70.68 (31 shares @ $2.28) – no change
  • OHI – $77.00 (35 shares @ $2.20 2.16) – up 1.9%

12 Month Future Dividend Income = $241.24 (up 0.6%)

Note – It is important to point out that these calculations are no guarantee of future income. The numbers are estimated on the current dividend yield of each company.

Based on our projected dividend income, our yield on cost for these investments is 4.82%!

YOC = $241.24 / $5,000.00 = 4.82%

Final Thoughts

It is important to note that all of our purchases for the tax refund portfolio have been made through our zero commission brokerage Robinhood. We are basically saving money on each investment since we are not paying any commissions or fees when we purchase these stocks.

We will continue to provide updates on our tax refund portfolio each month. Whether the market is down or up, I want to continue to track our results.

How has the recent stock market decline impacted your investments? Are you panicking or buying?

Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – BHP, CAT, EMR, O, and OHI. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.

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