Tax Refund Portfolio Update #7

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Just about one year ago, my wife and I decided to invest most of our tax return into several high quality dividend stocks. Up until last year, we had always put our tax returns to work in our kids 529 college savings plans.

Not that investing in these plans was a bad option (there are plenty of ways we could have spent this money), but we felt it was time to grow our income. By investing $5,000 of our tax refund into dividend stocks last year, we were able to increase our yearly income by over $200.

Now that our portfolio of stocks is just about one year old, I thought it would be a good opportunity to share our progress.

Tracking Our $5,000 Investment

We plan to track our $5,000 investment (from our 2014 tax return received in 2015) here periodically to show the power of investing in dividend stocks. Despite the stock market ups and downs over the past 12 months, the value of our tax refund portfolio grew.

Let’s look back at our initial investments last year.

Here are all of the initial purchases we made with the $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

We received a bunch of dividend payments since last reporting our tax refund portfolio status (over 6 months ago). In total, we earned $136.02 since our last report.

  • $25.16 – BHP Billiton Ltd. (BHP)
  • $18.52 – Caterpillar Inc. (CAT)
  • $8.55 – Emerson Electric (EMR)
  • $42.13 – Realty Income Corp (O)
  • $41.66 – Omega Healthcare Investors (OHI)

These most recent payments pushes our total up to $176.49 in dividends for the past 12 months.

Using a combination of the dividends earned the past 6 months ($136.02) and our remaining portfolio dividend balance of $7.90, we made the following purchases from our total cash balance ($143.92).

  • 1 share of Caterpillar Inc. (CAT) = $71.35
  • 1 share of Emerson Electric (EMR) = $50.74

This gives us a total of 13 shares of CAT and 10 shares of EMR. It leaves us with a cash balance of $21.83 to use for future stock purchases.

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 – $462.56 (16 shares @ $28.91) – down 35.4%
  • CAT – $1,029.21 (13 shares @ $79.17) – down 1.2%
  • EMR – $553.20 (10 shares @ $55.32) – up 4.3%
  • O – $1,953.31 (31 shares @ $63.01) – up 36.4%
  • OHI – $1,278.00 (36 shares @ $35.50) – up 1.5%
  • Cash Balance – $21.83

Note – Keep in mind the value of these stocks is at a point in time from the past and is already outdated.

Total Starting Balance – $5,000.00
Total Updated Balance (April 2016) – $5,298.11

Increase/Decrease = + 5.9%

In just about 1 years time, we were able to increase the value of our portfolio by almost $300. The 5.9% increase in the value of these funds is much higher than we could have earned in any certificate of deposit or savings account.

We even made a mistake and invested in a dog of a stock with BHP. Now down over 35% from where we purchased it, the other stocks in the portfolio certainly made up for its losses. Now we are debating if we should dump it and invest in a better performing dividend stock.

Increase in Future Dividend Income

Instead of concentrating on share prices and the portfolio value, we are more interested in increasing our future dividend income with this portfolio. By purchasing the 5 companies listed above, we have increased our 12 month forward dividend income by $241.61!

The breakdown of stocks is shown below with any changes from our last report (October 2015) –

  • BHP – $24.96 (16 shares @ $1.56) – down 37.1%
  • CAT – $40.04 (13 shares @ $3.08) – up 8.3%
  • EMR – $19.00 (10 shares @ $1.90) – up 12.3%
  • O – $74.09 (31 shares @ $2.39) – up 4.4%
  • OHI – $83.52 (36 shares @ $2.32) – up 5.5%

12 Month Future Dividend Income = $241.61 (down 0.9%)

Since last reporting, our future dividend income actually dropped by ($2.14) due to a huge dividend slash by BHP. However, overall we are in great shape as the other 4 stocks in the portfolio negated almost all of the losses.

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 4.83%!

YOC = $241.61 / $5,000.00 = 4.83%


Despite getting crushed by one of the stocks in our portfolio (BHP), the overall strength of the other stocks was solid. Over the course of 12 months, the value of our portfolio is up by almost 6% and we have increased our annual income by over $240.

We are confident that over time, this portfolio will continue to grow and produce amazing results. As dividends are reinvested into additional shares of stock and companies continue to increase their annual dividends, our returns will increase exponentially.

As we enter into year two of tracking this portfolio, we are once again considering investing a portion of this years tax return. With the success of last year, we most certainly will be investing at least a portion of our tax return again.

Did you get a tax return? Have you considered building an income producing portfolio of dividend stocks that can pay you year after year?

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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