$10,000 Investing Returns in 15 Months

The real-money Inflation-Protected Income Growth portfolio passed an important milestone since last week's update, reaching $10,000 in investing returns since its December 2012 launch. As of this Friday's close, the IPIG portfolio was worth $40,415.42, about $10,400 ahead of the $30,000 it started with.

While $10,000 in returns represents a nice and psychologically interesting round number, the reality is that it's just as meaningless as the celebrations over Dow 10,000 when that index crossed that mark. For one thing, that total return benchmarks as about average since the portfolio's launch. The following table compares the IPIG portfolio's returns with the S&P 500 index and to the Spiders (NYSEMKT: SPY  ) , a low-cost ETF that tracks that index and includes dividend payments:

Investment

Return Since iPIG Inception

S&P 500 Index

32.2%

iPIG Portfolio

34.7%

SPY, Dividends as Cash

35%

SPY, Dividends Reinvested

35.5%

Data from the IPIG portfolio brokerage account and Yahoo! Finance, as of Feb. 28. 2014. 

What really counts
Perhaps more important than the portfolio's performance versus the overall market, however, is its performance versus its objective. Since launch -- and continuing today -- the IPIG portfolio has been designed to seek an income stream that increases to combat inflation. Fighting inflation is a long-term battle, but at least in these early rounds, the IPIG portfolio is doing very well at meeting that key objective.

Two IPIG selections stand out in February for their dividend performance -- toymaker Hasbro (NASDAQ: HAS  ) and delivery titan UPS (NYSE: UPS  ) . Both companies had troubles during the all-important holiday shopping season, but both managed to deliver solid dividend increases this February.

Hasbro's 2013 holiday quarter earning came in almost 7% below its 2012 holiday quarter -- and virtually 9% below expectations. For a toy company, there's not much more important than being there to help Santa Claus on his annual journey. Hasbro could have used that earnings miss as a reason to hold off from increasing its dividend. Instead, it declared a $0.43 dividend, a 7.5% increase from its $0.40 prior dividend. 

UPS also failed to deliver over the holiday season -- literally. Its network got overloaded by a last-minute surge in demand, which caused it to miss delivering some goodies in time for Christmas. In spite of that slip-up, UPS managed to increase its quarterly dividend in February to $0.67, up 8% from the $0.62 it had paid previously. 

Time -- and ongoing results -- will tell whether UPS and Hasbro can continue to pay and increase their dividends. Still, the fact remains that both companies undertook the effort and expense to raise those payments in spite of their recent troubles. If nothing else, those increases in tough times should show the potential of a dividend-growth oriented strategy to shine when things are going well.

Broad strength
Across the entire IPIG portfolio, all but two of the picks have increased their dividends since being selected -- typically by much more than the inflation rate. The two that haven't are banking titan Wells Fargo (NYSE: WFC  ) and lawn-care giant Scotts Miracle-Gro (NYSE: SMG  ) . Even that's not a real problem, as the two have increased their dividends within the past year. Only their relative newness in the IPIG portfolio has kept the portfolio from seeing the benefits of those increases.

Indeed, Wells Fargo has already declared its intent to seek permission from the Federal Reserve to increase its dividend in 2014. While dividends are never guaranteed, Wells Fargo's public declaration is a signal of its confidence in its ability to deliver an increase.

While Scotts Miracle-Gro hasn't been so bold as to project a dividend increase, it did recently indicate that it believes itself to be on track for a solid 2014. As a lawn and garden company, its strong season should be coming up soon as spring and summer approach. Still, the company's projection that it will earn between $3.05 and $3.20 for its fiscal year 2014 puts it on track to beat its fiscal year 2013 operating earnings. That suggests that the company at least will have the potential to provide an increase in 2014

Together, they're a portfolio that delivers
Put together a series of companies that each have a history of increasing their dividends and look capable of continuing that trend, and you might wind up with something like the IPIG portfolio. As of Friday's close, the overall portfolio looked like this:

Company Name

Purchase Date

Total Investment (Including Commissions)

Current Value
Feb. 28, 2014

Current Yield
Feb. 28, 2014

United Technologies

Dec. 10, 2012

$1,464.82

$2,106.36

2.02%

Teva Pharmaceutical

Dec. 12, 2012

$1,519.40

$1,895.82

2.61%

J.M. Smucker

Dec. 13, 2012

$1,483.45

$1,700.17

2.32%

Genuine Parts

Dec. 21, 2012

$1,476.47

$2,026.07

2.61%

Mine Safety Appliances

Dec. 21, 2012

$1,504.96

$1,852.20

2.33%

Microsoft

Dec. 26, 2012

$1,499.15

$2,107.05

2.92%

Hasbro

Dec. 28, 2012

$1,520.60

$2,371.88

3.12%

UPS

Jan. 2, 2013

$1,524.00

$1,915.40

2.80%

Walgreen

Jan. 4, 2013

$1,501.80

$2,718.00

1.85%

Texas Instruments

Jan. 7, 2013

$1,515.70

$2,113.12

2.67%

Union Pacific

Jan. 22, 2013

$805.42

$1,082.28

2.02%

CSX

Jan. 22, 2013

$712.50

$942.14

2.17%

McDonald's

Jan. 24, 2013

$1,499.64

$1,522.40

3.41%

Becton, Dickinson

Jan. 31, 2013

$1,518.64

$2,073.96

1.89%

Aflac

Feb. 5, 2013

$1,466.35

$1,730.16

2.31%

Air Products & Chemicals

Feb. 11, 2013

$1,510.99

$2,062.44

2.34%

Raytheon

Feb. 22, 2013

$1,473.91

$2,643.57

2.25%

Emerson Electric

April 3, 2013

$1,548.12

$1,827.28

2.64%

Wells Fargo

May 30, 2013

$1,525.48

$1,717.54

2.59%

Kinder Morgan

June 21, 2013

$1,518.37

$1,337.70

5.15%

Scotts Miracle-Gro

Jan. 3, 2014

$1,974.68

$1,827.52

3.06%

Cash

   

$842.36

 

Total Portfolio

   

$40,415.42

 

To follow the IPIG portfolio as buy and sell decisions are made, watch Chuck's article feed by clicking here. To join The Motley Fool's free discussion board dedicated to the IPIG portfolio, simply click here.


Read/Post Comments (2) | Recommend This Article (4)

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  • Report this Comment On March 01, 2014, at 10:45 PM, kankemike wrote:

    KMI SUCKS

  • Report this Comment On March 02, 2014, at 9:05 AM, TMFBigFrog wrote:

    Hi Mike --

    One of my favorite parts of the market is the fact that there are thousands of companies to choose from. If you don't like one, you're under no obligation to buy its shares.

    Regards,

    -Chuck

    Inside Value Home Fool

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