This Dividend Portfolio Continues to Dominate

The real-money Inflation-Protected Income Growth portfolio launched 16 months ago as of last Friday's market close. The portfolio's primary objective is to generate an income stream that rises at least as quickly as inflation. As detailed in last week's update, the portfolio has thus far delivered on that objective, with all but one selection increasing its dividend since being selected.

The portfolio, meanwhile, has completely surpassed expectations in its overall performance versus the S&P 500 index and the SPDR S&P 500 (SPY -0.87%) ETF, an investable tracker for that index. The table below shows the iPIG portfolio's performance relative to those benchmarks:

Data from the iPIG portfolio brokerage account and Yahoo! Finance, as of April 4, 2014. 

Will that continue?
There are no guarantees in investing, and the iPIG portfolio's objective remains the quest for income growth, rather than relative total returns. The iPIG portfolio is not designed to beat the S&P 500 or the SPDR ETF that tracks the index. Still, it could continue to perform well overall, even as it aims for that rising income stream.

The iPIG portfolio has a shot to continue doing well because it traces its investing principles to Benjamin Graham's timeless book on value investing, The Intelligent Investor. Graham, and the generations of value investors inspired by his teachings, outperformed the market by focusing on what the company behind a given stock was really worth, rather than price fluctuations.

The iPIG portfolio adds Graham's often overlooked discussion on the importance of dividends to his well-known value focus as the basis for how it invests. That framework gives it a chance, but not a guarantee, of staying ahead of the market even as its focus remains the search for income growth.

Speaking of growing dividends
This past week, two iPIG selections paid their dividends. Both companies' dividends were higher than the payment they provided their owners last quarter.

Union Pacific (UNP 0.99%) handed the iPIG portfolio $0.91 per share on April 1, a nice raise from the $0.79 it paid in January. In addition, Union Pacific's increased dividend actually represents the railroad's second dividend boost within the past year. With a payout ratio of roughly 31% of its earnings, Union Pacific has room to continue increasing its dividend as its business grows over time.

Genuine Parts (GPC 1.35%) handed the iPIG portfolio $0.575 per share, also on April 1. That increase represents about a 7% improvement from the $0.5375 it paid in the previous quarter. Genuine Parts is perhaps best known for its NAPA auto parts stores, but it does have other business lines. Indeed, recent acquisitions in its industrial and distribution-related business lines may provide enough overall growth to fuel future dividend increases.

While the iPIG portfolio isn't expecting additional dividends in April, May will start out strong with continued payout growth. Defense contractor Raytheon (RTN) has declared a $0.605-per-share dividend (payable on May 1), a 10% increase from the $0.55 per share it paid last quarter. Raytheon earned its spot in the iPIG portfolio when worries from the defense sequester knocked its shares down. The company managed its operations well despite that lowered revenue forecast, enabling its stock to recover nicely.

Own businesses -- and let the stocks take care of themselves
With its focus on the businesses behind the stocks, rather than the daily fluctuations of their stock prices, the iPIG portfolio plans to stick to its objective of seeking out increasing dividends. If, as a result of that search, it continues to outperform the S&P 500 and the SPDR ETF that tracks that index, so be it.

The table below shows the overall state of the iPIG portfolio as of market close on April 4, 2014, after 16 months of investing:

Data from the iPIG portfolio brokerage account, as of April 4, 2014.

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