Baby DivHut Turns One

This month I am celebrating a very special milestone as it is one full year since I became a father. We all know how fast time flies in retrospect, but for me to acknowledge that I have a one year old is pretty insane. Exactly a year ago I announced on this blog that, There’s A New DivHut In Town and was very touched by all the well wishes and nice comments left celebrating this happy occasion. Of course, the point of this post is not to simply make mention of baby DivHut turning one, rather a showcase for Starting A Dividend Growth Portfolio At Birth and highlighting baby DivHut’s 2015 dividends as well as portfolio update.

 

Well before baby DivHut was born I knew I wanted to create a dividend growth portfolio in his name. Happily, Mrs. DivHut was fully on board with the idea and within a few months of his birth we established a custodial account in his name. Following my own tenets of investing and not trying to time the markets I wanted to put capital to work as soon as possible and begin building his portfolio of passive income earners. With that being said, I am happy to announce that:

 

Dividend income from his custodial account totalled $62.04 for 2015.

 

Not a bad start for the little guy considering it wasn’t even a full year of investing. So far in the first two months of 2016 his dividend totals are $14.99. Of course, I expect him to smash his 2015 income total. It will be very fun to watch his passive income grow over the years and see what can develop over the course of two or more decades.

 

SymbolDescriptionQuantityCost BasisMarket ValueCost/ShareGain or Loss
CATCATERPILLAR INC14.7948$979.64$1,055.76$66.22+$76.12
7.77%
EMREMERSON ELEC CO COM36.4183$1,891.30$1,840.95$51.93(-$50.35)
(-2.66%)
ITWILLINOIS TOOL WKS INC6.1156$508.66$593.58$83.17+$84.92
16.69%
JNJJOHNSON & JOHNSON8.1932$818.17$877.82$99.86+$59.65
7.29%
ULUNILEVER PLC - ADR12.9061$510.46$569.68$39.55+$59.22
11.60%
VFCV F CORP14.6862$1,009.64$958.27$68.75(-$51.37)
(-5.09%)
YUMYUM! BRANDS INC14.1696$1,063.92$1,087.66$75.08+$23.74
2.23%
Total: $6,983.71Gain or Loss: $201.92

 

As you can see above, baby DivHut’s portfolio skews heavily towards industrial names. No doubt, this portfolio is not complete by any means as I am looking to add more diversification from the consumer staples and health sectors. Names that I am considering adding to his portfolio in the coming months/years include, in no particular order, General Mills, Inc. (GIS), Pepsico, Inc. (PEP), The Coca-Cola Company (KO), The Procter & Gamble Company (PG), Colgate-Palmolive Co. (CL), Archer-Daniels-Midland Company (ADM), Becton, Dickinson and Company (BDX), Abbott Laboratories (ABT), W.W. Grainger, Inc. (GWW) and Kimberly-Clark Corporation (KMB).

 

What do you think about creating or contributing to a dividend growth portfolio for your child or other young relative in your family? I’d love to hear your own suggestions for selecting individual stocks as well as sector allocation ideas.

 

Disclosure: Long all above

57 thoughts on “Baby DivHut Turns One

  1. Happy Birthday, Baby DivHut! That’s quite a birthday gift you got there!

    As far as suggestions for the portfolio itself, I have nothing to add to what you’re doing. Just keep adding quality companies from different industries to the portfolio over time and let the magic of dividend growth investing happen.

    As for building a portfolio for a young family member, I’m all for it, but I wouldn’t give the child access until the age of 30. Then he/she will be at an age where, hopefully, responsibility will have been learned. The child should have at least 8 years of hard work at a job under his/her belt and know what it’s like to have limited money and resources and have to budget and go without. Otherwise, if you allow the kid to have access to the portfolio at 18 or 21, they’ll just go out and buy a Maseradi and book a month long tropical vacation.

    Keep posting Baby DivHut’s dividend growth! It is fascinating to see what it will look like a decade or two down the line.

    Sincerely,
    ARB–Angry Retail Banker
    ARB recently posted…Why Is Everything In Retail Banking A F***ing Problem!?My Profile

    • Hi ARB,

      Appreciate the birthday wishes. I still cannot believe at how fast a year has flown by. I plan to continue to add several more companies to his portfolio in the coming months and years as I feel it’s not quite diversified enough. Of course, it will only be with the high quality names we all know and love. I hope to raise a very financially responsible child and young adult but you do raise an interesting point about disclosing this portfolio to him at a, for lack of a better word, “stupid” age. What a waste it would be to squander the money away on nonsense. I will say that I would not have a problem of him using the dividends to buy “stuff” but not the actual principal. I want to teach him to pick the fruit of the tree and not to cut the tree itself. As always, I appreciate your comment.

  2. Congrats on the year point in fatherhood. It will be 9 months for me on St. Patty’s Day. So far I have only put some money into a savings account for our daughter. Eventually I want to do a custodial account, my parents had put a little money into index funds for me & my brother. So I want to do the same, either index funds or dividends or a mixture of both.

    This post gives me a better idea of what to look into.
    Josh recently posted…Is The National Debt A Reflection Of Our Society?My Profile

    • Hi Josh,

      Thank you for your wishes. Congrats to you as well. Enjoy every month and every stage as it really goes by extremely fast. I think it’s awesome that you have started a savings account for your child and are also considering a custodial account. If more parents took these basic steps for their children we’d have more adults in better financial shapes. Whether you choose dividend stocks or funds you are doing something beneficial for the next generation. Just starting an account is the single best thing to do because you are taking advantage of time and as we know, time is the ally of any long term investor as compounding effects only get magnified. Thank you for stopping by and commenting.

    • Hi R2R,

      Thank you for the birthday wishes. No doubt I was excited to jump start baby DivHut’s portfolio this first year. Going forward I expect to add more modest sums of fresh capital but I am happy that basically from birth dividends are being collected and automatically reinvested. A little more health and consumer staples should make this a sleep well at night portfolio for many years to come. Thank you for the comment.

  3. DivHuts,
    Congrats on the Birthday! I think you have a great thing going there, and it makes sense to invest more conservatively with lower yielding companies with lower payout ratios and more future growth. When mini-Hut comes into his own he will have a strong account that is punching well above its weight.

    – Gremlin
    No baby Gremlins yet.
    Dividend Gremlin recently posted…February, Review / March, 2016 PreviewMy Profile

    • Hi DG,

      Thank you for the well wishes. I don’t plan to add any speculative names to this portfolio ever. At most, I might go with a high growth SBUX or AMGN for added firepower but my main goal is to stick with the “boring” dividend payers in the “boring” sectors that may not offer stellar growth but can offer amazing dividend and income growth. For now the rule is, if I own it, then baby DivHut can own it too. Thank you for sharing your thoughts.

  4. Congratulations on the birthday! Starting a portfolio so soon for baby DivHut was and is an excellent idea.

    One other thing to consider would be to open a 529 plan. This would provide tax-advantages to baby DivHut’s investments as well. The only thing I’m not sure about is whether you can pick individual stocks with a 529 plan or are limited to a smaller selection of mutual funds.

    I’ll have to look into more of these options if there’s ever a baby in the future for me.

    Scott
    Scott recently posted…February 2016 IncomeMy Profile

    • Hi Scott,

      Thank you for the birthday wishes. I still can’t believe that I’m a parent now for one year. Where does the time go? I’m open to opening a tax advantaged account but honestly prefer a “no strings attached” investment vehicle for now. I know many have strong opinions about how to invest in a child’s future with many pros and cons for each method but quite honestly I’m happy that I took these first steps and just started. I plan to write these updates a few times a year and will mention any new accounts or stocks that have been added in baby DivHut’s name. Thank you for stopping by and commenting.

  5. Congratulations on the milestone! That’s great news and happy to hear that you have a healthy child. When little DivHut becomes an adult, I’m sure their portfolio will be bursting with as much life as they are. Keep it up! Also looking to get in on JNJ at some point in my own portfolio as soon as I can get a nice discount on it 🙂

    • Hi DM,

      Health first. Thank you for those kind words. Of course, my wife and I feel very blessed and are happy to share these updates online. Not to rush ahead, but I do look forward to a time when I can show baby DivHut’s dividend income growth over several years. In a sense, this is a real world experiment without cherry picking the top performing stocks or dividend growth in hindsight. Keep watching JNJ… I’m sure you’ll get a better chance to buy into that company. Not too long ago it was trading well below $100, a figure that seems to pique the interest of many dividend growth investors. As always, I appreciate your comment.

    • Hi German,

      Thank you for your birthday wishes. My wife and I feel very blessed to be able to do this for our child. The focus will continue to be only on the strong brand companies with a history of dividend raises and allow time and the magic of compounding to “do its thing.” Thank you for your comment.

  6. I think this is awesome. I wish I had done this for my kids. Since I was to stupid to do it when they were little, I’ve funded Roth IRAs for them once they started working. My plan is to help with Roth funding for five years, then they are on their own retirement path.

    Question Keith, As you are a big believer in Canadian banks, why are there none in your son’s portfolio? I suspect this is because they were overvalued when you funded this but I’m just curious.
    Investment Hunting recently posted…February 2016 – Dividend UpdateMy Profile

    • Hi IH,

      I am a big believer that if more parents took these basic steps for their children, we’d have more adults in better financial situations. When starting at a very young age it doesn’t require huge sums of cash to snowball into something quite substantial simply because of the time element involved. We seeded his account this first year and going forward plan to add modest sums of cash as our budgets allow. Take comfort in knowing that you are doing a great thing for your children as well by helping to fund their ROTH accounts. No doubt you are passing valuable lessons as well.

      While I love the Canadian banks long term, I did not put any into baby DivHut’s portfolio because it is a regular taxable account which means that a 15% withholding tax will be taken from every dividend distribution. For this reason there are also no REITs in his account. For now, the plan is to stick to only “regular” companies that pay qualified dividends. If we ever open a tax advantaged account, such as a ROTH or 529 for example, then I’d consider adding the Canadian banks and or REITs as well. Thank you for your question.

  7. Wow time sure flies by doesn’t it? Happy birthday Baby DivHut! It’s awesome that you created the dividend portfolio for him. It’ll grow nicely for him over the years.

    • Hi Tawcan,

      It sure does. About a year ago at this time we were all in the hospital getting ready to come home for the first time with our new baby. Blink your eyes and year has flown by. You already know the feeling watching your own T1 and T2 come into this world. I’ll be posting these dividend updates a few times a year from the baby DivHut portfolio. It will be fun to watch the dividend income grow over the years. Thank you for the birthday wishes and for stopping by.

  8. Keith,

    Awesome stuff. That’s one wealthy baby. I always like to tell people that I was worth more as a baby than I was when I was in my early 20s, but your baby is REALLY worth more than I was back then. 🙂

    Keep it up!

    Cheers.

    • Hi JF,

      It’s a true but sad statement you make about being worth more as a baby than an adult. Unfortunately, many fall into that category. I feel very blessed to be able to do this for my child and plan to teach him early on the value of investing, the value of a dollar and the value of patience. Thank you for your continued support and comment.

  9. Congrats to Baby DivHut! Is there going to be some cake smashing this weekend? My wife is expecting again in July and while I don’t think we’ll be able to get quite an early start as BDH did with his portfolio I hope to get one started sometime around the end of 2016 or early 2017. Having that many years of compounding is a huge advantage even if the initial capital isn’t that impressive and it will serve as a great teaching moment once they get around the pre-teen/teen years.

    • Hi JC,

      Thank you for the birthday wishes. My wife baked a cake and we cut a slice specifically for the “smash.” As you can imagine it was a lot of sticky cake and frosted hands but fun after all watching him play with this new texture. Looking forward to your blog post announcing the happy occasion in July. Just health and best thoughts and wishes. As you stated, even modest sums of cash can turn into an impressive sum simply because of all the time our young ones have. I wonder if more of our fellow dividend bloggers will start to share their own “baby/child” portfolios/savings/investments with us online. As always, I appreciate your comment.

    • Hi FV,

      I appreciate the birthday wishes. I’m sure it was amazing to see your friend with their new baby. So tiny when they first come out. It’s amazing at how much growth and change occurs in the first year. Thank you for your comment.

    • Hi DH,

      Thank you for the well wishes and compliments. We feel very fortunate to be able to do this for our child and look forward to teaching him the value of investing long term and what it really means to be patient. After all, this portfolio should grow untouched for at least two decades. I plan to share these updates a few times a year as not much will change on a month to month basis but it will be fun to watch the year over year growth in total dividend income as the years go by. Thank you for stopping by and commenting.

  10. Excellent idea! Baby Divhut will be very well on its way already by the age of 18. Talking about a kick start in life!

    We do something similar for our kids and godchilds. We invest each month a small amount into set of funds. Not my ideal situation, but the only solution available to us for the monthly amounts we want to invest.
    amber tree recently posted…Living life at 100 pctMy Profile

    • Hi at,

      The plan for baby DivHut is to take advantage of all the time he has for compounding returns. After all, time is the best ally for any long term investor. I think it’s great that you are doing something similar for your family too. Small amounts or large amounts of cash, funds or individual stocks doesn’t matter as much as the fact that you are doing something. Thank you for stopping by and sharing.

    • Hi TCF,

      Thank you for the compliment and birthday wishes. As I have commented to others, if nothing else, starting early enables you to take advantage of time and time is the best ally for any long term investor. Happy to hear you are doing something similar for Miss CF. The best thing anyone can do is simply starting an account and even better, starting early. Thank you for stopping by and commenting.

  11. Happy Birthday to Baby DivHut! Great idea about starting a portfolio early! Back when my kids were little I started 529 accounts for them because I didn’t know much about investing but I liked an idea of just putting a little amount every month into targeted fund. I never regretted this decision. But if I had another baby, I definitely will open just a regular brokerage account and keep adding up a little every year. Good luck and best wishes.
    Happy Healthy and Wealthy Girl recently posted…Sell or not to Sell?My Profile

    • Hi HHaWG,

      Thank you for the birthday wishes. Clearly, you were very responsible for your children financially by starting a 529 for them. If more parents took the initiative to open an investment account for their kids and simply fund it very modestly each year we’d have a lot more young adults in better financial shape. I appreciate your opinion too about choosing a regular brokerage account if you had to do it all over again. It kind of comforts me regarding my decision to start a regular brokerage account for baby DivHut. As always, I appreciate your comment.

  12. I had twins two months ago and wanted to do something similar. I was very worried about by tax ramifications and how it could hurt them getting help paying for college from the govt. I just opened a new taxable account in my name and put money monthly. What did horizontal wise?

    • Hi Nick,

      Congrats to you on your new arrivals! There are hundreds of articles and many differing opinions on what is the best thing to do for a child regarding investment types and investment vehicles. You really can make yourself crazy when looking at all the options that are out there. Of course, each method has it’s merits and disadvantages and it really depends on your individual situation. I went the route of a regular, taxable, custodial brokerage account filled with individual dividend stocks. I realize the potential impact this may create when applying for federal aid for college and that his account is not tax advantaged but I wanted a simple “no strings attached” account that he can access and use any which way he wants once he reaches adulthood. In two decades, who knows what college will be like and what the costs and value may be of a degree. The bottom line is that you started an account for them. Whether in your name or in their name, whether individual stocks or funds, you are setting aside a certain amount every year and taking advantage of the power of time to compound returns. Thank you for stopping by and sharing your happy news and investment account for your twins.

  13. Happy Birthday to Baby DivHut!!
    And kudos to you for starting investing for him and putting time on his side.
    We started investing for our son when he turned 3 a year ago. Over the last year, we bought nearly 9K worth of stock in ABBV, ABT, BAX, CLX, COP, DPS, EMR, GPC, HAS, JNJ, KO, PG, UNP and XOM. Current yearly dividend is at 260$ with current gain of 140$. We hope to continue to invest for him.
    We have another on the way and need to start investing for her as well.

    All the best!

    • Hi sans,

      Thank you for the birthday wishes and great job starting a healthy looking dividend growth portfolio for your child too. You mention a lot of great names, many of which are in my portfolios too. It’s all about taking advantage of time and allowing those dividends to compound and grow year over year. Continue investing for your child as long as you can knowing that because of all the time that’s on his side, even modest amounts of money can turn into a substantial sum over the years. Thank you for stopping by and commenting.

  14. Hey DH,

    It’s a really wonderful thing that you’re doing for your baby. They already have a net worth more than most people in the world, they’re very lucky to have parents looking out for their future. To think, your baby has 20 years of growth before they get to the age where a few young people are called forward-thinking for investing in their young 20s. I think this is a great idea, but I’d want to teach my kid the power of investing by showing them what’s happening with the investments and how, with time, they are getting more and more free money.

    Do you have an amount in mind of how much you want to seed this fund with?

    Tristan
    Dividendsdownunder recently posted…Dividends Down Under expandsMy Profile

    • Hi Dividendsdownunder,

      Thank you for your kind words regarding our investing for baby DivHut. There’s no question that as he gets older I’ll be teaching him about investing, saving, compounding, patience, not chasing “fantasy stocks/yields,” etc. My sincere hope is that as he grows into an adult he’ll continue to fund his own account for another ten or twenty years thereby giving him a portfolio that has potentially compounded returns for three or four decades. I can only imagine what that passive income stream will look like. We do not have a formal amount set for funding his account. All I know is that every year we’ll contribute something towards it. It will vary from year to year and not be as much as was funded in year one. That was just a nice booster to get things started. I’m happy to share that my family has climbed aboard the baby DivHut dividend train as I mentioned to them that any birthday/holiday cash gift he receives will 100% go into his custodial account. He receives plenty of toys, books and clothes from us and family friends already so cash can be his gift that he’ll enjoy later in life as a dividend income stream. Thank you for commenting.

    • Hi weenie,

      Thank you for the birthday wishes. That’s the whole point of starting a dividend growth portfolio from birth, time. It’s the one element we can take advantage of. Thank you for stopping by and commenting.

  15. 1 yr already! Happy b’day to baby DH. I’m also celebrating my little daughter’s birthday this month. Time flies. You are doing what I wished. Had I owned such a portfolio, I would be financially independent and be able to do what I or we love doing, world would be a better place. I’ve opened 529 account for my little one but its mostly funds. Need to consider adding some of the blue chips. Keep racing towards your goals.
    Race2Retirement recently posted…Recent Stock Purchase II – March 2016My Profile

    • Hi R2R,

      Yup… one year gone just like that. It’s cliché to say but it’s so true about time flying by so fast. Happy birthday to your daughter as well this month and congrats on creating a 529 for her. If more parents took the initiative to invest in their children’s financial future we’d have a lot more young adults in better financial shape. Keep building that portfolio for her with funds, stocks or whatever. The fact that you created an account for her says a lot. Thank you for your comment.

  16. Congrats on your first year of fatherhood. My youngest is turning 4 next month. It true what everyone says, “It goes by fast.” Cherish and enjoy each and every moment. Continue to build the dividend portfolio. You’ve done a great job so far. Look forward to hearing where the portfolio is a few years from now. 🙂

    Best wishes and continued success my friend. AFFJ
    A Frugal Family’s Journey recently posted…Collection of RECENT BUYS (February 2016 Summary)My Profile

    • Hi AFFJ,

      Thank you for your well wishes. All I hear from parents with older children is to cherish every moment because before I know it, diapers will be in the past and other new milestones will be achieved. The plan is to continue building and growing his dividend portfolio in the coming years. I still want to add several more names from the consumer staples sector and health but there’s plenty of time for that. As always I appreciate your comment.

  17. Happy birthday to Baby DivHut! I’m a huge believer in the value of compounding over time, so I’m sure your investments will do quite well in the long run. I have a few of the big name companies on my watch list right now – Coca Cola, Pepsi, Colgate, J&J and Unilever. My biggest issue right now isn’t necessarily with market timing, it’s converting to USD when our dollar is so low right now. It’s gone up a bit recently which is nice and if it continues to climb I’ll convert some cash. Cheers
    Dan @ Our Big Fat Wallet recently posted…Switching to Cash SpendingMy Profile

    • Hi OBFW,

      Thank you for the birthday wishes. Time is the one key ingredient for successful long term investing and for the magic of compounding to take effect. While I’ll be monitoring his account closely, I will have a ‘set it and forget it’ approach and not trade in and out of positions. I like all the names you mention for potential buys, of course, when currency issues come up I can understand waiting to pull the trigger. Thank you for stopping by and commenting.

  18. I’ve done the same thing for my daughter who will be 1 in April. I got a bit of a later start as I only opened up her custodial account in January of this year, but I’m really excited to track the growth and progress of her account as she grows.

    • Hi Matt,

      Congrats to you for starting an account for your daughter. It doesn’t have to be opened the day a child is born 🙂 as long as you do it early on in life you should be setting her up for a solid financial future. Like you, I also look forward to tracking the progress of the account and passive income earned over the years. It will definitely be an interesting real world example. I appreciate your comment.

  19. Excellent portfolio for baby DivHut! I also love the list of stocks you are looking to add to your child’s portfolio. I’m not too familiar with GWW, but all the other companies you listed are companies I either own or are also looking to own as well.

    Congrats on completing your first year of fatherhood! It’s such a blessing. I am enjoying and cherishing every second of fatherhood as well.

    • Hi ACI,

      Thank you for your kind words and support. I plan to add those additional companies to his portfolio in the coming months and years. No rush to fully build it out as I feel quite content that we were able to simply start a portfolio for him at this young age. I still can’t believe that I’m a father for a year. It’s so true about time and life flashing before our eyes. As always, I appreciate your comment.

    • Hi Dp,

      Well before he was even born I discussed doing something like this with Mrs. DivHut and she was 100% on board. The beauty of creating a dividend portfolio these days is that it does not require huge amounts of capital to start. With companies like RobinHood and Loyal3 modest sums of cash can be invested which can grow into a nice passive income stream because of all the time to compound returns. For our young children it’s more about time than money to get that dividend mojo rolling. Most of us are in our 30s, 40s or 50s even and do not have the luxury of investing small amounts of cash. Thank you for stopping by and sharing your thoughts.

  20. Happy birthday to Baby DivHut!

    Thanks for sharing your approach to creating a portfolio for your baby. Keep it up for 20 years and you’re child will have a great foundation to build on!

    I have three sons and I’ve encouraged them to open Loyal3 accounts. Its been a mixed bag so far (life happens), but at least they’re somewhat informed and invested now. Hopefully, over time, they’ll learn to save and to start generating passive income.

    I’m planning to “encourage” them to invest by giving them $1 for every $2 they invest, up to a certain maximum. We’ll see how it goes.

    Cheers
    FerdiS, DivGro

    • Hi FerdiS,

      Thank you for the birthday wishes and support for what I’m doing for baby DivHut. I always state that time is the biggest ally of any long term investor and starting a dividend growth portfolio at birth give as much time as possible for the effects of compounding to take hold. I’m happy to hear that you are doing the same for your children. Keep pressing, teaching and providing incentive for your children and I’m sure at some point something will ‘click’ and they’ll be hooked on this investing method. Thank you for stopping by and sharing your thoughts.

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