With three quarters of the year now in the books, it is time, once again, to take a look at baby DivHut’s dividend income progress in 2016. I like to do these baby DivHut updates three or four times a year as not much changes in his portfolio on a month to month basis. I can honestly say that I feel very proud to be able to start a dividend growth portfolio from birth for my son. The real effects of compounding will be very noticeable in an account that was started so early in life. For now baby DivHut’s portfolio is still relatively small in terms of individual holdings with just eight different dividend paying stocks currently. Of course, the number of individual holdings will grow over the years as we add fresh capital to his account and the inevitable stock spin off that will occur as well. To tell you the truth I was looking forward to seeing his portfolio diversify with the proposed Emerson Electric Co. (EMR) spin off of its network power business, Vertiv. Instead that deal was scrubbed in favor of a direct sale to private equity firm Platinum Equity for the price of $4 billion. Still, his portfolio should diversify with the proposed Yum Brands (YUM) spin off of Yum China later this year. With that being said, let’s take a look at baby DivHut’s current holdings, sector allocation and dividend income for the first nine months of the year.
Portfolio
| Symbol | Description | Quantity | Cost Basis | Market Value | Cost/Share | Gain or Loss |
|---|---|---|---|---|---|---|
| ABT | ABBOTT LABORATORIES | 8.9266 | $334.31 | $388.31 | $37.45 | +$54.00 16.15% |
| CAT | CATERPILLAR INC | 15.0963 | $1,002.55 | $1,331.80 | $66.41 | +$329.25 32.84% |
| EMR | EMERSON ELEC CO COM | 37.0715 | $1,926.05 | $1,919.19 | $51.96 | -$6.86 -0.36% |
| ITW | ILLINOIS TOOL WKS INC | 6.2139 | $519.42 | $723.36 | $83.59 | +$203.94 39.26% |
| JNJ | JOHNSON & JOHNSON | 8.3051 | $831.32 | $994.95 | $100.10 | +$163.63 19.68% |
| UL | UNILEVER PLC - ADR | 13.1015 | $519.63 | $606.73 | $39.66 | +$87.10 16.76% |
| VFC | V F CORP | 25.2242 | $1,629.80 | $1,388.34 | $64.61 | (-$241.46) (-14.82%) |
| YUM | YUM! BRANDS INC | 14.3245 | $1,077.00 | $1,251.82 | $75.19 | +$174.82 16.23% |
Total Investment Balance $8,604.49
Gain or Loss $764.41
Dividend income from baby DivHut’s account totaled $37.85 in September with a year to date grand total of $164.66.
Sector Allocation
| Sector | Sector % | Market Value |
|---|---|---|
| Industrials | 46.19% | $3,974.35 |
| Consumer Cyclical | 30.68% | $2,640.16 |
| Healthcare | 16.08% | $1,383.26 |
| Consumer Defensive | 7.05% | $606.73 |
Going forward I’d love to add some additional consumer staples and health care stocks to his portfolio but valuations for many names I like are still a little pricey. If I had to invest today, I’d look to add to his V.F. Corporation (VFC) as that name has dropped quite a bit from its highs earlier this year and values and yields are starting to look very compelling. Choosing a new stock for his portfolio today I’d probably initiate a position in Cardinal Health, Inc. (CAH). Unless something dramatic happens in the market I’ll most likely just sit tight with his portfolio holdings till the end of this year and continue to reinvest dividends automatically as they come in.
What do you think about baby DivHut’s portfolio and sector allocations? Please let me know below.
Disclosure: Long all above
I think Baby DivHut is a lucky baby and coming around nicely already. I’m also starting a custodial fund, but will be starting out in funds since the numbers are so small yet.
Dividend Ten recently posted…Recent Buy
Hi DT,
If more parents started investing for their kids at a young age I think we’d have better financially literate individuals today. Investing can teach, planning, discipline, consistency, the concept of risk and reward and of course the glory of earning passive income among many other things. These days there is zero excuse to not start an account for your child. With various fee free platforms to buy stock with minimum trades starting at $10 anyone can build a passive income generating portfolio for their child. It’s all a matter of education. Thank you for stopping by and commenting.
It looks good to me. It is good to see that you hare able to start investing for your son from birth onwards. Lucky baby!!!
Hi Pellrider,
Thank you for those kind words. I feel very proud to be able to start a passive income generating portfolio for my son. In time, I will teach him about investing, dividends, the value of time and the benefits of earning money passively. I appreciate your comment.
Is this in a 529? Would love to do something like this for my daughter.
Hi AS,
This is not a 529 account. It’s a standard custodial account. I mention why I went with a standard account rather than a 529 in my post, Starting A Dividend Growth Portfolio At Birth. The central reason for choosing a regular account rather than a 529 was because I wanted to create an account with no strings attached. This way the money can be used any way he wishes without any conditions or penalties. Besides, I’m not sure how valuable a college degree will be in two decades, especially as costs keep rising dramatically. I commend you on wanting to start an account for your daughter. I think it’s a very responsible action to take and whether you choose a 529 or taxable account for your daughter, invest in stocks, precious metals, real estate or whatever, the long term benefits can be enormous. Thank you for stopping by and commenting.
totally agreed on standard account vs. 529. Which brokerage company did you open custodian account with?
Happy Healthy and Wealthy Girl recently posted…September 2016 Dividends and Passive Income Progress
Hi HHaWG,
I opened the custodial account with CapitalOne Investing (formerly Sharebuilder). It was opened under a grandfathered commission rate of $2 a trade for Costco members.
Such a good thing, to start a fund from birth. It is like the best ‘experiment’ to see the power compounding put to work on the long term. Imagine the possibilities he would have at the age of 18. The portfolio would have had the same amount of time, some of us would need to get F.I.
Hi Divnomics,
As you stated, I consider this like a real world experiment to really show what compounding returns can look like. Most of us start investing, if we are lucky, in our 20s. The rest start much later in life and have less time to really enjoy the compounding fruits. Just imagine if baby DivHut decides to keep (re)investing into dividend growth stocks till age 40. He’d have four decades of investing under his belt and barely be middle aged. My hope is to teach him about being invested long term in solid dividend paying stocks without having the need to sell unnecessarily. Keep holding on to that dividend fruit tree and simply pick the fruits. As always, I appreciate your comment.
Hi Keith
This is such an interesting concept and what an amazing gift to give to your son. If only my parents had had the foresight. LOL! I know it’s a little early in the game, but I wonder if you’ve given any thought as to how you’ll eventually give him control… will you teach him the art of investing early? gradually give him control?
Andre – GoGoAssets recently posted…Dividend Update: September 2016
Hi GGA,
I think we all wish our parents would have started some type of investment plan for us as babies. Anything really… Gold/silver coins, a share or two of DIS. Anything would have helped and matured over the childhood years. It’s funny you ask about giving him control. My brother jokes I should keep this account secret from him till he’s 40 🙂 By then, he’ll be mature enough to handle the account and not make any youth related foolish mistakes. It’s a thought. Just imagine what forty years of compounding can create. Of course, the goal and responsibility is on me to teach him about dividends, passive income, investing and time and the notion of it being OK to pick the dividend fruits but never chop down the dividend tree. He’s only 18 months old but I’m already thinking about these future lessons. Thank you for sharing your thoughts.
I think your brother is onto something lol! I can’t imagine there are very many 20 something yr olds in the world who would know what to do with that kind of cash. 😉
Hi GGA,
He very well may be. He always reminds to me wait till he’s 40 to tell him about his account and even suggests opening up another account years down the road simply for teaching purposes. Something like a Loyal3 or Robinhood where I could still teach him the benefits of dividend investing using very little cash. We’ll see. For now, I’ll continue to enjoy the baby/toddler years 🙂 Thanks for the reply.
Such an amazing thing you are doing for Baby Divhut here. It is exactly what we want to do when we have children. While I’m sure the little one doesn’t know about this now, I can only imagine their excitement once they are older and understanding what it means to have this stream of passive income. Love, love, love the list of companies in the portfolio!
Bert
Dividend Diplomats recently posted…Lanny’s Q3 2016 Goals Update
Hi DD,
I hope these periodic updates can help inspire other parents (to be) to do the same for their child. These days anyone can open a trading account for their child easily and even opt for many fee free trading platforms that require extremely small amounts to invest. In other words, there’s no excuse to not start something similar for any child and slowly build up a passive income stream for them. After all, children have the best commodity of all, time. Glad you like the portfolio holdings thus far. Of course, I plan to add more stocks and sectors over the years as his portfolio continues to expand. Thank you for stopping by and commenting.
Baby Divhut is one lucky son of a gun! He almost has half the passive dividend Fund value as me! Keep up the great work. Not to mention, I love the investment gains he has made already! He is going to be pretty well off by the time he realizes what he truly has. Keep up the great work!
Hi kd,
I appreciate the continued support from you and others who have commented. All are positive and keep me motivated to continue on my own journey as well as baby DivHut’s journey. The goal for his portfolio is to build an ever increasing passive income stream every year by selectively investing, when funds are available, and reinvesting all dividends to get the compounding machine rolling faster. Thank you for your comment.
The little sprout is doing pretty good so far! He will be proud of his dad, who gave him a nice start in life with this solid portfolio.
Team CF recently posted…Thermostats and Pancakes
Hi TCF,
Thanks for those nice words. Starting and maintaining the portfolio is part of the equation. Teaching him about investing, passive income, compounding and the value of time is another. It will come as he gets older and I pass on my own thoughts on investing. Thank you for stopping by and commenting.
Good progress and solid portfolio. Just made the annual addition to my grandkids’ with WFC. Any reason you’re excluding financials?
Hi Charlie,
So far so good with his portfolio. As I mentioned, not much changes on a month to month basis as I do not buy stocks for him frequently. His portfolio is still in the early stages and I’m sure I’ll be adding a financial name or two down the road. Names like, TROW, WFC, AFL, CB, TRV, USB and others come to mind. Like my own portfolios I wish to make the consumer staples the largest sector holdings and eventually add to other sectors as the portfolio matures. His portfolio will include a financial stock or two eventually. As always, I appreciate your comment.
JNJ & UL. A few years ago I chose Proctor & Gamble instead of these two. I should buy a position in one of the other companies and maybe sell P&G altogether.
Josh recently posted…A Parent’s Guide to Student Loans After Graduation
Hi Josh,
PG is a great long term name I think and I have no plans to sell in my portfolio and would like to add it to baby DivHut’s portfolio one day too. Of course, I’m not comfortable buying the stock based on its current value but it is a name I am considering when valuation becomes a little more compelling. Just think hard before wanting to sell. Thank you for sharing your thoughts.
Its totally awesome progress! your son is so lucky! If I have another kid I will totally do it same way! thanks for sharing your progress!
Happy Healthy and Wealthy Girl recently posted…September 2016 Dividends and Passive Income Progress
Hi HHaWG,
Thanks for those kind words. I’m happy with his account progress thus far and I’m in no way finished adding stocks to his account. There are still quite a few great consumer staples and health names that will be added over the coming months and years among other sectors too. That’s the beauty of starting a portfolio from birth… you can take your time building it up. Thank you for commenting.
Nice portfolio you’re building for your child DivHut – it’s progressing very nicely indeed! I bet it’s going to make a heck of a present some day – I hope they’re inspired to learn about investing.
Tristan
Dividends Down Under recently posted…Helping family with finances?
Hi DDU,
Making sure baby DivHut does get inspired to invest long term is all up to me. I take that responsibility upon myself to make sure I can instill in him the values of patience, consistency and time to let an investment fully mature. The goal is for him to realize that he can continually pick the dividend fruits for the rest of his life as long as he never cuts down the dividend tree. Thank you for stopping by and commenting.
wow ! this blog topic is in yahoo finance today. Great!!
Hi Dipu,
That’s great. I think it’s something that should be discussed these days especially since it’s easier than ever to invest for your child. Thank you for sharing.
I remember you said you want to invest $50K, by the time baby DivHut is 18, he’d probably have $200K shinny in his bank account. LOL 🙂 Geez, the kid can just stay home and live off dividend or learn a trade and run his own show. heheh college is overrated. Eitherway, college or not, $200K to start a life is a great tool to have.
Best of luck!
Hi vivianne,
Who knows what the account value will be once he turns 18. All I care about foremost is making sure that his dividend income grows every year. If I can post year over year dividend income gains for two decades I know I would have done the right thing. And who knows… perhaps he’ll want to continue to contribute to his account on his own as a young adult. As always, I appreciate your comment.
Your child is going to be the envy of their friends when they are old enough to realize what an amazing head start that they have. It looks like you have a great asset allocation that should treat you well in the long run.
Mustard Seed Money recently posted…Teaching Kids About Money
Hi MSM,
Any edge you can help give your child is important. My goal is to teach him the value of investing and time as he gets older and hope that he continues building upon his account as a young adult. I mentioned in other comments that I want to teach him that it’s OK to pick the dividend fruits every now and then but it’s never OK to cut the dividend tree. Thank you for commenting.
Oh man, your son is going to be so happy one day. That’s actually really cool that you’ll get to see the compound interest effects of DGI over a long period of time. Nice portfolio! Thanks for sharing.
Graham @ Reverse The Crush recently posted…The Best Coffee Shops For Remote Work In The West End of Toronto
Hi RTC,
I think this is going to very interesting to see how the portfolio and dividend income grows over the years. I call it a real world experiment. My plan is to instill in my son the basics of investing for the long haul, the value of time and the beauty of passive income. If I’m successful I know he’ll continue to grow his portfolio on his own as an adult. Thank you for stopping by and commenting.
I like the JNJ and Yum brands holdings. I think next year when I don’t have to contribute a large % of my salary to my 401k to max it out, I’m going to leave a little leftover for dividend growth purchases. JNJ and Yum Brands will be on my watch list!
Finance Solver recently posted…Why I Purposely Lose Cash Every Month
Hi FS,
I think JNJ is perpetually on everyone’s list. JNJ is probably the one dividend staple almost every portfolio holds. While it’s great that you are contributing so much to your 401K I wouldn’t discount the benefits of long term dividend growth investing. It will be interesting to see how YUM will perform post spin off later this year. As always, I appreciate your comment.