It’s been nearly 2 years since we launched the Compounding Dividends portfolio.
The goal when we launched it was to build a reliable income stream, with a $5,000 per month (or $60,000 per year) target.
Let’s see how close we are to that goal.
Since the launch of the portfolio, we have:
Zero dividend cuts
Sold one company
Had a cannibal stock initiate a dividend
Had 11 companies increase their dividends since we bought them
The average company has increased its dividend by more than 9%!
If this were to continue, our income would double in about 8 years.
If we look over a longer period, the companies in Our Portfolio have increased their dividends by 11.5% per year.
At that rate, it takes just over 6 years for our income to double.
So far this year we’ve received $35,080 in dividends.
We’re projected to receive nearly $48,000 in dividends this year.
That’s:
Almost $4,000 per month
$923 every week
$131.50 per day
All for sitting back and letting our companies do the work.
Dividend Growth
If we assume an average dividend increase of 10%, it will take less than 3 years to hit my goal of $5,000 per month or $60,000 per year in dividends.
If we’re conservative and assume:
8.5% growth in dividends per year
7% growth in stock price per year
That we reinvest our dividends
Then in 5 years, we’ll have:
$64,462.36 per year in dividends
$5,371.86 per month
A portfolio value of $1,698,530
Here’s how the growth would look.
But what if you have more than 5 years?
What if you still have 20 years?
Let’s see how that would look:
$35,387 a month seems like plenty to live on.
But we can’t forget about inflation - let’s assume it stays at 3%.
At that rate, to have $5,000 in today’s spending power in 20 years, you’d need $9,030 per month.
We’re still covered!
A common critique of dividend investing is taxes.
Remember, this is a retirement scenario - you’ll need money to spend, so it’s either dividend income, or you have to sell stocks.
Fortunately here in the U.S., qualified dividends and long term capital gains are taxed at the same rate.
Right now, the highest rate is 20%.
But we all know the U.S. Government needs more money, so let’s assume 25% just to be safe.
We’ll need more than $9,030 a month to cover that bill.
$9,030 / 0.75 = $12,040
That puts us at about $12,000 per month including the tax bill.
W still have about $23,387.22 to figure out what to do with.
Reinvest it of course!
Over time, reinvesting your dividends makes a huge difference!
Now let’s dive in to the portfolio in more detail!
Our Portfolio
Of course I can’t show you everything (but I can if you upgrade to a paid subscription).
But I will share some…
Domino’s Pizza is the company that’s increased its dividend the most, growing by nearly 32%!
That means our income from Domino’s is nearly 1/3 higher today than it was when we bought it to start the Compounding Dividends Portfolio.
But the stock price is down by about the same amount!
Domino’s is struggling with slower growth due to inflation and how stretched consumers are right now.
But they’re still growing.
Here’s the same chart for Papa John’s:
The main takeaway?
Domino’s Pizza is growing revenue by about 5% this year
Papa John’s revenue is declining by about 5% of this year
That means that Domino’s is taking market share in this tough environment.
When things rebound (as they always do) Domino’s Pizza will come out stronger on the other side!
But Domino’s isn’t just a dividend grower.
It’s a Cannibal stock as well.
So management is continuing to buy back shares at these low valuations.
This is an amazing setup for long-term investors like us!
Right now, I think Mr. Market is overlooking a lot of opportunities like Domino’s Pizza.
He’s got a bad case of short-termism.
High quality dividend growers like Domino’s require too much patience, so investors are selling them to chase momentum in the AI buildout.
A 486% spike in something like Micron over the past year gets attention.
But look at the 20-year chart for Micron:
That’s an awfully big spike at the end - what if we cut off the last year?
It’s quite a bit less exciting…
84% of Micron’s total returns in the past 20 years have come in the last 12 months.
These gains are all AI-driven.
That feels very unsustainable to me.
Now compare Micron’s returns from 2006 through 2025 to Domino’s Pizza:
Pizza beats chips the vast majority of the time.
I think this small example frames up the strange split in the markets right now.
There’s an AI Capex story where trillions of dollars are going into chips and infrastructure for AI companies that are losing billions of dollars
Then there’s the real economy where consumers are tapped out, budgets are tight, and discretionary spending is softening
Howard Marks says that as investors we can’t know where we’re going, but we sure better know where we are.
On Monday we’ll start a series trying to figure out the answer to that very question.
I’m already 5,000+ words in, and I’m not done yet.
See you Monday morning.
-TJ
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Fiscal.ai: Financial data
Disclaimer
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