It has been more than two years since I made these picks and I’ve been providing a quarterly update ever since. This list is reflective of my investment objective which is to create a growing stream of passive income.

This isn’t an academic exercise for me. I own 11 out of 12 of these picks. The only exception is Soul Patts which is on my watchlist.

A passive income strategy requires patience and consistency. I’ve owned several of the names on this list for decades. My original purchase date for ADP is 1981, Diageo 2008, Phillip Morris 2009, Kinder Morgan 2010 and Brookfield Infrastructure in 2014. Find shares that consistently increase their dividends and reinvest those dividends for decades and your passive income can skyrocket.

Before getting into the update a quick reminder of what I’m trying to accomplish with these 12 picks.

My original premise

I had two long-term goals for the shares and ETFs I included on my list on June 20th 2024. For the more growth orientated bucket I wanted to achieve average income growth of 10% per year. For the higher yielding shares I was targeting average income growth of 8% annually.

In both cases this income growth comes from a combination of dividend reinvestment and dividend growth. In providing this update I used the following assumptions to calculate the results:

  • Equal weighted portfolio: I assumed that each of the 12 picks received an equal allocation of $10,000. For the US holdings I used the exchange rate on the 20th of June 2024 which makes a $10,000 local investment $6,654 US. I am going to assume no rebalancing so the equal weighted portfolio is only a day one exercise and the weights will fluctuate over time.
  • Dividend reinvestment: I am assuming that dividends are reinvested at the closing price on the day of the dividend payment. This may vary slightly from how a broker processes any automatic reinvestments or how an investor might manually reinvest dividends. In all but the most extreme situations the price will not vary significantly under these scenarios from my approach.
  • Income on 20th of June 2026: This represents the dividends and distributions in the preceding 12 months on the 20th of June multiplied by the number of shares held on the 20th of June.
  • Income on the 1st of January 2026: This represents the dividends in the proceeding 12 months on the 1st of January multiplied by the number of shares held on the 1st of January.

In the following chart you can see the results of this exercise.

13 income picks

Over these eighteen months the picks have achieved 18.62% income growth in constant currency terms and 13.61% in Aussie dollar terms. Overall passive income increased by around 2% for the quarter.

Currency matters and there will always be fluctuations. However, since this is a long-term portfolio I’m more interested in what is happening in constant currency terms. I included companies that I thought would grow their dividends. The constant currency view answers this question.

The two outliers

When you only have twelve holdings in a portfolio the overall results can be impacted by things going wrong with one or two positions.

Given my goal of growing passive income at a rate faster than inflation it is apparent where things have gone wrong – Diageo and the VanEck Australian Equal Weight ETF.

My thesis with the VanEck Australian Equal Weight ETF was straightforward. I wasn’t enthusiastic about the dividend growth prospects for the largest companies in Australia which dominate the local market capitalisation weighted indexes. Instead, I bought an ETF that was equally weighted.

From a dividend growth perspective things were going accordingly to plan as recently as my last update. In my Q2 update MVW had total income growth of 10.72% but the July distribution dropped from $1.09 in the previous year to $0.66.

This approximate 40% drop in July distributions for MVW was mirrored to a lesser degree by a reduction in July distribution for the Vanguard Australian Shares ETF (ASX: VAS) of 26%.

I don’t believe one distribution is enough to invalidate my thesis but this is one to watch.

The income drop in Diageo is more profound and potentially more of an issue going forward. Diageo is a global spirits and beer giant whose results have been impacted by what is increasingly looking like a structural decline in alcohol consumption.

I’ve personally owned Diageo since 2008. I liked their collection of brands including Guiness, Johnnie Walker, Smirnoff, and Tanqueray and thought they would benefit as consumers migrated to more premium alcohol.

This largely played out and the shares were a strong performer in my portfolio until 2021. But coming out of the pandemic people started drinking less. I believed this would be a short-term trend and since I thought the shares were cheap I included them on this list.

It is clear now that a more profound shift in alcohol consumption has occurred. Diageo has a new CEO who is starting a turnaround plan. This includes several initiatives including cost-cutting and repositing the drinks portfolio by investing in faster growing brands.

As part of this effort, in February 2026 the company announced a new dividend payout ratio target of 30%-50% of earnings, below the historical five-year average of 65%.

Our analysts think the shares are cheap and believe the dividend payout rate will move up as the turnaround efforts progress. I’m going to be patient but the results lately haven’t been great which is hurting the overall performance of the twelve picks.

Have any questions or comments? Write me at [email protected]

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