My Dividend Growth Portfolio Q3 Update: 41 Holdings, 6 Buys, 5 Sells, 3.81% Yield

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Introduction

Welcome to my monthly update for my dividend growth portfolio. This article series covers my investing journey as a father of two towards my eventual retirement. Any specific stocks or amounts are particular to my self-directed 401k plan.

The goal of my portfolio is to generate a perpetually growing income stream for my wife and me during our golden years. The aim is to live off dividends without touching the principal. Dividend growth stocks and ETFs are the chosen vehicle to meet that goal. Now 34, I have approximately 25 years before I can (safely) touch any of this money.

For anyone interested in seeing changes in real time, I have my portfolio and dividends tracked on Dividend Derek. I also have a trimmed version that you can freely take for yourself if you wish, found here.

I’ve received some questions in the past, so you can save off a copy by selecting “File” -> “Make A Copy.”

Change Log

I introduced a change log as a quick reference to highlight relevant non-data changes. Things like dividends collected, dividend increases, and charts will all change each month regardless.

  • Added Simply Safe Dividend scores to my spreadsheet
  • New table referencing “SSD” scores
  • Correlation Matrix analysis

Commentary

My portfolio rebounded September after an off month in August. I was up 3.1% versus the 1.95% on the S&P.

More importantly, my dividend income continues to grow month after month whether it is by dividend reinvestment, organic dividend increases or new purchases.

I ended the month with a balance of $332,327 which was up from $321,861 month over month (+3.1%).

The Fed cut their benchmark rate for a second time this year as they try to wrestle with mixed data. Their overnight repo story though took a bit of the spotlight as overnight lending rates spiked leading up to the end of the month. Additionally, they have been increasing their overnight lending and it’s expected to continue to at least the mid of October.

As I’ve started writing this in the early days of October, the markets have been down on some mixed economic data suggestion a recession may be on its way.

Now let’s switch back from macro topics to covering my portfolio. First, I made several transactions to consolidate overlapping holdings. Secondly, I closed some individual holding positions and put that money to work in either similar or higher yielding ETFs. I also started my first preferred share position based on some research by Rida Morwa. Lastly, I closed out of a non-dividend growth stock and put that money to work in one of the dividend ETFs. I’ll detail all of those moves below.

2019 Goals

  1. I want my dividend growth holdings to have an average dividend growth rate of at least 7% (currently 8.8%).
  2. By the end of 2019, I want to have a projected dividend income of at least $10,000 (accomplished in July. Was $9,000 and accomplished in April. Originally $7,900 at start of 2019).
  3. I want to suffer no dividend cuts. (Annaly (NLY) cut in April)

Portfolio Strategy

Buying Criteria

These are the general guidelines I will review to see if something is worthy of adding to my dividend portfolio or whether I will add to an existing position.

Investing Framework

This is the first round of questions to review during an initial filtering process of investments.

  • What is the opportunity here?
  • Am I excited about the business?
  • What are expected returns?
  • What are the risks and downside?
  • How does this fit into my portfolio?
  • Is the opportunity here better than an ETF?
    • There needs to be something materially different that isn’t readily duplicated with another product. This could be a yield that I can’t easily get or some major upside potential / limited downside that can be defined. An example could be seeing P/E mean reversion as part of a thesis.

Company-Specific Factors

  • How long is their dividend growth streak?
  • Is the sum of the dividend safety + yield + growth score >= 200?
    • This may become more nuanced; growth stocks may need a safety + growth score > 160 to be considered
    • High yield stocks may need a safety + yield score > 160 to be considered
  • Chowder rule > 10%. High yield investments may get a pass on this. Like mentioned above, I want some additional “kicker” that can provide additional upside with less risk.
  • I want to see steady earnings growth over time; this will generally remove commodity-based companies.
  • I like cash cows. Good profit margins (> 10%) are appreciated, though not required. A company with a moat should be analyzed to see how easily its moat can be disrupted.
  • I like to see shareholder-friendly management. This manifests in a healthy and rising dividend and a willingness to buy back shares. Often buybacks aren’t always done at opportune times. Additionally, they are frequently established to just buy back stock options for employees. A good metric to investigate is the “total shareholder yield.” This aggregates net dividends, buybacks and debt reduction.
  • Perhaps most importantly, the valuation needs to be right per F.A.S.T. Graphs. The stock should be trading at fair value or better for an appropriate timeline (13+ years, if possible). With a longer time frame, I can see how shares fared during the Great Recession, and this also removes some of the recency bias that can come from only analyzing valuation during this extended bull market.
  • I will also use Simply Safe Dividends and the information provided by Brian on his site. Among a plethora of information available, he has a dividend scorecard where companies are ranked in terms of dividend safety, growth and yield. I aim to pick companies that are in the 80+ safety range.

Selling Criteria

Here are my guidelines when I may consider a stock sale.

  • Dividend cut.
  • Company degradation – This could be things like deteriorating balance sheets, loss of competitive advantage and loss of credit ratings. These factors may come to light before a dividend cut manifests. This may also appear in a streak of less-than-expected dividend increases. The dividend increase is the more visible outward sign of a company’s success. A paltry increase or two may underscore problems below the surface.
  • Wild overvaluation – This becomes a bigger factor if there is something at a fair valuation that I wish to purchase with the proceeds. I will admit that several things I have sold have continued to defy financial gravity, so I am more becoming of the mind of just ignoring overvaluation if the underlying business continues to operate well. Think “Selling into Strength”.
    • I may put in a limit order to sell, tailing a stock upwards until financial gravity kicks in.
    • I may write an out-of-the-money covered call.
  • I just don’t want to own it. When I pull this card, I will more fully explain my reasoning. Part of the beauty of owning individual companies is choosing where I put my money. I can opt to not support companies, products, management, etc. that I do not agree with. An example of this could be companies with management issues or criminal/unethical business practices.
  • Based on known information, capital is better passively invested or focused into better ideas.

Timing

One tactic I’ve used is buying shares prior to the ex-dividend date after the company has announced its yearly increase (this also works for ETFs). The increase in amount gives a quick, “at a glance” view into how management thinks the company is operating. A large increase can be confirmation from management that the business is running quite well. Sometimes, the reverse can be true too – being snubbed with a “bad raise” can be a red flag that things are not as they seem and it’s time to research what’s up. I’ve front-run a dividend increase several times already with Altria Group, Starbucks (SBUX), Corning (GLW), Prudential Financial (PRU), Home Depot (HD), Johnson & Johnson (JNJ) and Illinois Tool Works (ITW).

Most importantly, this was not done to chase dividends but to strategically add to a position that was worthy of being added to. Trees don’t grow to the sky, and neither do dividend yields. A quality company that has a nice dividend increase should see its stock price rise by a similar amount over the course of the year, readjusting to the new and higher dividend amount. By jumping the gun, you can speed up the compounding process.

If this sounds interesting to you, you should check out my weekly article, where I give the full list of these companies.

Dividend Reinvestment

At the end of 2018, I turned off my dividend reinvestment as I wanted a continual cash flow coming in. As time goes on that continues to evolve. Analyzing my data, I came up with a simple metric for determining whether to turn it on or off. If the current share price is below my cost basis, I may turn it on. I would do this if as my cash is above my target (5% and it currently is). This is not universal, and I have reinvestment on for some other names.

To keep track of this, I just added some basic conditional formatting to my spreadsheet. I’ll highlight cells green if I have an opportunity to lower my cost basis.

I can quickly cross reference this with my upcoming dividend calendar for my dividend alerts. Additionally, I added an extra column on my spreadsheet for whether it’s on or off. I may look to add this as an extra feature on CSA.

The important note is that I always want cash on hand after the Q4 2018 meltdown left me with minimal ammo to take advantage of the sales.

With that said, here is the current state of where reinvestment is on. I created another table on my sheet to just capture this information, so I can see at a glance how I stand. You’ll note that reinvestment is on for some generational ideas like Mastercard (MA), Visa (V) and my favorite dividend ETF (SCHD).

Here’s the table of my basis and current share prices. This month I turned the DRIP back on for MLPA, CSCO and REM.

Name Ticker My Basis Current Share Price Reinvest On?
AbbVie ABBV $77.07 $72.06 Yes
Apple Hospitality APLE $15.69 $16.14 Yes
Cisco Systems CSCO $46.78 $46.57 Yes
CVS Health CVS $73.90 $61.52 Yes
Global X US SuperDividend DIV $23.25 $23.06 Yes
iShares International Select Dividend ETF IDV $11.74 $29.87 Yes
Mastercard MA $207.23 $264.65 Yes
3M MMM $185.70 $155.79 Yes
Altria MO $45.88 $40.25 Yes
Annaly Capital Management NLY $9.76 $8.57 Yes
Prudential Financial PRU $87.52 $85.10 Yes
iShares mREIT ETF REM $42.23 $41.43 Yes
Schwab US Dividend ETF SCHD $52.67 $52.96 Yes
Global X MSCI SuperDividend Emerging SDEM $13.94 $12.49 Yes
Global X SuperDividend® ETF SDIV $17.97 $16.52 Yes
Tanger Factory Outlets SKT $21.37 $14.54 Yes
Simon Property Group SPG $169.80 $148.87 Yes
SPDR S&P High Dividend SPYD $38.31 $36.59 Yes
Global X SuperDividend REIT SRET $14.91 $14.76 Yes
Visa V $142.15 $170.07 Yes

Dividend Increases

Dividend Cuts

  • None this month
  • Annaly Capital Management in April

Contributions

I did change my contribution during the year to be traditional 401k based from Roth. I felt I could use more cash in my paycheck and in truth I have trouble believing at this point that my tax rate will be higher in retirement. I’m open to more suggestions in this arena.

With another month gone, I now only have a few hundred dollars left to be contributed. It looks like I’ll finish my contributions during the month, so I must be better at managing my cash on hand from now until the end of the year.

The Portfolio

Name Ticker Percent of Portfolio CCC Status Income
Apple (AAPL) 4.41% Challenger $200
AbbVie (ABBV) 1.38% Challenger $261
Apple Hospitality (APLE) 0.50% None $121
Chatham Lodging (CLDT) 0.55% None $132
Cisco Systems (CSCO) 0.72% Challenger $70
CVS Health (CVS) 2.09% None $222
Walt Disney (DIS) 3.07% Challenger $136
Global X US SuperDividend (DIV) 0.72% $171
Corning (GLW) 2.44% Contender $230
Home Depot (HD) 2.57% Challenger $201
iShares International Select Dividend ETF (IDV) 3.72% $751
Iron Mountain (IRM) 2.01% Challenger $488
Illinois Tool Works (ITW) 2.89% Champion $269
Johnson & Johnson (JNJ) 2.44% Champion $229
JPMorgan Chase (JPM) 2.84% Challenger $297
Kraft Heinz Company (KHC) 0.82% None $160
Mastercard (MA) 2.90% Challenger $46
Medtronic (MDT) 2.25% Champion $147
Global X MLP ETF (MLPA) 0.77% $225
3M (MMM) 1.47% Champion $177
Altria (MO) 3.05% Champion $819
Nike (NKE) 0.88% Contender $27
Annaly Capital Management (NLY) 0.82% None $339
Pennsylvania REIT D Series 6.875% (PEI-D) 0.62% None $172
Invesco CEF Income ETF (PCEF) 0.69% $165
Prudential Financial (PRU) 2.67% Challenger $409
iShares mREIT ETF (REM) 1.90% $564
Starbucks (SBUX) 2.61% Challenger $144
Schwab US Dividend ETF (SCHD) 4.98% $470
Global X MSCI SuperDividend Emerging (SDEM) 1.17% $262
Global X SuperDividend® ETF (SDIV) 2.59% $827
Tanger Factory Outlets (SKT) 1.88% Contender $596
Simon Property Group (SPG) 1.85% Contender $333
SPDR S&P High Dividend (SPYD) 3.43% $516
Global X SuperDividend REIT (SRET) 0.93% $241
Stanley Black & Decker (SWK) 2.45% Champion $160
AT&T (T) 3.76% Champion $672
T. Rowe Price (TROW) 1.43% Champion $128
Travelers Companies (TRV) 2.00% Contender $151
Visa (V) 2.95% Contender $55
Wells Fargo (WFC) 0.74% Challenger $102

Here are the values behind the “CCC Status” category:

  • King: 50+ years
  • Champion/Aristocrat: 25+ years
  • Contender: 10-24 years
  • Challenger: 5+ years

Dividend Safety

This is a new table for this month and encapsulates several quality data points into one table. The table was designed to highlight (and sort) the individual holdings I own based on their dividend safety. A direct corollary is the assigned S&P credit rating.

Name S&P Credit Rating SSD Safety Score SSD Growth Score SSD Yield Score
Apple AA+ 99 98 19
Walt Disney A 99 85 18
Johnson & Johnson AAA 99 89 48
Mastercard A+ 99 99 3
Medtronic A 99 73 32
Nike AA- 99 80 10
Visa AA- 99 100 4
T. Rowe Price 94 75 47
Cisco Systems AA- 91 62 51
Stanley Black & Decker A 90 87 32
Home Depot A 87 92 40
Illinois Tool Works A+ 81 86 48
JPMorgan Chase A- 79 46 54
Wells Fargo A- 79 21 66
Travelers Companies A 78 75 37
Corning BBB+ 77 79 50
3M AA- 75 81 61
Prudential Financial A 75 60 71
CVS Health BBB 67 0 56
Starbucks BBB+ 67 73 25
Simon Property Group A 65 44 77
Altria BBB 55 46 89
AT&T BBB 55 11 76
Tanger Factory Outlets BBB 52 27 92
AbbVie A- 50 86 78
Iron Mountain BB- 47 22 86
Apple Hospitality 43 37 85
Chatham Lodging 41 38 85
Kraft Heinz Company BBB- 29 51 79
Annaly Capital Management 12 1 95

With this new chart I’ve had a few insights:

  • I primarily have safe companies (score 60+)
  • My low safety companies are all high yield
  • Generally, my high safety scores come at the expense of yield – this is one area where I want to identify more quality companies that tick many of these boxes
  • I have great ETF alternatives for dividend growth (SCHD), safe high yield (SPYD) and high income (DIV, SDIV, SRET, MLPA, PCEF, etc). Therefore – the bar for individual securities is quite high.
  • I’m considering rolling some of my lower safety holdings into one of the aforementioned ETFs and removing individual holding risks.

I’ve played with aggregating the scores and seeing what names come out with the best total scores – here’s a snippet of that list.

I doubt there is historical point in time data but that would make for a very interesting back-test by cherry picking the top X from the total aggregate list and running it forward.

An astute observer may have noticed above in my criteria I included a filter for total scores above 200. What I had noticed is there are quite a few companies that are able to accomplish this. An “average” company (50 across each 3 scores) would score 150 so this is an attempt to tilt towards quality. Even Visa, with their yield being in the 4th percentile, is still able to break over 200 which is an extreme credit to them.

Performance

Here’s my updated list of performance of my holdings versus their benchmark since I’ve first owned shares.

Ticker Owned Since Versus S&P Benchmark Versus Benchmark
AAPL 4/13/2015 35.19% SPY 35.19%
ABBV 1/28/2019 -15.36% SPY -15.36%
APLE 1/28/2019 -2.79% VNQ -8.37%
CLDT 8/23/2019 8.60% VNQ 8.14%
CSCO 8/23/2019 -2.47% SPY -2.47%
CVS 10/7/2016 SPY
DIS 12/28/2015 -25.76% SPY -25.76%
DIV 7/31/2019 3.63% SPY 3.63%
GLW 10/14/2015 20.53% SPY 20.53%
HD 5/3/2016 31.64% SPY 31.64%
IDV 6/20/2019 -0.55% SPYD 0.85%
IRM 4/25/2019 1.96% VNQ -7.44%
ITW 8/24/2018 SPY
JNJ 12/9/2015 -10.12% SPY -10.12%
JPM 7/15/2016 SPY
KHC 4/10/2019 -18.45% SPY -18.45%
MA 7/26/2018 23.00% SPY 23.00%
MDT 11/22/2016 14.23% SPY 14.23%
MLPA 2/6/2019 -7.08% SPY -7.08%
MMM 5/24/2018 -28.45% SPY -28.45%
MO 10/31/2013 -42.78% SPY -42.78%
NKE 5/3/2016 8.66% SPY 8.66%
NLY 4/3/2019 -11.06% REM -9.40%
PEI-D 9/16/2019 PFF
PCEF 2/15/2019 1.25% SPY 1.25%
PRU 4/7/2016 -14.53% SPY -14.53%
REM 6/20/2019 2.57% SPYD 3.97%
SBUX 12/3/2015 -0.09% SPY -0.09%
SCHD 9/24/2018 1.47% SPY 1.47%
SDEM 2/20/2019 -13.65% SPY -13.65%
SDIV 2/20/2019 -13.23% SPY -13.23%
SKT 7/26/2017 -60.77% VNQ -59.53%
SPG 4/30/2019 -11.36% VNQ -20.61%
SPYD 6/13/2019 -2.08% SPY -2.08%
SRET 2/20/2019 -1.79% SPY -1.79%
SWK 1/28/2016 -5.61% SPY -5.61%
T 11/3/2015 -13.65% SPY -13.65%
TROW 9/29/2016 37.76% SPY 37.76%
TRV 4/28/2014 7.39% SPY 7.39%
V 7/26/2018 15.06% SPY 15.06%
WFC 8/23/2019 7.81% SPY 7.81%

Versus S&P: This is a measure of the alpha generated (or not) versus the S&P 500 as a benchmark. This is calculated using the stock return calculator here, and it uses the “Owned Since” column as the starting date. This may not reflect actual results, as multiple purchases would change the figure. I can also set the benchmark at the individual ticker level. This table is how shares have performed since I first purchased them. I can compare versus both the S&P and another benchmark for each holding. It’s supported by the stock return calculator (there is also API access available for use in spreadsheets) that I built.

The next column allows flexibility to define what my benchmark can be. For example, look at the REITs – I’ve set their benchmark to be VNQ for an apples-to-apples comparison. A utility could be compared to XLU for example. I need to flesh out what high yield ETF I want to be the benchmark for my high yielding ETFs.

In past editions, I highlighted just how quick these results can change. My former holding of Ventas (VTR) went from a major laggard of both VNQ and the S&P to beating both of them within a few months. I managed to also sell my shares at the top. ABT was one of the hottest stocks I owned and around the time I trimmed it, it was beating the S&P by 82%.

Portfolio Yield

I’ve calculated a few aggregate statistics for my portfolio.

Projected Income $11,724.25
Cash $15,000
Cash Ratio 4.84%
Total Value $324,947.21
YOC (Divi Companies) 5.37%
Yield (Divi Companies) 4.17%
Portfolio Yield 3.78%
Yield w/Cash Drag 3.61%

Projected Income – the sum of all known dividends for all holdings

Cash Ratio – percentage of cash in the portfolio

Total Value – self-explanatory

For these next batch, the numerator in each calculation is my “Projected Income”.

YOC (Divi Companies) = “Projected Income” / (“sum of invested capital” – (cash + cost of all non-dividend-paying companies)). This is my yield based on what I put in, this is separate from current market valuations.

Yield (Divi Companies) = “Projected Income” / (“Portfolio Value” – (cash + value of all non-dividend-paying companies)). Said another way, this is the yield from all my dividend-paying companies.

Portfolio Yield = “Projected Income” / (“Portfolio Value” – Cash). This is the yield based on all my invested money and their respective prices today. This would be the headline figure advertising the portfolio.

Yield w/Cash Drag = “Projected Income” / (“Portfolio Value”). All in, this is the yield given my expected income divided by the full portfolio value.

Correlation Matrix

New for this month is a correlation matrix from Portfolio Analyzer. It’s a huge table mapping out how one stock trades with another from a relation of -1 to 1. -1 means they move perfectly opposite of another, 1 means they move in perfect lockstep.

I’m highlighting three ETFs that I own that have international exposure; EFAS, FGD and IDV. I’ve highlighted them on the picture, but they are highly correlated to one another (0.90+ is a very high score). Therefore, there is essentially zero benefit from diversification of owning all three. In fact, the correlation between IDV and FGD is 0.97 which is nearly identical movement.

Now using my stock return calculator, I’ve mapped the returns with dividends reinvested from all three. The common data only goes back near the end of 2016 but in my mind the initial results seem clear.

I’ve played with the time periods a few different ways, but the results have been the same with IDV coming out on top, EFAS a close second with FGD trailing. EFAS also throws off more dividends over the time as it is slightly more dividend focused.

When I remove EFAS (the youngest ETF) and compare IDV and FGD going back to 2010, FGD just barely edges out IDV (dividends received are virtually the same also).

Here are the stats for FGD from here on Seeking Alpha, it has a higher listed yield but higher expense ratio.

Here are the stats for IDV from here on Seeking Alpha. The yield is listed as being slightly lower, but the expense ratio is also 9 basis points lower.

Here is EFAS for reference also; the yield is listed as being lower (though from past performance dividends received are quite higher) and it has an expense ratio that sits in between the other two.

The underlying indices are also similar per the holdings tab for each. IDV has 116 holdings, FGD 108 and EFAS 57.

I’ll cover the details of the trades below but in the end, I sold both FGD and EFAS and rolled that money into more shares of IDV. After those moves, I no longer have any 0.90+ correlated stocks.

My Sells

First Trust Dow Jones Global Select Dividend Index ETF

With that said, I opted to sell FGD and plow that money into IDV. I sold my 200 shares, netted $4677 and a profit of $118. I then plowed that into 150 shares of IDV which cost $4697.

Global X MSCI SuperDividend EAFE ETF

Using the same rationale as selling my FGD, I sold my EFAS. I netted $4785 which I then bought another 150 shares of IDV.

Walgreens

I sold out of my Walgreens stake for a small profit this month. I had collected two dividend payments including the September payment. The position was only opened back in April and I’ve just felt ‘meh’ about it. What was more compelling to me was taking this money and adding to my SCHD and SPYD holdings.

Square

While not a dividend holding, this was one of my individual growth stocks that I picked up last year. In retrospect this was where I started making a left turn rather than sticking with my knitting. I like the company and the whole fin-tech space is interesting to me, but it’s not really core to what I’m good at. Valuing companies based on sales and other similar metrics is not my bread and butter. Admittedly – I did my lumps on this one selling it at a loss.

United Technologies

Lastly, I sold out of my UTX shares at $137. I have not been a fan of the merger / spin-off model, it might work out, but I’m not interested in holding a defense company either. I liked the diverse industrial with Carrier and Otis included and again – not really interested in the standalone versions. For what it’s worth, I logged a 7.3% CAGR with this one which was slightly ahead of what the S&P offered over that time.

My Buys

Schwab U.S. Dividend Equity ETF

With the money I gained from selling SQ and WBA I rolled that partly in SCHD. I picked up 96 more shares (to round me up to 300) prior to the dividend payment. That worked out as SCHD had their highest distribution ever. Just goes to show you can do extremely well with dividend ETFs and hopefully investors don’t eschew them.

SPDR Portfolio S&P 500 High Dividend ETF

I ended up picking up another 200 shares of SPYD with the funds accrued from my sales. This was also done prior to the ex-dividend date and I added another $90 over my last quarterly payment. I also found out that SPYD trades for free in my retirement account – added bonus!

Between SCHD at 6 basis points and SPYD at 7 basis points – there is really no good reason to not consider using these products. They are essentially free to own, and you can balance them to your own needs.

Pennsylvania REIT 6.875% Series D Preferred

This one may be out of left field some but let me explain. Firstly, as I mentioned above, this is my first individual preferred share holding. I was well convinced by Rida’s article covering the stock here. Now what drew me to the D shares specifically were these reasons:

  • 8.5% yield at $20
  • Added safety should PEI itself be taken over, the article details it better, but D shares will receive $25 in a buyout which would be a guaranteed premium (other shares may receive less but current yields are higher)
  • Per his research, the dividend is well covered – remember preferred shares must be paid in full before common holders.
  • The yields are higher than a similar ETF product

These are the kinds of ideas that will make me add individual preferred shares. I would tend to shoot for an ETF and just let the market handle the nuance of what goes into it if it provided me with a particular yield.

iShares International Select Dividend ETF

I covered most of the transaction up top when detailing selling EFAS and FGD. But to recap that, I added another 300 shares of IDV, an added bonus was the math essentially working out by swapping out those other ETFs.

iShares Mortgage Real Estate Capped ETF

I picked up another set of this high yielding mortgage REIT ETF also before the dividend payment. I also own individual shares of Annaly, partly because that yield is materially different than REM’s own. Conceptually though I could see myself consolidating into just having REM.

Altria

Lastly, I picked up another 50 shares of MO at $40. To me, the market has been too bearish about this company with the flood of bad news whether it is related to vaping or the merger with PM being off. I’m overweight MO and looking to ride this coiled spring upwards when the news blows over.

Options

None!

Charts And Graphs

Dividends

I introduced this chart last month. It covers a rolling 3-month average of my dividend income. With a quarterly view I can smooth out the variations from month to month. I had noted last month how well the line had fit the data.

This month the income absolutely spiked with the moves I had made. The line fit dropped from 0.943 but the trend is still quite clear.

I’m working through the math behind it but there is a trend of about $125 ($1,500/year) in new monthly dividend income accrued per year. What I ultimately like about the chart is that it takes a step back from focusing on an individual month and puts the whole journey into perspective. It gives me something firmer to point to and eventually I need to figure out where my summit aka retirement is.

Month beginning Average Monthly Amount Notes
Jan-2015 125.00
Jan-2016 250.00
Jan-2017 375.00
Jan-2018 500.00
Jan-2019 675.00
Jan-2020 750.00 Estimate
Jan-2021 875.00 Estimate
Jan-2022 1,000.00 Estimate
Jan-2023 1,125.00 Estimate
Jan-2024 1,250.00 Estimate
Jan-2025 1,375.00 Estimate

This table is using the approximate values seen above and projected out several years. By the end of 2019 I should be at about a monthly level of $750 and $875 by the end of 2020. I seem to be well ahead of this goal, but I will see how it goes.

September was my best month ever with over $1250 in dividends. This was also substantially higher than the $718 last year.

Notes

  • My monthly ETF suite (EFAS, PCEF, SDEM, SDIV and SRET) provided $159.
  • My quarterly ETFs of IDV, SCHD, SPYD and REM also paid over $500
  • The strikethrough lines show the payments from EFAS and WBA I won’t be receiving going forward
  • Here’s the table of who paid me during the month.

Dividends By Position Size

The bubble graph maps expected yearly dividends (y-axis) by the percentage in my portfolio (x-axis). The third data point, yield on cost, is represented by the size of the bubble.

I had to adjust my X-axis to fit in SCHD and AAPL. SDIV and MO are my two highest payers and IDV and T are next after that.

Growth

On a monthly level, the $1269 in August was 76% higher than last year. To the right of that figure, the 28% is a rolling YTD comparison to 2018 (a total of $6,992 versus $5,461). This rolling figure helps smooth out the monthly variances.With Q3 in the books I can do a quarterly comparison. I racked up a total of $2,902 in Q3 which was 67% higher than Q3 of 2018.

This table is my forward-looking 12-month dividend view. This is where I sum up what I would earn in the next 12 months based on the shares I own and the currently declared dividend rates.

This year has seen a monumental shift in projected dividend income. I’ve gone from having a lower projected figure in January 2019 than I had in January 2018. This was a consequence of selling some dividend stocks in late 2018 and adding either low or no dividend paying companies. From that point, I’ve pivoted back and have seen my income vault well over $10,000 in July. I’m sitting at $11,724 and potentially can cross $12,000 this month. That was another goal of mine, to average $1,000 a month! I was hesitant whether that would be possible this year, but it seems highly likely now.

Now, the year-over-year growth is up 75% and up 74.5% YTD. I saw a 7.6% month over month increase.

Target Portfolio

I created a target portfolio that captures my need for a lot of various dividend sources while also having allocation to growth. This is how I would like to allocate money across different equity (not asset) classes. I’m an equity guy and things like commodities, currencies or bonds don’t really interest me.

I first allocated 10% to growth stocks (was 20% then 15%). This scratches my itch for having shares in Berkshire and the FANGs of the world. I’m also optimistic that at least some will be the dividend growers of the future.

Next is 30% (was 20% then 25%) allocated to high-yielding stocks. I use these as the income portion of my dividend machine. Dividends may be directly reinvested if current prices are right or they will be harvested and tactically allocated to the best investment idea at the time. It also helps me shore up my “balance sheet” by having more cash being generated alongside my regular 401(K) contributions.

The main portion of the portfolio at 55% is core dividend growth. This is where I am to pick names that I expect to surpass the high yielders decades down the road. I would consider names like Apple, Nike or Home Depot to be generational winners.

Lastly, the remaining 5% is allocated to cash. I think any “active” investor must have cash on the sidelines at all times for opportunities that present themselves. Frequently these opportunities may only last a day and with no cash available either leads to a missed opportunity or a need to scramble to sell something else. This will help prevent FOMO.

Another way to view the core portfolio would be through a Venn diagram across the three equity categories.https://static.seekingalpha.com/uploads/2019/3/6/9020091-15518710183814197.png

For illustrative purposes, I specifically have the circles overlapping most of the area to highlight the focus on dividend growth stocks.

Actual Portfolio

The changes I’ve made during the year have gotten me where I’m looking to be. There are some slight deltas but I’m happy with it. With my sale of SQ this month it dropped my allocation to growth.

The classifications are subjective, but I try to be logically consistent here is how I grouped them. One example of the subjective nature is Altria is pegged as a dividend growth stock, but AT&T is high yield. Their current yields are about the same, but the growth rate of T’s dividend is barely beating the rate of inflation, if at all.

Ticker Classification
AAPL Dividend Growth
ABBV Dividend Growth
AMZN Growth
APLE High Yield
BRK.B Growth
CLDT High Yield
CSCO Dividend Growth
CVS Dividend Growth
DIS Dividend Growth
DIV High Yield
FB Growth
GLW Dividend Growth
GOOG Growth
HD Dividend Growth
IDV High Yield
IRM High Yield
ITW Dividend Growth
JNJ Dividend Growth
JPM Dividend Growth
KHC High Yield
KWEB Growth
MA Dividend Growth
MDT Dividend Growth
MLPA High Yield
MMM Dividend Growth
MO Dividend Growth
NKE Dividend Growth
NLY High Yield
PEI-D High Yield
PCEF High Yield
PRU Dividend Growth
REM High Yield
SBUX Dividend Growth
SCHD Dividend Growth
SDEM High Yield
SDIV High Yield
SKT High Yield
SPG High Yield
SPYD Dividend Growth
SRET High Yield
SWK Dividend Growth
T High Yield
TROW Dividend Growth
TRV Dividend Growth
V Dividend Growth
WFC Dividend Growth

Visualizations

Income By Sector

The chart above is my current view. You can see now 37% comes from ETF with the rest spread over the various sectors.

The one below is how I stood last month, clearly there was some contraction of individual sectors for broader ETF dividend exposure.

Sector Allocations

The charts above were around my income, this is how my actual “cost” perspective looks. Again – I included two versions to show the monthly deltas. I won’t normally do this but when changes are compelling I will. I jumped up to about 26% ETF allocation versus 19%. Again, that compressed the other sector, ‘cuz math.

Champion, Contender, Challenger View

My WBA and UTX positions closed fell into the champion/contender categories here. Otherwise, things are fairly spread across the different categories.

Things Coming Up

After analyzing some of those dividend safety scores from SSD, I might close out some positions that don’t stack up to my desired quality standards. I’ll continue playing with my theory of the SSD scores > 200 and seeing what shows up there.

I also have my eye on the Cohen&Steers Closed-End Opportunity Fund (FOF). It’s a fund-of-funds CEF but has had a great track record, solid dividend payments and has beaten PCEF over time. That is still a research item for me.

As I always point out, I like to run this screener to get some idea generation going and I’ve included it in case it helps anyone out. Here are the filters I start with:

  • $10 billion+ in size
  • US companies
  • Positive dividend yield
  • Forward P/E under 20 (I also remove this filter to allow REITs to show up)
  • Sorted by their 52-week lows

GLW, MMM look interesting to me right off the bat being existing holdings. I will circle back on them if they are worth adding to here.

Conclusion

I wrapped up September with $1,269 in dividends which brings the yearly total to $6,992. I collected 76% more dividends than September of 2018. Year to date, I’ve collected 28.6% more than 2018. Additionally, I ended Q3 with $2,902 in dividends.

I made 6 purchases and 5 sales which netted to adding $826 of projected income over the next year. Year to date, my projected income has grown 74% to $11,724. I finished with 41 dividend paying holdings (a decline of 3 holdings).

ITW announced a 7% dividend increase which is perfectly in line with my stated goal for the year.

Thanks for reading, I hope you’ve enjoyed reading it as much as I’ve enjoyed writing it. I encourage you to “follow me” if you don’t already!

Disclosure: I am/we are long AAPL, ABBV, AMZN, APLE, BRK.B, CLDT, CSCO, CVS, DIS, DIV, FB, GLW, GOOG, HD, IDV, IRM, ITW, JNJ, JPM, KHC, KWEB, MA, MDT, MLPA, MMM, MO, NKE, NLY, PEI-D, PCEF, PRU, REM, SBUX, SCHD, SDEM, SDIV, SKT, SPG, SPYD, SRET, SWK, T, TROW, TRV, V, WFC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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