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Long only, dividend investing, dividend growth investing
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Introduction:

The first of this year I decided to start sharing my personal income portfolio with my readers. As part of this article series I decided that I would write quarterly follow up articles so that my readers can view my portfolio changes and progress. You can view my original article here and both my Q1 update and Q2 update in the provided links. These articles will show you on a quarter by quarter basis how I am managing my income seeking portfolio

Activity Summary:

The stock market Q3 performance level has been quite different from the performance levels of both Q1 and Q2 so far this year. Lackluster job reports, a slowing housing market, and Federal Reserve QE tapering rumors have all had an adverse affect on market sentiment. lucky for us that markets trade on short term sentiment but long term fundamentals. I have tried to remove the short term sell mentality from this portfolio. This has afforded me the opportunity to benefit from some of the negative market sentiment experienced this quarter and add to my stock holdings during market dips. A clear sign is that I have used up almost all of my spare cash reserve and put it to work in my portfolio. I added to my stock holdings in the manner that I outlined in my original article detailing the purpose of this stock portfolio. Current cash on hand total is only $25.25.

Portfolio Holdings/Dividends:

My portfolio holdings for the end of Q3 2013 are as follows.

StockHeld SharesCurrent DividendAnnualized Dividend
The Hershey Company (NYSE:HSY)16.9327$0.485$32.85
Waste Management, Inc. (NYSE:WM)48.8565$0.365$71.33
IBM Corporation (NYSE:IBM)7.9593$0.95$30.25
PowerShares Preferred Stock ETF (NYSEARCA:PGX)139.7603$0.076$127.46
iShares iBoxx High Yield Corporate Bond (NYSEARCA:HYG)22.2708$0.48$128.28
Wells Fargo & Company (NYSE:WFC)47.7971$0.30$57.36
Southern Company (NYSE:SO)44.9836$0.5075$91.32
E. I. du Pont de Nemours and Company (NYSE:DD)38.0141$0.45$68.43
Darden Restaurants, Inc. (NYSE:DRI)40.2243$0.55$88.49
Chevron Corporation (NYSE:CVX)17.9036$1.00$71.61
Archer Daniels Midland Company (NYSE:ADM)49.0127$0.19$37.25
Johnson & Johnson (NYSE:JNJ)23.1511$0.66$61.12
Wal-Mart Stores Inc. (NYSE:WMT)19.6990$0.47$37.03
Intel Corporation (NASDAQ:INTC)79.9235$0.225$71.93
Aflac (NYSE:AFL)30.6370$0.35$42.89
PepsiCo, Inc. (NYSE:PEP)24.4584$0.5675$55.52
American Water Works (NYSE:AWK)40.1918$0.28$45.01
General Electric (NYSE:GE)88.4934$0.19$67.25
Main Street Capital (NYSE:MAIN)66.8248$0.16$128.30
Realty Income Corp (NYSE:O)42.152$0.1819$92.01

Main Street Capital currently has declared semi-annual bonus payments of $0.20 per share amounting to additional dividend payments totaling $26.73. Since these are bonus payments and not guaranteed I will factor them into the annualized portfolio dividend total but not into the annualized total for MAIN.

The dividends of these holdings result in a total annualized dividend for this portfolio of:

Annualized Portfolio Dividend Total:$1405.69 + $26.73 = $1432.42

Portfolio Buys/Sells:

Here are the Q3 transactions that affected the holdings of this portfolio. All of the rules governing the way purchases are made and how much of each stock is purchased can be found in my original article here with a few fundamental rule changes that I decided to make during Q2 mainly dealing with the compounding of dividend payments for my monthly paying investments. For more information about those changes please refer to my Q2 update which I referenced at the top of this article.

  • Buys

StockShares BoughtShare Price
PEP6.1080$81.21
WM11.8469$42.21
CVX3.8375$127.17
JNJ5.4162$92.32
WFC11.22$44.53

  • Sales (No sales were made this quarter)

Due to market fluctuations experienced during Q3 there were very few opportunities to profit from stock sales. I decided to hold off on any sales until a later period since I felt that current holdings were holding at relative fair value.

Portfolio Performance:

I deposited an additional $486.06 into this portfolio during the second quarter raising my total current cost of this portfolio to $24,336.54 including current cash on hand. Performance metrics for this portfolio are displayed in the tables and graphs below.

Annualized Dividend Total$1,432.42 (^6.96% Q/Q)
Portfolio Dividend Yield On Cost(YOC)5.89% (^5.18% Q/Q)
Total Net Portfolio Gain$13,181.31 (^4.03% Q/Q)
Total Portfolio Value$37,517.85 (^2.72% Q/Q)

There are three important metrics for this portfolio that I will track over time: Annualized Dividends, Yield On Cost (YOC), and Portfolio Value/Net Gain.

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Portfolio Quarterly Summary:

As you can see from the statistics above that even though Q3 was a difficult quarter for many investors our portfolio kept progressing along its objectives. Our annualized dividend increased by 6.96% on a quarterly basis (primary goal); our net portfolio gain increased by 4.03% on a quarterly basis (secondary goal); and our Yield on Cost (YOC) increased by 5.18% on a quarterly basis (secondary goal).

Future Portfolio Actions:

I do see our YOC statistic taking a slight hit in the upcoming quarters as I deposit more money and add more principal to our cost basis. I have run out of cash on hand in the portfolio and will seek increase my cash available through added deposits in the upcoming quarters. YOC will take periodic hits in this portfolio due to the low amount of cash currently realized as contributing to our cost. YOC is a secondary objective anyways for the sake of this portfolio and will rebound with time.

Market Headwinds:

As everyone is aware, Q4 is not starting off with good news. The federal government failed to pass a budget funding bill and so many federal workers now potentially face furloughs for an unspecified amount of time. The slowing housing market may also drag on the economy in Q4 we will wait to see if this market stabilizes before making any judgments. Q4 also has the potential for Federal Reserve tapering actions to finally come to fruition. This will further put pressure on low interest rates. Rising interest rates will make income style stocks less appealing to income seeking investors lowering their prices into enticing ranges. These and a few other headwinds will make Q4 a buying opportunity for those income seeking investors looking for value in large cap income based stocks. Be Ready Be Vigilant!

Source: My Income Portfolio Quarterly Update (Q3 2013)