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Long only, dividend investing, dividend growth investing
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Summary

  • This article series on my portfolio is designed to prove that income investing is not just for people near retirement.
  • Dividend growth investing is the most reliable way to generate recurring income over time. You must have an investment strategy and I hope these articles will help you.
  • Many times as an income investor we get attached to certain holdings, but you must be willing to swap holdings when they no longer perform to your standards.

Introduction:

Starting in 2013 I decided to start sharing my personal income portfolio investments with my readers as a quarterly article series. These articles along with periodic action articles, such as this one here that I wrote during Q2 outlining a portfolio investment change, were designed to show that income investing is not only for the near age retirees but when done right can be a lifetime investment guide. You can view my year ago Q2 article here and my previous Q1 update here. For more quarterly information please check out my other articles. These articles will show you on a quarter by quarter basis and year over year how I am managing my income seeking portfolio.

Activity Summary:

Q2 was a rather bullish quarter as well, more so than I originally anticipated and there were not as many buying opportunities as I had originally anticipated. We did however take advantage of this quarter's run in high yield bonds to swap out our investment in HYG for a position in LTC. I have linked an article outlining that decision in the paragraph above. I also had one trailing stop-loss order fire off this quarter when ADM took a price dive earlier this month. I have trailing 5% stop-loss orders active on every investment that has risen more than 30% since purchase. I have since bought back into ADM for the base amount of 2,000 dollars and taken the profit that was realized and made another purchase into my 5 ongoing buy positions as outlined in my last quarterly update.

Portfolio Holdings/Dividends:

My portfolio holdings for the end of Q2 2014 are as follows:

StockHeld SharesCurrent DividendAnnualized Dividend
The Hershey Company (NYSE:HSY)22.0967$0.485$42.86
Waste Management, Inc. (NYSE:WM)48.8565$0.375$73.28
Cisco Systems Inc. (NASDAQ:CSCO)91.3451$0.19$69.42
PowerShares Preferred Stock ETF (NYSEARCA:PGX)146.4831$0.0737$129.54
LTC Properties Inc51.9685$0.17$106.02
Wells Fargo & Company (NYSE:WFC)47.7971$0.35$66.91
Southern Company (NYSE:SO)44.9836$0.5250$94.46
E. I. du Pont de Nemours and Company (NYSE:DD)38.0141$0.45$68.42
Darden Restaurants, Inc. (NYSE:DRI)40.2243$0.55$88.49
Chevron Corporation (NYSE:CVX)17.9036$1.07$76.62
Archer Daniels Midland Company (NYSE:ADM)46.2102$0.24$57.83
Johnson & Johnson (NYSE:JNJ)23.1511$0.70$64.82
Wal-Mart Stores Inc. (NYSE:WMT)25.9525$0.48$49.82
Intel Corporation (NASDAQ:INTC)79.9235$0.225$71.93
Aflac (NYSE:AFL)38.1096$0.37$56.40
PepsiCo, Inc. (NYSE:PEP)24.4584$0.655$64.08
American Water Works (NYSE:AWK)52.3012$0.31$64.85
General Electric (NYSE:GE)88.4934$0.22$77.87
Main Street Capital (NYSE:MAIN)71.0881$0.165$140.75
Realty Income Corp (NYSE:O)43.8607$0.1825$96.20
Weyerhaeuser (NYSE:WY)19.8192$0.22$17.44
Deere (NYSE:DE)6.5834$0.60$15.80
Norfolk Southern (NYSE:NSC)2.1844$0.54$4.71
Alerian MLP ETF (NYSEARCA:AMLP)33.1526$0.279$36.99
Market Vectors ETF HG YLD MUNI (NYSEARCA:HYD)20.0889$0.127$28.98

Main Street Capital currently has declared semi-annual bonus payments of $0.275 per share amounting to additional dividend payments totaling $39.09. Since these bonus payments are 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:$1651.14 + $39.09 = $1690.23

Portfolio Buys/Sells:

I performed one investment exchange between HYG and LTC this quarter. I had one core holding stop-loss sale this quarter and a re-purchase of the same stock occur for ADM. I had other purchases for my 5 expansion positions that I have current open purchase plans for. These buys as well as sales are displayed in the tables below

  • Stock Buys
StockShares BoughtShare Price
AMLP21.8211$18.15
ADM46.2012$43.20
HYD13.2325$29.93
DE4.2807$92.52
LTC51.7426$38.58
  • Stock Sales
StockShares SoldShare Price
ADM60.2494$43.13
HYG23.2521$94.83

Profit From Sales totaled $789.05.

Portfolio Performance:

I deposited an additional $222.55 into this portfolio during the second quarter raising my total current cost of this portfolio to $28,615.09 including current cash on hand. Performance metrics for this portfolio are displayed in the tables and graphs below.

Annualized Dividend Total

$1690.23

Portfolio Dividend Yield On Cost (YOC)5.91%
Total Net Portfolio Gain$19,044.59
Total Portfolio Value$47,659.68

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

This graph represents the growth of my annualized dividend.

This graph represents my total portfolio value [blue] and my net gain in value above deposited funds [red] over time.

This graph represents my portfolio's Yield On Cost over time.

Portfolio Quarterly Summary:

As you can see from the statistics above Q2 was a decent quarter for this portfolio. The annualized dividend increased by 4.21% on a quarterly basis and 26.21% on an annual basis (primary goal); the net portfolio gain increased by 12.04% on a quarterly basis and 50.31% on an annual basis (secondary goal). Our Yield on Cost (tertiary goal) increased this quarter by 3.5% on a quarterly basis and 5.54% on an annual basis.

Future Portfolio Actions:

I will be continuing my planned purchases of WY, DE, HYD, AMLP and NSC until their cost basis reaches $2,000 as I previously mentioned in my Q4 article from 2013. The current cost basis of each stock is as follows.

StockCost Basis
WY$600
DE$600
HYD$600
AMLP$600
NSC$200

Market Headwinds:

I eliminated my position in HYG because high yield bonds no longer yield a high enough interest rate to compensate for the amount of risk assumed in these bonds. I think inflation pressures are just over the horizon. The end of Federal Reserve quantitative easing is set to occur during Q3. This will also exert downward pressure on bond prices. If you still hold bonds I would slowly and strategically rotate out of bonds and into other assets of your choosing. I think the bond bull has about run its course. Other than that stay diligent and keep your eyes open for bargain investments in Q3, although I do not think there will be many.

Source: My Income Portfolio Quarterly Update (Q2 2014)