My Income Portfolio Quarterly Update (Q1 2016)

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Includes: ADM, AFL, AMLP, AWK, CSCO, CVX, DE, DOW, DRI, FCPT, GE, HSY, HYD, INTC, JNJ, LTC, MAIN, NSC, O, PEP, PGX, SO, WFC, WM, WMT, WY
by: Invest Yourself

Summary

This article series on my portfolio is designed to prove that income investing is not just for people near retirement age.

Dividend growth investing is the most reliable way to generate recurring income over time.

Dividend investing is a long-term goal centered on the principal of supplementing/replacing current income.

Introduction:

This is my Q1 update for the continuing article series that I started in 2013. I decided to share my personal income portfolio investments with my readers as part of a quarterly article series. These articles, along with periodic action articles cataloging changes in my investment portfolio or investment swaps, are intended to show you that when properly monitored, an income portfolio can offer you reliable returns with minimized risk when starting at a young age. You can view my year-ago Q1 article here and my previous Q4 update here for 2015. For more quarterly information, please check out my other articles. These articles will show you on a quarter by quarter and year-over-year basis how I am managing my income-seeking portfolio and what my current level of success is. I intend to demonstrate that an income strategy when executed correctly is the ideal approach for young investors and is not just for near retirement age individuals.

Portfolio Activity Summary:

Q1 was another tumultuous quarter much like the quarter before it. As bearish as the first half of Q1 was the second half was equally as bullish. I continued my on schedule stock purchases as my plan outlines in my charter article. Due to the decreased prices, I was able to increase a bunch of positions and reduce my cost basis at the same time. All the value purchases from the Q4 and Q1 have compounded my rebound and has put my entire portfolio up 5.63% for the year and up 9.13% up over the last two quarters. Q1 offered quite a few good buying opportunities and I have a feeling that 2016 will continue the uncertainty trend.

Portfolio Holdings/Dividends:

My portfolio holdings for the end of Q1 2016 are as follows:

Symbol Name Held Shares Dividend (Per-Share) Annualized Dividend
(NYSE:MAIN) Main Street Capital 85.1065 0.18 $183.83
(NYSE:AFL) Aflac 38.8703 0.41 $63.75
(NYSE:HSY) The Hershey Company 22.6573 0.583 $52.84
(NYSE:WM) Waste Management, Inc. 38.8525 0.41 $63.72
(NYSEARCA:PGX) PowerShares Preferred 177.8027 0.073 $155.31
(NYSE:LTC) LTC Properties Incorporated 65.5834 0.18 $141.66
(NYSE:WFC) Wells Fargo & Company 40.1129 0.375 $60.17
(NYSE:SO) Southern Company 56.1664 0.543 $121.88
(NYSE: DOW) Dow Chemical 38.918 0.46 $71.61
(NYSE:DRI) Darden Restaurants, Inc. 30.9551 0.5 $61.91
(NYSE: FCPT) Four Corners Property Trust 15.4793 0.2 $12.38
(NYSE:CVX) Chevron Corporation 24.3504 1.07 $104.22
(NYSE:ADM) Archer Daniels Midland Company 60.9081 0.3 $73.09
(NYSE:JNJ) Johnson & Johnson 23.6759 0.75 $71.03
(NYSE:WMT) Wal-Mart Stores Inc. 26.3606 0.49 $51.67
(NASDAQ:INTC) Intel Corporation 76.9925 0.26 $80.07
(NYSE:PEP) Pepsico, Inc. 25.1741 0.703 $70.74
(NYSE:AWK) American Water Works 36.8747 0.34 $50.15
(NYSE:GE) General Electric 90.7127 0.23 $83.46
(NYSE:O) Realty Income Corp 55.1664 0.199 $131.74
(NASDAQ:CSCO) Cisco 91.4934 0.26 $95.15
(NYSEARCA:HYD) Market Vectors ETF HG YLD MUNI 83.7985 0.112 $112.42
(NYSEARCA:AMLP) Alerian MLP ETF 157.7496 0.299 $188.67
(NYSE:NSC) Norfolk Southern 25.7162 0.59 $60.69
(NYSE:DE) Deere Inc 28.798 0.6 $69.12
(NYSE:WY) Weyerhauser 78.4606 0.31

$97.29

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Main Street Capital currently has declared semi-annual bonus payments of $0.275 per share, amounting to additional dividend payments totaling $46.81. 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:

$2328.55 + $46.81.94 =$2375.36

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My Q1 dividend payout value is 23.84% above my Q1 total last year and 4.09% above my Q4 total.

Portfolio Commentary:

FCPT's dividend was estimate based upon estimated 2016 Q1 payout levels minus the special dividend paid. This calculation led me to a 0.20 per share quarterly dividend.

Portfolio Buys/Sells:

I continue to contribute capital towards this portfolio at an accelerated rate. I made 5 purchases during Q1 one of them was a re-buy of a stop loss order that executed during Q1. This stop-loss order is highlighted in the sell table below.

Stock Buys

Stock

Shares Bought

Share Price

DE

5.5312

$82.27

INTC

14.4568

$32.31

AWK

36.8747

$67.69

CSCO 17.1340 $26.27
ADM 13.7813 $32.66
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Stock Sales

Stock

Shares Sold

Share Price

AWK

42.9370

$68.51

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Portfolio Performance:

I deposited an additional $1,744.30 into this portfolio during the second quarter, raising my total current cost of this portfolio to $36,152.61, including current cash on hand. Performance metrics for this portfolio are displayed in the tables and graphs below.

Annualized Dividend Total

$2,375.36

Portfolio Dividend Yield On Cost (YOC)

6.44%

Total Net Portfolio Gain

$25,157.85

Total Portfolio Value

$61,310.46

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There are three important metrics for this portfolio that I will track graphically over time: annualized dividends, yield on cost (YOC), and portfolio value/net gain. A picture is worth a thousand words, therefore I created the graphs below based upon my prior data points that you can view in my previous quarterly articles on my author page here.

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The above graph displays my portfolio's historical annualized dividend. This value is the primary metric for this account that we are interested in tracking. My dividend growth continues on a linear track due to purchases of lower yielding investments.

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The above graph displays our total portfolio value and net value gains. You can see that since the end of Q3 in 2015 my portfolio has seen a rather profitable rebound. Please remember net value of the account is not my primary concern. I am primarily focused on how much income I can generate from this account.

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The above graph displays our portfolio YOC over time. You can see that continued contributions have a negative YOC impact. As the total cost of the portfolio increases over time, the negative effect this new money has will become less and less noticeable. I have theorized that when I get to the point that new contributions are negated on the YOC graph that will be the moment at which interest compounding curve will increase in leaps and bounds and will be recognized in the annual dividend chart.

Year-End Goals:

I will attempt to increase my year end payout in 2016 by 17% which would put my year end 2016 goals at $2670.06. I expect dividend compounding increases to continue to allow me to revise my annual goals higher and higher. Please follow my climb to my 2016 goals by reading my corresponding quarterly updates and tracking my progress.

General Market Comments:

Q1 saw the collapse of the Q4 rally and the first half of Q1 started rather rocky. Q1 rebounded however late in the quarter on nice bullish support. It regained all of the losses that we saw in the first half and even compounded on the late Q4 rally to reach higher highs than during Q4. I feel that Q2 will probably be slightly more bearish considering where Q1 ended. I fell the broader market is a little overbought at this point. As always though the status of the market will not hamper my planned stock purchases. Please look for value buying opportunities during Q2.

Disclosure: I am/we are long ADM, AFL, AMLP, AWK, CSCO, CVX, DE, DOW, DRI, FCPT, GE, HSY, HYD, INTC, JNJ, LTC, MAIN, NSC, O, PEP, PGX, SO, WFC, WM, WMT, WY.

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.