Quarterly Review Of DivGro: Q2 2016

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Includes: AAPL, GPS, NKE, UPS, VLO, WFC, WMT
by: FerdiS

Summary

I compile quarterly reports for my portfolio of dividend growth stocks, DivGro, to summarize investment decisions and to track portfolio performance.

In Q2-2016, DivGro produced dividend income of $2,741, an increase of 26.7% over last quarter's total of $2,163. The year-over-year increase in dividend income is 54%.

I create performance charts for long-term positions (those with a holding period of more than 1 year). The visual presentation helps me to monitor the overall performance of individual positions.

I compile quarterly reports for my portfolio of dividend growth stocks, DivGro, to summarize investment decisions and to track portfolio performance.

Each quarterly report summarizes the actions I've taken during the preceding quarter. I also provide a summary of dividend income, dividend adjustments, and portfolio performance. In order to evaluate the performance of individual stocks, I create charts for stocks I've owned for longer than a year.

In the second quarter of 2016, I finalized the portfolio consolidation process initiated last year. DivGro now contains all my dividend growth stocks, regardless of the brokerage account that holds them. The stocks are spread over 5 different accounts: one trust account at Scottrade, another trust account at FolioInvesting, and 3 IRA accounts, also at FolioInvesting.

Dividend Income

The following chart illustrates DivGro's dividend income by quarter:

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Dividend income in Q2-2016 totaled $2,741, an increase of 26.7% over last quarter's dividends of $2,163. This quarter's dividend total is 53.9% higher than the dividends received in the year-ago quarter (Q2-2015).

DivGro's average percentage payback is 8.54%, up from 8.33% at the end of Q1-2016. Percentage payback relates total dividend income to the total amount of capital invested.

Transactions

Here is a summary of my buys in Q2-2016:

Company Ticker Date Transaction
The Gap, Inc. GPS 25 Apr added shares at $23.40 per share
Apple Inc. AAPL 3 May
12 May
added shares at $94.07 per share
added shares at $90.20 per share
United Parcel Service, Inc. UPS 12 May bought at $101.84 per share
Valero Energy Corporation VLO 20 May added shares at $55.84 per share
Wal-Mart Stores, Inc. WMT 24 Jun added shares at $72.15 per share
Wells Fargo & Co. WFC 24 Jun bought at $46.51 per share
Nike Inc. NKE 24 Jun bought at $52.84 per share
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New positions are highlighted. The other transactions are additions to existing positions.

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Dividend Adjustments

In Q1-2016, I reported projected annual dividend income (PADI) of $10,613. This quarter, PADI increased by 14% to $11,576. Projected annual yield is a little lower now at 4.22%.

15 stocks in my portfolio announced dividend increases in Q2-2016, as presented in the following table. The new annual dividend and yield on cost (YoC) are included.

Company Ticker Increase Annual

Div

New

YoC

Toronto-Dominion Bank TD 21.26% $1.75 4.23%
Northrop Grumman Corporation NOC 12.50% $3.60 2.36%
Travelers Companies Inc TRV 9.84% $2.68 3.10%
Apple, Inc. AAPL 9.62% $2.28 2.18%
Gilead Sciences, Inc. GILD 9.30% $1.88 1.84%
International Business Machines Corp. IBM 7.69% $5.60 3.30%
Target Corporation TGT 7.14% $2.40 3.82%
Johnson & Johnson JNJ 6.67% $3.20 3.50%
Macquarie Infrastructure Corp. MIC 4.35% $4.80 6.48%
Exxon Mobil Corporation XOM 2.74% $3.00 3.81%
Helmerich & Payne, Inc. HP 1.82% $2.80 3.89%
Omega Healthcare Investors, Inc. OHI 1.75% $2.32 6.21%
Procter & Gamble Co. PG 1.00% $2.68 3.37%
W.P. Carey, Inc. WPC 0.60% $3.92 5.87%
Realty Income Corporation O 0.25% $2.39 4.48%
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Average YoC is 4.34%, down a little from the 4.44% reported at the end of Q1-2016.

Long-term Positions

As mentioned earlier, I create various performance charts for positions that are at least one year old, on average. Because I've owned stocks for different periods of time, it is useful to consider annualized total returns.

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DLR is the clear winner, followed by RAI and MO.

BHP Billiton plc (BBL) is by far my worst performer. The company's share price has plummeted from about $70 in July 2014 to below $20 in January 2016, before recovering to about $25 per share. In February, the struggling mining company cut its dividend by 75%. I'm holding onto my shares and waiting for a suitable exit point.

Two business development companies top the YoC chart: Main Street Capital Corporation (NYSE:MAIN) and PennantPark Investment Corporation (PNNT). Whereas MAIN is an excellent performer, PNNT is not. Shortly after I bought my shares of PNNT, the company froze its dividend. At the time, I decided to hold onto my shares and to continue collecting the high dividend yield. So far, it has not been a profitable decision and I'm still underwater with PNNT despite the high yield.

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Here is a chart showing the year-over-year dividend increases of my long-term positions. I prefer to see increases of at least 7%, so I'm happy to see that 20 of these long-term positions have increased their dividends by more than 7% in the last year.

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Four companies have not increased their dividend payments in more than a year:

  • Reliance Steel & Aluminum Co (RS)
  • Deere & Company (DE)
  • Chevron Corporation (CVX)
  • PennantPark Investment Corporation (NASDAQ:PNNT)

As a dividend growth investor, I like to see regular dividend increases - therefore, I'll need to monitor these stocks carefully and take action if the dividends are cut.

Outlook For Q3-2016

In Q3-2016, I'm planning to review my portfolio and potentially eliminate some positions, redeploying the cash so generated to increase the size of other positions. I've started boosting my dividend income using options. To fully utilize a covered-call strategy on a position, I need to own at least 100 shares.

Thanks for reading and take care everybody! If you liked this article and would like to read similar articles in future, please click the Follow link at the top of this article.

This article is a summary of my Q2-2016 quarterly review of DivGro, which first appeared on my blog on July 5. Interested readers can click on the link for more details.

Disclosure: I am/we are long ALL THE STOCKS MENTIONED.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.