My Income Portfolio Quarterly Update (Q3 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, UGAZ, 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:

For those of you who have never read any of my articles before, this is my Q2 update for a 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 Q3 article from a year ago here and my previous Q2 update for 2016 here. 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, when executed correctly, an income strategy is the ideal approach for young investors and is not just for near retirement age individuals.

Portfolio Activity Summary:

Q3 was an interesting quarter. The market has moved sideways to slightly down and is looking for some sort of catalyst to propel it higher. I have continued my on-schedule stock purchases as my plan outlines in my charter article and you will see these purchases later in the article. I have completed my latest round of additional stock funding and I am now looking to add 4 new stock positions starting in Q4 to bring my overall stock holding total to 30. I have settled on 30 investments as a nice round number to hold for now and one that I can easily keep maintained. After this next round of additional stock purchases I will continue to re-invest in my existing positions. I also committed a couple of sell and rotation actions to my portfolio during the quarter to capture additional profit of my front runners to allow for portfolio rebalancing.

Portfolio Holdings/Dividends:

My portfolio holdings for the end of Q3 2016 are as follows:

Symbol

Name

Held Shares

Dividend (Per-Share)

Annualized Dividend

(NYSE:MAIN)

Main Street Capital

88.6895

0.185

$196.89

(NYSE:AFL)

Aflac

34.1135

0.41

$55.95

(NYSE:HSY)

The Hershey Company

22.8296

0.618

$56.43

(NYSE:WM)

Waste Management, Inc.

45.5440

0.41

$74.69

(NYSEARCA:PGX)

PowerShares Preferred

182.898

0.071

$154.89

(NYSE:LTC)

LTC Properties Incorporated

67.0066

0.19

$152.78

(NYSE:WFC)

Wells Fargo & Company

49.2164

0.380

$74.81

(NYSE:SO)

Southern Company

56.1664

0.56

$125.81

(NYSE: DOW)

Dow Chemical

48.0306

0.46

$88.38

(NYSE:DRI)

Darden Restaurants, Inc.

41.9557

0.56

$93.98

(NYSE: FCPT)

Four Corners Property Trust

123.7622

0.243

$120.05

(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

20.6053

0.80

$65.94

(NYSE:WMT)

Wal-Mart Stores Inc.

32.7575

0.50

$65.52

(NASDAQ:INTC)

Intel Corporation

76.9925

0.26

$80.07

(NYSE:PEP)

PepsiCo, Inc.

29.1198

0.7525

$87.65

(NYSE:AWK)

American Water Works

36.8747

0.375

$55.31

(NYSE:GE)

General Electric

80.3713

0.23

$73.94

(NYSE:O)

Realty Income Corp.

40.0158

0.1995

$97.00

(NASDAQ:CSCO)

Cisco

91.4934

0.26

$95.15

(NYSEARCA:HYD)

Market Vectors ETF HG YLD MUNI

85.5460

0.1149

$110.35

(NYSEARCA:AMLP)

Alerian MLP ETF

163.8449

0.24

$157.29

(NYSE:NSC)

Norfolk Southern

25.7162

0.59

$60.69

(NYSE:DE)

Deere Inc.

28.798

0.6

$69.12

(NYSE:WY)

Weyerhaeuser

78.4606

0.31

$97.29

Click to enlarge

Main Street Capital has currently declared semi-annual bonus payments of $0.275 per share, amounting to additional dividend payments totaling $48.78. 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:

$2487.28 + $48.78 =$2476.22

Click to enlarge

My Q3 dividend payout value is 16.27% above my Q3 total last year and 2.42% above my Q2 total.

Portfolio Statistics:

Below are a couple images that outline the current relative value and trailing year's performance contributions. These informational images are compliments of the website www.simplywall.st.

Click to enlarge

Click to enlarge

Portfolio Buys/Sells:

I continue to contribute capital towards this portfolio at my defined savings rate. I made 5 purchases during Q2, one of them was a re-buy of a sell trade executed during Q2. This sell order is highlighted in the sell table below.

Stock Buys

Stock

Shares Bought

Share Price

WMT

6.2061

$73.81

FCPT

23.5340

$21.08

AFL

34.1135

$73.17

DOW

8.7775

$52.53

HSY

22.8296

$109.33

DRI

10.7519

$60.74

PEP

3.7620

$108.47

GE

80.3713

$31.06

WM

6.4403

$65.38

JNJ

20.6053

$121.14

Click to enlarge

Stock Sales

Stock

Shares Sold

Share Price

HSY

27.5217

$111.50

AFL

39.0998

$73.28

GE

104.7618

$31.21

JNJ

23.8395

$123.34

Click to enlarge

Portfolio Goal Performance:

I deposited an additional $1455.92 into this portfolio during the second quarter, raising my total current cost of this portfolio to $39,002.06, including current cash on hand. Performance goal values for this portfolio are displayed in the tables and graphs below.

Annualized Dividend Total

$2,536.06

Portfolio Dividend Yield On Cost (YOC)

6.52%

Total Net Portfolio Gain

$30,398.54

Total Portfolio Value

$68,389.01

Click to enlarge

There are three important metrics for this portfolio that I will track graphically over time: annualized dividends, yield on cost, 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.

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. The purpose of this account is to generate residual annual income via dividends.

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 mainly focused on how much income I can generate from this account, but it is never a bad thing to see capital worth increase.

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.

Year-End Goals:

I have set a year-end payout goal increase for 2016 of 17%, which would put my year-end 2016 goals at $2,670.06. As of right now, I am 67.5% of the way towards my goal. I have a little work to do in the 4th quarter in order to meet my year in.

General Market Comments:

Q3 saw a very sideways market which more than not is the general trend for most Q3's. My initial assumption was correct in that Q3 was a rather slow and uneventful quarter. Q4 could shape up to go one of two ways as I don't think the stock market will continue to trade sideways. I can see catalysts setting up to both drag the market down as well as vault it higher. Q4 earnings reports are more than often surprising to the upside which may be a catalyst to help drive the market higher in Q4. I would keep some cash in reserve just in case earnings trends do not continue on their current track which could signal a 5-10% correction. I feel the broader market is slightly overbought by about that same amount relative to earnings value.

Non-Portfolio Investments:

Generally I sink all of my cash and deposits into this portfolio however I saw one investment during Q2 that I could not resist. Natural gas has been trending down in price for the last 5 years and bottomed around $2 this summer. I have been watching the rig and inventory data for natural gas for some time. I compiled that data along with long term weather data that I feel points to a cold upcoming winter to determine that natural gas was set for a significant price increase. Supply has been declining while base consumption from utility companies has been increasing. I feel that a colder than normal winter could put a real price squeeze on the natural gas market that would take a little time to react to. I bought stock in UGAZ which is the triple long etf related to natural gas. So far my gamble has paid off in droves as UGAZ has seen a nice rise since the middle of august when it was priced around $30 to where it sits now at around $45. It even hit $55 in price during the middle of October and I feel that more price upswings are still to come. I will look to liquidate this position sometime between mid-November to mid-December. I will add any and all proceeds back to this income portfolio.

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, UGAZ, 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.