Quarterly Review Of DivGro: Q1-2017

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Includes: AAPL, ABBV, AFL, CB, CMI, DIS, F, GE, IBM, JNJ, KO, LMT, MCD, MO, NKE, NOC, PFE, PG, TGT, TRV, WBA, XOM
by: FerdiS

Summary

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

In Q1-2017, DivGro produced dividend income of $3,585, topping last quarter's total by 24%. The year-over-year increase in dividend income is 66%.

I include several charts to visualize DivGro's composition and how positions contribute to the portfolio's projected annual dividend income.

Welcome to my 17th quarterly review of DivGro, my portfolio of dividend growth stocks.

My quarterly reviews summarize the actions I've taken during the preceding quarter. I include summaries of dividends received and I report on changes that would impact future dividend income.

In the first quarter of 2017, I transferred our trust account from Scottrade to Interactive Brokers, which provides a more flexible trading platform and lower commissions. I'm taking additional consolidation actions, including transferring our IRAs to FolioInvesting where I'll be managing them as part of DivGro.

I have aggressive goals for 2017, including a new goal of boosting DivGro's dividend income through options trading. I'm hoping to earn $8,400 in options income and use the money so generated to buy more dividend growth stocks.

In Q1-2017, I've secured options income totaling $2,318, or 28% of my 2017 options income goal. Secured options income is from closed or expired options, which I no longer have potential obligations to fulfill.

Dividend Income

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

This past quarter, I collected dividend income totaling $3,585, topping last quarter's total by 23.8%. I'm particularly happy with the increase from Q1-2016 of 65.7%.

DivGro's average percentage payback is 10.55%, up from 9.85% at the end of Q4-2016. Percentage payback relates total dividend income to the total amount of capital invested.

Transactions

This quarter I deposited $3,000 in new capital, $1,451 in passive income, and $3,243 in options income.

"Passive" income is a bit of a misnomer, as I'm actively working on writing articles for DivGro and Seeking Alpha. Nevertheless, the income associated with these activities is not guaranteed but depends largely on my readership. (Thanks!)

Following is a summary of my buys in Q1-2017. New positions are highlighted:

Company Ticker Date Transaction
AGIC Equity & Convertible Income Fund NIE 4 Jan added 75 shares at $18.74 per share
Wal-Mart Stores, Inc WMT 14 Jan transferred 9 shares at $56.96 per share
Microsoft Corporation MSFT 16 Jan transferred 60 shares at $27.80 per share
Qualcomm Inc QCOM 7 Feb added 200 shares at $53.06 per share
T. Rowe Price Group, Inc TROW 10 Feb added 35 shares at $69.38 per share
Xcel Energy Inc XEL 24 Feb transferred 26 shares at $19.39 per share
Verizon Communications VZ 24 Feb transferred 16 shares at $28.96 per share
AT&T Inc T 24 Feb transferred 19 shares at $25.89 per share
Xcel Energy Inc XEL 24 Feb added 24 shares at $43.34 per share
Verizon Communications VZ 24 Feb added 84 shares at $50.46 per share
Stanley Black & Decker, Inc SWK 24 Feb bought 50 shares at $127.16 per share
General Electric Company GE 1 Mar bought 300 shares at $31.00 per share
AGIC Equity & Convertible Income Fund NIE 17 Mar added 179 shares at $19.13 per share
Main Street Capital Corporation MAIN 17 Mar added 120 shares at $37.35 per share
Vanguard High Dividend Yield ETF VYM 17 Mar bought 150 shares at $78.97 per share
UnitedHealth Group UNH 25 Mar transferred 19 shares at $85.98 per share

I closed several positions and reduced the number of shares in one case due to an option assignment:

Company Ticker Date Transaction
PennantPark Investment PNNT 9 Feb sold 785 shares for $8.27 per share
Reynolds American, Inc RAI 17 Feb sold 100 shares for $52.50 per share
Kimberly-Clark Corporation KMB 7 Mar sold 100 shares for $120.00 per share
Nuveen AMT-Free Quality
Municipal Income Fund
NEA 14 Mar sold 359 shares for $12.95 per share
Eaton Vance Tax-Managed Global
Diversified Equity Income Fund
EXG 14 Mar sold 724 shares at $8.38 per share

At the end of Q1-2017, DivGro contained 48 different positions, including 46 stocks, one closed-end fund (CEF), and one exchange-traded fund (ETF).

Here is the distribution of DivGro's holdings by sector:

I'm showing CEFs and ETFs as "sectors" even though they're funds.

Dividend Adjustments

Last quarter, I reported projected annual dividend income (PADI) of $12,376 on my total capital investment, for a projected annual yield of 4.31%. This quarter, PADI increased to $12,607, while m projected annual yield is 4.03%.

The following table shows the stocks in my DivGro portfolio that announced dividend increases in Q1-2017. I'm including the new annual dividend and yield on cost (YoC).

Company Ticker Increase Annual Div New YoC
Cisco Systems, Inc CSCO 11.54% $1.16 3.83%
Dominion Resources, Inc D 7.86% $3.02 4.14%
Eversource Energy ES 6.74% $1.90 4.63%
General Dynamics Corporation GD 10.53% $3.36 4.97%
Gilead Sciences, Inc GILD 10.64% $2.08 2.20%
Coca-Cola Company KO 5.71% $1.48 3.58%
Intel Corporation INTC 4.81% $1.09 4.68%
3M Company MMM 5.86% $4.70 2.94%
Realty Income Corporation O 3.95%
0.24%
$2.53
$2.53
5.35%
Omega Healthcare Investors, Inc OHI 1.64% $2.48 6.63%
Raytheon Company RTN 8.87% $3.19 2.97%
STAG Industrial, Inc STAG 0.71% $1.40 7.60%
AT&T Inc T 2.08% $1.96 6.02%
T. Rowe Price Group, Inc TROW 5.56% $2.28 3.07%
United Parcel Service, Inc UPS 6.41% $3.32 3.26%
Valero Energy Corporation VLO 16.67% $2.80 4.55%
Wal-Mart Stores, Inc WMT 2.00% $2.04 2.84%

DivGro's average YoC is 3.98%, down from the 4.26% reported at the end of Q4-2016.

I received dividends from 50 different stocks this month:

  1. Apple Inc (AAPL) :: $57.00
  2. AbbVie Inc. (ABBV) :: $128.00
  3. Aflac Incorporated (AFL) :: $21.50
  4. Chubb Limited (CB) :: $16.56
  5. Cummins Inc (CMI) :: $45.10
  6. Cisco Systems, Inc. (NASDAQ:CSCO) :: $78.00
  7. Dominion Resources, Inc (NYSE:D) :: $75.50
  8. The Walt Disney Company (DIS) :: $177.06
  9. Eversource Energy (NYSE:ES) :: $28.50
  10. Eaton Vance Tax-Managed Global Diversified Equity Income Fund (NYSE:EXG) :: $117.72
  11. Ford Motor Company (F) :: $200.00
  12. General Dynamics Corporation (NYSE:GD) :: $26.60
  13. Gilead Sciences, Inc (NASDAQ:GILD) :: $52.00
  14. International Business Machines Corporation (IBM) :: $42.00
  15. Intel Corporation (NASDAQ:INTC) :: $57.20
  16. Johnson & Johnson (JNJ) :: $43.20
  17. Kimberly-Clark Corporation (NYSE:KMB) :: $92.00
  18. Lockheed Martin (LMT) :: $25.48
  19. Main Street Capital (NYSE:MAIN) :: $183.15
  20. McDonald's Corporation (MCD) :: $25.38
  21. 3M Company (NYSE:MMM) :: $18.80
  22. Altria Group, Inc. (MO) :: $45.75
  23. Microsoft Corporation (NASDAQ:MSFT) :: $331.60
  24. Nuveen AMT-Free Quality Municipal Income Fund (NYSE:NEA) :: $44.52
  25. AGIC Equity & Convertible Income Fund (NYSE:NIE) :: $253.46
  26. Nike Inc (NKE) :: $8.46
  27. Northrop Grumman Corporation (NOC) :: $14.40
  28. Realty Income Corporation (NYSE:O) :: $31.19
  29. Omega Healthcare Investors, Inc (NYSE:OHI) :: $186.00
  30. Pfizer Inc (PFE) :: $96.00
  31. The Procter & Gamble Company (PG) :: $66.95
  32. PennantPark Investment (NASDAQ:PNNT) :: $280.00
  33. Qualcomm Inc (NASDAQ:QCOM) :: $212.00
  34. Reynolds American, Inc (NYSE:RAI) :: $92.00
  35. Raytheon Company (NYSE:RTN) :: $17.58
  36. STAG Industrial, Inc (NYSE:STAG) :: $83.80
  37. Stanley Black & Decker, Inc (NYSE:SWK) :: $29.00
  38. AT&T Inc (NYSE:T) :: $329.55
  39. Target Corporation (TGT) :: $84.00
  40. T. Rowe Price Group, Inc (NASDAQ:TROW) :: $57.00
  41. The Travelers Companies, Inc (TRV) :: $19.43
  42. UnitedHealth Group Inc (NYSE:UNH) :: $110.93
  43. United Parcel Service, Inc (NYSE:UPS) :: $20.75
  44. Valero Energy Corporation (NYSE:VLO) :: $120.40
  45. Vanguard High Dividend Yield ETF (NYSEARCA:VYM) :: $84.00
  46. Verizon Communications (NYSE:VZ) :: $250.32
  47. Walgreens Boots Alliance, Inc (WBA) :: $16.50
  48. Wal-Mart Stores, Inc (NYSE:WMT) :: $159.04
  49. Xcel Energy Inc (NYSE:XEL) :: $225.93
  50. Exxon Mobil Corporation (XOM) :: $48.75

Some of these payments are from stocks and funds I've sold in Q1-2017.

Portfolio Health

I've started using the analysis and visualization tools available at Simply Wall St, a Sydney-based startup that gives investors access to institutional quality data and analysis reports presented visually.

The snowflake infographic represents Value, Future, Past, Health and Dividend scores calculated from the weighted average scores of stocks in my portfolio. It gives an immediate sense of the quality of the underlying portfolio or stock:

When sorted by total snowflake score, JNJ, QCOM, GD, RTN, and PFE top the list, while F, AAPL, GILD, CSCO, and STAG are at the bottom.

Simply Wall St provides an industry diversification infographic, which is interesting to study:

The thickness of lines in this infographic represents the size of investments. DivGro is overweight in Capital Goods and underweight in Transportation, HealthCare Equipment and Services, and Consumer Services.

Portfolio Statistics

I now monitor DivGro's performance monthly in Pulse articles. It is important to monitor the performance of long-term stocks because changes that could affect the stock's performance can easily "hide" behind solid long-term results. I'd rather not be surprised by such changes. You can read the latest pulse article here.

For my quarterly reviews, I review general portfolio statistics. First, let's look at the yield of stocks in my portfolio:

My closed-end fund, NIE, has the largest yield, followed by OHI, which is a REIT (real estate investment trust). The average yield of stocks in DivGro is 3.28%.

Next up is the dividend growth rate. For quarterly reports, I look at the 1-year dividend growth rate, which will change throughout the year as stocks announce dividend increases. It is important to strike a good balance between high yielding stocks and high dividend growth stocks.

I like seeing dividend increases about 7%, so I'm very happy to see about half of my DivGro stocks with a 1-year dividend growth rate exceeding 7%. The arithmetic average also is above 7%!

Let's look at the weight of individual holdings in DivGro. I prefer to see equal weights, but this difficult to achieve because I want to sell covered call options and to do so I need 100 shares (or multiples of 100 shares). Quite naturally, therefore, my portfolio will not be ideally weighted.

Next, let's look at the contribution of each position to DivGro's projected annual dividend income, which depends not only on the stock's yield but also on the size of the investment. Here, MAIN dominates, followed by QCOM and NIE:

Finally, let's look at the payback percentage, or how much of my original investment I've received back in the form of dividends. Generally, stocks I've owned for a longer time will larger paybacks, but dividend yield also plays a role: payback will grow faster for stocks with larger yields.

RAI's payback percentage just topped 20%, followed by MAIN and MO, which are close to 20%. The arithmetic average payback percentage is 7.33%. On my portfolio spreadsheet, I calculate a weighted average payback percentage, which currently is 10.55%.

Goal For Q2-2017

In Q2-2017, I'd like to transfer our taxable account from FolioInvesting to our trust account Interactive Brokers. Doing so will allow me to write more covered calls.

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.

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.

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