5%+ Dividend Yield Portfolio: Risk-On Rally Continues (Nov 2017 Review)

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Includes: ABBV, ADM, BAC, BLW, BP, BXMT, DIV, DWX, E, ECNS, EDIV, ETW, EWA, F, FGD, FXEU, GCOW, GDX, GS, GSK, HYND, HYZD, IBM, IRM, JRO, KMI, KREF, NRZ, OHI, ONEY, PREMX, QCOM, QQQC, RDIV, REET, REK, RIG, SBRA, SCHD, SH, SKT, SPXU-OLD, SPYD, SRET, STOR, TEVA, TMUS, VDE, VRP, WDIV
by: Dividend Disco

Summary

My November returns were strong, but not as good as those for the broader market as the risk-on rally continues.

I’m adding lower yield, but higher growth stories to my portfolio to adapt to the times.

I’m still bullish on the rest of 2017 and early 2018, but midterm election season looks to be choppier.

Outlook

November was another hard month for bargain-focused investors and my 1.5% return for the month lagged the 3.0% return of the S&P 500. However, my 5% annualized yield significantly outpaced the 1.8% annualized dividend yield of the S&P 500. Volatility has been virtually non-existent (until Mueller related moves on Dec 1) and all seems to be going well with the US and global economy.

While I am not ready to abandon my conservative approach to generating gains through a value and dividend tilt, I am having some serious FOMO this year as I watch the steady gains in my portfolio eclipsed by the spectacular run that the broader market has had… that feeling is even worse when I consider the potential returns I would have had if I had liquidated my entire portfolio and put it all in Bitcoin!

However, I am adapting to the momentum of the market with (slightly) lower yield buys where I still believe that my long-term thesis of solid dividends plus low valuations will ultimately reward me. I have also been looking more intently at foreign stocks recently as the markets seem to be waking up to the low valuations to be had there. To me, having a strategy doesn’t mean being static in your approach to the markets. It means that you adapt to strong market signals and I don’t mind accepting a higher beta in my portfolio in this ‘rising tides’ market that we have been in for over a year.

November 2017 Review

As discussed, November 2017 was a tough one for my portfolio as I returned a 1.5% versus the strong 3.0% return for the S&P 500. My YTD return is now 5.7%, which is in my target growth goal of 5-15% per year, but still badly lagging the ‘risk-on’ 20.5% return of the S&P 500.

Despite this, I believe in mean reversion and that value plays will be in vogue again sometime (and I will be there to capitalize when their time comes). Last year at this time I was beating the S&P 500 YTD, so I remain confident in my strategy. In the meantime, I will keep cashing my dividends because at its core my portfolio isn’t about paper gains, it is about cash payments.

November was a solid payments month for me this year as my realized dividends were $910 for Nov 2017 (versus $905 in 2016). My YoY dividends are up over 7%! For the 12 months ending Nov 2017, my portfolio delivered $10,971 in cash to me (a realized yield of 4.5% for my full portfolio including cash reserves). I remain confident that I will exceed my $13,000 2017 goal, even with my sizable cash and short positions. Fear and greed are hard to balance, but I am happy with where I am overall. My yield-focused strategy still makes the most sense to me as paper gains may come and go but cash is forever!!

Background

Since I write for Seeking Alpha primarily to improve my own investment portfolio, I think it is important that you know my objectives. Please consider this context when you look at any advice I give and form your own opinions based on your needs and desires.

  • GOAL: Attractive, risk-adjusted, absolute returns (5-15% annually) over a long-term time frame while minimizing capital loss and extreme drawdowns.
  • STRATEGY: 'Enhanced' dividend growth or DGI strategy that focuses on a core of diversified holdings (ETFs and individual companies - my general screening criteria: growing companies (YoY EPS growth >0%) with attractive valuations (PEG <1.5 and P/E <20) and strong and safe dividends (yield >4%, payout <90%, and market cap >$500MM)… no tobacco stocks or micro caps), supplemented with return enhancing tools like hedges (derivatives and shorts), commodity exposure, etc., as well as some crazy picks.
  • BALANCE: Blend of ETFs (domestic and international) and individual companies (where there is a compelling reason to own). Seek to not overweight any one sector unless there is a compelling reason to do so (although the nature of these investments leads me to be overweight in traditional dividend-paying sectors like financials, REITs, and energy).

Note: I violate these guidelines constantly, so please call me out on it!

Portfolio Composition as of November 30, 2017

Security Type Div Yield Market Value Last Month Value Gain/Loss(%)
FUNDS 4.2% $99,635 $97,324 2.4%
Schwab U.S. Dividend Equity ETF (SCHD) ETF 2.9% $15,159 $14,547 4.2%
SPDR S&P 500 High Dividend ETF (SPYD) ETF 4.5% $15,115 $14,466 4.5%
SPDR S&P Emerging Markets Dividend ETF (EDIV) ETF 3.3% $9,402 $9,250 1.6%
SPDR S&P International Dividend ETF (DWX) ETF 5.0% $8,415 $8,279 1.6%
Fst Tst Dow Jns Glbl Sel Dvd Idx ETF (FGD) ETF 4.0% $7,794 $7,710 1.1%
Global X SuperDividend REIT ETF (SRET) ETF 7.4% $6,208 $6,132 1.2%
Global X SuperDividend U.S. ETF (DIV) ETF 6.2% $5,113 $5,040 1.4%
Vanguard Energy Index Fund ETF Shares (VDE) ETF 3.1% $4,725 $4,629 2.1%
iShares MSCI Australia ETF (EWA) ETF 4.5% $4,554 $4,540 0.3%
SPDR Russell 1000 Yield ETF (ONEY) ETF 2.9% $3,705 $3,572 3.7%
Oppenheimer Ultra Dividend Revenue ETF (RDIV) ETF 4.2% $3,624 $3,420 6.0%
Pacer Global Cash Cows Dividend ETF (GCOW) ETF 2.9% $3,111 $3,038 2.4%
Global X NASDAQ China Technology ETF (QQQC) ETF 3.3% $3,021 $3,055 -1.1%
iShares Global REIT ETF (REET) ETF 4.9% $2,603 $2,531 2.8%
iShares MSCI China Small Cap ETF (ECNS) ETF 3.3% $2,476 $2,503 -1.1%
Eaton Vance Buy-Write Opportunities Fund (ETW) CEF 9.3% $2,364 $2,364 0.0%
Market Vectors Gold Miners ETF (GDX) ETF 0.2% $2,247 $2,248 0.0%
COMPANIES 6.3% $121,741 $119,942 1.5%
Omega Healthcare Investors (OHI) REIT 9.7% $18,795 $19,860 -5.4%
Royal Dutch Shell (NYSE:RDS.B) Company 5.7% $9,891 $9,804 0.9%
Blackstone Mortgage Trust (BXMT) REIT 7.6% $9,816 $9,549 2.8%
New Residential Investment (NRZ) REIT 11.3% $9,093 $9,062 0.3%
BP (BP) Company 6.0% $8,014 $8,134 -1.5%
Tanger Factory Outlet REIT (SKT) REIT 5.5% $7,512 $6,825 10.1%
Qualcomm (QCOM) Company 3.4% $6,634 $5,101 30.1%
Sabra Healthcare REIT (SBRA) REIT 9.3% $6,465 $6,693 -3.4%
Ford Motors (F) Company 4.8% $5,008 $4,908 2.0%
Teva Pharmaceutical Industries (TEVA) Company 2.3% $4,446 $4,140 7.4%
Iron Mountain (IRM) REIT 5.8% $4,087 $4,000 2.2%
Archer-Daniels-Midland (ADM) Company 3.2% $3,988 $4,087 -2.4%
AbbVie (ABBV) Company 3.0% $3,877 $3,610 7.4%
IBM (IBM) Company 3.9% $3,849 $3,852 -0.1%
GlaxoSmithKline (GSK) Company 5.8% $3,506 $3,643 -3.8%
Eni (E) Company 5.6% $3,297 $3,265 1.0%
Kinder Morgan (KMI) Company 3.0% $3,170 $3,332 -4.9%
Transocean (RIG) Company 0.0% $3,042 $3,150 -3.4%
Store Capital (STOR) REIT 4.8% $2,582 $2,469 4.6%
KKR Real Estate Finance Trust (KREF) REIT 7.2% $2,050 $2,005 2.2%
VARIOUS POSITIONS OF <$1,000 VALUE VARIOUS 2.0% $2,619 $2,453 6.8%
FIXED INCOME TOTAL 5.2% $29,397 $29,824 -1.4%
PowerShares Variable Rate Preferred ETF (VRP) ETF 4.8% $5,148 $5,190 -0.8%
Bank of America Corporation (BAC) - Pref L (BML+L) Pref 4.5% $4,592 $4,714 -2.6%
Goldman Sachs (GS) - Pref A (GS+A) Pref 4.2% $4,500 $4,580 -1.7%
BlackRock Limited Duration Fund (BLW) ETF 6.0% $3,182 $3,210 -0.9%
T. Rowe Price Emerging Markets Bond Fund (PREMX) Fund 6.3% $3,052 $3,079 -0.9%
WisdomTree BofA Mrl Lynch HYBd ZrDr ETF (HYZD) ETF 5.2% $2,412 $2,419 -0.3%
Nuveen Floating Rate ETF (JRO) CEF 7.9% $2,162 $2,290 -5.6%
Goldman Sachs (GS) - Pref D (GS+D) Pref 4.5% $2,268 $2,277 -0.4%
WisdomTree BofA Mrl Lynch HYBd NgtDr ETF (HYND) ETF 5.0% $2,081 $2,065 0.8%
SHORTS TOTAL $7,703 $8,215 -6.2%
ProShares Short S&P 500 (SH) ETF 0.0% $7,638 $7,860 -2.8%
ProShares Short Real Estate (REK) ETF 0.0% $3,160 $3,252 -2.8%
ProShares UltraPro Short S&P 500 (SPXU-OLD) ETF 0.0% $1,180 $1,287 -8.3%
T-Mobile US (TMUS) Company 0.0% ($4,275) ($4,184) -2.1%
SCHWAB ROBO-ADVISOR TOTAL 2.0% $12,511 $12,282 1.9%
TOTAL 5.0% $270,987 $267,586
TOTAL + CASH $16,558 4.7% $287,545 $290,610 1.5%

Portfolio Moves in November 2017

New Positions

SHARE BUY – iShares MSCI China Small Cap ETF (ECNS): Bought 50 shares of this China Small Cap ETF at $50.05 on Nov 28.

  • Reasoning: I was looking to add to my China exposure and this ETF boasts a yield over 3%.

SHARE BUY – KKR Real Estate Finance Trust (KREF): Bought 100 shares of this sponsored REIT at $20.05 on Nov 3.

  • Reasoning: I had such a good experience with BXMT that I thought I would also get KKR’s version.

SHARE BUY – Omega Healthcare Investors (OHI): Bought an additional 200 shares of this medical REIT at $27.15 on Nov 15.

  • Reasoning: Like a batter that can’t lay off the curve ball… I just can’t seem to get enough of this beaten down REIT (hopefully, one day, it will be able to turn things around).

SHARE BUY – Global X Nasdaq China Technology ETF (QQQC): Bought 100 shares of this China Technology ETF at $30.55 on Nov 7.

  • Reasoning: I was looking to add to my China exposure and this ETF boasts a yield over 3%.

Exited Positions

SHARE SALE– PowerShares Europe Currency Hedged Low Vol (FXEU): Sold all 100 shares of this European ETF at $23.85 on Nov 16.

  • Reasoning: While I still love this ETF, apparently, I was the only person and they shut it down.

SHARE SALE– SPDR S&P Global Dividend ETF (WDIV): Sold all 50 shares of this international ETF at $68.55 on Nov 16.

  • Reasoning: This ETF’s fees were too high versus its alternatives.

Final Thoughts

Hopefully, the equity train will keep up its momentum into 2018. I am going to remain heavily invested in this rally (but will continue to preference unloved sectors and stocks where I think momentum has not gotten valuations as inflated). However, I won’t abandon all my hedges and cash positions just yet as heartbreak generally follows investments this late in the cycle.

Comments encouraged.

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

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.

Additional disclosure: The author is an amateur who has a history of getting calls both right and wrong with zero predictive power. Trade at your own risk and never rely solely on this author's opinion. Also, as I have no knowledge of your circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.