5%+ Dividend Yield Portfolio: Leaning In Is Yielding Results (April 2018 Review)
Summary
- General choppiness in the markets continued in April, but staying calm and true to my strategy is working in turns of returns and sleeping well at night.
- My April 2018 capital gains (1.1%) again solidly beat the S&P 500 (0.4%).
- My dividend yield of almost 5% also crushed the pathetic 1.8% of the S&P 500.
- I also continue to narrow my portfolio to only my best ideas by trading out of ideas that were just ‘okay’.
Outlook
April continued to deliver the volatility that 2018 is becoming known for, though the trough value of -10% is hardly unusual or large by historical standards.
Source: JP Morgan
However, if you are looking to make up for any 2018 losses with one killer trade, then you are on a fool's errand (and likely suffering from the gambler's fallacy). Thinking like this is one of the reasons why individual investors have terrible historical performance against almost every other asset class.
Source: JP Morgan
If you are worried that you missed the rocket ship ride that the market has been on, you are probably right (sorry to be the bearer of bad news). However, that doesn’t mean that hope is lost or that equities shouldn’t play a role in your current asset allocation. In my (occasionally) humble opinion, it means that you need to be smarter (because the easy money has already been made) and you need to accept the returns that are being offered (as opposed to always swinging for the fences). This is what major pensions are doing around the country as they accept the reality of the situation and proactively move to reallocate assets in response.
Source: JP Morgan
For me, that means looking for value (enhanced by supportable dividend yields). Fortunately, corporate earnings growth (despite 2018’s bumpy ride in stock prices) has been strong, so valuations are coming back in line to historical averages. This story is even more powerfully made overseas, where valuations are even more attractive on a relative basis.
Source: JP Morgan
So attractive opportunities exist (even if they aren’t the ‘screaming deals’ available at the beginning of this bull market). I think this is especially true for foreign markets, so I am gently tilting my portfolio to favor international equities.
Source: JP Morgan
April 2018 Review
April 2018 was another solid win for me both in terms of capital gains and dividend growth. In April, my portfolio gained 1.1% which beat the 0.4% gain of the S&P 500. However, I am even more pleased about my dividends which came in 6.6% higher than in March 2017.
April 2018 rewarded me with realized dividends of $854 (versus $801 in 2017). For the 12 months ending Apr 2018, my portfolio delivered $13,362 in cash to me (a realized yield of 4.4% for my full portfolio including cash reserves). My 2018 goal was to increase dividends by ~5% to $13,500 for the year. 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 April 30, 2018
| Security | Type | Div Yield | Market Value | Last Month Value | Gain/Loss (%) |
| FUNDS | 4.0% | $103,843 | $104,097 | -0.2% | |
| SPDR S&P 500 High Dividend ETF (SPYD) | ETF | 4.0% | $14,476 | $14,304 | 1.2% |
| Fst Tst Dow Jns Glbl Sel Dvd Idx ETF (FGD) | ETF | 4.1% | $13,120 | $12,775 | 2.7% |
| SPDR S&P Emerging Markets Dividend ETF (EDIV) | ETF | 3.0% | $10,413 | $10,790 | -3.5% |
| Schwab U.S. Dividend Equity ETF (SCHD) | ETF | 2.6% | $9,696 | $9,806 | -1.1% |
| iShares MSCI Australia ETF (EWA) | ETF | 4.7% | $8,876 | $8,793 | 0.9% |
| SPDR S&P International Dividend ETF (DWX) | ETF | 4.0% | $8,212 | $8,216 | 0.0% |
| ProShares S&P 500 Dividend Aristocrat ETF (NOBL) | ETF | 1.9% | $6,163 | $6,225 | -1.0% |
| iShares Nasdaq Biotechnology ETF (IBB) | ETF | 0.2% | $5,183 | $5,337 | -2.9% |
| UBS ETRACS 2x US High Div, Low Vol ETN (HDLV) | ETN | 12.0% | $5,030 | $5,320 | -5.5% |
| Global X SuperDividend U.S. ETF (DIV) | ETF | 6.2% | $4,924 | $4,806 | 2.5% |
| PowerShares S&P 500 High Div Low Volatility ETF (SPHD) | ETF | 3.5% | $3,959 | $3,943 | 0.4% |
| Oppenheimer Ultra Dividend Revenue ETF (RDIV) | ETF | 5.4% | $3,621 | $3,508 | 3.2% |
| Global X NASDAQ China Technology ETF (QQQC) | ETF | 2.3% | $2,917 | $3,047 | -4.3% |
| iShares MSCI China Small Cap ETF (ECNS) | ETF | 3.1% | $2,630 | $2,650 | -0.8% |
| Horizons NASDAQ 100 Covered Call ETF (QYLD) | ETF | 9.1% | $2,396 | $2,380 | 0.7% |
| Market Vectors Gold Miners ETF (GDX) | ETF | 0.8% | $2,228 | $2,198 | 1.4% |
| COMPANIES | 6.6% | $122,801 | $120,076 | 2.3% | |
| Omega Healthcare Investors (OHI) | REIT | 10.2% | $18,186 | $18,928 | -3.9% |
| Royal Dutch Shell (RDSB) | Company | 5.2% | $10,863 | $9,830 | 10.5% |
| Abbvie (ABBV) | Company | 3.9% | $9,655 | $9,404 | 2.7% |
| Blackstone Mortgage Trust (BXMT) | REIT | 8.1% | $9,255 | $9,426 | -1.8% |
| New Residential Investment (NRZ) | REIT | 11.5% | $8,985 | $8,455 | 6.3% |
| Ventas REIT (VTR) | REIT | 6.1% | $7,713 | $7,430 | 3.8% |
| Iron Mountain (IRM) | REIT | 6.8% | $6,788 | $6,572 | 3.3% |
| Tanger Factory Outlet REIT (SKT) | REIT | 6.3% | $6,585 | $6,600 | -0.2% |
| Sabra Health Care REIT (SBRA) | REIT | 9.8% | $6,152 | $5,930 | 3.7% |
| Qualcomm (QCOM) | Company | 4.9% | $5,101 | $5,541 | -7.9% |
| Archer-Daniels-Midland (ADM) | Company | 2.9% | $4,538 | $4,337 | 4.6% |
| Ford Motors (F) | Company | 5.2% | $4,496 | $4,432 | 1.4% |
| GlaxoSmithKline (GSK) | Company | 6.6% | $4,011 | $3,907 | 2.7% |
| Eni (E) | Company | 4.1% | $3,917 | $3,533 | 10.9% |
| Transocean (RIG) | Company | 0.0% | $3,711 | $2,970 | 24.9% |
| IBM (IBM) | Company | 4.3% | $3,624 | $3,836 | -5.5% |
| Kinder Morgan (KMI) | Company | 5.0% | $2,911 | $2,771 | 5.0% |
| KKR Real Estate Finance Trust (KREF) | REIT | 8.1% | $1,971 | $2,006 | -1.7% |
| Teva Pharmaceutical Industries (TEVA) | Company | 0.0% | $1,798 | $1,709 | 5.2% |
| VARIOUS POSITIONS OF <$1,000 VALUE | VARIOUS | 2.0% | $2,541 | $2,460 | 3.3% |
| FIXED INCOME TOTAL | 4.5% | $15,672 | $16,077 | -2.5% | |
| Bank of America Corporation (BAC) - Pref L (BML+L) | Pref | 4.5% | $4,551 | $4,698 | -3.1% |
| Goldman Sachs (GS) - Pref A (GS+A) | Pref | 4.4% | $4,342 | $4,588 | -5.4% |
| WisdomTree BofA Mrl Lynch HYBd ZrDr ETF (HYZD) | ETF | 4.8% | $2,396 | $2,390 | 0.3% |
| Goldman Sachs (GS) - Pref D (GS+D) | Pref | 4.3% | $2,232 | $2,287 | -2.4% |
| WisdomTree BofA Mrl Lynch HYBd NgtDr ETF (HYND) | ETF | 4.9% | $2,151 | $2,114 | 1.7% |
| SHORTS TOTAL | 0.0% | $10,902 | $10,939 | -0.3% | |
| ProShares Short S&P500 (SH) | ETF | 0.0% | $7,550 | $7,575 | -0.3% |
| ProShares Short Real Estate (REK) | ETF | 0.0% | $3,352 | $3,364 | -0.4% |
| SCHWAB ROBO-ADVISOR TOTAL | 2.0% | $12,694 | $12,626 | 0.5% | |
| TOTAL | 5.0% | $265,911 | $263,816 | ||
| TOTAL + CASH | $33,579 | 4.4% | $299,491 | $290,909 | 1.1% |
Portfolio Moves in April 2018
New Positions
SHARE BUY – Abbvie (ABBV): Bought another 60 shares of this pharma company at $93.55 on Apr 2.
- Reasoning: This high-flying pharma stock had a bad few months, so I was able to buy at a pretty good discount to recent prices.
SHARE BUY – iShares MSCI Australia ETF (EWA): Bought another 200 shares of this Australia ETF at $21.92 on Apr 2.
- Reasoning: The Australian market has strong dividend yields (4.7%) and commodities exposure to the explosive growth of SE Asia.
SHARE BUY – Fst Tst Dow Jns Glbl Sel Dvd Idx ETF (FGD): Bought another 200 shares of this dividend ETF at $25.45 on Apr 2.
- Reasoning: Featuring a 4.1% yield, this dividend ETF is one of the better ones that I own and expands my international exposure.
Exited Positions
SHARE SALE– BP (BP): Sold all 200 shares of this oil major company at $41.55 on Apr 5.
- Reasoning: Part of the narrowing of my portfolio, I decided to keep my exposure to RDSB and sell my position in BP for a solid gain.
SHARE SALE– Fidelity Dividend Rising Rates ETF (FDRR): Sold all 100 shares of this dividend focused ETF at $29.75 on Apr 4.
- Reasoning: I listened to my readers who encouraged me to winnow down my positions to only my best ideas, so I sold this higher fee dividend ETF to focus on more promising opportunities.
SHARE SALE– Schwab U.S. Dividend Equity ETF (SCHD): Sold 100 shares of this U.S. dividend ETF at $49.15 on Apr 4.
- Reasoning: I am reducing my U.S. exposure to increase my international exposure (but I am still keeping the bulk of my position in this ticker).
SHARE SALE– Vanguard Energy ETF (VDE): Sold all 50 shares of this energy focused ETF at $91.27 on Apr 2.
- Reasoning: I listened to my readers who encouraged me to winnow down my positions to only my best ideas, so I sold this general energy ETF to focus on more promising opportunities.
Final Thoughts
The easy money might already have been made but leaning in to the recent volatility with a sound investment strategy will still deliver compelling results. Individual investors have a nasty habit of doing exactly the wrong thing at the wrong time, so stay true to a strategy that makes sense to you. For me, international markets (with strong dividend yields) are especially appealing to me right now, but recent weakness in the U.S. pharma sector also has my eye for potential bargains. In the words of the Dos Equis man, “Stay thirsty, my friends.” To which I’ll add, ‘but don’t do anything foolish’. What moves is everyone else making to cope with the current markets?
Comments encouraged.
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