Dividend Portfolio Review: 22% Y/Y Growth In January

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Includes: AAPL, ABBV, AINV, AMD, AMZN, ARCC, ARI, ATVI, AVGO, AZSEY, BA, BABA, BAC, BASFY, BAYZF, BGS, BIP, BMWYY, BNS, BP, BX, BZUN, C, CBAUF, CL, CM, COR, CSCO, CTL, D, DATA, DDAIF, DHT, DIS, DRHKF, ED, EPD, EQT, FB, FDX, FMS, FSNUF, GE, GILD, GIS, GM, HCLP, HON, HUYA, INCY, INTC, IQ, JD, JNJ, JPM, KMI, KO, LNXSF, MAIN, MCD, MDGEF, MIC, MMM, MO, MS, MSFT, MU, NEP, NVDA, OHI, OSAGF, PEB, PEP, PFE, PG, PM, QTS, RDS.A, RDS.B, RY, SHE, SHLX, SNH, SO, STAG, STWD, SXTSY, T, TD, TEAM, TGT, TNK, TXN, UNIT, V, VONOY, VZ, WB, WBA, WFC, WRCDF, XOM
by: Stefan Redlich
Summary

The new year started with another big bang in the stock market followed by an impressive rally.

Unfortunately, I was quite limited in terms of fresh capital this month, and thus had to pass on some great buying opportunities.

Overall, I learned a valuable lesson the tough way.

Dividend income hit $205 in dividends, up 22% Y/Y and flat sequentially.

I outline portfolio composition by sector and portfolio weight for every holding.

2019 started with a big rally. Following an initial slump, markets rose throughout the month as optimism regarding the outcome of China-U.S. trade negotiations, a better-than-expected earnings season and a less hawkish Fed have provided lots of fuel.

(Source: onvista.de - Dow Jones Last 3M)

Tech stocks rebounded strongly, helped by much-better-than-expected results from heavyweights Apple (AAPL) and Facebook (FB), despite Amazon (AMZN) being slightly disappointing. In the Dow Jones, Boeing (NYSE:BA), next to Apple, was another major contributor to such a strong January.

In fact, the pattern is pretty similar to January 2018, although the Dow closed the month around 1,500 points higher back then. February 2018 saw a sharp correction followed by a quick rebound, and I would be surprised if this year's February would be a quiet one given that any news surrounding the trade negotiations can easily move markets up or down a few percentage points.

Although my portfolio recovered nicely, I was very frustrated that I couldn't buy as much as I wanted and thus had to pass on lots of exciting buying opportunities, especially when Apple tanked at the beginning of the month after cutting its guidance and also sending down semis again. Careless planning regarding required cash for extraordinary January expenses (tax + insurance) is the reason for that and definitely a lesson learnt the hard way.

Portfolio Changes | 0 new stocks, 0 exits, 1 sale and 8 repurchases

I only deployed around $600 in net cash in January and only added to existing positions. This was second-lowest level of investing ever and more than bad timing, as I missed out on some great buys.

I even had to sell a precious Apple share at the worst possible time in order to raise more capital and before the company reported earnings resulting in a 10% rally over the next few days. The only relief I can take here is that it was just one share, but given that I am very reluctant to sell anything, even that hurts.

I added one share to AbbVie (ABBV), as I considered the post-earnings slump to be way overdone. For the first time in years, ABBV missed both on the top and bottom lines.

At first glance, this could warrant a major selloff, but the numbers need to be put into perspective before jumping to conclusions too quickly. ABBV reported YoY revenue growth of 7.4% and only missed some analysts' estimates by a miniscule $60 million on $8.31 billion reported. To actually call that a miss can only be justified on mathematical terms, but in reality, I would hardly call a 0.72% deviation to estimates a miss. And even if you do call it a miss, you need to take note about the company's current valuation. Based on full-year 2018 adjusted EPS figures, the stock is only trading at around 10 times earnings and clocking in around 7% revenue growth, which more than justifies that, in fact, the stock appears deeply undervalued.

For me as an investor, I will just enjoy the safely covered dividend paired with healthy dividend growth while the company slowly brings its pipeline into market and prepares for the post-Humira future.

On top of that, I added to my holdings in Micron (MU) and AT&T (T). Micron stock has been taken to the cleaners in 2018 and lost more than 50% from its all-time high amid fears of a mega demand shortage for memory and subsequent pressure on pricing. While 2019 will be challenging for Micron, I don't think its P/E of 4 at that time was a risky bet to take. Even if earnings dropped 50%, a P/E of 8 would still be something I could happily live with.

AT&T is my largest holding, and although its current price is nowhere near my cost basis, I have confidence in the company in the long term. Trading at a 7% yield at that time, I simply had to add and either get rich with the dividends or die trying. It is really "game on" for AT&T, and while 2018 has been a year investors will want to forget, 2019 could be one to remember. Several analysts and authors on Seeking Alpha have picked AT&T as one of their top picks and conviction calls for 2019. Bank of America Merrill Lynch named AT&T a "high-conviction idea" for Q1, JPMorgan a "top pick" and expects "strong results" and Seeking Alpha's The Value Portfolio mentioned it as his "top investment idea for 2019". AT&T's latest earnings have disappointed again following record subscriber losses, but although that is uncomfortable to hear, it is neither unexpected nor a tragedy given that the bottom line contribution of these promotion-hungry subscribers was very low anyway.

Apart from that, I continued my regular monthly stock savings plans: these are routine investments between $50 and $115 each into Wells Fargo (NYSE:WFC), Visa (NYSE:V), McDonald's (NYSE:MCD), Johnson & Johnson (NYSE:JNJ), Apple, and the lesser-known Commonwealth Bank of Australia (OTCPK:CBAUF). I have increased each plan by 5% this year.

All net purchases and sales in January can be seen below:

Dividend Income: What happened on the dividend side?

While my capital contributions were very low, dividends continued to shine, as they provide income regardless of whether I add new capital to my portfolio.

My income from 22 corporations amounted to $206 in dividends, up 22% Y/Y and flat sequentially.

In terms of dividends, the biggest contributors in January were Big Tobacco, Cisco (CSCO), and the Canadian banks. In total, these 6 stocks provided 56% of monthly income. Following fresh investments in 2018 and organic dividend raises, basically all dividends were up Y/Y, although some companies left the portfolio while others entered it.

All dividends break down as follows:

The dashboard above shows how the monthly dividend income breaks down into individual stocks. It also shows the change in income versus the previous quarter and year.

I also created a new dashboard which shows all-time dividends by stocks clustered in a tree map which best shows the relative importance of each holding.

Here is a look at my favorite chart: the net dividend income development by month over time between 2015 and 2019, where you can easily see the development of my dividend income as well as the average annual dividend in a given year:

Next, I have scattered all the individual dividend payments I have ever received and colored them by year, rearranging the years side by side rather than horizontally as in previous updates:

The readability of the numbers is rather poor, as there is so much data, but the bigger picture becomes apparent regardless of these numbers. I am just looking at the size and quantity of the bubbles as they keep on climbing higher and expanding in size.

It remains fascinating to watch how all these metrics develop over time. Right now, as I am still in the early stages, these metrics are not that impressive but the growth is truly striking, and all these instruments help me measure it and provide meaning to it.

Speaking in terms of meaning, another way to express the monthly dividend income is in terms of Gifted Working Time (GWT). I am assuming an average hourly rate of $25 here. In 2018, I generated 121 hours in GWT, equaling slightly more than $3,000 in annual net dividends. For this year, I am targeting a 15% increase. This results in $3,450 in targeted annual net dividends, or 138 hours in GWT. Depending on actual performance, I may revise that target after the first 3-6 months.

What this shows is as follows:

  1. All time (blue area) - Around 241 hours, or 30.2 days, of active work have been replaced with passive income since the start of my dividend journey. Assuming a 5-day work week, that equals 6 full weeks, or more than an entire month, of vacation funded via dividends.
  2. YTD (green bars) - Around 8 hours, or 1 day, of active work have been replaced with passive income in 2019 already.

Upcoming February Dividends

The snapshot below is taken from my newly released Dividend Calendar & Dashboard Tool (make sure to follow instructions) and shows expected gross dividend payments for February.

My portfolio composition

As of end of January, on % cost basis, my portfolio is composed as follows:

Company Name Ticker % cost basis
AT&T Inc. T 5.78%
Apple Inc. AAPL 5.05%
Royal Dutch Shell Plc Class B (RDS.B) 4.73%
Altria Group Inc. (MO) 3.48%
Cisco Systems, Inc. CSCO 3.15%
Micron Technology, Inc. MU 3.09%
Gilead Sciences, Inc. (GILD) 3.05%
McDonald's Corp. MCD 2.97%
Commonwealth Bank of Australia (ASX:CBA) 2.81%
AbbVie Inc. ABBV 2.74%
Southern Co. (SO) 2.37%
Johnson & Johnson JNJ 2.24%
Main Street Capital Corporation (MAIN) 2.21%
Wells Fargo & Co. (WFC) 2.11%
3M Co. (MMM) 1.85%
Daimler (OTCPK:DDAIF) 1.77%
B&G Foods, Inc. (BGS) 1.73%
Siemens Healthineers (SHE) 1.68%
Philip Morris International Inc. (PM) 1.62%
Texas Instruments Incorporated (TXN) 1.38%
Microsoft Corporation (MSFT) 1.38%
Toronto-Dominion Bank (TD) 1.36%
Bank of Nova Scotia (BNS) 1.35%
Baozun Inc. (BZUN) 1.30%
Bank of America Corp. (BAC) 1.27%
PepsiCo, Inc. (PEP) 1.25%
Canadian Imperial Bank of Commerce (CM) 1.25%
Bayerische Motoren Werke AG Preference Shares (OTCPK:BMWYY) 1.23%
Dominion Energy Inc. (D) 1.19%
Honeywell International Inc. (HON) 1.14%
Verizon Communications Inc. (VZ) 1.12%
Alibaba Group Holding Ltd. (BABA) 1.03%
Intel Corporation (INTC) 0.99%
Procter & Gamble Co. (PG) 0.97%
The Coca-Cola Co. (KO) 0.94%
BASF (OTCQX:BASFY) 0.92%
Morgan Stanley (MS) 0.92%
Senior Housing Properties Trust (SNH) 0.87%
NVIDIA Corporation (NVDA) 0.81%
Wirecard AG (OTCPK:WRCDF) 0.80%
Ares Capital Corporation (ARCC) 0.79%
General Motors Company (GM) 0.74%
Target Corporation (TGT) 0.72%
Sixt (OTC:SXTSY) 0.72%
Blackstone Group LP (BX) 0.72%
Royal Bank of Canada (RY) 0.71%
BP plc (BP) 0.67%
JPMorgan Chase & Co. (JPM) 0.63%
General Mills, Inc. (GIS) 0.62%
Bayer AG (OTCPK:BAYZF) 0.61%
Allianz SE (OTCPK:AZSEY) 0.58%
Drillisch (OTC:DRHKF) 0.57%
Tableau Software Inc. Class A (DATA) 0.56%
Huya Inc. - ADR (HUYA) 0.54%
Walt Disney Co. (DIS) 0.48%
Advanced Micro Devices, Inc. (AMD) 0.48%
Exxon Mobil Corporation (XOM) 0.47%
Stag Industrial Inc. (STAG) 0.46%
Pfizer Inc. (PFE) 0.46%
NextEra Energy Partners LP (NEP) 0.45%
Enterprise Products Partners L.P. (EPD) 0.44%
Pebblebrook Hotel Trust (PEB) 0.43%
Fresenius SE (OTCQX:FSNUF) 0.43%
CoreSite Realty Corp. (COR) 0.42%
Citigroup Inc. (C) 0.41%
IQIYI Inc. (IQ) 0.39%
Activision Blizzard, Inc. (ATVI) 0.36%
Facebook, Inc. Common Stock FB 0.36%
Starwood Property Trust, Inc. (STWD) 0.35%
QTS Realty Trust Inc Class A (QTS) 0.35%
Teekay Tankers Ltd. (TNK) 0.34%
CenturyLink Inc. (CTL) 0.33%
Colgate-Palmolive Company (CL) 0.33%
EQT Corporation (EQT) 0.32%
Shell Midstream Partners LP (SHLX) 0.31%
Uniti Group Inc. (UNIT) 0.30%
Lanxess AG (OTCPK:LNXSF) 0.29%
Kinder Morgan Inc. (KMI) 0.28%
Consolidated Edison, Inc. (ED) 0.27%
Osram (OTCPK:OSAGF) 0.25%
Macquarie Infrastructure Corp. (MIC) 0.25%
Vonovia (OTCPK:VONOY) 0.24%
Broadcom Inc. (AVGO) 0.24%
Omega Healthcare Investors Inc. (OHI) 0.23%
Visa Inc. Class A (V) 0.20%
FedEx Corporation (FDX) 0.19%
Walgreens Boots Alliance Inc. (WBA) 0.18%
Atlassian Corporation PLC (TEAM) 0.18%
MediGene AG (OTCPK:MDGEF) 0.18%
Fresenius Medical Care (FMS) 0.18%
Apollo Commercial Real Est. Finance Inc. (ARI) 0.13%
Apollo Investment Corp. (OTC:AINV) 0.13%
Weibo Corp. (WB) 0.12%
JD.com Inc. (JD) 0.12%
Hi-Crush Partners LP (HCLP) 0.12%
DHT Holdings Inc. (DHT) 0.12%
Brookfield Infrastructure Partners L.P. (BIP) 0.12%
General Electric Company (GE) 0.11%
Incyte Corporation (INCY) 0.08%

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Disclosure: I am/we are long ALL STOCKS 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: I am not offering financial advice but only my personal opinion. Investors may take further aspects and their own due diligence into consideration before making a decision.