Seeking Alpha

5%+ Dividend Yield Portfolio: Staying In The Game (November 2019 Review)

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Includes: ABBV, AGN, BCHYX, BP, BXMT, BYLD, CAJ, CHIC, DVYA, ECNS, EELV, EWA, EWM, FGD, GILD, GSK, HDAW, HDEF, HDLV, IBM, IDHD, IDV, IEIH, IGLB, ING, IQDE, IRM, KMI, LVHE, LVHI, LYB, NRZ, OXY, PACW, PFE, PGAL, QYLD, RIG, SBRA, SKT, SPHD, SPLB, SPYD, T, TEVA, XBI, XSHD
by: Dividend Disco
Dividend Disco
Value, dividend investing, ETF investing
Summary

My +1.1% gain was beaten by the impressive 3.6% of the S&P 500 - marking my first beat in 5 months.

My Nov. dividends were an 12% increase from a year ago and my YTD dividends are up over 15%.

My dividend yields continue to achieve over 5% (versus the under 2% mark for the S&P 500).

I held my nose and deployed cash to stay 'in the game' - mostly in international ETFs.

Musings

Staying in the game is critical for anyone lacking a crystal ball who can anticipate the twists and turns of the markets. I won't go on a long rant about potential for self-inflicted damage that aggressive market timing brings most who attempt it… but suffice it to say that no one has a predictable model for how to do this successfully vs. just a broad-based buy and hold strategy. In the past few months, I have lightened up on some of my more aggressive positions, causing me to build up a cash balance - so, in November, I needed to deploy funds. And deploy I did, mostly into beaten-down domestic stalwarts and international ETFs.

My wife and I spent 2 wonderful weeks on vacation in Colombia and to my parents' home for Thanksgiving, so no long list of musings this month. However, I will comment that the market trends went back to old habits (rewarding the highly valued and ignoring the value plays) in November, so I predictably underperformed (for the first time in months). It is almost like the market is getting a 'second' wind, but I don't think anyone should get too excited ahead of what might prove to be a very trying 2020.

Source: S&P Global

November 2019 Review

November 2019 was another ripper for the broader markets with multiple record highs reached for U.S. equities. For the month, the S&P 500 posted a 3.6% gain which I trailed with a 1.1% gain. YTD, I am up 13.6% vs. the 27.6% gains for the index (before dividends are considered). However, my 5.1% dividend yield keeps crushing the 1.8% yield of the index.

As for cash yield, November 2019 rewarded me with realized dividends of $1,135 (versus $1,017 in 201 - a healthy 12% increase). For the last 12 months, my portfolio delivered $16,520 in cash to me (up 17% from my 2018 total). My realized yield for the trailing twelve months was 5.4% for my full portfolio including cash reserves. I'm also a lock to achieving my 2019 yield goal of over $15,000 for the year (a 15% increase over 2018). 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 high yielding 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, 2019

Security Type Div Yield Market Value Last Month Value Monthly Gain/Loss (%)
FUNDS 4.9% $137,978 $136,203 1.3%
SPDR S&P 500 High Dividend ETF (SPYD) ETF 4.4% $23,340 $22,968 1.6%
Fst Tst Dow Jns Glbl Sel Dvd Idx ETF (FGD) ETF 5.9% $12,140 $11,945 1.6%
Xtrackers MSCI World ex US Div Yld Hdgd ETF (HDAW) ETF 4.5% $10,069 $10,034 0.3%
Invesco S&P Emerging Markets Low Volatility ETF (EELV) ETF 4.8% $9,208 $9,252 -0.5%
PowerShares S&P 500 High Div Low Volatility ETF (SPHD) ETF 4.2% $8,610 $8,476 1.6%
FlexShares Intl Quality Dividend Defensive (IQDE) ETF 5.1% $6,591 $6,547 0.7%
UBS ETRACS 2x US High Div, Low Vol ETN (HDLV) ETN 10.8% $5,730 $5,602 2.3%
Invesco S&P Intl Devd High Div Low Vol ETF (IDHD) ETF 4.4% $5,659 $5,720 -1.1%
iShares Evolved U.S. Innovative Healthcare ETF (IEIH) ETF 1.5% $5,525 $5,155 7.2%
Legg Mason EM Low Vol High Div ETF (LVHE) ETF 3.4% $5,108 $5,190 -1.6%
Invesco S&P SmallCap High Div Low Vol ETF (XSHD) ETF 4.9% $4,799 $4,889 -1.8%
Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF) ETF 5.0% $4,771 $4,749 0.5%
SPDR S&P Biotech ETF (XBI) ETF 0.0% $4,683 $4,082 14.7%
Horizons NASDAQ 100 Covered Call ETF (QYLD) ETF 10.2% $4,678 $4,626 1.1%
iShares MSCI Australia ETF (EWA) ETF 5.3% $4,566 $4,506 1.3%
iShares Asia/Pacific Dividend ETF (DVYA) ETF 6.0% $4,368 $4,365 0.1%
iShares MSCI China Small Cap ETF (ECNS) ETF 6.1% $3,906 $3,931 -0.7%
iShares International Select Dividend ETF (IDV) ETF 5.7% $3,238 $3,189 1.5%
Global X MSCI Portugal ETF (PGAL) ETF 7.3% $3,231 $3,201 0.9%
iShares MSCI Malaysia ETF (EWM) ETF 3.6% $2,754 $2,812 -2.1%
Legg Mason Int'l Low Vol High Div ETF (LVHI) ETF 4.1% $2,744 $2,775 -1.1%
Global X MSCI China Comm Services ETF (CHIC) ETF 0.5% $2,261 $2,187 3.4%
COMPANIES 6.2% $147,584 $146,793 0.5%
AbbVie (ABBV) Company 5.4% $21,933 $19,888 10.3%
IBM (IBM) Company 4.8% $13,445 $13,468 -0.2%
Iron Mountain (IRM) REIT 7.7% $12,848 $13,120 -2.1%
AT&T (T) Company 5.5% $11,214 $11,547 -2.9%
Blackstone Mortgage Trust (BXMT) REIT 6.8% $10,989 $10,890 0.9%
Royal Dutch Shell (NYSE:RDS.B) Company 6.5% $8,642 $8,744 -1.2%
Sabra Health Care REIT (SBRA) REIT 8.1% $7,486 $8,266 -9.4%
New Residential Investment (NRZ) REIT 12.9% $7,967 $8,142 -2.1%
Tanger Factory Outlet REIT (SKT) REIT 9.3% $7,610 $8,060 -5.6%
GlaxoSmithKline (GSK) Company 4.5% $4,548 $4,580 -0.7%
LyondellBasell (LYB) Company 4.5% $4,627 $4,485 3.2%
Occidental Petroleum (OXY) Company 8.2% $3,857 $4,050 -4.8%
Pfizer (PFE) Company 3.7% $3,852 $3,837 0.4%
BP (BP) Company 6.6% $3,742 $3,791 -1.3%
PacWest Bancorp (PACW) Company 6.4% $3,724 $3,699 0.7%
Kinder Morgan (KMI) Company 5.1% $3,608 $3,676 -1.9%
ING (ING) Company 6.6% $3,456 $3,399 1.7%
Gilead Sciences (GILD) Company 3.8% $3,362 $3,186 5.5%
Canon (CAJ) Company 5.3% $2,764 $2,710 2.0%
Allergan (AGN) Company 1.6% $2,774 $2,642 5.0%
Transocean (RIG) Company 0.0% $1,494 $1,425 4.8%
Teva Pharmaceutical Industries (TEVA) Company 0.0% $1,042 $820 27.1%
VARIOUS POSITIONS OF <$1,000 VALUE VARIOUS 2.0% $2,600 $2,369 9.7%
FIXED INCOME TOTAL 3.6% $35,155 $35,079 0.2%
Amer Century CA High Yield Municipal Fund (BCHYX) Mutual 3.3% $20,332 $20,296 0.2%
iShares Long-Term Corporate Bond ETF (IGLB) ETF 4.1% $6,681 $6,656 0.4%
iShares Yield Optimized Bond ETF (BYLD) ETF 4.1% $5,120 $5,124 -0.1%
SPDR Long Term Corporate Bond ETF (SPLB) ETF 3.8% $3,022 $3,003 0.6%
SCHWAB ROBO-ADVISOR TOTAL 2.0% $13,582 $13,349 1.7%
TOTAL 5.2% $334,299 $331,423
TOTAL + CASH $8,860 5.2% $343,158 $339,039 1.1%

Portfolio Moves in November 2019

New Positions

SHARE BUY - IBM (IBM): Bought an additional 75 shares of this technology giant at $135.00 on November 1.

  • Reasoning: I wanted some higher yield technology exposure and this is basically the only one that can be had at a reasonable valuation; however, IBM has struggled for years to convert from hardware to software, so this might be a long slog.

SHARE BUY - Legg Mason Emerging Markets Low Volatility High Dividend ETF (LVHE): Bought 200 shares of this emerging markets ETF at $25.95 on November 12.

  • Reasoning: I am obsessed with high dividend, low volatility EFTs as well as my belief that emerging markets equities are finally going to start to shine (though the 3.4% yield and 0.5% fee rate are a bit high for my liking).

SHARE BUY - Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF): Bought 200 shares of this international ETF at $23.75 on November 13.

  • Reasoning: I think that European equities are finally going to start to shine (and the 5% yield will pay me handsomely while I wait); I also really like the 0.2% fee (which is quite cheap for this type of fund).

SHARE BUY - Legg Mason International Low Volatility High Dividend ETF (LVHI): Bought 100 shares of this international ETF at $27.75 on November 13.

  • Reasoning: I am obsessed with high dividend, low volatility EFTs as well as my belief that European equities are finally going to start to shine (and the 4.1% yield will pay me handsomely while I wait).

SHARE BUY - Xtrackers MSCI All World ex US High Dividend Yield Hedged Equity ETF (HDAW): Bought an additional 200 shares of this international ETF at $25.00 on November 13.

  • Reasoning: I believe that international equities are finally going to start to shine (and the 4.5% yield will pay me handsomely while I wait). I also really like the 0.2% fee (which is quite cheap for this type of fund).

Exited Positions

[none]

Final Thoughts

Staying invested despite the wall of worry is hard for most active market participants. I fought my own personal valuation quibbles this month to keep invested at new market highs. I think that European and international equities might be the smart plays in 2020, so I am taking advantage of low current valuations to position myself in case this hunch pays off (besides, strategies focused on high quality with low valuations are generally a solid place to park cash for long-term investors).

With a hat tip to Jeff Miller at NewArc Investments whose 'Weighing the Week Ahead' is the single most valuable thing I read every week, I will separate my thoughts into two buckets: 'Likely Signal' for front of mind topics and 'Probably Noise' for things in the press that don't bother me much at this point with regards to how it might impact equity markets. (note: the past months have seen Jeff's indicators indicate rising caution).

Likely Signal:

  • U.S. 2019 'earnings recession' continues
  • Endless trade wars (this month's Twitter optimism can rapidly turn into next month's shattered hopes)
  • Ex-U.S. economies finally catch a bid (this makes me more optimistic about foreign equities after a LONG period of underperformance)

Probably Noise:

  • U.S. Fed rate changes (the sugar high of mid-cycle rate cuts feels great, but I don't see the Fed having a lasting impact to prevent future weakness)
  • Trump impeachment proceedings (expect lots of smoke here but no fire due to the composition of the Senate)
  • Anything 2020 U.S. politics (it's just too early and governance has a way of moderating firebrands)

Comments encouraged.

Disclosure: I am/we are long ALL POSITIONS 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, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.