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Nicholas Ward's Dividend Growth Portfolio 2020 Review: Total Return 32.37%, Dividend Growth 24.25%

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Includes: AAPL, ABBV, AMGN, AMZN, AVGO, BA, BAM, BEP, BIP, BLK, BMY, BPR, CMCSA, CSCO, D, DEO, DIS, DLR, DPZ, ENB, FDX, FRT, GOOGL, HD, HON, INTC, ITW, IVZ, JNJ, KO, LOW, MA, MDT, MKC, MMM, MO, MSFT, NKE, NNN, NVDA, NVO, O, PEP, PFE, QCOM, SBUX, SPY, STOR, STZ, T, TXN, UPS, UTX, V, VER, VTR, VZ, WPC
by: Nicholas Ward
Nicholas Ward
Long only, long-term horizon, dividend investing, value
Summary

I discuss my December trades and dividend income.

I highlight full-year results (32.27% total returns and 24.25% y/y dividend growth).

I break down my current portfolio, cost basis, gain/loss %, and asset allocation weightings.

In this piece, my aim is to achieve several things. One, I’ll break down my December trading activity like I usually do in my monthly portfolio recaps. Two, I’ll break down December’s dividend income and y/y growth. Three, I’ll break down full year dividend income and y/y growth. And lastly, I’ll talk about my full-year, 2019 total returns and break down my current holdings. Enjoy!

December Trades

So, first things first, let’s get into the December trades. As discussed in prior works, in the month of December I embarked on a portfolio re-balancing quest due to the fact that I decided to liquidate stock towards the end of the year to pay down some of the high interest rate student debt that was coming due in early January. Being that I sold some dividend growth stocks to raise this capital, I then decided to make a couple of moves to bolster my passive income stream. And lastly, I made a couple of trades towards the end of the month due to dividend growth issues/concerns and a change in my general outlook towards the logistics industry at large.

With this rebalancing in mind, my trading activity was way up in December. I made 9 total trades (4 purchases and 5 sales).

On 12/12/19, I sold my Ventas (VTR) stake. I locked in 5.7% gains (plus year's worth of dividend income) when I sold at $55.72. This trade was made because of a frozen dividend. I discussed my mindset here in more detail in this focus ticker piece.

On 12/17/19, I sold a small portion of my Disney (DIS) position for $148.01, locking in 57.8% gains on those shares, and added to my Comcast (CMCSA) position at $43.42. I made this move because of several factors. Namely, Disney’s recent dividend freeze. This dividend-related move, combined with the fact that DIS shares look pretty expensive right now due to the significant multiple expansion that they’ve experienced throughout 2019, and Comcast’s relatively higher dividend yield, higher dividend growth prospects, and lower valuation, inspired the trade. Also, reducing Disney from ~7% of my portfolio down to ~6%, helped to reduce some single stock risk. Disney is still my second largest holding and Comcast is now in the top 10. Here’s the focus ticker article where I discussed this trade in more detail.

Then, on 12/18/19, I sold all of my FedEx (FDX) shares, locking in significant losses on two separate positions at $147.32 and $147.43. These shares were down 25.7% and 24.3% when I sold them. This move was made because of increased concerns regarding rising competition in the logistics space and the fact that FDX’s dividend has now been frozen for 7 consecutive quarters. Being that I was underwater on my shares, I gave management the benefit of the doubt, hoping they would increase the dividend at some point during 2019. When this didn’t happen, I decided to sell. This decision was discussed in more detail in this focus ticker piece.

And then on 12/18/19, I used the proceeds from the FedEx sales to buy shares of Brookfield Asset Management (BAM) and Brookfield Property REIT (BPR). This move increased my passive income significantly, which alongside the DIS/CMCSA trade, got me back on track after having previously lost out on income when selling Ventas and VEREIT (VER) in previous weeks. This trade was also discussed in the FedEx sale piece linked above.

And finally, due to my concerns about competition in the logistics space, I decided to trim back my exposure to United Parcel Service (UPS) as well. On 12/30/19, I sold roughly 60% of my position in UPS at $117.42, bringing my weighting down from overweight to slightly underweight. In doing so, I locked in 12.7% profits on these shares. I then decided to use the proceeds to invest in Federal Realty Investment Trust (FRT), which has been beaten down a bit in recent weeks and is, in my opinion, a more defensive, income-oriented play than UPS. This trade was discussed in this focus ticker piece.

For the month of December, the value of my holdings increased by roughly 3.3%, driven by continued strong out-performance by Apple (AAPL), which is my largest holding by far at this point in time.

Dividend Income Report

I’m very pleased to announce that my portfolio generated its highest monthly dividend income figure ever in December of 2019. My December passive income came in at roughly 60% higher than my December 2018 figure (thanks, in large part, to my increased exposure to Broadcom (NASDAQ:AVGO) and its recent, large dividend increase as well as generous shareholder return results from Brookfield Renewable Partners (BEP) and Brookfield Infrastructure Partners (BIP) as well).

For the full year, my passive income was up 24.25%. Other than 2017, when I saw a major influx of capital into the account due to a real estate deal, this was my best annual dividend growth year.

To me, this 2019 result is simply amazing. As I’ve discussed before, it was achieved without adding any new capital to the portfolio. On the contrary, with ~24% growth was achieved while taking funds out of my brokerage accounts to pay tuition costs for my wife’s final semesters of graduate school and some medical bills related to the birth of our first child.

Being that my wife and I are relatively younger investors, I never really planned on making withdrawals from the account so early on in our accumulation phase. However, it pleases me to know that I now have this experience as a portfolio manager and the proven ability to grow my portfolio’s passive income by prioritizing it when making value-oriented trades.

Throughout the last 12-18 months, I’ve made a handful of trades where I sold high and bought low, increasing my passive income stream organically, rather than solely relying on dividend increases, re-investments, and the deployment of new capital to grow my income stream. Moving forward, I plan on putting this knowledge to work alongside the addition of new capital now that my wife is out of school and working. Being that we’re a two-income household, we should be able to start contributing to our savings again for the first time in several years. While I certainly don’t expect to compound my passive income stream at a ~25% clip over the long term, this experience does give me confidence that I will be able to generate double-digit annual dividend growth moving forward. Obviously, only time will tell, but that’s the goal!

Full-Year Results

While I’m most joyous about that 24.25% dividend growth figure for the full year, I’m also pleased to announce that my portfolio’s total return beat the S&P 500 (which is one of my stated secondary goals). My basis total returns were 32.37% and my time-weighted returns were 32.84%. This is compared to the Dow Jones Industrial average, which was up 22.3% on the year, the S&P 500, which was up 28.9%, and the Nasdaq which was up 35.2%.

When factoring dividend income into the situation, the S&P 500 SPDR ETF (SPY) posted total returns of 30.97% on the year. This means that my portfolio’s total returns and time weighted returns both beat the average by a fairly significant margin. This out-performance in 2019 means that I’ve beaten the S&P 500’s results in 6 out of the last 8 years.

Current Portfolio Holdings And Weightings

For those of you interested in following along, here is a graphic showing my current portfolio’s holdings and weighting (as of 1/7/20).

Core Dividend Growth

47.67%
Company name Ticker Cost basis Gain/loss% Portfolio Weighting
Apple AAPL $103.78 187.5% 11.40%
Walt Disney DIS $94.94 53.5% 5.99%
Microsoft MSFT $48.77 223.1% 3.50%
Bristol-Myers Squibb BMY $48.38 32.1% 3.00%
Cisco CSCO $32.64 45.5% 2.68%
Johnson & Johnson JNJ $113.52 24.9% 2.06%
Qualcomm QCOM $61.60 44.4% 1.88%
BlackRock BLK $418.93 21.1% 1.88%
Honeywell HON $128.65 38.1% 1.46%
Coca-Cola KO $39.78 36.4% 1.44%
PepsiCo PEP $90.68 47.8% 1.43%
Amgen AMGN $130.50 82.4% 1.42%
Intel INTC $30.55 92.9% 1.09%
Illinois Tool Works ITW $130.90 34.8% 1.06%
Texas Instruments TXN $95.19 35.9% 1.06%
Pfizer PFE $31.94 21.3% 1.00%
Novo Nordisk NVO $37.74 50.9% 0.95%
United Parcel Service UPS $104.68 11.3% 0.91%
Medtronic MDT $73.94 54.8% 0.80%
Diageo DEO $107.91 54.1% 0.65%
United Technologies UTX $111.84 37.0% 0.63%
Brookfield Asset Management BAM $57.81 0.0% 0.49%
3M Company MMM $148.84 19.5% 0.48%
McCormick MKC $71.43 135.6% 0.41%
High Yield 18.05%
AT&T T $36.68 7.0% 4.39%
Altria MO $51.46 -3.7% 2.15%
W.P. Carey WPC $63.32 27.1% 1.98%
Federal Realty Investment Trust FRT $127.90 -2.0% 1.42%
AbbVie ABBV $67.05 32.6% 0.91%
Brookfield Renewable BEP $32.81 43.6% 0.87%
Store Capital STOR $20.46 77.9% 0.80%
Brookfield Infrastructure BIP $41.87 19.8% 0.74%
Dominion Energy D $63.65 29.2% 0.73%
Brookfield Property REIT BPR $18.49 -1.4% 0.73%
National Retail Properties NNN $37.54 41.8% 0.70%
Realty Income O $51.09 45.2% 0.61%
Verizon VZ $44.42 34.2% 0.61%
Digital Realty DLR $49.87 136.0% 0.60%
Enbridge ENB $31.07 27.9% 0.44%
Invesco IVZ $23.72 -25.1% 0.37%

High Dividend Growth

16.05%
Visa V $71.01 165.7% 3.10%
Starbucks SBUX $48.10 82.7% 2.92%
Comcast CMCSA $37.70 19.2% 2.59%
Broadcom AVGO $231.38 35.1% 2.50%
Nike NKE $58.75 73.2% 2.03%
Mastercard MA $74.15 304.9% 1.30%
Domino's Pizza DPZ $250.35 16.6% 0.60%
Lowe's LOW $95.77 24.9% 0.52%
Home Depot HD $184.52 18.4% 0.49%
Non-Dividend 5.87%
Alphabet GOOGL $741.39 88.2% 4.30%
Amazon AMZN $849.74 124.4% 1.57%

Special Circumstance

3.96%
Boeing BA $126.32 167.0% 2.77%
Nvidia NVDA $110.55 117.0% 0.74%
Constellation Brands STZ $172.19 6.6% 0.45%
Cash 8.40%
Most Recent Update: 1/7/20

Here’s to another great year in 2020! Best wishes all.

This article was previously published for members of The Dividend Growth Club.

Disclosure: I am/we are long AAPL, ABBV, AMGN, AMZN, AVGO, BA, BAM, BEP, BIP, BLK, BMY, BPR, CMCSA, CSC, O, D, DEO, DIS, DLR, DPZ, ENB, FRT, GOOGL, HD, HON, INTC, ITW, IVZ, JNJ, KO, LOW, MA, MDT, MKC, MMM, MO, MSFT, NKE, NNN, NVDA, NVO, PEP, PFE, QCOM, SBUX, STOR, STZ, T, TXN, UPS, UTX, V, VZ, WPC. 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.