Seeking Alpha

My Dividend Growth Portfolio 2019 Review: 36 Holdings, 3 Buys, 1 Sell, 3.61% Yield, $10,000 In Dividends

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Includes: AAPL, ABBV, BLK, CSCO, CVS, DIS, DIV, FOF, GLW, HD, IDV, JNJ, JPM, MA, MDT, MLPA, MO, MSFT, NKE, PRU, REM, SBUX, SCHD, SDEM, SDIV, SKT, SPG, SPYD, SRET, SWK, T, TROW, TRV, V, WFC
by: Dividend Derek
Dividend Derek
Dividend growth investing, long only, long-term horizon, dividend investing
Summary

I collected $1,476 in dividends during December which set a personal monthly best by over $200.

For the full year, I collected over $10,000 in dividends, a 45% increase over 2018.

I reflect on the past year and set goals for 2020.

Introduction

Welcome to my 2019 year in review for my dividend growth portfolio. This will cover December, Q4 and the whole year. For reference, this article series covers my investing journey as a father of two towards my eventual retirement. Any specific stocks or amounts are particular to my self-directed 401k plan.

The goal of my portfolio is to generate a perpetually growing income stream for my wife and me during our golden years. The aim is to live off dividends without touching the principal. Dividend growth stocks and ETFs are the chosen vehicle to meet that goal. Now 34, I have approximately 25 years before I can (safely) touch any of this money.

For anyone interested, I have a trimmed version that you can freely take for yourself if you wish, found here.

I've received some questions in the past, so you can save off a copy by selecting "File" -> "Make A Copy."

Another primary goal of writing is to assist other investors. I hope there are facets of my strategy that you find appealing and can implement yourselves.

Change Log

Lessons learned

Commentary

2019 was another banner year for the markets despite all the news regarding tariffs, interest rates and geopolitical risks at home and abroad. This time last year we were talking about the Fed rate hikes and the pace at which increases would occur.

No one could have predicted the S&P would return about 33% (with dividends) during the year. The takeaway is again that no one knows when a recession will hit nor can predict the market so the best course of action is to always be invested. It doesn't have to be 100% in the market (rainy day cash is always advisable), but none of this nonsense of selling 50%+ of your portfolio (special circumstances aside).

December was another strong month for my portfolio being up 2.25%. I ended the year with a balance of $362k which was up from $354k month over month. From the start of January 2019, I'm up from $283k (+27.9%).

Looking at another screen where they calculate rate of return, they show the year as 28%. As noted, that is behind what the S&P returned as growth continues to outpace value.

I also pulled up some data from my stock return calculator linked above to compare how some ETFs fared. SPYD represents much a higher value tilt than my own portfolio and that still returned 21% (10% lower than the S&P). SCHD which is the closest proxy I have for my portfolio returned over 27% which closely mirrors what I've built. What SCHD and SPYD offer over SPY of course are dividends. SCHD paid about 65% more in dividends, SPYD 133% more.

I've mentioned it in past writings, but I like having both SCHD and SPYD as portfolio anchors. If I ever get tired or incapable of managing individual holdings, a blend of those two would give a very nice dividend-centric cross section of the US markets.

Lessons Learned

I referred to my 2018 wrap-up about the lessons that I learned. I wanted to review what I thought about at the time and how I applied those lessons to this year.

Dividend reinvestment is not a black or white topic

During the year, I managed to flesh this out more for myself with a couple of simple rules:

  1. Reinvest when I can lower my reinvested cost basis
  2. Reinvest when I'm above my cash target
  3. Reinvest in my individual dividend growth picks

That's pretty much it and there are some corollaries to that. I can turn off the reinvestment for my income generators if I'm below my cash target and I can't lower my reinvested cost basis.

The other highlight from the year was free trading coming to most brokerages. That's not applicable to me (yet) in my 401k plan thus the reason to have to make some decisions about reinvestment.

Be more data-dependent

I followed this one this year. I used a combination of stock alerts and ex-dividend alerts to help drive the timing of purchases. I like stocks at 52-week lows and can be willing to part at all time and 52-week highs. I may also add to a position before the ex-dividend day, especially if I can lower my basis.

You don't have to swing at every pitch

I absolutely followed this one this year. Not only did I pass on some names when values seemed good, but I also shrunk my own personal watchlist. If I'm just not interested in the business, I'll remove it from my list. There are other factors of course but I'm trying to keep my realm smaller.

Passive investing is OK

Once again, my own results were close to what was being offered by SCHD. My income was higher, and the total return was higher, but they were close. Most of my investment dollars this year went into passive ETFs.

Markets are funny

There were plenty of plot lines that could have driven markets down further this year, but nothing materialized. Sometimes the sure thing isn't so sure. That's why it's important to stay in but focus on your plan. I like dividends, I get paid whether the stock prices go up or down.

(Source)

Much like the image, the water is much smoother below the waves of daily price gyrations. Another analogy related to this picture is the tide itself. When the tide is low (and stock prices are low with it), use it to your advantage to add to your winners at a better price. I have a steady trend upwards of my dividend income, getting me closer to my goals.

2019 Goals

  1. I want my dividend growth holdings to have an average dividend growth rate of at least 7% (finished 2019 at 10%).
  2. By the end of 2019, I want to have a projected dividend income of at least $10,000 (accomplished in July. Was $9,000 and accomplished in April. Originally $7,900 at start of 2019. Finished at $12,449).
  3. I want to suffer no dividend cuts. (Annaly cut in April but now a former holding)

At the end of the year, I finished with an average dividend increase of 10% which beat my goal of 7%. Here's an organized list sorted by increase size.

2020 Goals

  1. I want my dividend growth holdings to have an average dividend growth rate of at least 7%.
  2. By the end of 2020, I want to have a projected dividend income of at least $17,000.
  3. Looking to achieve an average monthly dividend of $1,400.
  4. I want to suffer no dividend cuts.

I liked the 7% dividend growth goal set last year and am reiterating it this year. There were a couple of extraordinary hikes in 2019 that really boosted the average but looking at the above chart there were quite a few names that were below the target. I still debate whether it is valid to include REITs for example with their generally small increases but higher starting yield.

My second and third goals are related to one another. I am looking to boost my projected dividend income over $17,000 by the end of the year. This is related to the third goal but achieving the $1,400 average monthly dividend is collected income, not future projected income.

I came up with the $1,400 figure by carrying forward a 2.84% monthly income increase. The math is down below but has been my approximate compounding rate for several years now (the real figure came out to $1,482 but I think it may be a little rosy).

I have a few levers to pull to accomplish this; large cash position, new contributions and company matches incoming, several potential sales that can be rolled into other names.

Portfolio Strategy

Buying Criteria

These are the general guidelines I will review to see if something is worthy of adding to my dividend portfolio or whether I will add to an existing position.

Investing Framework

This is the first round of questions to review during an initial filtering process of investments.

  • What is the opportunity here?
  • Am I excited about the business?
  • What's the expected growth?
  • What are the risks and downside?
  • How does this fit into my portfolio?
  • Is the opportunity here better than an ETF?
    • There needs to be something materially different that isn't readily duplicated with another product. This could be a yield that I can't easily get or some major upside potential / limited downside that can be defined. An example could be seeing P/E mean reversion as part of a thesis.

Company-Specific Factors

  • How long is their dividend growth streak?
  • Is the sum of the dividend safety + yield + growth score >= 200?
    • This may become more nuanced; growth stocks may need a safety + growth score > 160 to be considered
    • High yield stocks may need a safety + yield score > 160 to be considered
  • Chowder rule > 10%. High yield investments may get a pass on this. Like mentioned above, I want some additional "kicker" that can provide additional upside with less risk.
  • I want to see steady earnings growth over time; this will generally remove commodity-based companies.
  • I like cash cows. Good profit margins (> 10%) are appreciated, though not required. A company with a moat should be analyzed to see how easily its moat can be disrupted.
  • I like to see shareholder-friendly management. This manifests in a healthy and rising dividend and a willingness to buy back shares. Often buybacks aren't always done at opportune times. Additionally, they are frequently established to just buy back stock options for employees. A good metric to investigate is the "total shareholder yield." This aggregates net dividends, buybacks and debt reduction.
  • Perhaps most importantly, the valuation needs to be right per F.A.S.T. Graphs. The stock should be trading at fair value or better for an appropriate timeline (13+ years, if possible). With a longer time frame, I can see how shares fared during the Great Recession, and this also removes some of the recency bias that can come from only analyzing valuation during this extended bull market.
  • I will also use Simply Safe Dividends and the information provided by Brian on his site. Among a plethora of information available, he has a dividend scorecard where companies are ranked in terms of dividend safety, growth and yield. I aim to pick companies that are in the 80+ safety range.

Selling Criteria

Here are my guidelines when I may consider a stock sale.

  • Dividend cut.
  • Company degradation - This could be things like deteriorating balance sheets, loss of competitive advantage and loss of credit ratings. These factors may come to light before a dividend cut manifests. This may also appear in a streak of less-than-expected dividend increases. The dividend increase is the more visible outward sign of a company's success. A paltry increase or two may underscore problems below the surface.
  • Thesis not panning out
  • Wild overvaluation - This becomes a bigger factor if there is something at a fair valuation that I wish to purchase with the proceeds. I will admit that several things I have sold have continued to defy financial gravity, so I am more becoming of the mind of just ignoring overvaluation if the underlying business continues to operate well. Think "Selling into Strength".
    • I may put in a limit order to sell, tailing a stock upwards until financial gravity kicks in.
    • I may write an out-of-the-money covered call.
  • I just don't want to own it. When I pull this card, I will more fully explain my reasoning. Part of the beauty of owning individual companies is choosing where I put my money. I can opt to not support companies, products, management, etc. that I do not agree with. An example of this could be companies with management issues or criminal/unethical business practices.
  • Based on known information, capital is better passively invested or focused into better ideas.

Timing

One tactic I've used is buying shares prior to the ex-dividend date after the company has announced its yearly increase (this also works for ETFs). The increase in amount gives a quick, "at a glance" view into how management thinks the company is operating. A large increase can be confirmation from management that the business is running quite well. Sometimes, the reverse can be true too - being snubbed with a "bad raise" can be a red flag that things are not as they seem and it's time to research what's up. I've front-run a dividend increase several times already with Altria Group, Starbucks (SBUX), Corning (GLW), Prudential Financial (PRU), Home Depot (HD), Johnson & Johnson (JNJ) and Illinois Tool Works (ITW).

Most importantly, this was not done to chase dividends but to strategically add to a position that was worthy of being added to. Trees don't grow to the sky, and neither do dividend yields. A quality company that has a nice dividend increase should see its stock price rise by a similar amount over the course of the year, readjusting to the new and higher dividend amount. By jumping the gun, you can speed up the compounding process. This is also a much more compelling idea when valuations aren't in the nosebleeds like they are today.

If this sounds interesting to you, you should check out my weekly article, where I give the full list of these companies.

Dividend Reinvestment

At the end of 2018, I turned off my dividend reinvestment as I wanted a continual cash flow coming in. As time goes on that strategy continues to evolve. Analyzing my data, I came up with a simple metric for determining whether to turn it on or off. If the current share price is below my cost basis, I may turn it on. I would do this if as my cash is above my target (5% and it currently is). This is not universal, and I have reinvestment on for most of my individual dividend growth picks.

To keep track of this, I have conditional formatting on my spreadsheet. I'll highlight cells green if I have an opportunity to lower my cost basis.

I can quickly cross reference this with my upcoming dividend calendar for my dividend alerts. Additionally, I added an extra column on my spreadsheet for whether it's on or off. I may look to add this as an extra feature on CSA. Additionally, I have a separate sheet that holds small queries such as this.

The important note is that I always want cash on hand after the Q4 2018 meltdown left me with minimal ammo to take advantage of the sales.

With that said, here is the current state of where reinvestment is on. I created another table on my sheet to just capture this information, so I can see at a glance how I stand. You'll note that reinvestment is on for some generational ideas like Mastercard (MA), Visa (V) and my favorite dividend ETF (SCHD). The query I use is where reinvestment is on or where my basis is higher than the current share price (to show me where I could potentially turn on the DRIP). I'll update this each month.

I want to also highlight in my retirement account I do not have free trades - therefore - having all reinvestment off and selectively buying is not quite applicable. Perhaps one day they will offer that but alas, not yet.

I turned on the reinvestment for JNJ this month. It's well above my (as is virtually everything else) but I'm also above my cash target.

Name Ticker DRIP Basis Current Share Price Reinvest On?
AbbVie ABBV $74.88 $88.94 Yes
BlackRock BLK $443.77 $504.39 Yes
Cisco Systems CSCO $45.70 $47.62 Yes
CVS Health CVS $69.33 $73.79 Yes
Global X US SuperDividend DIV $22.74 $23.62 Yes
Cohen&Steers Opportunity CEF FOF $13.02 $13.60 Yes
Corning GLW $22.07 $29.47 Yes
Home Depot HD $143.70 $218.79 Yes
iShares International Select Dividend ETF IDV $30.50 $33.61 Yes
Johnson & Johnson JNJ $116.91 $144.86 Yes
MasterCard MA $205.87 $301.31 Yes
Global X MLP ETF MLPA $8.15 $7.97 Yes
Altria MO $41.70 $49.81 Yes
Microsoft MSFT $147.60 $159.37 Yes
Nike NKE $15.08 $101.61 Yes
Pennsylvania REIT D Series 6.875% PEI-D $20.05 $19.53 No
Prudential Financial PRU $83.08 $93.14 Yes
iShares mREIT ETF REM $41.66 $44.62 Yes
Starbucks SBUX $48.05 $88.64 Yes
Schwab US Dividend ETF SCHD $51.45 $57.66 Yes
Global X MSCI SuperDividend Emerging SDEM $13.14 $14.09 Yes
Global X SuperDividend® ETF SDIV $17.16 $17.73 Yes
Tanger Factory Outlets SKT $19.90 $14.25 Yes
Simon Property Group SPG $158.75 $145.13 Yes
SPDR S&P High Dividend SPYD $34.50 $38.98 Yes
Global X SuperDividend REIT SRET $14.50 $15.35 Yes
Visa V $140.81 $190.05 Yes

Dividend Increases

Dividend Cuts

  • None this month
  • Annaly Capital Management in April

Contributions

I maxed my yearly contributions last month so now I'm enjoying the larger few paychecks at the end of the year. Again, I'm greatly humbled that can do that and still juggle everything else in life.

One point to clarify - my employer will do a "true up" contribution match early the following year so that I don't lose out on matches when I max the IRS contribution earlier than year end.

The Portfolio

Name Ticker % of Portfolio CCC Status Income
Apple (AAPL) 5.34% Challenger $200
AbbVie (ABBV) 1.51% Champion $291
BlackRock (BLK) 1.40% Contender $133
Cisco Systems (CSCO) 1.32% Challenger $141
CVS Health (CVS) 2.27% None $224
Walt Disney (DIS) 3.13% Challenger $136
Global X US SuperDividend (DIV) 1.32% $343
Cohen&Steers Opportunity CEF (FOF) 2.26% $629
Corning (GLW) 2.35% Contender $232
Home Depot (HD) 2.23% Challenger $201
iShares International Select Dividend ETF (IDV) 3.78% $759
Johnson & Johnson (JNJ) 2.40% Champion $229
JPMorgan Chase (JPM) 3.14% Challenger $297
MasterCard (MA) 2.93% Challenger $56
Medtronic (MDT) 2.13% Champion $147
Global X MLP ETF (MLPA) 1.57% $537
Altria (MO) 3.39% Champion $832
Microsoft (MSFT) 0.44% Challenger $20
Nike (NKE) 0.87% Contender $30
Pennsylvania REIT D Series 6.875% (PEI-D) 0.54% $172
Prudential Financial (PRU) 2.65% Challenger $413
iShares mREIT ETF (REM) 2.73% $848
Starbucks (SBUX) 2.46% Challenger $165
Schwab US Dividend ETF (SCHD) 5.49% $536
Global X MSCI SuperDividend Emerging (SDEM) 2.34% $520
Global X SuperDividend® ETF (SDIV) 3.44% $1,143
Tanger Factory Outlets (SKT) 1.68% Contender $610
Simon Property Group (SPG) 2.44% Contender $508
SPDR S&P High Dividend (SPYD) 4.35% $690
Global X SuperDividend REIT (SRET) 1.74% $485
Stanley Black & Decker (SWK) 2.65% Champion $160
AT&T (T) 2.15% Champion $409
T. Rowe Price (TROW) 1.45% Champion $128
Travelers Companies (TRV) 1.73% Contender $151
Visa (V) 2.91% Contender $67
Wells Fargo (WFC) 0.73% Challenger $102

Here are the values behind the "CCC Status" category:

  • King: 50+ years
  • Champion/Aristocrat: 25+ years
  • Contender: 10-24 years
  • Challenger: 5+ years

Dividend Safety

Here's a table that I capture data points from Simply Safe Dividends from their scoring algorithm and meshing that with the S&P credit rating. The table is then sorted descending by total score (this is only for individual companies).

Name S&P Credit Rating SSD Safety Score SSD Growth Score SSD Yield Score Total Score
Johnson & Johnson AAA 99 89 46 234
BlackRock AA- 98 84 47 229
Home Depot A 87 92 44 223
T. Rowe Price - 94 75 44 213
AbbVie A- 50 86 76 212
Apple AA+ 99 98 14 211
Cisco Systems AA- 91 62 52 205
Corning BBB+ 77 79 49 205
Visa AA- 99 100 6 205
Prudential Financial A 75 60 69 204
Medtronic A 99 73 31 203
Microsoft AAA 99 86 18 203
Stanley Black & Decker A 90 87 26 203
MasterCard A+ 99 99 4 202
Walt Disney A 99 85 16 200
Travelers Companies A 78 75 42 195
Nike AA- 99 80 12 191
Simon Property Group A 65 44 79 188
Altria BBB 55 46 82 183
Tanger Factory Outlets BBB 52 27 93 172
JPMorgan Chase A- 79 46 46 171
Starbucks BBB+ 67 73 31 171
Wells Fargo A- 79 21 64 164
AT&T BBB 65 11 77 153
CVS Health BBB 67 0 48 115

Not many changes this month from last, I'm curious to keep an eye on scores and how they meander over time. Disney didn't have a hike in 2019 so maybe their score will be penalized at some point.

With this new chart I've had a few insights:

  • I primarily almost all safe companies now (score 60+). Tanger is on my naughty list right now.
  • I've removed the companies that have a safety < 50
  • Generally, out of safety, growth and yield, you can pick any two.
  • I have great ETF alternatives for dividend growth (SCHD), safe high yield (SPYD) and high income (DIV, SDIV, SRET, MLPA, FOF, etc.). Therefore - the bar for individual securities is quite high.

Here are the best aggregate scores when I snapshotted the data this month.

In a year I can try to run some analyses if high scores translate to better investment results.

When I'm adding an individual holding, I am looking for a total score over 200. Again, there are too many good and nearly free ETFs to own that an individual company should have very high marks.

Performance

Here's my updated list of performance of my holdings versus their benchmark since I've first owned shares. Results are sorted descending. Results may not perfectly line up with my own results due to subsequent purchases. It highlights the flat out result versus a benchmark since the date of first purchase.

Ticker Owned Since Versus S&P Benchmark Versus Benchmark
AAPL 4/13/2015 85.56% SPY 85.56%
JPM 7/15/2016 77.94% SPY 77.94%
TROW 9/29/2016 47.43% SPY 47.43%
MA 7/26/2018 29.13% SPY 29.13%
GLW 10/14/2015 19.08% SPY 19.08%
V 7/26/2018 17.41% SPY 17.41%
SWK 1/28/2016 11.82% SPY 11.82%
MDT 11/22/2016 10.66% SPY 10.66%
NKE 5/3/2016 9.54% SPY 9.54%
HD 5/3/2016 8.37% SPY 8.37%
WFC 8/23/2019 7.80% SPY 7.80%
BLK 10/16/2019 5.92% SPY 5.92%
MSFT 11/14/2019 3.48% SPY 3.48%
IDV 6/20/2019 1.69% SPYD 7.21%
REM 6/20/2019 -0.06% SPYD 5.46%
SCHD 9/24/2018 -0.77% SPY -0.77%
DIV 7/31/2019 -4.41% SPY -4.41%
ABBV 1/28/2019 -4.60% SPY -4.60%
SPYD 6/13/2019 -6.33% SPY -6.33%
FOF 10/10/2019 -9.64% SPY -9.64%
CSCO 8/23/2019 -9.76% SPY -9.76%
SBUX 12/3/2015 -10.23% SPY -10.23%
SRET 2/20/2019 -10.90% SPY -10.90%
JNJ 12/9/2015 -12.87% SPY -12.87%
PRU 4/7/2016 -16.40% SPY -16.40%
TRV 4/28/2014 -19.82% SPY -19.82%
SDIV 2/20/2019 -21.00% SPY -21.00%
SDEM 2/20/2019 -21.26% SPY -21.26%
T 11/3/2015 -23.18% SPYD -12.10%
DIS 12/28/2015 -24.48% SPY -24.48%
SPG 4/30/2019 -24.97% VNQ -21.54%
MLPA 2/6/2019 -30.06% SPY -30.06%
MO 10/31/2013 -32.01% SPY -32.01%
CVS 10/7/2016 -66.61% SPY -66.61%
SKT 7/26/2017 -76.11% VNQ -59.33%

The data runs off the API I host over at Custom Stock Alerts (documentation here). This set comes from exposing the stock return calculator as an API call that can be used in the web, Excel or Google Sheets.

Versus S&P: This is a measure of the alpha generated (or not) versus the S&P 500 as a benchmark. This is calculated using the stock return calculator here, and it uses the "Owned Since" column as the starting date. This may not reflect actual results, as multiple purchases would change the figure. I can also set the benchmark at the individual ticker level. This table is how shares have performed since I first purchased them. I can compare versus both the S&P and another benchmark for each holding. It's supported by the stock return calculator (there is also API access available for use in spreadsheets) that I built.

The next column allows flexibility to define what my benchmark can be. For example, look at the REITs - I've set their benchmark to be VNQ for an apples-to-apples comparison. A utility could be compared to XLU for example. I need to flesh out what high yield ETF I want to be the benchmark for my high yielding ETFs.

These results can change quickly - an example I have is from former holding of Ventas (VTR). It went from a major laggard of both VNQ and the S&P to beating both within a few months. I managed to also sell my shares at the top. ABT was one of the hottest stocks I owned and around the time I trimmed it, it was beating the S&P by 82%.

Portfolio Yield

I've calculated a few aggregate statistics for my portfolio.

Projected Income $12,441.12
Cash $30,394
Cash Ratio 9.12%
Total Value $363,624.87
YOC (Divi Companies) 6.08%
Yield (Divi Companies) 4.01%
Portfolio Yield 3.73%
Yield w/Cash Drag 3.42%

Projected Income - the sum of all known dividends for all holdings

Cash Ratio - percentage of cash in the portfolio

Total Value - self-explanatory

For these next batch, the numerator in each calculation is my "Projected Income".

YOC (Divi Companies) = "Projected Income" / ("sum of invested capital" - (cash + cost of all non-dividend-paying companies)). This is my yield based on what I put in, this is separate from current market valuations.

Yield (Divi Companies) = "Projected Income" / ("Portfolio Value" - (cash + value of all non-dividend-paying companies)). Said another way, this is the yield from all my dividend-paying companies.

Portfolio Yield = "Projected Income" / ("Portfolio Value" - Cash). This is the yield based on all my invested money and their respective prices today. This would be the headline figure advertising the portfolio.

Yield w/Cash Drag = "Projected Income" / ("Portfolio Value"). All in, this is the yield given my expected income divided by the full portfolio value.

Correlation Matrix

I use the correlation matrix from Portfolio Analyzer. It's a huge table mapping out how one stock trades with another from a relation of -1 to 1. -1 means they move perfectly opposite of another, 1 means they move in perfect lockstep.

I've used this information in the past to remove holdings that essentially move in lockstep (correlation > 0.90). It's also a factor when adding in a new position, it doesn't necessarily make sense to add something if another holding closely mirrors it.

I don't have anything that has that high correlation, there are a few in the 0.8x range though.

Trade Summary

I'll give a highlight of the trades that I made before diving into each of them. This shows the changes of expected dividend income and net cash.

Ticker Delta in Income
SDEM $83
SDIV $155
FB 0
FOF

$206

Change in Income

$444

Change in Cash $3,167

My Sells

Facebook

On paper, Facebook ticks all the boxes of a great company. Historically high operating margins, massive scale, monopolistic status among social media, incredible balance sheet. It's also become quite apparent that Zuck will go to any length to protect his child. Their stance regarding political ads rubbed me the wrong way and I cannot agree with leadership willing to turn a blind eye to election tampering. The platform was already weaponized in 2016 and it most likely be worse this time around with their evasiveness regarding ads. In any event, I had a limit sell order trigger that I mentioned last month and am taking my ball and going home.

My Buys

SDEM - MSCI SuperDividend Emerging Markets ETF

I picked up another 97 shares prior to ex-div day in December. The Global X funds are my income generators and I'm fine with the price bouncing around in the meantime. When they look attractive and I can lower my basis I'll be buying - especially when my cash is above my target which it currently is. I picked up those shares at about $12.90 and then right after that they launched to over $14 in the past month. Collectively my SDEM shares yield me about 6.5%. This was also a small nibble costing only about $1250.

SDIV - Global X SuperDividend ETF

Much like SDEM mentioned above, this was another nibble in adding some to my SDIV holding by rounding to the next nearest hundred shares. Those were picked up at $17 and much like SDEM also, shares popped a bit to about $17.50 as of the writing.

FOF - Cohen&Steers Closed-End Opportunity Fund

The final buythis month, and much like the two prior buys, are all income generators. I'm not really interested yet in getting into individual CEFs and past research has shown FOF to be a better holding than PCEF which I used to own also. Yielding about 8% has also been a nice perk.

These three are also monthly payers which is an additional nice perk and is helping build up my cash flow.

Charts and Graphs

Dividends

This chart covers a rolling 3-month average of my dividend income. With a quarterly view I can smooth out the variations from month to month. You can visually see how well the trend-line fits the data over time. The divergence from the trend started mid 2018 when I sold some income stocks for some growth stocks. After the subsequent fall of income and some mixed investment results, I stayed true to myself and got back into the dividend game whole hog. The addition of high yielding stocks and ETFs (now mostly ETFs) has given my dividend income a shot in the arm.

Even a month ago I didn't foresee hitting the $1,000-month average until next year, but I did hit that in December. I expect every month from here on out to be above that. The blowout results of over $1,400 boosted the quarterly results to average above that mark. I finally sat down and ran some figures based on what's happened in the past. Using my ending and beginning rolling average values plus the number of months that have passed, I could finally calculate my CAGR rate. That came out to 3.81% per month. In layman's, since March of 2015, I've averaged 3.81% more dividends per month until now. There are some nuances to that because it took some time to transfer all my money to being self-directed. If I look at the numbers from the beginning of 2017 until now the rate drops to about 2.85%.

Using that figure, it puts me just a hair under $1,500 by the end of 2020 for my average monthly dividend.

December blew the cover off the ball with $1,476 in dividends received. This was by far my best month ever including the high watermark set in September. Check the chart - last year was a step back in my journey with $518.Notes

  • My monthly payers (DIV, FOF, SDEM, SDIV and SRET) provided $259.
  • This was my first dividend from Blackrock, Microsoft, Wells Fargo and the PEI preferred shares.
  • Both SPYD and REM were about $70 higher each because of strategic adds.
  • IDV was higher than September because of my consolidating EFAS into IDV shares.

Dividends by Position Size

The bubble graph maps expected yearly dividends (y-axis) by the percentage in my portfolio (x-axis). The third data point, yield on cost, is represented by the size of the bubble.

SCHD blows out the y-axis being close to 6% of my portfolio. On the x-axis SDIV is the biggest money maker followed by REM, MO and IDV. I had to adjust the vertical scale again this month because of the amount of dividends SDIV throws off. AAPL is over 5% of my portfolio because of their monstrous gains over the past year.

Growth

Here's my monthly performance compared to 2018. Three months were lower, and the other nine were substantially higher than in 2018. As I've mentioned before, I pivoted (briefly) in 2018 before returning to my roots. November and December both records over 100% year over year gains. For the final tally, I collected 45% more dividends in 2019 than in 2018. I also crossed over $10,000 received which is a nice mental mark to achieve.

When we start going away from the ground view and look at the quarterly results, every quarter was better than in 2018. Q2 was anemic at only 6% growth but the other quarters were quite strong, especially Q4.

This table is my forward-looking 12-month dividend view. This is where I sum up what I would earn in the next 12 months based on the shares I own and the currently declared dividend rates.

With my higher yield adds in December, I continued to accelerate away from the expected value a year ago. I finished the year with a projected income that is 93% higher than what I projected at the end of 2018. My hypothetical forward looking income for 2020 is $12,449. This will underestimate it for several reasons; unknown dividend hikes, dividend reinvestment and the big one would be additional purchases.

Target Portfolio

I have a target portfolio that captures my need for a lot of various dividend sources while also having allocation to growth. This is how I would like to allocate money across different equity (not asset) classes. I'm an equity guy and things like commodities, currencies or bonds don't really interest me.

I first allocated 10% to growth stocks (was 20%, then 15%). This scratches my itch for having shares in Berkshire and some of the FANGs. I'm also optimistic that at least some will be the dividend growers of the future (most likely to be Berkshire or Alphabet at this point).

Next is 30% (was 20%, then 25%) allocated to high-yielding stocks. I use these as the income portion of my dividend machine. Dividends may be directly reinvested if current prices are right or they will be harvested and tactically allocated to the best investment idea at the time. It also helps me shore up my "balance sheet" by having more cash being generated alongside my regular 401(k) contributions.

The main portion of the portfolio at 55% is core dividend growth. This is where I am to pick names that I expect to surpass the high yielders decades down the road. I would consider names like Apple, Nike or Home Depot to be generational winners. This can also be ETFs such as SCHD which are built to hold dividend growth companies.

Lastly, the remaining 5% is allocated to cash. I think any active investor must always have cash on the sidelines for opportunities that present themselves. Frequently these opportunities may only last a day and with no cash available either leads to a missed opportunity or a need to scramble to sell something else. This will help prevent FOMO.

Another way to view the core portfolio would be through a Venn diagram across the three equity categories.https://static.seekingalpha.com/uploads/2019/3/6/9020091-15518710183814197.png

For illustrative purposes, I specifically have the circles overlapping most of the area to highlight the focus on dividend growth stocks.

Actual Portfolio

I'm approximately where I want to be in terms of my target portfolio. Cash is over my target and it will begin to accumulate more rapidly now that new contributions to my plan can begin. Growth is perhaps a little light so I could potentially add to the ones I have to add another ETF (QQQ or something like a cloud computing ETF) to round that out.

Here's how I classify my holdings in order to create the above pie chart. I try to be logically consistent, but it can be a little subjective. One example of the subjective nature is Altria is pegged as a dividend growth stock, but AT&T is high yield. Their current yields are about the same, but the growth rate of T's dividend is barely beating the rate of inflation, if at all.

Ticker Classification
AAPL Dividend Growth
ABBV Dividend Growth
AMZN Growth
BLK Dividend Growth
BRK.B Growth
CSCO Dividend Growth
CVS Dividend Growth
DIS Dividend Growth
DIV High Yield
FOF High Yield
GLW Dividend Growth
GOOG Growth
HD Dividend Growth
IDV High Yield
JNJ Dividend Growth
JPM Dividend Growth
MA Dividend Growth
MDT Dividend Growth
MLPA High Yield
MO Dividend Growth
MSFT Dividend Growth
NKE Dividend Growth
PEI-D High Yield
PRU Dividend Growth
REM High Yield
SBUX Dividend Growth
SCHD Dividend Growth
SDEM High Yield
SDIV High Yield
SKT High Yield
SPG High Yield
SPYD Dividend Growth
SRET High Yield
SWK Dividend Growth
T High Yield
TROW Dividend Growth
TRV Dividend Growth
V Dividend Growth
WFC Dividend Growth

Visualizations

Income by Sector

Here's how I receive my income; 50% now comes from an ETF of some sort. The other 50% is broken down by individual companies in their respective sectors.

When I flip it and look how I've invested my money, 1/3 is into an ETF (the difference mainly being higher yielding ETFs which scale up to generate 50% of my income) with the rest dispersed across individual holdings in each sector.

Sector Allocations

Lastly when analyzing my individual picks, I categorize them based on their dividend growth history (champions 25+ years, contenders 10+, challengers 5+). CVS is my "none".

Champion, Contender, Challenger View

Correction Watch List

I have a few individual names I'm open to adding into my portfolio if it fits into my framework. I'm more open if we get any sort of correction as prices are sky high these days. Here are some I'm interested in:

  • BAM
  • ABT - nice dividend hike incoming, may start 1/4 position again
  • O
  • TXN
  • SAAS / Cloud computing ETF for the growth portion

Things Coming Up

I'll lead off by disclosing having three stop limit sale orders setup for CVS, Wells Fargo and T. Rowe Price. I'm also on the fence with Tanger. If they trigger, I'll highlight my reasoning in a future edition.

Employee and employer contributions begin anew this year and I have to continue putting money to work. With the average S&P 500 stock up 30% over the past year it seems quite hard to find values at this time.

Expected Dividend Increases

  • MA (sneak peek but they announced 21.2% increase)
  • T (2%)
  • AbbVie
  • BlackRock
  • CVS (used to be January but now frozen)

As I always point out, I like to run this screener to get some idea generation going and I've included it in case it helps anyone out. Here are the filters I start with:

  • $10 billion+ in size
  • US companies
  • Positive dividend yield
  • Forward P/E under 20 (I also remove this filter to allow REITs to show up)
  • EPS growth next 5 years > 0% (new this month)
  • Revenue growth past 5 years > 0% (new this month)
  • Sorted by their 52-week lows

CSCO bounced back up and I didn't add more so I missed the most recent ex-dividend date. GLW I need to still take another look at, but it's still been tough with stocks - even near their 52 lows - seem quite expensive.

Another screener idea I've been working with comes courtesy of Schwab. The high-level criteria are as follows:

  • Dividend paying
  • Narrow or wide moat per Morningstar
  • Morningstar rating of 4 or 5
  • Schwab Equity Rating of A or B

GILD is one that comes across on both lists. I used to have shares in the past but haven't kept up with their drugs or pipeline, but it is interesting to note.

Conclusion

I wrapped up December with $1,467 in dividends which brings the grand total to $10,168. I collected 148% more dividends than December of 2018. For the full year, I've collected 45% more than 2018.

I made 3 purchases and one sale which netted to adding $444 of projected income over the next year. For the year, my projected income has grown 93% to $12,449. I maintained the dividend portfolio size with 36 dividend paying holdings.

I've created some lofty goals for 2020 and I hope to finish with an average monthly dividend over $1,400.

Thanks for reading, I hope you've enjoyed reading it as much as I've enjoyed writing it. I encourage you to "follow me" if you don't already!

Disclosure: I am/we are long AAPL, ABBV, AMZN, BLK, BRK.B, CSCO, CVS, DIS, DIV, FOF, GLW, GOOG, HD, IDV, JNJ, JPM, MA, MDT, MLPA, MO, MSFT, NKE, PEI-D, PRU, REM, SBUX, SCHD, SDEM, SDIV, SKT, SPG, SPYD, SRET, SWK, T, TROW, TRV, V, WFC. 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.