Blue Chip DRiP Portfolio: February Dividend Income Review
- Last week, the stock market pumped the brakes hard. On a sheet of ice. Where will this bus land and how many innocents will be taken out?
- I'm not sure. But this I do know: Our February dividend income remained predictable and growing. We received $1621.34 from 19 different stocks. In addition, 9 dividend raises were announced.
- All-time dividends received are up to $10,921.81 since we began this portfolio exactly one year ago. Happy one-year anniversary!
- We made 16 cash buys, 2 DRiPs, and 1 sale in February. These transactions add $1,529.81 annually, bringing our total forward estimated annual dividend income to $17,657.65.
Payers Gonna Pay
As I sit down and pen, er, type this monthly portfolio review, the headlines read:
Source: Seeking Alpha
Fiscal fear is seeping into the atmosphere as our presidential election eeks closer. COVID-19. Bernie. Recession. The markets had their worst week since 2008. Crystal balls are working overtime. I told you so's are proudly stepping forward. But here's the thing. You keep extra water, batteries, and canned food in your pantry. You live debt free, below your means, pay yourself first. You have an emergency fund and dry powder ready to deploy at a moment's notice. You invest in high-quality, dividend-paying businesses with a long-term outlook. You are diversified. You are prepared financially and mentally for a recession. You are not forced to sell your stocks, nor does the thought even cross your mind. You stick to the plan through the ups and downs. As any hip-hop song from the 2000s will tell you, haters gonna hate. When there's fear, sellers gonna sell. With all this uncertainty, it's absolutely imperative to keep the emotions in check and stay the course. Don't stray. I don't know which way the wind will blow tomorrow, but I know one thing: Dividend payers gonna pay.
Dividend Income: 2020 (Blue) vs 2019 (Red)
In February 2020, we pocketed $1,621.34 of dividend income. There is no February 2019 data to compare it to, because the Blue Chip DRiP portfolio is barely a year old and didn't generate any income until March 2019. As the year moves on, it will be fun to see how this chart fills out YoY.
Dividend Income Received: February 2020
|Ticker / Stock Name||Income|
|Antero Midstream (AM)||$206.03|
|Bristol-Myers Squibb (BMY)||$20.40|
|Blackstone Group (BX)||$49.08|
|CVS Health Corp (CVS)||$27.70|
|Energy Transfer (ET)||$281.77|
|General Dynamics (GD)||$44.88|
|Kinder Morgan (KMI)||$76.72|
|Gladstone Land (LAND)||$10.05|
|MSC Industrial (MSM)*||$86.25|
|People's United Financial (PBCT)||$47.93|
|iShares Pref ETF (PFF)||$21.12|
|Simon Property Group (SPG)||$170.11|
|Tanger Outlets (SKT)||$128.56|
|* = New position|| |
- Our highest payer for the month: Energy Transfer with $281.77. Coming in second was Antero Midstream with $206.03. The Energy Sector may be getting clobbered lately, but I'm not scared. ET is a conviction buy, and AM is speculative. We'll see what happens in the future. If either of them cuts the distribution, I'll reassess, but until then, I'll keep enjoying the pay day.
- February income of $1,621.34 was $291.79 more than the $1329.55 received from the previous quarter/November payouts. That's a 22.13% increase QoQ!
So, why the large QoQ increase in dividend income? A few reasons:
- Adding to existing positions. I deployed cash and/or re-invested dividends to these tickers before their most recent ex-div dates: AM, BMY, ET, GD, SKT, SPG, T.
- New positions. MSM and SBUX added income this month that didn't exist in November. Happy to have them in the family!
- Dividend increases. ABBV and BX both raised their dividends handsomely.
Dividend Increases Announced: February 2020
Nine of our holdings announced dividend increases in February. Prudential (PRU) and Corning (GLW) were noteworthy with 10% raises.
All in all, these raises add $85.20 to our forward estimated annual dividend income. Might not seem like much, but it would take $2,130 of fresh capital invested in a stock earning a 4% yield to match that increase. The magic of dividend growth never ceases to amaze! Even better: When you add the $80.43 of added forward income from January raise announcements, our projected annual income has now grown $165.63 in 2020, based on dividend increases alone! I'll take it.
Stock Transactions: February 2020
We made 16 purchases in February:
|Ticker / Name||# of Shares||Share Price||Amt. Invested||Est. Annual Income|
|Antero Midstream (AM)||370||$4.58||$1694.60||$455.10|
|Energy Transfer (ET)||220||$11.33||$2493.1||$268.40|
|MSC Industrial (MSM)||15||$69.49||$1042.35||$45|
|PPL Corp (PPL)||16||$32.58||$521.28||$26.56|
|Royal Dutch Shell (RDS.B)||50||$48.77||$2438.50||$188|
|Tanger Outlets (SKT)||40||$12.61||$504.40||$57.20|
|Texas Instruments (TXN)||20||$121.45||$2422.90||$72|
|United Parcel Service (UPS)||35||$100.79||$3527.80||$139|
|Exxon Mobil (XOM)||47||$54.64||$2568.16||$163.56|
|Total: $22,407.58||Total: $1,665.82|
|* = New Position||7.43% avg. yield|
We had two DRiP (dividends automatically reinvested) purchases in February:
|Ticker/Name||Amt. Reinvested||# of Shares||Share Price||Est. Annual Income|
|Total DRiP: $92.56|| |
4.31% avg. yield
We made one sale in February:
|Ticker / Name||# of Shares||Share Price|| |
|Archer Daniels Midland (ADM)||100||$44.50||$4450||$306|| |
February Transactions: Takeaway
- Cash invested $22,407.58 + DRiP reinvested $92.56 = $22,500.14 total invested in February.
- I sold ADM when a covered option got called in at $44.50. I made a small profit and quickly reinvested the money into a couple of businesses that I feel have better capital and dividend growth prospects.
- Including the sale of ADM, our investments add approximately $1,529.81 of annual passive dividend income.
- This raises our estimated forward annual dividend income to $17,657.65 from $16,047.24 last month. That's a 10% increase, MoM.
- Moving forward, I can expect to pocket an average of $48.37 of passive income each and every day without lifting a finger! That's up from $43.96 one month ago. In my bachelor days, that might have been enough to live off of. But with two kids, a wife, and a dog, and living in a ski town and having a healthy addiction of traveling and mountain biking thousands of miles a year... I've still got a lion's share of work to do to achieve 100% financial emancipation. But the groundwork has been laid, and I wouldn't change a thing.
We opened one new position in January: Texas Instruments. This is a good fit at a good price, and after being trampled by last week's correction, I'm looking to improve my position soon. We are glad to have TXN as part of the Blue Chip DRiP family.
Otherwise, we continued making strategic additions to existing positions and deployed a large amount of dry powder during the downturn last week. We try to balance purchases between lower-yielding/faster dividend growers and some higher-yielding players, with a potential higher-risk/speculative company sprinkled in for flavor (Antero Midstream). Building a reliable and ever-growing dividend income stream remains goal #1.
Diversification Checkup: Sector Allocations
|Stock Sector||Current % of Portfolio||Goal % of Portfolio|
|Basic Materials||2.94% (was 3.14%)||5%|
|Communications||5.33% (was 5.46%)||5%|
|Consumer Cyclical||4.76% (was 4.88%)||5%|
|Consumer Defensive||5.33% (was 7.22%)||8%|
|Energy||18.73% (was 17.35%)||12%|
|Financial||11.16% (was 11.14%)||10%|
|Healthcare||11.49% (was 11.88%)||10%|
|Industrials||10.11% (was 8.72%)||10%|
|Real Estate / REIT||12.86% (was 13.2%)||12%|
|Technology||9.31% (was 8.64%)||10%|
|Utilities||6.43% (was 6.72%)||10%|
|Misc. (ETFs, Funds)||1.55% (was 1.55%)||3%|
I do not include cash in the allocation chart, but I do keep dry powder available in case opportunities arise. If this downturn continues, I'll keep buying. As you can see in the chart, there are a few major changes from last month:
- A decrease in the Consumer Defensive sector due to the sale of ADM.
- An increase in the Industrials sector due to increasing my position in UPS.
- An increase in the Technology sector due to building my AVGO position and opening a small position in TXN.
- An increase in the Energy Sector due to purchases of AM, ET, RDS.B, and XOM. I'm now quite overweight in Energy. I will not add any more until I bring it more into balance with other allocations.
I'm not a "stickler" for exact allocations and won't buy purely based on sector. I do, however, like having a guideline to make sure we stay the course.
Top 10 Holdings: Ranked by Position Size
Below are my Top 10 Holdings ranked by position size within our portfolio. I include last month's rankings for comparison, as well as their contribution to our passive income stream.
|Ticker / Name||Ranking||Percentage of Portfolio||Ann. Div. Income|
|Energy Transfer (ET)||1 (was 1)||4.19% (was 3.66%)||$1395.49|
|AbbVie (ABBV)||2 (was 4)||3.79% (was 3.29%)||$632.48|
|AT&T (T)||3 (was 2)||3.52% (was 3.57%)||$629.61|
|3M (MMM)||4 (was 5)||3.33% (was 3.12%)||$396.49|
|Simon Property (SPG)||5 (was 3)||3.29% (was 3.40%)||$680.48|
|Exxon Mobil (XOM)||6 (was 6)||3.29% (was 2.86%)||$673.17|
|Broadcom (AVGO)||7 (was 7)||3.01% (was 2.73%)||$433.81|
|Cardinal Health (CAH)||8 (NA)||2.41% (NA)||$268.80|
|General Dynamics (GD)||9 (was 8)||2.32% (was 2.43%)||$179.52|
|United Parcel Svc (UPS)||10 (NA)||2.26% (NA)||$302.63|
As a rule of thumb, I try not to let any single position grow over 5% of the overall portfolio value. This rule is not hard and fast but keeps me from getting carried away with any individual holdings, no matter how glorious they may seem.
Notable changes In February
Qualcomm (QCOM) and Brookfield Property (BPR) slid off the list, mainly due to the correction last week. This opened the door to CAH and UPS to creep into the top 10. I recently wrote an analysis of UPS and I continue to put my money where my mouth is. Other than that, pretty much everything else remained status quo, MoM.
Top 10 Holdings: Ranked by Income Generated
This is another fun chart. I thought it might be beneficial to track my biggest payers:
|Ticker / Name||Ranking||Estimated Annual Income||% of Portfolio Income|
|Energy Transfer (ET)||1 (was 1)||$1395.49||7.90% (was 7.02%)|
|Antero Midstream (AM)||2 (was 2)||$1279.20||7.24% (was 5.14%)|
|Simon Property (SPG)||3 (was 3)||$680.48||3.85% (was 4.24%)|
|Exxon Mobil (XOM)||4 (was 8)||$673.17||3.81% (was 3.18%)|
|AbbVie (ABBV)||5 (was 5)||$632.48||3.58% (was 3.79%)|
|AT&T (T)||6 (was 4)||$629.61||3.56% (was 3.90%)|
|Tanger Outlets (SKT)||7 (was 7)||$575.13||3.26% (was 2.93%)|
|Royal Dutch Shell (RDS.B)||8 (NA)||$564||3.19% (NA)|
|Brookfield Property (BPR)||9 (was 6)||$523.69||2.97% (was 3.24%)|
|Iron Mountain (IRM)||10 (was 9)||$477.55||2.70% (was 2.97%)|
As with position size, I try not to let any single position generate over 5% of the portfolio's total dividend income. Again, this rule is not hard and fast, but it helps keep me accountable. A big chunk of dividend income is from the Energy and REIT sectors. This month, I picked up more shares of RDS.B which moved it up on the list and pushed Enbridge (ENB) off. ET is now responsible for 8% of our total dividend income, with AM generating over 7%. I will not invest any more in either of these companies until they come more into balance.
The Whole Enchilada: The Blue Chip DRiP Portfolio as of 2/29/20
Last but not least is a spreadsheet of the entire Blue Chip DRiP Portfolio as it currently stands. Unrealized gains/losses don't faze us. Lots of red last month on paper. But most importantly, lots of green (no pun intended) from our consistent, safe, and growing dividend income stream.
After the big hit from last week, the current balance of the account stands at: $302,651. With $320,222 invested, that's an unrealized capital loss of -$17,571 or -5.49%. Again, the markets will go up and down, but here's what I look at - our consistently growing passive income stream:
- Est. forward annual dividend income 12/31/19: $15,570.66
- Est. forward annual dividend income 1/31/20: $16,047.24
- Est. forward annual dividend income 2/29/20: $17,657.65 = up +10% MoM, up +13.4% YTD
March Madness Set To Ensue
With February in the books, the Blue Chip DRiP Portfolio is officially one year old. What a difference a year makes! I don't have much time to watch basketball these days. That's because I spend most of my time playing with the kiddos, skiing, riding my bike, investing in myself, etc. Regardless of the NCAA Tournament, I'm curious to see what "madness" March will hold for the stock markets and global financial arena. I pray for positive news regarding the Coronavirus. I'll continue making myself yawn by living frugally, saving, investing, re-investing, compounding and all that boring stuff. Luckily, all that boring stuff keeps inching us towards financial freedom so we can passively fund all the not so boring stuff we fill our days with. Ok, time to stretch the legs and take a bike ride.
I'm super curious. What is your take on the market correction? Are you buying (hopefully not selling) or sitting on the sidelines until the dust settles? Looking forward to the comments!
PS: Thanks for clicking the "Follow" button, and feel free to read my other articles. Best of luck as we journey towards financial emancipation!
This article was written by
Analyst’s Disclosure: I am/we are long EVERYTHING IN THIS PORTFOLIO. 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.
This is not stock advice. These are purely my opinions. I'm not a professional. Do your own research. Best of luck in your investing journey!
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