My Dividend Growth Portfolio February Update: 48 Holdings, 22 Buys, 4.27% Yield, Down 45k
Summary
- I collected $1,107 in dividends during February which was higher than the $567 in February 2019. Rolling dividend growth rate is over 30% from last year.
- I added a dozen new holdings and added to several others.
- Coronavirus Edition!
Introduction
Welcome to my February 2020 review for my dividend growth portfolio. 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 I during our golden years. The aim is to live off dividends without touching the principal. Dividend growth stocks and ETFs are the chosen vehicles to meet that goal. Currently 34, I have approximately 25 years before I can touch any of this money (without taxes and penalties).
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.
For anyone interested, I have a trimmed version of a portfolio tracking spreadsheet you can freely take for yourself, found here.
I've received some questions in the past, so you can save off a copy by selecting "File" -> "Make A Copy."
Change Log
Scoring rubric
Commentary
Let's be honest, any mention of any topic other than the Coronavirus would be wasted here.
I'll even lead off by saying I recently bought a case of Corona to do my share in helping out Constellation Brands. The beer is in no way related to the virus, there, I've done my part with that. It'll also help digest what has been going on lately in the market.
One of my first few thoughts was what would Warren do? Ask yourself, is he fleeing the market or is he finally rubbing his hands because he's been waiting years for sanity to return.
Here's another thought - there are more cases of investor-fleeing-itis than Coronavirus.
That brings me to temperament, where's your head at? Sure, it looks scary outside, but this is the time to check the emotions at the door. Hopefully this isn't the time you realize you can't sleep at night either. The worst time to have to come to this realization is when you are in the midst of a very rapid market correction. My hope is that you are already positioned that you can absorb these blows and remember that it's only a loss if you sell!
I hope you aren't just going to cash and getting onto the hamster wheel of market timing. The market hates uncertainty which is perhaps first and foremost the start of the contagion of fleeing. I think the sky-high valuations and ultimately downward earnings revisions is what is also giving the decline much more speed. I mean we literally hit another all-time high on Friday the 21st before going into the weekend news cycle.
As for me? I'm constantly taking little nibbles here and there especially now that I have commission free trading in my retirement account. I have 25 years before I can touch this money - I don't think this is the rapture or end times. There have been other scary communicable diseases over time from HIV, SARS, H1N1, bird flu, Ebola, other flu strains - we're still standing! In fact, where I'm looking is for more pricing corrections of my generational winners. I want to be adding more Apple, Microsoft, Home Depot, Starbucks, Disney, Visa, MasterCard, etc. Sure, earnings may take a hit and sales may drop for a while, but permanently? Nah. In fact, I don't think cloud spending at Microsoft or Amazon is going to stop and I don't think people will stop sprucing up their homes because of this. And people surely aren't going to stop using credit cards.
What I've noticed is that those types of companies are still well above their 52-week lows and so my next step is to see how pricing on some of those companies transpires over the next few weeks or months. I've noticed that for my holdings that aren't the high-flying stocks, they've already broken to new lows. That's the area I've been nibbling in so far. I'll get to the specific trades down below.
If you don't know what to pick, there are always plenty of good ETFs on sale. From dividend-centric ETFs like VYM, HDV, SCHD to more sector specific like VNQ for real estate, it's just pure chaos out there. That chaos also means sales and that is how it comes back to Buffett.
From his 2016 annual letter:
Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it's imperative that we rush outdoors carrying washtubs, not teaspoons.
-Warren Buffett
If you are looking for another idea, Berkshire looks awfully interesting again these days as it is near its year low. I wouldn't bet against that team and I'll leave it by saying I can't wait to see the next 13-F filing or two from Berkshire.
To round out that discussion, I hope that you are keeping a cool head and not making rash decisions (if any decisions are being made). I'm looking at this as an opportunity to increase my cash flow going forward now that yields are on the way back up across the equity board.
February visited many interesting places. From setting a new portfolio high around $373k and then finishing the month just under $330k. Oof!
From what I could control, this month was a success so let's get into it.
Dividend Increases
- Cisco (NASDAQ:CSCO) declares $0.36/share quarterly dividend, 2.9% increase from prior dividend of $0.35.
- Brookfield Asset Management (NYSE:BAM) declares $0.18/share quarterly dividend, 12.5% increase from prior dividend of $0.16.
- Corning (NYSE:GLW) declares $0.22/share quarterly dividend, 10% increase from prior dividend of $0.20.
- Home Depot (NYSE:HD) declares $1.50/share quarterly dividend, 10.3% increase from prior dividend of $1.36.
- Prudential Financial (NYSE:PRU) declares $1.10/share quarterly dividend, 10% increase from prior dividend of $1.00.
- Tanger Factory (NYSE:SKT) had declared $0.3575/share quarterly dividend, 0.7% increase from prior dividend of $0.3550.
- S&P Global (NYSE:SPGI) declares $0.67/share quarterly dividend, 17.5% increase from prior dividend of $0.57.
- T. Rowe Price (NASDAQ:TROW) declares $0.90/share quarterly dividend, 18.4% increase from prior dividend of $0.76.
- Canadian Imperial Bank (NYSE:CM) declares CAD 1.46/share quarterly dividend, 1.4% increase from prior dividend of CAD 1.44.
- Royal Bank of Canada (NYSE:RY) declares CAD 1.08/share quarterly dividend, a 2.9% increase from prior dividend of CAD 1.05.
- TD Bank (NYSE:TD) declares CAD 0.79/share quarterly dividend, 6.8% increase from prior dividend of CAD 0.74.
Dividend Cuts
- None this month
2020 Goals
- I want my dividend growth holdings to have an average dividend growth rate of at least 7%. So far, I'm at 9.8% with 11 increases during February.
- By the end of 2020, I want to have a projected dividend income of at least $17,000. I'm sitting at $14,815 currently (+$1,000 month over month).
- Looking to achieve an average monthly dividend of $1,400. Currently $1,091 (up 4.5% MoM).
- I want to suffer no dividend cuts.
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.
- Is this a trade? Is this something I would hold through thick and thin or something that I can make some nice yield from and later trade if the price is right?
Company-Specific Factors
- What's do the earnings and revenue growth look like?
- How long is their dividend growth streak?
- Is the sum of the dividend safe? 60+ on Simply Safe Dividends
- What about the dividend growth rate historically and potentially going forward? Is this a fast grower or slow grower?
- 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. First and foremost - I really don't want to sell shares.
- 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.
- Seems like a good time to close out a trade stock (non-core holding).
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
Now that I have commission free trades, it doesn't really matter whether I leave reinvestment on or not. I'll generally leave it on for my core holdings or where I can lower my cost basis. This is also generally when I have ample cash (5%+ in my portfolio). After the massacre at the end of February, I have it on for essentially all of my holdings. After taking a lot of steam off the valuations broadly speaking, stocks look more compelling here.
In any event, I did some simple conditional formatting on my spreadsheet. Cells will be green if I have an opportunity to lower my cost basis. This screenshot is quite old as almost everything I have today is above 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.
Here's my table showing reinvestment statuses. Items show up in here when reinvestment is either on or the current price is below my basis. I have reinvestment off specifically for the pure small percentage holding with a high yield (APLE, CLDT and PEI-D).
| Name | Ticker | DRIP Basis | Current Share Price | Reinvest On? |
| Apple | AAPL | $114.79 | $290.62 | Yes |
| AbbVie | ABBV | $73.97 | $87.45 | Yes |
| Abbott Laboratories | ABT | $86.27 | $79.08 | Yes |
| Apple Hospitality | APLE | $14.71 | $13.14 | No |
| Brookfield Asset Management | BAM | $67.87 | $60.93 | Yes |
| BlackRock | BLK | $443.77 | $474.49 | Yes |
| Bank of Montreal | BMO | $67.50 | $68.69 | Yes |
| Bank of Nova Scotia | BNS | $52.20 | $52.64 | Yes |
| Chatham Lodging Trust | CLDT | $16.38 | $14.38 | No |
| Canadian Imperial Bank of Commerce | CM | $76.00 | $77.09 | Yes |
| Cisco Systems | CSCO | $45.38 | $40.37 | Yes |
| Walt Disney | DIS | $94.40 | $118.00 | Yes |
| Global X US SuperDividend | DIV | $22.41 | $20.92 | Yes |
| Cohen&Steers Opportunity CEF | FOF | $12.85 | $12.71 | Yes |
| Corning | GLW | $22.44 | $24.10 | Yes |
| Home Depot | HD | $143.70 | $223.57 | Yes |
| XTrackers High Yield Corp Bond ETF | HYLB | $50.34 | $49.08 | Yes |
| iShares International Select Dividend ETF | IDV | $30.50 | $30.23 | Yes |
| Johnson & Johnson | JNJ | $116.91 | $137.41 | Yes |
| JPMorgan Chase | JPM | $85.93 | $118.45 | Yes |
| MasterCard | MA | $205.62 | $298.28 | Yes |
| Medtronic | MDT | $70.80 | $100.84 | Yes |
| Global X MLP ETF | MLPA | $7.78 | $6.20 | Yes |
| Altria | MO | $41.01 | $41.25 | Yes |
| Microsoft | MSFT | $147.60 | $167.32 | Yes |
| Nike | NKE | $15.08 | $90.82 | Yes |
| Realty Income | O | $81.00 | $74.30 | Yes |
| Pennsylvania REIT D Series 6.875% | PEI-D | $20.05 | $14.42 | No |
| Global X Preferred ETF | PFFD | $25.42 | $24.72 | Yes |
| Prudential Financial | PRU | $83.08 | $78.00 | Yes |
| Royal Bank of Canada | RY | $74.00 | $75.99 | Yes |
| Starbucks | SBUX | $47.83 | $80.72 | Yes |
| Schwab US Dividend ETF | SCHD | $51.54 | $52.72 | Yes |
| Global X MSCI SuperDividend Emerging | SDEM | $12.98 | $11.90 | Yes |
| Global X SuperDividend® ETF | SDIV | $16.93 | $15.33 | Yes |
| STAG Industrial | STAG | $1.79 | $28.60 | Yes |
| Tanger Factory Outlets | SKT | $127.42 | $12.03 | Yes |
| Simon Property Group | SPG | $3,465.67 | $125.69 | Yes |
| S&P Global | SPGI | $1.79 | $277.33 | Yes |
| SPDR S&P High Dividend | SPYD | $41.82 | $34.74 | Yes |
| Global X SuperDividend REIT | SRET | $238.36 | $14.23 | Yes |
| Stanley Black & Decker | SWK | $121.48 | $142.09 | Yes |
| TD Bank | TD | $51.20 | $51.84 | Yes |
| T. Rowe Price | TROW | $62.93 | $121.22 | Yes |
| Travelers Companies | TRV | $89.88 | $124.55 | Yes |
| Visa | V | $140.81 | $188.35 | Yes |
Contributions
...And we are off to the races. Contributions have started once again this calendar year and I should be able to max my plan once more. I'll get a boost with some bonus money showing up so don't read too much into the year-end figure being lower than the IRS limit for now.
I'm also expecting a "true up" contribution in another month or so because of the fact that I finished maxing the plan earlier than the end of December last year. My understanding is not everyone has this so check your circumstances if you fully fund a retirement account with an employer match prior to the end of the calendar year.
The Portfolio
Here's my actual portfolio with a few of my data points highlighted.
| Name | Ticker | % of Portfolio | CCC Status | Income |
| Apple | (AAPL) | 5.43% | Challenger | $200 |
| AbbVie | (ABBV) | 1.58% | Challenger | $295 |
| Abbott Laboratories | (ABT) | 1.13% | Challenger | $72 |
| Apple Hospitality | (APLE) | 0.37% | None | $120 |
| Brookfield Asset Management | (BAM) | 0.26% | Challenger | $11 |
| BlackRock | (BLK) | 1.40% | Contender | $146 |
| Bank of Montreal | (BMO) | 0.08% | None | $17 |
| Bank of Nova Scotia | (BNS) | 0.08% | None | $18 |
| Chatham Lodging Trust | (CLDT) | 0.40% | None | $132 |
| Canadian Imperial Bank of Commerce | (CM) | 0.09% | None | $23 |
| Cisco Systems | (CSCO) | 1.17% | Challenger | $146 |
| Walt Disney | (DIS) | 2.62% | Challenger | $137 |
| Global X US SuperDividend | (DIV) | 1.45% | None | $412 |
| Cohen&Steers Opportunity CEF | (FOF) | 2.24% | None | $637 |
| Corning | (GLW) | 2.18% | Challenger | $277 |
| Home Depot | (HD) | 2.43% | Contender | $221 |
| XTrackers High Yield Corp Bond ETF | (HYLB) | 2.84% | None | $580 |
| iShares International Select Dividend ETF | (IDV) | 3.57% | None | $759 |
| Johnson & Johnson | (JNJ) | 2.36% | King | $229 |
| JPMorgan Chase | (JPM) | 2.78% | Challenger | $296 |
| MasterCard | (MA) | 2.98% | Challenger | $56 |
| Medtronic | (MDT) | 1.97% | Champion | $147 |
| Global X MLP ETF | (MLPA) | 1.84% | None | $782 |
| Altria | (MO) | 3.05% | King | $846 |
| Microsoft | (MSFT) | 0.48% | Contender | $20 |
| Nike | (NKE) | 0.81% | Contender | $30 |
| Realty Income | (O) | 0.26% | Champion | $33 |
| Pennsylvania REIT D Series 6.875% | (PEI-D) | 0.42% | None | $172 |
| Global X Preferred ETF | (PFFD) | 1.24% | None | $242 |
| Prudential Financial | (PRU) | 2.24% | Contender | $454 |
| iShares mREIT ETF | (REM) | 2.84% | None | $848 |
| Royal Bank of Canada | (RY) | 0.09% | None | $17 |
| Starbucks | (SBUX) | 2.30% | Contender | $166 |
| Schwab US Dividend ETF | (SCHD) | 5.40% | None | $552 |
| Global X MSCI SuperDividend Emerging | (SDEM) | 2.50% | None | $620 |
| Global X SuperDividend® ETF | (SDIV) | 3.17% | None | $1,159 |
| Tanger Factory Outlets | (SKT) | 1.52% | Champion | $635 |
| Simon Property Group | (SPG) | 2.37% | Contender | $560 |
| S&P Global | (SPGI) | 0.24% | Champion | $8 |
| SPDR S&P High Dividend | (SPYD) | 4.90% | None | $834 |
| Global X SuperDividend REIT | (SRET) | 1.70% | None | $488 |
| STAG Industrial | (STAG) | 2.71% | Contender | $36 |
| Stanley Black & Decker | (SWK) | 2.25% | King | $160 |
| AT&T | (T) | 2.10% | Champion | $417 |
| TD Bank | (TD) | 0.07% | None | $16 |
| T. Rowe Price | (TROW) | 1.51% | Champion | $152 |
| Travelers Companies | (TRV) | 1.84% | Contender | $167 |
| Visa | (V) | 2.98% | Contender | $67 |
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 keep tabs on the dividend safety score from Simply Safe Dividends and how that meshes with the S&P credit rating. The table is then sorted descending by the safety score (this is only for individual companies).
| Name | S&P Credit Rating | SSD Safety Score |
| Johnson & Johnson | AAA | 99 |
| BlackRock | AA- | 98 |
| TD Bank | AA- | 95 |
| Home Depot | A | 87 |
| T. Rowe Price | - | 94 |
| Corning | BBB+ | 77 |
| AbbVie | A- | 50 |
| Apple | AA+ | 99 |
| Cisco Systems | AA- | 91 |
| Prudential Financial | A | 75 |
| Visa | AA- | 99 |
| Stanley Black & Decker | A | 90 |
| MasterCard | A+ | 99 |
| Medtronic | A | 99 |
| Royal Bank of Canada | AA- | 94 |
| Walt Disney | A | 99 |
| Microsoft | AAA | 99 |
| Canadian Imperial Bank of Commerce | A+ | 91 |
| Travelers Companies | A | 78 |
| S&P Global | - | 99 |
| Nike | AA- | 99 |
| Simon Property Group | A | 65 |
| Altria | BBB | 55 |
| Bank of Nova Scotia | A+ | 89 |
| Abbott Laboratories | A- | 71 |
| Realty Income | A- | 86 |
| Tanger Factory Outlets | BBB | 52 |
| Bank of Montreal | A+ | 94 |
| JPMorgan Chase | A- | 79 |
| Starbucks | BBB+ | 67 |
| Apple Hospitality | - | 43 |
| Chatham Lodging Trust | - | 41 |
| AT&T | BBB | 65 |
| Brookfield Asset Management | A- | 55 |
With this new chart I've had a few insights:
- I primarily own almost all safe companies now (score 60+).
- I did take very small nibbles at companies with a safety score < 50. These were specific yield plays and will be capped at a small portion of my portfolio.
- Generally, out of dividend safety, dividend growth and current 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. Many of these ETFs are also nearly free (SCHD and SPYD have extremely low costs) and have performed quite well.
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 the S&P and a benchmark since the date of first purchase. Many of the top holdings took a major hit during the first drop of the Coronavirus.
| Ticker | Owned Since | Versus S&P | Benchmark | Versus Benchmark |
| AAPL | 4/13/2015 | 81.31% | SPY | 81.31% |
| JPM | 7/15/2016 | 51.10% | SPY | 51.10% |
| TROW | 9/29/2016 | 48.43% | SPY | 48.43% |
| MA | 7/26/2018 | 32.14% | SPY | 32.14% |
| HD | 5/3/2016 | 23.80% | SPY | 23.80% |
| V | 7/26/2018 | 20.65% | SPY | 20.65% |
| MSFT | 11/14/2019 | 15.92% | SPY | 15.92% |
| HYLB | 1/10/2020 | 8.20% | AGG | -5.57% |
| REM | 6/20/2019 | 5.47% | SPYD | 13.09% |
| BLK | 10/16/2019 | 4.99% | SPY | 4.99% |
| MDT | 11/22/2016 | 4.69% | SPY | 4.69% |
| ABBV | 1/28/2019 | 3.42% | SPY | 3.42% |
| NKE | 5/3/2016 | 2.63% | SPY | 2.63% |
| SPGI | 2/21/2020 | 1.78% | VNQ | 2.31% |
| O | 2/21/2020 | 1.29% | SPY | 1.29% |
| IDV | 6/20/2019 | 0.53% | SPYD | 8.15% |
| APLE | 2/24/2020 | 0.39% | SPY | 0.39% |
| BAM | 2/21/2020 | 0.08% | SPY | 0.08% |
| ABT | 1/10/2020 | 0.07% | SPY | 0.07% |
| GLW | 10/14/2015 | -1.53% | SPY | -1.53% |
| SCHD | 9/24/2018 | -1.81% | SPY | -1.81% |
| STAG | 2/20/2019 | -2.57% | SPY | -2.57% |
| FOF | 10/10/2019 | -3.34% | SPY | -3.34% |
| SRET | 2/20/2019 | -5.46% | SPY | -5.46% |
| DIV | 7/31/2019 | -5.51% | SPY | -5.51% |
| CLDT | 2/24/2020 | -6.18% | SPY | -6.18% |
| SPYD | 6/13/2019 | -8.38% | SPY | -8.38% |
| JNJ | 12/9/2015 | -8.44% | SCHD | -5.31% |
| SBUX | 12/3/2015 | -11.38% | SPY | -11.38% |
| SWK | 1/28/2016 | -11.70% | SPY | -11.70% |
| CSCO | 8/23/2019 | -16.27% | SPY | -16.27% |
| SDEM | 2/20/2019 | -16.49% | SPY | -16.49% |
| SDIV | 2/20/2019 | -18.24% | SPY | -18.24% |
| T | 11/3/2015 | -19.12% | SPYD | -5.25% |
| TRV | 4/28/2014 | -24.57% | SPY | -24.57% |
| SPG | 4/30/2019 | -25.49% | VNQ | -27.67% |
| MLPA | 2/6/2019 | -31.60% | SPY | -31.60% |
| PRU | 4/7/2016 | -32.15% | SPY | -32.15% |
| DIS | 12/28/2015 | -37.92% | SPY | -37.92% |
| MO | 10/31/2013 | -44.44% | SPY | -44.44% |
| SKT | 7/26/2017 | -70.41% | VNQ | -61.18% |
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 the first time I owned it 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 | $14,815.38 |
| Cash | $7,554 |
| Cash Ratio | 2.18% |
| Total Value | $354,364.94 |
| YOC (Divi Companies) | 5.77% |
| Yield (Divi Companies) | 4.59% |
| Portfolio Yield | 4.27% |
| Yield w/Cash Drag | 4.18% |
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.
The Canadian banks have high correlation, but I understood that when taking the basket approach to owning them all.
Trade Summary
My Sells
None
My Buys
This is going to take a little time to go all through this. I'll firstly point out that again, commission free trading has given me the ability to take nibbles here and there. The transaction sizes have all been a lot smaller than they might normally be before I had free trading.
MLPA/DIV/PFFD
I started a position in PFFD and added to both my MLPA and DIV right before the ex-dividend on the funds. PFFD has always been on my watchlist and I finally decided to small a place to park money. This is a higher yielding ETF of preferred shares that also has a low expense ratio at 0.23%. The current yield is about 5.6% works alongside my HYLB for a high yielding low cost place to park money.
Simon Property Group
Though I'm down in price on it, I thought SPG had a nice quarter from their recent results. The ex-dividend was coming up and the stock was trading near its 52-week low though it was climbing (at the time).
Brookfield Asset Management / Realty Income / S&P Global
I managed to hit the market peak on Friday the 21st and start small positions in all three companies. I wouldn't have called any of them value buys at the time but over time, winning companies will continue to put up new all-time highs. I have no doubt they will surpass their previous highs at some point.
Brookfield had reported another nice quarter and also had a 12.5% dividend increase coming. Having been on my watchlist I nibbled here to get it started prior to ex-div.
Realty Income was one I was wrong to part with. It feels perennially expensive but that ends up being a great advantage with the lowest cost of capital. I bought a few shares to get that position started again and later added once the week meltdown occurred.
S&P Global really got on my radar as I was researching the company for my weekly dividend article regarding upcoming dividend increases. This is another one of those always expensive stocks, but they have an incredible track record of dividend increases with an upcoming 17.5% one. Growth looks great here. Unfortunately, you have to pay to play for growth. You can see at the end of 2018 was the last time shares appeared "fairly valued".
Apple Hospitality / Chatham Lodging Trust
Right off the bat, I bought these too early based on future pricing. I decided I'm OK with small positions in these yield plays. The first couple days of the meltdown both their yields crossed over 8% (they are over 9% now). I opted to buy 100 shares of each, and I'll just use them as an ATM.
STAG Industrial
Much like Realty Income, this is another former holding that I shouldn't have parted with. Nice yield at 5%, mid-single digit FFO growth expected for around 10% annual returns expected.
SCHD / SPYD
SCHD and SPYD are two core dividend centric ETFs that I hold. They drive a decent chunk of my returns and I use them as comparison points against my individual holdings. I received several alerts on both of these at the tail end of the week; whether it was being at 52-week lows or crossing over a desired dividend yield. Given the decline in absolutely everything, it made sense to just add a little to each.
BNS / BMO / CM / TD / RY
I added the "Big Five" Canadian Banks. These have long been recommended to me either directly through comments or via articles that I read. With my commission free trading I decided to add a few shares of each to get a position started. There isn't really an ETF either that adequately provides exposure available to US investors (I think there is one on the TSX). All are at 52-week lows and provide some fat and growing dividend yields.
Berkshire Hathaway
In my introduction I quoted Buffett and also attempted to read the tea leaves of what him, Charlie Munger and their lieutenants must be thinking. It also made perfect sense to add more Berkshire as the company was also being thrown to the wayside. They have too much cash to not be able to deploy it adequately. They can either add to stock positions, buy entire companies at depressed prices or even continue to repurchase their own shares should prices languish. I'm a buyer here.
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.
I broke the $1,000 average monthly dividend mark in December 2019, and I continue to grow from there. The average jumped to $1,091 (up 4.5% month over month) as the $1,107 was much better than the $967 in November. 
I calculated historical growth rates on some different time periods. Generally speaking, I'm able to increase the monthly average about 3% per month. Depending which figure I look at, it puts me just a hair under $1,500 by the end of 2020 for my average monthly dividend.
The big aqua bar for February puts every past figure to shame. February 2018 and 2019 were similar in the mid-$500 range. March is also shaping up to put every previous figure to shame.
Notes
- My monthly payers (HYLB, PFFD, DIV, FOF, SDEM, SDIV and SRET) provided $340.
- A lot of these names are high yield plays and if prices cooperate, I want to add to my core dividend names like Apple, the Abbotts, MasterCard and Starbucks.
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.
Apple is still my largest holding, narrowly larger than SCHD. SPYD is a close third place. On the y-axis the top payers are SDIV, REM, MO, SPYD, IDV and MLPA.
Growth
The $1,107 in February was 95% higher than the $567 in February of 2019. On a rolling YTD basis I'm up 31% versus the total last year.
The only chart that shows continued progress 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.
Right now, I estimate I would receive $14,414 over the next year. Now that is about 81% higher than what I was expecting this time last year. Additionally, the approximate $1,000 I added in the past month represents a 6.9% monthly increase. After March concludes I'll be able to have the Q1 report.
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 while things like commodities or currencies don't interest me, I've found value in some bonds as a place to park extra cash.
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 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.
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 right around where I'd like to be. I used a lot of my dry powder this month, but I view the "fixed income" slice as shadow cash. 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 |
| ABT | Dividend Growth |
| AMZN | Growth |
| APLE | High Yield |
| BAM | Dividend Growth |
| BLK | Dividend Growth |
| BMO | Dividend Growth |
| BNS | Dividend Growth |
| BRK.B | Growth |
| CLDT | High Yield |
| CM | Dividend Growth |
| CSCO | Dividend Growth |
| DIS | Dividend Growth |
| DIV | High Yield |
| FOF | High Yield |
| GLW | Dividend Growth |
| GOOG | Growth |
| HD | Dividend Growth |
| HYLB | Fixed Income |
| 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 |
| O | Dividend Growth |
| PEI-D | High Yield |
| PFFD | High Yield |
| PRU | Dividend Growth |
| REM | High Yield |
| RY | Dividend Growth |
| SBUX | Dividend Growth |
| SCHD | Dividend Growth |
| SDEM | High Yield |
| SDIV | High Yield |
| SKT | High Yield |
| SPG | Dividend Growth |
| SPGI | Dividend Growth |
| SPYD | Dividend Growth |
| SRET | High Yield |
| STAG | Dividend Growth |
| SWK | Dividend Growth |
| T | High Yield |
| TD | Dividend Growth |
| TROW | Dividend Growth |
| TRV | Dividend Growth |
| V | Dividend Growth |
Visualizations
Income by Sector
Here's how I receive my income; about 55% now comes from an ETF of some sort. The other 45% is broken down by individual companies in their respective sectors.
When I look at my allocations in dollar amounts, 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 (kings 50+, champions 25+ , contenders 10+, challengers 5+).
Champion, Contender, Challenger View
New this month is I added this field to be an automated pull from my API. This opened up the "King" status for those with streaks over 50 years. I want to note that the Abbott's per the CCC list are not champions though by legacy S&P rules they are both Dividend Aristocrats.
Correction Watch List
In my last edition I wrote:
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
SAAS / Cloud computing ETF for the growth portion
NETL / small position in several triple net lease companies (O, STAG, WPC for example)
Fast forward a month and how things have changed. I decided to start a position in BAM and restart positions in O and STAG. WPC is still on my short list and that'll drop the need for NETL.
Current wishlist:
- WPC
- SAAS / Cloud computing ETF / QQQ
- My current dividend growth winners at better prices (MSFT, SBUX, NKE, HD, AAPL, V, MA, etc)
Scoring Rubric
My latest tinkering this month is creating a scoring rubric to help facilitate automated stock research. To start, it's not complete.
Some of the challenges I am trying to solve:
- Automating and taking emotion out of stock research
- Focusing on the best opportunity at the moment
- Rewarding companies that grow earnings and dividends
- Penalizing or boosting holdings that are under a target allocation
- Preventing going "back to the well" by penalizing repeat purchases
Here's a small sample of what I'm playing with.
Low scores are good here and it would give me a quick at a glance idea of what is worth adding to. Stocks and ETFs get (or subtract) points for the following:
- Time since last purchase
- Estimated growth rates
- Position size vs a target
- Dividend payers
- Dividend history
- Current earnings in absolutes
- Dividend safety
- Current price being less than my cost basis
More to add:
- Estimated growth rates for ETFs
- Valuation against own history (can calculate an expected return)
- Dividend growth factors (recent increase, long term averages)
The important factors are then given a particular weight and stocks are ranked on the different metrics and the final score is what is shown.
For example, Prudential sits on top at the moment so let's see why.
Factors for:
- They rank middle in the upper tier of expected earnings growth this year (9% at last check)
- A low P/E in absolute terms (in the 6-7x earnings range)
- A good combination of a high dividend safety score, dividend growth and current yield
- Bonus for having a dividend history (dividend contender >10 years)
- Current price being under my cost basis
Factors against (or neutral):
- Middle of the pack since my last purchase
- Technically over my target position size (there is a penalty when over)
Things Coming Up
In past articles I'll highlight potential sells that may come up. I pointed out in January that T. Rowe Price I had gone back and forth on. After their monster dividend increase and seeing how they fared on my new rubric I've decided to let sleeping dogs lie. In fact - based on those insights they are a good candidate to add to.
Even as I prepared this article, the market had its enormous bounce back day on Monday, March 2nd. The Dow finished up over 5% (+1,293 points) and all of a sudden it feels like happy times are here again. It remains to be seen whether this is the case or not. It conjures up similar feelings at the end of 2018 when the market bottomed on Christmas Eve. The volatility cannot be overstated though, even that bounce back is not a normal market reaction. Maybe it was institutions making orders for clients placed over the weekend that did the heavy lifting, it remains to be seen.
The previous paragraph was written on Monday evening and again, the velocity of news cannot be overstated. Tuesday brought us an emergency 50 basis point rate cut and while there was a brief positive stock reaction, shares ended up tumbling giving up the Monday gains.
I don't have a huge surplus of cash at the moment after applying a lot of it at the tail end of February. Dividend reinvestment is on across the board for the moment to try and scoop up cheaper shares. I expect volatility to continue and perhaps will make some nibbles here and there. I don't expect a large investment and have to try to pace myself as the full business impacts of Coronavirus are going to take several quarters at a minimum to play out.
I don't think I have any expected dividend increases in March which isn't a surprise given how many apparently come in February. I am however, expecting an enormous record setting month of dividends. I fully expect March to eclipse December which was my previous high-water mark ($1,476). Pretty quickly I feel the last months of a quarter (March, June, September, December) are going to be giving me $2,000+ which is awesome.
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
This list was just going to look wild after the drops we've seen. Not surprisingly the top holding is Expedia which is getting hit being in the travel space. Also near the top are the airlines Southwest and Delta. American fell off the list because their market cap is now under $10B! Both FedEx and UPS are in there as well as Wells Fargo near the bottom there.
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
This has a few existing holdings; Medtronic, Microsoft, Nike and several former including Williams-Sonoma and Wells Fargo.
Conclusion
I wrapped up January with $690 in dividends. That amount was 13% lower than January of 2019 but up 25% when backing out a one-time large amount.
I made six purchases and two sales which netted to adding $971 of projected income over the next year. My projected income stands at $13,420 which is up 99% from this time last year and up 7.8% month over month. I maintained the dividend portfolio size with 36 dividend paying holdings.
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!
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
This article was written by
Analyst’s Disclosure: I am/we are long AAPL, ABBV, ABT, AMZN, APLE, BAM, BLK, BMO, BNS, BRK.B, CLDT, CM, CSCO, DIS, DIV, FOF, GLW, GOOG, HD, HYLB, IDV, JNJ, JPM, MA, MDT, MLPA, MO, MSFT, NKE, O, PEI-D, PFFD, PRU, REM, RY, SBUX, SCHD, SDEM, SDIV, SKT, SPG, SPGI, SPYD, SRET, STAG, SWK, T, TD, TROW, TRV, V. 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.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
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Comments (47)
Volatility is certainly around now and perhaps you will be able to get some of those growth stocks for a better price soon. Happy Investing :)) Rose
