- I collected a personal-best $2,114 in dividends in March. I'll compare against prior quarter-ends to see what moved the needle this time.
- Two new holdings were added, VPN and WCLD.
- Q1 total dividends were flat compared to 2020 though account values continue to push higher.
- Looking for a portfolio of ideas like this one? Members of Wheel of Fortune get exclusive access to our model portfolio. Learn More »
Welcome to my Q1 and March review for my dividend growth portfolio. Markets ran higher to finish out the quarter, and I joined in that prosperity. I finished the month with a record balance of $460k, up 5.5% in the past month and 50% in the past 12 months.
The pain of the market meltdown last year continues to fade from memory, but the lessons learned will last a lifetime. While there was plenty of panic, there was no panic selling on my part. I continued to ride the wave as difficult as it was and, for that, I've been handsomely rewarded. I opened two new positions this month, which I'll discuss further below.
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.
My portfolio aims 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 vehicles to meet that goal. I'm 35, and I have approximately 24 years before I can freely touch any of this money.
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 sample 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."
- I want my dividend growth holdings to have an average dividend growth rate of at least 7%. Currently 11.6%.
- By the end of 2021, I want to have a projected dividend income of at least $17,000. Currently $15,245.
- I want to suffer no dividend cuts. Currently zero cuts.
Through the three-legged stool of buying new shares, reinvesting dividends, and organic dividend increases will help drive me towards that $17,000 figure.
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.
Here is the first round of questions to review during an initial filtering process of investments.
- What is the opportunity here?
- Is the opportunity here better than an existing holding or ETF?
- What are the risks and downsides?
- Does it add diversification?
- Are we near an all-time high?
- How long is its dividend growth streak?
- Is the dividend safe? 60+ on Simply Safe Dividends
- Chowder Rule (current yield + five-year growth rate) > 10%.
- I like to see shareholder-friendly management. Total shareholder yield is another useful metric to analyze: the metric aggregates net dividends, buybacks, and debt reduction.
- Valuation needs to look right per F.A.S.T. Graphs.
Here are my guidelines when I may consider a stock sale. I don't want to sell shares, but I will when circumstances change.
- Company degradation - This could be things like deteriorating balance sheets, loss of competitive advantage, and credit rating loss. These factors may come to light before a dividend cut manifests. The pandemic exposed a lot of names in this category.
- A dividend cut, suspension, or unexpectedly paltry increases. The dividend increase is a visible outward sign of a company's success.
- Based on available information, capital is better passively invested or focused on better ideas.
One tactic I've used is buying shares before the ex-dividend date after the company has announced its yearly increase. The increase provides a glance into how management thinks the company is operating. A hefty increase can be confirmation from management that the business is running well. The reverse is true too, a small raise is a red flag, and it's time to research what's up. If this sounds interesting to you, you should check out my weekly article to get the full list.
Trees don't grow to the sky, and neither do dividend yields. A quality company with a nice dividend increase should see its stock price rise by a similar amount over the year, readjusting to the new and higher dividend amount. I'll also keep tabs when prices dip below their 50/200-day moving averages.
Free stock trading swept brokerages last year, so I now have that access. I'll generally leave on reinvestment for my core holdings and/or when I can lower my cost basis on others.
In any event, I have conditional formatting on my spreadsheet to highlight cells 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 have reinvestment turned on at the moment for everything except for PFFD and HYLB, with both of them trading above par. I found myself turning it off for specific companies, which led me to ask myself why I owned it. In those situations, I've sold the shares.
I've been able to max out my plan for the past several years, and I hope to do so again in 2021. I receive a "true-up" contribution in March for fully funding my plan before the end of the prior year. My understanding is not everyone has this, so check your circumstances if you fully fund a retirement account with an employer match before the end of the calendar year.
Here's my actual portfolio with a few of my data points highlighted.
|Name||Ticker||% of Portfolio||CCC Status||Income|
|Global X US Super Dividend||(DIV)||1.68%||None||$671|
|Cohen&Steers Opportunity CEF||(FOF)||2.94%||None||$1,039|
|X-trackers High Yield Corp Bond ETF||(HYLB)||2.44%||None||$650|
|iShares International Select Dividend ETF||(IDV)||3.40%||None||$915|
|Global X MLP ETF||(MLPA)||1.44%||None||$146|
|Global X U.S. Preferred ETF||(PFFD)||1.57%||None||$388|
|iShares mREIT ETF||(REM)||1.92%||None||$950|
|Schwab US Dividend ETF||(SCHD)||7.56%||None||$729|
|Global X MSCI SuperDividend Emerging||(SDEM)||2.17%||None||$710|
|Global X SuperDividend® ETF||(SDIV)||2.67%||None||$1,434|
|Simon Property Group||(SPG)||1.79%||None||$367|
|SPDR S&P High Dividend||(SPYD)||8.79%||None||$1,761|
|Global X SuperDividend REIT||(SRET)||1.17%||None||$656|
|T. Rowe Price||(TROW)||1.72%||Champion||$161|
Here are the values behind the "CCC Status" category:
- Champion/Aristocrat: 25+ years
- Contender: 10-24 years
- Challenger: 5+ years
- King: 50+ years
I use the table below to keep tabs on the dividend safety score from Simply Safe Dividends and how that meshes with the S&P credit rating. I've sorted the table by the safety score for individual companies only.
|Name||S&P Credit Rating||SSD Safety Score|
|T. Rowe Price||-||94|
|Simon Property Group||A||50|
This cut of data has led to a few insights and actionable items:
- I try to bundle my riskier companies into ETFs than individual exposure.
- I mostly own safe (60+ score) companies.
- Out of dividend safety, dividend growth, and current yield, you can pick any two.
- Disney has no safety score because of dividend suspension, though it will return.
Here's my updated performance of my holdings versus their benchmark since I've first owned shares. Results are sorted against the benchmark, though actual results may not align perfectly with my own results due to subsequent purchases. I've been able to see whether I'm better off rolling money into a benchmark ETF. I've made actionable portfolio moves based on this data, generally selling underperforming holdings. Right now, SPG and TRV are my big laggards.
|Ticker||Owned Since||Benchmark||Versus Benchmark||Versus S&P|
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 available on the web, MS Excel, or Google Sheets.
The next column allows flexibility to define what my benchmark can be. REITs, for example, compare against VNQ. Short of that, I generally compare everything to either SCHD or SPYD, depending on the yield/growth profile.
Versus S&P: This is a measure of the alpha generated (or not) versus the S&P 500 as a benchmark. I calculate using the stock return calculator here, and it uses the "Owned Since" column as the starting date. The results are not exact, 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. Data is provided by the stock return calculator (there is also API access available for use in spreadsheets) that I built.
Here are high-level aggregate statistics for my portfolio. After peaking over 6% in March 2020, my portfolio yield has steadily declined with the rise in asset prices. The yield sits well under 4%, and I have a projected income of $15,245 for the year.
|YOC (Divi Companies)||6.59%|
|Yield (Divi Companies)||3.79%|
|Yield w/Cash Drag||3.31%|
Projected Income - The sum of all known dividends for all holdings
Cash Ratio - Percentage of cash in the portfolio
Total Value - Self-explanatory
For this 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)). The percent is my yield based on what I put in. The measure 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). The percent 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.
I use the correlation matrix from Portfolio Analyzer. It's a table mapping out how one asset trades with another from a relation of -1 to 1. -1 means they move perfectly opposite 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've learned first-hand that all of this goes out the window during panics, as everything gets sold off indiscriminately. Bonds and preferred shares offered very little ballast.
- None this month
Global X Data Center REITs & Digital Infrastructure ETF (VPN)
VPN is a thematic ETF focusing on data center REITs and digital infrastructure (think cell tower companies). It's a high-growth area and provides a great basket approach rather than bloating up my portfolio with more individual holdings. To be expected, the current yield is low but should grow quickly as the companies in this space have been experiencing strong dividend growth.
For my portfolio, this gives me a nice cross-section of growth and dividend growth. My portfolio is also a bit light on REIT exposure in general, so this helps bolster it from that angle as well.
Here are the top 10 holdings for reference:
WisdomTree Cloud Computing Fund (WCLD)
The WisdomTree Cloud Computing Fund is another high-growth ETF focusing on the cloud computing space. This article by Lukas Wolgram was particularly compelling because I was considering the Global X fund (CLOU) as well. At a glance, WCLD offers a more diversified basket (58 holdings to 38) while also delivering stronger returns.
Returns in this area will be especially volatile, but much like the data center growth story, cloud computing is the future and an area that will continue to see strong growth. My own personal career is also hitched to this bandwagon.
Charts and Graphs
This chart covers a rolling three-month average of my dividend income. The average view smooths out monthly variations. What's been interesting is how well the data has fit the trendline over time.
With the large rebound in March, my average is around $1,200 per month.
Over the past three years, I've been compounding at about 2.2% per month. Using the Rule of 72, I can expect to double my income about every 33 months. From today, that puts me at an average of $2,000 per month around April of 2023. 33 months from now is about October of 2023, for when I might realistically see a doubling. I'll be excited to see how well this continues to track.
As the years go by, the personal bests continue. This March set my best month, eclipsing the two $1,800+ months I had last year.
March 2021 is on the left, December 2020 on the right. The increases in names like BlackRock, Corning, Home Depot, and T. Rowe Price were organic yearly dividend increases. I did get a boost from Starbucks and Nike paying out in March versus February, but that only accounts for about a $55 boost. The ETF payouts will vary; my monthly ETF basket was down some, though IDV had a much larger payout than in December.
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.
AAPL, SPYD, and SCHD battle monthly to be my largest holding. SPYD has held the title for a few months since rallying at the end of 2020.
SPYD is also my top income provider, then SDIV, and finally, a consortium of REM, MO, FOF, and IDV.
After a lackluster first two months, March came out with a bang. The results were up 15% year over year.
With the first quarter in the books, I can step back and smooth out the monthly variances. The net sum is actually being down slightly from last year. In the February/March 2020 timeframe, I had started spreading out some bets to high-yield companies which turned out to be the perfectly wrong thing to do. For example, I bought two hotel REITs right as COVID was getting started, oops.
Besides that, I removed sizable positions in AT&T and Tanger Outlets in 2020. Those had given me quite a bit of income, making comparables harder this time around. A few dividend cuts and suspensions from Disney and Simon Property Group made it harder to really set a new quarterly record.
With my projected income view, I improved a bit this month and moved closer to my $17,000 goal for the year. I still have quite a bit of cash on the sidelines that needs a home.
My target portfolio is how I've aimed to split money across different asset classes. The classifications can be subjective, as I'll show later.
- "Dividend Growth" comprises both my individual dividend growing holdings as well as ETFs.
- "Fixed Income" contains my PFFD and HYLB allocations.
- "Growth" has my Amazon, Alphabet, Berkshire, VPN, and WCLD holdings
- "High Yield" has mostly the Global X income ETFs and FOF (the fund of funds).
This chart shows the income provided by different sources. ETFs provide over 55% of my income. The rest is allocated over CEFs (FOF), bonds, preferred shares, and finally across common equity sectors.
31% of my investment dollars are invested in ETFs. Because I bundle up my high-yield holdings, I receive over 55% of my income from ETFs. Additionally, my dividend growth picks tend to yield a lot less.
Champion, Contender, Challenger View
I categorize my individual picks based on their dividend growth history.
- Kings 50+
- Champions 25+
- Contenders 10+
- Challengers 5+
I use this to help keep me focused on quality, and while it has been beneficial, it is not entirely predictive. My only king at the moment is Altria, and I mostly have contenders.
This field on my spreadsheet is an automated pull from my API. I have a "King" status for those with streaks over 50 years. I want to note that the Abbotts per the CCC list are not Champions, though, by legacy S&P rules, they are both Dividend Aristocrats.
Things Coming Up / Action Items
Based on my earlier analysis, I can add some growth as it is the most underweight category. Here are some possible ideas:
- iShares Nasdaq Biotech ETF (IBB)
- Global X Thematic ETFs (GNOM, BOTZ)
- Invesco QQQ ETF (QQQ)
- Adding to WCLD
I'm expecting Travelers and Apple to announce their annual dividend increase in April. I feel like I need a hit from Travelers as they've been one of my poorer performers. I'm also reviewing Berkshire Hathaway, categorized as a growth company; they've been lagging several benchmarks as well.
In March, I received $2,114 in dividends, 15% more than 2020. I received $3,615 in the first quarter, flat year over year. I added two new positions this month, VPN and WCLD, bolstering thematic growth. Though I didn't have any dividend increases this month, I'm expecting two in April.
My projected income moved up to $15,245, up about 3% from this time last year. Account balances continue to push higher, though that has made it much harder to find untapped areas for reasonably valued quality opportunities.
As always, thanks for taking the time to read this!
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This article was written by
Analyst’s Disclosure: I am/we are long AAPL, ABBV, ABT, AMZN, BLK, BRK.B, DIS, DIV, FOF, GLW, GOOG, HD, HYLB, IDV, JPM, MA, MDT, MLPA, MO, MSFT, NKE, O, PFFD, PRU, REM, SBUX, SCHD, SDEM, SDIV, SPG, SPYD, SRET, TROW, TRV, V, VPN, WCLD. 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.