- After 31 weeks and $3,100, the Dividend Harvesting Portfolio is generating $215.44 in estimated annual income and $17.95 in monthly estimated income.
- In week 31 I added to my current positions of Starwood Property Trust, Omega Healthcare Investors, the PIMCO Corporate&Income Opportunity Fund, the Global X SuperDividend Alternatives Fund.
- The Dividend Harvesting Portfolio is now generating 50 weeks of dividend income from 368 annual dividends with another 23 positions paying an estimated $14.30 throughout October.
This article series is dedicated to everyone in the Seeking Alpha community interested in building an income-producing portfolio. Investing in equities and funds that produce dividends has been part of my overall investing strategy for some time. I have received many comments and messages during my time as a contributor to Seeking Alpha asking me specific questions about how to start a dividend portfolio, where to start, and how much capital is needed to make this strategy work for them?
There is a serious misconception about dividend investing revolving around the amount of capital someone needs to make this an effective strategy. There isn't a one-size-fits-all investing strategy, and many paths throughout the investing space can help investors reach their end goal. For some, continuously investing in an S&P 500 index fund or a total market fund will do the trick. For others, a combination of equities and funds works well.
For me, I invest in funds, individual equities, and dividend-producing investments. I started this series to illustrate how someone could start from scratch and build a dividend portfolio from the ground up by investing on a fixed budget. I am allocating $100 a week to this series and its investments. I have allocated $3,000 over 30 weeks to this specific portfolio. My positions include 10 Closed-End Funds (CEFs), 8 ETFs, 3 BDCs, 2 ETNs, and 25 individual equities.
Diversification has been one of the fundamental principles of constructing this portfolio, and I continuously read comments indicating that I have too many positions. This would be entirely too many positions for some investors as it creates a substantial amount of ongoing work to stay current on the positions. I have plenty of time to conduct the necessary ongoing research for my investments, and I am building this portfolio into a personalized dividend fund for myself. Eventually, when we experience a correction or bear market, I believe this portfolio will navigate the adversity well as it's not overweight in a specific individual equity or sector, and the dividend snowball effect will continue to amplify as the months come and go.
In week 31, I allocated my $100 to current positions. I added an additional share to Starwood Property Trust (STWD), Omega Healthcare Investors (OHI), the PIMCO Corporate&Income Opportunity Fund (PTY), the Global X SuperDividend Alternatives Fund (ALTY), and the Tekla World Healthcare Fund (THW). I wish I could add everything at once, but I need to be disciplined, and since this concept is working with a set budget, I am not going to change the mission and start adding additional capital. Southern Company (SO) almost made it as it's been selling off lately, and after reading through Intel's (INTC) numbers, it was hard not to add them in week 31.
(Source: Steven Fiorillo)
I have made this Excel file that I update each week free to download for anyone who wants a copy. If you would like a copy, please click here and go to Dividend Harvesting. Everything in the sheet is live so that you can plug in your investments, and the charts and spreadsheet will update, providing you with your own personal tracker. If anyone has any ideas for enhancements after playing around with this, please let me know, as I am happy to make improvements.
A look inside the Dividend Harvesting portfolio
After 31 weeks of investing $100 per week, below is an overview of the Dividend Harvesting portfolio's composition:
(Source: Steven Fiorillo)
Since 4/12/21, when the first dividend was collected in the Dividend Harvesting portfolio, 129 dividends have found their way into my account. So far in October, 3 positions have paid me $1.12 in income, with another 23 positions paying an estimated $14.30 throughout the month. The ongoing cycle of dividends is exciting, and after my recent additions, an estimated 86 dividends will flow into my account throughout the rest of 2021.
Some of the comments have indicated that this portfolio is a waste of time, and why am I not focusing on the winners from the portfolio instead of over diversifying? Everyone is entitled to their own opinion, and everyone's investment strategy is different. These aren't my only investments. As I indicated in the opening, I am creating this portfolio from the ground up and documenting the progress along the way, and turning it into a series on Seeking Alpha. Remember, every investor's situation is different, and there aren't many articles that illustrate building a dividend portfolio from the ground up. One of my goals is to make this series relatable to the masses and show that anyone can start investing with any budget. Even if you are not fond of dividends, the strategy of allocating a fixed amount of capital every week, month, or quarter can be replicated to index funds, growth companies, or anything that meets your investment goals. Overall I want to emphasize the importance of allocating capital to savings or investments and planning for the future.
This portfolio accomplishes my primary goal of generating a continuous income stream that increases with each addition and dividend reinvestment. There will be periods in the future when the market corrects, and this portfolio is in the red, and there have been some weeks where I thought that would occur over the last 31 weeks. This portfolio isn't about growth, it's about generating income, and more importantly, I hope it teaches the importance of saving for the future. 31 weeks have flown by, and anyone who decided to follow the premise of saving money each week regardless of how they wanted to invest it would have a nice start to their investing future. I am choosing to invest this capital in dividend investments so I can expand my passive income. After 31 weeks of allocating $100 per week, the Dividend Harvesting portfolio is now generating an estimated $215.44 in estimated annual income with an estimated monthly average of $17.95.
- Estimated Annual Dividend Income
- $7.44 to $215.44, an increase of $208 or 2,795%
- Estimated Monthly Dividend Income
- $0.62 to $17.95, an increase of $17.33 or 2,795%
- Annual Dividends Generated
- 12 to 368, an increase of 356 dividends or 2,967%
- Weekly Dividends
- 9 weeks to 50 weeks
I am still stuck on 50 weeks of dividend income, with 368 dividends flowing into my account over the year. I will eventually generate income every week, but I have no idea when that will occur. In some months, I still can't get over that; I have 35-39 dividends being generated. I can't imagine what this will look like in 10, 20, or even 30 years from now.
(Source: Steven Fiorillo)
New Goals and Rules
After going through my holdings in the Dividend Harvesting portfolio, I have come up with two goals that will turn into rules once they are met. After the first year and $5,200 is allocated, I don't want a single sector to account for more than 20% of the entire portfolio. REITs have been coming close as they make up 18.75% of the holdings within the Dividend Harvesting portfolio. 20% will be my overall benchmark of a limit not to exceed for a single sector.
After the first year, the second goal is that I don't want a single position to exceed 5% of the portfolio. Currently, AT&T (T), Altria (MO), and Exxon Mobil (XOM) all exceed 5% of the overall portfolio value. T currently represents 7.97% of the portfolio, while AGNC Investment Corp (AGNC) is equivalent to 2.6% at the tenth-largest holding. Once this is accomplished, I am going to keep the 5% rule for this portfolio going forward.
(Source: Steven Fiorillo)
New dividends being generated annually
Just as important to generating continuous dividend income is having the share count of an investment increase without adding additional capital, and there is a lot of work to be done. Outside of generating reoccurring dividend income, one of my top priority long-term goals is to have each position generate enough dividend income annually to purchase 1 additional share. Eventually, I want an additional share of each position coming in every quarter. After this occurs, the next level would be to replicate the process on a bi-annual basis, then quarterly.
In week 31, I had some movement as STWD and OHI moved into the 40-49.99% category. MO and Tekla World Healthcare Fund (THW) both moved into the 30-39.99% category as well. Going forward, one of my goals is to get more of these symbols moving right on the grid I created below. It will take some time, but eventually, I want these positions to produce an additional share annually.
(Source: Steven Fiorillo)
Week 31 additions to the Dividend Harvesting portfolio
If you have been reading this series for a while, you are probably tired of me discussing STWD. I am a fan of their CEO, Barry Sternlicht, and happen to believe STWD is one of the best REITs to invest in. STWD has been a dividend powerhouse for the past decade and hasn't missed a dividend payment. STWD operates through four segments: Commercial and Residential Lending, Infrastructure Lending, Property, and Investing and Servicing segments creating a well-rounded REIT that was able to fend off the pandemic hardships. The next REIT I invested in was OHI. Just like STWD I have been a shareholder of OHI for years and have gone through its ups and downs. Recently, OHI informed shareholders that three operators accounting for about 9% of the company's estimated contractual rent and mortgage payments in Q3 2021 have stopped making rent payments in 2021 due to the COVID-19 impact on occupancy. This is a new development as when OHI reported Q2 2021 earnings on 8/2/21, their quarterly FFO increased from $0.81 to $0.85. OHI also disclosed that in Q3, OHI collected ~98% of contractual rent and mortgage payments for the month of July, 98% for Q2, and over 99% in Q1. I believe that the rent and mortgage payments will be a short-lived obstacle, and I decided to view this as an opportunity to add to my position.
I used the remaining capital to add an additional share in PTY, ALTY, and THW. PTY recently declared a reduced dividend of $.1188 per share from $0.13, which is not what I wanted to see. PTY is still generating a forward yield of 7.7% and, over the past five years has generated significant capital appreciation to its shareholders. I am sticking with PTY and adding to my position as it dips. THW is still one of my only exposures to healthcare. THW's top holdings include UnitedHealth Group (UNH), Abbott Laboratories (ABT), AbbVie (ABBV), Johnson & Johnson (JNJ), Medtronic (MDT), and Eli Lilly (LLY), which are all companies I am interested in owning individually. By owning THW, I am getting a large yield, monthly dividends, and exposure to companies I want to own. This interesting CEF throws off a yield of 8.36%, with dividends being generated monthly. Lastly, for week 31, I added to ALTY, which is an ETF from Global X that provides exposure to a range of alternative income-generating categories, including MLPs & Infrastructure, Real Estate, Preferred Stock, Emerging Market Bonds, and Covered Calls. I like the diversification of this fund and, like many of its individual positions such as Icahn Enterprises L.P. (IEP), Enterprise Products Partners (EPD), and Duke Energy (DUK). I believe many of the companies found within ALTY will get a significant boost after an infrastructure bill is passed.
Week 32 gameplan
There is one new company I am considering, and that is a Buffett stock that has been decimated. I submitted an article to Seeking Alpha about Kraft Heinz (KHC), and after tearing through the numbers, I believe they are undervalued. I also believe KHC's dividend is secure with a forward yield of 4.34% and an increasing free cash flow position. I also recently wrote an article on Intel (INTC), and I am blown away by their numbers. INTC is a cash cow that's been growing even though its share price is lower today than it was in 2000. INTC pays a forward yield of 2.6%, and I am expecting them to continue their 7 years of dividend increases. Some of the other companies from my current positions I am considering are I want to add to Southern Company (SO), Verizon (VZ), The Coca-Cola Company (KO), and Enbridge (ENB).
I want to say thank you to everyone who continues to read and comment on the Dividend Harvesting series. I am looking forward to engaging with everyone in the comments section and gaining perspectives and ideas for new investments. It's hard to believe that 30 weeks have gone by. I am enjoying documenting this journey and look forward to the progress in the years to come. I hope that individuals see this blueprint and incorporate the practice of investing on a schedule into their savings routine. Hopefully, everyone is enjoying this series, and your goals of reaching financial independence get closer with each investment you make.
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of STWD, OHI, THW, PTY, ALTY, INTC, SO, XOM, MO, T either through stock ownership, options, or other derivatives. 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.
I am long every position in the Dividend Harvesting Portfolio. Disclaimer: I am not an investment advisor or professional. This article is my own personal opinion and is not meant to be a recommendation of the purchase or sale of stock. Investors should conduct their own research before investing to see if the companies discussed in this article fit into their portfolio parameters.
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.