Dividend Harvesting Week 39 Update, $3,900 Allocated, $258.50 In Annual Dividends Yielding 6.74% With 55 Positions

Summary

• After 39 weeks and $3,900, the Dividend Harvesting Portfolio is generating $258.50 in estimated annual income and $21.54 in monthly estimated income.
• In week 39, I added to Algonquin Power & Utilities Corp (AQN), Goldman Sachs BDC (GSBD), Kraft Heinz Company (KHC), Kinder Morgan (KMI), and Owl Rock Capital Corporation (ORCC).
• I also added the Liberty All-Star Equity Fund (USA) to the Dividend Harvesting portfolio.
• The Dividend Harvesting Portfolio is now generating 50 weeks of dividend income from 404 annual dividends with an estimated 43 additional dividends generating $21.40 in income.

PM Images/DigitalVision via Getty Images

Black Friday wasn't just the traditional after Thanksgiving sale on retail, the markets sold off as the Dow slid -905.04, while the S&P 500 closed down -106.84, and the Nasdaq fell -353.57. Luckily I waited until the end of the week to utilize my weekly allocation, and I made 6 purchases. I added to my positions in Algonquin Power & Utilities Corp (AQN), Goldman Sachs BDC (GSBD), Kraft Heinz Company (KHC), Kinder Morgan (KMI), and Owl Rock Capital Corporation (ORCC). I also added the Liberty All-Star Equity Fund (USA) to the Dividend Harvesting portfolio.

Last week was a bloodbath in the markets, growth companies got crushed, and black Friday was nothing but a sea of red. The World Health Organization labeled the new COVID variant OMICRON a "variant of concern." Over the weekend, Moderna (MRNA) indicated that there is a possibility that OMICRON could elude current vaccines and believes that they could have a reformulated vaccine by early 2022. The news of a new variant certainly impacted the markets, and I wouldn't be surprised if the selloff continues. While many were speculating about a year-end rally, I am cautious as a new variant is emerging and tax loss harvesting season is upon us.

Overall, the Dividend Harvesting portfolio is still in the black, and it's gone 39 weeks straight, never seeing a red week. The Dividend Harvesting portfolio is currently generating $258.50 in annual dividend income with a monthly average of $21.54, and the portfolio's forward yield is 6.74%. Some may consider 55 positions too many, but I am doing this on purpose to build a diversified income-producing portfolio that can withstand market turbulence while generating dividend income around the clock.

In this specific portfolio, I am not concerned with capital appreciation. The objective is to invest each week into dividend-producing positions and build a passive income portfolio over time. Every dividend is reinvested to utilize the powers of compounding. I am not suggesting that this is the best way to invest or that it should be your only investment strategy. Some investors love dividends and building passive income as a portion of their investment strategy. This series takes readers through an ongoing journey to generating passive income over time. This portfolio is part of the income-producing side of my overall investment mix. The Dividend Harvesting portfolio is being specifically constructed to generate passive income through a large combination of positions to create a wide range of diversification.

The idea is that when I retire in 30 years, I will have passive income being generated to offset the loss of income from retiring before drawing down on my retirement account. Prior to any compounding or dividend increases, by investing $100 a week for 30 years, you would have $156,000 of capital working to generate income. At a 5% dividend rate, this would generate $7,800 annually. By actively managing this portfolio and reinvesting every dividend, there is no reason that number can't exceed $12,000 in annual income in retirement, in addition to social security, drawing down on retirement accounts through the required minimum distribution, and any other investments someone may have. If you are interested in generating passive income, please continue to read on, but if you are just interested in capital appreciation, one of my other articles about indexing or growth companies may be more appealing.

(Source: Steven Fiorillo)

All of my new spreadsheets and portfolio trackers will be available through the Barbell Capital Marketplace Service when it launches on Seeking Alpha in December. There have been several updates as Google Sheets is more user-friendly than Excel for certain aspects of creating these tools. In the new tracker, I have coded many aspects to automatically update from Google Finance, so everything is updated on a 15-minute delay from the changes in stock prices to dividends generated.

A look inside the Dividend Harvesting portfolio

After 39 weeks of investing $100 per week, here is an overview of the full portfolio sector allocations:

Industry	Investment	Portfolio Total	% of Portfolio
REIT	$625.50	$3,932.10	15.91%
ETFs	$545.02	$3,932.10	13.86%
Oil, Gas & Consumable Fuels	$450.16	$3,932.10	11.45%
Closed End Funds	$514.28	$3,932.10	13.08%
Consumer Staples	$413.00	$3,932.10	10.50%
Communication Services	$331.18	$3,932.10	8.42%
Utility	$246.94	$3,932.10	6.28%
Technology	$187.87	$3,932.10	4.78%
Pharmaceuticals	$173.04	$3,932.10	4.40%
BDC	$183.08	$3,932.10	4.66%
Independent Power & Renewable Electricity Producers	$116.65	$3,932.10	2.97%
Financials	$92.67	$3,932.10	2.36%
ETN	$39.62	$3,932.10	1.01%
Cash	$13.11	$3,932.10	0.33%

Click to enlarge

(Source: Steven Fiorillo)

Since the inception of this portfolio 39 weeks ago, I have generated $90.02 from 177 individual dividends. Last week wasn't one of the weeks without dividend income being generated, so I am going to check my transactions in a few days and see what gets posted. This section may get updated after the article posts as there could be a lag with dividends being posted due to the holiday. For the remainder of 2021, I have an estimated 43 additional dividends generating $21.40 in income. Last week I had an estimated 46 dividends being paid for the remainder of 2021 so my hunch seems to be correct and I will update this section once my transactions update in my account.

Below is the new dividend table I created to illustrate how the Dividend Harvesting portfolio's annual dividend income has increased week by week. Since the close of week 1 my annual dividend income has increased by $251.06 (3,374%). Over the past ten weeks, my average weekly dividend increase has been 3.03%. This statistic will be updated every week as it shows exactly how my annual dividend income is growing and can paint the picture of what will happen as I continue to allocate capital each week to this portfolio.

(Source: Steven Fiorillo)

As each dividend is reinvested, the powers of compounding interest enhance the snowball effect after each dividend is paid. Regardless of how large or small the dividend is, reinvesting the dividends is a powerful tool that can produce astonishing results over time. 38 weeks seem like a long time, but they have gone by quickly. 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 39 weeks of allocating $100, the Dividend Harvesting portfolio is now generating an estimated $258.50 in annual dividend income with a monthly average of $21.54.

• Estimated Annual Dividend Income
  • $7.44 to $258.50, an increase of $251.06 or 3,374.46%

• Estimated Monthly Dividend Income
  • $0.62 to $21.54, an increase of $20.92 or 3,374.19%

• Annual Dividends Generated
  • 12 to 404, an increase of 392 dividends or 3,266.67%

• Weekly Dividends
  • 9 weeks to 50

(Source: TD)

The amount of individual dividends being produced is now 404 on an annual basis, and I still haven't filled the two weeks without dividend income. In May, I have 42 positions paying an estimated $30.84 in dividend income, and in August, 44 positions paying $28.98. I am looking forward to the progression in weekly dividends, and dividend income as this portfolio is generating a never-ending stream of them. At this point, I plan on continuing this until I retire. This will become one stream of income in addition to my other passive income investments, and I am looking forward to it.

(Source: Steven Fiorillo)

Industry and account composition changes

The combination of adding USA and increasing my position in five of my current holdings in addition to market fluctuations have helped even out my sector weighting a bit further. REITs have come down significantly, and while I want to add to this section of the portfolio, I will try and hold off until 2022. My overall long-term goal is to make sure none of these sectors exceed 20% of the portfolio.

Industry	Week 38	Week 39	Change + or -
REIT	16.47%	15.91%	-0.56%
ETFs	14.23%	13.86%	-0.37%
Oil, Gas & Consumable Fuels	11.29%	11.45%	0.16%
Closed End Funds	12.84%	13.08%	0.24%
Consumer Staples	9.90%	10.50%	0.60%
Communication Services	8.67%	8.42%	-0.25%
Utility	6.11%	6.28%	0.17%
Technology	4.85%	4.78%	-0.07%
Pharmaceuticals	4.47%	4.40%	-0.07%
BDC	3.90%	4.66%	0.76%
Independent Power & Renewable Electricity Producers	3.11%	2.97%	-0.14%
Financials	2.46%	2.36%	-0.10%
ETN	1.04%	1.01%	-0.03%
Cash	0.91%	0.33	32.09%

Click to enlarge

(Source: Steven Fiorillo)

AT&T (T) is still the only position that exceeds 5% in the Dividend Harvesting portfolio. I have been trying to get all of my positions under the 5% mark by not allocating further capital to these positions. I put this rule into place because I don't want to have a large dependency on any individual company. At one point, T was approaching 10% after the initial few months of the portfolio, and it just represented too much of the portfolio. I am building this portfolio to withstand turbulence from market fluctuations and from individual breakdowns. Between a continuous flow of dividends and wide diversification, I believe this portfolio will navigate turbulence in the markets quite well.

(Source: Steven Fiorillo)

New shares being generated annually through dividends

T has moved to the 80-89.99% category, and there are three other positions that are generating over 50% of their share price in annual dividends. Eventually, I want each position to generate 1 share annually from reinvesting their dividends. In week 39, I allocated most of the weekly capital to increasing current positions. Going forward, excluding reader suggestion weeks, I plan to add to at least 1 of my current positions.

(Source: Steven Fiorillo)

Week 39 additions to the portfolio

Friday was ugly, and I took the opportunity to allocate the majority of my weekly allocation to current positions. I added 1 share to KMI, KHC, ORCC, GSBD, and AQN. I plan on writing a dedicated article on KMI in the near future, but if you want to read a previous article I wrote on them, you can find it here. I think the sector in general is undervalued, and KMI is in a great position as its infrastructure is almost irreplaceable. We need fossil fuels, and we need to transport them. KMI is one of the largest energy infrastructure companies in North America, with roughly 83,000 miles of pipelines and 144 terminals. 40% of the natural gas consumed in the United States is transported through KMI's pipeline network. I also wrote a dedicated article on KHC, which can be read here. KHC is growing its revenue and net income again while its dividend has a forward yield of 4.59%. KHC diversified my portfolio and gave me exposure to the packaged food industry. I added to AQN, GSBD, and ORCC as these positions were red, so I took the opportunity to dollar cost average.

I also added the USA in week 39. This is a closed-end fund from ALPS Advisors, which seeks to provide above-average long-term investment performance. USA has $1.82 billion in assets. USA trades at a 1.09% premium to its NAV and is up 31.83% this year. In the past three years, USA has had an annualized return of roughly 25.21%. USA pays a quarterly distribution which has a current yield of 10.10%. USA's top holdings include PayPal Holdings (PYPL), Amazon (AMZN), Meta Platforms (FB), Alphabet (GOOGL), Visa (V), and Microsoft (MSFT). This is an interesting fund that can provide both capital appreciation and large distributions.

Week 40 gameplan - Reader Suggestion week

This will be the 4th reader suggestion week, and there have been so many great suggestions over the previous weeks. Some of the ones I am highly considering are:

• Franchise Group (FRG)
• Nasdaq 100 Covered Call & Growth ETF (QYLG)
• Nationwide Risk-Managed Income ETF (NUSI)
• ZIM Integrated Shipping Services (ZIM)
• Walgreens Boots Alliance (WBA)

I am not sure which direction I am going. This could change based on new suggestions that come in this week. I plan on doing a bunch of research as I am not as familiar with some of the suggestions, but these are the top ones I am considering.

Conclusion

Thank you to everyone who continues to read this series. Creating a passive income fund isn't an investment approach that everyone believes in, but it is one of my investment cornerstones. I have a comprehensive investment approach where I invest in growth companies, value companies, and dividend companies/funds. I also utilize an indexing approach with funds for my retirement accounts. Income generation is just one aspect that I focus on when planning for the future. The passive income I am generating will act as an additional income in retirement. I look at this as a Barbell approach because I utilize several aspects of investing in my overall approach.

Seeking Alpha Marketplace

I will be launching a subscription service called Barbell Capital on the Seeking Alpha Marketplace. Barbell Capital will provide exclusive research, model portfolios, investment tools, Q&A sessions, watchlists, and additional features for its members. I will also have a live portfolio dedicated to generating capital from trading, selling puts and selling covered calls. The profits will be allocated to future capital appreciating investments and investing in dividend investments to generate income while we sleep.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of AQN, GSBD, KHC, ORCC, KMI, USA, AMZN, FB 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.