My International Portfolio: Expanding The Dividend And Risk-On

Summary

• Your main street neighbour investor in his early 30s sharing his investment journey pursuing a dividend growth strategy with a twist given my age and risk profile.
• Expanding my forward dividends significantly through expansion of existing holdings as well as new additions.
• The portfolio is just shy of $170,000 at this point striving to add as much as I can to ensure time in the market as opposed to timing the market.
• Still learning as an investor, I elaborate on that here.

BraunS/E+ via Getty Images

Disclosure

Within this article, the company Novo Nordisk A/S (NVO) will be mentioned. For the reader, I'd like to disclose that I'm an employee of the company. The nature of my position is an office job that does not concern sales.

Where Are We At?

I became a dividend growth investor, as I deemed it the logical choice given my personality and belief that instead of being over-reliant on capital appreciation I would rather strive towards increasing the passive income stream, allowing me to either reinvest it along the road towards financial freedom or funnel it into activities sweetening life. Studying books of famous investors within the discipline also lead me to appreciate the principles underlining this methodology as opposed to what I perceived to be a bit more of a gamble, relying solely on capital appreciation from stocks that could exhibit strong volatility - an element I've later added to my portfolio. At my very early days as an investor, I also suffered from an inclination to sell without proper reason if a position moved in the wrong direction, but it calmed me knowing the stream of dividends would ensure I got rewarded for my risk along the way. That isn't a problem today, but it's something I'm sure those new to investing can recognise.

Being a disciplined and structured individual, I linked with the idea that a dividend-paying corporation will have to maintain discipline to keep rewarding its shareholders, avoiding splurging on empire building and non-value-adding large-scale acquisitions or otherwise.

We are all undergoing lifelong investment journeys, where we learn and adjust along the route. As such, my own principles for investment will not be considered universal nor perfect, but I don't expect them to either. Summarising, it boils down to the following concepts, from which I deviate at my own discretion.

• Mature dividend payers, meaning those with medium to high payout ratios and a long track record of dividend payouts, must trade with a yield of 2.5% or higher when a position is initiated.
• Payout ratio should be below 70% when measured on a free cash flow basis, high yielders being the exception.
• Growth is added to the portfolio when I consider it a reasonable price, striving to reach 15-20% of my portfolio. You can see my portfolio sector allocation for what I label 'growth'.
• Maintaining a mix of mature dividend payers and companies with low yields but great potential in terms of future dividends.
• Striving to add minimum $6000 to the portfolio annually which is a stretch target for my financial abilities in a long-term scale.

These are my guiding stars when I consider an investment opportunity, but still being in my early 30s I have plenty of opportunities to develop and add on to these as I move up the ranks of life eventually, hopefully, reaching the point where I may retire on my own time as opposed to the mandatory 70-year-old retirement age for someone my age bracket in the country where I live. Coming closer to that date, I want work to be a choice and not an inevitability.

I don't have a specific goal in mind, in terms of reaching $1 million, $1.5 million or otherwise. I find that life will be much too unpredictable as I'll also be building a family and who knows if I can maintain the self-described pace above or if I at one point need to check-out of the 9 to 5 to prioritise otherwise. However, if I indeed did add $6000 to the portfolio annually and it appreciated 7% flat annually, I'd be holding several millions by the time in my mid-60s, not that it's something I speculate in whatsoever.

Being the first one in my family who completed a university education, we didn't discuss economics and investing growing up so my main goal is not to reach some fixed number that can allow me to retire sooner rather than later, but that I pass on the gift of investing to my children so that they may obtain even more flexibility in life than what I strive to create for myself.

Maybe one day, I'll even get to reflect upon that journey here, with this community. Time will tell.

Enough About Me, Let's Get To The Numbers

At my most recent update back in July, my portfolio had reached the following numbers.

• Total invested amount: $108.054
• Total portfolio value: $154.562
• Forward expected annual dividend: $3.791, up from $3.551 three months prior

The same metrics today, show the following

• Total invested amount: $123.485
• Total portfolio value: $167.091
• Forward expected annual dividend: $4.760, up from $3.791 four months prior

What sticks out here is the forward expected dividend, but there is a good explanation. First of all, that I've added in some of my high yielders, including two new positions, secondly that some of my international holdings have reinstated their dividends which were otherwise cut entirely or set a very low level during Covid-19.

Just to pick a few examples, these are some of the dividend hikes recently communicated and which represent changes since my most recent portfolio update.

• Royal Dutch Shell (RDS.A) (RDS.B) increased its dividend 38%
• Visa (V) increased its dividend 17%
• Texas Instruments (TXN) increased its dividend by 13%
• AbbVie (ABBV) increased its dividend by 8.5%
• Lockheed Martin (LMT) increased its dividend by 8%
• Royal Bank Of Canada (RY) increased its dividend by 11%
• NIKE (NKE) increased its dividend by 10.9%

It goes without saying, that as a shareholder I'm very pleased with these news, though it should be said that Shell's hike came on the back of a massive dividend cut during the onset of the Covid-19 pandemic in 2020, and that the company doesn't follow the same proud tradition of consistent hikes as the other companies, something I'm perfectly okay with, though I appreciate the consistency of the other companies who aren't subject to the same volatility in their business.

The detailed reader will also have noticed how my invested amount has expanded significantly, and way beyond my expected long-term average. I've been trying to reduce my cash percentage, something I touched upon in my most recent portfolio article, as I've previously had a tendency to maintain too significant a cash position somewhere close to 15% compared to total portfolio value. Simply put, I'm a conservative investor by heart who prefers to have ample cash should my refrigerator stop working ten times in the same month - foolish, I know. Having recognised and dealt with that tendency, I've therefore worked towards reducing the cash position significantly to the point where I only have a quarter's worth of savings in my account meaning I had to push in more capital than what I'm able to save on a monthly basis, with that bit coming on top. As with anything else investing, it is a matter of taste and preferences as there is no exact formula for how to do it, otherwise, there wouldn't be a market as we would all be loaded into the exact same stocks. I am, however, a strong believer in the famous words uttered by Peter Lynch, that "time in the market beats timing the market". He went on to give the following example, showcasing why it's a worthless exercise.

"I've gone through this before but let me give you another example based on actual stock-market performance from 1965 through 1995, a period with good years and bad. Imagine three investors, each of whom puts $1,000 into stocks annually over these three decades.

Investor 1, who is very unlucky, somehow manages to buy stocks on the most expensive day of each year. Investor 2, who is very lucky, buys stocks on the cheapest day of each year. Investor 3 has a system: She always buys her stocks on January 1, no matter what.

You'd think that Investor 2, having an uncanny knack for timing the market, would end up much richer than Investor 1, the unluckiest person on Wall Street, and would also outperform Investor 3.

But over 30 years, the returns are surprisingly similar. Investor 1 makes 10.6% annually; Investor 2, 11.7%; and Investor 3, 11%. Even I am amazed that perfect timing year after year is worth only 1.1% more than horrible timing year after year."

Peter Lynch

Having said that, here is the whole portfolio as it stands on December 2nd. My portfolio didn't have a particularly strong quarter as opposed to the previous one. However, a few did sprint through the quarter including the following names.

• Novo Nordisk (NVO) appreciating from $86.9 to $107.3
• Royal Dutch Shell appreciating from $38.9 to $47.3
• Broadcom (AVGO) appreciating from $469.4 to $554.8

Some of the largest depreciations belonged to the following companies.

• Lockheed Martin depreciating from $378.6 to $343.9 as LMT disappointed on both FY guidance and guidance for 2022, something I labelled housecleaning in my recent article covering General Dynamics (GD)
• Alibaba (BABA) depreciating from $200.7 to $122. I thought about adding to my position but decided not to, given the continuous regulatory risk. I'm in between on how to handle this development. I thought about cancelling some of my gains tax-wise for this year by offloading the position and initiating a new one as I remain bullish the company long-term.
• BHP (BHP) depreciating from $73.3 to $55.3 I've covered this company several times, and I'm bullish the industry and especially BHP given its asset composition and very low cost per commodity versus the strong raw material prices. It has also led to a massive special dividend during the most recent quarter, being one of the reasons why my forward dividend has spiked (assuming it will be maintained next year). There is no certainty, and raw material prices fluctuate, but I believe BHP will be making lots of money. I made use of the dip to add to my position on October 22nd.

Authors Own Creation

As a result of the recent additions and movements within my portfolio, my current division looks like the following. I don't take these targets too literal, but I do glance over them whenever reviewing cases to decide where I could place my cash. I exited a position in finance during this quarter, meaning I'd be interested to bolster this sector again. Not wanting to muddy the picture too much, I've labelled my recent growth-orientated additions exactly that, growth, as opposed to having a whole range of sub-sectors in the overview. It serves the specific purpose of reminding me exactly how much of my portfolio I've put into the high-risk bucket.

Authors Own Creation

Unfortunately, I haven't logged my actual dividends for as long as the portfolio has lasted, but I did begin as of 2020, and I've decided to share how the graphs develop over time, so here it is.

Authors Own Creation

It is rather lumpy and actually pinpoints how my portfolio has developed in the recent year but given that my contributions to the portfolio will slow down at this point, I expect it to even out as time goes. For those wondering, the reason the September dividend spikes compared to 2020 rests with the addition of BHP which contributed $210 in dividend for September while already having contributed with $106 back in March. Similarly, my March dividends received for 2021 are lower than the year prior because of one company shifting their dividend to April instead of March.

Portfolio Update

Apologies for taking so long, but I finally arrived at the point concerning the changes made to my portfolio.

Positions Sold

I decided to offload my position within Danske Bank A/S (OTCPK:DNKEY), a consumer & retail bank covering the Scandinavian economies, but who got caught up in a massive money-laundering scandal. Upon having traded significantly lower, I initiated a position at around price to book of 0.6, providing what I would label a significant margin of safety. Upon having held the stock for more than two years, however, the unpleasant headlines kept rolling with uncertainty concerning when the outlook might improve. Quite frankly, I ran out of patience and closed my position with a small plus if I include the dividends received. I wrote an article covering the company, and even though it remains cheap based on the financials, it's still in a slump trading sideways as has been the case since briefly after the news broke.

Positions Added - Existing Portfolio Companies

During the recent quarter, I deemed several possibilities presented themselves allowing for me to add to both high yielders and one of my largest winners. I added another 40 shares of British American Tobacco p.l.c. (BTI) having reached a total of $5300 which constitutes a full position for my portfolio. The addition also lowered my average per share slightly. Tobacco is out of favour, and I fully understand so, but BTI is trading at value territory as far as I see it. My position is currently down by 12% not including dividends received. As I build my portfolio, I could decide to add to this position even though it is already at a full position.

I also added to my position within BHP Group (BHP), in similar fashion by expanding my invested capital by roughly 50% to reach $5011, which again is a full position. I've written several articles concerning BHP, with my latest back on September 12th, arguing why I see BHP as an industry winner within mining, as it plays on the economic and political tailwinds.

I utilised the pullback within Fiverr International (FVRR) to expand my position on August 5th for $175.2 a share with the company currently trading at $124.7 per share. I find this company to hold great potential, only capturing a fraction of its potential, as I also laid out in this article. The sell-off has been particularly strong in recent week in conjunction with the wide sell-off in high-growth companies.

Lastly, I also made use of the recent pullback in Visa (V) to add to my position. Visa was already in contention for being my second largest position, with the recent addition putting it firmly ahead of NIKE who is now the third-largest. I see Visa as an extremely strong compounder over the decades to come, and its current multiples are well below the long-term averages of the last decades suggesting to me it will form a suitable entry point. Not to suggest tunnel vision or groupthink, but if I look at the most recently published articles concerning Visa, there seems to be agreement that the current fears of "buy now, pay later", crypto and Amazon's change of policy in UK regarding Visa Debit cards, are overblown. Visa, and Mastercard (MA) for that sake, have incredibly strong margins and returns on capital and while that might have to come down a bit over time as the space is increasingly competitive, it doesn't take away the fact that they are well situated in a time where we are going towards a more and more cashless society. I've discussed the industry dynamics in a recent article on Mastercard.

New Holdings

Entirely new holdings, I added the following companies

• Tyson Foods, Inc. (TSN) on July 26th for $71.52 a share. A direct consequence of off-loading my Coca-Cola (KO) shares earlier in 2021. I wrote two pieces on Tyson Foods both focusing on the consumer staples space including where the strongest potential for strong dividend growth remained. Tyson Foods was a clear winner in my book, but too pricey at the time causing me to stay patient until the stock retraced itself, eventually bottoming at $70.14. The stock is currently trading at around $82 per share and I'm monitoring it for the possibility of expanding my position.
• Pinterest, Inc. (PINS) on July 30th for 59.9 per share. As I've elaborated on earlier, I'm adding risk to my portfolio given my extremely long time horizon. The company is currently trading at $35.8 per share so I'm deep in the red. I don't have many available funds at this point in time, but this is definitely still on my watch list, and I elaborated on why I'm bullish the company in this article.
• Roblox Corporation (RBLX) on August 3rd for $77.25 a share with the company currently trading at $113.8 per share. The stock surged massively as a result of its recent growth outlook.
• Match Group, Inc. (MTCH) On August 20th for $131.4 a share, currently trading at $126, haven also sold off recently. The owner of world-famous Tinder, but also a strong portfolio of other offerings playing on a trend of digital relations. Again, I've written an article where I've been terribly wrong so far, but I'm notoriously long in my investments, so I'll allow my positions years to reveal their true potential.
• AT&T Inc (T) on November 22nd for $24.7 a share, currently trading at $23.5. Much can and has been said about T and I've been monitoring it for a long while. I haven't published an article myself, but I'll link to the most recent by fellow contributor Steven Fiorillo who shares the same perspective as myself, which is, that T is a valuation paradox. Quite simply, that we are dealing with a company that is creating a very strong FCF and sitting on top of a media library which is underappreciated. T has a history book thick with poor management decisions, but there comes a point where valuations start to become absurd as sentiment reigns supreme and forces the market cap to its knees. The company does have a pile of debt and isn't exactly the growth story of the coming decade, but there is still a lot of good to be said about this company.

There we have it, last time most of my recent additions were well in green, but this time around most of them are beaten and deep in the red. That is part of life as an investor, and come next portfolio update, they might be back in green, or even further into red. Only time will tell, but I'll give all of my positions years to reveal their potential.

Wrapping Up

I'd like to thank you for reading this piece. A rather lengthy one that I hope wasn't boring or irrelevant to you as the reader. I hope you can find inspiration in hearing a fellow amateur investor reflect upon his shortcomings and market ideas. I'd like to invite you to provide me with feedback in terms of what you would do in my shoes. I'm a strong believer in finding inspiration in what others contribute, and I've found great inspiration in this community throughout the years.

If there is anything else you would like for me to add to these updates or discard, please say so in the comments section and I'll consider adding or removing it for future posts.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of DDAIF, CSCO, NVO, BAYZF, NKE, V, NSRGY, MHGVY, AAPL, ABBV, TXN, WBA, ENB, RHHBY, GD, RDS.B, AVGO, MCD, RY, UGI, LYB, LMT, MO, BHP, BABA, BTI, SHOP, TTD, PINS, FVRR, ETSY, TSN, RBLX, MTCH, SEMR, 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.

Within this article, the company Novo Nordisk A/S (NVO) will be mentioned. For the reader, I'd like to disclose that I'm an employee of the company. The nature of my position is an office job that does not concern sales.