- In 2015, I started publishing quarterly updates regarding my dividend growth portfolio.
- I believe that someone who writes about financial assets should share his main holdings with his readers.
- In this article, I will share my portfolio, changes in the past 3 months and stocks that are currently on my wish list.
It is time to summarize another quarter and a whole year. The fourth quarter of 2021 saw the S&P 500 finishing strong with a total return of 28%. The index has reached a new all-time high 70 times, trailing only 1995. The political turmoil of a new president, new Congress, and a new wave of Covid haven't changed the optimism of investors.
In the coming quarter, we are expected to see the Democrats trying to pass the build-back better act after the infrastructure bill was signed into law. We are also scheduled to see more political fights regarding the debt ceiling. The Federal Reserve has started to slow down its asset purchasing plan, and it is forecasted to continue to do so. The main macro risks in this quarter are Covid and the increasing inflation which may accelerate interest rate hikes.
In Q4 my portfolio lagged the market. However, I am not focusing on the total return in this portfolio, but on the income it generates. I enjoyed several dividends increases and no dividend cuts. Therefore, my dividend income has also been growing organically. My main goal is to achieve a growing stream of dividends, giving me some more financial freedom. In Q4 2021, my dividend income grew by 5% QoQ and I am very pleased with this achievement as I allocated fewer funds to my dividend growth portfolio than I planned for initially.
I plan to keep executing my investment thesis. I will keep allocating funds to my portfolio monthly. I will invest in stocks I believe are cheap or fairly valued. I will try to achieve a higher dividend income and a high total return. I see no reason to amend my investment thesis at the moment, as it has worked for me over the past several years.
I see any sign of volatility as an opportunity that allows me to buy a future income for cheaper prices. If the market will be volatile due to a recession or any other reason, I will stick to the safest blue chips, which are usually expensive. Their dividend is usually extremely safe, and any price change is a possible opportunity. I will also try to take advantage of significant drops and buy some of the stocks that I find expensive right now. I wish you all a great quarter and a happy new year.
My dividend growth portfolio used to be more than 83% of my assets. To try to balance it, I allocated more funds to my other accounts. I want to balance it to hedge myself against possible failures in my strategy. Being overconfident in the financial world can lead to devastating results. Therefore, I am making some effort to allocate my funds and make sure that my assets stay diversified.
My current goal is to make my dividend growth portfolio around 50% of my assets and to do it while I keep increasing its value and achieve a 10% dividend growth. I am a believer in diversification. In the future, I believe that when I buy a house as an investment or to live in, it will lower the percentage of the dividend growth portfolio in my assets. Right now, I am allocating mainly to the other accounts.
My dividend growth portfolio is very well-diversified and contains a collection of 76 blue-chip companies. While I am proud of my achievements as a young investor, I must stay humble and diversify my investments wisely. The more I learn about investments, the humbler I become.
I maxed my Roth IRA in 2021 and already allocated the cash to max it for 2022. I have medium-term accounts that may serve as a down payment on a house. These two measures helped me diversify my holdings. While the Roth IRA, the pension, and the dividend growth portfolio are long-term investments, I plan to keep the rest of the accounts liquid.
(Graph created by author)
Since I started setting goals, I managed to achieve most of my goals. My goals for 2021 were to achieve at least 10% of dividend growth and to diversify my investments, maximize my Roth IRA contribution, read at least twelve books, and find new employment opportunities now that I have finished school.
I managed to achieve most of them. I allocated funds, saved, and invested. I also started a new job that I love, and my investments have performed extremely well. I didn't read as much as I should, and due to Covid, I didn't travel as much as I want.
My goals for 2022 will be similar. Maximizing my Roth accounts, allocating funds, achieving 10% dividend growth, reading 12 books, and traveling more. I keep track of my goals so I can achieve them.
By setting goals, you can organize your time better. I highly recommend it to everyone. It allows you to see your progress during the year. Just set some goals that are challenging but achievable, and make sure they are quantifiable.
As my brokerage account is my largest asset, I keep allocating money there according to my optimal sector allocation. As I am still accumulating, I don't mind buying stocks from sectors I am over-allocated to. I don't want to ignore my optimal allocation. Over the past quarter, I bought stocks across several sectors.
I probably will not add to sectors that are exceeding the optimal allocation like the financial and IT sectors unless a great opportunity arises. In the coming quarter, I will probably invest more in sectors I lack exposure to. I usually write articles regarding companies that I find attractive.
I bought shares in some of them, while others are still on my radar. In Q1 I will try to add some more dividend growth companies in the consumer discretionary sector.
Energy and Materials
The following table shows the current holdings in my brokerage account. All the companies below are part of my dividend growth portfolio. Alphabet (GOOG) (GOOGL) and Facebook (FB) and Disney (DIS) don't pay dividends. However, they enjoy steady growth in their free cash flow. This metric is the basis of any dividend payment. As a long-term investor, I don't mind waiting until they are ready to share some of this wealth with their investors. Alphabet and Facebook have already started buyback programs. I hope that both will offer dividends in the years to come. Disney will hopefully reinstate the dividend soon. I kept a small portion of my Disney position as it was my first position (I don't recommend having emotions in your decision-making process, but sometimes we can't help it)
|Industry||Company||Ticker||% of Portfolio||% of Income|
|Information Technology||APPLE INC||(AAPL)||4.45%||0.76%|
|Health Care||ABBVIE INC||(ABBV)||1.13%||1.61%|
|Health Care||ABBOTT LABORATORIES||(ABT)||2.94%||1.35%|
|Consumer Staples||ARCHER-DANIELS-MIDLAND CO||(ADM)||1.41%||1.06%|
|Financials||AMERIPRISE FINL INC||(AMP)||1.26%||0.65%|
|Financials||BANK OF AMERICA CORP||(BAC)||2.23%||1.44%|
|Health Care||BECTON DICKINSON & CO||(BDX)||0.63%||0.30%|
|Financials||CITIGROUP INC COM||(C)||0.76%||0.88%|
|Health Care||CARDINAL HEALTH INC||(CAH)||1.08%||1.40%|
|Information Technology||CISCO SYSTEMS INC||(CSCO)||0.79%||0.64%|
|Health Care||CVS HEALTH CORPORATION||(CVS)||0.43%||0.31%|
|Consumer Discretionary||WALT DISNEY CO||(DIS)||0.65%||0.00%|
|REIT||DIGITAL REALTY TRUST INC||(DLR)||2.22%||1.99%|
|Utilities||DUKE ENERGY CORPORATION HOLDING COMPANY||(DUK)||0.44%||0.56%|
|Industrials||EMERSON ELECTRIC CO||(EMR)||1.94%||1.47%|
|Energy||ENTERPRISE PRODUCTS PARTNERS LP||(EPD)||1.83%||5.15%|
|Industrials||EATON CORPORATION PLC||(ETN)||1.44%||0.87%|
|Information Technology||Meta Platforms, Inc.||(FB)||1.69%||0.00%|
|Industrials||GENERAL DYNAMICS CORP||(GD)||0.87%||0.68%|
|Consumer Staples||GENERAL MILLS INC||(GIS)||1.13%||1.17%|
|Information Technology||ALPHABET INC CLASS C CAPITAL STOCK||(GOOG)||2.42%||0.00%|
|Information Technology||INTERNATIONAL BUSINESS MACHINES CORP||(IBM)||0.56%||0.94%|
|Health Care||JOHNSON & JOHNSON||(JNJ)||3.57%||3.03%|
|Financials||JPMORGAN CHASE & CO||(JPM)||1.98%||1.72%|
|Consumer Staples||KELLOGG CO||(K)||0.32%||0.40%|
|Information Technology||KYNDRYL HOLDINGS INC||(KD)||0.02%||0.00%|
|Consumer Staples||KIMBERLY-CLARK CORP||(KMB)||1.79%||1.96%|
|Energy||KINDER MORGAN INC||(KMI)||0.99%||2.32%|
|Consumer Staples||COCA-COLA COMPANY||(KO)||1.73%||1.68%|
|Industrials||LOCKHEED MARTIN CORP||(LMT)||0.30%||0.32%|
|Consumer Discretionary||LOWE'S COMPANIES||(LOW)||0.54%||0.23%|
|Consumer Discretionary||MCDONALD'S CORP||(MCD)||3.36%||2.37%|
|Health Care||MCKESSON CORP||(MCK)||0.52%||0.13%|
|Health Care||MEDTRONIC PLC COM||(MDT)||1.30%||1.08%|
|Energy||MAGELLAN MIDSTREAM PARTNERS LP UNIT REPSTG LTD PARTNER||(MMP)||0.97%||2.97%|
|Consumer Staples||ALTRIA GROUP INC||(MO)||1.19%||3.09%|
|Energy||MPLX LP COM UNIT REPSTG LTD PARTNER INT||(MPLX)||0.74%||2.42%|
|REIT||MEDICAL PROPERTIES TRUST INC||(MPW)||0.12%||0.19%|
|Information Technology||MICROSOFT CORP||(MSFT)||0.70%||0.18%|
|Industrials||MSC INDUSTRIAL DIRECT CO INC CL A||(MSM)||0.70%||0.86%|
|Utilities||NEXTERA ENERGY INC||(NEE)||0.62%||0.35%|
|Consumer Discretionary||NIKE INC CLASS B COM||(NKE)||1.39%||0.35%|
|Industrials||NORFOLK SOUTHERN CORP||(NSC)||2.36%||1.19%|
|REIT||REALTY INCOME CORP||(O)||1.49%||2.11%|
|REIT||OMEGA HEALTHCARE INVESTORS INC||(OHI)||1.48%||4.60%|
|REIT||ORION OFFICE REIT INC||(ONL)||0.04%||0.00%|
|Consumer Staples||PEPSICO INC COMMON STOCK||(PEP)||2.90%||2.46%|
|Health Care||PFIZER INC||(PFE)||0.49%||0.46%|
|Consumer Staples||PROCTER & GAMBLE CO||(PG)||2.05%||1.49%|
|Consumer Staples||PHILIP MORRIS INTERNATIONAL INC||(PM)||2.38%||4.29%|
|Financials||PRUDENTIAL FINANCIAL INC||(PRU)||2.26%||3.29%|
|Information Technology||QUALCOMM INC||(QCOM)||1.53%||0.78%|
|Industrials||RAYTHEON TECHNOLOGIES CORPORATION COMMON STOCK||(RTX)||0.72%||0.58%|
|Consumer Discretionary||STARBUCKS CORP||(SBUX)||0.98%||0.56%|
|Utilities||SOUTH JERSEY INDUSTRIES INC||(SJI)||0.33%||0.53%|
|Consumer Staples||J M SMUCKER COMPANY||(SJM)||0.57%||0.57%|
|Consumer Staples||TARGET CORP||(TGT)||2.90%||1.55%|
|Financials||T ROWE PRICE GROUP INC||(TROW)||0.82%||0.62%|
|Consumer Staples||TYSON FOODS||(TSN)||0.15%||0.11%|
|Information Technology||TEXAS INSTRUMENTS INCORPORATED||(TXN)||0.47%||0.40%|
|Industrials||UNION PACIFIC CORP||(UNP)||1.47%||0.95%|
|Financials||VISA INC CL A COMMON STOCK||(V)||1.81%||0.43%|
|Consumer Discretionary||VF CORPORATION||(VFC)||0.92%||0.86%|
|Energy||VALERO ENERGY CORP NEW||(VLO)||0.31%||0.56%|
|Health Care||VIATRIS INC||(VTRS)||0.06%||0.06%|
|Utilities||WEC ENERGY GROUP INC||(WEC)||0.81%||0.83%|
|Consumer Staples||WALMART INC COMMON STOCK||(WMT)||0.97%||0.50%|
|REIT||W P CAREY INC COM||(WPC)||1.37%||2.42%|
|Energy||EXXON MOBIL CORP||(XOM)||1.53%||3.02%|
I currently own 76 companies in my portfolio. Over the quarter, I added to existing positions. I am not worried at all about the number of positions I hold. These blue-chip companies don't need me to follow them daily. In fact, I wouldn't mind holding them even if the stock market is closed for a decade.
Acquisitions Made in Q4 2021
The fourth quarter was fantastic for most equities. Since even my technology companies are stable like Apple and Alphabet and not speculative like Tesla (TSLA) or NIO (NIO), I am not overly concerned about volatility. I bought shares in two sectors: consumer discretionary and real estate.
In the real estate sector, I bought more shares in Medical Properties Trust (MPW) which owns real estate used for hospitals. I don't expect ultra-high growth as an understatement. The shares now yield 4.74%, and I expect dividend growth of roughly 4%-5% annually in the medium term. I probably won't add to this position anymore after the price recovered.
In the consumer discretionary sector, I bought shares in Lowe's. Lowe's is a home improvement store, and with home prices on the rise, it's an interesting investment. I expect the 1.25% yield to come with a 10%-15% annual growth in distributions in the short-medium term. Nonetheless, the company is trading near its all-time high and the valuation is not that attractive anymore.
Sales Made in Q4 2021
Over the past quarter, I have not sold any stock. I sell when a company cuts its dividend, and that didn't happen in Q4 2021. When I look at the near future, I try to find dividends that are relatively in danger. Right now, I believe that the dividends in my portfolio are adequately safe. The riskiest dividends, in my opinion, are the ones paid by AT&T who announced its intention to lower the distribution and Omega Healthcare.
What Am I Looking For?
When I look at my portfolio, I see a great collection of companies. Every year, I feel more confident about some companies and less confident about others. That's why diversification is key. I am always looking for the weaker links in my portfolio, and I try to measure the effect of a possible dividend cut on my dividend income.
In Q1, I will keep following the real estate and consumer discretionary sectors closely. As we get out of recession discretionary spending will grow and people will roam the streets as the pandemic fades. Some of my positions in the energy sector are a bit risky so I will monitor them closely. You probably recognize the chart below, as it is part of my stock analysis. Using this chart contributes to my analysis thesis. I keep looking for Type 2 stocks mostly, as they offer the best combination of growth and income.
(Graph created by author)
2021 was a great year for investors. I managed to maintain the dividend income growth during the entire year. In 2022, I will keep executing my investment thesis, as I invest in companies monthly. Hopefully, I will be able to achieve my goals and get closer to my long-term objectives.
The coronavirus is fading, yet insists to stay with us, as countries are learning to live with it. The short-term risks now are inflation, government spending plans, and the debt ceiling which can increase volatility. Investors should ignore the noises and keep executing their plans. I wish you all a great quarter. I hope you all stay safe and healthy.
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of ALL STOCKS IN MY PORTFOLIO 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.
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