My Dividend Growth Portfolio - Q4 2021 Summary

9.08K Followers

Summary

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.

Growing Graph — Eoneren/E+ via Getty Images

Introduction

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.

Investment Allocation

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)

My Goals

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.

Sector Allocation

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.

Sector	Current	Goal
Consumer Staples	19.5%	20.0%
Health Care	12.1%	12.5%
Industrials	13.6%	12.5%
Financials	13.3%	12.5%
Consumer Discretionary	7.8%	10.0%
Energy and Materials	8.3%	8.0%
Information Technology	12.6%	10.0%
REITs	6.7%	7.5%
Telecommunications	2.9%	4.0%
Utilities	3.1%	3.0%

My Portfolio

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	AFLAC INC	(AFL)	2.19%	2.06%
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%
Industrials	CATERPILLAR INC	(CAT)	2.33%	1.72%
Information Technology	CISCO SYSTEMS INC	(CSCO)	0.79%	0.64%
Health Care	CVS HEALTH CORPORATION	(CVS)	0.43%	0.31%
Energy	CHEVRON CORPORATION	(CVX)	1.96%	3.07%
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%
Industrials	3M COMPANY	(MMM)	1.48%	1.69%
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%
Utilities	SOUTHERN CO	(SO)	0.86%	1.13%
Telecom	AT&T INC	(T)	1.13%	3.27%
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%
Telecom	VERIZON COMMUNICATIONS	(VZ)	1.74%	2.93%
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)

Conclusion

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

Khen Elazar

9.08K Followers

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.

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.

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