Dividend Harvesting Week 52, Year-End Review, 62 Positions Yielding 6.8% And Profitable

Summary

• I wrote a different style article for the Year-End review. I plan on doing several updates like this in year 2 as a health check to the portfolio.
• In week 52 I added to INTC, PTY, AGNC, BRMK, and QYLD.
• The Dividend Harvesting Portfolio finished the year in the black by $164.59, is generating $365.01 in dividend income, and is yielding 6.8%.
• I do much more than just articles at Barbell Capital: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

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Year 1 of the Dividend Harvesting portfolio has come to an end as I allocated my last $100 for the year. 2021 and the beginning of 2022 have been full of surprises for the markets as Covid variants spread globally, supply chain issues continued, inflation grew, the growth trade collapsed, commodity prices increased, and geopolitical tensions soared. Some investors had a great year, while others found out the hard way that stocks don't just appreciate, and all good things come to an end. I debated how I would structure the year-end review, and I decided just to write it and see what comes out. Thank you to everyone who continued to read this series week after week. I appreciate all the comments and enjoyed engaging with the Seeking Alpha community.

Over the past 52 weeks, I have allocated $5,200, which was broken down to $100 per week. Each week I took $100 and invested in income-producing investments, which included individual equities, Real Estate Investment Trusts (REITs), Exchange Traded Funds (ETFs), Closed-End Funds (CEFs), Exchange Traded Notes (ETNs), and Business Development Companies (BDCs). I finished the year with 62 positions, an account value of $5,362,08, $365.01 in future dividend annual income, a portfolio that has a current dividend yield of 6.81%, and a portfolio that was in the black by $162.08 (3.02%).

Steven Fiorillo

So how do I think I did? Things can always be better, but I am pleased with the outcome. My priorities were to build a portfolio of income-producing assets that would mitigate downside risk while generating a continuous flow of income. I am generating 472 annual dividends throughout 50 weeks of the year. The Dividend Harvesting portfolio is extremely diversified, and no matter what sector of the economy is on a hot streak or cooling off, I have exposure to almost every type of investment class from technology down to corporate credit.

Three of the most frequent criticisms were the monetary investment size of the portfolio, the number of positions I started, and the amount of time this requires vs. investing in an ETF. I want to address these three criticisms here and see if anyone makes the same rhetorical comments because I have a suspicion many of the people who left these comments didn't actually read the articles.

1. This isn't my only account, and these aren't my only investments. Everyone in the Seeking Alpha community is at a different stage in their life and has different investment goals. Many of the articles on Seeking Alpha alluded to investing sums of money that aren't realistic to others within the community. I wanted to write a dividend series that was different, one that started from the ground up. I had never seen a series documented in this fashion, and many of the portfolio articles I read don't explain how they appreciated to its current level. I had received many messages about where to start the dividend investing journey, so instead of just giving a generic answer, I decided to start my journey all over again. I wanted to provide a blueprint about what was important to me, what I wanted to invest in, how I make my decisions, metrics that I focus on, and how to grow a portfolio over time by continuously investing regardless if it is $10, $100, or $1,000 a week.
2. To build a diversified portfolio, you need multiple positions across different sectors. I am not limiting the number of investments I make, and I am investing in the individual securities and funds that I want to own. While my seed capital is much different than ETFs and CEFs, look at the number of holdings in each of the following funds:
3. 1. Schwab U.S. Dividend Equity ETF (SCHD) - 105 Holdings
   2. Vanguard High Dividend ETF (VYM) - 413 Holdings
   3. Vanguard Dividend Appreciation ETF (VIG) - 270 Holdings
   4. BlackRock Enhanced Equity Dividend Trust (BDJ) - 342 Holdings
   5. PIMCO Dynamic Income Fund (PDI) - 2,162 Holdings
   6. Cohen&Steers Infrastructure Fund (UTF) - 231 Holdings

I don't know how many positions I will ultimately end up with, but I won't be short on diversification. One of my main goals is to make sure that downside risk is mitigated. If energy prices somehow get cut in half and some of my positions, such as Exxon Mobil (XOM) or BP p.l.c. (BP) crash, other positions will become more popular as sector rotations will occur. Diversification makes sure that I am not over-allocated in a specific position or sector.

1. This portfolio doesn't take as much time as you would think. I like to read and consume a tremendous amount of information. In addition to reading the Wall Street Journal, Barrons, and articles on Seeking Alpha, I listen to the following podcasts/videos from The Compound, which includes What Are Your Thoughts, Animal Spirts, The Compound & Friends, All-In Podcast, Everything Money, Halftime Report from CNBC, and Fast Money from CNBC. I try not to waste any time, and no matter if I am walking somewhere or on my normal 2-hour round trip commute during the week I am always listening to a financial podcast or video. I research different ideas over the weekend and make a game plan for the following week. It's really not that hard.

Investing in income-producing investments isn't for everyone, and I know investors who only focus on disruptive growth. I am not saying my approach is correct and a different investment philosophy is incorrect. Everyone has a different investment thesis and style. I believe in having a portion of your investments allocated to income-producing assets. The most important thing is that you're investing for your future to attain financial freedom. This methodology doesn't have to be used for dividend investing, and it could be as simple as allocating a set amount of capital to an S&P index fund or a Total Market fund. This series has never been about hitting a target yield, generating a certain amount of profit, or beating the market. I am pleased that after a year, the portfolio finished in the black, its now generating $365.01 in annual dividend income and has a 6.81% yield across 62 positions.

Something I always wanted to know about the Dividend Harvesting portfolio that I never looked at

I was always interested in how many positions each of the funds I am invested in have within their portfolios.

Steven Fiorillo

Well, I looked at every BDC, CEF, and ETF, tallied up their holdings, and the grand total is 10,007. So, in addition to my 62 individual positions within the Dividend Harvesting portfolio, I am exposed to 10,007 smaller positions through my investments in various BDCs, CEFs, and ETFs. If we were playing am I diversified on Mad Money, Cramer may not like some of the positions, but I would pass being diversified with flying colors.

What I invested in throughout Year 1 of the Dividend Harvesting portfolio and would I do anything differently?

Below is a list of every investment alphabetized by ticker symbol. I provided the number of shares purchased throughout the year, the current value per share, and the current value. This is prior to dividends and only my purchased shares. Overall, from the $5,200 that I invested, I lost -$6.93 or 0.0013%. I was basically flat, but, in all fairness, I did lose -$6.93 on my original investment. This is an important figure to look at because it shows if the portfolio can withstand turbulence in the markets and succeed with the overall goal of mitigating downside risk. Overall, I would say I passed as some investments didn't live up to my expectations, and some exceeded them based on just the share prices. Overall, the ones that declined were basically canceled out by the ones that appreciated.

Steven Fiorillo

The next list shows all my current investments with the dividends reinvested throughout the year. Keep in mind that I added these week by week, so I didn't capture $365.01 of dividend income, that is what the portfolio is now projected to generate. The dividends that I generated throughout the previous year were $171.52, which were all reinvested except for new companies that were just added or the Global X Nasdaq 100 Covered Call & Growth ETF (QYLG), and the Global X S&P 500 Covered Call & Growth ETF (XYLG). For some reason, the firm I use doesn't reinvest those dividends. In a previous article, one of the readers called the firm and provided details that they obtained about this. As it stands today, the dividend income padded the -$6.93 that I lost and provided $164.59 (3.17%) of profit for the first year. Going into year 2, I am starting day 1, generating $365.01 of dividend income before I make a single allocation, unlike day 1 of the first year, where I transferred $100 and tried to decide where I would start the journey.

Steven Fiorillo

It's always easy to sit back and reflect on decisions that you could have made, and I am not going to do that. There isn't a single thing I would have done differently. I made every choice, and I would do it again. If I wasn't confident, I wouldn't have made these investments.

AT&T, what am I doing about the dividend cut and the spinoff of WarnerMedia?

The short answer is I plan to hold Legacy AT&T (T) shares and the new WarnerMedia shares. For every share of T that you own, you will receive an estimated 0.24 shares of the new entity. T is reducing its dividend from $2.08 to $1.11. I just wrote a detailed article about this and my views on the subject so please read it for the in-depth answer. As for now, I plan on holding the new WarnerMedia shares until they get to a point where I can sell them and replace the lost dividend income with an equivalent amount or more. Since I have 10.57 shares of T in this account, I will receive 2.54 shares of the new entity.

Dividend Cash Flow

I started in week 1 purchasing a share of Altria Group (MO), Starwood Property Trust (STWD), and T. The combination of these 3 investments provided $7.44 of annual dividend income. Since then, I have added 59 positions and $357.57 in dividend income through additional investments and reinvesting the dividends. On average, my annual dividend income stream increased by $7.01 per week. Some weeks it grew quicker than others, depending on which dividends were generated and what positions I allocated capital to.

Steven Fiorillo

I just extrapolated my annual dividend income out to the end of year 2 based on the average $7.01 weekly increase. Hypothetically, if my annual dividend income increases by an average of $7.01 per week, I should end year 2 by generating $729.53 in dividend income. We will see how this progresses throughout year 2.

Steven Fiorillo

I am generating 472 dividends across 50 weeks throughout the year. Some weeks I have 20 dividends being generated. While this portfolio doesn't have an exorbitant amount of capital, the frequency of generating dividends is impressive. I am going to make 2 predictions for year 2 of the Dividend Harvesting portfolio. I accomplish generating 52 weeks of dividend income, and the portfolio exceeds generating 600 individual dividends. These are both by-products, and I am not making investments based on these secondary goals. Let's see what happens.

Steven Fiorillo

So far in 2022, YTD, I have generated $55.13 from 66 dividends in the Dividend Harvesting portfolio. I have another 12 dividends expected to be generated Monday to close out February and 8 additional dividends paying out throughout next week bring the total to 20 dividends for next week. March is going to be a busy month as I am expecting 42 dividends to be paid.

Week 52 additions

In week 52, I added to Intel Corp (INTC), PIMCO Corporate&Income Opportunity Fund (PTY), the Global X Nasdaq 100 Covered Call ETF (QYLD), AGNC Investment Corp (AGNC), and Broadmark Realty Capital (BRMK). I was adamant last week about adding to my position in INTC. INTC has decreased considerably, and it's time to add. INTC broke ground on two new fabs in Arizona three months ahead of schedule as part of the largest overall manufacturing expansion in Intel's history. INTC also announced their new manufacturing site in Ohio, which will support future growth and advance their plan to create a more geographically balanced, resilient supply chain. I plan on holding INTC for decades as I believe in what some would consider their turnaround story. Their financials are strong, and INTC is a cash machine. With the market selling off AGNC, PTY, BRMK, and QYLD were all significantly in the red, so I took an opportunity to dollar cost average on these positions.

Conclusion

I would consider the first year of the Dividend Harvesting portfolio a success. I started in week 1 with $100 and finished week 52 with $5,364.59 for a profit of $164.59. The main goals that I am measuring myself on are whether the portfolio withstands volatility, whether the portfolio ended up close to even without the dividends being generated, and whether it is producing a healthy stream of dividend income. I would answer yes to everything as my winners canceled out the losers, and the dividend income which was collected throughout the year pushed the portfolio into the black. I am starting year two of this series with an estimated annual dividend income of $365.01 prior to the powers of compounding or future investments. I plan on continuing this series and allocating $100 per week to the portfolio. Ultimately all of my targets were reached, I am generating 50 weeks of dividend income through 472 individual dividends, and I have created a diversified portfolio with 62 positions.

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's 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'm generating will act as additional income in retirement. I look at this as a Barbell approach because I utilize several aspects of investing in my overall approach.

Disclosure: I/we have a beneficial long position in the shares of BP, XOM, INTC, T, AGNC, PTY, BRMK, QYLD 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.