Dividend Harvesting Portfolio Week 95 Update: $9,500 Allocated, $721.66 Projected Annual Dividends

Dec. 29, 2022 9:00 AM ETENB, ENB:CA, JEPI, KMI, MPW, PDO, STWD, VZ39 Comments

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Summary

The Dividend Harvesting Portfolio is now generating $721.66 in annual dividends, yielding 7.88%.
The Dividend Harvesting portfolio has a 74.74% record of finishing the week in the black since its inception, 71/95 weeks.
In week 95, I added to my positions in ENB, KMI, PDO, MPW and STWD.
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Little piggy banks on ascending stacks of coins — PM Images

2022 is coming to a close, and with one week remaining, the S&P 500 is down -19.89%, and the Nasdaq has declined -33.70% YTD. Chances are that even if a Santa Clause rally occurs going into 2023, 2022 will end as a negative year for many investors. Over the past 95 weeks, I have been documenting how to build an income-producing portfolio from the ground up by allocating $100 per week to this project. The Dividend Harvesting Portfolio is currently down -3.59% (-$340.97) from my invested capital. Considering how the markets have fared, I am quite happy with this portfolio's progress. I believe that if you have a long time horizon, there are many interesting income investments in the market today. I plan on continuing this project for many years and documenting each investment along the way.

At the end of week 95, The Dividend Harvesting Portfolio's balance was $9,159.03. In week 95, three positions generated dividends in the amount of $1.89, and dividend income was generated each week in 2022. I added one share to each of the following positions, Enbridge (ENB), Kinder Morgan (KMI), Starwood Property Trust (STWD), Medical Properties Trust (MPW), and PIMCO Dynamic Income Opportunities Fund (PDO). My projected annual dividend income increased by 1.17% ($8.38) to $721.66. In the last week of 2022, I am projected to generate 24 individual dividends, which will produce $29.18 in dividend income which will be reinvested in addition to any purchases I make through my weekly $100 allocation.

I allocate capital toward big tech, funds, dividends, and growth outside of my retirement accounts. These are not my only investments, but I did open a separate account, so I could easily track and document this series. I intentionally created broad diversification throughout the Dividend Harvesting portfolio so I could benefit from sector rotations and mitigate my downside risk. Investors who are too exposed to growth companies or large-cap tech have gotten crushed as the investment landscape changes. On the growth and tech side of my investments, I am feeling the pain as some of my favorite companies, including Alphabet (GOOGL, GOOG), Amazon (AMZN), and Meta Platforms (META), have been taken to the woodshed.

I am going to address a question that continues to surface. I am not trying to beat the market with this portfolio. I love index funds and am invested in several index funds. I love dividend investing due to the stream of cash flow it generates. I don't want 100% of my assets outside of real estate tied to an S&P index fund. I have created a personal investment strategy that works to achieve my investment goals, and having a stream of income generated from dividends is part of my investment strategy. Low-cost index funds are one of the best investments anyone can make in my opinion, and the Dividend Harvesting portfolio is not meant to be a substitute for an index fund. I have read many questions about dividend investing and wanted to start a portfolio from the ground up and document its progress to disprove many misconceptions, including that you need a large amount of seed capital to make dividend investing work for you.

This series has never been about hitting a target yield, generating a certain amount of profit, or beating the market. I had two specific goals with this series. The first was to create a blueprint for constructing a dividend portfolio by documenting the journey starting from the beginning. The second goal was to illustrate how allocating capital each week toward investing, regardless of the amount, would be beneficial in the long run.

Too many people are under the illusion that you need tens of thousands or even hundreds of thousands to benefit from investing. Instead of using my real dividend portfolio as an example, I decided to start a new account, fund it with $100, and add $100 weekly, providing a step-by-step guide to dividend investing. This methodology doesn't have to be used for dividend investing, and it could be as simple as an S&P index fund or a Total Market fund. Hopefully, this series is inspiring people to invest in their future to attain financial freedom.

A Historical Recap of the Dividend Harvesting Portfolio's Investment Principles and Historical Performance

Investment Objectives

Income generation
Downside mitigation through diversification
Capital appreciation

Below are the fundamental rules I have put in place for this Portfolio:

Allocate $100 weekly to this Portfolio
Only invest in dividend-producing investments
No position can exceed 5% of the Portfolio
No sector can exceed 20% of the Portfolio
All dividends & distributions are to be reinvested

Below is a chart that extends from week 1 through the current week to illustrate the Dividend Harvesting Portfolio's Progression

Blue line is my initial investment $100 in week 1, $1,000 in week 10, etc.
Red line is the account value at the end of each week
Yellow line is the annual dividend income the Dividend Harvesting Portfolio was projected to generate after that week's investments and dividends reinvested

The Dividend Harvesting Portfolio Section

Here is how much dividend income is generated per investment basket:

Equities $216.35 (30.33%)
ETFs $177.37 (24.87%)
CEFs $136.80 (19.18%)
REITs $135.18 (18.95%)
BDCs $47.57 (6.67%)

Collecting dividends can serve many functions in a portfolio. Some investors utilize dividends to supplement their income and live off. I am building a dividend portfolio for myself 30 years into the future. In 2022, I have collected $463.79 in dividend income from 515 dividends across 51 weeks. This has allowed the Dividend Harvesting portfolio to stay in the black while growing the snowball effect.

These dividends allow me to gain additional equity in my investments while increasing my future cash flow in down markets. This style of investing isn't for everyone, but if you're looking to generate consistent cash flow while mitigating downside risk, this method has worked for me. I am hoping to collect between $450 and $500 in dividends in 2022, which will be reinvested, and finish the year generating >$700 in annual dividends.

I am interested to see how the dividend income in December ends, as there has been a significant uptrend in the YoY monthly dividend income. I am excited to see what this chart looks like in several years from now.

I haven't added new positions since week 90, and the Dividend Harvesting Portfolio has 604 individual dividends flowing through its portfolio on a weekly basis.

The goal of generating enough income from the dividends to purchase an additional share per year has been the never-ending project of this portfolio. There are now 17 total positions generating at least 100% of their share value in dividends within the Dividend Harvesting portfolio.

The Dividend Harvesting Portfolio Composition

Many of the readers have asked if I could break down the individual positions within these sectors. I created pie charts for each individual sector and have illustrated how much each position represents of that sector of the Dividend Harvesting portfolio. Since I only have 1 position in Food & Staple Retailing and Industrials, I did not make a chart for those. 3M (MMM) and Walgreens Boots Alliance (WBA) represent 100% of those sectors. The charts will follow the normal portfolio total I have constructed. Please keep the ideas coming, as I am happy to add as much detail to this series as I can.

In week 96 REITs became the largest section of the Dividend Harvesting Portfolio's composition. Individual equities make up 44.45% of the portfolio and generate 30.52% of the dividend income, while exchange-traded funds ("ETFs"), closed-end funds ("CEFs"), real estate investment trusts ("REITs"), business development companies ("BDCs"), and exchange-traded notes ("ETNs") represent 5555% of the portfolio and generate 69.48% of the dividend income.

I have a 20% maximum sector weight, so when a singular sector gets close to that level, I make sure capital is allocated away from that area to balance things out. In 2022, I will make an effort to even out these portfolio percentages. As more capital is deployed, the bottom half of the portfolio weighting will increase.

Industry	Investment	Portfolio Total	% of Portfolio
REIT	$1,650.75	$9,159.03	18.02%
ETFs	$1,639.38	$9,159.03	17.90%
Closed End Funds	$1,195.64	$9,159.03	13.05%
Oil, Gas & Consumable Fuels	$875.04	$9,159.03	9.55%
Communication Services	$617.59	$9,159.03	6.74%
Consumer Staples	$587.91	$9,159.03	6.42%
Technology	$572.57	$9,159.03	6.25%
Financials	$559.51	$9,159.03	6.11%
BDC	$504.84	$9,159.03	5.51%
Utility	$275.29	$9,159.03	3.01%
Pharmaceuticals	$244.46	$9,159.03	2.67%
Industrials	$124.10	$9,159.03	1.35%
Food & Staple Retailing	$117.78	$9,159.03	1.29%
Independent Power & Renewable Electricity Producers	$97.33	$9,159.03	1.06%
Cash	$2.28	$9,159.03	0.02%

In week 95, Verizon (VZ) remained my largest position as it represents 4.33% of the portfolio. I still believe there is long-term value in adding shares of VZ, and will probably pick up another share or two over the next several weeks. I will be monitoring VZ closely as it could creep up to the 5% level quickly.

Week 95 Additions

In week 95 I added one share to each of the following positions:

Enbridge (ENB)
Kinder Morgan (KMI)
Starwood Property Trust (STWD)
Medical Properties Trust (MPW)
PIMCO Dynamic Income Opportunities Fund (PDO)

Enbridge

I wrote a dedicated article on ENB outlining my investment thesis (can be read here). ENB is one of my favorite midstream operators and just announced its 28^th consecutive annual dividend increase. I think energy will have another good year in 2023 and feel midstream operators are undervalued as a whole. I will be adding additional shares of ENB in the future.

Kinder Morgan

I also wrote a dedicated article on KMI recently (can be read here). As natural gas becomes more sought after and additional LNG import facilities come online in Europe over the next two years I believe KMI will be a direct beneficiary. KMI has one of the largest natural gas infrastructures, which is next to impossible to replicate. I think KMI is undervalued and also offers a dividend that exceeds 6%.

Starwood Property Trust

There isn't much to say about STWD. I think their CEO Barry Sternlicht is one of the best CEO running a company today. Whenever STWD falls below $20 I put it at the top of my buy list. Over the years, STWD has been a great income generator for me as its dividend has been maintained at $1.92, which is a current yield of 9.98%.

Medical Properties Trust

MPW has been a horrible investment, but it's fallen so much in value that shares look very attractive. When I look at the numbers, I think the risks have been overblown and that the dividend is safe. Anything can happen, but I don't think hospitals are going under any time soon. I will be reassessing this investment after the next quarterly report, and if my investment thesis hasn't changed, I will be adding more in the Dividend Harvesting Portfolio and in my main dividend account. With shares falling again, I wanted to add to my position and dollar cost average a bit.

PIMCO Dynamic Income Opportunities Fund

PDO was a position I added in week 90 from reader recommendations. I was down a bit so I dollar cost averaged into the position with the remaining capital for week 94.

Week 96 Gameplan

In week 96, I am considering adding another share of the JPMorgan Equity Premium Income ETF (JEPI), and maybe another share of ENB.

Conclusion

There is one week left in 2022, and nine weeks in the 2^nd year of this series. I am looking forward to writing the year-over-year analysis and looking at the data. I am projecting that I will close out 2022, generating roughly $475 in dividend income, with dividends being produced each week. Week 100 is approaching quickly so please leave all of your thoughts and suggestions below. Happy holidays and hopefully, 2023 is a better year for the markets than 2022 was.

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This article was written by

Steven Fiorillo

24.68K Followers

I am focused on growth and dividend income. My personal strategy revolves around setting myself up for an easy retirement by creating a portfolio which focuses on compounding dividend income and growth. Dividends are an intricate part of my strategy as I have structured my portfolio to have monthly dividend income which grows through dividend reinvestment and yearly increases. Feel free to reach out to me on Seeking Alpha or https://dividendincomestreams.substack.com/

Disclosure: I/we have a beneficial long position in the shares of STWD, MPW, ENB, KMI, PDO 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.

Additional disclosure: 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. The investments and strategies discussed within this article are solely my personal opinions and commentary on the subject. This article has been written for research and educational purposes only. Anything written in this article does not take into account the reader’s particular investment objectives, financial situation, needs, or personal circumstances and is not intended to be specific to you. Investors should conduct their own research before investing to see if the companies discussed in this article fit into their portfolio parameters. Just because something may be an enticing investment for myself or someone else, it may not be the correct investment for you.