January 2019 Portfolio Update

Jan. 31, 2019 5:14 PM ET2 Comments
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Contributor Since 2017

NOTE: For those looking for the DGI Chit Chat Blog here's the link: https://seekingalpha.com/instablog/48196727-cemanuel/5208606-dgi-chit-chat-successor

I recently sold a bunch of real estate (first purchase was in 1986 when I was 23) and am investing in stocks - have gone with mutual funds for a couple of decades and formerly traded grain commodities but opened my accounts to trade individual stocks on March 8, 2017. The longer I have been in the market the more convinced I have become that Dividend Growth Investing (DGI) is the best method for building income. 

I am retired, effective 12/31/21.

I have three accounts; a Taxable Account, a Roth IRA, and a Traditional IRA. I also have a small HSA I can invest with but have index ETFs in it and don't discuss it on SA.

I am managing my separate accounts differently as follows:

Taxable: Main purpose - to live off in retirement. Most of this will come from dividend income which will be about 70% of what I need. But I have large amounts of AAPL and GOOGL which I will sell as needed to supplement this. As much as possible, other than those two companies, I intend to have a buy-and-hold strategy for this account.

IRAs: Total return. I like dividends but as I don't expect to need to withdraw from these until RMD time I will look for more rapid dividend growth and non-dividend payers are not automatically excluded. The Roth is quite small so dividends received will be automatically reinvested in the issuing stock. I take them as cash in the T-IRA to buy more stocks with. I will likely be more active in these accounts though I never expect to be a frequent trader. 

Buying for the IRA began on 2/22/22 and was completed on 3/7/22. I am doing Roth conversions, trying to be close to the 24% tax bracket limit each year. The first was on 6/17/22.

I ended my accumulation phase of investing on 7/1/21 to build cash for retirement. 

Here are my current holdings, last updated 8/4/22:

- Taxable Account: AAPL, ABBV, BBY, BLK, CVS, GD, GOOGL, ITW, LMT, LYB, MO, MSFT, NEE, OGE, PM, T, TROW, UNH, VZ, WHR, WSM

- Roth: ABBV, AMD, AMZN, BBY, BMO, CHWY, GOOGL, KLAC, LRCX, MSFT, MU, NVDA, PYPL, QSR, SBUX, WSM

- TIRA: AAPL, ABBV, AMAT, AMZN, ANTM, AOS, BBY, BMO, CHWY, CM, CMI, CRM, DG, DT, F, FAF, GM, GOOGL, KLAC, LCID, LOW, LRCX, META, MSFT, MU, PYPL, QSR, RY, SHW, TD, TGT, TROW, TSCO, TSLA, TXRH, UNH, WMS, WSM

2017 Total Return: 16.2%.

2018 Total Return: 1.58%.

2019 Total Return: 31.63%

2020 Total Return: 13.57%

2021 Total Return: 32.63%

2 year/24 month return on 3/8/19 - 18.87%

3 year/36 month return on 3/8/20 - 39.61%

4 year/48 month return on 3/8/21 - 78.02%

5 year/60 month return on 3/8/22 - 113.39%*

I calculate the returns after subtracting new money added into the account however I do count reinvested dividends. For example, if I have an account worth $100,000 at the start of the year, I add $10,000 in new money and the 12/31 balance is $112,000 my return would be 2%, not 12%.

*Does not include the IRA

Summary

  • Trades made and dividends received.
  • Plans going forward.

Trades and Dividends Received

January was a light month. I spent all my cash on December 24 except for the $7,000 I added to my Roth on January 1. Then I waited. I finally made a couple of buys, both in the Roth, and both NOT according to plan which I'll cover later.

Trading Activity:

  • 1/22 - Bought Altria Group (MO) at $44.64.
  • 1/30 - Bought AT&T (T) at $29.10.

Dividends Received:

  • 1/2 - WalMart (WMT)
  • 1/10 - Disney (DIS)
  • 1/10 - Hannon Armstrong Infrastructure (HASI)
  • 1/10 - Illinois ToolWorks (ITW)
  • 1/10 - Medical Properties Trust (MPW)
  • 1/15 - Uniti Group (UNIT)
  • 1/25 - New Residential (NRZ)
  • 1/28 - Two Harbors (TWO)

NOTE: I DRIP dividends in my Roth. In my taxable account I take them as cash. The cash is in a Fidelity money market which pays a little over 2%.

The Trades:

This was interesting. I have been using my Roth for what I consider high yield stocks. My definition of high yield means pretty much Real Estate Investment Trusts or REITs and Business Development Companies or BDCs. And if I ever buy them this will also include Closed End Funds or CEFs. I had some REITs and BDCs I was looking at but was waiting to see if the market would retest the December lows. Then MO and T dropped to where their respective yields were over 7% and I picked them up instead.

Buys made in my taxable account are with the idea that I'll never sell. This is not the case for the Roth. It is a total return account. The goal is to make the most money I can in it by hook or by crook. I have no tax liability for anything that happens in it and if I ever trade again it will be in this account. So if MO or T has a price pop I could sell it - same for any other Roth stock. And if they don't I'm happy to collect and DRIP the 7%.

But it was not the original plan.

I made no sells in January.

Dividends:

This was a good dividend month for me, well above my average 2018 month. I am hoping it is part of the new normal, not an outlier. Based on my projections February should be a better dividend month but we shall see. It doesn't mean all that much but my January 2019 dividends were an increase of 106.90% over January, 2018. This is more due to a change in my portfolio and an increase in the amount invested than due to dividend increases though some of this was in play.

Plans Going Forward

still plan on selling WMT if it reaches $100 though if this happens close to February 20 I may hold off for the next dividend announcement. If they continue raising it by a penny a quarter as they have done since 2014 it'll confirm it as one to sell. If they raise it by $.05 it will completely change my plans - and be a big surprise. My retirement is not far off. Owning a company paying just a little over 2% and only increasing the dividend 2% annually does not fit my plans for growing income.

Before buying MO and T I had planned to sell either NRZ or UNIT from my Roth to maintain a fairly consistent overall BDC and REIT level in my accounts. They were in a race - NRZ at $18 or UNIT at $20. Whichever reached its respective level first would be sold. That plan is on hold. I own each in my Roth so it's not that I dislike them, I just dislike paying taxes on the ordinary dividends. Either could still be sold if it is trading high and something else I like goes on sale.

It doesn't matter much but for the month my portfolio value increased by 6.78%. This does not include the money I added to the Roth but does include dividends.

January was a slow month after the hustle and bustle of December. That's OK - other than the Roth I was pretty much out of cash anyway. But dividends are coming in and at some point will be put to use.

Disclosure: I am/we are long All companies in the trade and dividend lists.

Additional disclosure: I am not a professional investor and do not offer investing advice. I have a college degree in Animal Science and used to train horses for a living. Would you really want to tell a loved one you invested based on something an ex-horse trainer/animal scientist wrote?

I didn't think so. Please perform your own due diligence when making investing decisions.

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