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Assessing My Portfolio For Dividend Yield

Summary

Purpose of this table.

The table.

Summary.

Introduction

I initially included this table as part of my 2019 Portfolio Review post but decided that was long enough already and took it out. But I think it's valuable enough to post, particularly since it's something I may refer to in the future.

Purpose of the Table

As I have mentioned, my number one investing goal is to increase my dividend income to where, once I'm retired, I never *need to sell a single share of a stock in order to live. I've also mentioned that I'm "sort of" there. I have a hard time seeing where I would be unable to meet this number once I roll my company 403b over to an IRA - but I can't guarantee it because I don't know how much income I will be able to buy when I sell my mutual funds.

*The key word here is "need." I am not morally opposed to selling. But since I can't predict where stocks will be trading at any given time, I don't want to have to rely on selling them to buy groceries. It's one of my problems with the 4% withdrawal rule of thumb sometimes recommended. In a big pullback the figure calculated to be 4% may become 6-7%.

The sub-goal I need to pay attention to is if I can generate enough income from my taxable account alone. Why is this important?

Taxes: There are two aspects to this. First, anything I do within the IRA or the Roth will be tax-protected. I can buy and sell stocks without taking a tax hit. If I sell a stock at a profit in the taxable account I'll be paying taxes on capital gains. I'd rather pay the relatively low rate on qualified dividends. Second, I'd like to preserve as much wealth in tax-sheltered accounts as possible by never withdrawing anything until RMD time in the IRA. I can grow my investments much more quickly when Uncle Sam isn't taking a cut - the more money the government has no claim on, the better.

So as I am not 100% certain that I have reached my dividend income goal, I need to at least be alert to the possibility that I may need to convert some of my lower-yielding stocks into those with higher yields. 

The Table

I've divided my stocks into 4 categories based on dividend yield. These are:

  • Very High Yield - over 7%
  • High Yield - 4-7%
  • Medium Yield - 2-4%
  • Low Yield - Under 2%

All numbers are as of market close on December 31, 2019 except for five year DGR which is as of December 21 when I last ran stocks through my screen. I have already bought Apple Hospitality (APLE), yielding about 7.5%, on January 2 but if I plugged it in I'd need to recalculate everything for accuracy - sorry folks, that's more time than I want to spend today. I may make this table part of my quarterly portfolio updates in order to track progression.

Account Symbol Name % of Portfolio 1/1/20 Price Annual Div/Share 1/1/20 Div Yield Five-Year Div Growth Rate % 2020 Div Income %
Roth (NRZ) NEW RESIDENTIAL INVT CORP COM NPV 0.66% 16.11 $2.00 12.41% 5.64% 2.39%
Roth (TWO) TWO HBRS INVT CORP COM NEW 0.59% 14.62 $1.60 10.94% -5.11% 1.90%
Roth (CXW) CORECIVIC INC COM 0.70% 17.38 $1.76 10.13% -2.91% 2.08%
Roth (SKT) TANGER FACTORY OUTLET CTRS INC 0.58% 14.73 $1.42 9.64% 8.14% 1.64%
Roth (NEWT) NEWTEK BUSINESS SVCS CORP COM NEW 0.65% $22.65 $2.15 9.49% 0 1.80%
Roth (ARCC) ARES CAPITAL CORP COM STK USD0.001 0.69% $18.65 $1.68 9.01% 1.03% 1.83%
Roth (IRM) IRON MOUNTAIN INC COM USD0.01 0.78% 31.87 $2.44 7.67% 5.42% 1.75%
Taxable (OXY) OCCIDENTAL PETE CORP COM 1.59% $41.21 $3.16 7.67% 1.87% 3.58%
Very High Yield 6.24% 16.97%
Taxable (MO) ALTRIA GROUP INC 5.65% $49.91 $3.36 6.73% 10.07% 11.16%
Roth (OHI) OMEGA HEALTHCARE INVS INC 0.85% 42.35 $2.68 6.33% 5.2% 1.58%
Roth (T) AT&T INC COM USD1 0.82% $39.08 $2.04 5.22% 2.48% 1.26%
Taxable (T) AT&T INC COM USD1 6.33% $39.08 $2.04 5.22% 2.48% 9.70%
Taxable (XOM) EXXON MOBIL CORP 1.64% $69.78 $3.48 4.99% 4.75% 2.40%
Taxable (ABBV) ABBVIE INC COM USD0.01 5.81% $88.54 $4.28 4.83% 22.95% 8.24%
Taxable (LYB) LYONDELLBASELL INDUSTRIES N V COM USD0.01 CLASS A 3.72% $94.48 $4.20 4.45% 8.45% 4.86%
Taxable (D) DOMINION ENERGY INC COM 3.25% $82.82 $3.67 4.43% 8.87% 4.22%
Taxable (VZ) VERIZON COMMUNICATIONS 3.33% $61.40 $2.46 4.01% 2.26% 3.91%
High Yield 31.40% 47.33%
Taxable (GILD) GILEAD SCIENCES INC COM USD0.001 3.91% $64.98 $2.52 3.88% 0 4.45%
Taxable (VLO) VALERO ENERGY CORP 0.94% $93.65 $3.60 3.84% 26.76% 1.06%
Taxable (MSM) MSC INDUSTRIAL DIRECT CO INC 0.92% $78.47 $3.00 3.82% 13.40% 1.03%
Taxable (PFE) PFIZER INC 4.59% $39.18 $1.44 3.68% 7.89% 4.95%
Taxable (ADM) ARCHER DANIELS MIDLAND 1.87% $46.35 $1.40 3.02% 7.84% 1.65%
Taxable (CVS) CVS HEALTH CORPORATION COM USD0.01 3.77% $74.29 $2.00 2.69% 0 2.98%
Taxable (WSM) WILLIAMS SONOMA INC COM 1.11% $73.44 $1.92 2.61% 7.78% 0.85%
Taxable (LMT) LOCKHEED MARTIN CORP COM USD1.00 2.29% $389.38 $9.60 2.47% 9.86% 1.65%
Taxable (ITW) ILLINOIS TOOL WORKS INC COM USD0.01 5.73% $179.63 $4.28 2.38% 17.15% 4.01%
Taxable (BBY) BEST BUY CO INC COM USD0.10 1.19% $87.80 $2.00 2.28% 21.35% 0.79%
Taxable (NEE) NEXTERA ENERGY INC COM USD0.01 2.64% $242.16 $5.00 2.06% 11.51% 1.60%
Taxable (NYSE:AOS)) SMITH A O CORP COM 1.85% $47.64 $0.96 2.02% 26.19% 1.09%
Medium Yield 30.81% 26.11%
Taxable (UNH) UNITEDHEALTH GROUP 5.09% $293.98 $4.28 1.46% 23.56% 2.17%
Taxable (MSFT) MICROSOFT CORP 7.45% $157.70 $2.04 1.29% 10.47% 2.83%
Taxable (DIS) DISNEY WALT CO 4.69% $144.63 $1.76 1.22% 8.88% 1.67%
Taxable (AAPL) APPLE INC COM USD0.00001 9.51% $293.65 $3.08 1.05% 10.38% 2.93%
Taxable (GOOGL) ALPHABET INC CAP STK CL A 3.59% $1,339.39 $0.00 0.00% 0 0.00%
Low Yield 30.33% 9.60%

As you can see, I have a fairly small amount in the very high yield group with roughly equal amounts in the other three.

Summary

If I find myself behind on reaching my income goal, the easiest fix would be replacing low yielding companies with higher yielders. Other than stocks listed in the Roth I have no plans to sell anything however if, for example, DIS decides to freeze its dividend, it would become a likely candidate to sell, despite how much I like the company.

I have never worried too much about having a target number when it comes to things like sector weighting and I don't have one for the amount of companies I want in each yield category. But I do have a target number for the amount of dividend income I need to be receiving within 3 years.

For younger investors I think having a table dividing companies by dividend growth rate would be useful. I include those numbers and they are a factor in my decisions but with retirement 3 years or so off, current income is more important to me than growth.

I also have a spreadsheet which includes for each company; number of shares owned, annual dividend per share and 5-year dividend growth rate. I use this to project my dividend income forward for the next 6 years. This is one of the most useful things I've done and I recommend it.

Happy investing everyone!

Disclosure: I am/we are long APLE, and all stocks listed in the table..

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.