My 2020 Second Quarter Portfolio Update
Summary
- Introduction.
- Two (three?) portfolio tables.
- Review of second quarter performance.
- Summary.
Introduction
I am 57 and plan to retire in the next 2-4 years. When I retire I hope to entirely fund my retirement from dividend income without ever having to sell a share of stock - this doesn't mean I won't, I just don't want to be forced to sell something in order to buy food. I first opened my accounts to trade individual stocks on March 8, 2017. Prior to that my investments were mainly in real estate, particularly farm land.
Current status towards goal: Progress has slowed. The uninterrupted growth in dividend income has stagnated somewhat. This is not a complete shock considering the economic situation but it's not something I'm happy about. On the other hand, stagnation isn't a decline and better than many people have done. But the coronavirus impact is just beginning. I still have a hard time seeing how I won't be able to generate enough dividend income once I roll over my 403b to an IRA but the secondary goal of being able to live completely off the dividends from my taxable account alone is less likely today than it was on February 1.
Portfolio Update
For the second quarter of the year I closed one position, Core Civic (CXW). I did not open any new positions. I added to positions in Altria Group (MO), Philip Morris (PM) and Exxon-Mobil (XOM).
More details on transactions are available in my monthly reviews:
I am going to provide two charts of my holdings. One will list them by portfolio percentage using current value. The second will list them based on dividend income contribution.
All figures are as of market close on June 30, 2020.
Holdings ranked by Portfolio Value:
| Account | Symbol | Name | Price | Portfolio % | Dividend/share | Yield | % of 2020 Income |
| SPAXX** | Cash | $1.00 | 0.12% | n/a | n/a | n/a | |
| Taxable | (AAPL) | APPLE INC COM USD0.00001 | $364.80 | 12.05% | $3.28 | 0.90% | 3.04% |
| Taxable | (MSFT) | MICROSOFT CORP | $203.51 | 9.80% | $2.04 | 1.00% | 2.75% |
| Taxable | (ABBV) | ABBVIE INC COM USD0.01 | $98.18 | 6.57% | $4.72 | 4.81% | 8.85% |
| Taxable | (ITW) | ILLINOIS TOOL WORKS INC COM USD0.01 | $174.85 | 5.69% | $4.28 | 2.45% | 3.90% |
| Taxable | (MO) | ALTRIA GROUP INC | $39.25 | 5.41% | $3.36 | 8.56% | 12.96% |
| Taxable | (UNH) | UNITEDHEALTH GROUP | $294.95 | 5.21% | $5.00 | 1.70% | 2.47% |
| Taxable | (T) | AT&T INC COM USD1 | $30.23 | 5.00% | $2.08 | 6.88% | 9.63% |
| Taxable | (GILD) | GILEAD SCIENCES INC COM USD0.001 | $76.94 | 4.72% | $2.72 | 3.54% | 4.68% |
| Taxable | (PFE) | PFIZER INC | $32.70 | 3.90% | $1.52 | 4.65% | 5.08% |
| Taxable | (GOOGL) | ALPHABET INC CAP STK CL A | $1,418.05 | 3.88% | $0.00 | 0.00% | 0.00% |
| Taxable | (WSM) | WILLIAMS SONOMA INC COM | $82.01 | 3.37% | $1.92 | 2.34% | 2.21% |
| Taxable | (CVS) | CVS HEALTH CORPORATION COM USD0.01 | $64.97 | 3.36% | $2.00 | 3.08% | 2.90% |
| Taxable | (D) | DOMINION ENERGY INC COM | $81.18 | 3.24% | $3.76 | 4.63% | 4.21% |
| Taxable | (VZ) | VERIZON COMMUNICATIONS | $55.13 | 3.05% | $2.46 | 4.46% | 3.81% |
| Taxable | (BBY) | BEST BUY CO INC COM USD0.10 | $87.27 | 2.70% | $2.20 | 2.52% | 1.91% |
| Taxable | (NEE) | NEXTERA ENERGY INC COM USD0.01 | $240.17 | 2.67% | $5.00 | 2.08% | 1.56% |
| Taxable | (LYB) | LYONDELLBASELL INDUSTRIES N V COM EUR0.04 CLASS A | $65.72 | 2.64% | $4.20 | 6.39% | 4.73% |
| Taxable | (LMT) | LOCKHEED MARTIN CORP COM USD1.00 | $364.92 | 2.18% | $9.60 | 2.63% | 1.61% |
| Taxable | (AOS) | SMITH A O CORP COM | $47.12 | 1.86% | $0.96 | 2.04% | 1.06% |
| Taxable | (ADM) | ARCHER DANIELS MIDLAND | $39.90 | 1.64% | $1.44 | 3.61% | 1.66% |
| Taxable | (PM) | PHILIP MORRIS INTERNATIONAL INC COM NPV | $70.06 | 1.56% | $4.68 | 6.68% | 2.92% |
| Taxable | (VLO) | VALERO ENERGY CORP COM | $58.82 | 1.26% | $3.92 | 6.66% | 2.35% |
| Taxable | (XOM) | EXXON MOBIL CORP | $44.72 | 1.07% | $3.48 | 7.78% | 2.34% |
| Taxable | (GD) | GENERAL DYNAMICS CORP COM USD1.00 | $149.46 | 1.02% | $4.40 | 2.94% | 0.84% |
| Taxable | (MSM) | MSC INDUSTRIAL DIRECT CO INC | $72.81 | 0.87% | $3.00 | 4.12% | 1.01% |
| Roth | (IRM) | IRON MOUNTAIN INC COM USD0.01 | $26.10 | 0.68% | $2.47 | 9.48% | 1.81% |
| Roth | (T) | AT&T INC COM USD1 | $30.23 | 0.67% | $2.08 | 6.88% | 1.29% |
| Roth | (OHI) | OMEGA HEALTHCARE INVS INC | $29.73 | 0.64% | $2.68 | 9.01% | 1.61% |
| Roth | (ARCC) | ARES CAPITAL CORP COM | $14.45 | 0.58% | $1.60 | 11.07% | 1.80% |
| Roth | (NEWT) | NEWTEK BUSINESS SVCS CORP COM NEW | $18.22 | 0.54% | $2.15 | 11.80% | 1.80% |
| Roth | (XOM) | EXXON MOBIL CORP | $44.72 | 0.42% | $3.68 | 8.23% | 0.97% |
| Roth | (CGBD) | TCG BDC INC COM | $8.57 | 0.41% | $1.48 | 17.27% | 1.96% |
| Roth | (APLE) | APPLE HOSPITALITY REIT INC COM NEW | $9.66 | 0.37% | $0.00 | 0.00% | 0.00% |
| Roth | (NRZ) | NEW RESIDENTIAL INVT CORP COM NPV | $7.43 | 0.32% | $0.40 | 5.38% | 0.48% |
| Roth | (SKT) | TANGER FACTORY OUTLET CTRS INC | $7.13 | 0.31% | $0.00 | 0.00% | 0.00% |
| Roth | (TWO) | TWO HBRS INVT CORP COM NEW | $5.04 | 0.22% | $0.56 | 11.11% | 0.68% |
Holdings ranked by expected 12-month Dividend Income Contribution:
| Account | Symbol | Name | Price | Portfolio % | Dividend/share | Yield | % of 2020 Income |
| SPAXX** | Cash | $1.00 | 0.12% | n/a | n/a | n/a | |
| Taxable | MO | ALTRIA GROUP INC | $39.25 | 5.41% | $3.36 | 8.56% | 12.96% |
| Taxable | T | AT&T INC COM USD1 | $30.23 | 5.00% | $2.08 | 6.88% | 9.63% |
| Taxable | ABBV | ABBVIE INC COM USD0.01 | $98.18 | 6.57% | $4.72 | 4.81% | 8.85% |
| Taxable | PFE | PFIZER INC | $32.70 | 3.90% | $1.52 | 4.65% | 5.08% |
| Taxable | LYB | LYONDELLBASELL INDUSTRIES N V COM EUR0.04 CLASS A | $65.72 | 2.64% | $4.20 | 6.39% | 4.73% |
| Taxable | GILD | GILEAD SCIENCES INC COM USD0.001 | $76.94 | 4.72% | $2.72 | 3.54% | 4.68% |
| Taxable | D | DOMINION ENERGY INC COM | $81.18 | 3.24% | $3.76 | 4.63% | 4.21% |
| Taxable | ITW | ILLINOIS TOOL WORKS INC COM USD0.01 | $174.85 | 5.69% | $4.28 | 2.45% | 3.90% |
| Taxable | VZ | VERIZON COMMUNICATIONS | $55.13 | 3.05% | $2.46 | 4.46% | 3.81% |
| Taxable | AAPL | APPLE INC COM USD0.00001 | $364.80 | 12.05% | $3.28 | 0.90% | 3.04% |
| Taxable | PM | PHILIP MORRIS INTERNATIONAL INC COM NPV | $70.06 | 1.56% | $4.68 | 6.68% | 2.92% |
| Taxable | CVS | CVS HEALTH CORPORATION COM USD0.01 | $64.97 | 3.36% | $2.00 | 3.08% | 2.90% |
| Taxable | MSFT | MICROSOFT CORP | $203.51 | 9.80% | $2.04 | 1.00% | 2.75% |
| Taxable | UNH | UNITEDHEALTH GROUP | $294.95 | 5.21% | $5.00 | 1.70% | 2.47% |
| Taxable | VLO | VALERO ENERGY CORP COM | $58.82 | 1.26% | $3.92 | 6.66% | 2.35% |
| Taxable | XOM | EXXON MOBIL CORP | $44.72 | 1.07% | $3.48 | 7.78% | 2.34% |
| Taxable | WSM | WILLIAMS SONOMA INC COM | $82.01 | 3.37% | $1.92 | 2.34% | 2.21% |
| Roth | CGBD | TCG BDC INC COM | $8.57 | 0.41% | $1.48 | 17.27% | 1.96% |
| Taxable | BBY | BEST BUY CO INC COM USD0.10 | $87.27 | 2.70% | $2.20 | 2.52% | 1.91% |
| Roth | IRM | IRON MOUNTAIN INC COM USD0.01 | $26.10 | 0.68% | $2.47 | 9.48% | 1.81% |
| Roth | ARCC | ARES CAPITAL CORP COM | $14.45 | 0.58% | $1.60 | 11.07% | 1.80% |
| Roth | NEWT | NEWTEK BUSINESS SVCS CORP COM NEW | $18.22 | 0.54% | $2.15 | 11.80% | 1.80% |
| Taxable | ADM | ARCHER DANIELS MIDLAND | $39.90 | 1.64% | $1.44 | 3.61% | 1.66% |
| Taxable | LMT | LOCKHEED MARTIN CORP COM USD1.00 | $364.92 | 2.18% | $9.60 | 2.63% | 1.61% |
| Roth | OHI | OMEGA HEALTHCARE INVS INC | $29.73 | 0.64% | $2.68 | 9.01% | 1.61% |
| Taxable | NEE | NEXTERA ENERGY INC COM USD0.01 | $240.17 | 2.67% | $5.00 | 2.08% | 1.56% |
| Roth | T | AT&T INC COM USD1 | $30.23 | 0.67% | $2.08 | 6.88% | 1.29% |
| Taxable | AOS | SMITH A O CORP COM | $47.12 | 1.86% | $0.96 | 2.04% | 1.06% |
| Taxable | MSM | MSC INDUSTRIAL DIRECT CO INC | $72.81 | 0.87% | $3.00 | 4.12% | 1.01% |
| Roth | XOM | EXXON MOBIL CORP | $44.72 | 0.42% | $3.68 | 8.23% | 0.97% |
| Taxable | GD | GENERAL DYNAMICS CORP COM USD1.00 | $149.46 | 1.02% | $4.40 | 2.94% | 0.84% |
| Roth | TWO | TWO HBRS INVT CORP COM NEW | $5.04 | 0.22% | $0.56 | 11.11% | 0.68% |
| Roth | NRZ | NEW RESIDENTIAL INVT CORP COM NPV | $7.43 | 0.32% | $0.40 | 5.38% | 0.36% |
| Taxable | GOOGL | ALPHABET INC CAP STK CL A | $1,418.05 | 3.88% | $0.00 | 0.00% | 0.00% |
| Roth | APLE | APPLE HOSPITALITY REIT INC COM NEW | $9.66 | 0.37% | $0.00 | 0.00% | 0.00% |
| Roth | SKT | TANGER FACTORY OUTLET CTRS INC | $7.13 | 0.31% | $0.00 | 0.00% | 0.00% |
High, Medium and Low Yielding Companies
I thought about adding another chart ranking companies by dividend yield but decided I'd offer one which is more to the point. I wanted to calculate how much of what I own are what I will call high, medium, and low-yielding companies. I have no plans to do anything with this and may never, however if at some point I find myself in a bind when it comes to income I want to have an idea of what potential I have to convert to higher-yielding companies.
I hope I don't ever use this (much anyway, yield matters). I like owning AAPL, MSFT and GOOGL. But I need to know my options. My categories are:
- High Yield: 5% and above
- Medium Yield: 2%-4.99%
- Low Yield: Less than 2%
| Category | Companies | % Portfolio Value | % 12-month dividend income | Aggregate Yield |
| Low-Yield - <2% (6 companies) | AAPL, APLE, Cash, GOOGL, MSFT, SKT, UNH | 31.74% | 8.19% | .93% |
| Medium-Yield - 2-4.99% (16 companies) | ABBV, ADM, AOS, BBY, CVS, D, GD, GILD, ITW, LMT, MSM, NEE, NRZ, PFE, VZ, WSM | 47.17% | 45.37% | 3.46% |
| High-Yield - 5% and above (12 companies) | ARCC, CGBD, IRM, LYB, MO, NEWT, OHI, PM, T, TWO, VLO, XOM | 21.08% | 46.44% | 7.93% |
I like owning some growth. And I don't mind having a few sluggards like T, VZ, MO - adding more utes is a goal. I'm pretty OK with this.
Sector Weights, based on running a Fidelity portfolio analysis:
- Health Care - 24%
- Information Technology - 22%
- Communications Services - 13%
- Industrial - 12%
- Consumer Staples - 9%
- Utilities - 6%
- Materials - 3%
- Energy - 3%
- Financials - 2%
- Real Estate - 2%
I have no idea where the other 4% went - Fidelity didn't say. I don't do a lot with sector weights but I know some people do.
Here are previous portfolio updates in case you're interested. I only started doing quarterlies the second half of last year.
Now for the important stuff.
Second Quarter Performance
- Dividend increase over second quarter, 2019: 26.13%
- Dividend increase over first quarter, 2020: -3.01%
- January-June dividend increase over first six months of 2020: 33.46%
- Second Quarter change in overall portfolio value: 21.21%
- Second Quarter change in taxable account value: 21.19%
- Second Quarter change in Roth value: 23.08%
- Current overall portfolio yield: 3.64%
- Taxable account yield: 3.38%
- Roth yield: 8.53%
- Increase in projected 12 month dividend income from March 31, 2020: 1.18%
The 3% quarter over quarter decrease is a bit of a fooler as MSM paid a $5/share dividend in February. Without that the first and second quarter dividend income would be virtually equal - 2nd quarter would have been $3.77 higher than the first. Can you get a cup of coffee with that? Maybe from a truck stop. But it's not a complete illusion either. My dividend income had been showing very consistent quarterly increases since I started tracking it. Being flat isn't horrible but it also isn't great.
I do like the increase of 33% over the first six months of 2019. This pace won't hold up going forward though. In the first half of 2019 I converted WalMart (WMT) and Facebook (FB) into higher-yielding companies. Right now I'm looking at a 29.1% increase for the full year if I receive the same income for the second half of 2020.
March 31 was the low point, so far, for my 12-month projected dividend income. See this post for how I calculate this. This was down about 4% from February 28 so I partially recovered in the second quarter.
This is my favorite personal investing chart. Or at least the most useful for reminding me that I'm on track.
Dividend income by quarter:
Summary
The second quarter of 2020 wasn't great. Then again, it wasn't terrible. In a way it's probably a good thing that I'm getting to experience a recession before I retire. At the very least, the past few months have shown me that I don't completely suck at this and there is no reason to second-guess myself (much).
I have pretty much decided that RICs aren't for me. The bottom line when I really think about things is this: One of my investing metrics is to look for companies with a payout ratio of 70% or lower. By law, RICs can't achieve this - they are required to pay out 90% of their taxable income to shareholders. This means they are higher risk. The Roth account experiment was to find out if I felt I could read the tea leaves well enough for these to be 10-20% of my portfolio when I roll my 403b over to an IRA. Clearly, based on how my REITs have done since March 1, I can't. There are safer REITs but they typically have yields in the 3-4% range. I can buy companies with that yield where most of the dividends are not taxed as income. And when even a stalwart like Simon Property Group (SPG) cuts its dividend, none of them are, IMO, really "safe."
I expect all of my RICs to show price recovery with time. Once they do I'll be selling in favor of common stock companies.
Going forward I'll pretty much keep on keeping on. I'll use accumulated dividends to buy more dividend-payers and when I can I'll add cash though I expect this to be rare. The taxes I'm paying now are a little rough.
Correction: In my initial version I had the quarterly, not the annual, expected dividends for NRZ and TWO. These are such small positions that it didn't have a lot of impact on anything but I have now corrected this.
Happy Investing Everyone!
Analyst's Disclosure: I am/we are long all companies listed in the stock tables.
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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