November Portfolio Review - A Dividend Bonanza!
Seeking Alpha Analyst 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 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. Beyond occasional sales to make up my dividend income gap I will do little trading in 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. I take dividends as cash 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 3/2/23:
- Taxable Account: ABBV, BBY, BLK, CVS, GD, ITW, LMT, LYB, MO, MSFT, NEE, PM, TROW, UNH, WHR, WSM
- Roth: AAPL, ABBV, AMD, AMZN, BBY, BMO, CM, CRM, DG, GOOGL, KLAC, LCID, LOW, LRCX, META, MSFT, MU, NVDA, PYPL, QSR, SBUX, TGT, TSLA, WSM
- TIRA: AAPL, ABBV, ADBE, AMAT, ANTM, AOS, BBY, BMO, CM, CMI, DG, DT, F, FAF, GM, GOOGL, KLAC, LOW, LRCX, MU, PYPL, QSR, RY, SHW, TD, TGT, TROW, TSCO, 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%. With withdrawals, conversions, taxes, etc., tracking returns for 2022 and beyond is enough of a headache that I've quit doing it. Things seem to be holding up well for funding my retirement.
*Does not include the IRA
Summary
- Introduction.
- Trades made and dividends received.
- Plans going forward.
Introduction
Just to take note, this is SA post 100 since I started blogging in August, 2018.
This is my real-world portfolio I plan to retire on within 2-3 years, intending to live entirely off dividend income. The bulk is in a taxable account but I have a small amount in a Roth. At this point I have 34 stocks. You can find the complete list at the bottom of this post.
Probably the best - but quite long - overview of my investing goals and how I go about selecting companies is this post: Doing the "Deep Dive" for My Next Potential Stock Purchase.
November was a fantastic dividend month and not because of the amount of income received though this was nothing to sneeze at. I'll cover it in more detail further on but for the first time since March it feels like I made real progress. I know the lack of progress this year is an illusion - I've done better than a lot of people over the past 8 months and treading water, more or less, when things are rough is part of it. But in November the numbers turned positive.
The 10.8% value gain was nice. I knew things went up but was surprised when I ran the numbers and saw by how much. No wonder it's hard to find stocks to buy! My REITs finally started to move though I'm still down by about 27% for the year in my Roth.
This one's a little long. A lot to talk about and some celebrating mixed in.
Here's a quick numbers summary:
- Number of buys: 2
- Number of sells: 1
- Dividend increase over November, 2019: 18.00%
- Dividend increase over August, 2020: 12.23%
- October change in overall portfolio value: 10.82%
- October change in taxable account value: 10.34%
- October change in Roth value: 19.87%
- Current overall portfolio yield: 3.29%
- Taxable account yield: 3.03%
- Roth yield: 7.94%
- Increase in annual (12-month) projected dividend income from October 31, 2020: 2.00%
Trades Made and Dividends Received
Trading Activity:
- 11/5/20 - Bought Philip Morris (PM) for $71.50 per share
- 11/17/20 - Viatris (VTRS) spinoff from Pfizer (PFE)
- 11/19/20 - Sold VTRS for $16.50 per share
- 11/27/20 - Bought Johnson & Johnson (JNJ) for $144.42 per share
Dividends Received:
- 11/2/20 - CVS Health (CVS)
- 11/2/20 - AT&T (T)
- 11/2/20 - Verizon (VZ), increase from $.615 to $.6275 per share
- 11/12/20 - Apple (AAPL)
- 11/13/20 - General Dynamics (GD)
- 11/16/20 - AbbVie (ABBV)
- 11/16/20 - A.O. Smith (AOS), increase from $.24 to $.26 per share
- 11/16/20 - Omega Healthcare (OHI)
- 11/24/20 - MSC Industrial Direct (MSM)
- 11/27/20 - Williams Sonoma (WSM), increase from $.48 to $.53 per share
The Trades:
Nothing complicated about any of these.
Buying PM. I had some cash left from my tax loss sale of Valero (VLO) and Exxon-Mobil (XOM) on September 25. Initially I thought I'd buy XOM back in my taxable account and not miss a dividend. After some thought, due to my having concerns about the dividend, I decided it would be a better stock for my Roth. PM was trading under my price of $75 so I went with it.
Buying JNJ. For some reason my first JNJ buy left me about 5 shares short of my usual $5k purchase. I honestly don't recall why though I suspect I wanted to keep enough cash to buy back all of the XOM I'd recently sold. Anyway, I picked up 5 shares at what I consider a very reasonable price. Was a little out of character for me to spend $700 on a trade. Truly a nibble. I picked it up right after ex-div so I'll have to wait a bit for that $5.05 to hit my accounts.
Selling VTRS. I never really wanted Viatris. I'm not a big believer in generic pharma as a rule but I was willing to hold it for a bit. But I didn't realize the spinoff amount would be so darn little. After some thought - not much - I decided that I didn't want to spend my time messing around with something which a) was about a half of my normal buy and b) was unlikely to be something I'd want more of. So I sold. As usual I could have waited and gotten more but I was working, very busy, and the couple hundred bucks or whatever I could have gotten was not even worth the time I'd have spent that day on it.
In essence I treated VTRS as a PFE special dividend. Not for accounting purposes - it's not in any of my dividend numbers - but that's how I decided to manage it. Plus it will make it easier to transfer $7k to the Roth in January.
The Dividends:
OK, it's cartwheel time. Or some other bendy/limberish thing my body can no longer safely perform. The dollar figure was nice - all-time high for dividends in a month if you discount the MSM special paid in February. But the celebration comes from two things.
First were the increases. VZ gave me the usual sluggard minimal increase, fine, unsurprising. But I honestly thought AOS would give a penny a quarter this year and I sure wasn't looking for over 10% from WSM. So that's a cartwheel.
Now for the backflip. I've mentioned before that I have built a spreadsheet to track my expected dividends going forward. The final bullet point in my numbers summary indicates how this changes month to month. This spreadsheet uses the number of shares I have times annual dividend for the 12-month numbers. For subsequent years I take the historical 5-year DGR for each company, balance it to account for how much I own of each company, and use this to provide an expected portfolio annual dividend growth rate (as well as absolute dollar figures).
Early in 2020 this number was much higher. This is something I don't really track but have a sense of. However the figure 9.80% sticks in my mind. As the year went on, as some companies cut and others did not announce their usual raises, this dropped. This has happened each month since March. November was finally the turnaround. Early in the month it was at 8.13%. Today, after seeing that WSM's above-expected increase raised its 5-year DGR from in the 6.5% range (should have jotted it down) to 8.65%, my portfolio 5-year DGR is now 8.44%. In absolute figures this is not a lot. From the perspective of my mindset it's HUGE. Let me restate this: HUGE. Things are finally, after a (to me, market vets will chuckle at the newbie) long time, heading in the right direction.
The climb ahead was never this steep but at times it felt like it
Where this really shows up is in future years. Because of the higher DGR, my expected income in November of year 5 is 3.52% higher than it was in October, not the projected 2% gain for the next 12 months.
As a side note, with the 2% increase in my projected 12-month income I'm within .67% of my all-time high projection from the beginning of March. Will I get there in December? Hard to say but if I don't I almost certainly will in January.
Maybe two backflips. Ow, strained something just thinking about it. Virtual backflips.
Plans Going Forward
I intend to let cash build to transfer it into my Roth after January 1. There are a couple of companies trading at or below my buy levels but prices would need to be much more attractive before I'll use my Roth-targeted-cash to buy something in my taxable account. Over Thanksgiving I ran my screen for the first time since last December. While this gave me some new ones to look at, no companies jumped out at me.
The Qualifier. Always have to have one of these. I have about $13k more in tax loss sales than I can use for my 2020 taxes. So I could trim something to take care of that. I only have two candidates; AAPL and Alphabet (GOOGL). On the surface GOOGL would seem the logical choice as it does not pay a dividend. But I'd probably trim AAPL simply because it's nearly 14% of my portfolio. The combination of a very low yield and two years of tepid dividend increases is a factor too. It would be less than 10% of what I own so I'd still have plenty.
Or maybe two qualifiers. There are companies in my Roth approaching levels where I'll at least think about selling. Even though I really like Apple Realty (APLE) it hasn't given me a dividend since February and I'm only down about 15% on it. Tangier Factory Outlet Centers (SKT) and New Residential (NRZ) at $10 at least get a look. And I'll sell OHI at $40. I barely noticed a nearly 20% rise in my Roth which can happen when an account is under 3% of your total holdings.
If I buy something, at today's prices I'd say Johnson and Johnson (JNJ) tops the list as I only have the one full purchase. GD is also a "onesie" and trading at a decent level. Lockheed-Martin (LMT), Gilead (GILD) and Pfizer (PFE) are also at good buy levels. PM is not far off either. And all three of my full positions - ABBV, Altria (MO) and T remain at good buy levels but not my "go overweight" levels.
But I could also do a loss carry forward.
Summary
This was my most positive portfolio month in a while - very possibly for the entire year. My projected portfolio DGR heading back up is big. So yeah - REALLY good month.
It was also my highest dividend month ever. That would have been nice but now it's a footnote. The portfolio value also popped which I never hate though I pay less attention to this, plus I think the market still has its Goldilocks glasses on.
December looks to be a solid income month though I was expecting a decline due to the XOM and VLO - December payers - sales. But MSM announced a $3.50/share special dividend. I'm going to look pretty closely at their balance sheet next year but for the near-term, I know what to do when someone gives me money. And because I can't resist blabbing, if - and they've all announced - the December dividends come in as expected, my total dividends for 2020 will be 30.25% over what I received in 2019.
I hope you all had an enjoyable Thanksgiving (if you're not from the US, this is National Gluttony Day) and have a wonderful holiday season.
Happy investing everyone!
I am long: AAPL, ABBV, ADM, AOS, APLE, ARCC, BBY, CGBD, CVS, DUK, GD, GILD, GOOGL, IRM, ITW, JNJ, LMT, LYB, MO, MSFT, MSM, NEE, NEWT, NRZ, OHI, PFE, PM, SKT, T, TWO, UNH, VZ, WSM, XOM.
Analyst's Disclosure: I am/we are long All companies listed at the end of this post.
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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