Wednesday, October 5, 2016

Monthly Review: September 2016

Over the past three months, I've closed no fewer than 14 positions in my DivGro portfolio. I've used some of the cash to round out the number of shares of several positions to 100 or multiples of 100. The reason is I'm implementing a strategy to boost dividend income by writing covered calls against the stocks I own.

This month, I closed one more position and increased another position to 100 shares, ready for covered call trading. I also increased the number of shares of two other positions, although I'm not planning to write covered calls one those positions.

The net result of my trades in September is that DivGro's projected annual dividend income (PADI) increased by about $531, reversing the downward trend of the last two months. I'm on schedule to achieve my goal of increasing PADI to $12,000 before year's end.

In September, I executed several options trades, boosting my total options income by just more than $1,500. Of course, these options are potential obligations until they expire or get exercised. I mark option income as secured income only when I no longer have that obligation against me. Please see my September 2016 options update for details.

In October, I plan to transfer several of my DivGro positions to another account in which I can trade options. Currently, a fairly large percentage of my DivGro positions are in an account that does not allow options trading.

September Highlights

The main goal of DivGro is to generate a growing dividend income stream. That's why I like to review my dividend income and any changes that would affect future payments.

I received dividend income of $1,177 from 30 DivGro stocks in September, for a year to date total of $12,496. Dividend income increased 54% over the total received in September 2015.

Projected annual dividend income (PADI) is the total dividend income I expect to receive in the next 12 months. DivGro's PADI increased by 4.93% to $11,307 due to stock trades and dividend changes. I recorded three buys and one sell, while four companies announced dividend increases and one paid a reduced dividend.

The following chart plots DivGro's projected monthly dividend income (red line) against monthly dividends:


Lining up dividend income by month is informative and shows year over year progress nicely:


Transactions

In September, I added shares to 3 existing positions:

• Eaton Vance Tax-Managed Global Diversified Equity Income Fund (EXG)
• Omega Healthcare Investors, Inc (OHI)
• Union Pacific Corporation (UNP)

Additionally, I closed the following position:

• Texas Instruments Inc (TXN)

As a result of these transactions, DivGro's PADI increased by $506.

Dividend Changes

The following stocks announced dividend increases:

• Lockheed Martin (LMT)
• Realty Income Corp. (O)
• Altria Group Inc. (MO)
• Microsoft Corp. (MSFT)

The following stock paid a smaller dividend:

• BHP Billiton plc (BBL)

DivGro's PADI increased by $25 due to these dividend changes.

Dividends Received

I received dividends from 30 different stocks this month, for a total of $1,147 in dividend income:

• AFLAC Incorporated (AFL) – $20.50
• BHP Billiton plc (BBL) – $28.00
• Cummins Inc (CMI) – $45.10
• Dominion Resources, Inc (D) – $70.00
• Eversource Energy (ES) – $26.70
• Ford Motor Company (F) – $90.00
• Gilead Sciences, Inc (GILD) – $47.00
• Helmerich & Payne Inc. (HP) – $49.00
• International Business Machines Corporation (IBM) – $42.00
• Intel Corporation (INTC) – $26.00
• Intel Corporation (INTC) – $31.20
• Johnson & Johnson (JNJ) – $24.00
• Johnson & Johnson (JNJ) – $19.20
• Lockheed Martin (LMT) – $23.10
• Main Street Capital Corp. (MAIN) – $41.40
• McDonald's Corp. (MCD) – $24.03
• 3M Company (MMM) – $17.76
• Microsoft Corp. (MSFT) – $28.80
• AGIC Equity&Convertible Income Fund (NIE) – $112.48
• Northrop Grumman Corporation (NOC) – $14.40
• Nuveen Premium Income Municipal Fund 2 (NPM) – $23.28
• Realty Income Corp. (O) – $10.08
• Pfizer Inc (PFE) – $30.00
• Qualcomm Inc (QCOM) – $53.00
• STAG Industrial Inc (STAG) – $27.80
• Target Corporation (TGT) – $24.00
• T. Rowe Price Group, Inc (TROW) – $35.10
• Valero Energy Corporation (VLO) – $43.20
• Walgreens Boots Alliance, Inc (WBA) – $16.50
• Wells Fargo & Co (WFC) – $20.52
• Wal-Mart Stores, Inc (WMT) – $17.00
• Wal-Mart Stores, Inc (WMT) – $17.50
• ExxonMobil Corporation (XOM) – $48.75

Duplicate entries are for dividends received from different accounts.

Markets

It is worth looking at the markets to understand the environment we're investing in, even though I no longer compare DivGro's performance to those of the markets:

Aug 31, 2016
DOW: 18,400.88S&P 500: 2,170.95NASDAQ: 5,213.2210-YR BOND: 1.57%
Sep 30, 2016
DOW: 18,308.15S&P 500: 2,168.27NASDAQ: 5,312.0010-YR BOND: 1.61%

In September, the DOW dropped -0.50%, the S&P 500 dropped -0.12%, and the NASDAQ gained 1.89%. The yield on the benchmark 10-year Treasury note rose to 1.61%.

Below are charts showing the market activity of these indices in September, courtesy of Google Finance. (Click on the charts to see detail). Each chart shows a 20-period exponential moving average (in red). I've also included a 20-period relative strength index below the main chart.


Market Value

In September 2016, DivGro's market value increased by 1.05% to $334,849. Year over year, market value increased by 128%.

Market ValueCash DepositsSimple Return
Sep 30, 2015
$146,706.62$148,287.00-1.07%
Aug 31, 2016
$331,373.20$278,284.2519.08%
Sep 30, 2016
$334,849.23$280,764.3019.26%

Here's a chart showing DivGro's market value breakdown. Dividends are plotted at the base of the chart so we can see them grow over time.


Given the current market value of $334,849, my portfolio has delivered a simple return of 19.26% since inception. In comparison, DivGro's IRR (internal rate of return) is 11.16%. (IRR takes into account the timing and size of deposits since inception, so it is a better measure of portfolio performance).

Portfolio


Here is a snapshot of DivGro's state on the last day of September 2016:


I track yield on cost (YoC) for individual stocks, as well as an average YoC for my portfolio. DivGro's average YoC increased from 4.29% last month to 4.35% this month.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 9.89%, up from last month's 9.73%.

Finally, DivGro's projected annual yield is at 4.03%, up from last month's value of 3.87%. I calculate projected annual yield by dividing PADI ($11,307) by the total amount invested ($280,764).

Goals Review

I've set some challenging goals for 2016:
  1. PADI: Increase projected annual dividend income to $12,000
  2. Dividends: Earn $10,800 in dividend income
  3. Dividends: Write 120 articles for DivGro
  4. Seeking: Write 52 premium articles for Seeking Alpha
  5. DivNet: Write 8 articles for The DIVNet
Here is a set of gauges representing the progress I've made towards achieving these goals. The last gauge is a reference – it indicates where the other gauges should be after 274 out of 366 days:


I've achieved my goal of earning $10,800 in dividend income in 2016 and I'm very close to achieving three other goals. I managed to write one article for The DivNet this month, but I'm still lagging on my DivNet goal for 2016.

Looking Ahead

I have 14% of my portfolio in cash. My focus remains on preparing DivGro for options trading. The next step is to transfer several of my DivGro positions to another trading account in which I can trade options. Currently, I hold a fairly large percentage of my portfolio in an account that does not permit options trading. I'm considering transferring these positions to Interactive Brokers, mainly because I like to remain diversified and because Interactive Brokers have low commission rates for options trades. In the process of transferring, I'll use available cash to round out more positions for options trading. Volatility remains very low (see the CBOE market volatility index VIX), so option premiums are not so high at the moment.

Please see my Performance page for various visuals summarizing DivGro's performance.

Thanks for reading and take care everybody!

10 comments :

  1. Incredible DivGro! I only hit over $1k once a year (in December) and you've done it several times this year ALREADY. Very impressive.

    My goal is $10K this year, and I think I will fall a few hundred dollars short, unfortunately. But my goal for next year is $15k. That, without a doubt, is going to be a stretch, but I think it is possible. Take care and keep it up,

    ReplyDelete
    Replies
    1. Hi, Passive Income Dude -- thanks for reading and commenting!

      It is great to receive $1k in dividends per month and I'm looking forward to doing that sustainably every month. With my current portfolio constitution, that would require an increase of about 20% in projected dividend income (and portfolio size), so it'll take a while to get there...

      I like stretching goals -- there's little to gain by setting goals that are easy to achieve!

      Take care and happy investing!

      Delete
  2. Great month FerdiS. I like how you have taken your time in implementing your new strategy. I think this will greatly improve your returns in the long run. This was a great article and I appreciate you sharing it. I hope that all has been going good for you.

    ReplyDelete
    Replies
    1. Thanks, More Dividends -- I think it is important to take things one step at a time... I have lots to learn from yet! Thanks for visiting and commenting and all the best to you with your investments!

      Delete
  3. WOW! Nice work! That's an exciting amount to receive!

    I really like your total dividends received chart as a percentage of the portfolio value. That's a great way to demonstrate the power of this type of investing. Mind if I borrow that concept?

    Keep up the fantastic work!

    Blake

    ReplyDelete
    Replies
    1. Hi Blake -- thanks for your kind words!

      You're very welcome to borrow any ideas from my blog -- its the least I can do having learned so much from this community myself!

      All the best and happy investing!

      Delete
    2. +1 to dividends received idea, really like that graph. Congrats btw, great income and your growth is super.

      Delete
    3. Thanks for your kind words, MrSLIM!

      Delete
  4. Awesome month DivGro! Over $1.1K in dividend from 30 different companies is impressive. Love seeing the progress and success enjoyed by fellow DGI investors. Look forward to seeing how you finish up the year!

    Best wishes and continued success. AFFJ

    ReplyDelete
    Replies
    1. Hi AFFJ -- I just love quarter-ending months! Those are BIG for DivGro! I can't believe we're talking about finishing up the year already! All the best to you and your family and happy investing!

      Delete

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