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Thursday, September 1, 2016

Monthly Review: August 2016

Over the past couple of months I've been positioning DivGro for option trading. To do so, I increased the number of shares of several positions to 100 or multiples thereof. My goal is to boost dividend income by selling covered calls against several of the stocks I own, collecting option premiums in return.

I closed five positions this month and increased my holdings of three positions to 100 shares each, readying them for option trading. I also initiated a position in Cisco Systems, Inc (CSCO), a great candidate for option trading!

DivGro's projected annual dividend income (PADI) decreased further this month. Nevertheless, I'm on schedule goal-wise and I'm confident to reach my goal of $12,000 before year's end. Good news is that I've achieved my goal of earning $10,800 for 2016.

In August I executed several option trades, receiving option premiums totaling more than $1,100. Those options remain potential obligations until they expire or get exercised. I mark option income as secured income only when I no longer have the obligation against me. Please see my August 2016 options update for details.

In September, I'll continue to look for opportunities to execute option trades, specifically selling more covered calls.

August 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.

In the month of August, I recorded dividend income totaling $791. 19 different DivGro stocks paid dividends. The year over year increase for August is 41%. Including this month's total, I've collected dividend income of $11,248 this year.

DivGro's PADI decreased by 2.46% to $10,791 due to stock trades and dividend changes. I recorded 4 buys and 5 sells, while one stock announced a dividend increase.

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

Comparing dividend income by month is another way to see progress:


In August, I added shares to 3 existing positions:

• Dominion Resources, Inc (D)
• Kimberly-Clark Corporation (KMB)
• The Coca-Cola Company (KO)

Also, I opened the following position in DivGro:
• Cisco Systems, Inc (CSCO)

Lastly, I closed the following positions:

• Deere & Company (DE)
• Digital Realty Trust, Inc (DLR)
• Dr Pepper Snapple Group, Inc (DPS)
• HCP Inc (HCP)
• Macquarie Infrastructure Company LLC (MIC)

As a result of these transactions, DivGro's PADI decreased by $300.

Dividend Changes

The following stock announced a dividend increase:

• Macquarie Infrastructure Company LLC (MIC)

DivGro's PADI increased by $14 due to this dividend change.

Dividends Received

I received dividends from 19 different stocks this month, for a total of $791 in dividend income:

• Apple Inc (AAPL) – $57.00
• AbbVie Inc (ABBV) – $45.60
• Caterpillar Inc (CAT) – $46.20
• Deere & Company (DE) – $18.00
• Eaton Vance Tax-Managed Global Diversified Equity Income Fund (EXG) – $49.76
• General Dynamics Corporation (GD) – $26.60
• HCP Inc (HCP) – $94.88
• Main Street Capital Corp. (MAIN) – $41.40
• Macquarie Infrastructure Company LLC (MIC) – $87.50
• Nuveen Premium Income Municipal Fund 2 (NPM) – $23.28
• Realty Income Corporation (O) – $9.98
• Omega Healthcare Investors, Inc (OHI) – $84.00
• The Procter & Gamble Company (PG) – $21.42
• Raytheon Company (RTN) – $17.58
• STAG Industrial Inc (STAG) – $27.80
• AT&T Inc (T) – $72.00
• Toronto-Dominion Bank (TD) – $25.25
• Texas Instruments Inc (TXN) – $22.80
• United Parcel Service, Inc. (UPS) – $19.50


Even though I'm no longer comparing DivGro's performance to market indices, its useful to understand the environment we're investing in:

Jul 31, 2016
DOW: 18,432.24S&P 500: 2,173.60NASDAQ: 5,162.1310-YR BOND: 1.46%
Aug 31, 2016
DOW: 18,400.88S&P 500: 2,170.95NASDAQ: 5,213.2210-YR BOND: 1.57%

In August, the DOW dropped -0.17%, the S&P 500 dropped -0.12%, and the NASDAQ gained 0.99%. Yield on the benchmark 10-year Treasury note rose to 1.57%.

Below are charts showing the market activity of these indices in August, 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

This month, DivGro's market value increased by 0.75% to $331,373. Compared with August 2015's market value of $148,837, the year over year increase is 123%.

Market ValueCash DepositsSimple Return
Aug 31, 2015
Jul 31, 2016
Aug 31, 2016

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 $331,373, my portfolio has delivered a simple return of 19.08% since inception. In comparison, DivGro's IRR (internal rate of return) is 11.54%. (IRR takes into account the timing and size of deposits since inception, so it is a better measure of portfolio performance).


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

I track yield on cost (YoC) for individual stocks, as well as an average YoC for my portfolio. DivGro's average YoC decreased from 4.48% last month to 4.29% this month.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 9.73%, up from last month's 9.60%.

Finally, DivGro's projected annual yield is at 3.88%, down from last month's value of 4.00%. I calculate projected annual yield by dividing PADI ($10,791) by the total amount invested ($278,284).

Goals Review

I've set some challenging goals this year:
  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 244 out of 366 days:

Goods news this month is that I've achieved my goal of earning $10,800 in dividend income in 2016. Some of this income comes from dividends transferred during my portfolio consolidation process, but I planned for those when I originally set the goal. DivGro's PADI took a bit of a hit this month, though I remain on schedule. The one goal that is still lagging is DivNet. I'll try to submit a couple of articles to The DivNet this month.

Looking Ahead

I continue to hold a large portion of my portfolio in cash, some 15%. With my focus currently on preparing DivGro for options trading, I'll see if there are opportunities to round out more positions for options trading. I'm also hoping to sell a few more of the weaker positions in September. With several positions now ready for option trades, I'm looking forward to selling some more covered calls in September. Volatility increased a bit this month (see the CBOE market volatility index VIX) but remains very low, 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! How did your portfolio perform last month? Please comment below.


  1. Congrats on another record-beating month Ferdi. I love how many different numbers, graphs and tables you tell us about - really gives us a big insight into your numbers. $791 is awesome for 1 month, we'll be extremely lucky to get that amount over the next tax year.


    1. Hi Dividends Down Under -- thanks for visiting and for your kind words. When I started just over 3.5 years ago, I didn't think this kind of income would be possible at this time. Just hang in there and keep at it -- the dividend snowball will get larger quickly!

  2. I love the Monthly Market Value Breakdown chart - Impressive way to show the data and your progress over time. Good stuff. I also think you're "doing more" with your portfolio size and achieving better results than most people in terms of income and total return. I'm trying to do the same thing with my RE component. Keep it up!

    1. Thanks, Passive Income Dude! I enjoyed creating that chart, but its definitely not my idea... I saw it on another DGI blogger's page. I like how it presents the changes over time. As for my portfolio, I'm happy with how things are going, but I've made some mistakes along the way that I'm still paying for. The important thing is to learn from those mistakes and try not to repeat them.

      All the best and thanks for visiting and commenting!

  3. Great update Ferdi. Congrats on hitting you annual dividend goal. With 4 months to go this year, that number will be absolutely crushed. I really like the consolidation moves you're making. Next year your total income, dividend and options should be really impressive. Nice work sir.

    1. Thanks, Investment Hunting! I'm looking forward to seeing where the dividend total can end this year! Hopefully, the adjustments I made to the portfolio will start paying off. I'll be boosting the dividend income with option premiums, so that should really top things up nicely!

      Thanks for visiting and commenting!

  4. Looks like more good numbers in your favor this month. I really like your 'monthly market value breakdown' chart. I should start using something like that. My last two months have my portfolio seeing red since REIT's & utilities have been coming off of their highs since early July. Thanks for the update.

    1. Thanks Captain! As I mentioned, the monthly breakdown chart was something I saw on another blog. It took a while to figure out how to do it, and I'm quite happy with the result. You're right about REITs and utilities pulling back! I'm curious to see where this market is heading!

      Thanks for commenting and all the best!

  5. Looks like a great month for you DivGro. I like that you're getting into options heavier and I hope to move that way a bit more myself. I closed one position today and am looking at closing a few others to then roll that cash into options on DGI companies. Maybe September will bring some more volatility to boost up those option premiums for you.

    1. Hi Passive IncomePursuit! Usually volatility kicks up in late September and into October, so yeah -- I hope that translates into higher option premiums. It would be cool to see more DGIs go with options. I think we can learn from each other! All the best and thanks for visiting and commenting!

  6. That is a nice portfolio that you have working for you. I like how your maximizing the income potential of your portfolio. I look forward to seeing how your options income helps boost your dividend income. Keep up the good work and thanks for sharing!

    1. Thanks, More Dividends! It would be interesting to see how adding the options strategy would affect my portfolio's income generating capacity. I've seen some comments on Seeking Alpha essentially warning me not to pursue this strategy. I'm forging ahead, though. The next few years will tell me if those warnings were warranted!

  7. Good Job, love the visual chart it's very detailed. Congratulation on hitting your annual dividend goal you're well ahead of the game.

    1. Hi Jay -- thanks for reading and commenting. I appreciate visuals because they often communicate so much better than words! I'm thrilled to have achieved my annual dividend goal in August. Perhaps next year's goal should be a little more stretching!

  8. The short time you built up this portfolio always amazes me. Your YOC is impressive as well. In ten years that will double and you will be ready for retirement.

    1. Thanks Dividend Family Guy! We're blessed to be in this position. Opportunity. Hard work. Frugality.

      I have an unrealistic goal of reaching a YoC of 12% in 10 years. Certainly, that goal is not out of the question for individual dividend growth stocks held for 10 years. But the portfolio as a whole wont get there in 10 years.

  9. Haven't seen you mention Eaton Vance Tax-Managed Global Diversified Equity Income Fund before. Seems the dividend was cut previously - is this an opportunistic play?

    1. Hi Alex, you probably missed it. Please see:

      EXG is a closed-end fund that seeks to minimize and defer taxes. It started paying monthly dividends in 2013. Prior to that, the dividends were paid quarterly.

      You're right about the cut. In 2012, EXG paid 28.43¢ per quarter before dropping to 24.4¢ per quarter.

      I don't consider my investment in EXG opportunistic. The fund has a nice yield (11.23% presently). Additionally, EXG has exposure to foreign common stocks (about 45%) which increases my diversification a bit. I also like the fact that it pays monthly dividends and, because it write calls against holdings, the option premiums help shield performance from market declines.

      Hope that clarifies my motivation for owning EXG.


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