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:


Transactions

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

Markets

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: 18,432.24 S&P 500: 2,173.60 NASDAQ: 5,162.13 10-YR BOND: 1.46%
Aug 31, 2016	DOW: 18,400.88 S&P 500: 2,170.95 NASDAQ: 5,213.22 10-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 Value Cash Deposits Simple Return
Aug 31, 2015	$148,836.99 $145,787.00 2.09%
Jul 31, 2016	$328,891.03 $276,284.25 19.04%
Aug 31, 2016	$331,373.20 $278,284.25 19.08%

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).

Portfolio

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.