Thursday, April 27, 2017

Quarterly Review, Q1-2017

Welcome to my 17th quarterly review of DivGro, my portfolio of dividend growth stocks. I adopted the strategy of dividend growth investing (DGI) just more than four years ago after being inspired by several do-it-yourself DGI bloggers. It has been quite a journey!

My quarterly reports summarize the actions I've taken during the preceding quarter. I include summaries of dividends received and I report on changes that would impact future dividend income.

In the first quarter of 2017, I transferred our trust account from Scottrade to Interactive Brokers, which provides a more flexible trading platform and lower commissions. I'm taking additional consolidation actions, including transferring our IRAs to FolioInvesting where I'll be managing them as part of DivGro.

I have aggressive goals for 2017, including a new goal of boosting DivGro's dividend income through options trading. I'm hoping to earn $8,400 in options income and use the money so generated to buy more dividend growth stocks.

In Q1-2017, I collected option income totaling $3,243, compared with Q4-2016's total of $4,485. While it seems like I'm well on my way of achieving my options income goal for 2017, I only count options income for closed or expired trades. I call such options income secured because I no longer have potential obligations to fulfill. So far in 2017, I've managed to secure $2,318 in options income, or 28% of my $8,400 goal.

Dividend Income


The following chart illustrates DivGro's dividend income by quarter:


This past quarter, I collected dividend income totaling $3,585, topping last quarter's total by 23.8%. I'm particularly happy with the increase from Q1-2016 of 65.7%. Also, I recorded past dividend income in the amount of $1,245, which are from stocks in our IRA's.

DivGro's average percentage payback is 10.55%, up from 9.85% at the end of Q4-2016. Percentage payback relates total dividend income to the total amount of capital invested.

Transactions


This quarter I deposited $3,000 in new capital, $1,451 in passive income, and $3,243 in options income.

"Passive" income is a bit of a misnomer, as I'm actively working on writing articles for  DivGro and Seeking Alpha. Nevertheless, the income associated with these activities is not guaranteed but depends largely on my readership. (Thanks!)

Additionally, I recognized $16,005 in consolidation cash deposits and $5,280 in past cash deposits. These terms need a little explanation. Consolidation cash is simply the cash available in the IRA's that now will be managed as part of DivGro. For stocks in the IRA's that I decided to keep, such as UnitedHealth Group (UNH), Verizon Communications (VZ), and Xcel Energy Inc (XEL), past cash represents the initial cash outlay to buy these stocks.

Following is a summary of my buys in Q1-2017. New positions are highlighted:

Company
 Ticker
 Date 
Transaction
AGIC Equity & Convertible Income Fund
 NIE
 4 Jan
 added 75 shares at $18.74 per share 
Wal-Mart Stores, Inc
 WMT
 14 Jan
 transferred 9 shares at $56.96 per share
Microsoft Corporation
 MSFT
 16 Jan
 transferred 60 shares at $27.80 per share 
Qualcomm Inc
 QCOM
 7 Feb
 added 200 shares at $53.06 per share 
T. Rowe Price Group, Inc
 TROW
 10 Feb
 added 35 shares at $69.38 per share 
Xcel Energy Inc
 XEL
 24 Feb
 transferred 26 shares at $19.39 per share 
Verizon Communications
 VZ
 24 Feb
 transferred 16 shares at $28.96 per share 
AT&T Inc
 T
 24 Feb
 transferred 19 shares at $25.89 per share 
Xcel Energy Inc
 XEL
 24 Feb
 added 24 shares at $43.34 per share 
Verizon Communications
 VZ
 24 Feb
 added 84 shares at $50.46 per share 
Stanley Black & Decker, Inc
 24 Feb
 bought 50 shares at $127.16 per share 
General Electric Company
 1 Mar
 bought 300 shares at $31.00 per share 
AGIC Equity & Convertible Income Fund
 17 Mar
 added 179 shares at $19.13 per share 
Main Street Capital Corporation
 17 Mar
 added 120 shares at $37.35 per share 
Vanguard High Dividend Yield ETF
 17 Mar
 bought 150 shares at $78.97 per share 
UnitedHealth Group
 25 Mar
 transferred 19 shares at $85.98 per share 

I closed several positions and reduced the number of shares in one case, either by choice or due to option assignment:

Company
 Ticker
 Date 
Transaction
PennantPark Investment
 PNNT
9 Feb
 sold 785 shares for $8.27 per share 
Reynolds American, Inc
 RAI
17 Feb
 sold 100 shares for $52.50 per share 
Kimberly-Clark Corporation
 KMB
 7 Mar
 sold 100 shares for $120.00 per share 
Nuveen AMT-Free Quality
Municipal Income Fund
 NEA
 14 Mar
 sold 359 shares for $12.95 per share 
Eaton Vance Tax-Managed Global
Diversified Equity Income Fund
 EXG
 14 Mar
 sold 724 shares at $8.38 per share

DivGro now contains 48 different positions, including 46 stocks, one closed-end fund (CEF), and one exchange-traded fund (ETF). Here is the distribution of DivGro's holdings by sector:


I'm showing CEFs and ETFs as "sectors" even though they're funds.

Dividend Adjustments


Last quarter, I reported projected annual dividend income (PADI) of $12,376 on investments totaling $286,854, for a projected annual yield of 4.31%. This quarter, PADI increased to $12,607 and total investments increased to $312,590, so now projected annual yield is 4.03%.

The following table shows the stocks in my DivGro portfolio that announced dividend increases in Q1-2017. I'm including the new annual dividend and yield on cost (YoC).

Company
 Ticker
Increase Annual Div
 New YoC
Cisco Systems, Inc
 CSCO
$1.16
3.83%
Dominion Resources, Inc
D
 $3.02 
4.14%
Eversource Energy
 ES
$1.90
4.63%
General Dynamics Corporation
 GD
$3.36
4.97%
Gilead Sciences, Inc
 GILD
$2.08
2.20%
Coca-Cola Company
 KO
$1.48
3.58%
Intel Corporation
 INTC
$1.09
4.68%
3M Company
 MMM
$4.70
2.94%
Realty Income Corporation
 O
$2.53
$2.53
5.35%
Omega Healthcare Investors, Inc
 OHI
$2.48
6.63%
Raytheon Company
 RTN
$3.19
2.97%
STAG Industrial, Inc
 STAG
0.71%
$1.40
7.60%
AT&T Inc
 T
2.08%
$1.96
6.02%
T. Rowe Price Group, Inc
 TROW
$2.28
3.07%
United Parcel Service, Inc
 UPS
$3.32
3.26%
Valero Energy Corporation
 VLO
$2.80
4.55%
Wal-Mart Stores, Inc
 WMT
$2.04
2.84%

DivGro's average YoC is 3.98%, down from the 4.26% reported at the end of Q4-2016.

I received dividends from 50 different stocks this month:
  1. Apple Inc (AAPL) :: $57.00
  2. AbbVie Inc. (ABBV) :: $128.00
  3. Aflac Incorporated (AFL) :: $21.50
  4. Chubb Limited (CB) :: $16.56
  5. Cummins Inc (CMI) :: $45.10
  6. Cisco Systems, Inc. (CSCO) :: $78.00
  7. Dominion Resources, Inc (D) :: $75.50
  8. The Walt Disney Company (DIS) :: $177.06
  9. Eversource Energy (ES) :: $28.50
  10. Eaton Vance Tax-Managed Global Diversified Equity Income Fund (EXG) :: $117.72
  11. Ford Motor Company (F) :: $200.00
  12. General Dynamics Corporation (GD) :: $26.60
  13. Gilead Sciences, Inc (GILD) :: $52.00
  14. International Business Machines Corporation (IBM) :: $42.00
  15. Intel Corporation (INTC) :: $57.20
  16. Johnson & Johnson (JNJ) :: $43.20
  17. Kimberly-Clark Corporation (KMB) :: $92.00
  18. Lockheed Martin (LMT) :: $25.48
  19. Main Street Capital (MAIN) :: $183.15
  20. McDonald's Corporation (MCD) :: $25.38
  21. 3M Company (MMM) :: $18.80
  22. Altria Group, Inc. (MO) :: $45.75
  23. Microsoft Corporation (MSFT) :: $331.60
  24. Nuveen AMT-Free Quality Municipal Income Fund (NEA) :: $44.52
  25. AGIC Equity & Convertible Income Fund (NIE) :: $253.46
  26. Nike Inc (NKE) :: $8.46
  27. Northrop Grumman Corporation (NOC) :: $14.40
  28. Realty Income Corporation (O) :: $31.19
  29. Omega Healthcare Investors, Inc (OHI) :: $186.00
  30. Pfizer Inc (PFE) :: $96.00
  31. The Procter & Gamble Company (PG) :: $66.95
  32. PennantPark Investment (PNNT) :: $280.00
  33. Qualcomm Inc (QCOM) :: $212.00
  34. Reynolds American, Inc (RAI) :: $92.00
  35. Raytheon Company (RTN) :: $17.58
  36. STAG Industrial, Inc (STAG) :: $83.80
  37. Stanley Black & Decker, Inc (SWK) :: $29.00
  38. AT&T Inc (T) :: $329.55
  39. Target Corporation (TGT) :: $84.00
  40. T. Rowe Price Group, Inc (TROW) :: $57.00
  41. The Travelers Companies, Inc (TRV) :: $19.43
  42. UnitedHealth Group Inc (UNH) :: $110.93
  43. United Parcel Service, Inc (UPS) :: $20.75
  44. Valero Energy Corporation (VLO) :: $120.40
  45. Vanguard High Dividend Yield ETF (VYM) :: $84.00
  46. Verizon Communications (VZ) :: $250.32
  47. Walgreens Boots Alliance, Inc (WBA) :: $16.50
  48. Wal-Mart Stores, Inc (WMT) :: $159.04
  49. Xcel Energy Inc (XEL) :: $225.93
  50. Exxon Mobil Corporation (XOM) :: $48.75
Some of these payments are from stocks and funds I've sold in Q1-2017.

Market Value


At the end of Q4-2016, DivGro's market value of $414,850 represented a simple gain of 32.7% on $312,590 invested. Of course, this does not take into account the timing and size of cash deposits. DivGro's internal rate of return since inception is 15.16%.

 

I've started using the analysis and visualization tools available at Simply Wall St, a Sydney-based startup that gives investors access to institutional quality data and analysis reports presented visually.

The snowflake infographic represents ValueFuturePastHealth and Dividend scores calculated from the weighted average scores of stocks in my portfolio. It gives an immediate sense of the quality of the underlying portfolio or stock:



When sorted by total snowflake score, JNJ, QCOM, GD, RTN, and PFE top the list, while F, AAPL, GILD, CSCO, and STAG are at the bottom.

Simply Wall St provides an industry diversification infographic, which is interesting to study:



The thickness of lines in this infographic represents the size of investments. DivGro is overweight in Capital Goods and underweight in Transportation, HealthCare Equipment and Services, and Consumer Services.

Portfolio Statistics


I now monitor DivGro's performance monthly in Pulse articles. It is important to monitor the performance of long-term stocks because changes that could affect the stock's performance can easily "hide" behind solid long-term results. I'd rather not be surprised by such changes. You can read the latest pulse article here.

For my quarterly reviews, I review general portfolio statistics. First, let's look at the yield of stocks in my portfolio:



My closed-end fund, NIE, has the largest yield, followed by OHI, which is a REIT (real estate investment trust). The average yield of stocks in DivGro is 3.28%.

Next up is the dividend growth rate. For quarterly reports, I look at the 1-year dividend growth rate, which will change throughout the year as stocks announce dividend increases. It is important to strike a good balance between high yielding stocks and high dividend growth stocks.



I like seeing dividend increases about 7%, so I'm very happy to see about half of my DivGro stocks with a 1-year dividend growth rate exceeding 7%. The arithmetic average also is above 7%!

Let's look at the weight of individual holdings in DivGro. I prefer to see equal weights, but this difficult to achieve because I want to sell covered call options and to do so I need 100 shares (or multiples of 100 shares). Quite naturally, therefore, my portfolio will not be ideally weighted.



Next, let's look at the contribution of each position to DivGro's projected annual dividend income, which depends not only on the stock's yield but also on the size of the investment. Here, MAIN dominates, followed by QCOM and NIE:



Finally, let's look at the payback percentage, or how much of my original investment I've received back in the form of dividends. Generally, stocks I've owned for a longer time will larger paybacks, but dividend yield also plays a role: payback will grow faster for stocks with larger yields.



RAI's payback percentage just topped 20%, followed by MAIN and MO, which are close to 20%. The arithmetic average payback percentage is 7.33%. On my portfolio spreadsheet, I calculate a weighted average payback percentage, which currently is 10.55%.

Goal For Q2-2017


In Q2-2017, I'd like to transfer our taxable account from FolioInvesting to our trust account Interactive Brokers. Doing so will allow me to write more covered calls.

Thanks for reading and take care, everybody! 

18 comments :

  1. Excellent review. So good to see those dividend incomes increasing over time. Next year will be even better! how fantastic!

    ReplyDelete
    Replies
    1. Thanks, I appreciate your kind words. I'm enjoying the journey and also look forward to seeing what'll happen in a year's time!

      Delete
  2. Looks like a great quarter. Hoping to add to some of those companies. VZ is looking good. I am hoping for another dip before adding some shares.

    ReplyDelete
    Replies
    1. Hi, Dividend Mongrel -- I think the quarter looks great, too! As for VZ, I kind-of backed into it with a smallish investment a few years ago. So I decided to keep it and add more shares. If the share price dips, I'll be a buyer again!

      Delete
  3. WOW love your reports. looks like you had a great quarter!!

    ReplyDelete
    Replies
    1. Thanks, FiscalVoyage -- it takes a while to compile but it helps me to track things and keep the right perspective! Take care and happy investing!

      Delete
  4. Excellent, thanks for sharing!

    ReplyDelete
    Replies
    1. Thanks, Anonymous -- I appreciate the support!

      Delete
  5. Very impressed by growth of PADI. Love to see more people selling options to grow the stockpile too!

    ReplyDelete
    Replies
    1. PADI is doing great! March was a little bit of a pullback with some high-yielding CEF sales, but April will make up for it!

      Options are fun and profitable, if you do them correctly! I'm still making mistakes, but that's how you learn, right?

      Delete
  6. great analysis. and fantastic increase year over year! grats on your options trading. seems like you will hit your goal no problem

    ReplyDelete
    Replies
    1. Thanks for visiting! I appreciate you kind words... I'm hoping for the best with my options income goal. You never know what happens later in the year, but I'm working hard to achieve it!

      Delete
  7. Based on your chart, it seems as though you're making more money from capital gains than from dividends!

    ReplyDelete
    Replies
    1. True, though no longer intentional. Earlier, to prepare for options trading, I sold some dividend paying stocks in order to round out the number of shares of other positions to 100 or multiples thereof. Several of those sales had capital gains. Now, when selling covered calls, occasionally, an options is assigned and I have to sell my shares. Those sales also have capital gains.

      Delete
  8. Awesome review, love the breakdown and the charts. Amazing quarter for you. Very impressive to see 50 companies paying. I don't even come close to having that many in my portfolio just yet haha.

    ReplyDelete
    Replies
    1. All I can say is just keep going... at some point in the last four years I was in your position, as I started in January 2013.

      Delete

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