Saturday, June 9, 2018

Monthly Review: May 2018

Welcome to the monthly review of DivGro, my portfolio of dividend growth stocks. I present details of any buys or sells, and I provide a summary of dividends collected. I also look at how DivGro's projected annual dividend income (PADI) has changed.

In May, I opened three new positions and added shares to twelve existing positions. Additionally, I reduced my holdings in three positions. Two DivGro stocks announced dividend increases in May. The net result is that PADI increased by about 9.4% in May. Year over year, PADI increased by 38.7%.

As for dividend income, in May I received dividends totaling $1,254 from 17 stocks in my portfolio. So far in 2018, I've collected $6,712 in dividends or about 37% of my 2018 goal of $18,000.

DivGro's PADI of $20,428, means I can expect to receive $1,702 in dividend income per month, on average, in perpetuity, assuming the status quo is maintained. But DivGro's PADI should increase over time because I invest in dividend growth stocks. Furthermore, I plan to reinvest dividends until I retire, so DivGro's PADI should continue to grow through dividend growth and through compounding.

Dividend Income


I received dividends from 17 different stocks, for a monthly total of $1,254 in dividend income:
Here is a list of the dividends I collected in May:
  • Apple (AAPL)income of $73.00
  • AbbVie (ABBV)income of $192.00
  • CVS Health (CVS)income of $50.00
  • General Dynamics (GD)income of $32.55
  • Hormel Foods (HRL)income of $18.75
  • Nuveen Floating Rate Income Fund (JFR)income of $31.00
  • Lowe's Companies (LOW)income of $41.00
  • Main Street Capital (MAIN)income of $85.50
  • National Retail Properties (NNN)income of $71.25
  • Realty Income (O)income of $16.46
  • Omega Healthcare Investors (OHI)income of $330.00
  • Procter & Gamble Company (The) (PG)income of $71.72
  • Raytheon (RTN)income of $20.82
  • Starbucks (SBUX)income of $30.00
  • AT&T (T)income of $100.00
  • Texas Instruments (TXN)income of $31.00
  • Verizon Communications (VZ)income of $59.00
The chart below shows DivGro's monthly dividends plotted against PMDI. Clearly, quarter-ending months are huge outliers:
To smooth things out a bit, I create a rolling 12-month average of dividends received (the orange bars) plotted against a rolling 12-month average of PMDI (the blue, staggered line):
While it would be great if dividends were distributed more evenly, I don't want to change my investment decisions based on the timing or frequency of dividend payments.

Dividend Changes


In May, the following stocks announced dividend increases:
  • Apple (AAPL)increase of 15.87%
  • Chubb (CB)increase of 2.82%
As a result of these changes, DivGro's PADI will increase by $42.

I like seeing dividend increases above 7%, so I'm very happy with AAPL's increase but not so thrilled with CB's increase. Though small, the CB increase nevertheless beats the CPI of 2.5% for the 12 months ending April 2018.

Transactions


Following is a summary of my transactions in May.

I added more capital to DivGro than my usual monthly contribution, allowing me to open three new positions and to add to twelve existing positions. I also trimmed three existing positions.

New Positions:
  • Anheuser-Busch InBev (BUD)new position of 100 shares
  • Kite Realty Group (KRG)new position of 200 shares
  • TJX (TJX)new position of 100 shares
I bought 100 shares of Belgian-based Anheuser-Busch InBev due to an options assignment. BUD is the ticker for American Depository Receipts (ADRs), which allow US investors to indirectly buy foreign stock on US exchanges. BUD pays dividends semi-annually, with exchange-rate fluctuations impacting the dollar amount received. Nevertheless, according to Dividend.com, BUD has paid higher dividends for seven consecutive years and has a 5-year dividend growth rate of about 21%. To calculate forward yield, I use the sum of the latest two dividend payments. For BUD, ($1.8839 + $2.39) / $94.67 = 4.51%. This article provides a good overview of the stock's investment prospects.

KRG is a REIT that invests in retail properties, parking garages, and dining and entertainment properties in the United States. KRG yields 7.75% at $16.39. The REIT has a strong mix of tenants, including top investment grade-rated tenants like TJ Maxx (a subsidiary of TJX,) Ross Stores (ROST), and Lowe's (LOW). Aside from the attractive yield, see this article for additional reasons why I invested in KRG.

I found TJX with a new screener I developed for the CCC list and the stock was ranked #4 in my top 10 Dividend Growth Stocks for May 2018. In that article, I included a chart from F.A.S.T. Graphs that shows the relationship of TJX's stock price performance to the company's operating results. The chart is one of the most impressive I've ever seen! The stock has an impressive 5-year DGR of 22% and yields 1.64% at $94.94. (I was fortunate to get in below $89 with an initial yield on cost of 1.76%).

Expanded Positions:
  • Comcast (CMCSA)added 50 shares and increased position to 200 shares
  • Eversource Energy (ES)added 40 shares and increased position to 100 shares
  • Johnson & Johnson (JNJ)added 46 shares and increased position to 100 shares
  • National Retail Properties (NNN)added 12 shares and increased position to 162 shares
  • NVIDIA (NVDA)added 10 shares and increased position to 30 shares
  • Realty Income (O)added 25 shares and increased position to 100 shares
  • Procter & Gamble (PG)added 100 shares and increased position to 200 shares
  • AT&T (T)added 30 shares and increased position to 230 shares
  • Travelers (TRV)added 71 shares and increased position to 100 shares
  • Walgreens Boots Alliance (WBA)added 100 shares and increased position to 200 shares
  • Walmart (WMT)added 6 shares and increased position to 84 shares
  • Xcel Energy (XEL)added 15 shares and increased position to 65 shares
CMCSA ranked #2 in my latest DivGro Pulse article and the stock is trading about 23% below fair value. After opening a position in CMCSA in March at $33.60 per share, the stock has declined to below $31 per share, so I took the opportunity to lower my average cost basis.

I own three stocks in the Utilities sector and decided to increase my holdings in two of them. ES is trading near its 52-week low and yields 3.77% at $53.56 per share. XEL is also trading near its 52-week low and yields 3.56% at $42.69 per share. Both stocks have A-rated S&P 500 Credit Ratings.

JNJ is one of only two stocks with an AAA-rated S&P 500 Credit Rating. When such high-quality stocks are trading near fair value, I take the opportunity to add shares. You don't often get a chance to buy shares of JNJ near fair value! JNN yields 2.9% at $124.06 per share.

Although NVDA is a dividend growth stock, it yields only 0.23%. One reason for the low yield is that NVDA has increased 64% in the past year, and 468% in the past two years and 3,500% since the company started paying dividends. I'll continue to add shares because of the company's growth prospects.

I've added shares to two REITs in my portfolio, NNN and O. NNN owns property that it leases to retail tenants under long-term net leases. The stock yields 4.53% at $41.96 per share. O is known as The Monthly Dividend Company®. O invests in commercial real estate markets in the US and the stock yields 4.94% at $53.27 per share. 

Two Dividend Champions are also trading near their respective 52-week lows. PG has paid higher dividends for 62 consecutive years, while WBA has paid higher dividends for 42 consecutive years. I decided to double my holdings in each of these stocks. PG yields 3.72% at $77.18 per share, while WBA yields 2.52% at $63.40 per share.

Another Dividend Champion, T, has lost about 22% of its market value in the past two years. The company has paid higher dividends for 34 consecutive years. The stock is attractive, as it yields nearly 6% at $33.83 per share. 

Insurer TRV yields 2.35% at $131.32 per share. I like the stock as it is a steady, high-quality dividend growth stock with a 5-year dividend growth rate of 9.6%. The stock has an A-rated S&P 500 Credit Rating.

Finally, I added a few shares to increase my WMT position to 84 shares. The stock is down significantly since hitting an all-time high price of $109.98 in January 2018. It now yields 2.47% at $84.36 per share. 

Trimmed Positions:
  • Intel (INTC)sold 50 shares and reduced position to 520 shares
  • Vanguard REIT Index Fund (VNQ)sold 25 shares and reduced position to 100 shares
  • Vanguard High Dividend Yield ETF (VYM)sold 50 shares and reduced position to 100 shares
I trimmed some shares from one of my larger positions, INTC, to buy shares of NVDA. In the past year, INTC has performed wonderfully well. The stock price increased about 50% in that time. INTC now yield 2.18%, compared to my yield on cost of 4.32%.

To partially fund this month's buys, I decided to trim two of my ETF positions, VNQ and VYM. These ETFs yield about 4.52% and 2.85%, respectively. I'll continue to trim these positions if suitable opportunities to own high-quality dividend growth stocks present themselves. 

All these transactions increased DivGro's PADI by about $1,710.

Markets


Here is a summary of various market indicators, showing the changes over the last month:

DOW
30
S&P
500
NASDAQ
Composite
10-YR
BOND
CBOE
VIX
Apr 30, 201824,163.152,648.057,066.272.936%15.93
May 31, 201824,415.842,748.807,442.122.822%15.43

In May, the DOW 30 gained 1.0%, the S&P 500 gained 3.8%, and the NASDAQ gained 5.3%. The yield on the benchmark 10-year Treasury note fell to 2.822%, while CBOE's measure of market volatility, the VIX decreased by 3.1%.

Portfolio Statistics


Based on the total capital invested and the portfolio's current market value, DivGro has delivered a simple return of about 46% since inception. In comparison, DivGro's IRR (internal rate of return) is 15.9%. (IRR takes into account the timing and size of deposits since inception, so it is a better measure of portfolio performance).

I track the yield on cost (YoC) for individual stocks, as well as an average YoC for my portfolio. DivGro's average YoC decreased from 4.12% last month to 3.98% this month. The decrease is due to all the buys I made last month.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 12.4%, down from last month's 14.0%. Percentage payback is also down due to last month's buys.

Finally, DivGro's projected annual yield is at 4.90%, down from last month's value of 5.19%. I calculate projected annual yield by dividing PADI ($20,428) by the total amount invested.

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:

Looking Ahead


I have finally transferred my trust account to Interactive Brokers, where the consolidated account will give me a stronger foundation for options trading. I'm looking forward to finding new opportunities for generating options income.

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

Thanks for reading and take care, everybody!

7 comments :

  1. Amazing detailed report of your May income! Congrats. I hope to have this kind of PADI one day - curious to know how much average monthly cash you have invested over time to reach where you are? Very inspiring - thanks!

    ReplyDelete
    Replies
    1. Thanks for your comment and kind words. See the first row of my portfolio statistics spreadsheet on this page:

      https://divgro.blogspot.com/p/performance.html.

      With 65 months of investments, the average monthly capital inflow is about $6,400.

      Delete
  2. Great Post DivGro. I've also added to JNJ and O in May and started a position in XOM.
    Isn't BUD payout a little high? Thanks and also thanks for the interview for http://www.aposenteaos40.org/.

    ReplyDelete
    Replies
    1. Thanks for commenting and I think you'll be happy with your positions in JNN, O, and XOM. As for BUD, yes, the payout in 2017 was too high. You'll notice, though, that earnings over the last 5 years more than adequately covered the dividend (53% payout ratio).

      Delete
  3. As always, fantastic job! Your reports are some of the best! I also recently added BUD. Good thinking ;) I have a limit order set for BASFY, now I just have to wait. Anyway, keep up the great work!

    ReplyDelete
    Replies
    1. Thanks, I appreciate your kind words -- BUD looks good to me, even though I don't particularly like investing in ADRs and receiving wildly varying dividends only twice a year.

      Delete

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