Friday, July 6, 2018

Monthly Review: June 2018

Welcome to the monthly review of DivGro, my portfolio of dividend growth stocks.

The goal of these reviews is to provide a summary of dividends received and to detail buy and sell transactions. I also consider the impact on DivGro's projected annual dividend income (PADI).

In June, I opened six new positions and added shares to five existing positions. Additionally, I closed two positions and reduced my holdings in one position. Eight DivGro stocks announced dividend increases in June. The net result of these changes is that PADI increased by about 2.6% in June. Year over year, PADI increased by 40.2%.

My dividend income in June totaled $2,538, which is a new monthly record for DivGro! I received dividend payments from 33 stocks in my portfolio, a year over year increase of 22%. So far in 2018, I've collected $9,250 in dividends or about 51% of my 2018 goal of $18,000.

DivGro's PADI now stands at $20,967, which means I can expect to receive $1,747 in dividend income per month, on average, in perpetuity, assuming the status quo is maintained. Of course, I expect the companies I've invested in not only to continue to pay dividends but to increase them over time! Also, until I retire, I hope to continue to reinvesting dividends, so DivGro's PADI should continue to grow through dividend growth and through compounding.

Dividend Income


I collected dividends totaling $2,538 from 33 different stocks in June:
Following is a list of the dividends I collected in June:
  • Aflac (AFL)income of $26.00
  • Cummins (CMI)income of $47.52
  • Dominion Resources (D)income of $83.50
  • Eversource Energy (ES)income of $30.30
  • Ford Motor (F)income of $300.00
  • Gilead Sciences (GILD)income of $114.00
  • International Business Machines (IBM)income of $47.10
  • Intel (INTC)income of $171.00
  • (JFR)income of $31.00
  • Johnson & Johnson (JNJ)income of $90.00
  • Lockheed Martin (LMT)income of $28.00
  • Main Street Capital (MAIN)income of $209.25
  • McDonald's (MCD)income of $27.27
  • 3M (MMM)income of $21.76
  • Microsoft (MSFT)income of $25.20
  • AllianzGI Equity & Convertible Income Fund (NIE)income of $209.00
  • NVIDIA (NVDA)income of $4.50
  • Realty Income (O)income of $16.46
  • QUALCOMM (QCOM)income of $248.00
  • Royal Dutch Shell plc (RDS.B)income of $131.60
  • Schwab Strategic Trust (SCHD)income of $40.56
  • Stanley Black & Decker (SWK)income of $31.50
  • T. Rowe Price (TROW)income of $70.00
  • Travelers Companies (TRV)income of $77.00
  • UnitedHealth (UNH)income of $17.10
  • United Parcel Service (UPS)income of $31.85
  • Valero Energy (VLO)income of $144.00
  • Vanguard REIT Index Fund (VNQ)income of $73.18
  • Vanguard High Dividend Yield ETF (VYM)income of $63.02
  • Walgreens Boots Alliance (WBA)income of $40.00
  • Wal-Mart Stores (WMT)income of $22.88
  • Xilinx (XLNX)income of $12.60
  • Exxon Mobil (XOM)income of $53.30
The following chart shows DivGro's monthly dividends plotted against PMDI. Quarter-ending months are huge outliers:
This is one reason that I now 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 nicer if dividends were distributed more evenly, it is not something that would drive my investment decisions.

Dividend Changes


In June, the following stocks announced or paid higher dividends:
  • Lowe's Companies (LOW)increase of 17.07%
  • Medtronic plc (MDT)increase of 8.70%
  • Realty Income (O)increase of 0.23%
  • Starbucks (SBUX)increase of 20.00%
  • Schwab Strategic Trust (SCHD)increase of 5.81%
  • UnitedHealth (UNH)increase of 20.00%
  • Vanguard High Dividend Yield ETF (VYM)increase of 1.40%
  • Walgreens Boots Alliance (WBA)increase of 10.00%
As a result of these changes, DivGro's PADI will increase by $104.

I like seeing dividend increases above 7%, so Five of the eight increases top my expectations, which is quite satisfactory! The arithmetic average of this month's dividend increases is 13.9%, which easily beats inflation.

Transactions


Once again, I allocated more capital to DivGro than my usual monthly contribution, allowing me to open six new positions and to add to five existing positions. Additionally, I trimmed one existing position and closed two positions.

New Positions:
  • Illinois Tool Works (ITW)new position of 25 shares
  • Medtronic plc (MDT)new position of 25 shares
  • NextEra Energy (NEE)new position of 25 shares
  • Pfizer (PFE)new position of 200 shares
  • Provident Financial Services (PFS)new position of 100 shares
  • Ross Stores (ROST)new position of 100 shares
In a recent article, I identified seven high-quality dividend growth stocks with consistent earnings growth. While I already own three of these stocks, two looked attractive enough even at premium valuations and so I decided to open new positions in each of them. ROST yields only 1.06% at $84.95 but boasts an impressive 5-year DGR of 18%. NEE yields 2.72% at $163.00 and has a 5-year DGR of 10%. 

ITW (along with ROST) made my top 10 list of dividend growth stocks for June. In fact, ITW also appeared in May's top 10, so I decided to add this Dividend Champion to my portfolio. ITW yields 2.14% at $145.72 and has a 5-year DGR of 13%.

I wanted to increase my exposure to the Health Care sector and MDT and PFE looked like solid candidates. MDT yields 2.33% at $86.83, while PFE yields 3.66% at $37.26. I previously owned PFE and I'm happy to return to this stock. 

Financials sector stock PFS yields 2.85% at $28.29. I found the stock while doing research on consistent earnings growers. Based on an F.A.S.T. Graphs review of PFS, the company has delivered higher earnings every year since a drop in earnings in 2009. The stock relatively unknown, but it looks like a solid dividend grower with a 5-year DGR of 9%.

Expanded Positions:
  • Chubb (CB) — added 26 shares and increased position to 50 shares
  • Johnson & Johnson (JNJ) — added 24 shares and increased position to 124 shares
  • Starbucks (SBUX) — added 100 shares and increased position to 200 shares
  • AT&T (T) — added 50 shares and increased position to 280 shares
  • UnitedHealth (UNH) — added 21 shares and increased position to 40 shares
A couple of my existing positions are trading at discount prices. 

SBUX's stock price took a beating in recent times, but I believe the stock remains a good long-term investment even when considering several risks. At $49.90, the stock yields 2.94% and the 5-year DGR is quite impressive at 24%. 

T also trades at a discount. The stock price has not done much since March 2012, but the stock now yields 6.13% at $32.15 and I might just add a few more shares in the coming month or two!

Dividend Champions CB and JNJ are both trading at about fair value. JNJ is one of only two AAA-rated stocks, while CB was one of my smaller holdings before this buy.  

UNH is a solid performer and one of DivGro's home run stocks, a designation I give to any position in my portfolio that crosses the 100% mark in total returns. 

Trimmed Positions:
  • Hannon Armstrong Sustainable Infrastructure Capital (HASI) — sold 200 shares and reduced position to 350 shares
While I still like HASI, the sustainable infrastructure REIT seems to be entering a consolidation phase with a likely dividend freeze. I wanted to reduce my exposure some, so I sold 200 shares at a loss of about 12%.

Closed Positions:
  • Nuveen Floating Rate Income Fund (JFR)sold 500 shares and closed position
  • Vanguard Financials ETF (VFH)sold 88 shares and closed position
I'm disappointed with JFR's performance since opening a position in May 2018. With so many buys this month, I decided to close my JFR position for a 5% loss to partially fund the buys.

As for VFH, I considered this position a placeholder until I identified an individual Financials sector stock to invest in. With my buy of PFS, I closed my VFH position at a small loss of 2%.

The net result of these transactions is that DivGro's PADI increased by about $435.

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
May 31, 201824,415.842,748.807,442.122.822%15.43
Jun 30, 201824,271.412,718.377,510.302.849%16.09

In June, the DOW 30 dropped 0.6%, the S&P 500 dropped 1.1%, but the NASDAQ gained 0.9%. The yield on the benchmark 10-year Treasury note rose to 2.849%, while CBOE's measure of market volatility, the VIX, increased by 4.3%.

Portfolio Statistics


Based on the total capital invested and the portfolio's current market value, DivGro has delivered a simple return of about 43% since inception. In comparison, DivGro's IRR (internal rate of return) is 15.2%. (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 3.98% last month to 3.85% this month.

Percentage payback relates dividend income to the amount of capital invested. DivGro's average percentage payback is 12.2%, down from last month's 12.4%.

Finally, projected annual yield is calculated by dividing PADI ($20,967) by the total amount invested. DivGro's projected annual yield is at 4.69%, down from last month's value of 4.90%.

The following chart shows 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'll report on DivGro's second quarter performance soon.

In the third quarter, I'd like to focus on strengthening DivGro's risk profile. I'll be using various tools to identify riskier stocks and either trim or close those positions.

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

Thanks for reading and take care, everybody!

6 comments :

  1. Congrats DivGro,
    looks like new records.Any details when those 5 positions initiated.

    ReplyDelete
  2. Wow, you are killing it! That's some impressive growth and I love all the charts! Your rolling 12-month average is quite a bit higher than 2017. I'm assuming you are putting more capital to work this year? That's awesome. I also like all of your purchases. I ended up adding to SBUX, JNJ, T recently myself. Keep it up!

    ReplyDelete
  3. Fantastic work, love seeing the forward dividends increasing over time. That is fantastic growth that we love to see. Keep up the great work.

    ReplyDelete
  4. Nice report! June was my best month ever. I collect 363 USD from dividedns. But this is nothing against your 2538 USD :). Do you made some options trades in June?

    ReplyDelete
  5. Hi Ferdi,

    congrats for number 1 in monthly portfolio yield with 0.94% - thanks to option income - and number 2 in total monthly income. Only Mr. Taco made more dollars with his super big portfolio:

    https://dividendstocks.cash/blog/income-heroes-update-june-2018/

    I really admire all your documenting. That's really a ton of work.

    CU next month!

    Torste

    ReplyDelete
    Replies
    1. Hi Torsten -- I checked out your Incomes Heroes post and I'm very impressed with your summary and charts. Great job! Very interesting to see a broad spectrum of dividend growth investor portfolios in one place.

      Delete

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