Thursday, February 7, 2019

Monthly Review of DivGro: January 2019

After a miserable fourth quarter in 2018, the stock market rebounded with a vengeance! The 7.9% return of the S&P 500 in January was the best January performance since 1987!

Of course, the S&P 500 was down more than 9% in December, and the index still is 8% below the all-time record it set on 20 September 2018.

December was a busy trading month for DivGro, as I looked to take advantage of discounted prices on high-quality dividend growth stocks. January certainly was quieter, though I opened two new positions and also closed a long-held position.

Eight DivGro stocks announced dividend increases in January and I received dividends totaling $1,765 from 22 stocks in my portfolio. Year over year, DivGro's projected annual dividend income (PADI) increased by 50%, while January's dividends increased by 90% over last's year's total.


DivGro's PADI of $25,136 means that, for the first time, I can expect to receive more than $2,000 in dividend income per month, on average!


Dividend Income


As mentioned in the introduction, I received dividends from 22 different stocks, for a monthly total of $1,765 in dividend income:


Here is a list of the dividends I received in January:
  • Chubb (CB)income of $36.50
  • Comcast (CMCSA)income of $38.00
  • Cisco Systems (CSCO)income of $66.00
  • Quest Diagnostics (DGX)income of $106.00
  • Walt Disney (DIS)income of $176.00
  • Digital Realty Trust (DLR)income of $45.45
  • EPR Properties (EPR)income of $18.00
  • Federal Realty Investment Trust (FRT)income of $40.80
  • Iron Mountain (IRM)income of $91.65
  • Illinois Tool Works (ITW)income of $38.00
  • JPMorgan Chase (JPM)income of $160.00
  • Kite Realty Group Trust (KRG)income of $190.50
  • Main Street Capital (MAIN)income of $146.25
  • Medtronic (MDT)income of $25.00
  • Altria (MO)income of $160.00
  • AllianzGI Equity & Convertible Income Fund (NIE)income of $209.00
  • Nike (NKE)income of $22.00
  • Realty Income (O)income of $55.25
  • Raytheon (RTN)income of $20.82
  • Walmart (WMT)income of $43.68
  • WP Carey (WPC)income of $51.50
  • Xcel Energy (XEL)income of $24.70

Dividend Changes


In January, the following stocks announced dividend increases:
  • Air Products and Chemicals (APD)increase of 5.45%
  • Blackrock (BLK)increase of 5.43%
  • Comcast (CMCSA)increase of 10.53%
  • Dominion Energy (D)increase of 9.88%
  • EPR Properties (EPR)increase of 4.17%
  • Iron Mountain (IRM)increase of 4.00%
  • Realty Income (O)increase of 2.04%
  • Valero Energy (VLO)increase of 12.50%
As a result of these changes, DivGro's PADI will increase by $180.

I prefer seeing dividend increases above 7%, so the increases from CMCSA, D, and VLO make me very happy! To be fair, BLK year over year increase is 14.58%, so the smaller increase this month should be seen in proper context.

Transactions


Here is a summary of transactions executed in January:
  • Philip Morris International (PM)new position of 100 shares
  • WP Carey (WPC)new position of 50 shares
  • Walmart (WMT)sold 84 shares and closed position
  • Ford Motor (F)added 1,900 shares and increased position to 2,000 shares
  • Williams-Sonoma (WSM)added 100 shares and increased position to 200 shares
These transactions increased DivGro's PADI by about $1,798.

PM manufactures and sells cigarettes, tobacco products, and other nicotine-containing products in more than 180 markets outside the United States. My new position in PM is due to an options assignment. A Dividend Contender with 11 consecutive years of dividend increases, PM yields 6.00% at $76.05 per share and has an annualized dividend growth rate of 4.8% over the last five years. According to Simply Safe Dividends, PM's dividend is considered Safe with a dividend safety score of 68. Furthermore, PM's current dividend yield is 32% above its 5-year average of 4.55%, which means the stock is probably undervalued.

WPC is a REIT that invests in high-quality, single-tenant industrial, warehouse, office, and retail properties subject to long-term leases with built-in rent escalators. WPC is a Dividend Contender with 22 consecutive years of dividend increases. The stock yields 5.53% at $74.45 and has a 5-year dividend growth rate of 5.1%. WPC's dividend safety score is 71 (Safe) and the stock appears to be fairly valued.

I decided to part ways with WMT. The stock's dividend growth rate has declined to just 2% per year over the last 5 years. Furthermore, WMT's current dividend yield of 2.19% is 14% below its 5-year average dividend yield of 2.55%, so the stock is likely overvalued.
Source: Simply Safe Dividends

In December, I executed some trades to harvest tax losses. Having waited at least 31 days to avoid violating the IRS wash-sale rule, I'm reestablishing two positions.

Although F is not a dividend growth stock, it yields 6.9% at $8.70 and I consider the stock good for options trading. Simply Safe Dividends consider F's dividend to be Borderline Safe with a dividend safety score of 41. With this buy, my average cost basis drops to $8.57 and the position has a yield on cost (YoC) of 7%.

WSM yields 3.13% at $55.02 and has a 5-year dividend growth rate of 7.9%. With a dividend safety rating of 60, the stock's dividend is considered to be Borderline Safe. The average cost basis of my WSM position is $55.61, and my YoC is 3.09%.

Markets


I no longer compare DivGro's performance to those of the markets, but it is worth looking at the markets to understand the environment we're investing in:

DOW
30
S&P
500
NASDAQ
Composite
10-YR
BOND
CBOE
VIX
Dec 31, 201823,327.462,506.856,635.282.686%25.42
Jan 31, 201924,999.672,704.107,281.742.635%16.57

In January, the DOW 30 increased by 7.2%, the S&P 500 increased by 7.9%, and the NASDAQ increased by 9.7%. The yield on the benchmark 10-year Treasury note fell to 2.635%, while CBOE's measure of market volatility, the VIX, dropped to 16.57.

Portfolio Statistics


Given DivGro's current market value and the total capital invested, the portfolio has returned about 42% since inception. But calculating the IRR (internal rate of return) gives a better measure of portfolio performance, as IRR takes into account the timing and size of deposits since inception. DivGro's IRR is 13.9%.

I track the yield on cost (YoC) for individual stocks, as well as an average YoC for my portfolio. DivGro's average YoC increased from 3.77% last month to 3.93% this month.

Percentage payback relates dividend income to the amount of capital invested. DivGro's average percentage payback is 12.8%, down from last month's 13.5%.

Finally, projected annual yield is calculated by dividing PADI ($25,136) by the total amount invested. DivGro's projected annual yield is at 4.78%, up from last month's value of 4.63%.

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've set some challenging goals for 2019, including aggressive goals for dividend and options income. I'm looking forward to seeing how things pan out!

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

Thanks for reading and take care, everybody!


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