Friday, April 5, 2019

Monthly Review of DivGro: March 2019

Welcome to the March review of DivGro, my portfolio of dividend growth stocks! Quarter-ending months are exciting, as many of the stocks I own pay dividends in these months and I usually set a new record for monthly dividend income in quarter-ending months.

March did not disappoint! I received dividends totaling $3,220 from 43 stocks in my portfolio, a new record for monthly dividend income! Year over year, DivGro's dividend income increased by 28%. So far in 2019, I've collected $6,724 in dividends or about 27% of my 2019 goal of $25,200.

Looking at how the month's activities impacted DivGro's projected annual dividend income (PADI), I note that five DivGro stocks announced dividend increases in March. Additionally, I opened one new position and added shares to five existing positions. On the other hand, I closed out one high-yielding position. Unfortunately, the net result of these changes is that projected annual dividend income (PADI) decreased by about 0.6% in March. Year over year, PADI increased by 39%.


DivGro's PADI now stands at $25,376, which means I can expect to receive $2,115 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 reinvesting all dividends, so DivGro's PADI should continue to grow through dividend growth and through compounding.

Dividend Income


In March, I received a total of $3,220 in dividend income from 43 different stocks:

Following is a list of the dividends I collected in March:
  • Aflac (AFL)income of $27.00
  • Amgen (AMGN)income of $36.25
  • Broadcom (AVGO)income of $53.00
  • Boeing (BA)income of $41.10
  • BlackRock (BLK)income of $115.50
  • Cummins (CMI)income of $57.00
  • Chevron (CVX)income of $28.56
  • Dominion Energy (D)income of $91.75
  • Digital Realty Trust (DLR)income of $48.60
  • EPR Properties (EPR)income of $18.75
  • Eversource Energy (ES)income of $53.50
  • Extra Space Storage (EXR)income of $47.30
  • Ford Motor (F)income of $300.00
  • Gilead Sciences (GILD)income of $126.00
  • Home Depot (HD)income of $81.60
  • Honeywell International (HON)income of $41.00
  • International Business Machines (IBM)income of $47.10
  • Intel (INTC)income of $163.81
  • International Paper (IP)income of $50.00
  • Johnson & Johnson (JNJ)income of $111.60
  • Lockheed Martin (LMT)income of $30.80
  • Main Street Capital (MAIN)income of $146.26
  • McDonald's (MCD)income of $31.32
  • 3M (MMM)income of $36.00
  • Microsoft (MSFT)income of $46.00
  • NextEra Energy (NEE)income of $31.25
  • NIE-name (NIE)income of $380.00
  • Realty Income (O)income of $56.38
  • PepsiCo (PEP)income of $18.55
  • Pfizer (PFE)income of $72.00
  • Public Storage (PSA)income of $60.00
  • Ross Stores (ROST)income of $25.50
  • Stanley Black & Decker (SWK)income of $33.00
  • TJX (TJX)income of $39.00
  • T Rowe Price (TROW)income of $152.00
  • Travelers (TRV)income of $77.00
  • UnitedHealth (UNH)income of $36.00
  • Union Pacific (UNP)income of $35.20
  • United Parcel Service (UPS)income of $33.60
  • Visa (V)income of $4.25
  • Valero Energy (VLO)income of $166.50
  • Walgreens Boots Alliance (WBA)income of $88.00
  • Exxon Mobil (XOM)income of $82.00
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 March, the following stocks announced dividend increases:
  • General Dynamics (GD)an increase of 9.68%
  • Realty Income (O)an increase of 0.22%
  • Ross Stores (ROST)an increase of 13.33%
  • Raytheon (RTN)an increase of 8.65%
  • WP Carey (WPC)an increase of 0.19%
These changes will increase DivGro's PADI by about $39.

I like seeing dividend increases above 7% and three of the five increases top my expectations. As for the REITs O and WPC, they announce dividend increases multiple times per year. O's year over year increase is 2.96%, whereas WPC's year over year increase is 1.67%.

Transactions


Here is a summary of my transactions in March:
  • Merck (MRK)new position of 30 shares
After opening a small position in Chevron (CVX) in December 2018, MRK was the highest ranked stock in the top 50 holdings of dividend ETFs not in my DivGro portfolio. MRK ranked higher on aggregate score than several of my Health Care sector holdings and, according to Simply Safe Dividends, MRK has a Very Safe dividend safety score of 98.

I opened a relatively small position of 30 shares at $80.52 per share, as MRK is not trading at my preferred discount to fair value of at least 10%. With this opening position, I'll be able to track MRK more closely and look for opportunities to add shares at a better valuation. 
  • Omega Healthcare Investors (OHI)sold 250 shares and closed position
I decided to close my position in OHI on concerns about the declining fundamentals of OHI's skilled nursing tenants. OHI has a Borderline Safe dividend safety score of 47, yet the REIT's yield of 7%+ provides some compensation for the increased risk. Unfortunately, OHI broke a streak of 21 consecutive quarters of dividend increases when it froze its dividend last April, and unless OHI declares another dividend increase in 2019, it will be removed from the CCC list of dividend growth stocks.

It turns out my closing trade was about two weeks premature, as OHI closed at a 30-day high of $38.31 on 28 March. Nevertheless, my closing price of $35.90 secured a net gain of 29% or about 18% annualized.

To (somewhat) make up for the $660 in annual dividends I gave up by closing my OHI position, I added shares to several existing positions trading at favorable comparative yields.
  • CVS Health (CVS)added 50 shares and increased position to 200 shares
CVS continues to struggle and now is trading about 34% below its 52-week high. I paid $53.49 per share and lowered my average cost basis to $65.16. CVS froze its dividend after buying Aetna, though Simply Safe Dividends still considers the dividend Safe with a dividend safety score of 75.

I believe CVS will be fine in the long term, so the current yield is just too compelling to pass up, as illustrated in this 7-year yield channel chart:



  • Home Depot (HD)added 10 shares and increased position to 60 shares
  • Honeywell International (HON)added 10 shares and increased position to 60 shares
  • Iron Mountain (IRM)added 50 shares and increased position to 200 shares
  • 3M (MMM)added 15 shares and increased position to 40 shares
HD's dividend safety score is 90 (Very Safe) while the stock's current dividend yield of 2.71% is 29% above its 5-year average of 2.11%, according to Simply Safe Dividends. I paid $182.11 per share, slightly lowering my average cost basis in the process. The stock's dividend growth is stellar, with 5-year and 20-year dividend growth rates of 22%!

I also added 10 shares to my HON position, which is deemed a Very Safe dividend growth stock with a dividend safety score of 98. HON is trading at about fair value. Honeywell reported solid Q4'18 results and the management team increased their guidance for fiscal 2019. I think the stock is a great long term hold, though it is vulnerable to market cyclicality.

IRM's dividend yield of 6.8% is about 11% above its 5-year average dividend yield of 6.13%. While the REITs dividend safety score is on the low end at 52 (Borderline Safe), I think the 6.8% yield compensates me sufficiently for the somewhat higher risk. I paid $34.86 per share and I notice the stock is now trading above $36 per share, so my timing seemed to be good.

Finally, it is not often that one can buy MMM at a discount to fair value. I missed an even better opportunity in December 2018, but I'm happy that I grabbed 15 shares at $206.08 in March! The stock now trades at $216 per share. MMM has a Very Safe dividend safety score of 86 and boasts a 5-year dividend growth rate of 16%.



The net effect of my March transactions is that DivGro's PADI decreased by about $198. However, I believe my portfolio's risk profile has improved in the process and I'm happy that I replaced the somewhat riskier OHI with safer alternatives.

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
Feb 28, 201925,916.002,784.497,532.532.711%14.78
Mar 31, 201925,928.682,834.407,729.322.414%13.71

In March, the DOW 30 increased slightly, the S&P 500 increased by 1.79%, and the NASDAQ increased by 2.61%. The yield on the benchmark 10-year Treasury note fell to 2.414%, while CBOE's measure of market volatility, the VIX, decreased to 13.71.

Portfolio Statistics


Based on the total capital invested and the portfolio's current market value, DivGro has delivered a simple return of about 47% since inception. In comparison, DivGro's IRR (internal rate of return) is 14.5%. (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 3.92% this month.

On the other hand, DivGro's projected annual yield is 4.73%. This is down from last month's value of 4.84%. I calculate the projected annual yield by dividing PADI ($25,376) by the total amount invested.

Percentage payback relates dividend income to the amount of capital invested. DivGro's average percentage payback is 13.5%, up from last month's 13.1%.

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:

Goals Review


Here's a recap of my goals for 2019:
  1. PADI: Increase projected annual dividend income to $27,000
  2. Dividends: Earn $25,200 in dividend income
  3. Options: Collect $21,000 in options income
  4. Seeking: Earn income of $5,200 writing premium articles.
  5. Analyses: Write 12 stock analysis articles.
The gauges below represent the progress I've made towards achieving my goals. Each gauge has a gray pointer indicating where the other gauges should be after 90 of 365 days:

I'm behind pace on Seeking, somewhat ahead of pace on Dividends and Options, and way ahead of pace on PADI. Analysis remains stuck at 0%, as I have yet to write a stock analysis article this year.

Looking Ahead


I've been working on creating a database of weekly dividend yields covering a period of 12 years. For now, the database covers dividend-paying stocks in my portfolio. In time I'd like to add high-quality dividend growth stocks I don't yet own.

Maintaining the database will allow me to create yield channel charts at any time to help guide investment decisions. Furthermore, I'll be able to do a quick fair value estimate for stocks in the database by comparing the current dividend yield with the historical average dividend yield over a period of, say, five years.

I'm hoping to get back to writing monthly DivGro Pulse articles and share yield channel charts of stocks trading at or near extreme historical yields.

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

Thanks for reading and take care, everybody!

6 comments :

  1. Wow 3k ,what a payment it is.One of Blogger i always wait to read is yours and as always you never disappoint with wonderful writing and NIce information.I want to add MMM and BA.

    ReplyDelete
    Replies
    1. Thanks, desidividend !

      I was pleasantly surprised to see the total go above $3,000 this quarter. I guess the additions I made in December is really paying off!

      MMM and BA would be good additions, I believe.

      Take care

      Delete
  2. I saw you adding CVS but I just started my position on WBA. What's your opinion on these pharma stocks and if you're not concerned about their dividend and market conditions with Amzn taking over this one too

    ReplyDelete
    Replies
    1. I cannot speculate whether AMZN will be successful in "taking over" the pharma industry and there are concerns in the market place just for the fact that AMZN said they'll be entering that space.

      I focus on dividends and dividend safety and until the picture changes, in my opinion, CVS and WBA are good stocks to invest in. One element of dividend safety is earnings, and if there is a significant (and sustained) change in earnings and earnings estimates, I'll reconsider my positions.

      Delete
  3. Replies
    1. Thanks, DSFI -- I'm happy about how things are going!

      Delete

Please don't include irrelevant links in comments. I will mark such comments as spam and the comment won't be published. To make me aware of your blog or website, comment on my Blogrole page instead.

Contact Form

Name

Email *

Message *

Follow by Email