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Wednesday, July 10, 2019

Monthly Review Of DivGro: June 2019

Once a month, I review my DivGro portfolio of dividend growth stocks and provide a summary of dividends collected. Additionally, I detail buy and sell transactions and how those transactions impacted my portfolio's projected annual dividend income (PADI).

In June, I opened one new position due to an options assignment. Additionally, I reduced my holdings in two positions, also due to options assignments. Five of my stocks announced dividend increases. The net result of these transactions is that PADI decreased by about 5.4% in June. Year over year, PADI increased by 16%.

As for dividend income, in June I received dividends totaling $3,529 from 42 stocks in my portfolio, a year over year increase of 37%. So far in 2019, I've collected $13,070 in dividends or about 52% of my 2019 goal of $25,200.

DivGro's PADI now stands at $24,310, which means I can expect to receive $2,026 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 reinvest dividends, so DivGro's PADI should continue to grow through dividend growth and through compounding.

Dividend Income

I collected dividends totaling $3,529 from 42 different stocks in June. This happens to be another record-setting month for dividend income, as is evident in the following chart:

Here is a list of the dividends I received in June:
  • Archer-Daniels-Midland (ADM)income of $70.00
  • Aflac (AFL)income of $27.00
  • Amgen (AMGN)income of $72.50
  • 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
  • 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 $49.20
  • International Business Machines (IBM)income of $48.60
  • Intel (INTC)income of $157.50
  • International Paper (IP)income of $50.00
  • Johnson & Johnson (JNJ)income of $117.80
  • Lockheed Martin (LMT)income of $30.80
  • Main Street Capital (MAIN)income of $337.50
  • McDonald's (MCD)income of $31.32
  • 3M (MMM)income of $86.40
  • 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 $56.50
  • PepsiCo (PEP)income of $19.10
  • Pfizer (PFE)income of $72.00
  • Public Storage (PSA)income of $60.00
  • Qualcomm (QCOM)income of $21.70
  • Ross Stores (ROST)income of $25.50
  • Stanley Black & Decker (SWK)income of $33.00
  • TJX (TJX)income of $46.00
  • T Rowe Price (TROW)income of $152.00
  • Travelers (TRV)income of $82.00
  • UnitedHealth (UNH)income of $43.20
  • Union Pacific (UNP)income of $35.20
  • United Parcel Service (UPS)income of $48.00
  • Visa (V)income of $4.25
  • Valero Energy (VLO)income of $166.50
  • Walgreens Boots Alliance (WBA)income of $132.00
  • Exxon Mobil (XOM)income of $87.00
The chart below shows DivGro's monthly dividends plotted against PMDI (projected monthly dividend income). Clearly, quarter-ending months are huge outliers:
For this reason, 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 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 June, the following stocks announced dividend increases:
  • JPMorgan Chase (JPM)increase of 12.50%
  • Medtronic (MDT) — increase of 8.00%
  • Realty Income (O)increase of 0.22%
  • UnitedHealth (UNH)increase of 20.00%
  • WP Carey (WPC)increase of 0.19%
These adjustments will increase DivGro's PADI by $55.


Here is a summary of my transactions in June:
  • Gap (GPS)new position of 300 shares
  • Main Street Capital (MAIN)sold 500 shares and reduced position to 250 shares
  • Realty Income (O)sold 200 shares and reduced position to 50 shares
These transactions decreased DivGro's PADI by about $1,453.

I had to buy 300 shares of The Gap (GPS) when the June $27 put options I'd sold were exercised early. On the day of the assignment, GPS closed at $18.79 per share. Unfortunately, this means that I've been handed an unrealized loss of $2,463—somewhat softened by the $1,003 in options income collected for selling the shares.

GPS reported poor Q1-2019 results, reflecting soft top-line growth and comparable sales as well as lower margins. Management lowered its earnings outlook for fiscal 2019, noting that the trade war with China may impact results going forward.

Getting assigned under such circumstances is never pleasant, but that's part and parcel of put selling. I'll monitor the stock closely in case the outlook deteriorates. If that happens, I'll have to accept the loss and sell the shares. Meanwhile, I'll collect the dividends ($291 annually) and sell covered calls to boost my income.

Main Street Capital (MAIN) is trading near its 52-week high and the stock's current yield is a bit below its 5-year average.

Source: Simply Safe Dividends

I decided to "allow" the June $40 covered calls to be assigned (rather than trying to roll them forward) and, consequently, sold 500 of my 750 MAIN shares. I'm happy with my investment in MAIN, which generated gains totaling $3,645 or 20% on my original investment (15% annualized).

As a result of this trade, DivGro's PADI took a bit of a knock and I'll be collecting $1,200 less as a result. On the other hand, my remaining 250 shares will have a reduced average cost basis of $22.96 and deliver dividends totaling at least $600 per year. The average yield on cost (YoC) of my MAIN position is 10.5%!

I also decided to sell 200 of my 250 Realty Income (O) shares by "allowing" the June $70 covered calls to expire and be assigned. This investment turned out even better, as I generated total gains of $3,187 or 28% on my original investment, which is 31% annualized.

DivGro's PADI will be reduced by $720 as a result of this trade and my remaining shares will have an average cost basis of $47.36 per share and an average YoC of 5.74%.

O is trading near its 52-week high and the stock's current yield is quite a bit lower than its 5-year average, an indication that the stock is trading at a premium to fair value. Notice also the higher than average current P/AFFO ratio.

Source: Simply Safe Dividends


Here is a summary of various market indicators, showing the changes from the end of May to the end of June:

May 31, 201924,815.042,752.067,453.152.142%18.71
Jun 30, 201926,599.962,941.768,006.242.000%15.08

In June, the DOW 30 gained 7.2%, the S&P 500 gained 6.9%, and the NASDAQ gained 7.4%. The yield on the benchmark 10-year Treasury note fell to 2%, while CBOE's measure of market volatility, the VIX decreased 15.08.

Portfolio Statistics

Based on the total capital invested and the portfolio's current market value, DivGro has delivered a simple return of about 48% since inception. In comparison, DivGro's IRR (internal rate of return) is 14.0%. (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 3.92% last month to 3.83% this month.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 14.2%, up from last month's 13.6%.

Finally, DivGro's projected annual yield is at 4.41%, down from last month's value of 4.67%. I calculate projected annual yield by dividing PADI ($24,310) by the total amount invested.

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

If the market continues to meander higher, I expect to reduce some of my positions due to the assignment of covered calls. This is my way of slowly moving to cash as this bull market matures.

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

Thanks for reading and take care, everybody!


  1. What site do you use to see the 5 year average dividend yield? Thanks - Mike

    1. I use https://www.simplysafedividends.com/ but you need a subscription.

      This one is free: https://www.dividendchannel.com/symbol/aapl/chart/


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