Wednesday, December 4, 2019

Monthly Review Of DivGro: November 2019

Welcome to the November review of DivGro, my portfolio of dividend growth stocks. I provide a summary of transactions and dividends received in the past month. I also consider the impact on DivGro's projected annual dividend income (PADI).

In November, I opened one new position and added shares to five existing positions. Additionally, I reduced my holdings in one position. Ten DivGro stocks announced dividend increases in November. The net result of these changes is that PADI increased by about 3.2% in November. Year over year, PADI increased by 15.6%.

As for dividend income, in November I received dividends totaling $1,713 from 22 stocks in my portfolio, a year over year decrease of 5%. So far in 2019, I've collected $22,516 in dividends or about 89% of my 2019 goal of $25,200.

DivGro's PADI of $25,881, means I can expect to receive $2,157 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


In November, I received a total of $1,713 in dividend income from 22 different stocks:
Here is a list of the dividends I collected in November:
  • Apple (AAPL)income of $77.00
  • AbbVie (ABBV)income of $214.00
  • Accenture (ACN)income of $8.00
  • Air Products and Chemicals (APD)income of $18.56
  • Costco Wholesale (COST)income of $6.50
  • CVS Health (CVS)income of $150.00
  • General Dynamics (GD)income of $51.00
  • Hormel Foods (HRL)income of $21.00
  • Lowe's (LOW)income of $55.00
  • Mastercard (MA)income of $3.30
  • Main Street Capital (MAIN)income of $51.25
  • National Retail Properties (NNN)income of $83.43
  • Realty Income (O)income of $11.35
  • Procter & Gamble (PG)income of $74.59
  • Raytheon (RTN)income of $47.12
  • Royal Bank of Canada (RY)income of $19.73
  • Starbucks (SBUX)income of $41.00
  • Tanger Factory Outlet Centers (SKT)income of $177.50
  • Simon Property (SPG)income of $168.00
  • AT&T (T)income of $306.00
  • Texas Instruments (TXN)income of $67.50
  • Verizon Communications (VZ)income of $61.50
Here is a chart showing DivGro's monthly dividends plotted against PMDI. It is clear that 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 nicer if dividends were distributed more evenly, it is not something that would drive my investment decisions.

Dividend Changes


In November, the following stocks announced dividend increases:
  • AbbVie (ABBV)increase of 10.28%
  • Accenture (ACN)increase of 9.59%
  • Automatic Data Processing (ADP)increase of 15.19%
  • Hormel Foods (HRL)increase of 9.52%
  • Merck (MRK)increase of 10.91%
  • Nike (NKE)increase of 11.36%
  • Royal Bank of Canada (RY)increase of 3.16%
  • Snap-On (SNA)increase of 13.68%
  • Simon Property (SPG)increase of 2.44%
  • Verizon Communications (VZ)increase of 2.07%
As a result of these changes, DivGro's PADI will increase by $170.

I like seeing dividend increases above 7%, so seven of the ten increases this month top my expectations! The arithmetic average of this month's dividend increases is 8.8%, which easily beats inflation.

Transactions


I've made a few changes to my portfolio in November, including trimming one of my larger positions (due to an options assignment), opening a new position from the Utilities sector, and doubling the size of several smaller positions.

Trimmed Position
  • Intel (INTC) — sold 200 shares and reduced position to 300 shares
I sold 200 (of 500) shares of INTC due to an options assignment. The stock traded above $57 per share on 5 November when the $55 covered calls I'd sold got exercised.

I'm happy that one of my largest positions got trimmed a bit, as it gave me the opportunity to redeploy capital to boost several smaller and higher-yielding positions. This investment generated total returns of 59%, which works out to about 22% on an annualized basis.

Selling 200 INTC shares reduced DivGro's PADI by $252.

The remaining position of 300 shares has an average cost basis of $22.68 and an average yield on cost of 5.55%. My INTC position now equals 1.93% of total portfolio value and has unrealized returns totaling 190%.

New Position
  • Pinnacle West Capital (PNW)new position of 50 shares
In November, I wrote an article identifying several reasonably valued, high quality, high yield dividend growth stocks. 

One of the stocks that piqued my interest is PNW, a Utilities sector stock yielding 3.64% at $86.06 per share. I've been looking to add another Utilities sector stock for a while. 

Pinnacle West Capital is a holding company that provides retail and wholesale electric services primarily in the state of Arizona. Its subsidiary, Arizona Public Service Company, is a vertically-integrated electric that generates, transmits, and distributes electricity using coal, nuclear, gas, oil, and solar resources. PNW founded in 1920 and is headquartered in Phoenix, Arizona.

With a Dividend Safety Score of 92, PNW's dividend is deemed to be a Very Safe by Simply Safe Dividends. The stock has a 5-year dividend growth rate of 5.1%. 

Source: Simply Safe Dividends

I opened a relatively small position (0.48% of total portfolio value) at a cost basis of $86 per share. My initial yield on cost is 3.64%.

Increased Positions
  • Toronto-Dominion Bank (TD) — added 50 shares and increased position to 100 shares
  • Royal Bank of Canada (RY)added 25 shares and increased position to 50 shares
  • Bank of Nova Scotia (BNS) — added 50 shares and increased position to 100 shares
  • United Parcel Service (UPS)added 50 shares and increased position to 100 shares
  • Wells Fargo (WFC)added 100 shares and increased position to 200 shares
In the same article cited earlier, several stocks I already owned passed my screens:





The main difference between these stocks is that TD and RY have slightly different higher Chowder Numbers. Both BNS and UPS have share repurchase plans, so their net payout yields should be well above their dividend yields. As for WFC, I think the stock has upside prospects now that the company has a new leader

Since these were all small positions, I decided to double my shares in each case. 

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
Oct 31, 201927,046.233,037.568,292.361.72813.22
Nov 30, 201928,051.413,140.988,665.471.776%12.62

In November, the DOW 30 gained 3.7%, the S&P 500 gained 3.4%, and the NASDAQ gained 4.5%. The yield on the benchmark 10-year Treasury note fell to 1.776%, while CBOE's measure of market volatility, the VIX, decreased by 4.5%.

Portfolio Statistics


Given DivGro's current market value and the total capital invested, the portfolio has returned about 63% 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 15.3%.)

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 3.61% last month to 3.64% this month.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 15.9%, up from last month's 15.6%.

Finally, DivGro's projected annual yield is at 4.67%, up from last month's value of 4.53%. I calculate the projected annual yield by dividing PADI ($25,881) 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'm looking forward to December for various reasons, including a little break from work over the Christmas season. Also, quarter-ending months are great months for dividend income, and I'm curious to see if DivGro will set another record high for dividend income in a month.

I'm also looking forward so celebrating DivGro's seventh anniversary in January!

In December, I review my year goals and set new goals for next year. I like setting stretching but doable goals, but it appears that I've stretched too far this year... While I've absolutely clobbered my options income goal, a couple of my other goals appear to be just out of reach. And sadly, one will have to be revisited next year, perhaps in a more subdued form.

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


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4 comments :

  1. DivGro
    That is quite a collection of stocks and a very thorough review. Solid annual yield as well. Keep up the good work.

    DS

    ReplyDelete
    Replies
    1. Thanks, DS -- I'm happy with DivGro's progress this year... we'll see how it goes next year! All the best!

      Delete
  2. Divgro engine is at Fullspeed,Any plans to add MA,seems to have similar AAPL shares.

    ReplyDelete
    Replies
    1. Not sure what you mean? Add to MA? Perhaps, when the stock trades at decent valuations, again.

      Delete

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