Thursday, January 2, 2020

Monthly Review Of DivGro: December 2019

Welcome to the December 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 look at how DivGro's projected annual dividend income (PADI) has changed.

In December, I added shares to four existing positions. Nine DivGro stocks announced dividend increases in December. The net result of these changes is that PADI increased by about 1.8% in December. Year over year, PADI increased by 14.4%.


As for dividend income, in December I received dividends totaling $3,026 from 43 stocks in my portfolio, a year over year increase of 11%. In 2019, I've collected a total of $25,542 in dividends or about 101% of my 2019 goal of $25,200.


Assuming the status quo and given DivGro's PADI of $26,358, I can expect to receive $2,196 in dividend income per month, on average, in perpetuity. Of course, most of the stocks I own are dividend growers, so I expect my dividend income to increase over time! 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


I received dividends from 43 different stocks, for a monthly total of $3,026 in dividend income:
Here is a list of the dividends I collected in December:
  • Archer-Daniels-Midland (ADM)income of $105.00
  • Aflac (AFL)income of $27.00
  • Amgen (AMGN)income of $87.00
  • Anthem (ANTM)income of $8.00
  • Broadcom (AVGO)income of $65.00
  • Boeing (BA)income of $61.65
  • Blackrock (BLK)income of $115.50
  • Cummins (CMI)income of $65.55
  • Canadian National Railway (CNI)income of $10.12
  • Chevron (CVX)income of $95.20
  • Dominion Energy (D)income of $91.75
  • Gilead Sciences (GILD)income of $126.00
  • Home Depot (HD)income of $81.60
  • Honeywell International (HON)income of $54.00
  • International Business Machines (IBM)income of $48.60
  • Intercontinental Exchange (ICE)income of $6.88
  • Intel (INTC)income of $94.50
  • Johnson & Johnson (JNJ)income of $117.80
  • Coca-Cola (KO)income of $80.00
  • Lockheed Martin (LMT)income of $33.60
  • Main Street Capital (MAIN)income of $111.25
  • McDonald's (MCD)income of $33.75
  • 3M (MMM)income of $144.00
  • Microsoft (MSFT)income of $51.00
  • NextEra Energy (NEE)income of $31.25
  • Realty Income (O)income of $11.35
  • Pfizer (PFE)income of $108.00
  • Public Storage (PSA)income of $60.00
  • Qualcomm (QCOM)income of $21.70
  • Ross Stores (ROST)income of $25.50
  • Snap-On (SNA)income of $27.00
  • Stanley Black & Decker (SWK)income of $34.50
  • 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 $38.80
  • United Parcel Service (UPS)income of $96.00
  • Visa (V)income of $5.10
  • Valero Energy (VLO)income of $166.50
  • Walgreens Boots Alliance (WBA)income of $137.25
  • Wells Fargo (WFC)income of $51.00
  • Exxon Mobil (XOM)income of $174.00
The following chart shows DivGro's monthly dividends plotted against PMDI. 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 December, the following stocks announced dividend increases:
  • Amgen (AMGN)increase of 10.34%
  • Broadcom (AVGO)increase of 22.64%
  • Mastercard (MA)increase of 21.21%
  • Realty Income (O)increase of 0.22%
  • Pfizer (PFE)increase of 5.56%
  • Stryker (SYK)increase of 10.58%
  • AT&T (T)increase of 1.96%
  • Visa (V)increase of 20.00%
  • WP Carey (WPC)increase of 0.19%
These changes will increase DivGro's PADI by about $141.

I like seeing dividend increases above 7%, so five of the eight increases top my expectations. The arithmetic average of this month's dividend increases is 10.3%, which easily beats inflation.

Transactions


Here is a summary of my transactions in December:
  • FedEx (FDX)added 25 shares and increased position to 75 shares
  • Oracle (ORCL)added 15 shares and increased position to 140 shares
  • Toronto-Dominion Bank (TD)added 100 shares and increased position to 200 shares
  • Union Pacific (UNP)added 8 shares and increased position to 48 shares
These transactions increased DivGro's PADI by about $335.

In December, I revisited the Top Holdings of Dividend ETFs, an article series in which I compile a virtual portfolio of dividend growth stocks based on the holdings of dividend ETFs. In Part 3, I showcased high-quality stocks that are not in the list of 50 top-ranked stocks. These are hidden gems and worth considering from a contrarian perspective.

Of the hidden gems so identified, I determined that FDX, ORCL, TD, and UNP were trading at or below fair value and decided to increase my holdings in these positions.

Markets


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

DOW
30
S&P
500
NASDAQ
Composite
10-YR
BOND
CBOE
VIX
Nov 30, 201928,051.413,140.988,665.471.76712.62
Dec 31, 201928,538.443,230.788,972.601.91913.78

In December, the DOW 30 gained 1.7%, the S&P 500 gained 2.9%, and the NASDAQ gained 3.5%. The yield on the benchmark 10-year Treasury note increased to 1.919%, while CBOE's measure of market volatility, the VIX, increased by 9.2%.

Portfolio Statistics


Based on the total capital invested and the portfolio's current market value, DivGro has delivered a simple return of about 66% since inception. In comparison, DivGro's IRR (internal rate of return) is 15.5%. (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 increased from 3.64% last month to 3.65% this month.

Percentage payback relates dividend income to the amount of capital invested. DivGro's average percentage payback is 16.4%, up from last month's 15.9%.

Finally, DivGro's projected annual yield is at 4.75%, up from last month's value of 4.67%. I calculate projected annual yield by dividing PADI ($26,358) 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


The market surged higher in 2019 but Wall Street's expectations for 2020 (and beyond) are much more modest. Stocks are more expensive than a year ago, so there's less room to grow. And while the trade war with China seems to be cooling off and fears of a recession are subsiding, 2020 is a presidential election year. Chances are we'll experience increased volatility in the stock market this year.

In the next few weeks, I'll post quarterly and annual reviews of DivGro, as well as an article identifying DivGro's best and worst performers of 2019. Overall, I'm happy with DivGro's performance and how I've managed to reduce its risk profile in 2019.

I'm looking forward to seeing what 2020 brings!

I wish all my readers a Happy New Year and the best of success in your investment journey in 2020!

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

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2 comments :

  1. Ferdi! That is an awesome month. Congrats on receiving over $3k in dividend income, all from individual companies. It was also great to see you add $300+ from purchases and another $100+ from dividend increases. That's how you keep the snowball rolling and growing.

    Bert

    ReplyDelete
    Replies
    1. Hi, Bert -- good to hear from you! Thanks for commenting -- December was a good month although I didn't break my record for monthly dividend income. I think my reshuffling has trimmed some end-of-quarter dividends. No harm because those will show up in other months and I'll break the record again soon with reinvestments and additional cash contributions! All the best for 2020!

      Delete

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