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Saturday, February 15, 2020

Monthly Review Of DivGro: January 2020

Once a month, I review my portfolio of dividend growth stocks, DivGro. 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 January, I closed three positions and added shares to four existing positions. Twelve DivGro stocks announced dividend increases in January. The net result of these changes is that PADI increased by about 0.8% in January. Year over year, PADI increased by 5.7%.

As for dividend income, in January I received dividends totaling $1,899 from 27 stocks in my portfolio, a year over year increase of 8%. So far in 2020, I've collected $1,899 in dividends or about 7% of my 2020 goal of $27,000.

Assuming the status quo and given DivGro's PADI of $26,558, I can expect to receive $2,213 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 collected dividends totaling $1,899 from 27 different stocks in January:
Here is a list of the dividends I received in January:
  • Automatic Data Processing (ADP)income of $9.10
  • Bank of Nova Scotia (BNS)income of $68.13
  • Chubb (CB)income of $37.50
  • Comcast (CMCSA)income of $42.00
  • Cisco Systems (CSCO)income of $70.00
  • Quest Diagnostics (DGX)income of $53.00
  • Walt Disney (DIS)income of $176.00
  • Digital Realty Trust (DLR)income of $48.60
  • FedEx (FDX)income of $48.75
  • Illinois Tool Works (ITW)income of $40.66
  • JPMorgan Chase (JPM)income of $36.00
  • Main Street Capital (MAIN)income of $51.25
  • Medtronic (MDT)income of $27.00
  • Altria (MO)income of $168.00
  • Merck (MRK)income of $67.10
  • AllianzGI Equity & Convertible Income Fund (NIE)income of $380.00
  • Nike (NKE)income of $3.68
  • Realty Income (O)income of $11.38
  • Oracle (ORCL)income of $33.60
  • PepsiCo (PEP)income of $19.10
  • Philip Morris International (PM)income of $140.40
  • Raytheon (RTN)income of $47.13
  • Stryker (SYK)income of $5.75
  • Toronto-Dominion Bank (TD)income of $111.80
  • Taiwan Semiconductor Manufacturing (TSM)income of $125.06
  • WP Carey (WPC)income of $51.90
  • Xcel Energy (XEL)income of $26.33
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 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 January, the following stocks announced dividend increases:
  • Anthem (ANTM) — increase of 18.75%
  • Air Products and Chemicals (APD) — increase of 15.52%
  • Blackrock (BLK) — increase of 10.00%
  • Comcast (CMCSA) — increase of 9.52%
  • Chevron (CVX) — increase of 8.40%
  • Dominion Energy (D) — increase of 2.45%
  • Quest Diagnostics (DGX) — increase of 5.66%
  • Intel (INTC) — increase of 4.76%
  • Realty Income (O) — increase of 2.20%
  • Tanger Factory Outlet Centers (SKT) — increase of 0.70%
  • Taiwan Semiconductor Manufacturing (TSM) — increase of 28.57%
  • Valero Energy (VLO) — increase of 8.89%
As a result of these changes, DivGro's PADI will increase by $329.

I like seeing dividend increases above 7%, and seven of these increases top my expectations. The arithmetic average of this month's dividend increases is 9.6%, which easily beats inflation!


Here is a summary of my transactions in January:

  • Boeing (BA)sold 30 shares and closed position
  • NestlĂ© SA (NSRGY)sold 15 shares and closed position
  • Stanley Black & Decker (SWK)sold 50 shares and closed position
I decided to close my Boeing position due to the increased risk following the Boeing 737 MAX crashes, and indications that the company faces many more challenges in 2020 and beyond. There are plenty of opportunities (even in this toppy market) without the associated risk that BA presents. 

Last year I focused on improving DivGro's risk profile by eliminating riskier positions. This year, I'll be focusing on improving DivGro's growth prospects, specifically by favoring stocks with higher dividend growth rates [DGRs]. I have a strong sense that high-DGR stocks perform better in the long run when considering total returns. 

NSRGY and SWK are the first victims of my new focus. Both stocks have low yields and their DGRs that do not sufficiently compensate me for those low yields. I'm reinvesting the proceeds in existing DivGro positions with superior DGRs.

  • Broadcom (AVGO)added 10 shares and increased position to 30 shares
  • Illinois Tool Works (ITW)added 22 shares and increased position to 60 shares
  • Oracle (ORCL)added 35 shares and increased position to 175 shares
  • Visa (V)added 33 shares and increased position to 50 shares
In January, I identified several high-quality DivGro stocks with smaller-than-average position sizes and high DGRs. (I consider a full position to be about 1% of total portfolio value). Of these candidates, I decided to add shares to AVGO, ITW, ORCL, and V.

Rank Ticker Company Yrs VL
Qual Yield 5-Yr
CDN Fair
Price (Disc.)
6VVisa121A++WideAA-99250.57%20.1%  21  193210.659%
8ORCLOracle111A++WideA+99241.72%13.6%  15  6055.71(7%)
35ITWIllinois Tool Works451A++NarrowA+81232.28%18.5%  21  171187.7410%
81AVGOBroadcom103B++NarrowBBB-67164.08%55.5%  60  359319.01(11%)

In the table, I provide key metrics of interest to DG investors, including the dividend Yield for a recent stock Price and the 5-year compound annual dividend growth rate (5-Yr DGR), as well as the so-called Chowder Number (CDN).

Notice the strong DGRs and favorable CDNs of these stocks.


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

Dec 31, 201928,538.443,230.788,972.601.91913.78
Jan 31, 202028,256.033,225.529,150.941.52018.84

In January, the DOW 30 dropped 1.0% and the S&P 500 dropped 0.2%. On the other hand, the NASDAQ gained 2.0%. The yield on the benchmark 10-year Treasury note fell to 1.52, while CBOE's measure of market volatility, the VIX, increased by 36.7%.

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 14.7%.

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 3.65% last month to 3.69% this month.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 16.7%, up from last month's 16.4%.

Finally, DivGro's projected annual yield is at 4.76%, up from last month's value of 4.75%. I calculate projected annual yield by dividing PADI ($26,558) 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

In 2020, I'm looking to favor high-quality dividend growth stocks that are likely to deliver annualized returns of 8%. I expect some portfolio consolidation as I eliminate positions with lower DGRs and redeploy the proceeds to positions offering higher DGRs.

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

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