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Monday, June 8, 2020

Monthly Review Of DivGro: May 2020

Every month, I write a review of my portfolio of dividend growth stocks, DivGro. I present details of any buys or sells, and I provide a summary of dividends collected. I also consider the impact on DivGro's projected annual dividend income (PADI).

In May, I opened one new position and added shares to three existing positions. Four DivGro stocks announced dividend increases in May. Unfortunately, the pandemic finally impacted my portfolio, as three stocks suspended their dividends and one of my closed-end funds cut its distribution. The net result of these changes is that PADI decreased by about 1.6% in May. Year over year, PADI increased by 12.8%.

As for dividend income, in May I received dividends totaling $1,536 from 20 stocks in my portfolio, a year over year decrease of 7%. So far in 2020, I've collected $10,112 in dividends or about 37% of my 2020 goal of $27,000.

DivGro's PADI now stands at $29,005, which means I can expect to receive $2,417 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 reinvesting dividends, so DivGro's PADI should continue to grow through dividend growth and through compounding.

Dividend Income

I received dividends from 20 different stocks, for a monthly total of $1,536 in dividend income:
Here is a list of the dividends I collected in May:
  • Apple (AAPL)income of $82.00
  • AbbVie (ABBV)income of $236.00
  • Accenture (ACN)income of $8.00
  • Air Products and Chemicals (APD)income of $21.44
  • Costco Wholesale (COST)income of $7.00
  • CVS Health (CVS)income of $150.00
  • Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO)income of $85.50
  • General Dynamics (GD)income of $55.00
  • Hormel Foods (HRL)income of $23.25
  • Lowe's (LOW)income of $55.00
  • Mastercard (MA)income of $12.00
  • Main Street Capital (MAIN)income of $71.75
  • National Retail Properties (NNN)income of $83.43
  • Realty Income (O)income of $11.65
  • Procter & Gamble (PG)income of $19.77
  • Royal Bank of Canada (RY)income of $115.49
  • Starbucks (SBUX)income of $57.40
  • AT&T (T)income of $312.00
  • 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 I would prefer receiving more evenly distributed dividends,  I don't want to change my investment decisions based on the timing or frequency of dividend payments.

Dividend Changes

In May, the following stocks announced dividend increases:
  • Apple (AAPL)increase of 6.49%
  • Chubb (CB)increase of 4.00%
  • Medtronic (MDT)increase of 7.41%
  • PepsiCo (PEP)increase of 7.07%
The following stocks announced dividend suspensions:

Additionally, one of my closed-end funds announced a dividend decrease:
  • Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO) — decrease of  20.83%

As a result of these changes, DivGro's PADI will decrease by $888.


Here is a summary of my transactions in May:
  • Northrop Grumman (NOC)new position of 10 shares
NOC was one of the stocks we identified in our introductory article on Dividend Radar. In May, the company increased its dividend by about 10%. The stock now yields 1.73% at $342.10 per share. 
  • Chevron (CVX)added 20 shares and increased position to 100 shares
  • Realty Income (O)added 50 shares and increased position to 100 shares
  • PepsiCo (PEP)added 30 shares and increased position to 50 shares
At the end of May, I identified a few stocks that represented smaller than full positions in my portfolio. 

One of these is PEP, which ranked fourth in my top-ranked stocks for May 2020. I'll need to add another 20 shares to turn PEP into a full position. But I want to wait for a better entry point, perhaps below $130 per share. 

Both CVX and O presented good entry points, allowing me to replace some of the dividends I lost due to the suspensions and cut. CVX yields 5.36% at $100.81 per share, while O yields 4.65% at $62.21 per share.

These transactions increased DivGro's PADI by about $424.


Here is a summary of various market indicators, showing the changes over the last month:

Apr 30, 202024,345.722,912.438,889.550.64234.15
May 31, 202025,383.113,044.319,489.870.64827.51

In May, the DOW 30 gained 4.3%, the S&P 500 gained 4.5%, and the NASDAQ gained 6.8%. The yield on the benchmark 10-year Treasury note rose to 0.648, while CBOE's measure of market volatility, the VIX, decreased by 19.4% to 27.51.

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 11.4%. (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 3.79% last month to 3.67% 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 16.5%.

Finally, projected annual yield is calculated by dividing PADI ($29,005) by the total amount invested. DivGro's projected annual yield is at 4.74%, down from last month's value of 4.88%.

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

DivGro recovered nicely since the market's big drop in late February and early March. There are two positions in my portfolio that are underperforming rather poorly, Simon Property Group (SPG) and Wells Fargo (WFC). Both now have Unsafe dividends according to Simply Safe Dividends and there is a high likelihood that one or both will experience a dividend cut. I'm going to wait and see what happens.

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

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