This is the 30th quarterly review of DivGro, my portfolio of dividend growth stocks.In quarterly reviews, I summarize the transactions executed in the past quarter and provide a summary of dividend income and dividend changes. Moreover, I include charts showing various portfolio statistics. The reviews are mostly informational and help to track progress over time.
My portfolio generated more than $7,090 of dividend income this quarter and I'm projecting dividend income of at least $7,950 per quarter going forward.
Year-to-date I've collected dividend income of $14,112 or about 52% of my 2020 goal of $27,000. DivGro's all-time dividend income total is $105,099.
Dividend Income
In Q2-2020, I collected dividend income totaling $7,099, up 1% from the dividends received in Q1-2020, and up 12% from the dividends received in Q2-2019.
79 different stocks and funds paid me quarterly dividends:
- Apple Inc (AAPL) — income of $82.00
- AbbVie Inc (ABBV) — income of $236.00
- Accenture plc (ACN) — income of $8.00
- Archer-Daniels-Midland Company (ADM) — income of $108.00
- Automatic Data Processing, Inc (ADP) — income of $54.60
- Aflac Incorporated (AFL) — income of $28.00
- Amgen Inc (AMGN) — income of $80.00
- Anthem, Inc (ANTM) — income of $9.50
- Air Products and Chemicals, Inc (APD) — income of $21.44
- Broadcom Inc (AVGO) — income of $97.50
- Blackrock, Inc (BLK) — income of $127.05
- The Bank of Nova Scotia (BNS) — income of $144.66
- Chubb Limited (CB) — income of $18.00
- Comcast Corporation (CMCSA) — income of $46.00
- Cummins Inc (CMI) — income of $78.66
- Canadian National Railway Company (CNI) — income of $52.78
- Costco Wholesale Corporation (COST) — income of $7.00
- Cisco Systems, Inc (CSCO) — income of $72.00
- CVS Health Corporation (CVS) — income of $150.00
- Chevron Corporation (CVX) — income of $103.20
- Dominion Energy, Inc (D) — income of $94.00
- Digital Realty Trust, Inc (DLR) — income of $50.40
- FedEx Corporation (FDX) — income of $48.75
- General Dynamics Corporation (GD) — income of $55.00
- Gilead Sciences, Inc (GILD) — income of $136.00
- The Home Depot, Inc (HD) — income of $90.00
- Honeywell International Inc (HON) — income of $54.00
- Hormel Foods Corporation (HRL) — income of $23.25
- International Business Machines Corporation (IBM) — income of $114.10
- Intercontinental Exchange, Inc (ICE) — income of $30.00
- Intel Corporation (INTC) — income of $99.00
- Illinois Tool Works Inc (ITW) — income of $64.20
- Johnson & Johnson (JNJ) — income of $24.24
- JPMorgan Chase & Co (JPM) — income of $63.00
- The Coca-Cola Company (KO) — income of $82.00
- Lockheed Martin Corporation (LMT) — income of $33.60
- Lowe's Companies, Inc (LOW) — income of $55.00
- Mastercard Incorporated (MA) — income of $12.00
- McDonald's Corporation (MCD) — income of $33.75
- Medtronic plc (MDT) — income of $54.00
- 3M Company (MMM) — income of $147.00
- Altria Group, Inc (MO) — income of $168.00
- Merck & Co, Inc (MRK) — income of $67.10
- Microsoft Corporation (MSFT) — income of $51.00
- NextEra Energy, Inc (NEE) — income of $35.00
- AllianzGI Equity & Convertible Income Fund (NIE) — income of $380.00
- NIKE, Inc (NKE) — income of $3.68
- National Retail Properties, Inc (NNN) — income of $83.43
- Northrop Grumman Corporation (NOC) — income of $14.50
- Oracle Corporation (ORCL) — income of $42.10
- PepsiCo, Inc (PEP) — income of $51.13
- Pfizer Inc (PFE) — income of $114.00
- The Procter & Gamble Company (PG) — income of $19.77
- Philip Morris International Inc (PM) — income of $140.40
- Pinnacle West Capital Corporation (PNW) — income of $39.13
- Public Storage (PSA) — income of $90.00
- Phillips 66 (PSX) — income of $180.00
- QUALCOMM Incorporated (QCOM) — income of $22.75
- Raytheon Technologies Corporation (RTX) — income of $57.00
- Royal Bank of Canada (RY) — income of $115.49
- Starbucks Corporation (SBUX) — income of $57.40
- Snap-On Incorporated (SNA) — income of $64.80
- Stryker Corporation (SYK) — income of $5.75
- AT&T Inc (T) — income of $312.00
- The Toronto-Dominion Bank (TD) — income of $113.43
- T. Rowe Price Group, Inc (TROW) — income of $180.00
- The Travelers Companies, Inc (TRV) — income of $85.00
- Texas Instruments Incorporated (TXN) — income of $67.50
- UnitedHealth Group Incorporated (UNH) — income of $50.00
- Union Pacific Corporation (UNP) — income of $46.56
- United Parcel Service, Inc (UPS) — income of $101.00
- Visa Inc (V) — income of $15.00
- Valero Energy Corporation (VLO) — income of $181.30
- Verizon Communications Inc (VZ) — income of $61.50
- Walgreens Boots Alliance, Inc (WBA) — income of $137.25
- Wells Fargo & Company (WFC) — income of $102.00
- W. P. Carey Inc (WPC) — income of $52.00
- Xcel Energy Inc (XEL) — income of $27.95
- Exxon Mobil Corporation (XOM) — income of $174.00
- Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO) — income of $336.00
- Main Street Capital Corporation (MAIN) — income of $194.75
- Realty Income Corporation (O) — income of $46.60
- Taiwan Semiconductor Manufacturing Company Limited (TSM) — income of $124.72
Dividend Changes
Last quarter, I reported a projected annual dividend income (PADI) of $29,432. This quarter, PADI increased to $30,743, and relative to the total capital invested, DivGro's projected annual yield is 4.81%.
The following table shows the stocks in DivGro that announced dividend increases in Q2 2020. I'm including the new annual dividend and yield on cost (YoC).
Company
|
Ticker
| Increase | Annual Div |
New YoC
|
UnitedHealth Group Incorporated
|
UNH
| 15.74% |
5.00
|
2.88%
|
Costco Wholesale Corporation
|
COST
| 7.69% |
2.80
|
1.03%
|
Medtronic plc
|
MDT
| 7.41% |
2.32
|
2.53%
|
PepsiCo, Inc
|
PEP
| 7.07% |
4.09
|
3.22%
|
Apple Inc
|
AAPL
| 6.49% |
3.28
|
3.14%
|
Johnson & Johnson
|
JNJ
| 6.32% |
4.04
|
4.18%
|
The Procter & Gamble Company
|
PG
|
6.01%
|
3.16280
|
4.02%
|
QUALCOMM Incorporated
|
QCOM
|
4.84%
|
2.60
|
3.75%
|
Canadian National Railway Company
|
CNI
|
4.43%
|
1.68896
|
2.12%
|
Chubb Limited
|
CB
|
4.00%
|
3.04
|
1.28%
|
The Travelers Companies, Inc
|
TRV
|
3.66%
|
3.40
|
2.93%
|
The Toronto-Dominion Bank
|
TD
|
1.46%
|
2.26860
|
4.01%
|
International Business Machines Corporation
|
IBM
|
0.62%
|
6.52
|
4.51%
|
Realty Income Corporation
|
O
|
0.21%
|
2.80200
|
5.45%
|
W. P. Carey Inc
|
WPC
|
0.19%
|
4.16800
|
6.41%
|
DivGro's average YoC is 3.70%, down from the 3.78% reported at the end of Q1 2020.
I'd like to see dividend increases of at least 7%. Unfortunately, only four dividend increases topped 7%! The arithmetic average of the increases in Q2 2020 is 5.08%.
The COVID-19 pandemic has created some challenges for dividend growth companies and my portfolio was not spared! Here is a list of dividend cuts and suspensions announced in Q2-2020:
- The Walt Disney Company (DIS) — decided to forgo the first semi-annual dividend
- Ross Stores, Inc (ROST) — suspended dividend
- The TJX Companies, Inc (TJX) — suspended dividend
- Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO) — a decrease of 20.83%
- Simon Property Group, Inc (SPG) — a decrease of 38.10%
Additionally, the following stocks suffered a dividend decrease due to the impact of exchange rate fluctuations:
- The Bank of Nova Scotia (BNS) — a decrease of 5.64%
- Royal Bank of Canada (RY) — a decrease of 2.56%
- Taiwan Semiconductor Manufacturing Company Limited (TSM) — a decrease of 0.28%
Dividend Growth
Some stocks announce dividend increases more than once per year, so when considering dividend growth, it is better to look at year-over-year increases. Here is a chart of the one-year dividend growth rates of stocks in DivGro, as of 30 June 2020:
At 8.68%, the (arithmetic) average year-over-year dividend growth rate of dividend growth stocks in my portfolio is well above 7%, which makes me a very happy dividend growth investor!
And here is a chart of the 5-year dividend growth rates of my dividend growth stocks:
Generally, I would expect stocks with smaller dividend growth rates to offer higher yields.
Here is a summary of the dividend yields offered by stocks with the lowest 5-year dividend growth rates, and a column showing the so-called CDR number, which sums the dividend yield and the 5-year dividend growth rate [DGR]:
Company
| Ticker | Sector | Yield | 5-Yr DGR | CDN |
W.P. Carey, Inc
| WPC | Real Estate | 6.13% | 1.77% | 8 |
AT&T Inc
| T | Communication Services | 6.92% | 2.04% | 9 |
Verizon Communications Inc
| VZ | Communication Services | 4.41% | 2.26% | 7 |
The Procter & Gamble Company
| PG | Consumer Staples | 2.52% | 2.99% | 6 |
Philip Morris International Inc.
| PM | Consumer Staples | 6.19% | 3.19% | 9 |
Main Street Capital Corporation
| MAIN | Financials | 7.92% | 3.22% | 11 |
Chevron Corporation
| CVX | Energy | 5.73% | 3.81% | 10 |
Bristol-Myers Squibb Company
| BMY | Health Care | 3.01% | 3.99% | 7 |
National Retail Properties, Inc
| NNN | Real Estate | 5.81% | 4.16% | 10 |
Realty Income Corporation
| O | Real Estate | 4.81% | 4.22% | 9 |
The Coca-Cola Company
| KO | Consumer Staples | 3.41% | 4.44% | 8 |
Exxon Mobil Corporation
| XOM | Energy | 7.98% | 4.75% | 13 |
Archer-Daniels-Midland Company
| ADM | Consumer Staples | 3.51% | 5.15% | 9 |
Pinnacle West Capital Corporation
| PNW | Utilities | 3.78% | 5.63% | 9 |
Chubb Limited
| CB | Financials | 2.29% | 5.64% | 8 |
Digital Realty Trust, Inc
| DLR | Real Estate | 3.11% | 5.67% | 9 |
Xcel Energy, Inc
| XEL | Utilities | 2.52% | 6.09% | 9 |
Merck & Co., Inc
| MRK | Health Care | 3.09% | 6.27% | 9 |
Walgreens Boots Alliance, Inc
| WBA | Consumer Staples | 4.52% | 6.27% | 11 |
Johnson & Johnson
| JNJ | Health Care | 2.71% | 6.30% | 9 |
Pfizer Inc
| PFE | Health Care | 3.98% | 6.30% | 10 |
Intel Corporation
| INTC | Information Technology | 2.17% | 6.58% | 9 |
United Parcel Service, Inc
| UPS | Industrials | 3.40% | 6.71% | 10 |
I color-code the CDN column to indicate a stock's likelihood of delivering annualized returns of at least 8%. Green means likely, yellow means less likely, and red means unlikely. I consider green CDN's favorable.
This year I'm focusing on increasing DivGro's growth prospects, and I'm doing so by targeting stocks with favorable CDNs. I avoid increasing my holdings of stocks with yellow CDNs, and stocks with red CDNs are candidates for reduction or elimination.
Transactions
This quarter I deployed new capital and options income to add new positions and to expand existing positions.
New Positions
- Northrop Grumman Corporation (NOC) — new position of 10 shares
- Bristol-Myers Squibb Company (BMY) — new position of 100 shares
- Chevron Corporation (CVX) — added 20 shares and increased position to 100 shares
- Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO) — added 400 shares and increased position to 1,000 shares
- General Dynamics Corporation (GD) — added 15 shares and increased position to 65 shares
- Honeywell International Inc (HON) — added 10 shares and increased position to 70 shares
- JPMorgan Chase & Co (JPM) — added 30 shares and increased position to 100 shares
- Lockheed Martin Corporation (LMT) — added 16 shares and increased position to 30 shares
- Realty Income Corporation (O) — added 50 shares and increased position to 100 shares
- PepsiCo, Inc (PEP) — added 50 shares and increased position to 70 shares
- Pinnacle West Capital Corporation (PNW) — added 75 shares and increased position to 125 shares
- Wells Fargo & Company (WFC) — added 200 shares and increased position to 400 shares
Additionally, Raytheon Corporation (RTN) completed its merger with United Technologies Corporation to officially form Raytheon Technologies Corporation (RTX). My 50 shares of RTN were replaced with 120 shares of RTX.
I covered these transactions in monthly reviews and other articles on my blog, so I won't rehash details here. For the most part, these continued my effort to strengthen DivGro's risk profile.
To assess risk, I utilize Dividend Safety Scores provided by Simply Safe Dividends (SSD):
From left to right, the colors represent Unsafe, Borderline Safe, Safe, and Very Safe dividend safety scores. (I no longer own Very Unsafe).
DivGro now contains 92 different positions. Of these, 76 are dividend growth stocks, seven are dividend-paying stocks, and two are CEFs (closed-end funds). I also own seven stocks that do not pay dividends.
Here is the distribution of DivGro's holdings by sector:
Market Value
At the end of Q1 2020, DivGro's market value represented a simple gain of 48% on the total amount invested. Of course, this does not take into account the timing and size of cash deposits. DivGro's internal rate of return since inception is 11.8%.
Portfolio Statistics
In quarterly reviews, I like to present general portfolio statistics.
First, let's consider the weight of individual holdings in DivGro. I prefer to see equal weights, but this is difficult to achieve because I sell covered call options and to do so I need 100 shares (or multiples of 100 shares). Quite naturally, therefore, my portfolio will not be ideally weighted.
At 3.9%, AAPL is my largest position by far. I don't like having positions much larger than about 3.5% of portfolio value. However, AAPL's share price has exploded higher and I'm going to enjoy the ride! Meanwhile, I'll continue to add to other positions in my portfolio and so reduce AAPL's relative weight.
Next, let's look at the contribution of each position to DivGro's PADI, which depends not only on the stock's yield but also on the size of the investment. Here, T dominates with 4.06%:
Single positions that contribute more than 6% to DivGro's PADI make me nervous. Fortunately, I have none at this time.
Here is a chart showing the distribution of dividend yields of stocks in my portfolio:
At 8.15%, MO is the top-yielding position in DivGro. Yields above 7% make me nervous, so I'll keep a close eye on MO, XOM, and MAIN. (Last week, WFC indicated that it would significantly cut its dividend).
The arithmetic average yield of my portfolio is 3.21%, way down from last quarter's 3.54%. If I weigh yields based on each position's contribution to PADI, then the average yield is 4.28% (versus 4.80% last quarter).
The stock market has recovered well since the crash in late February and early March. Only a small number of the stocks in my portfolio fall in the lower half of the 52-week trading range, as shown in the following chart:
I find this chart informative as it highlights positions that are performing poorly and potentially could be candidates for further investment (or maybe to sell!).
Concluding Remarks
After the rather tough first quarter in 2020, the second quarter brought a solid recovery! DivGro recovered nicely as well! I'm somewhat skeptical of this recovery, so I'll be circumspect in trading going forward. We'll see how it goes!
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