Sunday, September 6, 2020

Monthly Review Of DivGro: August 2020

Welcome to the monthly review of DivGro, my portfolio of dividend growth stocks. The goal of these monthly reviews is to share updates I've made to the portfolio and to provide a summary of dividends collected. I also consider the impact on DivGro's projected annual dividend income (PADI).

In August, I opened one new position and added shares to four existing positions. Four DivGro stocks announced dividend increases in August. The net result of these changes is that PADI increased by about 1.9% in August. Year over year, PADI increased by 20.5%.

As for dividend income, in August I received dividends totaling $1,674 from 21 stocks in my portfolio, a year over year increase of 4%. So far in 2020, I've collected $17,565 in dividends or about 65% of my 2020 goal of $27,000.



Assuming the status quo and given DivGro's PADI of $30,834, I can expect to receive $2,570 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 21 different stocks, for a monthly total of $1,674 in dividend income:


Here is a list of the dividends I collected in August:
  • 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
  • Bristol-Myers Squibb (BMY) — income of $45.00
  • 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 $142.50
  • General Dynamics (GD) — income of $71.50
  • 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 $84.24
  • Realty Income (O) — income of $23.35
  • Procter & Gamble (PG) — income of $19.77
  • Royal Bank of Canada (RY) — income of $122.49
  • 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
The chart below shows DivGro's monthly dividends plotted against PMDI. Clearly, quarter-ending months are huge outliers:


For this reason, I prefer 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 August, the following stocks announced dividend increases:
  • Illinois Tool Works (ITW) — increase of 6.54%
  • Lowe's (LOW) — increase of 9.09%
  • National Retail Properties (NNN) — increase of 0.97%
  • Royal Bank of Canada (RY) — increase of 6.06%
These changes will increase DivGro's PADI by $68.

I like seeing dividend increases above 7%. Only one increase top that expectation. Still, the average increase is an inflation-topping 5.67%.

Transactions


Here is a summary of my transactions in August:

New Position
  • Pinterest, Inc. (PINS) — bought 100 shares following a call option assignment
In January I read an interesting article on Pinterest, which moved me to buy a $24 call option expiring in August, when PINS was trading below $23. The call option cost me $355, so to break even PINS would have needed to trade above $27.55 per share on 21 August. As it turns out, PINS closed at $34.19 on 21 August, well above that breakeven point and so justifying my speculative options trade.

Now, I hardly ever buy options. I prefer to be on the other side of options trades, because I like collecting options premiums rather than paying them. In this case, though, I liked the prospects of PINS so much that I decided to speculate.

After assignment, I decided to keep the 100 shares of PINS in my DivGro portfolio, adding one more growth stock to small list of non-dividend-growing stocks. With PINS closing at $34.38 on Friday, the position has returned about 25% on my cost basis, so far.

Increased Positions
  • Automatic Data Processing (ADP) — added 10 shares and increased position to 70 shares
  • International Business Machines (IBM) — added 30 shares and increased position to 100 shares
  • National Retail Properties (NNN) — added 30 shares and increased position to 192 shares
  • WP Carey (WPC) — added 50 shares and increased position to 100 shares
These transactions increased DivGro's PADI by about $503.

In my monthly 10 Dividend Growth Stocks article for August, I identified ADP and IBM as good opportunities to buy more shares. ADP traded about 19% above its 5-year average yield, while IBM traded about 22% above its average yield. Since these were not yet full positions, I decided to add more shares in both.

Adding 10 shares to ADP lowered my average cost basis to $170.29 and increased the average Yield on Cost (YoC) of my ADP position to 2.14%. ADP is not yet a full-size position, which I somewhat arbitrarily define to be about 1% of total portfolio value. I'll consider adding more shares to ADP if another good opportunity presents itself. The stock yields 2.63% at $138.53 per shae

As for IBM, I reduced my average cost basis too $138.49 and increased the average YoC to 4.71%. IBM is now a full-size position, to I wouldn't actively seek to add more shares at this time. The stock yields 5.24% at $122.30 per share.

I also decided to add shares to high-yielding NNN (5.55%) and WPC (5.95%). Both these stocks are not yet full positions in my portfolio, and are trading at favorable valuations.

Markets


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

DOW
30
S&P
500
NASDAQ
Composite
10-YR
BOND
CBOE
VIX
Jul 31, 202026,268.003,265.2510,936.000.53624.46
Aug 31, 202028,430.053,500.3111,775.460.69326.41

In August, the DOW 30 gained 8.2%, the S&P 500 gained 7.2%, and the NASDAQ gained 7.7%. The yield on the benchmark 10-year Treasury note rose to 0.693%, while CBOE's measure of market volatility, the VIX, increased by 8.0% to 26.41.

August was the best one-month performance for the stock market in many years!
  • The Dow 30 had its best August performance since 1984 when it gained 9.78%.
  • The S&P 500 had its best August since 1986 when it gained 7.12%
  • The Nasdaq had its best monthly performance since 2000 when it gained 11.66%.
DivGro trailed the market but was still up 6.12%. Here's a one-month performance chart of DivGro's dividend growth stocks:



Portfolio Statistics

Based on the total capital invested and the portfolio's current market value, DivGro has delivered a simple return of about 63% since inception. In comparison, DivGro's IRR (internal rate of return) is 14.0%. (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.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 16.9%, up from last month's 16.7%.

Finally, DivGro's projected annual yield is at 4.79%, up from last month's value of 4.72%. I calculate the projected annual yield by dividing PADI ($30,834) 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


I'm looking forward to September's dividend income. Quarter-ending months are huge months for DivGro, and I'm curious to see how much higher September's dividend income will be compared with the year-ago total.

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

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4 comments :

  1. Hi Ferdi, amazing results. I also noticed that you hit the $1,000,000 portfolio value. Congrats. Keep going! Your blog is my Number 1 dividend growth blog with high quality information which has guided me to be more focused on quality rather than chasing the high yield. Your stock valuation system I also employ. Many thanks for that! I really appreciate it.

    ReplyDelete
    Replies
    1. Thanks for commenting, DGJ -- I'm sure the 7-figure portfolio will soon turn back into a 6-figure portfolio, given the market's correction. Hopefully, this will just create more opportunities to buy high-quality stocks at better valuations! Take care and all the best!

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  2. Four digits for the month of August is an awesome total. Congrats. As usual it's nice to see quite a few names in common paying us both in August. Nice to see some dividend raises too among the sea of cuts we experienced in 2020. Love that ITW raise. That's a machine of a stock for decades and decades. Thanks for sharing.

    ReplyDelete
    Replies
    1. Thanks for commenting, DivHut -- I'm happy with August's dividend income, and, I agree, ITW is a great dividend growth stock! It is good for us to have dividend growth machines churning out monthly incomes!

      Delete

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