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Saturday, October 31, 2020

Quarterly Review Of DivGro: Q3 2020

Welcome to the 31st quarterly review of DivGro, my portfolio of dividend growth stocks.

My quarterly reviews provide a summary of dividend income, dividend changes, and transactions executed in the past quarter. I also provide some charts showing various portfolio statistics. While these reviews are mostly informational, they help me to track progress over time.

Now in its eighth year of existence, my portfolio generated more than $7,540 of dividend income this quarter and I'm projecting dividend income of at least $8,140 per quarter going forward.

Year-to-date I've collected dividend income of $21,659 or about 80% of my 2020 goal of $27,000. DivGro's all-time dividend income total is $112,646.

Dividend Income

In Q3-2020, I collected dividend income totaling $7,547, up 6% from the dividends received in Q2-2020, and up 16% from the dividends received in Q3-2019.

81 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
  • Bristol-Myers Squibb Company (BMY)income of $45.00
  • The Bank of Nova Scotia (BNS)income of $151.52
  • Chubb Limited (CB)income of $18.72
  • Comcast Corporation (CMCSA)income of $46.00
  • Cummins Inc (CMI)income of $78.66
  • Canadian National Railway Company (CNI)income of $53.94
  • 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 $129.00
  • 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 $71.50
  • Gilead Sciences, Inc (GILD)income of $136.00
  • The Home Depot, Inc (HD)income of $90.00
  • Honeywell International Inc (HON)income of $63.00
  • 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 $90.00
  • The Coca-Cola Company (KO)income of $82.00
  • Lockheed Martin Corporation (LMT)income of $72.00
  • 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 $58.00
  • 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 $84.24
  • Northrop Grumman Corporation (NOC)income of $14.50
  • Oracle Corporation (ORCL)income of $42.00
  • PepsiCo, Inc (PEP)income of $71.58
  • 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 $97.81
  • Public Storage (PSA)income of $90.00
  • Public Storage (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 $122.49
  • Starbucks Corporation (SBUX)income of $57.40
  • Snap-on Incorporated (SNA)income of $64.80
  • Simon Property Group, Inc (SPG)income of $104.00
  • Stryker Corporation (SYK)income of $5.75
  • AT&T Inc (T)income of $312.00
  • The Toronto-Dominion Bank (TD)income of $117.78
  • T Rowe PriceT. 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 $140.25
  • Wells Fargo & Company (WFC)income of $40.00
  • W. P. Carey Inc (WPC)income of $52.10
  • Xcel Energy Inc (XEL)income of $27.95
  • Exxon Mobil Corporation (XOM)income of $174.00
Additionally, I collected monthly dividends from 3 different stocks and funds:
  • Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO)income of $427.50
  • Main Street Capital (MAIN)income of $215.25
  • Realty Income Corporation (O)income of $70.05
One stock paid an annual dividend this quarter:
  • Taiwan Semiconductor Manufacturing Company Limited (TSM)income of $127.16
    The following chart shows DivGro's dividend income by quarter:

    Dividend Changes

    Last quarter, I reported a projected annual dividend income (PADI) of $30,743. This quarter, PADI increased to $31,473, and relative to the total capital invested, DivGro's projected annual yield is 4.83%.

    In July, Wells Fargo & Company (WFC) cut its dividend by 80%.

    The following table shows the stocks that announced dividend increases in Q3 2020. I'm including the new annual dividend and yield on cost (YoC).

    Increase Annual Div
     New YoC
    Texas Instruments Incorporated
    Accenture plc
    Microsoft Corporation
    Lockheed Martin Corporation
    Illinois Tool Works
    Royal Bank of Canada
    The Bank of Nova Scotia
    The Toronto-Dominion Bank
    Honeywell International Inc
    Philip Morris International Inc
    Altria Group, Inc
    Walgreens Boots Alliance, Inc
    Canadian National Railway Company
    Verizon Communications Inc
    National Retail Properties
    Realty Income Corporation
    W.P. Carey Inc

    DivGro's average YoC is 3.66%, down from the 3.70% reported at the end of Q2 2020. I'd like to see dividend increases of at least 7%. Only five dividend increases in the table topped 7%. 

    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 31 October 2020:
    At 8.73%, 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:


    This quarter I deployed new capital and options income to add new positions and to expand existing positions. I also trimmed and closed some positions. 

    New Positions
    • Public Service Enterprise Group Incorporated (PEG) —  new position of 100 shares
    • Pinterest, Inc (PINS) — new position of 100 shares
    Increased Positions
    • Simon Property Group, Inc (SPG) — added 20 shares and increased my position to 100 shares
    • Automatic Data Processing, Inc (ADP) — added 10 shares and increased position to 70 shares
    • Automatic Data Processing, Inc (ADP) — added 50 shares and increased position to 120 shares
    • Cisco Systems, Inc (CSCO) — added 100 shares and increased position to 300 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
    I covered these transactions in monthly reviews and other articles on my blog, so I won't rehash details here. Some transactions resulted from options assignments, while others 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 UnsafeBorderline SafeSafe, and Very Safe dividend safety scores. DivGro now contains 94 different positions. Of these, 76 are dividend growth stocks, eight are dividend-paying stocks, and two are CEFs (closed-end funds). I also own eight stocks that do not pay dividends. 

     Here is the distribution of DivGro's holdings by sector:

    I now also look at the distribution of my dividend growth stocks by supersector:

    My goal is to slowly move towards an equal super sector distribution, thereby increasing my defensive exposure significantly. 

    Market Value

    At the end of Q3 2020, DivGro's market value represented a simple gain of 60% 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 13.3%.

    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 4.32%, Apple (AAPL) is by far my largest position. I don't like having positions much larger than about 3.5% of portfolio value, but AAPL has just exploded higher and I'm going to hang on and enjoy the ride.

    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 3.97%:
    Single positions that contribute more than 6% to DivGro's PADI would 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 10.67%, Exxon Mobil Corporation (SKT) is the top-yielding position in DivGro, followed by Valero Energy Corporation (VLO) with 10.15%. The arithmetic average yield of dividend growth stocks in my portfolio is 3.50%. 

    Finally, let's look at the payback percentage, or how much of my original investment I've received back in the form of dividends. Generally, stocks I've owned for a long time will have larger paybacks, but dividend yield also plays a role: payback will grow faster for stocks with larger yields.

    Main Street Capital (MAIN) is my oldest position and has, by far, the largest payback in my portfolio.

    Concluding Remarks

    I'm happy with DivGro's overall composition and performance, but I've decided to slowly increase DivGro's defensive exposure. So, when deploying new capital, I'll focus on buying high-quality stocks in the defensive super sector trading at or below fair value.
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    1. Great articule, but..
      I've been looking at seeking alpha, marketbeat and yahoo finance and I don't see a dividend increase on CNI or BNS. Could you tell me the date? In CAD I don't see them increasing.

      1. Thanks for commenting, Daniel --

        You're right, of course... I convert the Canadian dividends to USD for my portfolio, and compare it with prior converted dividends. So the dividend is not necessarily a formal increase... but an increase for my portfolio nonetheless.


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