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Thursday, December 17, 2020

Monthly Review Of DivGro: November 2020

Every month, I write a review of my portfolio of dividend growth stocks, DivGro. I provide a summary of transactions and dividends received in the past month. I also consider the impact on DivGro's projected annual dividend income (PADI).

In November, I opened a new position, added shares to an existing position, and closed a position. Eight DivGro stocks announced dividend increases in November. The net result of these changes is that PADI increased by about 0.2% in November. Year over year, PADI increased by 26.8%.

As for dividend income, in November I received dividends totaling $2,538 from 25 stocks in my portfolio, a year over year increase of 48%. So far in 2020, I've collected $25,908 in dividends, or about 96% of my 2020 goal of $27,000. My 2020 dividend income now tops the total I received in 2019. 

DivGro's PADI is $32,809, which means I can expect to receive $2,734 in dividend income per month, on average, in perpetuity, assuming the status quo is maintained. But DivGro's PADI should increase over time because I invest in dividend growth stocks. 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


In November, I received a total of $2,538 in dividend income from 25 different stocks:

Here is a list of the dividends I collected in November:

  • Apple Inc (AAPL)income of $82.00
  • AbbVie Inc (ABBV)income of $236.00
  • Accenture plc (ACN)income of $8.80
  • Air Products and Chemicals, Inc (APD)income of $21.44
  • Bristol-Myers Squibb Company (BMY)income of $45.00
  • Costco Wholesale Corporation (COST)income of $7.00
  • CVS Health Corporation (CVS)income of $150.00
  • Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO)income of $142.50
  • General Dynamics Corporation (GD)income of $71.50
  • Hormel Foods Corporation (HRL)income of $23.25
  • JPMorgan Chase & Co (JPM)income of $90.00
  • Lowe's Companies, Inc (LOW)income of $60.00
  • Mastercard Incorporated (MA)income of $12.00
  • Main Street Capital (MAIN)income of $71.75
  • National Retail Properties, Inc (NNN)income of $99.84
  • Realty Income Corporation (O)income of $23.40
  • Pfizer Inc (PFE)income of $577.59
  • The Procter & Gamble Company (PG)income of $19.77
  • Royal Bank of Canada (RY)income of $124.33
  • Starbucks Corporation (SBUX)income of $63.00
  • AT&T Inc (T)income of $312.00
  • The Toronto-Dominion Bank (TD)income of $119.30
  • Texas Instruments Incorporated (TXN)income of $76.50
  • Cohen & Steers Infrastructure Fund, Inc (UTF)income of $38.75
  • Verizon Communications Inc (VZ)income of $62.75

Here is a chart showing DivGro's monthly dividends plotted against PMDI (projected monthly dividend income). 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 wouldn't let that influence my investment decisions.


Dividend Changes


In November, the following stocks announced dividend increases:

  • Automatic Data Processing, Inc (ADP)increase of 2.20%
  • Aflac Incorporated (AFL)increase of 17.86%
  • Hormel Foods Corporation (HRL)increase of 5.38%
  • Merck & Co., Inc (MRK)increase of 6.56%
  • NIKE, Inc (NKE)increase of 12.24%
  • Royal Bank of Canada (RY)increase of 1.50%
  • Snap-on Incorporated (SNA)increase of 13.89%
  • The Toronto-Dominion Bank (TD)increase of 1.29%

As a result of these changes, DivGro's PADI will increase by about $103.

I like seeing dividend increases above 7% and three of the eight increases top my expectations. The arithmetic average of this month's dividend increases is 7.6%, which easily beats inflation.


Transactions


Here is a summary of my transactions in November.

New Position

  • Franklin Resources, Inc (BEN)new position of 100 shares
I bought 100 shares of BEN due to the assignment of a $22.50 put option. At the time of assignment, BEN traded around $20.85 per share, but now BEN is trading above $25 per share, so I'm happy to have been assigned! Since the assignment on 19 November, BEN has easily outperformed the S&P 500:

Source: Portfolio-Insight.com

At $22.50 per share, my initial yield on cost is 4.80%. That is fairly close to BEN's 10-year undervalue yield of 5.08%, as indicated in the blue line in the following yield channel chart:

Source: Portfolio-Insight.com

Yield channel charts are based on dividend yield theory, which postulates that dividend yields will tend to fluctuate around a relatively fixed level, approximating fair value. I think BEN is more appropriately valued at around $30 per share, which provides an upside potential of at least 15%.

I've written about BEN before, as the stock continues to pop up on my screens. Until now, I've hesitated to open a position because I wanted to see evidence that the company's recent purchase of Legg Mason would bear fruit. Bank of America securities analyst Michael Carrier upgraded BEN to a "Buy", citing merger synergies and the company's strong balance sheet and an elevated cash position.

This buy added $108 to DivGro's PADI.

Closed Position
  • Dominion Energy, Inc (D)sold 100 shares and closed position
I wrote about this trade here


After Dominion Energy sold its Gas Transmission & Storage segment assets and cut its quarterly dividend, I elected to close my position and replace the lost dividend income by investing in suitable replacements. I may revisit D in the future, but I'd like to give the company some time to execute its new plan, which involves repositioning itself as a pure-play, state-regulated utility with increased cash-flow stability. Besides, after the cut D appears to be overvalued:

Source: Portfolio-Insight.com

The sell removed $376 from DivGro's PADI.

Increased Position
  • Main Street Capital (MAIN)added 100 shares and increased position to 450 shares
Based on its yield channel chart, MAIN is undervalued:

Source: Portfolio-Insight.com

The stock's price line is just above the blue undervalue yield line of 8.10%, currently yielding 7.69%. I added these shares at an initial yield on cost of 7.85%. MAIN pays monthly dividends and I'll be increasing DivGro's PADI by $246. 


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
Oct 30, 202026,501.603,269.9610,911.590.86038.02
Nov 30, 202029,638.643,621.6312,198.740.84420.57

In November, the DOW 30 gained 11.8%, the S&P 500 gained 10.8%, and the NASDAQ gained 11.8%. The yield on the benchmark 10-year Treasury note dropped to 0.844, while CBOE's measure of market volatility, the VIX decreased by 46% to 20.57.

Here's a one-month performance chart of DivGro's dividend growth stocks:

Collectively, the dividend growth stocks in my portfolio gained about 10.66%, slightly underperforming the S&P 500 (10.75%). However, when adding the non-dividend growth stocks in my portfolio to the equation, my portfolio gained 12.17%!


Portfolio Statistics


Based on the total capital invested and the portfolio's current market value, DivGro has delivered a simple return of about 78% since inception. In comparison, DivGro's IRR (internal rate of return) is 15.7%. (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 3.68% last month to 3.70% this month.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 17.8%, up from last month's 17.5%.

Finally, DivGro's projected annual yield is at 4.99%, unchanged from last month. I calculate projected annual yield by dividing PADI ($32,809) 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 December for various reasons, including a little break from work over the Christmas season. Also, quarter-ending months are great months for dividend income, and I'm curious to see if DivGro will set another record high for dividend income this month.

I'm also looking forward to celebrating DivGro's eighth anniversary in January!

In December, I'll review my 2020 goals and set goals for 2021. I like setting stretching but doable goals, but it appears that I've stretched too far this year... I failed to achieve my options income goal in 2020!

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

I'd like to wish all my readers a very restful and happy holiday season! 


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4 comments :

  1. Great content. I have learned a lot from your blogs. The charts are so informative.

    ReplyDelete
    Replies
    1. Thanks! I appreciate your comment and kind words!

      Delete
  2. How much capital are you adding each month/year?

    ReplyDelete
    Replies
    1. See: https://divgro.blogspot.com/p/about.html

      I also add bonus deposits occasionally.

      Delete

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