Saturday, January 30, 2021

2020 Annual Review Of DivGro

Welcome to the eighth annual review of DivGro, my portfolio of dividend growth stocks! 

I created DivGro in January 2013 to create the proverbial dividend-generating machine. With monthly dividend income approaching $2,800 per month, on average, I can only say I'm very pleased with my DG machine!

In annual reviews, I look at DivGro's performance as measured by dividend income, dividend increases, annualized returns, and rate of return. I also look at some highlights of the past year and share my outlook for the coming year.

Introduction


The S&P 500 (and the broader market) took quite a beating in late February and early March 2020, dropping about 32% from an all-time on 19 February 2020. Concerns about the impact of COVID-19 on the world economy was cited as the main reason for the market crash. Remarkably, the market recovered quickly, setting new all-time highs on 2 September and again on 31 December, the last trading day of the year. 

For the year, the S&P 500 returned about 16.3% (excluding dividends). This is a solid performance and certainly one to be savored in an otherwise weird and very challenging year!


Source: Yahoo Finance

I started 2020 with the goal of preferring dividend growth stocks with higher dividend growth rates. The market crash in late February and early March quickly changed my approach. With so many high-quality dividend growth stock trading at discounted valuations, I looked to add to underweight positions and ones deemed safer long-term investments. 

Additionally, I decided not to immediately sell positions that suffered dividend suspensions or cuts. Rather, I waited until December and sold or reduced several positions to harvest tax losses. This strategy of tax-loss harvesting is not without problems, but I like having an excuse to clean house.

With a projected annual dividend income (PADI) of $32,768, my portfolio should continue to produce significant amounts of income annually and in perpetuity. I'm hoping to reinvest these dividends for the foreseeable future and until (or even into) retirement. 

This is a great position to be in and I'm thankful for the decision I made eight years ago to switch to dividend growth investing. 

Let's take a look at DivGro's performance in 2020.

Performance


Dividend Income

The main goal of DivGro is to generate a reliable and growing dividend income stream.

In 2020, DivGro generated dividends totaling $30,021, an increase of about 18% over the 2019 total of $25,542.


PADI increased by 23% to $32,768, meaning I can expect to earn monthly dividend income averaging at least $2,731 in perpetuity. (PADI one year ago was $26,358).


Of course, DivGro's PADI should increase over time because I invest in dividend growth stocks and I reinvest all dividends. I'm hoping to increase PADI to $37,500 in 2021, which, if realized, would be an increase of 14%.

Dividend Increases

In dividend growth investing, regular dividend increases are just as important as dividend income. I use selection criteria that favor stocks with a track record of paying higher dividends every year. In 2020, the following DivGro stocks paid or announced higher dividends:

1-Year
Increase  
Company
 Ticker
Increase  Annual Div
 New YoC
Outsized
(above 20%) 
Taiwan Semiconductor
Manufacturing Company Limited
TSM
28.57%✧
1.74
3.85%
 Large
(above 10%
and up to 20%)
Anthem, Inc
ANTM
18.75%
3.80
1.32%
T. Rowe Price Group, Inc
TROW
18.42%
3.60
4.21%
UnitedHealth Group Incorporated
UNH
15.74%
5.00
2.88%
Air Products and Chemicals, Inc
APD
15.52%
5.36
3.39%
Snap-on Incorporated
SNA
13.89%
4.92
3.17%
Texas Instruments Incorporated
TXN
13.33%
4.08
4.42%
The TJX Companies, Inc
TJX
13.04%
1.04
2.35%
NIKE, Inc
NKE
12.24%
1.10
1.34%
NextEra Energy, Inc
NEE
12.00%
1.40
3.44%
Ross Stores, Inc
ROST
11.76%
0.00
0.00%
Broadcom Inc
AVGO
10.77%
14.40
5.31%
The Home Depot, Inc
HD
10.29%
6.00
3.29%
AbbVie Inc
ABBV
10.17%
5.20
8.44%
Medium
(above 5%
and up to 10%) 
BlackRock, Inc
BLK
10.00%
14.52
3.67%
Accenture plc
ACN
10.00%
3.52
2.00%
Amgen Inc
AMGN
10.00%
7.04
3.77%
Mastercard Incorporated
MA
10.00%
1.76
0.57%
Microsoft Corporation
MSFT
9.80%
2.24
4.80%
Starbucks Corporation
SBUX
9.76%
1.80
2.84%
Stryker Corporation
SYK
9.57%
2.52
1.20%
Comcast Corporation
CMCSA
9.52%
0.92
2.36%
Intercontinental Exchange, Inc
ICE
9.09%
1.20
1.28%
Lowe's Companies, Inc
LOW
9.09%
2.40
2.59%
Bristol-Myers Squibb Company
BMY
8.89%
1.96
3.27%
Valero Energy Corporation
VLO
8.89%
3.92
6.17%
Chevron Corporation
CVX
8.40%
5.16
5.22%
Lockheed Martin Corporation
LMT
8.33%
10.40
3.78%
Gilead Sciences, Inc
GILD
7.94%
2.72
closed
General Dynamics Corporation
GD
7.84%
4.40
3.64%
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%
Visa Inc
V
6.67%
1.28
0.70%
Merck & Co., Inc
MRK
6.56%
2.60
3.15%
Illinois Tool Works Inc
ITW
6.54%
4.56
3.03%
Apple Inc
AAPL
6.49%
0.82
3.14%
Johnson & Johnson
JNJ
6.32%
4.04
2.86%
Xcel Energy Inc
XEL
6.17%
1.72
3.22%
Pinnacle West Capital Corporation
PNW
6.07%
3.32
4.27%
The Procter & Gamble Company
PG
6.01%
3.16
4.02%
Quest Diagnostics Incorporated
DGX
5.66%
2.24
closed
Hormel Foods Corporation
HRL
5.38%
0.98
2.41%
United Parcel Service, Inc
UPS
5.21%
4.04
3.54%
Small
(above 2.5%
and up to 5%) 
QUALCOMM Incorporated
QCOM
4.84%
2.60
3.75%
Intel Corporation
INTC
4.76%
1.32
5.82%
The Bank of Nova Scotia
BNS
4.74%
2.70
5.62%
Canadian National Railway
Company
CNI
4.43%
1.80
2.26%
Chubb Limited
CB
4.00%
3.12
2.56%
Aflac Incorporated
AFL
3.70%✧
1.32
5.27%
Franklin Resources, Inc
BEN
3.70%
1.12
4.98%
Digital Realty Trust, Inc
DLR
3.70%
4.48
4.03%
The Travelers Companies, Inc
TRV
3.66%
3.40
2.93%
Honeywell International Inc
HON
3.33%
3.72
2.57%
McDonald's Corporation
MCD
3.20%
5.16
3.47%
Cummins Inc
CMI
2.97%
5.40
4.28%
Archer-Daniels-Midland Company
ADM
2.86%
1.44
3.33%
Cisco Systems, Inc
CSCO
2.86%
1.44
3.50%
Pfizer Inc
PFE
2.63%
1.56
4.21%
Philip Morris International Inc
PM
2.56%
4.80
5.98%
Tiny
(below 2.5%) 
The Coca-Cola Company
KO
2.50%
1.64
3.64%
Dominion Energy, Inc
D
2.45%
2.52
closed
Altria Group, Inc
MO
2.38%
3.44
6.90%
Automatic Data Processing, Inc
ADP
2.20%
3.72
2.38%
Realty Income Corporation
O
2.20%✧
2.81
4.93%
Walgreens Boots Alliance, Inc
WBA
2.19%
1.87
closed
3M Company
MMM
2.08%
5.88
3.28%
Verizon Communications Inc
VZ
2.03%
2.51
5.34%
The Toronto-Dominion Bank
TD
1.46%
2.39
4.22%
National Retail Properties, Inc
NNN
0.97%
2.08
5.32%
Tanger Factory Outlet Centers, Inc
SKT
0.70%
0.89
closed
International Business Machines Corporation
IBM
0.62%
6.52
4.71%
W. P. Carey Inc
WPC
0.19%✧
4.18
6.20%
Royal Bank of Canada
RY
0.13%
3.32
4.60%
 ✧multiple increases

The table includes the new yield on cost (YoC) for positions still in my portfolio.

I like to see dividend increases of 7% or higher and I'm happy to note that 18 positions had dividend increases of at least 7% in 2020. The arithmetic average of the 74 increases above is 7.04%, down from last year's 8.58% from 77 increases. Note that I've closed five of these positions.

The following chart, courtesy of Portfolio Insight, shows updated 1-year dividend growth rates (DGRs) of dividend growth stocks in my DivGro portfolio:

Again, more than half of my dividend growth stocks have 1-year DGRs of at least 7%. 

Annualized Returns

As mentioned earlier, the S&P 500 returned 16.3% in 2020 (excluding dividends). The Dow Jones Industrial Average gained 7.2%, and the NASDAQ soared 43.6%, with Apple Inc (AAPL) and Microsoft Corporation (MSFT) leading the way.

DivGro performed reasonably well in 2020, with many of my existing positions showing positive gains for the year. Looking only at the stocks I've owned since 1 January 2020, DivGro's positioned-weighted returns of 19.4% easily beat the S&P 500's returns. Of course, that calculation excludes the stocks I sold in December for tax-loss harvesting purposes. When including those losses, DivGro trailed the S&P 500 a bit except when accounting for dividends. 
 

Note that I also own dividend-paying stocks and a fund that pays dividends, as well as a few stocks that do not pay dividends.

Here is a chart showing the annualized returns of all positions in my portfolio (including dividends, where applicable):

Note that this chart shows the annualized returns of every stock and fund in DivGro, regardless of when I first opened my position. It is mostly useful to compare the performance relative to each other and the S&P 500 benchmark.  

In 2020, DivGro added eight Home Run stocks, a designation I give to stocks in my portfolio that achieve total returns of 100%. Here are the home runs with returns as of 31 December 2020:
  • Home run #20: Amazon.com (AMZN) — up 160% (56% annualized)
  • Home run #21: Salesforce.com (CRM) — up 61% (28% annualized)
  • Home run #22: Procter & Gamble (PG) — up 101% (15% annualized)
  • Home run #23: Taiwan Semiconductor Manufacturing (TSM) — up 153% (55% annualized)
  • Home run #24: Pinterest, Inc (PINS— up 139% (379% annualized)
  • Home run #25: Air Products and Chemicals, Inc (APD— up 79% (38% annualized)
  • Home run #26: QUALCOMM Incorporated (QCOM— up 126% (78% annualized)
  • Home run #27: Cummins Inc (CMI— up 95% (24% annualized)
Once a stock achieves home run status, it retains that status even if the stock price drops and the total returns dip below the 100% mark. Also, if I buy additional shares of a home run stock at a higher cost basis, the calculated total returns could drop below 100%.

Here are DivGro's top-performers sorted by annualized returns, as of 31 December 2020:
  1. Apple Inc (AAPL— up 421% (84% annualized)
  2. Microsoft Corporation (MSFT— up 399% (78% annualized)
  3. Netflix, Inc (NFLX) — up 166% (59% annualized)
  4. Amazon.com (AMZN) — up 160% (56% annualized)
  5. Intel Corporation (INTC) — up 155% (22% annualized)
  6. Taiwan Semiconductor Manufacturing (TSM— up 160% (56% annualized)
  7. QUALCOMM Incorporated (QCOM— up 126% (78% annualized) 
  8. UnitedHealth Group Incorporated (UNH) — up 111% (32% annualized)
  9. Aflac Incorporated (AFL) — up 106% (20% annualized)
  10. The Procter & Gamble Company (PG— up 160% (56% annualized)
Rate of Return

DivGro's IRR (internal rate of return) provides the best measure of overall portfolio performance, as IRR takes into account the timing and size of deposits since inception. On 31 December 2020, DivGro's IRR was 16.2%, up from the 15.5% reported in 2019.

Other Statistics

At the end of 2020, DivGro's average YoC was 3.70%, a little up from the 3.65% reported last year. Over time, as stocks I own stocks pay higher dividends, DivGro's average YoC should increase.


DivGro's payback increased from 13.1% at the end of 2019 to 118.4% at the end of 2020. Payback is the proportion of capital returned as dividends. I consider it to be a reasonable measure of portfolio maturity.


Main Street Capital (MAIN) tops the chart, mainly because the company pays a generous dividend and it is the stock I've owned the longest in my DivGro portfolio.

2020 Highlights


The year 2020 will be remembered for the COVID-19 pandemic and its impact on life as we know it! 

Remarkably, the stock market recovered quickly from a 32% crash in late February and early March, ending at or near all-time highs on 31 December 2020. 

DivGro's market value crossed into seven figures in August 2020! Dividend income topped $30,000 for the first time in 2020 and, since January 2013, I've collected a total of $121,008 in dividend income. 

My options income totaled $14,120 in 2020, down significantly from last year's $30,120. Unfortunately, the market's volatility made options trading quite tricky last year, and I'm hoping 2021 will be more successful than last year! The extra income generated by trading options allows me to buy more dividend growth stocks, so boosting DivGro's dividend-generating capability.

Pageviews

DivGro's pageviews climbed to 2.33 million on 31 December 2020, an increase of 560,000 over the 1.77 million pageviews I had on 3 January 2020. That's an average of 1,530 pageviews per day in 2020. 


                 
 3 January 2020
 average since inception:
 611 
pageviews 

                 
 31 December 2020
 average since inception: 
 798 pageviews

Popular Posts

In 2020, I posted 155 articles on DivGro. This included 92 premium articles published at Seeking Alpha. Here are some of the most successful articles in 2020, based on pageviews:

Top 2020 DivGro Article:
   • 03 Oct'20: Finding Undervalued Dividend Growth Stocks Using Dividend Radar's New Added Value Metrics (4,158 pageviews)

Top 2020 Seeking Alpha Article:
   • 27 Mar'20: The Dividend Kings Ranked By Quality Score (40,605 pageviews)

Personal Highlights

In my annual reviews, I also like to share some personal highlights.

Toy Story 4 won the Academy Award for Best Animated Feature, the tenth Pixar film to receive that honor! We released Onward on 6 March 2020, just days before much of the country went into lockdown due to the pandemic. Unfortunately, that severely impacted the film's box office performance. 

Soul was also impacted by the pandemic and, in fact, we finished the last few sequences working from home. Slated for a theatrical release on Junteenth (19 June 2020), the release was postponed, twice, and Disney finally decided to release it on Christmas day on Disney+ instead. 

In December, we became grandparents for the first time and we got to meet the baby boy in January after quarantining for two weeks to limit the chances of infecting him.

2021 Outlook


I've set some challenging goals for 2021, including collecting dividends and options income totaling $56,500. Along with "passive" income of $5,400, I'm hoping to put about $62,000 to work in DivGro in 2021.

In 2021, I want to favor buying stocks and funds yielding at least 3.2%. This does not mean I won't buy if the yield is not at least 3.2%, just that I want to favor higher yields in 2021. 

A special word of thanks to all my readers, especially to those that comment regularly and continue to encourage me! This community is amazing and I really love being part of it!

Thanks for reading and all the best with your investing in 2021! 




6 comments :

  1. Congratulations, FerdiS! Always enjoy your amazing work!

    ReplyDelete
    Replies
    1. Thanks, Scott T -- I appreciate your comment! All the best!

      Delete
  2. One of the best reviews on the net .Nice analysis ,slowly the home runs frequency is increasing.

    ReplyDelete
    Replies
    1. Thanks, I appreciate your comment. The longer I'm in this journey, the more home runs I should get (if the market cooperates, I'll get more home runs faster!).

      Delete
  3. Hi divgro,
    congratulations to your work! Inspirational.

    Best regards,
    Petar

    ReplyDelete
    Replies
    1. Thanks, I appreciate your comment! All the best in your investment journey!

      Delete

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