Saturday, February 13, 2021

Monthly Review Of DivGro: January 2021

Welcome to the monthly review of DivGro, my portfolio of dividend growth stocks. I provide a summary of transactions and dividends received in the past month. I also look at how DivGro's projected annual dividend income (PADI) has changed.

In January, I closed one position and reduced my holdings in another position. Eight DivGro stocks announced dividend increases in January. The net result of these changes is that PADI increased by about 0.6% in January. Year over year, PADI increased by 24.1%.

As for dividend income, in January I received dividends totaling $2,277 from 23 stocks in my portfolio, a year over year increase of 20%. The dividends I collected in January represent about 7% of my 2021 goal of collecting $34,500 in dividends.

Assuming the status quo and given DivGro's PADI of $32,950, I can expect to receive $2,746 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


In January, I received a total of $2,277 in dividend income from 23 different stocks:

Here is a list of the dividends I received in January:

  • Automatic Data Processing, Inc (ADP)income of $111.60
  • Franklin Resources, Inc (BEN)income of $28.00
  • The Bank of Nova Scotia (BNS)income of $158.36
  • Chubb Limited (CB)income of $78.00
  • Comcast Corporation (CMCSA)income of $92.00
  • Cisco Systems, Inc (CSCO)income of $108.00
  • Digital Realty Trust, Inc (DLR)income of $50.40
  • Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO)income of $142.50
  • Illinois Tool Works Inc (ITW)income of $68.40
  • Main Street Capital (MAIN)income of $92.25
  • Medtronic plc (MDT)income of $58.00
  • Altria Group, Inc (MO)income of $172.00
  • Merck & Co., Inc (MRK)income of $71.50
  • AllianzGI Equity & Convertible Income Fund (NIE)income of $380.00
  • Realty Income Corporation (O)income of $70.35
  • Oracle Corporation (ORCL)income of $42.00
  • PepsiCo, Inc (PEP)income of $71.58
  • Philip Morris International Inc (PM)income of $144.00
  • Stryker Corporation (SYK)income of $6.30
  • Taiwan Semiconductor Manufacturing Company Limited (TSM)income of $44.64
  • Cohen & Steers Infrastructure Fund, Inc (UTF)income of $155.00
  • W. P. Carey Inc (WPC)income of $104.60
  • Xcel Energy Inc (XEL)income of $27.95

The chart below shows DivGro's monthly dividends plotted against PMDI. Clearly, quarter-ending months are huge outliers:

To smooth things out a bit, I 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 it would be nicer if dividends were distributed more evenly, it is not something that would drive my investment decisions.


Dividend Changes


In January, the following stocks announced dividend increases (or paid a higher dividend due to the impact of exchange rate changes):

  • Archer-Daniels-Midland Company (ADM)increase of 2.78%
  • Anthem, Inc (ANTM)increase of 18.95%
  • Air Products and Chemicals, Inc (APD)increase of 11.94%
  • BlackRock, Inc (BLK)increase of 13.77%
  • The Bank of Nova Scotia (BNS)increase of 4.11%
  • Comcast Corporation (CMCSA)increase of 8.70%
  • Intel Corporation (INTC)increase of 5.30%
  • Taiwan Semiconductor Manufacturing Company Limited (TSM)increase of 2.62%

These changes will increase DivGro's PADI by $182.

I like seeing dividend increases above 7% and four of the eight increases top my expectations. The arithmetic average of this month's dividend increases is 8.5%, which easily beats inflation.


Transactions


Here is a summary of my transactions in January:

  • Ross Stores, Inc (ROST)sold 100 shares and closed position
  • The Walt Disney Company (DIS)sold 100 shares and reduced position to 100 shares

ROST has recovered nicely since it crashed in late February and early March 2020, and after announcing that it would be suspending its dividend. In doing so, ROST gave up its status as a Dividend Aristocrat. I'm happy that I decided not to close my ROST position immediately, instead replacing the lost dividend income with options income.


Source: Portfolio-Insight.com

With ROST's price recovery, it was time to part ways. While the stock could continue its upward trend, my interest remains growing DivGro's dividend income stream, and ROST no longer serves that purpose. 

My ROST investment was successful, overall, though slightly underperforming the S&P 500 in the time I've owned it. Based on my sell price of $116.38, my net profit is 37.1% (or 14.6% annualized).

DIS also suspended its dividend, "citing the ongoing impact of COVID-19 and the Company's decision to prioritize investment in its direct-to-consumer initiatives".

Instead of closing my DIS position, I decided to sell 100 of 200 shares and to sell a call option against those shares to collect options income. The COVID-19 pandemic has created extraordinary challenges for the company, but the company's on-demand streaming service, Disney+, now has about 95 million subscribers and the company expects Disney+ to grow to 230-260 million subscribers by 2024.

Source: Portfolio-Insight.com

DIS's price recovery since the February/March 2020 market crash has been remarkable and the stock has outperformed the S&P 500 in the time I've owned it. 

I sold my Dec 5, 2016 lot for $178.33 per share, securing total returns of 84.2% (or 20.6% annualized). 

With proceeds totaling about $29,500, I should be able to generate an annual dividend income totaling $700-$1,000 (or more), depending on the yield of the stock I choose to invest in.

 

Markets


It is worth looking at the markets to understand the environment we're investing in, even though I no longer compare DivGro's performance to those of the markets:


 DOW
30
S&P
500
NASDAQ
Composite
10-YR
BOND
CBOE
VIX
Dec 31, 202030,606.483,756.0712,888.280.91722.75
Jan 31, 202129,982.623,714.2413,070.691.09333.09

In January, the DOW 30 dropped 2%, the S&P 500 dropped 1.1%, and the NASDAQ gained 1.4%. The yield on the benchmark 10-year Treasury note rose to 1.093%, while CBOE's measure of market volatility, the VIX, increased by 45.5% to 33.09.


Portfolio Statistics


Based on the total capital invested and the portfolio's current market value, DivGro has delivered a simple return of about 80% since inception. In comparison, DivGro's IRR (internal rate of return) is 15.4%. (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 3.70% last month to 3.88% this month.

Percentage payback relates dividend income to the amount of capital invested. DivGro's average percentage payback is 18.7%, up from last month's 18.4%.

Finally, DivGro's projected annual yield is at 5.00%, up from last month's value of 4.98%. I calculate the projected annual yield by dividing PADI ($32,950) by the total amount invested.

Here's a chart showing 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 investing the proceeds of my ROST and DIS sell transactions. I'll be aiming to average a yield of at least 3%, which should add about $885 to DivGro's PADI.  

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


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