Subscribe to Portfolio Insight and Save!

Use my affiliate link to sign up for a free 14-day, no-obligation trial of Portfolio Insight. No credit card required. If you decide to subscribe during the trial period, you'll receive a 20% discount on the first year's annual subscription price of $330. Please note the 20% affiliate discount does not apply to the monthly rate.

Sunday, March 21, 2021

Monthly Review Of DivGro: February 2021

My monthly review of DivGro provides a summary of transactions and explains how those transactions affect projected annual dividend income.

In February, I opened two new positions and added shares to four existing positions. Additionally, I reduced the size of one existing position. DivGro now contains 91 different positions. Twelve DivGro stocks announced dividend increases in February. The net result of these changes is that PADI increased by about 6.8% in February. Year over year, PADI increased by 33.1%.

As for dividend income, in February I received dividends totaling $2,151 from 22 stocks in my portfolio, a year over year increase of 29%. So far in 2021, I've collected $4,428 in dividends, or about 13% of my 2021 goal of $34,500.

DivGro's PADI now stands at $35,201, which means I can expect to receive $2,933 in dividend income per month, on average, in perpetuity, assuming the status quo is maintained. Of course, I expect the companies I've invested in not only to continue to pay dividends but to increase them over time! Also, until I retire, I hope to continue reinvesting dividends, so DivGro's PADI should continue to grow through dividend growth and through compounding.


Dividend Income


In February, I received a total of $2,151 in dividend income from 22 different stocks:

Following is a list of the dividends I collected in February:

  • AbbVie Inc (ABBV)income of $260.00
  • Accenture plc (ACN)income of $8.80
  • Air Products and Chemicals, Inc (APD)income of $21.44
  • Bristol-Myers Squibb Company (BMY)income of $98.00
  • 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 $110.00
  • Hormel Foods Corporation (HRL)income of $49.00
  • JPMorgan Chase & Co (JPM)income of $90.00
  • Lowe's Companies, Inc (LOW)income of $60.00
  • Mastercard Incorporated (MA)income of $13.20
  • Main Street Capital (MAIN)income of $92.25
  • National Retail Properties, Inc (NNN)income of $99.84
  • Realty Income Corporation (O)income of $70.35
  • The Procter & Gamble Company (PG)income of $19.77
  • Royal Bank of Canada (RY)income of $129.20
  • AT&T Inc (T)income of $312.00
  • The Toronto-Dominion Bank (TD)income of $123.05
  • Texas Instruments Incorporated (TXN)income of $76.50
  • Cohen & Steers Infrastructure Fund, Inc (UTF)income of $155.00
  • Verizon Communications Inc (VZ)income of $62.75

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

This is one reason that 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, that is not a factor that would influence my investment decisions.


Dividend Changes


In February, the following stocks announced dividend increases or will pay a higher dividend in US$ terms:

  • Cisco Systems, Inc (CSCO)increase of 2.78%
  • Digital Realty Trust, Inc (DLR)increase of 3.57%
  • The Home Depot, Inc (HD)increase of 10.00%
  • Intercontinental Exchange, Inc (ICE)increase of 10.00%
  • The Coca-Cola Company (KO)increase of 2.44%
  • NextEra Energy, Inc (NEE)increase of 10.00%
  • Public Service Enterprise Group Incorporated (PEG)increase of 4.08%
  • Royal Bank of Canada (RY)increase of 3.92%
  • The Toronto-Dominion Bank (TD)increase of 3.14%
  • T Rowe PriceT. Rowe Price Group, Inc (TROW)increase of 20.00%
  • United Parcel Service, Inc (UPS)increase of 0.99%
  • Xcel Energy Inc (XEL)increase of 6.40%

These changes will increase DivGro's PADI by $302.

I like seeing dividend increases above 7%, and four of the twelve increases top my expectations. The arithmetic average of this month's dividend increases is 6.4%, which easily beats inflation.


Transactions


One of my goals this year is to slowly transition my portfolio to one with about equal representation in each of the super sectors. This process will be slow and methodical and will probably take several years.

In October 2020, I determined DivGro's super sector distribution for the first time. At 48.1%, DivGro was heavily overweight in the Sensitive sectors, which include both the best-performing sector in 2020 , Information Technology, and the worst-performing sector in 2020, Energy. In contrast, DivGro's representation was somewhat underweight in the Cyclical sectors at 29.1%, and significantly underweight in the Defensive sectors at 22.8%. 

Since October, I've somewhat improved DivGro's super sector distribution:


As mentioned, this balancing process will be slow and methodical. 

In January, I closed my position in Ross Stores, Inc (ROST) and trimmed my position in The Walt Disney Company (DIS). Both companies suspended their dividend payments in 2020 and I collected nearly $30k from these transactions, including about $12k in profits. 

Here is a summary of February's transactions.

Trimmed Positions
  • Apple Inc (AAPL) — sold 200 shares and reduced position to 200 shares

This transaction was due to the assignment of two covered calls on Apple Inc (AAPL), which helped me to trim my AAPL position by 50%. Before the assignment, my AAPL position was significantly overweight at 4.45% of total portfolio value, well above DivGro's average position size of 1.12%.

The proceeds from January's sells and from trimming AAPL in early February provided an opportunity to significantly increase DivGro's PADI. 

Expanded Positions
  • Chevron Corporation (CVX) — added 200 shares and increased position to 244 shares
  • Northrop Grumman Corporation (NOC) — added 10 shares and increased position to 20 shares
  • PepsiCo, Inc (PEP) — added 30 shares and increased position to 100 shares
  • Pinnacle West Capital Corporation (PNW) — added 25 shares and increased position to 200 shares
I decided to significantly increase my CVX position after selling some shares in December 2020 for tax-loss harvesting purposes. In fact, I closed two other Energy sector positions for the same reason, Phillips 66 (PSX) and Exxon Mobil Corporation (XOM). Rather than reinvest in those stocks, I decided to just increase the size of my CVX position, which I think is the strongest of the three.  


I picked up CVX for $91.80 per share and secured an initial yield on cost (YoC) of 5.62%, but even at the current $103.38 per share and a yield of 4.99%, the stock looks attractive relative to historical dividend yields. 

NOC is trading inside its yield channel, which encloses 50% of all yields over the past 10 years. This means NOC is trading at fair value relative to historical dividend yields. 


Even after this buy, which reduced my average cost basis to $324.51, my NOC position remains relatively small at only 0.49% of total portfolio value. I think I'll wait for an even better entry point, perhaps below $275 per share, before adding more shares. 

PEP is a Consumer Staples sector stock, and hence falls in the Defensive super sector. Buying 30 shares of PEP turned my position into a full-sized position (which I consider to be 1% of total portfolio value). My average cost basis of $129.80 essentially matches my buy price, and I secured an initial YoC of 3.00% for this lot. This is slightly higher than PEP's 5-year average yield of 2.94%.


Since buying PEP at $136.36, the stock is down 1.36%, which means a better entry point is available now!

Utility sector stock PNW also falls in the Defensive super sector. I wanted to turn my position into a full position and adding 25 shares accomplished that objective! At my buy price of $76.44 per share, I secured an initial YoC of 4.34%.


The above chart shows that PNW is trading at an attractive level and at the lower end of its historical P/E-based fair value range of 16.03-18.98. 

New Positions
  • Atmos Energy Corporation (ATO)new position of 100 shares
  • Gilead Sciences, Inc (GILD)new position of 200 shares
I also added two new positions. 

I closed my previous GILD position in December to harvest tax-losses, so this buy reinstates my position at a lower cost basis of $66.49 per share and an initial YoC of 4.41%. I like GILD Gilead with its impressive portfolio of assets and ability to generate strong cash flow. We'll see if my latest foray into GILD will be better than the previous attempt!

ATO is a legitimately new position in DivGro, and DivGro's fifth Utilities sector stock. ATO traded above fair value for a along time and only recently started trading at discounted valuations, at least based on historical dividend yields:


I paid $90.70 per share and secured an initial YoC of 2.76%, on the low side for Utilities sector stocks. However, I like ATO's solid 5-year dividend growth rate of 8.1%. Even though ATO now trades at $94.09 per share, I think it still presents a great entry point!

February's transactions increased DivGro's PADI by about $1,950. This means I'll be collecting an extra $162.50 in dividend income every month, on average, in perpetuity! 

Markets


It is worth looking at various indices to understand the environment we're investing in:


 DOW
30
S&P
500
NASDAQ
Composite
10-YR
BOND
CBOE
VIX
Jan 31, 202129,982.623,714.2413,070.691.09333.09
Feb 28, 202130,932.373,811.1513,192.351.4627.95

In February, the DOW 30 gained 3.2%, the S&P 500 gained 2.6%, and the NASDAQ gained 0.9%. The yield on the benchmark 10-year Treasury note rose to 1.46, while CBOE's measure of market volatility, the VIX, decreased by 15.5% to 27.95.

Here's a chart showing how the stocks and funds in DivGro performed over the past month:


In February, DivGro outperformed the S&P 500. 


Portfolio Statistics


Given DivGro's current market value and the total capital invested, the portfolio has returned about 81% since inception. But calculating the IRR (internal rate of return) gives a better measure of portfolio performance, as IRR takes into account the timing and size of deposits since inception. DivGro's IRR is 15.6%.

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 3.88% last month to 3.94% this month.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 18.5%, down from last month's 18.7%.

Finally, DivGro's projected annual yield is at 5.19%, up from last month's value of 5.00%. I calculate the projected annual yield by dividing PADI ($35,201) 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 really looking forward to getting vaccinated against the COVID-19 virus and doing my small part to help the United States move towards herd immunity. The faster we get there, the faster our lives will start to resemble some form of normalcy! 

I'm also looking forward to Spring! Time for some gardening!

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


Thanks for reading! Please subscribe to receive an e-mail whenever I post new articles.
Soon sections of my blog will only be available to subscribers, so I encourage you to sign up now!


No comments :

Post a Comment

Please don't include links in comments. I will mark such comments as spam and the comment won't be published. To make me aware of your blog or website, comment on my Blogrole page instead.