Tuesday, June 1, 2021

Monthly Review Of DivGro: May 2021

Once a month, I review my portfolio of dividend growth stocks, DivGro. The goal of these monthly reviews is to share updates I've made to the portfolio and to provide a summary of dividends collected. I also look at how DivGro's projected annual dividend income (PADI) has changed.

In May, I added shares to one existing position and I reduced my holdings in one position. Seven DivGro stocks announced dividend increases in May. The net result of these changes is that PADI increased by about 0.2% in May. Year over year, PADI increased by 17.2%.

As for dividend income, in May I received dividends totaling $1,905 from 23 stocks in my portfolio, a year over year increase of 24%. So far in 2021, I've collected $13,109 in dividends or about 38% of my 2021 goal of $34,500.

Assuming the status quo and given DivGro's PADI of $33,987, I can expect to receive $2,832 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.

Source: Unless otherwise indicated, all images and charts are from the author's blog, DivGro.

Dividend Income


I collected dividends totaling $1,905 from 23 different stocks in May:

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

  • Apple Inc (AAPL)income of $44.00
  • AbbVie Inc (ABBV)income of $260.00
  • Accenture plc (ACN)income of $8.80
  • Air Products and Chemicals, Inc (APD)income of $24.00
  • Bristol-Myers Squibb Company (BMY)income of $98.00
  • Costco Wholesale Corporation (COST)income of $7.90
  • CVS Health Corporation (CVS)income of $100.00
  • D.R. Horton, Inc (DHI)income of $10.00
  • Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO)income of $142.50
  • Eaton Vance Tax-Advantaged Dividend Income Fund (EVT)income of $145.00
  • General Dynamics Corporation (GD)income of $119.00
  • Hormel Foods Corporation (HRL)income of $49.00
  • Lowe's Companies, Inc (LOW)income of $60.00
  • Mastercard Incorporated (MA)income of $13.20
  • Main Street Capital (MAIN)income of $53.30
  • National Retail Properties, Inc (NNN)income of $117.00
  • Realty Income Corporation (O)income of $35.25
  • The Procter & Gamble Company (PG)income of $21.75
  • Royal Bank of Canada (RY)income of $134.32
  • Starbucks Corporation (SBUX)income of $63.00
  • AT&T Inc (T)income of $260.00
  • Texas Instruments Incorporated (TXN)income of $76.50
  • 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:

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 great if dividends were distributed more evenly, I don't want to change my investment decisions based on the timing or frequency of dividend payments.


Dividend Changes


In May, the following stocks announced dividend increases or paid a higher dividend:

  • Chubb Limited (CB)increase of 2.56%
  • Lowe's Companies, Inc (LOW)increase of 33.33%
  • Medtronic plc (MDT)increase of 8.62%
  • Northrop Grumman Corporation (NOC)increase of 8.28%
  • PepsiCo, Inc (PEP)increase of 5.13%
  • Royal Bank of Canada (RY)increase of 3.96%
  • Union Pacific Corporation (UNP)increase of 10.31%

As a result of these changes, DivGro's PADI will increase by $196.

I like seeing dividend increases above 7% and four of the seven increases top my expectations  b. The arithmetic average of this month's dividend increases is 10.31%, which easily beats inflation.


Transactions


In April, I adopted a new approach to determining position sizes in my portfolio based on target weights. The two trades I executed in May were done to bring two DivGro positions closer to their target weights.  

  • Mastercard Incorporated (MA)added 20 shares and increased position to 50 shares
Given MA's low yield of 0.49%, some dividend growth investors will probably frown when learning that I increased my MA holding. But MA is a high-quality stock with very impressive total returns, as is evident in the following chart:

Source: Portfolio-Insight.com

Over the past 10 years, MA delivered total returns (including dividends) of 1,226%, versus the S&P 500's total returns of 280%. Of course, there's no guarantee that MA would continue this incredible outperformance, but I'm willing to invest just a little more in this stock given its outstanding 5-year dividend growth rate of 20%.

The buy added $35.20 to DivGro's PADI.
  • Archer-Daniels-Midland Company (ADM)sold 100 shares and reduced position to 200 shares

I sold one-third of my ADM position for a similar reason, namely to get the position to my ideal target weight. ADM is trading above its yield channel, meaning the stock is overvalued currently. Therefore, it seemed to be appropriate to trim my ADM position now:

Source: Portfolio-Insight.com

Selling 100 shares of ADM reduced DivGro's PADI by $148. 

Here is a list of possible trades that would bring DivGro positions closer to their target weights:
  • Merck & Co., Inc  (MRK) — buy 25 shares at about $76 per share ($1,900)
  • Cisco Systems, Inc (CSCO) — buy 180 shares at about $53 per share ($9,540)
  • Pfizer Inc (PFE) — buy 170 shares at about $39 per share ($6,630)
  • Raytheon Technologies Corporation (RTX) — buy 75 shares at about $89 per share ($6,675)
  • Atmos Energy Corporation (ATO) — buy 99 shares at about $99 per share ($9,801)
I'll look for good opportunities in May to execute some of these trades, depending on available capital.

Over the next few months, I'd like to continue rebalancing my portfolio based on my recently adopted factor-based target weights. This action should help to improve DivGro's super sector distribution, too, which still is significantly overweight in the Sensitive Sectors:

Markets


The DOW and S&P 500 gained ground in May, but the tech-heavy NASDAQ came under pressure:


 DOW
30
S&P
500
NASDAQ
Composite
10-YR
BOND
CBOE
VIX
Apr 30, 202133,874.854,181.1713,962.681.63118.61
May 31, 202134,529.454,204.1113,748.741.58116.76

The DOW 30 gained 1.9% and the S&P 500 gained 0.5%, but the NASDAQ dropped 1.5%. The yield on the benchmark 10-year Treasury note fell to 1.581, while CBOE's measure of market volatility, the VIX decreased by 9.9% to 16.76.

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


In May, DivGro outperformed the S&P 500.

.

Portfolio Statistics


Given DivGro's current market value and the total capital invested, the portfolio has returned about 100% 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 17.2%.)


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 3.64% last month to 3.65% this month.


Percentage payback relates dividend income to the amount of capital invested. DivGro's average percentage payback is 19.7%, up from last month's 19.5%.


Finally, projected annual yield is calculated by dividing PADI ($33,987) by the total amount invested. DivGro's projected annual yield is at 4.99%, unchanged from last month.


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

June is a quarter-ending month, and I'm looking forward to seeing if DivGro makes another record-high in dividend income in June. We'll see how it goes. 

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

Thanks for reading and take care, everybody!

AAPL, ABBV, ACN, ADM, ADP, AFL, ALL, AMGN, AMZN, ANTM, APD, ATO, AVGO, AWR, BEN, BLK, BMY, BNS, CB, CMCSA, CMI, CNI, COST, CRM, CSCO, CVS, CVX, DBX, DHI, DIS, DLR, ETO, EVT, FDX, GD, GILD, GOOG, HD, HON, HRL, IBM, ICE, INTC, ITW, JNJ, JPM, KO, LMT, LOW, MA, MAIN, MCD, MDT, MMM, MO, MRK, MSFT, NEE, NFLX, NIE, NKE, NNN, NOC, O, ORCL, PEG, PEP, PFE, PG, PINS, PM, PNW, PSA, QCOM, RTX, RY, SBUX, SNA, SRE, SYK, T, TD, TJX, TROW, TRV, TSM, TSN, TXN, UNH, UNP, UPS, V, VLO, VZ, WPC, XEL


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