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Sunday, August 29, 2021

Monthly Review Of DivGro: July 2021

Every month, I review my portfolio of dividend growth stocks, DivGro. My goal is to share updates and provide a summary of the dividends I collected. I also monitor DivGro's projected annual dividend income (PADI) and its monthly counterpart, PMDI. 

In July, I opened two new positions and added shares to five existing positions. Additionally, I closed five positions and reduced my holdings in six existing positions. Four DivGro stocks announced dividend increases in July. The net result of these changes is that PADI decreased by about 4.1% in July. Year over year, PADI increased by 8.5%.

As for dividend income, in July I received dividends totaling $2,597 from 27 stocks in my portfolio, a year over year increase of 46%. So far in 2021, I've collected $21,014 in dividends or about 61% of my 2021 goal of $34,500.

Assuming the status quo and given DivGro's PADI of $32,843, I can expect to receive $2,737 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


I received dividends from 27 different stocks, for a monthly total of $2,597 in dividend income:

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

  • Automatic Data Processing, Inc (ADP)income of $93.00
  • The Allstate Corporation (ALL)income of $40.50
  • Franklin Resources, Inc (BEN)income of $28.00
  • The Bank of Nova Scotia (BNS)income of $17.89
  • Chubb Limited (CB)income of $80.00
  • Comcast Corporation (CMCSA)income of $100.00
  • Canadian National Railway Company (CNI)income of $61.91
  • Cisco Systems, Inc (CSCO)income of $51.80
  • 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
  • FedEx Corporation (FDX)income of $56.25
  • Illinois Tool Works Inc (ITW)income of $68.40
  • The Coca-Cola Company (KO)income of $126.00
  • Main Street Capital (MAIN)income of $53.30
  • Medtronic plc (MDT)income of $63.00
  • Altria Group, Inc (MO)income of $197.80
  • Merck & Co., Inc (MRK)income of $188.50
  • NIKE, Inc (NKE)income of $4.13
  • Realty Income Corporation (O)income of $35.33
  • Oracle Corporation (ORCL)income of $64.00
  • Philip Morris International Inc (PM)income of $24.00
  • Sempra Energy (SRE)income of $55.00
  • Stryker Corporation (SYK)income of $6.30
  • T Rowe PriceT. Rowe Price Group, Inc (TROW)income of $600.00
  • Taiwan Semiconductor Manufacturing Company Limited (TSM)income of $89.12
  • W. P. Carey Inc (WPC)income of $105.00
  • Xcel Energy Inc (XEL)income of $100.65

The following chart shows DivGro's monthly dividends plotted against PMDI. Quarter-ending months are huge outliers:

For this reason, 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 July, the following stocks announced dividend increases:

  • Cummins Inc (CMI)increase of 7.41%
  • Canadian National Railway Company (CNI)increase of 1.31%
  • National Retail Properties, Inc (NNN)increase of 1.92%
  • Taiwan Semiconductor Manufacturing Company Limited (TSM)increase of 1.31%
Additionally, two stocks will pay reduced dividends:
  • The Bank of Nova Scotia (BNS) — decrease of 1.67%
  • Enbridge Inc (ENB) — decrease of 3.26%

These decreases are not extraordinary, but due to currency exchange rate gyrations.

I like seeing dividend increases above 7%, and only CMI tops my expectation. The arithmetic average of this month's dividend increases is only 2.99%, well below the 12-month CPI increase of 5.4%.


Transactions


In July, we decided to buy a new property. To collect cash for the down payment, I decided to close and trim several positions. For the most part, I targeted some of DivGro's non-dividend-paying growth stocks, a couple of dividend payers, and a few dividend growth stocks.

Closed Positions

  • Dropbox, Inc (DBX) — sold 100 shares and closed position
  • The Walt Disney Company (DIS) — sold 100 shares and closed position
  • Pinterest, Inc (PINS) — sold 100 shares and closed position
  • AT&T Inc (T)sold 400 shares and closed position
  • Taiwan Semiconductor Manufacturing Company Limited (TSM)sold 200 shares and closed position
I owned DBX for only four months and captured gains of 19.6% (or 54.2% annualized). This was a speculative trade, so I'm happy with my short-term returns.

Last year, DIS suspended its dividend due to the COVID-19 pandemic. So far, the company has not reinstated the dividend, and I see no reason why DIS would do so until the pandemic is behind us. Because DIS is not a growth stock, it was an easy target given my need to collect cash. I captured returns of 87.7% (or 14.5% annualized).

PINS was another speculative buy and a tremendously successful one! My 11-month investment returned 161.2% (or 176.2% annualized). I'm happy that I closed this position when I did, as PINS dropped about 20% following its last earnings release!

AT&T indicated that it would cut its dividend in 2022 when it spins off WarnerMedia. That's enough reason for me to cut AT&T from my portfolio (although I would have waited for a few more dividend payments this year if I didn't need to raise cash now!). My investment in AT&T has been a disappointment, with total returns of only 7.8% (or 2.4% annualized)!

In contrast, TSM has been a fantastic investment, with total returns of 46.9% (or 40.1% annualized). Receiving dividends from TSM always generated a withholding tax entry at my brokerage, which I disliked. Who likes to be reminded that you have to pay taxes on dividends!

Selling T and TSM reduced DivGro's PADI by $1,187.

Decreased Positions
  • The Bank of Nova Scotia (BNS)sold 200 shares and reduced position to 25 shares
  • FedEx Corporation (FDX)sold 25 shares and reduced position to 50 shares
  • Oracle Corporation (ORCL)sold 50 shares and reduced position to 150 shares
  • Royal Bank of Canada (RY)sold 100 shares and reduced position to 50 shares
  • The TJX Companies, Inc (TJX)sold 100 shares and reduced position to 100 shares
  • T Rowe PriceT. Rowe Price Group, Inc (TROW)sold 100 shares and reduced position to 100 shares
Decreasing my positions in BNS and RY was actually the result of covered call assignments. I'm fine with that, as I wanted to raise money for the down payment on the new property. BNS returned 25.9% (or 14.7% annualized), and RY returned 28.6% (or 18.0% annualized), so both really successful investments!

Trimming the other positions brings them more in line with my desired portfolio target weights. Here is a summary of each position's performance:
  • FDX generated total returns of 75.6% (or 32.6% annualized)
  • ORCL generated total returns of 21.3% (or 74.1% annualized)
  • TJX generated total returns of 57.2% (or 17.7% annualized)
  • TROW generated total returns of 126.7% (or 50.5% annualized)
I'm very happy with the performance of each of these stocks!

These transactions reduced DivGro's PADI by a total of $1,615.

Two new positions and five increased positions somewhat compensate for the loss of PADI. 

New Positions
  • DTE Energy Company (DTE) — new position of 50 shares
  • Enbridge Inc (ENB) — new position of 100 shares
I recently covered Dividend Challenger ENB in my list of top-ranked Energy Sector stocks, pointing out that ENB is worth considering despite its Borderline Safe dividend safety score of 57. The stock yields 6.91% and has an impressive 5-year DGR of 10.8%. 

In contrast, Dividend Challenger DTE has a Very Safe dividend safety score and made my list of seven top-ranked discounted stocks yielding at least 3%. With a favorable Chowder Number, DTE is likely to deliver annualized returns of 8% or more.

These transactions increased DivGro's PADI by a total of $432.

Increased Positions
  • The Allstate Corporation (ALL) — added 20 shares and increased position to 70 shares
  • Franklin Resources, Inc (BEN) — added 300 shares and increased position to 400 shares
  • Cisco Systems, Inc (CSCO) — added 200 shares and increased position to 340 shares
  • The Home Depot, Inc (HD) — added 10 shares and increased position to 70 shares
  • Pinnacle West Capital Corporation (PNW) — added 50 shares and increased position to 250 shares

I added to my positions in BEN and CSCO due to the assignment of put options. Both positions are now essentially full positions based on my ideal portfolio target weights. 

Adding shares to the other positions (ALL, HD, and PNW) moves those holdings closer to full positions, too. 

These additions increased DivGro's PADI by a total of $705.

One positive outcome of this month's trades is that my portfolio is much better distributed between the three supersectors


:


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
Jun 30, 202134,502.514,297.5014,503.951.44315.83
Jul 31, 202134,935.474,395.2614,672.681.23918.24

In July, the DOW 30 gained 1.25%, the S&P 500 gained 2.27%, and the NASDAQ gained 1.16%. The yield on the benchmark 10-year Treasury note fell to 1.239%, while CBOE's measure of market volatility, the VIX increased by 15.2% to 18.24.

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


In July, DivGro underperformed the S&P 500.

Portfolio Statistics


Given DivGro's current market value and the total capital invested, the portfolio has returned about 106% 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 3.68% last month to 3.75% this month.

Percentage payback relates dividend income to the amount of capital invested. DivGro's average percentage payback is 20.8%, up from last month's 20.4%.

Finally, the projected annual yield is calculated by dividing PADI ($32,843) by the total amount invested. DivGro's projected annual yield is at 4.80%, down from last month's value of 5.01%.

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


My PADI has suffered a bit due to this month's trades, so I'm looking forward to recovering it in the months to come so I can achieve my 2021 goal of increasing PADI to $37,500.

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


Thanks for reading and take care, everybody!

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