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Sunday, September 5, 2021

Monthly Review Of DivGro: August 2021

Once a month, I review my portfolio of dividend growth stocks, DivGro. These reviews aim to provide a summary of dividends received, and detail buy and sell transactions. I also look at how DivGro's projected annual dividend income (PADI) has changed.

In August, I opened two new positions and added shares to three existing positions. Five DivGro stocks announced dividend increases in August. The net result of these changes is that PADI increased by about 4.7% in August. Year over year, PADI increased by 11.5%.

As for dividend income, in August, I received dividends totaling $2,116 from 25 stocks in my portfolio, a year-over-year increase of 26%. So far in 2021, I've collected $23,130 in dividends or about 67% of my 2021 goal of $34,500.

DivGro's PADI now stands at $34,376, which means I can expect to receive $2,865 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, I hope to continue reinvesting dividends until I retire, so DivGro's PADI should continue to grow through dividend growth and compounding.

Dividend Income


I received dividends from 25 different stocks, for a monthly total of $2,116 in dividend income:

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

  • 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 $179.20
  • Eaton Vance Tax-Advantaged Dividend Income Fund (EVT)income of $162.60
  • General Dynamics Corporation (GD)income of $119.00
  • Hormel Foods Corporation (HRL)income of $49.00
  • JPMorgan Chase & Co (JPM)income of $99.00
  • Lowe's Companies, Inc (LOW)income of $80.00
  • Mastercard Incorporated (MA)income of $22.00
  • Main Street Capital (MAIN)income of $53.30
  • National Retail Properties, Inc (NNN)income of $119.25
  • Realty Income Corporation (O)income of $35.32
  • The Procter & Gamble Company (PG)income of $21.75
  • Royal Bank of Canada (RY)income of $42.82
  • Starbucks Corporation (SBUX)income of $63.00
  • AT&T Inc (T)income of $208.00
  • The Toronto-Dominion Bank (TD)income of $125.87
  • Texas Instruments Incorporated (TXN)income of $76.50
  • Verizon Communications Inc (VZ)income of $106.68

The following chart shows DivGro's monthly dividends plotted against PMDI. 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 it would be nicer if dividends were distributed more evenly, it would not drive my investment decisions.


Dividend Changes


In August, the following stocks announced dividend increases:

  • Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO)increase of 25.75%
  • Eaton Vance Tax-Advantaged Dividend Income Fund (EVT) — an increase of 12.14%
  • Illinois Tool Works Inc (ITW) — an increase of 7.02%
  • Main Street Capital (MAIN) — an increase of 2.44%
  • Altria Group, Inc (MO) — an increase of 4.65%
I like seeing dividend increases above 7%, and three of these increases top my expectations. The arithmetic average of this month's dividend increases is 10.4%, which easily beats inflation.

I'm particularly thrilled with ETO's and EVT's increases. They boost DivGro's PADI by $440.40 and $211.20, respectively. I'm unsure how long and if these distributions will be maintained at these levels, but I'm happy to be on the receiving end of these generous increases!

Two Canadian stocks paid out reduced dividends due to exchange rate fluctuations:

  • Royal Bank of Canada (RY) — a decrease of 4.36%
  • The Toronto-Dominion Bank (TD) — a decrease of 2.00%

I'm hoping the restrictions the OSFI placed on Canadian banks will soon be lifted, so they would be free to increase their dividend payouts again. 

The dividend changes in August will increase DivGro's PADI by $705.


Transactions


Here is a summary of my transactions in August:

New Positions

  • Cintas Corporation (CTAS)new position of 10 shares
  • Mondelez International, Inc. (MDLZ)new position of 100 shares
Last month, I published an article covering the highest-quality dividend growth stocks in Dividend Radar. I presented stocks with quality scores of at least 20 points based on DVK Quality Snapshots in one section. CTAS and MDLZ caught my attention, and I decided to open new, relatively small positions.

CTAS has performed incredibly well, especially in the past five years or so, growing its dividend rapidly in concert with its earnings growth:


Recently, CTAS announced another spectacular 26.7% dividend increase! CTAS is trading at a premium of about 10%, so I opened an underweight position to closely track CTAS and, hopefully, add shares at a more reasonable valuation. 

MDLZ 's performance is not as impressive, but the stock yields 2.27% and has an impressive 5-year dividend growth rate of 13.1%. Furthermore, MDLZ is trading at fair value, and I'm happy to put a bit more cash to work in MDLZ.


Increased Positions
  • Franklin Resources, Inc (BEN)added 100 shares and increased its position to 500 shares.
  • Gilead Sciences, Inc (GILD)added 100 shares and increased its position to 300 shares.
  • The Toronto-Dominion Bank (TD)added 100 shares and increased its position to 300 shares.
BEN, GILD, and TD are three of only ten Dividend Radar stocks that passed my very stringent screens for a recent article picking dividend growth stocks for September.  To summarize, the screens find high-quality stocks with Safe or Very Safe dividends trading at reasonable valuations and stocks with attractive total return prospects over the next five years. 

By adding 100 shares to each position, they are now full-sized positions in my portfolio based on my system to determine ideal target weights

These transactions increased DivGro's PADI by about $826.

Markets


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


 DOW
30
S&P
500
NASDAQ
Composite
10-YR
BOND
CBOE
VIX
Jul 31, 202134,935.474,395.2614,959.901.23918.24
Aug 31, 202135,360.734,522.6815,582.511.30416.48

The DOW 30 gained 1.2% in August, the S&P 500 gained 2.9%, and the NASDAQ gained 4.2%. The yield on the benchmark 10-year Treasury note rose to 1.304, while CBOE's measure of market volatility, the VIX, decreased by 9.6%.

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


In August, DivGro underperformed the S&P 500.


Portfolio Statistics


Given DivGro's current market value and the total capital invested, the portfolio has returned about 118% since inception. But calculating the IRR (internal rate of return) gives a better measure of portfolio performance, as IRR considers the timing and size of deposits since inception. DivGro's IRR is 17.4%.)

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 3.75% last month to 3.81% this month.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 21.0%, up from last month's 20.8%.

Finally, the projected annual yield is calculated by dividing PADI ($34,376) by the total amount invested. DivGro's projected annual yield is 5.87%, up from last month's value of 4.80%.

The following chart shows 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 on pace to achieve my goal of collecting $34,500 in dividend income in 2021 but a little behind what's needed to increase my PADI to $37,500 by year's end. With cash of nearly $50,000 on hand and four months of dividends yet to be collected, perhaps it is possible to still achieve that goal. 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!

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