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Thursday, November 18, 2021

Monthly Review Of DivGro: October 2021

Welcome to the October review of DivGro, my portfolio of dividend growth stocks. I present details of any buys or sells, and I provide a summary of dividends collected. Additionally, I look at how the month's activities have impacted DivGro's projected annual dividend income (PADI).

In October, I opened one new position and added shares to one existing position. Two DivGro stocks announced dividend increases in October. The net result of these changes is that PADI increased by about 0.9% in October. Year over year, PADI increased by 13.3%.

As for dividend income, in October I received dividends totaling $2,247 from 26 stocks in my portfolio, a year over year increase of 31%. So far in 2021, I've collected $30,009 in dividends or about 87% of my 2021 goal of $34,500.

Assuming the status quo and given DivGro's PADI of $37,089, I can expect to receive $3,091 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 26 different stocks, for a monthly total of $2,247 in dividend income:

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

  • Automatic Data Processing, Inc (ADP)income of $93.00
  • The Allstate Corporation (ALL)income of $56.70
  • Franklin Resources, Inc (BEN)income of $140.00
  • The Bank of Nova Scotia (BNS)income of $18.24
  • Chubb Limited (CB)income of $80.00
  • Comcast Corporation (CMCSA)income of $100.00
  • Cisco Systems, Inc (CSCO)income of $125.80
  • DTE Energy Company (DTE)income of $41.25
  • Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO)income of $224.00
  • Eaton Vance Tax-Advantaged Dividend Income Fund (EVT)income of $203.25
  • FedEx Corporation (FDX)income of $37.50
  • Illinois Tool Works Inc (ITW)income of $73.20
  • The Coca-Cola Company (KO)income of $126.00
  • Main Street Capital (MAIN)income of $54.60
  • Mondelez International, Inc. (MDLZ)income of $35.00
  • Medtronic plc (MDT)income of $63.00
  • Altria Group, Inc (MO)income of $207.00
  • Merck & Co., Inc (MRK)income of $188.50
  • NIKE, Inc (NKE)income of $4.13
  • Realty Income Corporation (O)income of $35.40
  • Oracle Corporation (ORCL)income of $48.00
  • Philip Morris International Inc (PM)income of $25.00
  • Sempra Energy (SRE)income of $55.00
  • Stryker Corporation (SYK)income of $6.30
  • W. P. Carey Inc (WPC)income of $105.20
  • Xcel Energy Inc (XEL)income of $100.65

Here is a chart showing DivGro's monthly dividends plotted against PMDI. It is clear that quarter-ending months are huge outliers:

For this reason, 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 is not something that would drive my investment decisions.


Dividend Changes


In October, the following stocks announced dividend increases:

  • AbbVie Inc (ABBV)increase of 8.46%
  • Honeywell International Inc (HON)increase of 5.38%

As a result of these changes, DivGro's PADI will increase by $102.

I like seeing dividend increases above 7%. While HON's increase was less than 7%, ABBV's somewhat compensated for that shortfall. The average is 6.92%, not quite the 7% I'd like to see! 


Transactions


Here is a summary of my transactions in October:

  • American Tower Corporation (AMT)new position of 10 shares
  • Atmos Energy Corporation (ATO)added 70 shares and increased position to 200 shares

These transactions increased DivGro's PADI by about $227.

New Position

AMT was the top-ranked Real Estate sector stock in a recent article I wrote for TheStreet.com. Here is what I wrote about AMT: 
Given its high 5-year DGR of 19.6%, AMT looks like an interesting candidate. Its 5-year yield on cost of 4.4% and high Chowder Number of 21 indicate strong dividend income and growth prospects. However, it is advisable to wait for a more favorable entry point. My risk-adjusted Buy Below price is $228. For investors willing to accept some risk, my fair value estimate of AMT is $252.

With AMT trading around $257 per share, the stock is trading at a premium to my Buy Below price of $228. Nevertheless, I wanted to open a small position in AMT so I can track the stock more diligently. As soon as AMT presents a better entry point, I'll increase my opening position!

Source: Portfolio Insight

Note that AMT is trading near the Undervalue Price relative to past dividend yields. Additionally, AMT's current yield exceeds its 5-year average yield, indicating that the stock offers a good opportunity presently.

Added to Existing Position

I liked ATO in my recent article covering the Dividend Aristocrats, noting the utility could return about 22% over the next twelve months if the share price reverts to the fair value price:

Source: Portfolio Insight

ATO is up nearly 6% since my purchase, which essentially matches the market's performance in October. 

I'm continuing my theme of increasing DivGro's exposure to Defensive and Cyclical sectors and, effectively, reducing my exposure to the Sensitive sectors.


I'm happy to note that my exposure to Defensive sectors increased to 31.5%. Likewise, Cyclicals are slightly higher at 29%. 

Markets

Here is a summary of various market indicators, showing the changes from the end of September to the end of October:

  DOW
30
S&P
500
NASDAQ
Composite
10-YR
BOND
CBOE
VIX
Sep 30, 2021 33,843.92 4,307.54 14,448.58 1.529 23.14
Oct 31, 2021 35,819.56 4,605.38 15,850.47 1.575 16.26

In October, the DOW 30 gained 5.8%, the S&P 500 gained 6.9%, and the NASDAQ gained 9.7%. The yield on the benchmark 10-year Treasury note rose to 1.575, while CBOE's measure of market volatility, the VIX decreased by 29.7% to 16.26.

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

October was a much better month than September and fewer DivGro stocks ended the month in negative territory. DivGro underperformed the S&P 500 in October, though this comparison does not account for dividends. 


Portfolio Statistics


Given DivGro's current market value and the total capital invested, the portfolio has returned about 129% 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 17.0%.)

I track the yield on cost (YoC) for individual stocks, as well as an average YoC for my portfolio. DivGro's average YoC was unchanged from last month's 3.91%.

Percentage payback relates dividend income to the amount of capital invested. DivGro's average percentage payback is 25.7%, up from last month's 25.4%.

Finally, projected annual yield is calculated by dividing PADI ($37,089) by the total amount invested. DivGro's projected annual yield is at 6.30%, up from last month's value of 6.26%.

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 on track to achieve my goal of collecting $34,500 in dividend income in 2021. So far in November, the markets have continued October's upward momentum, and two more DivGro stocks have achieved home run status. That's home run numbers 40 and 41!

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


Thanks for reading and take care, everybody!
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