Monthly Review Of DivGro: November 2021

Every month, I write a review of 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 November, I opened two new positions in DivGro, increasing the number of positions in my portfolio to 98. Additionally, I did some significant rebalancing, adding shares to seventeen existing positions and removing shares from ten other positions. No fewer than fourteen DivGro stocks announced dividend increases in November. The net result of all these changes is that DivGro's PADI increased by about 4.5% in November. Year over year, my PADI increased by about 18.2%.

As for dividend income, in November, I received dividends totaling $2,951 from 24 stocks, a year-over-year increase of 16%. So far, in 2021, I've collected $32,960 in dividends or about 96% of my 2021 goal of $34,500.

DivGro's PADI of $38,776 means I can expect to receive $3,231 in dividend income per month, on average, in perpetuity, assuming the status quo is maintained. But DivGro's PADI should increase over time because I invest in dividend growth stocks. 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 collected dividends totaling $2,951 from 24 different stocks in November:

• Apple Inc (AAPL) — income of $44.00
• AbbVie Inc (ABBV) — income of $260.00
• Accenture plc (ACN) — income of $9.70
• 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
• 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
• General Dynamics Corporation (GD) — income of $119.00
• Hormel Foods Corporation (HRL) — income of $49.00
• International Business Machines Corporation (IBM) — income of $570.00
• JPMorgan Chase & Co (JPM) — income of $110.00
• Lowe's Companies, Inc (LOW) — income of $80.00
• Mastercard Incorporated (MA) — income of $22.00
• Main Street Capital (MAIN) — income of $54.60
• National Retail Properties, Inc (NNN) — income of $119.25
• Realty Income Corporation (O) — income of $317.25
• The Procter & Gamble Company (PG) — income of $21.75
• Royal Bank of Canada (RY) — income of $42.61
• Starbucks Corporation (SBUX) — income of $68.60
• The Toronto-Dominion Bank (TD) — income of $191.75
• Texas Instruments Incorporated (TXN) — income of $86.25
• Verizon Communications Inc (VZ) — income of $128.00

Following is a chart showing DivGro's monthly dividends plotted against projected monthly dividend income [PMDI]. It is clear that 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, I wouldn't let that influence my investment decisions.

Dividend Changes

In November, the following stocks announced dividend increases or paid higher dividends due to exchange rate fluctuations:

• Automatic Data Processing, Inc (ADP) — increase of 11.83%
• Aflac Incorporated (AFL) — increase of 21.21%
• Atmos Energy Corporation (ATO) — increase of 8.80%
• The Bank of Nova Scotia (BNS) — increase of 1.96%
• D.R. Horton, Inc (DHI) — increase of 12.50%
• DTE Energy Company (DTE) — increase of 7.27%
• Hormel Foods Corporation (HRL) — increase of 6.12%
• Mastercard Incorporated (MA) — increase of 11.36%
• Merck & Co., Inc (MRK) — increase of 6.15%
• NIKE, Inc (NKE) — increase of 10.91%
• Realty Income Corporation (O) — increase of 4.24%
• Pinnacle West Capital Corporation (PNW) — increase of 2.41%
• Snap-on Incorporated (SNA) — increase of 15.45%
• The Toronto-Dominion Bank (TD) — increase of 1.56%

These changes will increase DivGro's PADI by $299.

I like seeing dividend increases above 7%, so I'm happy to see eight of the fourteen increases exceed my expectations. The arithmetic average of this month's dividend increases is 8.7%, which easily beats inflation.

Transactions

In November, I did some significant rebalancing of my portfolio to align with my modified system for determining target weights. The system is dynamic and flexible and allows me to calibrate factors when my goals change. 

Additionally, I opened positions in two new closed-end funds [CEFs], mainly to earn higher yields for my investment dollars. Over time, I hope to slowly increase my exposure to these CEFs. Doing so will allow me to invest in individual stocks with a more substantial focus on dividend growth (and total return). 

I have some work to do towards reaching my desired target weights, but I like the system I have in place now and the fact that I can easily visualize the imbalance:

I'll include this chart in future monthly reports to help keep track of progress!

I'm not really interested in trimming positions to bring them back into "compliance," especially for positions in my taxable account. The old adage let your winners run also comes to mind. Instead, I'd like to favor buying more shares of more minor positions over time and slowly filling any gaps from below.

That said, in November, I did some substantial trimming of several positions!

Here is a summary of my transactions in November:

New Positions

I've been looking to increase my market exposure via CEFs, which often yields higher than comparable investment vehicles. 

Let's briefly look at the three CEFs I currently own:

1. Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO) 
2. Eaton Vance Tax-Advantaged Dividend Income Fund (EVT) 
3. Virtus AllianzGI Equity & Convertible Income Fund (NIE) 

I've owned NIE the longest, but ETO has performed the best. 

Since my initial investment in October 2012, NIE has paid $6,837.66 in distributions equivalent to 25.1% of the total capital I'd invested. My NIE position has delivered total returns of 62% or 19% annualized. 

Recently, NIE increased its distribution by 32% (starting with the March 2022 payment) and will pay a special distribution of $1.754 per unit in January 2022. That's great news! I own 1,250 shares, so the special dividend alone will add $2,192.50 to my dividend income tally! Furthermore, NIE's forward dividend yield will increase to 6.77%, and my yield on cost [YOC] will increase to 9.16%. Following the increase, NIE's quarterly distribution will represent about 6.35% of DivGro's PADI.

I first invested in ETO in March 2020, and the CEF has returned 57% or 46% annualized! Distributions totaling $3,039.70 represent a payback of 11% of the total capital I'd invested. ETO yields 6.65%, having raised its distribution by 25.8% in August 2021. My YOC is 9.74%, and ETO's monthly distribution represents 6.93% of DivGro's PADI.

Finally, I added EVT in April 2021. EVT yields 5.10%, and my YOC is 6.96% after the CEF raised its distribution by 21.1% in August 2021. Distributions totaling $1,352.35 represent a payback of 4% of the total capital I'd invested. EVT pays monthly distributions that represent about 6.29% of DivGro's PADI. EVT has produced total returns of 11% or 17.6% annualized. 

In November, I decided to add two CEFs to my DivGro portfolio from this list by Michael Foster :

• Virtus AllianzGI Artificial Intelligence & Technology Opportunities Fund (AIO) — 
       new position of 200 shares
• BlackRock Science and Technology Trust (BST) — 
       new position of 200 shares

Paraphrasing Foster's viewpoint, even if we finally get to something somewhat resembling a pre-pandemic world, some habits (working from home, holding remote meetings, ordering groceries online, getting food delivered, etc.) will be hard to shake. So the internet will continue to facilitate business operations for years to come. 

I like AIO because of its exposure to both Technology and Artificial Intelligence. Furthermore, the CEF has a hybrid allocation between equity and convertible securities, making it a little more diversified than equity-only CEFs. 

AIO offers monthly distributions yielding 7.19% after its recent increase of 20%, from 12.5¢ to 15¢ per unit. Moreover, I'm happy to note that AIO will pay a rather significant special distribution of $3.4497 per unit in January 2022. Given that I bought 200 shares, that's a rather welcome $689.92!

AIO uses little leverage and has an expense ratio of 1.43%, which is somewhat high. The CEF is trading at a discount to net asset value [NAV] of 6.08%.

BST is a more established science and technology-focused CEF offering monthly distributions currently yielding 6.08%. The CEF raised its distributions twice in 2021; the latest increase announced in October equaled 10.6%, from 22.6¢ to 25¢ per unit. 

BST's expense ratio is more palatable at 0.99%, and the CEF is discounted by 6.26% to NAV. 

Note that BST will pay a special distribution of $1.55844 per unit on 31 December, a welcome bonus of $311.69 for my DivGro portfolio. 

Increased Positions

• Aflac Incorporated (AFL) —
       added 100 shares and increased position to 200 shares

AFL briefly gave me a chance to double my position at a discounted valuation. The Dividend Champion has a 5-year dividend growth rate [DGR] of 9.15% and a 5-year trailing total return [TTR] of 10.31%

• The Allstate Corporation (ALL) —
       added 30 shares and increased position to 100 shares

ALL is trading at a significant discount, so I took the opportunity to round out my position to 100 shares. I need another 35 shares to reach my target weight. Unfortunately, my ALL position is in an IRA account with limited funds, so I'll have to wait a bit before adding more shares. 

• Bristol-Myers Squibb Company (BMY) —
       added 100 shares and increased position to 300 shares

BMY is trading at about 25% below my Buy Below price. The stock's 5-year DGR is impressive at 16.16%, and its forward yield of 3.48% is rather attractive. 

• The Bank of Nova Scotia (BNS) —
       added 125 shares and increased position to 150 shares

BNS yields 4.18%, and Canadian banks are starting to increase their dividends again! BNS increased its quarterly dividend by 11.1% to C$1.00 per share. BNS is still discounted and offers a 5-year YOC of 4.37%. 

• D.R. Horton, Inc (DHI) —
       added 50 shares and increased position to 100 shares

DHI briefly traded below my Buy Below price on 30 November, so I grabbed the opportunity to double my position. DHI's 5-year DGR and 5-year TTR are spectacular, at 20.12% and 24.17%, respectively. 

• DTE Energy Company (DTE) —
       added 50 shares and increased position to 100 shares

DTE yields 2.82% and has a 5-year DGR of 7.70%. Those numbers combine for a 5-year YOC of 4.09%, a reasonable income outlook for this Utilities sector stock. 

• Enbridge Inc (ENB) —
       added 200 shares and increased position to 300 shares

Given Dividend Champion ENB's 7.00% forward yield and strong 5-year DGR of 11.12%, it wasn't a difficult decision to increase my position. 

• Hormel Foods Corporation (HRL) —
       added 100 shares and increased position to 300 shares

HRL is a Dividend King with a 55-year streak of higher dividend payouts. The stock briefly traded below $42 per share, allowing me to increase my position to the target weight of 300 shares. I like the stock's strong 5-year DGR of 11.56%.

• Mondelez International, Inc. (MDLZ) —
       added 100 shares and increased position to 200 shares

MDLZ is another stock with a strong 5-year DGR of 13.10%. I was fortunate to buy shares at a discounted valuation of about 10%. Since the buy, MDLZ has added 8% to its share price, and the stock is now trading at about fair value.  

• Public Service Enterprise Group Incorporated (PEG) —
       added 150 shares and increased position to 250 shares

PEG is a Utility sector stock that yields a modest 3.16%. With a dividend deemed Very Safe by Simply Safe Dividends, I'm hoping my expanded investment will bear some fruit. PEG's 5-year TTR is 11. 62%, which is a performance I would welcome from PEG over the next five years!

• The Procter & Gamble Company (PG) —
       added 75 shares and increased position to 100 shares

Since my purchase, Dividend King PG has increased 10%, a remarkable spurt of growth in less than one month! The stock is one of only seven Dividend Radar stocks with a perfect quality score of 25. Unfortunately, PG is now trading at a slight premium to my Buy Below price of $157 per share. 

• Philip Morris International Inc (PM) —
       added 100 shares and increased position to 120 shares

I recovered my PM position to its desired target weight. Given a forward yield of 5.38%, the stock boasts a strong 5-year YOC of 6.37%, making it an attractive income prospect.

• Raytheon Technologies Corporation (RTX) —
       added 40 shares and increased position to 100 shares

RTX is discounted at least 16% to my Buy Below price, so it was opportune to move my position to its target weight. RTX yields a respectable 2.40%.

• Royal Bank of Canada (RY) —
       added 100 shares and increased position to 150 shares

RY is discounted by about 8%, and I happily added 100 shares to turn it into a full-sized position matching my target weight. The bank increased its dividend by 11%!

• Visa Inc (V) —
       added 10 shares and increased position to 100 shares

V is another Dividend Radar stock with a perfect quality score. The stock yields a puny 0.69% but grows its dividend at an impressive rate (5-year DGR is 17.98%)! The stock trades 12% below my Buy Below price. 

• Valero Energy Corporation (VLO) —
       added 50 shares and increased position to 150 shares

VLO yields 5.46% and has a 5-year DGR of 11.26%. Given its 4% discount, I took the opportunity to round out my position to the ideal target weight. The Energy sector has struggled for many years, so it would be interesting to see how fast it will recover going forward. 

• Verizon Communications Inc (VZ) —
       added 50 shares and increased position to 250 shares

VZ is a bond-like stock with a generous 4.86% yield and a tiny 5-year DGR of 2.13%. On the plus side, VZ is discounted by about 17%, so there's some upside for investors willing to wait for the stock to recover some. 

Trimmed Positions

As mentioned earlier, I don't really want to trim positions unless there's some fundamental issue to act on. But, to increase underweight positions, I necessarily had to trim overweight positions. So there's not much to be said about these trades, except that their proceeds were used to increase underweight positions!

• AbbVie Inc (ABBV) —
       sold 100 shares and reduced position to 100 shares

ABBV is DivGro's 11^th Home Run stock. It is trading about 9% above my Buy Below price.

• Franklin Resources, Inc (BEN) — 
       sold 200 shares and reduced position to 300 shares

I trimmed Dividend Champion BEN because its quality score dropped and its target weight. It is back in line now. 

• Comcast Corporation (CMCSA) —
       sold 100 shares and reduced position to 300 shares

CMCSA has performed remarkably well, delivering total returns of 42% or 16% annualized. It is slightly underweight now, so I'll see if I can find a good re-entry point sometime in 2022. 

• Cisco Systems, Inc (CSCO) —
       sold 100 shares and reduced position to 240 shares

I trimmed CSCO to a full-sized position. The stock is trading at about fair value. 

• CVS Health Corporation (CVS) —
       sold 100 shares and reduced position to 100 shares

Halving my CVS position trimmed it back to a full-sized position. I was happy to note that CVS increased its dividend again!

• Gilead Sciences, Inc (GILD) —
       sold 100 shares and reduced position to 200 shares

Likewise, GILD needed to be halved to trim it to a full-sized position. The stock is discounted about 9% relative to my Buy Below price. 

• The Coca-Cola Company (KO) —
       sold 100 shares and reduced position to 200 shares

KO is fairly valued, and it is now appropriately sized after I halved my position.

• Altria Group, Inc (MO) —
       sold 100 shares and reduced position to 230 shares

Trimming MO to right-size was a difficult call, as the stock's yield of 7.71% is so attractive. 

• Merck & Co., Inc (MRK) —
       sold 90 shares and reduced position to 200 shares

MRK has a quality score of 24, so trimming it was another tough call. 

• Xcel Energy Inc (XEL) —
       sold 55 shares and reduced position to 165 shares

XEL is now a full-size position after this sell. 

These transactions increased DivGro's PADI by about $1,387.

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

With the rebalancing of my portfolio in November, I've taken a step back in that my exposure to the Defensive sectors has dropped from 31.5% to 29.8%. But the Cyclicals sectors are slightly higher at 30.2%, up from 29% last month. I need to shift a little more weight away from the Sensitive sectors, though!

Markets

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

	DOW 30	S&P 500	NASDAQ Composite	10-YR BOND	CBOE VIX
Oct 31, 2021	35,819.56	4,605.38	15,850.47	1.575	16.26
Nov 30, 2021	34,483.72	4,567.00	15,537.69	1.443	27.19

The DOW 30 dropped 3.7% in November, the S&P 500 dropped 0.8%, and the NASDAQ dropped 2.0%. The yield on the benchmark 10-year Treasury note fell to 1.443%, while CBOE's measure of market volatility, the VIX, increased by 67.2% to 27.19.

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

November was another challenging month with fewer DivGro stocks that ended in positive territory. DivGro underperformed the S&P 500 in November, 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 123% 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 16.4%.

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 3.91% last month to 3.94% this month.

Percentage payback relates dividend income to the amount of capital invested. DivGro's average percentage payback is 26.2%, up from last month's 25.7%.

Finally, DivGro's projected annual yield is at 6.48%, up from last month's value of 6.30%. I calculate the projected annual yield by dividing PADI ($38,776) by the total amount invested.

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 looking forward to December for various reasons, including a little break from work over the Christmas season. Also, quarter-ending months are great months for dividend income, and I'm curious to see if DivGro will set another record high for dividend income this month.

I'm also looking forward to celebrating DivGro's ninth anniversary in January!

In December, I'll review my 2021 goals and set goals for 2022. I like setting stretching but doable goals, but it appears that I've stretched too far this year! Hopefully, I'll do better in 2022!

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

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Thanks for reading and take care, everybody!
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