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Thursday, January 6, 2022

Monthly Review Of DivGro: December 2021

Every month, I write a review of my portfolio of dividend growth stocks, DivGro. My goal with these reviews is to share updates to my portfolio and to detail the dividends I received during the month. I also consider the impact on DivGro's projected annual dividend income (PADI).

In December, I added shares to one existing position and twelve DivGro stocks announced dividend increases. The net result of these changes is that PADI increased by about 1.4% in December. Year over year, PADI increased by 20.0%.

As for dividend income, in December I received dividends totaling $4,756 from 51 stocks in my portfolio, a year over year increase of 16%. In 2021, I collected $37,716 in dividends or about 109% of my 2021 goal of $34,500.


DivGro's PADI now stands at $39,327, which means I can expect to receive $3,277 in dividend income per month, on average, in perpetuity, assuming the status quo is maintained. Of course, the stocks I own are dividend growth stocks, so I expect to see increasing dividend income over time! Moreover, until I retire, I hope to continue to reinvest dividends, so DivGro's PADI should continue to grow through dividend growth and through compounding.


Dividend Income


I received dividends from 51 different stocks, for a monthly total of $4,756 in dividend income:

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

  • Archer-Daniels-Midland Company (ADM)income of $74.00
  • Aflac Incorporated (AFL)income of $33.00
  • Amgen Inc (AMGN)income of $158.40
  • Anthem, Inc (ANTM)income of $11.30
  • Atmos Energy Corporation (ATO)income of $136.00
  • Broadcom Inc (AVGO)income of $123.00
  • American States Water Company (AWR)income of $31.03
  • BlackRock, Inc (BLK)income of $144.55
  • BlackRock Science and Technology Trust (BST)income of $361.69
  • Cummins Inc (CMI)income of $72.50
  • Canadian National Railway Company (CNI)income of $60.12
  • Cintas Corporation (CTAS)income of $9.50
  • Chevron Corporation (CVX)income of $201.00
  • D.R. Horton, Inc (DHI)income of $22.50
  • Enbridge Inc (ENB)income of $65.09
  • 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
  • Gilead Sciences, Inc (GILD)income of $142.00
  • The Home Depot, Inc (HD)income of $115.50
  • Honeywell International Inc (HON)income of $68.60
  • International Business Machines Corporation (IBM)income of $164.00
  • Intercontinental Exchange, Inc (ICE)income of $33.00
  • Intel Corporation (INTC)income of $69.50
  • Johnson & Johnson (JNJ)income of $133.56
  • The Coca-Cola Company (KO)income of $126.00
  • Lockheed Martin Corporation (LMT)income of $112.00
  • Main Street Capital (MAIN)income of $80.60
  • McDonald's Corporation (MCD)income of $69.00
  • 3M Company (MMM)income of $111.00
  • Microsoft Corporation (MSFT)income of $62.00
  • NextEra Energy, Inc (NEE)income of $38.50
  • NIKE, Inc (NKE)income of $4.58
  • Northrop Grumman Corporation (NOC)income of $62.80
  • Realty Income Corporation (O)income of $36.90
  • Public Service Enterprise Group Incorporated (PEG)income of $127.50
  • Pfizer Inc (PFE)income of $117.00
  • Pinnacle West Capital Corporation (PNW)income of $212.50
  • Public Storage (PSA)income of $120.00
  • QUALCOMM Incorporated (QCOM)income of $47.60
  • Raytheon Technologies Corporation (RTX)income of $30.60
  • Snap-on Incorporated (SNA)income of $85.20
  • The TJX Companies, Inc (TJX)income of $26.00
  • T Rowe PriceT. Rowe Price Group, Inc (TROW)income of $108.00
  • The Travelers Companies, Inc (TRV)income of $88.00
  • Tyson Foods, Inc (TSN)income of $69.00
  • UnitedHealth Group Incorporated (UNH)income of $87.00
  • Union Pacific Corporation (UNP)income of $56.64
  • United Parcel Service, Inc (UPS)income of $51.00
  • Visa Inc (V)income of $33.75
  • Valero Energy Corporation (VLO)income of $98.00

The chart below shows DivGro's monthly dividends plotted against PMDI. Clearly, 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 is not something that would drive my investment decisions.


Dividend Changes


In December, the following stocks announced dividend increases:

  • Amgen Inc (AMGN)increase of 10.23%
  • American Tower Corporation (AMT)increase of 6.11%
  • Broadcom Inc (AVGO)increase of 13.89%
  • Franklin Resources, Inc (BEN)increase of 3.57%
  • Bristol-Myers Squibb Company (BMY)increase of 10.20%
  • Realty Income Corporation (O)increase of 0.20%
  • Pfizer Inc (PFE)increase of 2.56%
  • Stryker Corporation (SYK)increase of 10.32%
  • Tyson Foods, Inc (TSN)increase of 3.37%
  • Union Pacific Corporation (UNP)increase of 10.28%
  • Visa Inc (V)increase of 17.19%
  • W. P. Carey Inc (WPC)increase of 0.29%

These changes will increase DivGro's PADI by about $251.

I like seeing dividend increases above 7%, and I'm happy to see that six of the twelve increases in December topped my expectations. The arithmetic average of this month's dividend increases is 7.35%, which easily beats inflation.


Transactions


Here is a summary of my transactions in December:

  • Virtus AllianzGI Artificial Intelligence & Technology Opportunities Fund (AIO)added 200 shares and increased position to 400 shares
I opened a new position in the closed-end fund [CEF] AIO in November 2021 to gain exposure to the fields of Technology and Artificial Intelligence and, of course, for the CEF's generous monthly distributions (7+% yield). Given that AIO is trading at a discount to net asset value, I decided to double my position.

This transaction increased DivGro's PADI by about $300.

Also in November 2021, I reworked my system for determining target weights for DivGro. The system is dynamic and flexible and allows me to calibrate factors when my goals change. Following is a chart showing the current and target weights of dividend-paying stocks in DivGro:


I'm not really interested in trimming positions to bring them back into "compliance," especially for positions in my taxable account. Rather, I'll favor buying more shares of underweight positions to fill any gaps from below.

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 the Defensive sectors is back above 30%! 

Markets


I no longer compare DivGro's performance to those of the markets, but 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
Nov 30, 2021 34,483.72 4,567.00 15,537.69 1.443 27.19
Dec 31, 2021 36,338.30 4,766.18 15,644.97 1.512 17.22

In December, the DOW 30 gained 5.4%, the S&P 500 gained 4.4%, and the NASDAQ gained 0.7%. The yield on the benchmark 10-year Treasury note rose to 1.512, while CBOE's measure of market volatility, the VIX decreased by 36.7% to 17.22.

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

December was a strong month, with fewer DivGro stocks that ended in negative territory. I'm happy to note that DivGro outperformed the S&P 500 in December!


Portfolio Statistics


Given DivGro's current market value and the total capital invested, the portfolio has returned about 138% 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 17.5%.)

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 3.94% last month to 3.97% this month.

Another interesting statistic is percentage payback, which relates dividend income to the amount of capital invested. DivGro's average percentage payback is 26.4%, up from last month's 26.2%.

Finally, the projected annual yield is calculated by dividing PADI ($39,327) by the total amount invested. DivGro's projected annual yield is at 6.54%, up from last month's value of 6.48%.

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


This month, I'm celebrating DivGro's ninth anniversary! 

It has been quite a journey since my first blog article on 10 January 2013! I'm happy to continue this journey and share my experiences. Thanks for following along, and especially for challenging my thinking... I've learned as much from comments on my articles as I have done preparing and writing them!

In the next few weeks, I'll post quarterly and annual reviews of DivGro. I'm very happy with DivGro's performance in 2021, and I look forward to seeing what 2022 brings!

I wish all my readers a Happy New Year and the best of success in your investment journey in 2022!

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

Thanks for reading and happy investing!
You can now follow me on Twitter and Facebook.

12 comments :

  1. Great results. What's your strategy to lower your tax bill since all these dividends are either ordinary or qualified income?

    ReplyDelete
    Replies
    1. Thanks, and that's a good question... but, also, a good problem to have!
      (I mean, having to paying taxes because of earning significant dividend income).

      In 2021, I recorded some losses with options that will offset some of my tax obligations on capital gains and dividend income. Usually, though, some of the dividend income will need to be set aside to pay taxes. Investing in tax-advantaged funds like ETO and EVT, and maximizing investing via nontaxable accounts also helps.

      Delete
    2. As usual a superb update.
      What happened to the plan to move divgro to another platform?

      Delete
    3. Yeah, I'm still wanting to do that. Some unfortunate happenings in 2021 (pandemic-related) made it impossible to reach that goal! Hoping to do so in 2022!

      Delete
  2. Ferdi...I'm an old guy who began managing my money in 2008 instead of others managing.. You are my mentor though I have 40 CStocks that are DGI and not 90 or so.. Some of my early stocks I'd like to replace but don't want to pay tax since my already 100k plus dividends eat me up on taxes. Any thoughts?? Keep on keepin' on, Ferdi.

    ReplyDelete
    Replies
    1. Hi, KC Kid -- thanks for your comment and kind words. I'm happy to be of some service to you and others looking to manage their own investments.

      Nobody loves taxes, but I'd rather have a big tax bill than no tax bill.

      That said, the question to answer is whether not replacing your early stocks has a larger opportunity cost than you'd save not paying capital gains taxes. (I'm assuming that's the issue). Are these stocks that are performing poorly now but have gone up a lot since your investment? What would you replace them with? Would the income of the replacements be much higher? If so, how long would it take before you'd make up the taxes you'd need to pay after selling?

      Delete
    2. Looking over my 40 CS with a more critical eye I'm only questioning DEO and maybe PRU and AMP. Better replacements ????

      Delete
    3. I can't give individual advice, sorry.

      Read these articles for ideas:

      https://seekingalpha.com/article/4477683-top-16-dividend-growth-stock-picks-2022

      https://www.thestreet.com/dividendstrategists/dividend-ideas/top-7-dividend-growth-stock-picks-for-2022

      AMP has a quality score of 19 (out of 25) and has outperformed the S&P 500 over various time frames. I think it's a solid stock.

      PRU has a quality score of 15 and a high yield and dividend growth rate.

      DEO is not in my watch list Dividend Radar, so I don't know much about it.

      Delete
  3. Ferdi...as usual, great update and I'm glad you continue to put out articles and updates, always look forward to them. I noticed on your 12 month rolling average chart, starting in about June of '21, your dividends received started to outpace PADI and has continued to do so...any insight as to why? Larger than expected increases or did you ramp up share purchases?

    ReplyDelete
    Replies
    1. Thanks for commenting.

      Yeah, that's due to "special" dividends in the form of shares when company's do spinoffs. Like a regular special dividend, it's a one-time event and do not contribute to PADI. I determine the value of shares received and record it as a special dividend. A few such occurrences happened in 2021.

      Delete
  4. Great job! Thank you for the update!

    ReplyDelete

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