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Friday, April 1, 2022

2021 Annual Review Of DivGro

Welcome (finally!) to the ninth annual review of DivGro, my portfolio of dividend growth stocks! 

I've been swamped at work with little time to write articles, but things are letting up a bit and I'm happy to have some free time to catch up on article writing!

I created DivGro in January 2013 to create the proverbial dividend-generating machine. DivGro has grown beyond my wildest dreams and now generates dividend income of $3,277 per month, on average. That's a tidy income stream, which I plan to reinvest until and perhaps into, retirement. 

In my annual reviews, I look at DivGro's performance as measured by dividend income, dividend increases, annualized returns, and rate of return. I also look at some highlights of the past year and share my outlook for the coming year.

Introduction


The stock market performed very well in 2021. The S&P 500 gained 26.9% for the year, while the Dow Jones Industrial Average (DJIA) and the Nasdaq Composite gained 18.7% and 21.4%, respectively. It is only the sixth time that the S&P 500 outperformed the Dow and the Nasdaq in a year! In fact, the S&P 500 managed a record close on 68 occasions or nearly 30% of all trading days in 2021!

Source: Yahoo Finance

In 2021, I set out to average an initial yield on cost of 3.20% for new buys. A quick calculation indicates that I averaged 3.51%, easily achieving that goal. In 2022, I'm aiming to average an initial yield on cost of 3.60% for new buys.  

Last year, I managed to increase DivGro's projected annual dividend income (PADI) from $32,768 to $39,327. My portfolio should continue to produce significant amounts of income annually and in perpetuity. I'm hoping to reinvest all dividends for the foreseeable future and until (or even into) retirement. 

This is a great position to be in and I'm thankful for the decision I made nine years ago to switch to dividend growth investing. 

Let's take a look at DivGro's performance in 2021.

Performance


Dividend Income

The main goal of DivGro is to generate a reliable and growing dividend income stream.

In 2021, DivGro generated dividends totaling $37,716, an increase of about 26% over the 2020 total of $30,021.


PADI increased by 20% to $39,327, meaning I can expect to earn monthly dividend income averaging at least $3,277 in perpetuity. (PADI one year ago was $32,768).


Of course, DivGro's PADI should increase over time because I invest in dividend growth stocks and I reinvest all dividends. I'm hoping to increase PADI to $45,000 in 2022, which, if realized, would represent an increase of 20% over my 2021 goal of $37,500.

Dividend Increases

In dividend growth investing, regular dividend increases are just as important as dividend income. I use selection criteria that favor high-quality dividend growth stocks with safe dividends. In 2021, the following DivGro stocks paid or announced higher dividends:

1-Year
Increase
 
Company
 Ticker
Increase  Annual Div
 New YoC
Outsized
(≥ 20%)
Lowe's Companies, Inc
LOW
33.33%
3.20
3.46%
Oracle Corporation
ORCL
33.33%
1.28
2.27%
Eaton Vance Tax-Advantaged
Global Dividend Opportunities Fund
ETO
25.75%
2.15
9.74%
Aflac Incorporated
AFL
21.21%
1.60
4.01%
Large
(≥ 10%
but
 < 20%)
 
T. Rowe Price Group, Inc
TROW
20.00%
4.32
5.82%
Anthem, Inc
ANTM
18.95%
4.52
1.57%
Visa Inc
V
17.19%
1.50
0.73%
UnitedHealth Group Incorporated
UNH
16.00%
5.80
2.40%
Snap-on Incorporated
SNA
15.45%
5.68
3.66%
FedEx Corporation
FDX
15.38%
3.00
2.00%
Broadcom Inc
AVGO
13.89%
16.40
6.05%
BlackRock, Inc
BLK
13.77%
16.52
4.18%
Philip Morris International Inc
PM
13.04%
5.00
5.82%
Costco Wholesale Corporation
COST
12.86%
3.16
1.16%
Texas Instruments Incorporated
TXN
12.75%
4.60
4.98%
D.R. Horton, Inc
DHI
12.50%
0.90
0.94%
Eaton Vance Tax-Advantaged
Dividend Income Fund
EVT
12.14%
1.95
7.14%
Air Products and Chemicals, Inc
APD
11.94%
6.00
3.80%
Automatic Data Processing, Inc
ADP
11.83%
4.16
2.70%
Mastercard Incorporated
MA
11.36%
1.96
0.60%
JPMorgan Chase & Co
JPM
11.11%
4.00
2.87%
NIKE, Inc
NKE
10.91%
1.22
1.49%
Microsoft Corporation
MSFT
10.71%
2.48
5.32%
Stryker Corporation
SYK
10.32%
2.78
1.33%
Union Pacific Corporation
UNP
✧10.31%✧
4.72
3.18%
Accenture plc
ACN
10.23%
3.88
2.21%
Amgen Inc
AMGN
10.23%
7.76
3.58%
Bristol-Myers Squibb Company
BMY
10.20%
2.16
3.73%
The Procter & Gamble Company
PG
10.00%
3.48
2.68%
Intercontinental Exchange, Inc
ICE
10.00%
1.32
1.41%
NextEra Energy, Inc
NEE
10.00%
1.54
3.78%
The Home Depot, Inc
HD
10.00%
6.60
3.26%
Medium
(≥ 5%
but
 < 10%) 
American States Water Company
AWR
8.96%
1.46
1.91%
Starbucks Corporation
SBUX
8.89%
1.96
3.09%
Atmos Energy Corporation
ATO
8.80%
2.72
3.04%
Comcast Corporation
CMCSA
8.70%
1.00
2.71%
Medtronic plc
MDT
8.62%
2.52
2.75%
Canadian National Railway Company
CNI
✧8.52%✧
1.92
2.41%
AbbVie Inc
ABBV
8.46%
5.64
9.31%
Northrop Grumman Corporation
NOC
8.28%
6.28
1.92%
General Dynamics Corporation
GD
8.18%
4.76
3.94%
Lockheed Martin Corporation
LMT
7.69%
11.20
3.61%
Cummins Inc
CMI
7.41%
5.80
4.90%
Raytheon Technologies Corporation
RTX
7.37%
2.04
3.27%
Apple Inc
AAPL
7.32%
0.88
3.84%
DTE Energy Company
DTE
7.27%
3.54
3.14%
Illinois Tool Works Inc
ITW
7.02%
4.88
3.25%
McDonald's Corporation
MCD
6.98%
5.52
3.71%
Xcel Energy Inc
XEL
6.40%
1.83
3.36%
Merck & Co., Inc
MRK
6.15%
2.76
3.59%
Hormel Foods Corporation
HRL
6.12%
1.04
2.52%
American Tower Corporation
AMT
6.11%
5.56
2.09%
Honeywell International Inc
HON
5.38%
3.92
2.71%
Intel Corporation
INTC
5.30%
1.39
6.58%
PepsiCo, Inc
PEP
5.13%
4.30
3.40%
Small
(≥ 2.5%
but
 < 5%) 
Johnson & Johnson
JNJ
4.95%
4.24
2.92%
Altria Group, Inc
MO
4.65%
3.60
7.80%
QUALCOMM Incorporated
QCOM
4.62%
2.72
2.60%
The Bank of Nova Scotia
BNS
✧4.11%✧
2.92
4.92%
Public Service Enterprise Group
PEG
4.08%
2.04
3.40%
Royal Bank of Canada
RY
✧3.92%✧
3.41
3.82%
Chevron Corporation
CVX
3.88%
5.36
5.72%
Franklin Resources, Inc
BEN
3.57%
1.16
3.87%
Digital Realty Trust, Inc
DLR
3.57%
4.64
4.17%
The Travelers Companies, Inc
TRV
3.53%
3.52
3.04%
Tyson Foods, Inc
TSN
3.37%
1.84
2.34%
The Toronto-Dominion Bank
TD
✧3.14%✧
2.56
4.52%
Archer-Daniels-Midland Company
ADM
2.78%
1.48
3.49%
Cisco Systems, Inc
CSCO
2.78%
1.48
3.31%
Taiwan Semiconductor Manufacturing Company Limited
TSM
✧2.62%✧
1.98
closed
Chubb Limited
CB
2.56%
3.20
2.62%
Pfizer Inc
PFE
2.56%
1.60
4.38%
 Tiny
(< 2.5%)
The Coca-Cola Company
KO
2.44%
1.68
4.07%
Main Street Capital
MAIN
2.44%
2.52
13.21%
Pinnacle West Capital Corporation
PNW
2.41%
3.40
4.32%
Verizon Communications Inc
VZ
1.99%
2.56
4.97%
National Retail Properties, Inc
NNN
1.92%
2.12
5.30%
United Parcel Service, Inc
UPS
0.99%
4.08
3.33%
3M Company
MMM
0.68%
5.92
3.32%
International Business Machines
Corporation
IBM
0.61%
6.56
4.74%
Realty Income Corporation
O
✧0.21%✧
2.96
5.45%
W. P. Carey Inc
WPC
✧0.19%✧
4.22
6.25%
multiple increases

The table includes the new yield on cost (YoC) for positions still in my portfolio.

I like to see dividend increases of 7% or higher and I'm happy to note that 47 positions had dividend increases of at least 7% in 2021. The arithmetic average of the 82 increases above is 8.66%, up from last year's 7.04% from 74 increases. Note that I've closed one of these positions.

Annualized Returns

As mentioned earlier, the S&P 500 returned 26.9% in 2021, while the Dow and Nasdaq returned 18.7% and 21.4%, respectively. DivGro underperformed the S&P 500 with returns of 21.22% (excluding dividends) and 24.38% (including dividends). 

I'm not thrilled with having underperformed the S&P 500 in 2021, but returns above 20% are fantastic! 

As a dividend growth investor, my goal is to generate a reliable and growing dividend stream. On that front, DivGro's dividend yield of 3.16% in 2021 easily beat the 1.33% dividend yield of the S&P 500:



Most of my existing positions show positive gains for 2021:


Topping the list is Alphabet (GOOG), Public Storage (PSA), and Lowes (LOW), all with returns exceeding 60%. At the bottom of the list, we find Pinnacle West Capital (PNW), Medtronic (MDT), and Verizon Communications (VZ), all with negative returns of at least 10%.  

Here is a chart showing the lifetime returns of all positions in my portfolio (including dividends, where applicable):

Microsoft (MSFT) and Apple (AAPL) are, by far, DivGro's most profitable positions with total returns exceeding 700% and 600%, respectively, as of 1 April 2022.

In 2021, DivGro added 15 Home Runs, which are stocks in my portfolio that achieve total returns topping 100%. Here are the home runs with returns as of 31 December 2021:
  • Home run #28: NextEra Energy (NEE) — up 141% (39% annualized)
  • Home run #29: BlackRock, Inc (BLK) — up 143% (46% annualized)
  • Home run #30: T. Rowe Price Group, Inc (TROW up 193% (32% annualized)
  • Home run #31: Texas Instruments Incorporated (TXN up 119% (30% annualized)
  • Home run #32: Alphabet Inc (GOOG) — up 209% (45% annualized)
  • Home run #33: The Walt Disney Company (DIS closed for 88% gain (15% annualized)
  • Home run #34: Lowe's Companies, Inc (LOW up 189% (49% annualized)
  • Home run #35: FedEx Corporation (FDX up 77% (33% annualized)
  • Home run #36: NIKE, Inc (NKE up 106% (42% annualized)
  • Home run #37: Starbucks Corporation (SBUX)  up 94% (25% annualized)
  • Home run #38: Accenture plc (ACN up 140% (51% annualized)
  • Home run #39: Broadcom Inc (AVGO up 158% (58% annualized)
  • Home run #40: The Home Depot (HD up 113% (44% annualized)
  • Home run #41: Costco Wholesale Corporation (COST up 115% (45% annualized)
  • Home run #42: CVS Health Corporation (CVS up 107% (38% annualized)
Once a stock achieves home run status, it retains that status even if the stock price drops and the total returns dip below the 100% mark. Also, if I buy additional shares of a home run stock at a higher cost basis, the calculated total returns could drop below 100%.

Here are DivGro's top-performers sorted by annualized returns, as of 31 December 2021:
  1. Apple Inc (AAPL— up 691% (120% annualized)
  2. Microsoft Corporation (MSFT— up 648% (104% annualized)
  3. Netflix, Inc (NFLX— up 299% (64% annualized)
  4. Broadcom Inc (AVGO up 158 (58% annualized)
  5. QUALCOMM Incorporated (QCOM— up 79% (52% annualized) 
  6. Accenture plc (ACN up 140% (51% annualized)
  7. Amazon.com (AMZN) — up 234% (50% annualized)
  8. Lowe's Companies, Inc (LOW up 189% (49% annualized)
  9. BlackRock, Inc (BLK) — up 143% (46% annualized)
  10. Costco Wholesale Corporation (COST up 115% (45% annualized)
Rate of Return

DivGro's IRR (internal rate of return) provides the best measure of overall portfolio performance, as IRR takes into account the timing and size of deposits since inception. On 31 December 2021, DivGro's IRR was 17.5%, up from the 16.2% reported in 2020

Other Statistics

At the end of 2021, DivGro's average YoC was 3.97%, up from the 3.70% reported last year. Over time, as stocks I own stocks pay higher dividends, DivGro's average YoC should increase.


DivGro's payback increased from 18.4% at the end of 2020 to 26.4% at the end of 2021. Payback is the proportion of capital returned as dividends. I consider it to be a reasonable measure of portfolio maturity.


Main Street Capital (MAIN) tops the chart, mainly because the company pays a generous dividend and it is the stock I've owned the longest in my DivGro portfolio. 

2021 Highlights


Here are some highlights of 2021:

Pageviews

DivGro's pageviews climbed to 2.96 million on 29 December 2021, an increase of 630,000 over the 2.33 million page views I had on 31 December 2020. That's an average of 1,731 page views per day in 2021. 

 29 December 2021
 average since inception:
 709 
page views 
 31 December 2020
 average since inception: 
 1,013 page views

Popular Posts

In 2021, I posted 206 articles on DivGro. This included 92 premium articles published at Seeking Alpha. Here are some of the most successful articles in 2021, based on page views:

Top 2021 DivGro Article:
   • 18 Oct'21: The Top 10 Dividend Growth Opportunities (3,375 pageviews)

Top 2021 Seeking Alpha Article:
   • 9 Sep'21: The Dividend Aristocrats Ranked By Quality Scores (88,757 pageviews)

Personal Highlights

In my annual reviews, I also like to share some personal highlights.

Soul won the Academy Award for Best Animated Feature, the 11th Pixar film to receive that honor! The film also won the Academy Award for Best Original Score, awarded to composers Trent Reznor, Atticus Ross, and Jon Batiste.

We released Luca on 18 June 2021 on Disney+, as COVID-19 continued to impact the Box Office in 2021. Nevertheless, I'm happy to say that Luca was nominated for an Academy Award for Best Animated Feature despite not being released widely in theaters in the USA. 

In 2022, Pixar will be releasing two Animated Feature Films, Turning Red and Lightyear. It is remarkable that most of the production of Luca, Turning Red, and Lightyear have been done from home!  

In October, we became grandparents for the second time, this time of a little girl! We truly are blessed!

2022 Outlook


I've set some challenging goals for 2022, including collecting dividends and options income totaling $55,200. I'm hoping to put this income to work in DivGro in 2022, favoring investments with yields averaging at least 3.6%. This doesn't mean I won't buy stocks if they yield less than 3.6%. But to afford lower-yielding positions, I'd need to balance them with higher-than-3.6% counterparts. 

A special word of thanks to all my readers, especially to those that comment regularly and continue to encourage me! This community is amazing and I really love being part of it!

Thanks for reading and all the best with your investing in 2022! 

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