Welcome to the 40th quarterly review of DivGro, my portfolio of
dividend growth stocks. Quarterly reviews provide a summary of dividend income, dividend changes, and transactions executed in the past quarter. I also provide some charts showing various portfolio statistics. These reviews are mostly informational and help me to track progress over time.
My portfolio generated more than $11,580 of dividend income this quarter, and I'm projecting dividend income of at least $11,970 per quarter going forward.
In 2022, I collected dividend income of $47,646, or about 110% of my 2022 goal of $43,200. DivGro's all-time dividend income total is $206,369.
Dividend Income
In Q4-2022, I collected dividend income totaling $11,589, down 2% from the dividends received in Q3-2022 but up 16% from the dividends received in Q4-2021.
83 different stocks and funds paid me quarterly dividends:
- Apple Inc (AAPL) — income of $46.00
- AbbVie Inc (ABBV) — income of $141.00
- Accenture plc (ACN) — income of $11.20
- Archer-Daniels-Midland Company (ADM) — income of $80.00
- Automatic Data Processing, Inc (ADP) — income of $104.00
- Aflac Incorporated (AFL) — income of $80.00
- The Allstate Corporation (ALL) — income of $85.00
- Amgen Inc (AMGN) — income of $223.10
- American Tower Corporation (AMT) — income of $14.70
- Air Products and Chemicals, Inc (APD) — income of $25.92
- Atmos Energy Corporation (ATO) — income of $148.00
- Broadcom Inc (AVGO) — income of $138.00
- American States Water Company (AWR) — income of $79.50
- BlackRock, Inc (BLK) — income of $170.80
- Bristol-Myers Squibb Company (BMY) — income of $162.00
- The Bank of Nova Scotia (BNS) — income of $114.02
- Chubb Limited (CB) — income of $83.00
- Comcast Corporation (CMCSA) — income of $121.50
- Cummins Inc (CMI) — income of $157.00
- Canadian National Railway Company (CNI) — income of $134.51
- Costco Wholesale Corporation (COST) — income of $9.00
- Cisco Systems, Inc (CSCO) — income of $114.00
- Cintas Corporation (CTAS) — income of $11.50
- CVS Health Corporation (CVS) — income of $55.00
- Chevron Corporation (CVX) — income of $213.00
- DTE Energy Company (DTE) — income of $88.50
- Anthem, Inc (ELV) — income of $12.80
- Enbridge Inc (ENB) — income of $191.55
- FedEx Corporation (FDX) — income of $57.50
- General Dynamics Corporation (GD) — income of $126.00
- The Home Depot, Inc (HD) — income of $190.00
- Honeywell International Inc (HON) — income of $103.00
- Hormel Foods Corporation (HRL) — income of $78.00
- International Business Machines Corporation (IBM) — income of $165.00
- Intercontinental Exchange, Inc (ICE) — income of $38.00
- Intel Corporation (INTC) — income of $102.20
- Illinois Tool Works Inc (ITW) — income of $131.00
- Johnson & Johnson (JNJ) — income of $85.88
- JPMorgan Chase & Co (JPM) — income of $100.00
- The Coca-Cola Company (KO) — income of $176.00
- Lockheed Martin Corporation (LMT) — income of $120.00
- Lowe's Companies, Inc (LOW) — income of $105.00
- Mastercard Incorporated (MA) — income of $24.50
- McDonald's Corporation (MCD) — income of $76.00
- Mondelez International, Inc. (MDLZ) — income of $77.00
- Medtronic plc (MDT) — income of $68.00
- 3M Company (MMM) — income of $111.75
- Altria Group, Inc (MO) — income of $216.20
- Merck & Co., Inc (MRK) — income of $138.00
- Microsoft Corporation (MSFT) — income of $68.00
- NextEra Energy, Inc (NEE) — income of $42.50
- AllianzGI Equity & Convertible Income Fund (NIE) — income of $1000.00
- NIKE, Inc (NKE) — income of $9.68
- National Retail Properties, Inc (NNN) — income of $110.00
- Northrop Grumman Corporation (NOC) — income of $69.20
- Oracle Corporation (ORCL) — income of $48.00
- PACCAR Inc (PCAR) — income of $37.00
- Public Service Enterprise Group Incorporated (PEG) — income of $162.00
- Pfizer Inc (PFE) — income of $80.00
- The Procter & Gamble Company (PG) — income of $91.33
- Philip Morris International Inc (PM) — income of $152.40
- Pinnacle West Capital Corporation (PNW) — income of $173.00
- Public Storage (PSA) — income of $90.00
- QUALCOMM Incorporated (QCOM) — income of $75.00
- Raytheon Technologies Corporation (RTX) — income of $55.00
- Royal Bank of Canada (RY) — income of $143.47
- Starbucks Corporation (SBUX) — income of $106.00
- Snap-on Incorporated (SNA) — income of $97.20
- Sempra (SRE) — income of $91.60
- Stryker Corporation (SYK) — income of $6.95
- The Toronto-Dominion Bank (TD) — income of $130.37
- The TJX Companies, Inc (TJX) — income of $29.50
- T. Rowe Price Group, Inc (TROW) — income of $120.00
- The Travelers Companies, Inc (TRV) — income of $93.00
- Texas Instruments Incorporated (TXN) — income of $124.00
- UnitedHealth Group Incorporated (UNH) — income of $66.00
- Union Pacific Corporation (UNP) — income of $91.00
- United Parcel Service, Inc (UPS) — income of $76.00
- Visa Inc (V) — income of $45.00
- Verizon Communications Inc (VZ) — income of $261.00
- WEC Energy Group (WEC) — income of $50.93
- W. P. Carey Inc (WPC) — income of $106.10
- Xcel Energy Inc (XEL) — income of $80.44
- Virtus Artificial Intelligence & Technology Opportunities Fund (AIO) — income of $540.00
- BlackRock Science and Technology Trust (BST) — income of $300.00
- Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO) — income of $567.50
- Eaton Vance Tax-Advantaged Dividend Income Fund (EVT) — income of $575.25
- Main Street Capital (MAIN) — income of $210.40
- BlackRock MuniHoldings California Quality Fund (MUC) — income of $187.00
- Realty Income Corporation (O) — income of $124.00
Dividend Changes
Last quarter, I reported a projected annual dividend income (PADI) of $45,683. This quarter PADI increased to $45,885, easily topping my 2022 goal of increasing PADI to $45,000!
DivGro's average YOC is 4.20%, down from the 4.31% reported at the end of
Q3-2022.
Relative to the total capital invested, DivGro's projected annual yield is
6.92%, down from 7.17% at the end of Q3-2022.
The following table shows the stocks that announced dividend increases in
Q4-2022 or have paid a higher dividend than before. I've included the new
annual dividend and yield on cost [YOC]:
|
Company
|
Ticker
|
Increase | Annual Div |
New YoC
|
|
Automatic Data Processing, Inc
|
ADP |
20.19% |
5.00
|
3.24% |
|
Visa Inc
|
V |
20.00% |
1.80
|
0.88% |
|
Mastercard Incorporated
|
MA |
16.33% |
2.28
|
0.69% |
|
Snap-on Incorporated
|
SNA |
14.08% |
6.48
|
4.18% |
|
Broadcom Inc
|
AVGO |
12.20% |
18.40
|
6.78% |
|
NIKE, Inc
|
NKE |
11.48% |
1.36
|
1.66% |
|
McDonald's Corporation
|
MCD |
10.14% |
6.08
|
4.09% |
|
CVS Health Corporation
|
CVS |
10.00% |
2.42
|
4.61% |
|
Amgen Inc
|
AMGN |
9.79% |
8.52
|
3.90% |
|
Atmos Energy Corporation
|
ATO |
8.82% |
2.96
|
3.31% |
|
PACCAR Inc
|
PCAR |
8.82% |
1.48
|
1.85% |
|
Stryker Corporation
|
SYK |
7.91% |
3.00
|
1.43% |
|
DTE Energy Company
|
DTE |
7.63% |
3.81
|
3.38% |
|
Illinois Tool Works Inc
|
ITW |
7.38% |
5.24
|
2.37% |
|
WEC Energy Group
|
WEC |
7.22% |
3.12
|
3.18% |
|
Merck & Co., Inc
|
MRK |
5.80% |
2.92
|
3.79% |
|
Hormel Foods Corporation
|
HRL |
5.77% |
1.10
|
2.67% |
|
Bristol-Myers Squibb Company
|
BMY |
5.56% |
2.28
|
3.93% |
|
Aflac Incorporated
|
AFL |
5.00% |
1.68
|
4.21% |
|
AbbVie Inc
|
ABBV |
4.96% |
5.92
|
9.78% |
|
Pfizer Inc
|
PFE |
2.50% |
1.64
|
4.49% |
|
Main Street Capital
|
MAIN |
2.33% |
2.70
|
12.47% |
|
Pinnacle West Capital Corporation
|
PNW |
1.76% |
3.46
|
4.46% |
|
Canadian National Railway Company
|
CNI |
0.70% |
2.1597
|
2.71% |
|
Realty Income Corporation
|
O |
0.20% |
2.982
|
5.25% |
|
W. P. Carey Inc
|
WPC |
0.19% |
4.26
|
6.31% |
I like seeing dividend increases of at least 7%. This quarter, fifteen of
the 26 dividend increases topped 7%, while the arithmetic average of all the
increases is 7.95%. That's a rate that outpaces the current inflation rate
in the US of 6.5%.
The following stocks paid a smaller US$ dividend in Q4-2022:
- The Bank of Nova Scotia (BNS) — decrease of 4.82%
- Canadian National Railway Company (CNI) — decrease of 5.71%
- Enbridge Inc (ENB) — decrease of 2.25%
- Royal Bank of Canada (RY) — decrease of 2.97%
- The Toronto-Dominion Bank (TD) — decrease of 5.91%
Additionally, the following Closed-End Funds [CEFs] announced distribution
cuts in Q4-2022:
- Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO) — decrease of 23.33%
- Eaton Vance Tax-Advantaged Dividend Income Fund (EVT) — decrease of 8.49%
- BlackRock MuniHoldings California Quality Fund (MUC) — decrease of 20.00%
The CEFs in my portfolio all use leverage. With the Fed's benchmark
rate at 4.5% and widely expected to increase even higher in 2023, CEFs will
find it increasingly harder to pay their high distributions. So, additional
distribution cuts are not out of the question. Nevertheless, I'm planning to
hold my positions and even increase them occasionally.
Dividend Growth
Some stocks announce dividend increases more than once per year, so when considering dividend growth, it is better to look at year-over-year increases:
The arithmetic average year-over-year dividend growth rate of
dividend-paying stocks in my portfolio is 11.9%, while my
position-weighted average is 11.3%.
The arithmetic average of 5-year dividend growth rates of dividend-paying stocks in my portfolio is 9.9%, and the position-weighted average is 10.0%. Most DivGro's stocks have 5-year DGRs that exceed my target dividend growth rate of 7.00%! (These are colored green in the chart above.)
Transactions
This quarter I deployed new capital and options income as
follows:
New Positions
Increased Positions
Decreased Positions
I covered these transactions in monthly reviews, so I
won't rehash the details here.
From left to right, the colors represent Borderline Safe, Safe, and Very Safe dividend safety scores. I no longer own Unsafe or Very Unsafe dividend growth stocks.
DivGro now contains 89 different positions. Of these, 75 are dividend growth stocks, nine are dividend-paying stocks,
and four are CEFs (closed-end funds). I also own one stock that does not pay dividends.
Here is the distribution of DivGro's stock holdings by
sector:
I also look at the distribution of my stocks by Super Sector:
Market Value
At the end of Q4-2022, DivGro's market value represented a simple gain of 114% on the total amount invested. Of course, this does not consider the timing and size of cash deposits and withdrawals. DivGro's IRR (internal rate of return) since inception is 13.7%, which is a better measure of portfolio performance.
I'm happy to note that DivGro recovered nicely in Q4-2022 after a difficult Q3-2022!
Portfolio Statistics
In quarterly reviews, I like to present general portfolio statistics.
First, consider the weight of individual holdings in DivGro:
NIE is the largest position in my portfolio, followed by
MUC and HD. On the other hand, NKE, SYK, and ACN are the smallest positions in DivGro.
Last year, I reworked my system for determining the target weights of positions in DivGro.
The system is dynamic and flexible and allows me to calibrate factors when my goals change. Here 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.
Next, let's look at the contribution of each position to DivGro's PADI, which depends not only on the stock's yield but also on the size of the investment.
If a position has an outsized contribution to PADI, a dividend cut will have
an outsized impact. While I invest in relatively safe dividend growth
stocks, I want to limit the potential damage of unexpected dividend
cuts.
NIE contributes 8.7% of DivGro's PADI — a rather large percentage coming from just one holding! In fact, my top four holdings contribute 21% to DivGro's dividend income! Since I only have a few years left before retirement, I hope to collect more income now to expand my portfolio of dividend-paying positions in the near future.
Here is a chart showing the distribution of dividend yields of stocks in my portfolio:
The top-yielding positions in DivGro are NIE, MO, ETO, EVT, and MAIN, with yields that range from 10.97% (AIO) down to 7.31% (MAIN). Ordinarily, I don't like to see forward yields this high, but
taking on more risk is necessary, given the current inflation rate of 6.5%.
The arithmetic average yield of dividend-paying stocks in my portfolio is
3.05%, while the position-weighted average yield is 3.27%. Although both
of these average yields are on the low side, I'm not too concerned because
DivGro's average dividend growth rate is relatively high, and stocks often
appreciate nicely with dividend increases.
Yield on Cost (YoC) provides another perspective, effectively
representing a stock's (initial) dividend yield and its dividend growth
since my acquisition. I've owned MAIN the longest, so it is not
surprising that its YoC is above 13%.
Let's look at the payback percentage, or how much of my original
investment I've received back as dividends. Generally, stocks I've owned
for a long time will have larger paybacks, but dividend yield also plays
a role: payback will grow faster for stocks with larger yields.
MAIN is my oldest position, and with a payback of 84.4%,
it has the largest payback in my portfolio! ABBV is the second highest with 43.0%.
Here is a chart showing DivGro's year-over-year performance:
INTC and TROW have been the worst performers over the past year, with share
prices dropping 49.3% and 44.5.%, respectively. In
contrast, CVX and MRK have performed the best, with returns of 53.0% and 44.8%, respectively.
One way to identify potentially undervalued positions is to compare the
current forward yield to the 5-year average yield. Discounted stocks
(relative to historical yields) are colored green:
Presently, INTC and FDX appear to offer
the best opportunities for additional investment. Based on how I determine target weights, however, my INTC position is overweight by 150 shares. As for FDX, I'd have to add 12 shares to match my target position.
Concluding Remarks
As mentioned in my December review article, I plan to make some changes to this blog and how I report on my DivGro portfolio. Thanks for all your support over the years. It's been a pleasure sharing my journey with you!
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