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Friday, February 17, 2023

2022 Annual Review Of DivGro

Welcome to the tenth annual review of DivGro, my portfolio of dividend growth stocks! 

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 averaging $3,824 per month. With less than ten years to go before I retire, I plan to continue reinvesting all dividends and allow my portfolio to grow even more. 

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

Introduction


The stock market had a brutal year in 2022. All three major indexes suffered their worst year since 2008. The Dow performed best, down "only" about 8.8%. The S&P 500 dropped 19.4% to more than 20% below its record high, and the Nasdaq tumbled 33.1%.



As Jesse Pound and Samantha Subin write:
"Sticky inflation and aggressive rate hikes from the Federal Reserve battered growth and technology stocks and weighed on investor sentiment throughout the year. Geopolitical concerns and volatile economic data also kept markets on edge."
Last year, I increased DivGro's projected annual dividend income (PADI) from $39,327 to $45,885, an increase of 16.68%. If I continue to increase PADI at the same rate every year for five years, DivGro's PADI should approach $100,000 at the end of 2027. 

I'm very happy I switched to dividend growth investing in January 2013! 

Buying shares of companies with a track record of paying regular and increasing dividends is a wonderful strategy. Much like rolling a snowball down a hill, the longer you're invested in dividend growth stocks, the larger your portfolio will grow and the more dividend income it will produce every year. Reinvesting dividends will speed up the process for a double compounding effect.

Let's take a look at DivGro's performance in 2022.

Performance


Dividend Income

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

In 2022, DivGro generated dividends totaling $47,646, an increase of about 26.33% over the 2021 total of $37,716.


Here are the dividend increases for the last five years:

2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
37.06% 25.70% 17.54%25.63% 26.33%

That's a 5-year compound annual growth rate of 26.30%!

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 2022, the following DivGro stocks paid or announced higher dividends:

1-Year Increase 
Company
 Ticker
Increase Annual Div
 New YoC
Outsized
(≥ 20%)
FedEx Corporation
FDX
53.33%
4.60
3.07%
United Parcel Service, Inc
UPS
49.02%
6.08
3.98%
AllianzGI Equity & Convertible Income Fund
NIE
31.58%
2.00
9.19%
Lowe's Companies, Inc
LOW
31.25%
4.20
4.54%
Canadian National Railway Company
CNI
⟡21.93%⟡
2.16
2.71%
Cintas Corporation
CTAS
21.05%
4.60
1.17%
Automatic Data Processing, Inc
ADP
20.19%
5.00
3.24%
Virtus Artificial Intelligence &
 Technology Opportunities Fund
AIO
20.00%
1.80
closed
Visa Inc
V
20.00%
1.80
0.88%
 Large
(≥ 10%
 but
< 20%)
BlackRock, Inc
BLK
18.16%
19.52
4.93%
Mastercard Incorporated
MA
16.33%
2.28
0.69%
Accenture plc
ACN
15.46%
4.48
2.55%
The Home Depot, Inc
HD
15.15%
7.60
3.39%
Intercontinental Exchange, Inc
ICE
15.15%
1.52
1.62%
Snap-on Incorporated
SNA
14.08%
6.48
4.18%
Costco Wholesale Corporation
COST
13.92%
3.60
1.32%
UnitedHealth Group Incorporated
UNH
13.79%
6.60
3.80%
The TJX Companies, Inc
TJX
13.46%
1.18
2.67%
Anthem, Inc
ELV
13.27%
5.12
1.78%
Broadcom Inc
AVGO
12.20%
18.40
6.78%
NIKE, Inc
NKE
11.48%
1.36
1.66%
T. Rowe Price Group, Inc
TROW
11.11%
4.80
6.46%
NextEra Energy, Inc
NEE
10.39%
1.70
4.17%
QUALCOMM Incorporated
QCOM
10.29%
3.00
2.73%
Northrop Grumman Corporation
NOC
10.19%
6.92
2.12%
Union Pacific Corporation
UNP
10.17%
5.20
3.09%
McDonald's Corporation
MCD
10.14%
6.08
4.09%
CVS Health Corporation
CVS
⟡10.00%⟡
2.42
4.61%
Mondelez International, Inc.
MDLZ
10.00%
1.54
2.52%
Medium
(≥ 5%
 but
< 10%) 
Amgen Inc
AMGN
9.79%
8.52
3.90%
Microsoft Corporation
MSFT
9.68%
2.72
5.83%
The Toronto-Dominion Bank
TD
⟡9.39%⟡
2.61
4.61%
Royal Bank of Canada
RY
⟡9.38%⟡
3.83
4.28%
American States Water Company
AWR
8.90%
1.59
1.72%
Atmos Energy Corporation
ATO
8.82%
2.96
3.31%
PACCAR Inc
PCAR
8.82%
1.48
1.85%
Cummins Inc
CMI
8.28%
6.28
4.07%
Starbucks Corporation
SBUX
8.16%
2.12
3.13%
Archer-Daniels-Midland Company
ADM
8.11%
1.60
3.77%
Air Products and Chemicals, Inc
APD
8.00%
6.48
4.10%
Comcast Corporation
CMCSA
8.00%
1.08
2.86%
Medtronic plc
MDT
7.94%
2.72
3.22%
Stryker Corporation
SYK
7.91%
3.00
1.43%
The Bank of Nova Scotia
BNS
⟡7.89%⟡
3.04
5.43%
Raytheon Technologies Corporation
RTX
7.84%
2.20
3.53%
Texas Instruments Incorporated
TXN
7.83%
4.96
4.56%
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%
Lockheed Martin Corporation
LMT
7.14%
12.00
3.87%
PepsiCo, Inc
PEP
6.98%
4.60
3.07%
Johnson & Johnson
JNJ
6.60%
4.52
2.91%
Xcel Energy Inc
XEL
6.56%
1.95
3.41%
Chevron Corporation
CVX
5.97%
5.68
6.06%
General Dynamics Corporation
GD
5.88%
5.04
4.17%
Public Service Enterprise Group
 Incorporated
PEG
5.88%
2.16
3.61%
Merck & Co., Inc
MRK
5.80%
2.92
3.79%
Hormel Foods Corporation
HRL
5.77%
1.10
2.67%
The Travelers Companies, Inc
TRV
5.68%
3.72
3.21%
Bristol-Myers Squibb Company
BMY
5.56%
2.28
3.93%
Digital Realty Trust, Inc
DLR
5.17%
4.88
4.42%
Honeywell International Inc
HON
5.10%
4.12
2.71%
Intel Corporation
INTC
5.04%
1.46
4.85%
The Procter & Gamble Company
PG
5.00%
3.65
2.81%
Aflac Incorporated
AFL
5.00%
1.68
4.21%
 Small
(≥ 2.5%
 but
< 5%) 
AbbVie Inc
ABBV
4.96%
5.92
9.78%
The Allstate Corporation
ALL
4.94%
3.40
2.86%
The Coca-Cola Company
KO
4.76%
1.76
4.26%
Apple Inc
AAPL
4.55%
0.92
4.01%
Altria Group, Inc
MO
4.44%
3.76
8.20%
Tyson Foods, Inc
TSN
4.35%
1.92
closed
Sempra
SRE
4.09%
4.58
3.12%
Enbridge Inc
ENB
⟡3.86%⟡
2.55
6.65%
National Retail Properties, Inc
NNN
3.77%
2.20
5.60%
Chubb Limited
CB
3.75%
3.32
2.72%
Gilead Sciences, Inc
GILD
2.82%
2.92
closed
Cisco Systems, Inc
CSCO
2.70%
1.52
3.67%
Pfizer Inc
PFE
2.50%
1.64
4.49%
  Tiny
(< 2.5%)
Main Street Capital
MAIN
2.38%⟡
2.70
12.47%
Verizon Communications Inc
VZ
1.95%
2.61
5.31%
Pinnacle West Capital Corporation
PNW
1.76%
3.46
4.46%
Philip Morris International Inc
PM
1.60%
5.08
5.91%
American Tower Corporation
AMT
⟡0.72%⟡
6.24
closed
3M Company
MMM
0.68%
6.00
closed
International Business Machines
 Corporation
IBM
0.61%
6.60
closed
Realty Income Corporation
O
⟡0.20%⟡
2.98
5.25%
W. P. Carey Inc
WPC
⟡0.19%⟡
4.26
6.31%
multiple increases

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

I like seeing dividend increases of 7% or higher, and I'm happy to note that 50 positions had dividend increases of at least 7% in 2022. The arithmetic average of the 87 increases above is 9.71%, up from last year's 8.66% from 82 increases. Note that I've closed one of these positions (AIO).

Annualized Returns

As mentioned earlier, the S&P 500 dropped 19.4% in 2022, while the Dow and Nasdaq dropped 8.8% and 33.1%, respectively. DivGro easily outperformed all three indexes, with returns of -5.61% (excluding dividends). I'm thrilled DivGro outperformed the broader market in 2022, but a negative return is never a pleasing result!

As a dividend growth investor, I aim to generate a reliable and growing dividend stream. On that front, DivGro's position-weighted average dividend yield of 3.27% in 2022 easily beats the 1.64% dividend yield of the S&P 500:


Not many of my existing positions show positive gains for 2022:


Topping the list are Chevron (GOOG), Merck (MRK), Northrop Grumman (NOC), Archer-Daniels-Midland (ADM), and Lockheed Martin (LMT), all with returns exceeding 30%. At the bottom of the list, we find Intel (INTC), T. Rowe Price (TROW), Digital Realty Trust(DLR), QUALCOMM (QCOM), and AllianzGI Equity & Convertible Income Fund (NIE), all with negative returns of at least 40%.  

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

 
By far, Microsoft (MSFT) and Apple (AAPL) are DivGro's most profitable positions, with total returns exceeding 600% and 500%, respectively, as of 17 February 2023.

In 2022, DivGro added only 2 Home Runs, which are stocks in my portfolio that achieve total returns topping 100%. Here are those home runs with returns as of 31 December 2022:
  • Home run #42: CVS Health Corporation (CVS) — up 92% (25% annualized)
  • Home run #43: Archer-Daniels-Midland (ADM) — up 131% (37% 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 2022:
  1. Apple Inc (AAPL— up 487% (73% annualized)
  2. Microsoft (MSFT— up 447% (63% annualized)
  3. Chevron (CVX— up 102% (61% annualized)
  4. UnitedHealth (UNH— up 221% (40% annualized)
  5. Northrop Grumman (NOCup 71% (40% annualized)
  6. Archer-Daniels-Midland (ADMup 131% (37% annualized)
  7. Raytheon Technologies (RTX) — up 68% (36% annualized)
  8. Broadcom Inc (AVGO up 125 (35% annualized)
  9. AbbVie (ABBV)  up 210 (35% annualized)
  10. Aflac (AFL— up 95% (31% annualized) 
Rate of Return

DivGro's IRR (internal rate of return) provides the best measure of overall portfolio performance, as IRR considers the timing and size of deposits since inception. On 31 December 2022, DivGro's IRR was 13.7%, down from the 17.5% reported in 2021

Other Statistics

At the end of 2022, DivGro's average YoC was 41.7%, up from the 3.97% reported last year. Over time, as stocks I own stocks pay higher dividends, DivGro's average YoC should increase.


DivGro's payback increased from 26.4% at the end of 2021 to 31.1% at the end of 2022. 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. 

2022 Highlights


Here are some highlights of 2022:

Pageviews

DivGro's page views climbed to 3.45 million on 17 December 2022, 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. 

 31 December 2021
 average since inception:
 901 
page views per day
  
 17 December 2022
 average since inception: 
 949 page views per day

Popular Posts

In 2022, I posted 100 articles on DivGro. This included 61 premium articles published at Seeking Alpha. Here are some of the most successful articles in 2022, based on page views:

Top 2021 DivGro Article:
   • 1 Apr'22: 2021 Annual Review Of DivGro (4,314 pageviews)

Top 2021 Seeking Alpha Article:
   • 23 Apr'22: The Dividend Kings Ranked By Quality Scores (89,051 pageviews)

Personal Highlights

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

In 2022, Pixar released two animated feature films, Turning Red (on Disney+) and Lightyear (in theaters). Both films were almost entirely made from home, which is astonishing considering how many crew members work on these films. I have an Effects Artist credit on Lightyear. 

Turning Read was nominated for Best Animated Feature Film at the 80th Golden Globe Awards and the 95th Academy Awards. The competition is strong this year, with Guillermo del Toro's Pinocchio widely expected to win everything!

In 2023, Pixar will release Elemental. I worked on effects development for Elemental but switched to another production to help with character and effects development. 



In September, we became grandparents for the third time, welcoming Adrian into the family! Brother James turned two in December, and cousin Chloe turned one in October.  

We are truly blessed!

2023 Outlook


After ten years of blogging about DivGro and sharing my portfolio publicly, I've decided to make a few changes. While the content of DivGro will remain intact, my Portfolio page will no longer be updated automatically. In fact, it will be a snapshot of DivGro as of 31 December 2022. 

I plan to move DivGro to another platform where registered readers can continue to follow my journey of Dividend Growth Investing and Options Trading

I'm continuing to work with Portfolio Insight, and we have some exciting features in development, including the creation of model portfolios. 

Thanks for reading, and all the best with your investments in 2023! 

2 comments:

  1. What are you going to do with INTC now that they cut dividends by 66%?

    ReplyDelete
    Replies
    1. I already trimmed my position prior to the cut. The remaining shares are involved in a covered call trade. Depending on the options premium available at expiration, I might write another call and continue doing so until the shares are called away. Covered calls are a way of generating income from shares one owns.

      Delete

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