PDO - Dividend Harvesting Portfolio Week 104: $10400 Allocated $805.41 In Projected Dividends

Summary

• The Dividend Harvesting Portfolio is now generating $805.41 in annual dividends, yielding 7.79%.
• The Dividend Harvesting portfolio has a 74.04% record of finishing the week in the black since its inception, 77/104 weeks.
• In week 104, I added to the following positions - JEPI, PDO, BST.

Week 104 wasn't a great week for the Dividend Harvesting Portfolio. The six-week streak that was established of finishing in the black was broken, as the account value fell -$67.33 under its invested capital. What's worse was that Intel Corporation ( INTC ) slashed its dividend by -65.8% to $0.50 annualized from $1.46. I will write a section about my thoughts on INTC after the opening, and I plan on writing a dedicated article on INTC addressing the dividend cut. INTC marks the third dividend reduction the Dividend Harvesting Portfolio has endured from individual equities since its inception, which is why I'm overly diversified. Nobody wants to have down weeks or to see their income reduced, but the blows were softened due to INTC being less than 4% of the portfolio's holdings.

After week 104 and $10,400 of capital allocated, the balance of the Dividend Harvesting Portfolio is $10,332.67, down -$67.33 or -0.65% on invested capital. In week 104, I collected $11.44 in dividend income from three individual dividends. Year-to-date the Dividend Harvesting Portfolio has generated $118.78 of dividend income which is 24.20% of the income generated in 2022. In week 104, I added 1 share to each of the following positions, JPMorgan Equity Premium Income ETF ( JEPI ), BlackRock Science and Technology Trust ( BST ), and the PIMCO Dynamic Income Opportunities Fund ( PDO ). Due to the reduced dividend from INTC, my dividend income declined by -$1.86 or -0.23% week over week to $805.41, which is a forward yield of 7.79%.

I allocate capital toward big tech, funds, dividends, and growth outside of my retirement accounts. These are not my only investments, but I did open a separate account, so I could easily track and document this series. I intentionally created broad diversification throughout the Dividend Harvesting portfolio so I could benefit from sector rotations and mitigate my downside risk. Investors who are too exposed to growth companies or large-cap tech have gotten crushed as the investment landscape changes. On the growth and tech side of my investments, I'm feeling the pain as some of my favorite companies, including Alphabet ( GOOGL , GOOG ), Amazon ( AMZN ), and Meta Platforms ( META ), have been taken to the woodshed.

I'm going to address a question that continues to surface. I'm not trying to beat the market with this portfolio. I love index funds and am invested in several index funds. I love dividend investing due to the stream of cash flow it generates. I don't want 100% of my assets outside of real estate tied to an S&P index fund. I have created a personal investment strategy that works to achieve my investment goals, and having a stream of income generated from dividends is part of my investment strategy. Low-cost index funds are one of the best investments anyone can make in my opinion, and the Dividend Harvesting portfolio is not meant to be a substitute for an index fund. I have read many questions about dividend investing and wanted to start a portfolio from the ground up and document its progress to disprove many misconceptions, including that you need a large amount of seed capital to make dividend investing work for you.

This series has never been about hitting a target yield, generating a certain amount of profit, or beating the market. I had two specific goals with this series. The first was to create a blueprint for constructing a dividend portfolio by documenting the journey starting from the beginning. The second goal was to illustrate how allocating capital each week toward investing, regardless of the amount, would be beneficial in the long run.

Too many people are under the illusion that you need tens of thousands or even hundreds of thousands to benefit from investing. Instead of using my real dividend portfolio as an example, I decided to start a new account, fund it with $100, and add $100 weekly, providing a step-by-step guide to dividend investing. This methodology doesn't have to be used for dividend investing, and it could be as simple as an S&P index fund or a Total Market fund. Hopefully, this series is inspiring people to invest in their future to attain financial freedom.

My Reaction to Intel Corporation's Dividend Cut

In an interview that can be watched here Pat Gelsinger joined CNBC to discuss INTC's earnings and address the dividend on 1/27/23, just one month prior.

Mr. Gelsinger was asked specifically about the dividend and here's what transpired:

CNBC: Why didn't you just say that you needed to cut the dividend instead of changing the language around it?

Pat Gelsinger: Well, you know we're always going to look at capital allocation priorities of the company. We should be a dividend payer, and as Dave said on the call last night we're committed to the dividend and to a very competitive dividend position. Amongst all of the capital requirements we look at that very carefully over time and per the last conference conversation, strategic capital, capital offsets, near-term adjustments, as well as the continuing healthy dividend we present to our shareholders.

CNBC: I guess what does that healthy dividend mean Pat, you mentioned earlier that you wanted to be transparent so are the folks that took that wording competitive dividend, you just said that again, are they wrong to interpret that as a potential cut?

Pat Gelsinger: Well you know we just reaffirmed our dividend for this last quarter and we did that on the earnings call yesterday. Obviously, an important topic that we will continue discussing with the leadership team and the board of directors, but we do believe this competitive healthy dividend you know is something a company of our size and scale should be presenting to our shareholders.

Ok, so INTC is paying its next dividend on 3/1/23 at full freight, then the dividend payable on 6/1/23 will see a drastic reduction. From a long-term investor standpoint, I'm not against cutting the dividend as it will free up capital required to implement its long-term strategic plan, which should ultimately drive value for shareholders.

From an income investor standpoint, I'm not happy with Pat Gelsinger or INTC. He didn't make any definitive statements in this interview, but my interpretation is that he alluded to the dividend yield being safe. Deirdra Bosa did a great job of pressing Pat Gelsinger on TechCheck regarding the dividend. When I listened to what Pat Gelsinger said, he used the words healthy dividend multiple times and said, "we do believe this competitive healthy dividend you know is something a company of our size and scale should be presenting to our shareholders." The key words here are "this competitive healthy dividend." When he puts the word this in front of competitive healthy dividend, it makes me believe he's referring to the current dividend as being healthy. Now that's my interpretation, and Pat Gelsinger did a fantastic job of not making any definitive statements, but I feel as if he strung investors along and indicated several times that the dividend was safe.

Ultimately, this specific account is an income-focused account, and I am not looking at prospects for long-term appreciation as my first priority. I do think INTC will recover, but with a dividend that is now under 2%, it doesn't fit well in this portfolio. I plan on buying more INTC as time progresses to dollar cost average, and when INTC gets back to the $30-$32 range, I plan on exiting this position in the Dividend Harvesting Portfolio.

A Historical Recap of the Dividend Harvesting Portfolio's Investment Principles and Historical Performance

Investment Objectives

• Income generation
• Downside mitigation through diversification
• Capital appreciation

Below are the fundamental rules I have put in place for this Portfolio:

• Allocate $100 weekly to this Portfolio
• Only invest in dividend-producing investments
• No position can exceed 5% of the Portfolio
• No sector can exceed 20% of the Portfolio
• All dividends and distributions are to be reinvested

Below is a chart that extends from week 1 through the current week to illustrate the Dividend Harvesting Portfolio's Progression

• Blue line is my initial investment $100 in week 1, $1,000 in week 10, etc.
• Red line is the account value at the end of each week
• Yellow line is the annual dividend income the Dividend Harvesting Portfolio was projected to generate after that week's investments and dividends reinvested

The Dividend Harvesting Portfolio Dividend Section

Here's how much dividend income is generated per investment basket:

• Equities $232.74 (28.90%)
• ETFs $211.52 (26.26%)
• CEFs $155.89 (19.36%)
• REITs $146.79 (18.23%)
• BDCs $58.47 (7.26%)

Collecting dividends can serve many functions in a portfolio. Some investors utilize dividends to supplement their income and live off. I'm building a dividend portfolio for myself 30 years into the future. In 2022, I collected $490.76 in dividend income from 533 dividends. This has allowed the Dividend Harvesting portfolio to stay in the black while growing the snowball effect. In week 8 of 2023, I collected $11.44 in dividends, and in 2023 I generated $118.78 in dividend income. YTD I have generated 24.20% of my 2022 dividend income from 87 dividends which is 16.32% of the dividends generated throughout 2022.

These dividends allow me to gain additional equity in my investments while increasing my future cash flow in down markets. This style of investing isn't for everyone, but if you're looking to generate consistent cash flow while mitigating downside risk, this method has worked for me. I'm hoping to collect around $1,000 in dividends in 2023, which will be reinvested.

February is almost coming to a close, and I'm excited to update the following chart. The YoY data is interesting as there is extreme growth in the monthly dividend income.

I found a tool that can track and visualize my monthly and weekly dividend income. I plan on showing this graph rather than the full year as it's a better visualization than what I had created. In week 104, my total annual dividend count remained 632, and there's dividend income being generated each week. There's a projected $11.37 of income being generated in the last two days of February from 17 individual dividends.

The goal of generating enough income from the dividends to purchase an additional share per year has been the never-ending project of this portfolio. I will be working on moving several of these positions to the last column over the next several months.

The Dividend Harvesting Portfolio Composition

Many of the readers have asked if I could break down the individual positions within these sectors. I created pie charts for each individual sector and have illustrated how much each position represents of that sector of the Dividend Harvesting portfolio. Since I only have one position in Food & Staple Retailing and Industrials, I did not make a chart for those. 3M ( MMM ) and Walgreens Boots Alliance ( WBA ) represent 100% of those sectors. The charts will follow the normal portfolio total I have constructed. Please keep the ideas coming, as I am happy to add as much detail to this series as I can.

In week 104, ETFs remained the largest section of the Dividend Harvesting Portfolio's composition. Individual equities make up 42.58% of the portfolio and generate 28.90% of the dividend income, while exchange-traded funds ("ETFs"), closed-end funds ("CEFs"), real estate investment trusts ("REITs"), business development companies ("BDCs"), and exchange-traded notes ("ETNs") represent 57.42% of the portfolio and generate 71.10% of the dividend income.

I have a 20% maximum sector weight, so when a singular sector gets close to that level, I make sure capital is allocated away from that area to balance things out. In 2022, I will make an effort to even out these portfolio percentages. As more capital is deployed, the bottom half of the portfolio weighting will increase.

In week 104, Verizon ( VZ ) remained my largest position while JEPI moved into the #2 position at 3.79% of the portfolio.

Week 104 Additions

In week 104 I added 1 share to each of the following positions:

• JPMorgan Equity Premium Income ETF
• BlackRock Science and Technology Trust
• PIMCO Dynamic Income Opportunities Fund

JPMorgan Equity Premium Income ETF

• I added to my position in JEPI because I feel it's positioned well to benefit when the markets turn while continuing to generate large amounts of income. As the portfolio isn't capped by covered-calls it's a fund I plan on adding more shares of in the future

BlackRock Science and Technology Trust

• I needed one additional share to get BST over the finish line of generating an additional share per year through its dividend. I added BST in week 104 to accomplish this goal

PIMCO Dynamic Income Opportunities Fund

• PDO is interesting, and I'm trying to get this to be a larger percentage of the portfolio. I think PDO is positioned well for the future, and as more bonds mature in the next 12 months they should be able to reinvest that capital and benefit from higher interest rates

Week 105 Gameplan

In week 105, I'm tempted to add an additional share of 3M Corporation as shares have recently fell under $110.

Conclusion

Week 104 was a small setback for the Dividend Harvesting Portfolio, but it should be viewed as an important lesson. INTC reduced its dividend by over -60%, and the markets fell significantly, yet the Dividend Harvesting Portfolio absorbed both well. This portfolio is extremely diversified, and with the investment rules I have set in place, no one position can greatly derail its progress. I look forward to continuing allocating capital in this portfolio and documenting the progress.

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