JEPI - Dividend Harvesting Portfolio Week 123: $12300 Allocated $1053.16 In Projected Dividends

2023-07-13 09:00:00 ET

Summary

• The Dividend Harvesting Portfolio has performed well, generating a continuous stream of dividend income and maintaining a balance above its invested capital.
• The portfolio includes 87 positions across equities, ETFs, REITs, CEFs, and BDCs, with a focus on generating weekly income and mitigating downside risk.
• The author plans to continue adding to current positions and introducing new investments, with a goal of generating $1,300 in projected annual dividends and over $100 per month in dividend income by the end of 2023.

The S&P 500 started off the 2 ^nd half of 2023 down -1.09% the week of July 2 ^nd, while the Nasdaq closed down -1.13%. The next FOMC meeting on the 26 ^th is quickly approaching, and the CME Group FedWatch Tool indicates there is a 93% chance the Fed will raise rates a quarter point. On Wednesday, July 12 ^th, at 8:30 am, CPI data will hit the street, and the consensus estimate is that inflation will fall from 4% to 3.1% MoM. This will certainly set the tone going into the Fed meeting at the end of July, and the markets will be eagerly awaiting these outcomes. July is a big month for data points, and if inflation happens to come in lower than expected, there is a chance we will see the FedWatch Tool reduce its chances of another increase. Either way, I believe the markets will ultimately appreciate, but they could continue seeing outsized volatility in the near term.

In week 123, the Dividend Harvesting Portfolio continued to establish a trend of having a balance above its invested capital. After 123 weeks, the Dividend Harvesting Portfolio is in the black by 2.27%, as the balance of the portfolio is $12,579.24. In the first week of July, I collected $17.03 of dividend income from 12 positions. Over the past 27 weeks, I have collected $452.43 of dividend income from the Dividend Harvesting Portfolio. In week 123, I purchased 1 share of Citigroup (C), 1 share of Truist Financial (TFC), and 1 share of FS KKR Capital Corp (FSK). At the end of week 123, my projected annual dividend income increased by $8.76 or 0.84% to $1,053.16, which is a forward yield of 8.37%.

The overall performance of the Dividend Harvesting Portfolio

It’s interesting that I continue to see comments about underperformance and being flat or being up a few percent is a waste of time. I am not trying to beat the market, and this is not my only account. I am building out a dividend portfolio from scratch by allocating $100 per week to mitigate downside risk and generate a continuous stream of dividend income. Over the past 123 weeks, the Dividend Harvesting Portfolio has traded in a close range to invested capital with one outsized swing to the downside from its normal range. If I wanted to show better performance to make the numbers look better, I would have added shares of Apple ( AAPL ) when I was buying in other accounts. I am constructing a portfolio that is well-rounded with 87 current positions that generate weekly income with an above-average yield that can mitigate the downside throughout different market cycles. I am quite happy with the metrics I track and will continue to add to current positions and add new investments to the Dividend Harvesting Portfolio in the future.

The Dividend Harvesting Portfolio dividend section

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

• Equities $307.82 (29.23%)
• ETFs $243.23 (23.10%)
• REITs $225.21 (21.38%)
• CEFs $173.56 (16.48%)
• BDCs $103.34 (9.81%)

Collecting dividends can serve many functions in a portfolio. Some investors utilize dividends to supplement their income and live off of them. 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. In week 27 of 2023, I collected $17.03 in dividends, and in 2023, I generated $452.43 in dividend income. YTD, I have generated 92.19% of my 2022 dividend income from 336 dividends, which is 63.04% 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.

We’re now in the month of July, and just in the first week, I have collected 48.03% of the dividend income generated from the entire month of July in 2022. Looking at the YoY trends of increased monthly dividend income, I am excited to see how much income is produced this month. Last year, I generated $35.46 and there is a chance that the income produced in July of 2023 will exceed $80.

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. I really enjoy the payout calculator feature as this allows me to see my estimated monthly and weekly income and view every dividend rolling in one place. July looks like it will be a strong month as there is around $90 of projected dividend income being generated depending on when the dividends hit my account. I am getting closer and closer to my next goal of generating $100 of dividend income each month from this portfolio.

I have broken this into two sections, positions not generating at least one share per year through its dividend and positions that are. In the section for the positions that are, I have shaded it green and added how many shares annually are being generated and the new future dividend income those new shares will generate. I didn’t add to any positions that were close to generating 1 share annually from their dividends in week 123. As earnings season is upon us and financials are kicking things off, I allocated capital toward C and TFC. With the remaining capital this week, I also added to FSK, as I believe it is also undervalued. From the 24 positions that are generating at least 1 share from their dividends, the total new projected annual income from these dividends is roughly $72.76. Over the summer, I am expecting to get several other positions into the block of green in the chart below.

The Dividend Harvesting Portfolio composition

REITs are getting very close to the 20% threshold I am trying to avoid from any individual sector. Individual equities make up 39.83% of the portfolio and generate 29.23% of the dividend income, while exchange-traded funds ("ETFs"), closed-end funds ("CEFs"), real estate investment trusts ("REITs"), and business development companies ("BDCs"), represent 60.17% of the portfolio and generate 70.77% of the dividend income.

In week 123, Altria Group (MO) moved into the largest position in the Dividend Harvesting Portfolio while Enbridge ( ENB ) moved into the 2 ^nd largest position. Verizon ( VZ ) fell 2 spots to the 3 ^rd largest spot and I am starting to see a larger drop-off than expected after the top 4 positions. At one point, the JPMorgan Equity Premium Income ETF ( JEPI ) was very close to my 5% threshold for a single position, and while I am seeing a steep drop off in percentages of the portfolio in positions 5-10, the top 4 positions are nowhere close to reaching 5%. This is good because I am considering adding to MO or VZ soon.

Week 123 additions

In week 123, I allocated the weekly $100 of capital toward:

• Citigroup
• Truist Financial
• FS KKR Capital Corp

Citigroup

• There were 2 pieces of news that came out which made me want to add another share of C. First, the Fed published their 2023 Federal Reserve Stress Test Results , and in their findings, the 23 large banks have sufficient capital to absorb more than $540 billion in loan losses which C is part of. The 2 ^nd piece of news was that C’s board approved a plan to increase the quarterly dividend from $0.51 to $0.53. C also repurchased $1 billion of common shares during Q2.
• I have indicated in the past that I felt C was undervalued and it could be the best value play from the large financial centers. C has a current dividend yield of 4.46%, and C is starting to increase the dividend again. C has a payout ratio of 28.02%, which leaves a tremendous amount of room for future dividend increases. The dividend has been stagnant since the summer of 2019, so I am hoping that C is establishing a new trend of annual dividend increases.
• I like when companies repurchase shares because it helps increase EPS, but it also can signal that upper management feels shares are undervalued. Currently, shares of C trade for $45.74, and their book value on the balance sheet is $96.60, while their tangible book value is $84.34. Shares of C are currently trading at a -52.65% discount to book value and shares would need to appreciate by 111.19% to trade at a 1:1 ratio. I think there is too large of a disconnect, and we may see shares of C rally in the back half of 2023.

Truist Financial

• During the regional bank meltdown, I wrote an article on TFC ( can be read here ) as to why I felt the move was overdone. Since that article was published on 5/9/23, shares of TFC have appreciated by 12.53% compared to 6.68% for the S&P 500, and if you factor in dividends, TFC’s total return has been 14.67%. TFC passed the stress test and announced that they will maintain the planned dividend at current levels.
• For me, TFC has been a yield play as the sell-off made the yield jump, and in my eyes, the shares are undervalued. TFC has a book value of $41.82 and with the current share price of $31.88, shares are trading at a -23.76% discount to book. TFC is one of the largest regional banks and has grown its dividend for the previous 8 consecutive years. Management can still increase the dividend in 2023, and even if they don’t, I think I am getting a solid bank and an undervalued valuation making my yield on cost very enticing.

FS KKR Capital Corp

• FSK has become one of my favorite BDCs. FSK is the 2 ^nd largest BDC by market cap and by net investment income ((NII)) generated. I track the largest BDCs, so I can view what their NII to market cap valuation is, how shares are trading to their net asset value ((NAV)), and what the dividend yield is.
• FSK trades at the lowest NII to market cap multiple of the group at 6.33x compared to the peer group average of 8.58x. FSK is also trading at one of the largest discounts to NAV as shares trade at a -22.82% discount. FSK also has the largest dividend yield from the 12 BDCs I track at 13.2%.
• The main reason I am adding shares of FSK is that they are generating $851 billion in NII over the TTM and trading at the lowest NII multiple of the group. I am cheap and I love paying a discounted price for shares of a company. I will pay 6.33x FSK’s NII all day for shares. I feel shares are massively undervalued and I can continue collecting a double-digit yield while I wait for shares to appreciate.

Week 124 Gameplan

In week 124, I was planning on adding shares to Realty Income ( O ) as they have currently dipped below $60 which pushed the yield past 5%. I also wanted to grab another share of Altria Group and maybe another share of Kinder Morgan ( KMI ) if I have enough spending power this week.

Conclusion

Earnings season is upon us and there is no telling what the markets will do, especially with an incoming CPI report and Federal Reserve meeting on the horizon. No matter what occurs, I believe that the Dividend Harvesting Portfolio will continue to perform up to my expectations. The annual projected dividend income continues to grow at a quick rate and I am approaching $1,100 of projected annual income. When 2023 is finished, I believe the Dividend Harvesting Portfolio will be generating at least $1,300 in projected annual dividends and over $100 per month in dividend income. Thank you for reading, and I look forward to interacting with everyone in the comment section.

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