ARCC - Dividend Harvesting Portfolio Week 127: $12700 Allocated $1095.77 In Projected Dividends

2023-08-10 09:00:00 ET

Summary

• Despite strong earnings from Amazon and Apple, the markets finished the week in the red.
• The Dividend Harvesting Portfolio finished its 6th consecutive week in the black, with a 4.59% profit on invested capital.
• The portfolio is generating consistent cash flow, has a high single-digit yield, and is currently in positive territory.

The markets finished the week in the red despite Amazon ( AMZN ) blowing earnings out of the water and Apple ( AAPL ) delivering strong earnings. The S&P 500 declined by -2.44%, while the Nasdaq fell by -3.08%. I would hate to think what would have occurred if big tech didn’t post strong earnings over the past 2 weeks. I still believe the markets will appreciate into the end of the year regardless if the recent declines are extended in the short term. No matter what occurs, I will always seek opportunities and add to positions within the Dividend Harvesting Portfolio.

In week 127, the Dividend Harvesting Portfolio finished in the black for its 6 ^th consecutive week. There has been $12,700 allocated, and in week 127, the Dividend Harvesting Portfolio finished with a $13,282.91 balance which is a 4.59% profit on invested capital. There was $41.13 of dividend income generated in week 127, and I have collected $548.93 in dividend income YTD. This week I added 5 shares of Ares Capital ( ARCC ) which is one of my favorite Business Development Corporations ((BDC)). The Dividend Harvesting Portfolio finished week 127 increasing its projected annual income by $13.67 (1.26%) to $1,095.77, which is an 8.25% forward yield on the portfolio balance. I am inching my way to $1,100 in projected annual dividend income, and when 2023 is over, there is a chance this portfolio will be generating over $1,300 of annualized dividend income. I am excited about continuing to document and build out the Dividend Harvesting Portfolio as time goes on.

The overall performance of the Dividend Harvesting Portfolio

No matter what has occurred in the markets, the Dividend Harvesting Portfolio has met my expectations. My sole focus is to build an ongoing stream of income from a portfolio that can mitigate downside risk. Capital appreciation is a secondary goal that isn’t as important to me. I have other investments, and in this specific portfolio, I am building it to navigate an array of market conditions. The Dividend Harvesting Portfolio is generating weekly income, has a high single-digit yield, and is currently in positive territory. I have basically built a customized ETF that fulfills my specific needs.

The Dividend Harvesting Portfolio dividend section

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

• Equities $323.56 (29.53%)
• ETFs $244.84 (22.34%)
• REITs $237.91 (21.71%)
• CEFs $175.56 (16.02%)
• BDCs $113.89 (10.39%)

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 $507.80 in dividend income from 533 dividends. In week 31 of 2023, I collected $41.13 in dividends, and in 2023, I exceeded the amount of income generated from dividends compared to 2022. In 2022, I generated $490.76 from dividend income, and in 2023, I generated $548.93, which is 111.85% of my total 2022 dividend income. I have collected 387 dividends, 72.61% of the total dividends generated in 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. Eventually, this portfolio will be producing $100 per month of dividend income, and at some point in the future, if I continue down this path, I believe it will generate over $1,000 per month of income.

July is in the books and I generated a total of $77.15 in dividend income. This is a 117.57% YoY increase in the amount of dividend income that was generated in July. In the first half of 2022, I generated $234.17 in dividend income, and this has increased to $504.65 in 2023. I am hoping that by the end of the year, I am at the point where at least 1 month generated over $100 of dividend income.

I am using The Dividend Tracker to track my upcoming dividend income. This tool allows me to visualize my data down to the day. I need to go in and update a bunch of the data. Lately, I have only been updating the positions I add capital to, not the new share amounts from reinvesting the dividends. This is why the annual income is a bit different than what I am posting in the other sections. Eventually, I will sit down and update everything in the program. July will be a strong month, and the way things look, October may be the first month that my dividend income exceeds $100. After this summer's investments, I feel that this can be accomplished.

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. In week 127, there were 26 positions generating at least 1 share annually through their dividends. These new shares from the top 26 positions are projected to add an additional $79.60 of dividend income annually. I am going to work on getting more positions over to the green block with a new goal of generating an additional $100 of dividend income from new shares generated.

The Dividend Harvesting Portfolio Composition

I am trying to work on other sections of the portfolio rather than allocating more capital toward REITs and ETFs. I still think there are a bunch of good opportunities in the market, and I am looking forward to making future investments. Individual equities comprise 39.27% of the portfolio while generating 29.53% of the income, while ETFs, CEFs, BDCs, and REITs account for 60.73% of the portfolio and 70.47% of the dividend income.

In week 127, only 3 positions exceeded 4% of the portfolio while Altria Group ( MO ), and Enbridge ( ENB ) continued to reduce their portfolio percentages. I think the top 10 will continue to level out as the year progresses.

Week 127 Addition

In week 127 I added 5 shares to my position in:

• Ares Capital ((ARCC))

Ares Capital

• I recently wrote a dedicated article on ARCC ( can be read here ) outlining my investment thesis.
• In Q3 2023 ARCC delivered its 3 ^rd consecutive quarter generating more than $300 million in NII. NII is critical because of the amount of capital left over after expenses and taxes from ARCC's investments. In Q3, ARCC generated $314 million in NII and realized $17 million in gains placing their net income at $331 million, their GAAP net income per share at $0.61, and their Core EPS at $0.58. ARCC pays a quarterly dividend of $0.48 so the dividend is well covered by its core EPS. This is exactly what I am looking for because in the past ARCC has paid special dividends when they had a wide coverage ratio on the dividend.
• ARCC is often a favorite in the BDC community as it has the largest market cap, and the largest amount of net assets. I track many different stats from the largest BDCs, and ARCC is also the only BDC that has generated over $1 billion in NII over the TTM. I consider ARCC the gold standard in the BDC space, and the current valuation is very enticing to me. ARCC is trading at 8.32x its NII, and this is under its peer group average of 8.9. Main Street Capital ( MAIN ) which I own is another favorite among the BDC community even though its valuation has skyrocketed to 12.39x its NII. I am more than happy to add ARCC at 8.32x its NII and at a 5.16% premium to its NAV.

Week 128 Game Plan

There is a good chance that I am going to stick with BDCs in week 128 and add to my position in FS KKR Capital Corp ( FSK ) and Blue Owl Capital Corporation ( OBDC ). These BDCs are both trading at a discount to NAV, have yields that exceed 9%, and trade at less than 9x their NII.

Conclusion

After more than 2 years the snowball effect is really taking form. Next week I should crack the $1,100 mark for projected annual dividend income, and there is a good chance that the Dividend Harvesting Portfolio reaches $1,300 by the end of 2023. By allocating $100 per week, I have built out a portfolio that has mitigated downside risk and generates an 8.25% yield throwing off weekly income. Even if income investing isn’t what you’re interested in, establishing a budget and continuing to invest for the future is the most important thing. An S&P 500 index fund works well for many people, and I have 100% of my 401k in one. Regardless of your investment goals or style, I hope this article series inspires people to invest for their future no matter what their goals are.

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