FSK - Dividend Harvesting Portfolio Week 128: $12800 Allocated $1108.94 In Projected Dividends

2023-08-17 08:45:00 ET

Summary

• Inflation for the latest quarter came in at 3.2%, slightly lower than expected.
• The Dividend Harvesting Portfolio has performed well, delivering consistent cash flow and mitigating downside risk.
• Dividend income from various investment baskets has increased, with the goal of generating $1,000 per month in the future.

This week, we received the latest CPI Print , which came in at 3.2%. This marked the end of QoQ sequential declines in inflation, but the print came in lower than expected, as the consensus number was 3.3%. The S&P 500 declined by 0.91%, while the Nasdaq fell -2.24% this week. Overall the markets are doing well as the Nasdaq has appreciated by 31.36%, and the S&P 500 is up 16.73% YTD. The macro-environment is setting up well for the markets to finish out 2023, and we could be on the verge of a multi-year upward cycle. Regardless if my prediction is correct, I will be allocating to positions within the Dividend Harvesting Portfolio as I still feel many positions are attractively valued.

A new string of positive weeks is forming as the Dividend Harvesting Portfolio finished in the black for its 7th consecutive week. I have allocated $12,800 to this portfolio, and in week 128, the Dividend Harvesting Portfolio finished with a balance of $13,327.01, a 4.12% on invested capital. This was a light week for dividend income as 5 positions generated $3.41, bringing the amount of dividend income generated in 2023 to $552.34. This week I stayed in the BDC segment and added 5 shares of FS KKR Capital Corp (FSK) to the Dividend Harvesting Portfolio with this week's $100 allocation. By adding 5 shares of FSK, the Dividend Harvesting Portfolio finished week 128 with a forward dividend income stream of $1,108.94, which is a 1.2% increase ($13.17) compared to week 127. The Dividend Harvesting Portfolio has now exceeded $1,100 of forward dividend income and has a forward yield of 8.32% on its portfolio balance. There are 19 weeks left in 2023, and I would speculate that there is a significant chance The Dividend Harvesting Portfolio finishes 2023 generating between $1,250 - $1,300 in forward projected annual dividend income.

The overall performance of the Dividend Harvesting Portfolio

No matter what the markets are doing, or what external crisis emerges, the Dividend Harvesting Portfolio continues to deliver on my expectations. This portfolio was built to mitigate downside risk and generate an ongoing stream of dividend income. The bottom never really fell out from under this portfolio despite an inflationary environment, rising rates, the war in Ukraine, the regional banking crisis, and changing economic policy. Capital appreciation is a secondary goal that I am not prioritizing because I am positioning the Dividend Harvesting Portfolio for cash flow.

The Dividend Harvesting Portfolio dividend section

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

• Equities $323.56 (29.18%)
• ETFs $244.95 (22.09%)
• REITs $237.91 (21.45%)
• CEFs $175.59 (15.83%)
• BDCs $126.69 (11.42%)

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 32 of 2023, I collected $3.41 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 $552.34, which is 112.55% of my total 2022 dividend income. I have collected 392 dividends, 73.55% 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, it will generate over $1,000 per month of income.

Looking at the graph below, I am pleased with how the monthly income generated has progressed. My average monthly income from dividends in 2023 has been $72.09 compared to $33.45 in 2022 over the first 7 months. If I keep this pace up, I will see at least a $100 monthly average in 2024.

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 128, 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 $82.13 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 39.39% of the portfolio while generating 29.18% of the income, while ETFs, CEFs, BDCs, and REITs account for 60.61% of the portfolio and 70.82% of the dividend income.

Altria Group ( MO ) is still the largest position in the Dividend Harvesting Portfolio, and 4 positions represent 4% or more of the portfolio. I am trying to direct allocations away from the top 10, but I don't know how successful I will be. Ultimately, I would like to see the top 10 level out some more.

Week 128 addition

In week 128, I stuck with BDCs and added 5 shares of:

• FS KKR Capital Corp (FSK)

FS KKR Capital Corp

• FSK just reported earnings and delivered a top and bottom line beat, generating $0.82 of net investment income [NII] and $462 million in total investment income. FSK finished Q2 with a net asset value [NAV] of $24.69, placing shares at an -18.35% discount to its NAV. Shares of FSK are trading at a discount and yield 12.7% as they are paying $2.56 per share on the annualized dividend. This is a strong BDC trading at a good valuation, and I want to own more of it.
• FSK's board declared a cash distribution for the 3rd quarter of $0.70, which consists of a base distribution of $0.64 per share and a supplemental distribution of $0.06 per share. FSK is firing on all cylinders and is about to reward shareholders above and beyond the already high double-digit yield.
• When I look at all the BDCs I track, FSK looks to be the best bang for the buck in my opinion. FSK trades at the 2nd largest discount to NAV, the 2nd lowest multiple on its NII, and generates the largest dividend yield. I think FSK is a great value here, and I am thrilled to buy shares at a discount, especially looking at the yield that is being produced.

Week 129 game plan

I want to add capital toward Blue Owl Capital Corporation (OBDC) and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ). I don't know if I will split the allocation, or focus on one of these next week.

Conclusion

We're heading into week 130, which is reader suggestion week. Every 10th week I add a new position from the suggestions left in the comment section or a previous position that has been purchased during a reader suggestion week. Please leave all of your top ideas in the comment section, and we will see what I add in week 130. Thank you to everyone who is reading and commenting on this series. I enjoy engaging with everyone in the comment section while documenting this series. The Dividend Harvesting Portfolio is really shaping up, and as you can see below, the dividend income snowball effect is starting to take form. Eventually, more dividend income will be generated annually than I am allocating toward this portfolio, and I can't wait to see how the compounding effects look at that point.

For further details see: