XOM - Dividend Harvesting Portfolio Week 133: $13300 Allocated $1154.34 In Projected Dividends

2023-09-21 08:45:00 ET

Summary

• The stock market closed down this week, with the S&P falling more than expected to a 3-month low.
• The Dividend Harvesting Portfolio has shown consistent growth and profitability, with a 3.44% profit on invested capital.
• Dividend income from various investment baskets has increased, with equities generating the highest income at 39.83%.

In week 133, the S&P 500 closed down -0.71% while the Nasdaq fell -1.05%. The markets received some critical data points this week while waiting for the FOMC meeting on Wednesday, the 20 ^th . The US Consumer Sentiment fell more than expected to a 3-month low of 67.7 compared to the September forecast of 69.1. CPI increased for the 2 ^nd consecutive month to 3.7% while core CPI declined to 4.3%. Over the past month, crude has increased 13.3% to $94.07 per barrel, while gasoline increased 3.64%. It's going to be interesting to see what the Fed does on the 20 ^th and the context of Jerome Powell's speech. I think the Fed is going to hold rates rather than hike due to rising energy prices. I don’t think we are going to get an indication that increases are finished until the November meeting and we will probably hear more commentary regarding being data-dependent. Ultimately, I think the markets will be choppy for the next month or two, and I am looking forward to adding to my positions as the markets fluctuate.

133 weeks have now concluded since I started this account, and I am pleased with the overall progression. After 133 weeks, I have allocated $13,300 toward the Dividend Harvesting Portfolio, which has an account balance of $13,758.07. This is a $458.07 (3.44%) profit on invested capital. In week 133, the Dividend Harvesting Portfolio produced $20.36 of dividend income, bringing the total amount of income generated in 2023 to $656.73. In week 133, I added 5 shares of the PIMCO Dynamic Income Fund ( PDI ) and 1 share of AGNC Investment Corp. ( AGNC ). In week 133, my forward projected dividend income increased by $14.67 or 1.29% to $1,152.99. Reaching the $1,200 level is right around the corner, and soon I will be averaging more than $100 per month of generated dividend income from the Dividend Harvesting Portfolio.

The overall performance of the Dividend Harvesting Portfolio since inception

The Dividend Harvesting Portfolio closed in the black for its 12 consecutive months while continuing to grow its forward projected dividend income. This account has an income and stability first mandate with a secondary emphasis on capital appreciation. I am quite happy that no matter what has occurred in the markets, the Dividend Harvesting Portfolio has lived up to my expectations. I am not trying to beat the market, as this is an income-first strategy.

The Dividend Harvesting Portfolio dividend section

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

• Equities $344.34 (39.83%)
• ETFs $251.22 (21.76%)
• REITs $232.29 (20.12%)
• CEFs $190.59 (16.51%)
• BDCs $135.90 (11.77%)

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 37 of 2023, I collected $20.36 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 $656.73, which is 133.82% of my total 2022 dividend income. I have collected 461 dividends, 86.49% 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. I am getting closer and closer to the $1,200 of projected dividend income on an annualized basis and will soon exceed a monthly average of generating $100 in dividends.

As I am adding capital each week, generating more income on an annual basis each month is only logical. While this is expected, it's very interesting to see how large the YoY progression each month is. Looking at August 2022, its YoY income grew by $33.19, and in 2023, its YoY income grew by $46.50. The spread between the income growth in the last 2 years is $13.31. If the August income generated growth increases by just $10 annually, then next year, there should be $149.62 generated in August. On this methodology, the August income over the next several years should be $149.62 (2024), $216.12 (2025), $292.62 (2026), $379.12 (2027), $475.62 (2028), $582.12 (2029), and $698.62 in 2030.

Going into the week of September 18 ^th there are 5 positions that are expected to generate dividend income. The week of September 25 ^th is going to be interesting as 28 positions are expected to generate dividend income. Based on what this year has looked like, I am excited to see what the monthly numbers look like in September.

Since I have an array of investments that distribute their dividend income on either a monthly or quarterly basis, I was considering making an additional chart to show the annualized quarter-over-quarter dividend increases. Please leave me a message in the comments if you would be interested in seeing this chart become part of the series.

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 133, 27 positions were generating at least 1 share annually through their dividends. These new shares from the top 27 positions are projected to add $86.41 of dividend income annually. I will 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

REITs remained over the 20% threshold as I added a share of AGNC in week 133. Eventually, this sector will represent less than 20% of the Dividend Harvesting Portfolio, but for the time being, I think it's going to stay between 19-21%.

In week 133, Enbridge ( ENB ) remained the largest holding within the Dividend Harvesting Portfolio. Over the past several weeks the top 10 positions have flattened out a bit as only ENB and Altria Group ( MO ) exceed 4% of the portfolio balance. While looking at the top 10 holdings, I am most surprised about Exxon Mobil ( XOM ) still being in the top 10 as I haven’t added to this position in a while. I actually think, on a percentage basis, XOM has been the largest appreciating position. It’s going to be hard not to add to MO or ENB, but I don’t think I will for a bit, as I am buying ENB in another account.

Week 133 Additions

In week 133, I added to my current positions of:

• PIMCO Dynamic Income Fund, 5 shares
• AGNC Investment Corp., 1 share

PIMCO Dynamic Income Fund

• At the end of July, I wrote a dedicated article on PDI which can be read by clicking here .
• I think PDI is interesting as I see a long-term opportunity in fixed income. PDI is a culmination of PIMCO’s best income ideas across global fixed-income sectors and invests in a worldwide portfolio of debt obligations and other income-producing securities. PDI provides access to investments I can’t access on my own. I think that there is an opportunity to buy fixed income funds cheap prior to the Fed cutting rates in 2024. When risk-free assets no longer yield over 5% and then eventually drop to under 4%, I think we will see money come off the sidelines looking for yield, and funds like PDI will see an influx of capital coming in.
• Since its inception, PDI has generated $38.17 of income which is comprised of $28.53 of distributions, $8.28 of special distributions, $0.90 of long-term capital gains, and $0.46 of short-term capital gains. This is 152.67% of its $25 IPO price, and PDI has never missed or cut its distribution. From an income standpoint, I am excited because PDI should be investing in higher-yielding investments due to the current market and should be in a position to sustain its distributions.
• The other aspect that was interesting is how the reinvestment works. The other day I noticed that my distribution from PDI was reinvested at $17, but PDI hadn’t fallen that low. In the prospectus indicates that the reinvestments will be reinvested at a discount to the share price. The exact wording is below

If, on a distribution payment date, the NAV is equal to or less than the market price per Common Share plus estimated brokerage commissions (often referred to as a “market premium”), the Plan Agent will invest the distribution amount on behalf of participants in newly issued shares at a price equal to the greater of (i) NAV or (ii) 95% of the market price per Common Share on the payment date. If the NAV is greater than the market price per Common Share plus estimated brokerage commissions (often referred to as a “market discount”) on a distribution payment date, the Plan agent will instead attempt to invest the distribution amount through open market purchases. If the Plan Agent is unable to invest the full distribution amount in open market purchases, or if the market discount shifts to a market premium during the purchase period, the Plan Agent will invest any un-invested portion of the distribution in newly issued shares at a price equal to the greater of (i) NAV or (ii) 95% of the market price per share as of the last business day immediately prior to the purchase date (which, in either case, maybe a price greater or lesser than the NAV per Common Share on the distribution payment date)

AGNC Investment Corp.

• I had written a dedicated article on AGNC back on April 19 ^th ( can be read here ). Since then the S&P has increased by 7.52% while AGNC increased 1.1%, but after the dividends are factored in, AGNC has a total return of 7.47%.
• AGNC has held its dividend steady since the reduction during the pandemic. I had some capital left over and decided to dollar cost average into this position as I feel it will continue to generate ongoing dividend income and as the Fed reduces rates its shares will appreciate as the housing sector becomes more active.

Week 134 gameplan

In week 134 I am planning on adding to my position in Citigroup ( C ), and possibly Medical Properties Trust ( MPW ).

Conclusion

The Dividend Harvesting Portfolio continues to finish in the black while generating an ongoing stream of weekly dividend income. I have constructed this portfolio to withstand market volatility and while I am not trying to beat the market, I do expect its immense diversification (89 positions) to provide stability during market fluctuations. This is an income-first strategy, and I am building out this portfolio to help meet my future income needs. I feel that this portfolio has lived up to my expectations, and I am excited to see what the results will be in the future. Thank you for continuing to read this series, and please leave all your comments below.

For further details see: