UTG - Dividend Harvesting Portfolio Week 136: $13600 Allocated $1185.62 In Projected Dividends

2023-10-12 09:00:00 ET

Summary

• The markets showed some recovery this week, with a slight appreciation in the S&P 500 and a significant climb in the Dow Jones Industrial Average.
• The Dividend Harvesting Portfolio experienced its second consecutive week of losses, but overall dividend income has increased compared to the previous year.
• The portfolio composition is still heavily weighted towards REITs, but the investor is considering adjusting the maximum sector weighting rule.

The markets regained some ground this week as the S&P 500 appreciated by 0.38% and the Nasdaq climbed 1.06%. While several Fed members are giving speeches this week, all eyes will be on the CPI and Core CPI reports at 8:30 a.m. on Thursday, 10/12. The next day, the Michigan Consumer Sentiment report will be released as the upcoming week is full of economic news and data points. I am especially interested in Fed member Kashkari's speech on Tuesday and the official FOMC minutes that will be released on Wednesday. There is no telling how the market will react, but if inflation ticks higher, I think the markets will panic, and the CME Fed Watch Tool will increase their percentages for a rate hike in November. Many sectors and stocks have felt the pressure of a higher for longer environment, and I feel there are many great long-term investments in the market. No matter what, I am a buyer as I am investing for the long-term and have no problem with dollar cost averaging into positions I want to own for years to come.

The Dividend Harvesting Portfolio experienced its 2nd consecutive week in the red after stringing together 13 consecutive weeks in the black. After 136 weeks, I have allocated $13,600 to the Dividend Harvesting Portfolio, which finished the week down -2.65% on invested capital with an account balance of $13,239.69. I am expecting someone to enter the comment section and indicate that this is a waste of time and money, which is fine. I have always said that I expect this account to fluctuate within a tight range of invested capital for the foreseeable future. In week 136, $29.73 of dividend income was generated, bringing the amount of income the Dividend Harvesting Portfolio has produced in 2023 to $723.27. In week 136, I grabbed another share of Realty Income ( O ) under $50 and started a position in Leggett & Platt ( LEG ). The combination of the week 136 investments and dividends reinvested increased my forward annual projected dividend income by $10.43 (0.89%) to $1,185.62. I am looking forward to the next several weeks as I have an idea of positions I want to add to.

The overall performance of the Dividend Harvesting Portfolio since inception

In week 136, the Dividend Harvesting Portfolio fell a bit further into the red as it solidified its cross through invested capital. I fully expect criticism in the comment section and comments to discuss that this methodology is a waste of time. This type of investing isn't for everyone, and luckily, it's my time and money, not theirs, which would be wasted. From the beginning, I have indicated that I am not trying to beat the market, and if I was, this account would be structured differently. My investment goals with this account have been to build a portfolio of income-producing assets that will generate an ongoing stream of income while mitigating downside risk. I am happy with how the Dividend Harvesting Portfolio has performed so far, and as we exit the rising rate environment in 2024, I believe many of the underlying assets in the portfolio will be rewarded.

The Dividend Harvesting Portfolio dividend section

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

• Equities $351.85 (29.68%)
• ETFs $258.85 (21.83%)
• REITs $244.08 (20.59%)
• CEFs $192.28 (16.22%)
• BDCs $138.56 (11.69%)

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 39 of 2023, I collected $35.34 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 $723.27, which is 147.38% of my total 2022 dividend income. I have collected 502 dividends, 94.18% 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'm 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.

September ended up being my 2nd largest month of dividend income generated in 2023 as the overall trend continues up and to the right. I am expecting to finish 2023 having produced at least one month of triple-digit dividend income, and I am hoping that by the end of 2024, I am on pace to generate at least $100 of dividend income each month from the underlying positions within the Dividend Harvesting Portfolio.

Some payout projections look to have changed as roughly $98.33 of dividend income is estimated to be generated this month. I am closing in on the $100 level and many companies are paying me this month. I am excited to see the amount of income generated as October is off to a strong start and projected to be my largest month of dividend income since I started the series.

There are 28 positions generating at least 1 share per year through their reinvested dividend income. The new shares these 28 positions are producing are expected to generate an additional $89.24 in annualized dividend income. While I have focused on certain companies, over the next several quarters, I am going to try and get at least 5-10 additional positions to generate at least 1 share annually through their dividends.

The Dividend Harvesting Portfolio Composition

REITs are still my largest exposure, and part of the reason the portfolio weighting has declined is declining REIT values due to rising rates. I have still been adding to Realty Income, and there are several REITs that I see tremendous value in. I have been considering changing my maximum sector weighting rule to 25% from 20%. Let me know your thoughts on this possible change. Individual equities comprise 38.85% of the portfolio while generating 29.68% of the income, while ETFs, CEFs, BDCs, and REITs account for 61.15% of the portfolio and 70.32% of the dividend income.

Altria Group ( MO ) remained my largest position in week 136, followed by Enbridge ( ENB ). I am happy that the bottom end of my top-10 holdings has fallen under the 3% level and that the top end is under 4.5%. I believe that the top 10 holdings will continue to flatten out, as I am going to try to focus on adding to other positions within the Dividend Harvesting Portfolio.

Week 135 Additions

In week 136 I made the following purchases

• Realty Income
• Leggett & Platt

Realty Income

• Realty Income continues to decline, and YTD has fallen -21.46%. I believe that Realty Income is one of the highest-quality REITs, and I want to own more of it. Shares are approaching their pandemic lows, and Realty Income is yielding more than 6%.
• I plan on continuing to add shares of Realty Income as physical retail isn't disappearing, and despite the rising rate environment, they are continuing to increase the dividend.
• I think that Realty Income at its current price will be looked at as a gift sometime next year as the Fed is expected to pivot.

Leggett & Platt

• I recently wrote a dedicated article about my investment thesis on Leggett & Platt ( which can be read here ).
• Leggett & Platt is a Dividend King, having increased their dividend for 52 consecutive years. Shares of Leggett & Platt have declined -23.94% YTD and, over the past 5 years, have fallen -41.46%. They aren't an exciting company but are projected to get back to earnings growth next year, and the current yield is 7.41%.
• Having paid and increased the dividend annually for over 5 decades indicates that they have a good handle on their business and can accurately forecast long-term internal and external trends. I believe that now is an optimal time to add shares as Leggett & Platt is now selling for where it was during the pandemic crash. I decided to add this Dividend King and plan on adding to the position in the future.

Week 137 Gameplan

In week 137, I plan on adding to my positions in the Reaves Utility Income Trust ( UTG ) and the JPMorgan Nasdaq Equity Premium Income ETF ( JEPQ ).

Conclusion

The Dividend Harvesting Portfolio is rapidly approaching, generating $1,200 in projected dividend income with less than $15 to go. We have a critical CPI report this week, and earnings season is starting up again. We're going to find out real quick if we should anticipate another rake hike in 2023 and how companies are handling the higher for longer rate environment. On the bright side, even if the Fed does raise rates again in 2023, we're at the end of the tightening cycle rather than the beginning. I plan on dollar cost averaging into positions that the current environment has impacted, as I believe many of the positions within the Dividend Harvesting Portfolio will rebound in 2024. Week 140 is quickly approaching, so please start leaving your suggestions in the comment section as to what investments I should add.

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