XOM - Dividend Harvesting Portfolio Week 137: $13700 Allocated $1197.09 In Projected Dividends

2023-10-19 09:00:00 ET

Summary

• Core CPI continued to fall while CPI remained flat, potentially influencing the Fed's decision to hold rates at the next meeting.
• The Dividend Harvesting Portfolio experienced its third consecutive week of losses, but losses tightened instead of expanding.
• Dividend income generated in 2023 has exceeded the amount generated in 2022, and the portfolio is on track to break $100 of monthly dividend income.

This was a highly anticipated week as CPI came in flat at 3.7% while Core CPI declined to 4.1% MoM. The markets finished higher, with the S&P 500 climbing 0.79% and the Nasdaq increasing by 0.77% for the week. Commodity prices have increased as Brent Crude increased 25.67% (18.61) from $72.49 to $91.1 per barrel since May 31 ^st . This is a main reason why Core CPI continued to fall while CPI remained flat, as Core CPI excludes volatile items, including food and energy. My opinion is that the Fed will hold rates where they are at the next upcoming meeting, and as long as Core CPI declines into the 3s, they will hold again in the December meeting. I think it will be a shock if the Fed decides to hike in November, but nothing would surprise me at this point. No matter what the Fed does or what occurs geopolitically, I will continue to invest in assets that I want to hold for the foreseeable future and build out the growing stream of income this portfolio produces.

This week, the Dividend Harvesting Portfolio finished in the red for the 3 ^rd consecutive week, but its losses tightened instead of expanding. After 137 weeks, I have allocated $13,700 to the Dividend Harvesting Portfolio, which finished the week down -1.65% on invested capital with an account balance of $13,473.66. October is shaping up to be a strong month for income as $26.90 was generated from dividends this week, bringing the amount of income the Dividend Harvesting Portfolio will produce in 2023 to $750.17. In week 137, I added to my positions in the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ), and the Reaves Utility Income Trust (UTG). The combination of adding to UTG and JEPQ while reinvesting week 136's dividend income increased my forward annual projected dividend income by $11.47 (0.97%) to $1,197.09. Next week, the $1,200 level will be broken, and it's on to the next milestone of actually exceeding $100 per month of dividend income rather than having $100 be the forward monthly average.

The overall performance of the Dividend Harvesting Portfolio since inception

In week 137, the losses tightened as the Dividend Harvesting Portfolio went from being down -2.65% to -1.65% on invested capital from week 136. I am surprised there wasn't as much criticism in the comment section last week as there has been in the past when this portfolio dips into the red. I am not structuring this portfolio to beat the market, as its main focus is generating an ongoing stream of dividend income while mitigating downside risk. These are not my only investments, and I am documenting building an income-producing portfolio from the ground up on a weekly budget of $100. I plan on continuing this portfolio for decades to come as it will be one of my income-producing portfolios for when I retire. Many of the sectors within this portfolio have been hit hard in 2023, and I believe when the Fed pivots in 2024, many of these positions will see better days as the rate of return from risk-free assets becomes less appealing.

The Dividend Harvesting Portfolio dividend section

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

• Equities $353.10 (29.50%)
• ETFs $263.22 (21.99%)
• REITs $244.83 (20.45%)
• CEFs $196.87 (16.45%)
• BDCs $139.07 (11.62%)

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 41 of 2023, I collected $26.90 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 $750.17, which is 152.86% 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. So far in October, $56.63 of dividend income has been generated. October could be the first month where I break $100 of the monthly dividend income generated. Once this occurs, the next goal will be going from the first month to every month. I am excited to see where this month ends up and how the rest of 2023 unfolds.

The Dividend Tracker is projecting that 7 positions should generate dividends in week 138 while another 14 dividends roll in throughout week 139. We're right on the bubble, with an expected $98.36 being generated for the month. I am getting closer and closer to triple-digit income being generated on a monthly basis.

Two positions are left in the green quadrant of the table below, and they are no longer producing one new share annually through their dividend income. There are now 26 positions producing at least 1 new share annually from their dividends reinvesting, and this is producing $86.44 in projected annual dividend income. At some point, I am going to need to add to all the positions above 70% to make sure they stay above the 100% level for new shares being produced from dividends.

The Dividend Harvesting Portfolio Composition

Last week, I asked what everyone thought about increasing my sector allocation rule to 25% from 20%, and every response on the subject was to keep it at 20%. Eventually, REITs will come back under 20%, and other sectors will increase their percentage of the holdings in the Dividend Harvesting Portfolio. Over the next several weeks, I am planning on adding to financials, BDC's, Oil & Gas, CEFs, and ETFs.

I can't say I am surprised that Altria Group ( MO ) is still my largest position. I think MO and Verizon ( VZ ) are two of the most undervalued income-producing equities in the market. I am glad none of these positions are close to 5%, and while I am going to try not to add to any of them for a while, it is certainly tempting. Surprisingly, if Exxon Mobil ( XOM ) dips under $100, I would be inclined to add a share.

Week 137 Additions

In week 137 I added to the following positions:

• JPMorgan Nasdaq Equity Premium Income ETF ( JEPQ )
• Reaves Utility Income Trust ( UTG )

JPMorgan Nasdaq Equity Premium Income ETF

• I recently wrote an article on JEPQ outlining my investment thesis ( can be read here )
• JEPQ has paid out $5.57 in distributions over the trailing twelve months ((TTM)) which is an 11.88% yield based on its current price.
• I think the Nasdaq will rally in 2024 as the Fed is expected to pivot at some point. This should create a risk on environment as capital starts to flow out of risk-free assets into equities. I think JEPQ is positioned to generate both appreciation and a large yield, so I will be adding more to JEPQ going forward.

Reaves Utility Income Trust

• I wrote a dedicated article at the beginning of October on UTG ( can be read here ).
• Utilities have been left out of the market rally in 2023 as they are just not as attractive when treasuries are exceeding 5%. There is less of a reason for investors to take on equity risk, especially when equities are yielding less than the risk-free rate of return.
• I think Utilities will rally in 2024 and 2025 as rates decline and UTG is an interesting CEF that has maintained much larger distributions than investing in individual equities. I plan on adding to UTG in the future as I anticipate a pivot in the middle of 2024.

Week 138 gameplan

Earnings season is upon us, and AT&T ( T ) is reporting this week. I plan on adding shares of AT&T before they report and also adding to my position in the PIMCO Dynamic Income Opportunities Fund (PDO).

Conclusion

Next week, the Dividend Harvesting Portfolio will exceed $1,200 in forward projected dividend income. It's taken a while for this to occur, and the chart below is documentation of what my forward projected dividend income was each week throughout the process. The dividend snowball effect is starting to occur, and I can't wait to see what it looks like several years into the future. Week 140 is approaching quickly, so please leave all your ideas and suggestions in the comment section. After this week's CPI report, I think the Fed will hold in November, and if we get another MoM decline in Core CPI that the Fed will pivot in the middle of 2024. I am excited to continue building out these positions as I feel much of this portfolio will benefit in a lower-rate environment.

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