FSK - Dividend Harvesting Portfolio Week 143: $14300 Allocated $1263.34 In Projected Dividends

2023-11-30 09:00:00 ET

Summary

• The markets had a good week, with the S&P 500 increasing by 0.89% and the Dow Jones Industrial Average rising by 0.44%.
• Jeremy Siegel believes inflation is over and predicts a market rally in 2023, while Andrew Hollenhorst sees early indications of a recession.
• The Dividend Harvesting Portfolio finished week 143 with a 1.78% increase and $4.02 of dividend income, bringing the total dividend income for 2023 to $868.53.

This was another good week for the markets as the S&P 500 climbed 0.89% and the Nasdaq increased by 0.44%. Last week, the CME Group Fed Watch Tool indicated that there was a 100% chance that the Fed would hold rates where they are, and now there is a 4.5% chance that we will get a 25 bps increase at the December 13 ^th meeting. Jeremy Siegel, Wharton School professor of finance, joined CNBC's Closing Bell last week and discussed his views that inflation is over and he has also joined CNBC to discuss why he believes 2023 will end with a market rally. On the other side of the coin, Andrew Hollenhorst (Citi chief U.S. economist) joined Squawk Box recently and outlined the early indications of a recession that he is seeing. Regardless of which camp you're in, we're going to have to wait and see how things unfold. I am very interested in the upcoming Fed Meeting and the press conference which will follow. I have a funny feeling that Jerome Powell will be hawkish, considering his stance hasn't changed with the data, but will keep rates where they are. The next several weeks leading up to the Fed meeting will be interesting, and if I am wrong and we get a dovish Fed it could be off to the races for the holidays.

After 143 weeks, I have allocated $14,300 to the Dividend Harvesting Portfolio. We had another good week in the markets, and the Dividend Harvesting Portfolio continued further into the black. With week 143 in the books, the Dividend Harvesting Portfolio finished up 1.78% ($254.76) on invested capital with a balance of $14,554.76. This was a light week for dividend income being generated due to Thanksgiving, but nonetheless, $4.02 of dividend income was produced. This brought the amount of dividend income generated in 2023 up to $868.53. In week 143, I added to my positions in Medical Properties Trust ( MPW ) and FS KKR Capital Corp (FSK). The combination of these purchases and the reinvested dividends increased my forward dividend income by $11.28 (0.90%) to $1,263.34, which is a forward yield of 8.68%. There are 5 weeks remaining in 2023, and reaching $1,300 of projected forward dividend income will be my final goal for the year.

The overall performance of the Dividend Harvesting Portfolio since inception

The Dividend Harvesting Portfolio is starting to establish another string of consecutive weeks in positive territory. The graph below shows the variance between invested capital and the portfolio balance on a weekly basis in addition to the projected dividend income. I am not trying to beat the market with this portfolio, and after building out a portfolio that has 92 positions, I feel it has lived up to my expectations. I wanted to build a portfolio that could mitigate downside risk no matter what macroeconomic or geopolitical events occurred while generating a stream of ongoing dividend income. Based on what my goals have been, I feel my objectives are being accomplished, and I will continue building out this portfolio as the years progress.

The Dividend Harvesting Portfolio dividend section

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

• Equities $365.12 (28.90%).
• ETFs $273.39 (21.64%).
• REITs $263.42 (20.85%).
• CEFs $210.80 (16.69%).
• BDCs $150.61 (11.92%)

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 47 of 2023, I collected $4.02 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 $868.53, which is 176.98% of my total 2022 dividend income. I have collected 575 dividends, 107.88% 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. Now that I have exceeded $1,200 of forward dividend income, I am working toward my next goal of generating 12 consecutive months of $100 in dividend income.

November is coming to a close, and I am excited to see if this is the month where I finally exceed $100 of dividend income generated in the Dividend Harvesting Portfolio. As we can see by the chart below, each month on a YoY basis, the dividend income generated has significantly increased. I am excited to see where the snowball effect takes me. Last month, I missed the $100 mark by $0.38 as I got closer and closer to the triple-digit mark. Maybe next week's article is the one where this graph hits a new milestone.

The final week in November is going to be interesting as 24 positions are expected to generate roughly $24.47 in income. I just added some of these positions, such as FSK, so I am expecting some variance in the income produced. Either way, I am going to be right on the bubble again for dividends generated as I get closer and closer to $100 of monthly dividend income in the Dividend Harvesting Portfolio. I am looking forward to how November ends. I just looked at December, and I am expected to generate $95.54 in dividend income so depending on my next few purchases, December could bring me a nice holiday present of $100 in dividend income.

SL Green Realty Corp. ( SLG ) moved back into the green quadrant while Kinder Morgan ( KMI ) remained in the 90-100% column of generating a new share annually through its dividend income. Before 2023 is over, I will add to both of these positions and try to keep them in the green. There are 30 positions that are generating new shares on an annual basis that is accounting for $101.97 of new dividend income. Excluding KMI, I don't think I will be getting any other positions into the green quadrant in 2023, but in 2024 I think at least 10 more positions will be generating at least 1 share per year from their dividend income. As this metric increases, it should help intensify the snowball effect of generating forward dividend income.

The Dividend Harvesting Portfolio Composition

In week 143, REITs crept up a bit as the dollar cost averaged into Medical Properties Trust. While REITs still account for more than 20% of the portfolio, it's not by much, and eventually, this percentage will drop as capital is allocated to other areas. I have been increasing my cash position, and there is now $118.32 sitting in a money market account. I am planning on building out the cash position in case we get a correction, this way I have additional dry powder to deploy in addition to the weekly $100. If we don't get a correction anytime soon, I may deploy a portion of the cash into some of the positions within the Dividend Harvesting Portfolio, or I may break down and purchase something like Apple (AAPL).

Individual equities comprise 37.78% of the Dividend Harvesting portfolio while generating 28.90% of the dividend income. REITs, ETFs, CEFs, and BDCs make up 62.22% of the portfolio and generate 71.10% of the forward income. I am not planning on putting any restrictions on this section regarding the equity ratios. Looking at the sectors, I am quite pleased at the level of diversification I have achieved, and over the next several years, I am going to work on getting a more even distribution for the portfolio weighting.

In week 143, Verizon ( VZ ) regained the top spot as the largest holding in the Dividend Harvesting Portfolio. I am still very tempted to add to VZ and Altria Group (MO), but I am holding off as I am making an effort to allocate capital away from the top 10 holdings. My recent purchase of additional shares in FS KKR Capital Corp has pushed it into the top 10 as Simon Property Group ( SPG ) has been replaced. There are now 2 BDCs in the top 10 holdings, and I wouldn't be surprised if FS KKR Capital Corp becomes a more permanent fixture in this group.

Portfolio Statistics

I have updated the top 10 holdings in the portfolio statistics section to reflect FSK entering the group. With SPG leaving and FSK entering, the totals have changed a bit. The 10 largest positions have cost me $4,888.16, and they have generated $457.20 in dividends. My total investment in the top 10 is now worth $5,081.09; I am up $192.93. These positions generate $445.98 in forward projected annual dividend income, which is a yield of 9.12% on their invested capital. I am still trying to figure out what else I am going to do in this section, as it's a lot to keep up with. I may do the largest sector also. I know some readers have tried to backdoor their way into the positions, so I am trying to make all of the information available in a legible way so nobody has to waste time trying to reverse-engineer anything in the article.

Week 143 additions

In week 143 I added to my positions in

• Medical Properties Trust ( MPW )
• FS KKR Capital Corp ( FSK )

Medical Properties Trust

• I recently wrote an article about MPW that outlined my investment thesis ( can be read here )
• I am down on MPW in this account and in my main dividend account. After going through the Q3 numbers, I made the decision to dollar cost average into these positions in both accounts.
• MPW's tangible book value is $13.84, which is 196.36% more than the current share price. Even if MPW's assets were to get rerated a bit, the disconnect between the tangible book value and the share price makes a compelling case.
• The dividend yield is back to double digits again, and the combination of adding shares and reinvesting the dividends could eventually allow me to compound my way out of the hole if shares remain at these levels. It will take a while, but it is possible.
• I looked at the debt profile, the EBITDA generated, and the deal pipeline and determined that unless something goes seriously wrong, MPW will remain intact in the high-rate environment.

FS KKR Capital Corp

• FSK has become one of my favorite BDCs, and I wrote an article recently about their Q3 results ( can be read here )
• FSK has continued to drive its net interest income ((NII)) higher YoY, and they are generating so much cash that the board has authorized a supplemental distribution in addition to the base distribution in Q4.
• When I wrote the article, FSK was trading at a -22.18% discount to its net asset value ((NAV)) and a market cap to NII of 6.33x. Both of these were the 2 ^nd lowest in their peer group of 11 BDCs.

Week 144 Gameplan

In week 144, I am planning on adding to my position in the Cohen & Steers Infrastructure Fund ( UTF ) and Truist Financial Corporation (TFC).

Conclusion

I can't believe that November is just about over, and 2023 is coming to an end. After 143 weeks, the Dividend Harvesting Portfolio has grown into an income-producing machine, yielding 8.68% and generating $1,263.34 of projected dividend income on an annual basis. Looking at the chart below, the dividend snowball effect from investing $100 per week and reinvesting the dividends is starting to pay off, and I am excited to see how this progresses over the next several years. It took roughly 71 weeks to reach the first $500 of projected forward dividend income, and then 48 weeks later, I hit the $1,000 mark. After 24 weeks, I am more than halfway to $1,500 as the snowball effect and the powers of compounding work their magic. The Dividend Harvesting Portfolio continues to mitigate downside risk and produce a continuous flow of dividend income. I am excited for the future as I feel the Fed is going to pivot in the first half of 2024, which should be a catalyst for many of the positions within this portfolio. Thank you for reading, and please leave all your suggestions in the comment section as I try to interact with everyone.

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