T - Dividend Harvesting Portfolio Week 145: $14500 Allocated $1274.81 In Projected Dividends

2023-12-14 09:00:00 ET

Summary

• The markets had a strong week fueled by optimistic economic data, with the S&P 500 increasing by 1.2% and the Dow Jones climbing by 2.41%.
• The Dividend Harvesting Portfolio finished up 5.17% on invested capital, generating $17.17 in dividend income in week 145.
• The portfolio is positioned well for the future, with a focus on generating ongoing dividend income while mitigating downside risk.

This was another strong week for the markets as the S&P 500 increased by 1.2%, and the Nasdaq climbed 2.41%. The markets were fueled by optimistic economic data that created a resurgence in the idea that a soft landing would occur. Nonfarm payrolls increased by 199,000 in November, and unemployment dropped to 3.7%, which is the lowest it has been in 4 months. I have said for quite some time that the inverted yield curve is not the economic indicator that should be followed. A recession has occurred 100% of the time when unemployment has risen by 1% or more since 1948. A hard landing or a recession is less likely to occur when unemployment is declining or stable, and the new economic data helped recreate bullish sentiment in the markets. All eyes will be on Jerome Powell this week, and while the CME Group is expecting a 97.1% chance that rates remain the same, there is always a chance that the Fed will take rates higher until they announce a pivot or indicate that the tightening cycle is over. I think we're going to get a hawkish pause, and Jerome Powell will leave room open for another hike even though the markets are pricing in an aggressive tightening cycle in 2024.

After 145 weeks, I have allocated $14,500 to the Dividend Harvesting Portfolio series on Seeking Alpha. I am building this income-producing portfolio from the ground up on a budget of $100 per week. At the end of week 145, the Dividend Harvesting Portfolio finished up 5.17% ($749.47) on invested capital with a balance of $15,249.47. In week 145, a total of $17.17 in dividend income was produced, bringing the total amount of dividend income generated in 2023 to $912.56. This week, I added to my positions in the JPMorgan Nasdaq Equity Premium Income ETF ( JEPQ ) and Kinder Morgan (KMI). The combination of these investments and reinvesting the dividend income that was produced in week 145 has increased my forward dividend income by $9.39 (0.74%) to $1,284.20, which is a forward yield of 8.42%. There are 3 weeks remaining in 2023, and I think I will come close to generating $1,000 of dividend income this year while putting the Dividend Harvesting Portfolio in a position to start 2024 off with at least $1,300 of forward projected income being generated.

The overall performance of the Dividend Harvesting Portfolio since inception

Things are looking a bit better as 2023 winds down than they did in the fall. The Dividend Harvesting Portfolio is living up to my expectations as it continues to navigate the markets with a focus on generating ongoing dividend income while mitigating downside risk. The market has fluctuated quite a bit due to geopolitical and macroeconomic factors, yet the Dividend Harvesting Portfolio hasn't overshot its invested capital in either direction. Currently, the Dividend Harvesting Portfolio is in the black by 5.17% and is projected to generate $1,284.20 in forward dividend income. 2022 and 2023 were difficult for income-producing assets, and I am quite happy with the overall performance of this portfolio. I think it is positioned well for the future, and when the Fed eventually pivots, I think the continuous investments into many of these positions will have a surprising outcome and push the portfolio further into positive territory.

The Dividend Harvesting Portfolio dividend section

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

• Equities $367.81 (28.64%)
• ETFs $280.63 (21.85%)
• REITs $263.88 (20.55%)
• CEFs $221.27 (17.23%)
• BDCs $150.61 (11.73%)

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 49 of 2023, I collected $17.17 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 $912.56, which is 185.95% of my total 2022 dividend income. I have collected 611 dividends, 114.63% 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, and November was my 1st month generating over $100 of dividend income, my next goal will be to generate 12 consecutive months of generating at least $100 in dividend income.

I am coming off my first month of the Dividend Harvesting Portfolio, generating $100 of dividend income in November. December and January will be critical months as I add more investments to the portfolio; there is a good chance the foundation will be started for at least $100 of monthly income being generated moving forward. Over the previous 4 months, September was my lowest month of dividend income generated at $87.97, and when I look back at the overall growth in monthly dividend income, I am confident that the majority of 2024 will exceed $100 in monthly dividend income. This will help the compounding effect as all dividends are reinvested, and when it's combined with weekly capital, I am expecting 2024 to be a strong year for forward dividend growth.

We have some big weeks of dividend income on the horizon. The Dividend Tracker indicates that 20 positions are generating dividends this week, and 26 positions will produce dividends in the last week of December. There is roughly $70 of dividend income that will flow into the Dividend Harvesting Portfolio over the next 3 weeks, and once again, I will be right up against that $100 mark. The onslaught of dividend income will continue every week going forward, and I am looking forward to an average of $100 per week being generated rather than $100 per month of dividend income. First things first, and getting to $100 per month is the immediate goal that should be achieved sooner than later.

I have a good problem that is causing a bit of a dilemma for me. While I added shares of KMI this week and got that position to finally cross over into the green quadrant with a bit of room, SL Green ( SLG ) keeps going up and falling further back as its dividends are now generating 79.26% of its share price on an annual basis. All of the positions in the green quadrant of the chart below produce at least 1 share from their dividends on an annual basis, and I am trying to get more of the positions within this portfolio to that side. SLG is one of my biggest winners, and it was on the bubble, but now it's shot up quite a bit, and it's nowhere close to being in the green. Over the next several years, this chart will look much different as more companies cross over, and I expect this to have a drastic impact on the amount of income generated within the Dividend Harvesting Portfolio in the future.

The Dividend Harvesting Portfolio Composition

In week 145, REITs scaled back a bit, as they now represent 20.87% of the Dividend Harvesting Portfolio. I am trying not to allocate capital toward REITs as hard as it is for me because I do want to keep a maximum 20% sector weight within the portfolio. In week 146, I am not planning on adding to any REITs, and I will try not to add to any REITs for the remainder of 2023. I am committed to building the cash reserves further, and there is now $149.69 sitting in cash as I am trying to spend between $85 and $95 of the weekly $100. At some point, the cash will be used, but I am still unsure of what the Fed will do and if there is a correction on the horizon, I have my eyes on a few names that I would like to add to the Dividend Harvesting Portfolio.

Individual equities now represent 37.39% of the Dividend Harvesting portfolio while generating 28.64% of the dividend income. REITs, ETFs, CEFs, and BDCs make up 62.61% of the portfolio and generate 71.36% of the forward income. Over the next several months, I am planning on adding to financial and BDCs quite a bit as I think they are both going to have a strong 2024 and would like to establish attractive cost bases on my invested capital.

Well, in week 145, SLG knocked out AT&T ( T ) from the top-10 holdings as it surged to my 8th largest position in the Dividend Harvesting Portfolio. I think there could come a time in the not-so-distant future when all of the positions fall under 4% of the portfolio. I have a 5% max weighting rule on individual positions, and while REITs have given me a bit of a problem with a sector methodology, things have remained within my risk threshold on an individual position basis.

Portfolio Statistics

As I expected, this section would evolve as it's new, and in week 145 I added 4 additional line items to the graph below. I will now have the calculations for the return on investment [ROI] on a dollar and percentage basis, in addition to the total portfolio weight for the top-10 positions. The holdings updated from last week to reflect SLG moving into the top ten. Currently, $4,784.11 has been allocated to the top 10, and their total investment value is $5,203.49. The top 10 positions are projected to generate $426.49 of forward dividend income, which is an 8.91% yield. The current ROI on these positions is 8.77% or $419.38, and they represent 34.12% of the Dividend Harvesting Portfolio.

I made this section because many readers were asking for some of this data, and I didn't want people wasting time trying to reverse-engineer the data. I will keep this section up to date, but I am not sure if I will add other tables, as it takes time to keep track of the additional data points. If anyone has any suggestions, please let me know.

Week 145 additions

In week 145 I added to my positions in:

• JPMorgan Nasdaq Equity Premium Income ETF
• Kinder Morgan

JPMorgan Nasdaq Equity Premium Income ETF

• Since my last article on JEPQ on October 9th ( which can be read here ) shares have appreciated by 5.05% and when the dividend is factored in the total return is 6.93%.
• I am bullish on the Nasdaq for 2024 regardless if rates stay higher for longer or if a recession occurs. JEPQ has 80% of its portfolio uncapped so if the Nasdaq does have a good year, shares of JEPQ should replicate a significant amount of its gains on a percentage basis.
• JEPQ allows me to increase my allocation toward big tech as its largest holdings include Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), NVIDIA (NVDA), and Meta Platforms (META).
• JEPQ is providing a dividend that exceeds 10% on a trailing basis and gives a nice boost to my monthly income being generated.

Kinder Morgan

• I recently wrote an article on KMI ( can be read here )
• KMI recently increased its guidance for 2024 and indicated that it would increase the dividend for the 7th consecutive year
• I believe that energy infrastructure companies will continue to do well in 2024 as more consolidation occurs and more energy is produced domestically
• I like pipelines because they have a gigantic moat around them due to regulation, cost of capital, permitting, zoning, and industry expertise
• I think that KMI will continue to grow its top and bottom line and investors will receive future dividend increases as the years progress

Week 146 gameplan

In week 146 I am looking toward financials. I may add to Citigroup ( C ) and I have my eyes on Truist Financial Corporation (TFC) and New York Community Bank (NYCB). I will be looking at my cost basis in these positions and determining what I will do throughout the week.

Conclusion

I think things are looking good for the Dividend Harvesting Portfolio, as the fall correction was short-lived. The Dividend Harvesting Portfolio is back in positive territory, and the amount of dividend income being generated continues to grow. If the market continues to rally, there is a chance that the Dividend Harvesting Portfolio will finish the year with a $1,000 gain on invested capital while generating a forward dividend yield that exceeds 8%. I have built a diversified portfolio of 92 positions with the goals of mitigating downside risk and generating income. No matter what has been thrown its way, this portfolio continues to live up to my expectations, and I am excited for the future. Please leave all of your comments and suggestions below, as I look forward to interacting with everyone in the comment section.

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