TROW - My Dividend Growth Income - January 2023 Update

Summary

• Dividends received in January totaled $451.
• Forward dividend income grew by $1,171, translating to M/M growth of 26.08%.
• Estimated forward dividend income is now $5,661.
• The massive increase in forward income was mainly driven by consolidation and re-allocation of existing investments.

The new year has started off incredibly strong, adding $1,171 amount to my forward income already. This is almost entirely due to the re-shuffling of investments that were already in my portfolio. Aside from that change, I am maintaining the same basic strategy as I did in 2022 and I can't wait to see what my portfolio looks like at the end of the full year. With a 26.08% increase in my forward income in just the first month, I am already well over my year end goal of 20% growth in my forward dividend income.

Background

The initiation of tracking my DGI income on Seeking Alpha can be found here . My dividend income is tracked across all of my portfolios (taxable accounts and IRAs, not 401ks). A large portion of the target $100,000 will be produced within retirement accounts and thus not easily accessible during early retirement; however, I will aim to maintain a 33% proportion of dividend income in my taxable account. With this level of dividend income and adhering to the 4% rule on the overall taxable account size, I will be able to reasonably consider a change in career into a more part-time role or pursue other methods of income until I am able to access retirement funds. Meanwhile, my retirement accounts will continue to build and grow until I'm ready to begin taking distributions to fund my retirement.

Forward Income Added

During the month of January I added $1,171 in forward income, now making my total forward income $5,661. The amount of forward income added excluding the re-shuffling totaled $80.66. I received a modest amount of dividends this month, $451.

My breakdown of income added via new purchases, dividend reinvestments, and dividend rate increases does not include forward income added via re-allocation of funds that already existed within my portfolio (i.e. the money from the sale of one security invested into another). I will only be breaking down the effect of "new" capital entering the accounts in this section. Also, I would like to reiterate that increased income and tracking of funds from my recur ring 401( K ) contr ibutions are not included in these articles as the fund options available to me do not paint a clear picture on income and distributions.

For my weekly $150 purchases I accumulated shares of Cogent Communications ( CCOI ), Visa ( V ), Medical Properties Trust ( MPW ), and Microsoft ( MSFT ). Additionally, I continued my weekly $25 purchase of General Motors ( GM ) throughout the month. I decided to change two of my weekly investments, pivoting from Ally Financial ( ALLY ) and American Tower ( AMT ) to CCOI and MSFT. The main driver for doing so was my desire to build a larger position in CCOI and to begin propelling MSFT into a much larger weighting in my portfolio. Let's first look at the forward dividends added via new purchases:

• 2.892 shares of GM adding $1.04 in forward income
• 9.803 shares of MPW adding $11.37 in forward income
• 0.56 shares of V adding $1.01 in forward income
• 1.056 shares of MSFT adding $2.87 in forward income
• 4.032 shares of CCOI adding $14.76 in forward income

January proved to provide a healthy addition to future income via dividend reinvestments, several of my highest yielding positions pay out dividends during this month:

• 0.398 shares of Best Buy ( BBY ) reinvested adding $1.40 in forward income
• 2.171 shares of VICI Properties ( VICI ) reinvested adding $3.39 in forward income
• 0.58 shares of Graphic Packaging ( GPK ) reinvested adding $0.23 in forward income
• 10.309 shares of MPW reinvested adding $11.96 in forward income
• 0.286 shares of Realty Income ( O ) reinvested adding $0.85 in forward income
• 0.381 shares of Digital Realty ( DLR ) reinvested adding $1.86 in forward income
• 2.982 shares of Franchise Group ( FRG ) reinvested adding $7.46 in forward income
• 0.716 shares of Comcast Corporation ( CMCSA ) reinvested adding $0.77 in forward income
• 0.106 shares of Watsco Inc. ( WSO ) reinvested adding $1.04 in forward income

Two companies announced dividend increases during the month, contributing to the growth of my future income:

• Watsco announced an 11.4% increase to the dividend, adding $12.10 to my future income. This was a welcomed increase, continuing it's 5-year history of double digit dividend increases.
• Comcast announced a 7.4% increase to the dividend, adding $8.55 in future income. I am happy to see this nice raise to the dividend to continue its long standing streak of dividend growth. I am bullish on the company and its ability to grow its cash flows in the future.

One disappointment during the month was the decision by ALLY to maintain the same dividend, now making the upcoming payment the 5th quarter in a row to offer $0.30 per share. I was hoping to see a continuation of strong dividend growth for this growing financial firm, but I am choosing to believe this decision was made in order to be fiscally responsible and will set the company up in a better position for strong growth in the future.

Below we can see the amount of income added this month via new purchases, dividend reinvestments, and dividend increases for January. I'm actually very happy to see the influence of dividend reinvestments on my forward income, new purchases have typically been the overwhelming driver of income growth for my portfolio (responsible for nearly 75% of portfolio dividend growth in 2022). Dividend reinvestments and dividend increases accounted for over 60% of the growth in my forward income, a much higher percentage than any previous month to date. The exciting part will be when $175 of weekly new purchases becomes insignificant in driving the growth of my dividends because it means that my dividend snowball has grown quite large and is picking up speed.

Portfolio Re-allocation

I made some major changes to my existing holdings during January, finally pulling the trigger on several actions I have been considering for several months. After all the re-shuffling was completed, I reduced my total number of holdings across my portfolio by two down to XX positions. Main drivers for making these large changes was to dispose of smaller positions and re-allocate into larger positions to increase the weight of those holdings. In addition, I plan on having an extremely large position in the S&P 500 by the time I retire via my 401k's so I took this opportunity to transform my S&P 500 Index ( VOO ) holding into the Schwab U.S. Dividend Equity ETF ( SCHD ) which will provide me with much larger dividends and greater growth. The table below summarizes the change in holdings.

The specific changes are as follows. I sold off my positions in T. Rowe Price ( TROW ), American Financial Group ( AFG ), S&P 500 Index ETF ( VOO ), Graphic Packaging ( GPK ), and Global Payments Inc. ( GPN ). I then used the funds from those sales to add to my positions in Microsoft, Cogent Communications, Visa, and Starbucks ( SBUX ) along with adding some new positions. The new additions to the portfolio are Schwab Dividend Equity Fund ETF, Essential Properties Realty Trust ( EPRT ), and MPLX LP ( MPLX ).

The result of making these changes led to an increase in forward income by a massive $1,090. I am pleased with the improvement this has made to my portfolio and I like to see the heavier weighting in my highest conviction picks. As it currently stands, I'm not eyeing anymore reshuffling of my holdings and look forward to continuing to build on my current foundation. I will be focusing on adding to lower-yield, higher-growth stocks for the next several months as I don't want to be caught up in yield chasing and ignoring the importance of high growth companies.

Portfolio

There have been some drastic changes to my portfolio in the past month. I did not convert my entire VOO position into SCHD, opting to instead use some of those funds to invest in both growth and income stocks as well. Overall, the singular ETF in my portfolio now has a reduced weighting to just under 19% versus the roughly 24% weighting of VOO last month. Additionally, there has been a substantial increase in the concentration of both Microsoft and Visa which is in-line with my long term plan. Lastly, I made a step in the direction of trimming my number of positions by reducing the total holdings count down to 30.

Looking Forward

I am satisfied with my foundation now after executing several large trades I have been eyeing for quite some time. In accordance with my plan to add to higher growth prospects I will change up my weekly $150 investments. In February I will be investing the recurring injection of cash into MSFT, ALLY, and EPRT. I believe all 3 companies have the ability to exhibit strong growth in the years to come and are currently available at attractive entry points.

Summary

Due to the large shake-up in my portfolio I witnessed a massive increase in my monthly income by $1,171, of which $1,090 can be attributed to the shuffling of funds that already existed in my portfolio. In terms of forward income added by new purchases, dividend reinvestments, and dividend increases I was able to grow my estimated future dividends by $80.66. After increasing my income by 26.08% this month, I am already over the full year goal of 20+%. I obviously expect growth to be much slower for the rest of the year but I am excited to see how the dividend pile continues to grow.

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