2023-04-06 09:00:00 ET
Summary
- The Dividend Harvesting Portfolio is now generating $887.60 in annual dividends, yielding 8.21%.
- The Dividend Harvesting portfolio has a 68.81% record of finishing the week in the black since its inception, 75/109 weeks.
- In week 109, I added to SLG, VNO, MPW, and STWD.
The markets had a good week as the S&P 500 increased 2.98%, and the Nasdaq jumped 3.23%. The Dividend Harvesting Portfolio is within striking distance of crossing over its invested capital line and back into positive territory. Nobody likes to see the markets decline or their accounts in the red, but as a long-term investor, I look at it as an opportunity to dollar cost average into positions. I have 83 individual positions within the Dividend Harvesting Portfolio, some are up, and some are down, but the diversity has been critical to mitigating my downside during periods of volatility. I will continue to allocate capital each week and add to positions that I feel are undervalued.
After 109 weeks and $10,900 allocated, the balance of the Dividend Harvesting Portfolio is $10,805.72. The account is down -$94.28 or -0.86% on invested capital. In the last week of March, I collected $29.71 in dividend income bringing 2023’s total dividend income generated to $204.98. In week 109, I allocated my capital toward REITs as they have been declining. I added to my positions in SL Green (SLG), Starwood Property Trust (STWD), Medical Properties Trust (MPW), and Vornado (VNO). In week 109, my projected annual dividend income increased by $15.21 or 1.74% to $887.60, which is a forward yield of 8.21%.
I allocate capital toward big tech, funds, dividends, and growth outside of my retirement accounts. These are not my only investments, but I did open a separate account, so I could easily track and document this series. I intentionally created broad diversification throughout the Dividend Harvesting portfolio so I could benefit from sector rotations and mitigate my downside risk. Investors who are too exposed to growth companies or large-cap tech have gotten crushed as the investment landscape changes. On the growth and tech side of my investments, I'm feeling the pain as some of my favorite companies, including Alphabet ( GOOGL , GOOG ), Amazon ( AMZN ), and Meta Platforms ( META ), have been taken to the woodshed.
I'm going to address a question that continues to surface. I'm not trying to beat the market with this portfolio. I love index funds and am invested in several index funds. I love dividend investing due to the stream of cash flow it generates. I don't want 100% of my assets outside of real estate tied to an S&P index fund. I have created a personal investment strategy that works to achieve my investment goals, and having a stream of income generated from dividends is part of my investment strategy. Low-cost index funds are one of the best investments anyone can make in my opinion, and the Dividend Harvesting portfolio is not meant to be a substitute for an index fund. I have read many questions about dividend investing and wanted to start a portfolio from the ground up and document its progress to disprove many misconceptions, including that you need a large amount of seed capital to make dividend investing work for you.
This series has never been about hitting a target yield, generating a certain amount of profit, or beating the market. I had two specific goals with this series. The first was to create a blueprint for constructing a dividend portfolio by documenting the journey starting from the beginning. The second goal was to illustrate how allocating capital each week toward investing, regardless of the amount, would be beneficial in the long run.
Too many people are under the illusion that you need tens of thousands or even hundreds of thousands to benefit from investing. Instead of using my real dividend portfolio as an example, I decided to start a new account, fund it with $100, and add $100 weekly, providing a step-by-step guide to dividend investing. This methodology doesn't have to be used for dividend investing, and it could be as simple as an S&P index fund or a Total Market fund. Hopefully, this series is inspiring people to invest in their future to attain financial freedom.
A historical recap of the Dividend Harvesting Portfolio’s investment principles
Investment Objectives
- Income generation
- Downside mitigation through diversification
- Capital appreciation
Below are the fundamental rules I have put in place for this Portfolio:
- Allocate $100 weekly to this Portfolio
- Only invest in dividend-producing investments
- No position can exceed 5% of the Portfolio
- No sector can exceed 20% of the Portfolio
- All dividends and distributions are to be reinvested
Below is a chart that extends from week 1 through the current week to illustrate the Dividend Harvesting Portfolio's Progression
- Blue line is my initial investment $100 in week 1, $1,000 in week 10, etc.
- Red line is the account value at the end of each week
- Yellow line is the annual dividend income the Dividend Harvesting Portfolio was projected to generate after that week's investments and dividends reinvested
The Dividend Harvesting Portfolio dividend section
Here's how much dividend income is generated per investment basket:
- Equities $256.87 (28.94%)
- ETFs $232.06 (26.14%)
- REITs $176.75 (19.91%)
- CEFs $162.65 (18.32%)
- BDCs $59.27 (6.68%)
Collecting dividends can serve many functions in a portfolio. Some investors utilize dividends to supplement their income and live off. I'm building a dividend portfolio for myself 30 years into the future. In 2022, I collected $490.76 in dividend income from 533 dividends. In week 12 of 2023, I collected $29.71 in dividends, and in 2023 I generated $204.98 in dividend income. YTD I have generated 41.77% of my 2022 dividend income from 161 dividends which is 30.21% of the dividends generated throughout 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.
March is over and it was a record month of dividend income, generating $78.88. YoY March’s dividend income has increased by $45.58 or 136.88%. Looking at the graph below the YoY increase in dividend income has been drastic. I am looking forward to seeing what April brings as it will be the first month with 3 years of data.
I found a tool that can track and visualize my monthly and weekly dividend income. I plan on showing this graph rather than the full year as it's a better visualization than what I had created. In week 107, I added SLG to the Dividend Harvesting Portfolio, and my total annual dividend count increased to 644. There are dividends flowing each week.
The goal of generating enough income from the dividends to purchase an additional share per year has been the never-ending project of this portfolio. There are now 19 positions generating an additional share per year. I am continuously working on getting more positions over the 100% threshold. I think I can finish 2023 with at least 25-30 positions generating a share per year from their dividends.
The Dividend Harvesting Portfolio Composition
Many of the readers have asked if I could break down the individual positions within these sectors. I created pie charts for each individual sector and have illustrated how much each position represents of that sector of the Dividend Harvesting portfolio. Since I only have one position in Food & Staple Retailing and Industrials, I did not make a chart for those. 3M ( MMM ) and Walgreens Boots Alliance ( WBA ) represent 100% of those sectors. The charts will follow the normal portfolio total I have constructed. Please keep the ideas coming, as I am happy to add as much detail to this series as I can.
In week 109, ETFs remained the largest section of the Dividend Harvesting Portfolio's composition. Individual equities make up 41.77% of the portfolio and generate 28.94% of the dividend income, while exchange-traded funds ("ETFs"), closed-end funds ("CEFs"), real estate investment trusts ("REITs"), business development companies ("BDCs"), and exchange-traded notes ("ETNs") represent 58.23% of the portfolio and generate 71.06% of the dividend income.
I have a 20% maximum sector weight, so when a singular sector gets close to that level, I make sure capital is allocated away from that area to balance things out. This is the first time I have exceeded 20% in a single sector of the portfolio. I will be allocating capital away from ETFs for a while to get this sector under 20%.
Industry | Investment | Portfolio Total | % of Portfolio |
ETFs | $2,310.57 | $10,805.72 | 21.38% |
REIT | $1,882.51 | $10,805.72 | 17.42% |
Closed End Funds | $1,537.27 | $10,805.72 | 14.23% |
Oil, Gas & Consumable Fuels | $1,157.94 | $10,805.72 | 10.72% |
Financials | $748.54 | $10,805.72 | 6.93% |
Communication Services | $721.13 | $10,805.72 | 6.67% |
Technology | $259.30 | $10,805.72 | 2.40% |
Consumer Staples | $563.20 | $10,805.72 | 5.21% |
BDC | $558.95 | $10,805.72 | 5.17% |
Utility | $295.49 | $10,805.72 | 2.73% |
Pharmaceuticals | $239.05 | $10,805.72 | 2.21% |
Food & Staple Retailing | $211.18 | $10,805.72 | 1.95% |
Industrials | $216.53 | $10,805.72 | 2.00% |
Independent Power & Renewable Electricity Producers | $100.67 | $10,805.72 | 0.93% |
Cash | $3.41 | $10,805.72 | 0.03% |
The JPMorgan Equity Premium Income ETF ( JEPI ) and Verizon ( VZ ) both declined a bit, coming away from the 5% mark. I will continue to divert capital away from them as I would like to see them closer to the 4% level than 5% even though I want to add more VZ to the portfolio.
Week 109 Additions
In week 109 I added to the following positions:
SL Green
- I thought SLG was bottoming when I originally bought it and it continued to decline so I added to the position again. SLG looks to be consolidating and I think the fears for commercial real estate in NYC are overblown. SLG has arguably the best buildings in its portfolio and the yield exceeds 14%. I think this is a good long-term play and I am happy with the addition.
Starwood Property Trust
- I have been a shareholder of STWD for 6 or 7 years now and it's one of my favorite REITs. I think their CEO Barry Sternlicht is phenomenal and this is a position I will gladly add to at depressed levels. It has paid an $1.92 annualized dividend like clockwork and I will continue to reinvesting each payment that is made
Medical Properties Trust
- MPW has been decimated and every time I look over the numbers I don’t see the doom and gloom. I added again to dollar cost average as its trading at a large discount to book value and the yield exceeds 10%.
Vornado
- VNO is a similar story to SLG. I was down about 40-45% on this so I tripled my position which wasn’t hard since I only had 1 share. I think VNO will come out of the current climate just fine and I will probably add to it later on in April.
Week 110 Gameplan
Well, week 110 is here and I will be adding to positions suggested by the readers. Please keep the ideas coming as I have a list of suggestions that continues to grow.
Conclusion
The Dividend Harvesting Portfolio has been up and it’s been down, but it never traded outside of my risk tolerance on the downside. I am perfectly happy with the fluctuations and in the past couple of weeks I have been able to increase the positions that I feel were undervalued. I hope that this article series serves as a blueprint to just keep buying and that you can have success investing in small amounts. Regardless of how you look at it, this portfolio started with $100 just over 2 years ago. It is now valued at $10,805.72 and is projected to generate $887.60 in annualized dividends. It doesn’t matter if your investing in an S&P fund or individual equities, the most important thing is to start investing, do the research, and keep investing. I am looking forward to future milestones where this portfolio is generating $1,000 of dividend income, $5,000 of dividend income, and $10,000 of dividend income annually. Please leave your comments below and I am glad that everyone is continuing to enjoy this series.
For further details see:
Dividend Harvesting Portfolio Week 109: $10,900 Allocated, $887.60 In Projected Dividends