2023-09-07 09:00:00 ET
Summary
- The markets had a good week, with the S&P 500 up 1.91% and the Dow Jones up 2.52%.
- The Dividend Harvesting Portfolio continues to perform well, generating consistent weekly income and increasing projected dividend income.
- I added to positions in Altria Group, Realty Income, and Eagle Point Credit in Week 131.
The markets had a good week as the S&P 500 closed up 1.91%, and the Nasdaq finished up 2.52% in the last week of summer. The U.S. added 187,000 jobs in August, which came in 17,000 more than the market's expectations of 170,000. All eyes will be on the CPI and Core CPI reports that get released at 8:30 am on 9/13. I am expecting that from 9/13 to 9/20, there will be an ongoing news cycle regarding what the Fed will do regarding rates. The Fed interest rate decision, FOMC economic projections, and the Fed press conference are scheduled for 2 pm and 2:30 pm on 9/20. These will set the tone for the markets, and we will finally see if the Fed will continue to hold rates and let the data dictate their decisions or if they bump rates up one more time. The FOMC Fed Watch Tool by the CME Group projects that there is a 94% chance that the Fed will leave rates where they are. I don't think they will raise rates due to various factors, including where credit card and mortgage rates are, but even if they go 25 basis points higher, I will be buying equities.
Week 131 has concluded, and the Dividend Harvesting Portfolio finished its 10 th consecutive week in positive territory. I have now allocated $13,100 to this account, and at the close of week 131, it was up 3.92% ($513.51) on invested capital. This week, the Dividend Harvesting Portfolio produced $21.16 in dividend income, bringing the income this portfolio produced in 2023 to $607.24. In week 131, I dollar cost averaged into my positions in Altria Group (MO), Realty Income (O), and Eagle Point Credit (ECC). In week 131, my forward projected dividend income increased by $12.41 or 1.12% to $1,124.81. I am getting closer and closer to generating $1,200 in projected annual dividends, which would be an average of $100 per month. Eventually, this portfolio will surpass that goal and many others.
The overall performance of the Dividend Harvesting Portfolio
The Dividend Harvesting Portfolio continues to extend its time in positive territory as it generates a continuous flow of weekly income. I am not constructing this account to beat the market, as these are not my only investments. This account is structured to generate income, mitigate downside risk, and, as a secondary objective, generate capital appreciation. I am more than happy staying within a tight range, positive or negative, to invested capital as long as my dividend income continues to be generated well above the rate of risk-free assets.
The Dividend Harvesting Portfolio dividend section
Here's how much dividend income is generated per investment basket:
- Equities $342.71 (30.47%)
- ETFs $246.44 (21.91%)
- REITs $230.33 (20.48%)
- CEFs $175.99 (15.65%)
- BDCs $129.34 (11.50%)
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 35 of 2023, I collected $21.16 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 $607.24, which is 123.73% of my total 2022 dividend income. I have collected 429 dividends, 80.49% 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. Eventually, this portfolio will be producing $100 per month of dividend income, and at some point in the future, if I continue down this path, it will generate over $1,000 per month of income.
August has come to a close, and I am able to update the monthly dividend chart again. August of 2023 was a record month as there was $93.12 of dividend income generated. This is a 99.73% ($46.50) YoY increase, and the pattern continues to go up and to the right. Before 2023 is over, I expect to break through the $100 level for monthly dividends, and I am excited to see how this chart progresses in the years to come.
September is here, and there is an estimated 16 days of income being generated from the Dividend Harvesting Portfolio. I am expecting that there will be roughly $87.85 of income generated. It's going to be a busy month as 59 dividends are being generated.
I have broken this into two sections, positions not generating at least one share per year through its dividend and positions that are. In the section for the positions that are, I have shaded it green and added how many shares annually are being generated and the new future dividend income those new shares will generate. In week 129, 26 positions were generating at least 1 share annually through their dividends. These new shares from the top 26 positions are projected to add $82.02 of dividend income annually. I will work on getting more positions over to the green block, with a new goal of generating an additional $100 of dividend income from new shares generated.
The Dividend Harvesting Portfolio Composition
REITs crept up a bit, and that is because I added a share of Realty Income in week 131, and that SL Green Realty ( SLG ) had a strong week. I am breaking my rule of less than 20% per sector for a while as REITs are on the bubble. I am going to make a conscious effort to have the REIT section retrace to under 20% over the next several months.
After adding a share to Enbridge ( ENB ) recently and Altria Group this week, there are still no positions at 5% or closely approaching the 5% level. I don't foresee myself adding to ENB or Altria Group over the next several weeks, so these levels should start to taper off.
Week 131 Additions
In week 131 I added to the following positions:
- Altria Group ((MO)) 1 share
- Realty Income ((O)) 1 share
- Eagle Point Credit ((ECC)) 2 shares
Altria Group
- On 8/28 I wrote a dedicated article on Altria Group outlining my investment thesis. (The article can be read by clicking here )
- In my opinion, Altria Group is the King of Dividend Kings. To be classified as a Dividend King, a company must be a member of the S&P 500 and have increased its dividend for at least 50 consecutive years. Altria just increased its dividend for the 54 th consecutive year, and the current yield is 8.89%, which is the largest-yielding Dividend King.
- Altria's latest dividend increase was a 4.3% bump for shareholders, and the annualized dividend increased from $3.76 to $3.92. Altria plans on continuing to increase its dividend on an annual basis in the mid-single-digit range through 2028. If shareholders receive a 4.3% increase each year through 2028, then the dividend will grow by $1.29 or 34.27% from the beginning of 2023 to the start of 2029.
- I believe Altria is undervalued as it trades at a forward P/E in the high single digits based on its 2023 P/E, 2024 P/E, and 2025 P/E. I think that Altria can generate both high-yield and capital appreciation over the years
Realty Income
- On 8/29, I wrote a dedicated article on Realty Income outlining my investment thesis. (The article can be read by clicking here )
- Shares of Realty Income had declined, and I was in the red on my investment. As shares of Realty Income reached the same levels as the height of the pandemic I decided to dollar cost average and lower my price per share.
- Realty Income is one of my favorite REITs. They don't have the largest dividend yield, but what they lack in yield, they make up for in stability. Realty Income has established a 54-year track record of providing investors with monthly dividend income. Realty Income is part of the renowned Dividend Aristocrat club and currently has the 4 th largest yield of these S&P 500 companies that have increased their dividend for at least 25 consecutive years.
- From a dividend perspective, it's hard to go wrong with a company that has declared 637 consecutive monthly dividends and provided 103 consecutive quarterly increases since the end of Q2 2023. Realty Income has provided investors with 29 years of annual dividend growth, and I am projecting that the ongoing increases will continue to flow from their shares.
- I believe that just like Altria Group, Realty Income is undervalued and can generate capital appreciation and growing dividend income in the future.
Eagle Point Credit
- I had roughly $25 left over and decided to purchase 2 additional shares of Eagle Point Credit. I dollar cost averaged into the position.
- Eagle Point Credit changed its dividend payments from quarterly to monthly in 2017 and ended up reducing its dividend in 2020 during the pandemic.
- As the economic landscape got better, they have increased the dividend 3 times and paid a bunch of special dividends along the way. In 2023, in addition to the monthly dividend of $0.14, they have paid 5 special dividends of $0.02.
- Eagle Point has a yield of 16.2%, and its share value has declined by -1.34% over the past year. On a YTD basis, their share value has appreciated by 2.11%. I am quite happy holding my shares and continuing to add to my position here and there to capitalize on the strong dividends Eagle Point produces.
Week 132 Gameplan
In week 132, I am planning on adding Prospect Capital Corporation ( PSEC ) to the BDC side of the Dividend Harvesting Portfolio, and I may add to my position in the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ).
Conclusion
The Dividend Harvesting Portfolio is going strong 132 weeks later. Despite different economic conditions, a rising rate environment, and inflation, the Dividend Harvesting Portfolio continues to mitigate downside risk while generating ongoing cash flow on a weekly basis. I am pleased with how the portfolio has performed, as it has delivered on my objectives while generating a forward yield of 8.26% across 88 positions. This approach isn't for everyone, as I am building this portfolio from scratch on $100 per week to prove that you don't need a large sum of capital to make dividend investing work for you. I am excited to see where this portfolio goes in the future, and looking at the charts below, the forward dividend income is really starting to take form. It will be nice when there is $5,200 of forward projected dividend income being generated, and the dividend income helps double my weekly investments. Please leave all your comments and suggestions in the comment section, and I will do my best to engage with everyone.
For further details see:
Dividend Harvesting Portfolio Week 131: $13,100 Allocated, $1,124.81 In Projected Dividends