2023-11-09 09:00:00 ET
Summary
- The Dividend Harvesting Portfolio experienced a significant turnaround, finishing the week in the black after several weeks of negative performance.
- The portfolio generated $38.32 of dividend income in week 140, bringing the total dividend income for 2023 to $812.81.
- The portfolio composition includes a focus on REITs, individual equities, ETFs, CEFs, and BDCs, with plans to allocate more capital to individual equities, BDCs, and CEFs in the future.
I only have one word to sum up this week in the markets, and that is wow. The market felt as if it went parabolic after the Fed meeting as rates on the 10-year dropped, and many signs indicate the Fed is done hiking. The S&P 500 finished the week up 4.96%, while the Nasdaq increased up 5.52%. The Dividend Harvesting Portfolio took a round trip from finishing week 139 in the red by -$805.54, only to find itself up $112.65 one week later. I have always said I can't time the markets, and I would continue to dollar cost average into positions during periods of weakness. This week was a prime example of why I don't try to time the markets because if I had waited until after the Fed meeting to allocate capital, I probably would have second-guessed myself waiting for a pullback and missed the huge rally. If the markets continue to appreciate into the end of the year, I won't shy away from investing as I feel there are many long-term opportunities within the Dividend Harvesting Portfolio. As far as the Fed goes, I believe that we're going to see a pivot in the 1 st half of 2024, and even if they increase rates by 25 bps next month or in January, it will be short-lived.
After spending 5 consecutive weeks in negative territory, the Dividend Harvesting Portfolio is back in the black. After 140 weeks, I have allocated $14,000 to the Dividend Harvesting Portfolio, which finished the week up 0.80% on invested capital with a balance of $14,112.65. In October, the Dividend Harvesting Portfolio generated $99.62 of dividend income, coming up just shy of the $100 monthly income milestone. In week 140, the Dividend Harvesting Portfolio produced $38.32 of dividend income, bringing the amount of income produced by the Dividend Harvesting Portfolio to $812.81 YTD. In week 140, I added a new position that had been on my list from the reader suggestions, and it was CTO Realty Growth (CTO). The combination of adding CTO and the dividends that were reinvested increased my forward annual projected dividend income by $11.21 (0.92%) to $1,231.81. I don't know when I will see the Dividend Harvesting Portfolio produce its first month of generating $100 in dividend income, but it's on its way. I am looking forward to continuing this portfolio as I see a lot of good things occurring in 2024.
The overall performance of the Dividend Harvesting Portfolio since inception
After several difficult weeks, the Dividend Harvesting Portfolio took a one-way trip into the black. I don't know if the huge reversal will be short-lived, but this is why I keep allocating capital each week. I learned a long time ago that I am not good at trying to time the market, and weeks like this make dollar cost averaging into positions that I have conviction in that much better. While REITs and other areas are still down on the year, I feel that the Dividend Harvesting Portfolio is positioned well for the future. Regardless of whether the rally continues, if the markets are choppy, or if they sell off, I plan on continuing to allocate capital, as my overall goal is to build out a diversified portfolio that generates ongoing income while mitigating risk. I am not trying to beat the market, but I think the underlying assets within the Dividend Harvesting Portfolio will move higher in time.
The Dividend Harvesting Portfolio dividend section
Here's how much dividend income is generated per investment basket:
- Equities $358.16 (29.10%)
- ETFs $264.67 (21.50%)
- REITs $257.42 (20.91%)
- CEFs $205.09 (16.66%)
- BDCs $145.48 (11.82%)
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 44 of 2023, I collected $38.32 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 $812.81, which is 165.62% of my total 2022 dividend income. I have collected 547 dividends, 102.63% 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. I'm getting closer and closer to the $1,200 of projected dividend income on an annualized basis and will soon exceed a monthly average of generating $100 in dividends.
The Dividend Harvesting Portfolio was so close to generating $100 of dividend income in October that I almost can't believe it didn't. A new record was established with $99.62 of monthly dividend income, and I will have to wait for my first $100 month a bit longer. I am extremely happy with the turnout, as the YoY dividend income in October increased by 175.96% ($63.52), and the YoY dividend income increase continues to grow significantly. I am excited to see how the remainder of the year unfolds and look forward to seeing how the monthly dividend income looks over the first several months of 2024.
November is here, and The Dividend Tracker is showing that $88.72 of dividend income is expected to flow into the Dividend Harvesting Portfolio's account. We're starting off week 1 strong with companies like Verizon ( VZ ) And AT&T ( T ) paying their dividends. The end of the year is going to get interesting, and while November is shy of the $100 level I have been searching for, things get a bit more interesting as I look forward to December. All in all, there are many more dividends to be generated and reinvested along the way to my next goal of not just generating $100 in a month but generating $100+ of dividend income each month going forward.
Keeping SL Green Realty ( SLG ) in the green quadrant of positions that generate at least 1 share annually through its dividends has become a chore. While I am glad that SLG appreciated by 13.44% this week, it looks like I am going to have to dollar cost average up again to get this position where I want it to be. Ultimately I want every position in the portfolio generating at least 1 share per year through their dividends, but that will take several years to accomplish. I am going to work on getting several more positions crossed over in 2023, and I will figure out what my goal for this project will be for 2024.
The Dividend Harvesting Portfolio Composition
REITs had an incredible week, as it looks like the Fed is at the end of its tightening cycle. I didn't help the situation as I have wanted to add shares of CTO to the Dividend Harvesting Portfolio and felt that given the circumstances, now may be a great time. It's going to take a bit longer to get REITs back down under the 20% level, but I am looking forward to allocating capital toward other areas over the next several weeks. REITs are back up to 20.8% of the portfolio allocation. Individual equities comprise 38.24% of the Dividend Harvesting portfolio while generating 29.10% of the dividend income. REITs, ETFs, CEFs, and BDCs make up 61.76% of the portfolio and generate 70.90% of the forward income. As the remainder of 2023 progresses, I believe that I will be able to even out some of these sectors as I plan on adding more capital to individual equities, BDCs, and CEFs than REITs and ETFs.
While the sector allocations have been out of whack a bit, on an individual position basis, my largest holdings continue to decline as a percentage of the portfolio. I have a 5% max individual position allocation, and Enbridge ( ENB ) remains my largest position, representing 4.26% of the Dividend Harvesting Portfolio. Only 3 positions have more than a 4% weighted average, and this could continue to fall over the next several weeks. I actually wouldn't be surprised if the bottom half of the top ten changes a bit over the next several months, as I am planning on adding to some other positions that are in slots 11-20.
Week 140 additions
In week 140 I added a new position:
- CTO Realty Growth ((CTO))
CTO Realty Growth
- CTO was a REIT that was suggested a while ago, and it has remained on my watch list. Given the carnage in the REIT sector, I have been paying more attention to it. While I certainly didn't need another REIT, I felt it presented a strong opportunity.
- CTO recently reported earnings, and their book value came in at $24.25, and their tangible book value is $19.77. Shares of CTO are trading at $16.92, placing them at a -30.23% discount to book and a -14.42% discount to tangible book value.
- CTO just provided a solid earnings report as they came in with $0.48 of FFO, which was a beat of $0.15, and $28.47 million in revenue, which was a 23.1% YoY increase and a $2.96 million beat.
- They guided for $1.72 - $1.76 of adjusted FFO per diluted share, while the consensus is $1.57
- CTO has no exposure to NY or CA and focuses on states that are seeing an influx of people moving in from coastal states.
- CTO is a smaller REIT that I believe can grow into a larger REIT over the next 5-10 years, and I plan on building out this position over time.
Week 141 Gameplan
I am going to give the market a few days to see if we get a pullback, but there are many positions I want to add capital to. Some of the PIMCO CEFs look very enticing as is seems like the Fed is done hiking, and I am considering adding to the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ).
New potential section
There have been many comments over the past few months asking questions about share counts, dividends collected, and so on. Would you like to see a new section that has a running table that has the following information for each position?
- invested capital
- current value
- dividends collected
- forward dividend income
Please leave your comments below on this idea. This would take some time to develop and go through all my data, but if the readers are interested in this data, then I am happy to build it. If there is other information you would like, please leave that in your comments below.
This is my initial idea of what it would look like. This could change if I start building it out, but I am open to ideas and suggestions.
Conclusion
Thank you for all your continued commentary and suggestions. While I would love to own more companies and funds, there is no way I can invest in everything. The Dividend Harvesting Portfolio is going strong, and it's back in positive territory with investments in 92 positions and a portfolio balance of $14,112.65 while generating an estimated $1,230.81 in forward dividend income for a forward yield of 8.72%. While the market rallied this week, I believe all eyes will be on the next CPI report and the December Fed meeting to see if this was a head fake or a sustainable outlook on reaching peak rates. No matter what the decision is, I plan on allocating capital each week and dollar cost averaging into many positions within the Dividend Harvesting Portfolio. We have endured geopolitical and macroeconomic headwinds, yet the Dividend Harvesting Portfolio has held up relatively well. I am building this portfolio to mitigate downside risk and generate continuous income, and I would say it has lived up to my expectations. I believe that when the Fed pivots, this portfolio will see some unlocked potential, and I am excited for the future.
For further details see:
Dividend Harvesting Portfolio Week 140: $14,000 Allocated, $1,230.81 In Projected Dividends