My Dividend Growth Portfolio May Update: 35 Holdings And 9 Buys (2024)

With Memorial Day behind and summer upon us, it's time to review May of my dividend growth portfolio. The S&P was up 0.55% for the month, which is perfectly fine as we move in the right direction. I finished up about 1.2% as several of my financial holdings have rallied strong.

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May was a bit different from the past several months; there appears to be some short-term profit-taking. As a result, several of my holdings slowed and dropped below their 50-day or 200-day moving averages. I took some of these opportunities to add to several existing holdings; after all, the best stock to buy might be one already in your portfolio.

I'll detail my transactions below, but they all fell into one of two camps. Either I added to increase overall growth exposure or added to my strong dividend growers because of short-term weakness.

I have to also opine about AT&T (T). This was a former holding of mine, and I'm sure many of you have or currently own it as well. I fell into the siren song of that tantalizing dividend for so long, but I had finally come to my senses and sold last October. In hindsight, it all looks so obvious that a dividend cut was coming. This is a business that has been treading water for a very long time. They are a habitual bad acquirer and the most indebted company in the world. It was only a matter of time that someone would look at all the cash walking out the door and come after it. Again, I'm not happy that it's happening, but it can be so hard to see it when you are on the inside. Ironically, that very move may have been the best medicine to right the ship.

From my own perspective, this was a company I played games with. I would write covered calls or would sell peaks and buy back shares down the road. After some time, I didn't even reinvest dividends; that was a wake-up sign for me. My own investing philosophy has matured, perhaps due to the pandemic, but I don't want to play games with stocks. I want great companies that I'm happy to add to over the long haul. If I have exposure through an index fund, that's fine, but I don't need individual exposure to average (at best) companies. My best investments have also been the biggest "no-brainers" as well. I didn't have to overthink a thesis or find a niche angle; just finding great companies with growing market opportunities has worked out extremely well.

About Me

For reference, this article series covers my investing journey as a father of two towards my eventual retirement. Any specific stocks or amounts are particular to my self-directed 401(k) plan.

My portfolio aims to generate a perpetually growing income stream for my wife and me during our golden years. The aim is to live off dividends without touching the principal.

Dividend growth stocks and ETFs are the chosen vehicles to meet that goal. Being 35, and I have approximately 24 years before I can freely touch any of this money.

Another primary goal of writing is to assist other investors. Therefore, I hope there are facets of my strategy that you find appealing and can implement yourselves.

For anyone interested, I have a sample version of a portfolio tracking spreadsheet you can freely take for yourself, found here.

I've received some questions in the past, so you can save off a copy by selecting "File" -> "Make A Copy."

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2021 Goals

1. I want my dividend growth holdings to have an average dividend growth rate of at least 7%. Currently 9.6%.
2. By the end of 2021, I want to have a projected dividend income of at least $17,000. Currently $16,056.
3. I want to suffer no dividend cuts. Currently zero cuts.

Through the three-legged stool of buying new shares, reinvesting dividends, and organic dividend increases will help drive me towards that $17,000 figure.

Portfolio Strategy

Buying Criteria

These are the general guidelines I will review to see if something is worthy of adding to my dividend portfolio or whether I will add to an existing position.

Investing Framework

Here is the first round of questions to review during an initial filtering process of investments.

• What is the opportunity here?
• Is the opportunity here better than an existing holding or ETF?
• What are the risks and downsides?
• Does it add diversification?
• Are we near an all-time high?
• How long is its dividend growth streak?
• Is the dividend safe? 60+ on Simply Safe Dividends

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• Chowder Rule (current yield + five-year growth rate) > 10%.
• I like to see shareholder-friendly management. Total shareholder yield is another useful metric to analyze: the metric aggregates net dividends, buybacks, and debt reduction.
• Valuation needs to look right per F.A.S.T. Graphs.

Selling Criteria

Here are my guidelines when I may consider a stock sale. I don't want to sell shares, but I will when circ*mstances change.

• Company degradation - This could be things like deteriorating balance sheets, loss of competitive advantage, and credit rating loss. These factors may come to light before a dividend cut manifests. The pandemic exposed a lot of names in this category.
• A dividend cut, suspension, or unexpectedly paltry increases. The dividend increase is a visible outward sign of a company's success.
• Based on available information, capital is better passively invested or focused on better ideas.

Timing

One tactic I've used is buying shares before the ex-dividend date after the company has announced its yearly increase. The increase provides a glance into how management thinks the company is operating. A hefty increase can be confirmation from management that the business is running well. The reverse is true too, a small raise is a red flag, and it's time to research what's up. If this sounds interesting to you, you should check out my weekly article to get the full list.

Trees don't grow to the sky, and neither do dividend yields. So a quality company with a nice dividend increase should see its stock price rise by a similar amount over the year, readjusting to the new and higher dividend amount. I keep tabs when prices dip below their 50/200-day moving averages.

Dividend Reinvestment

I have access to free stock trading now that the trend swept over brokerages in 2020. I'll generally leave on reinvestment for my core holdings or when I can lower my cost basis.

I have conditional formatting on my spreadsheet to highlight cells if I have an opportunity to lower my cost basis. Here's an example of what I mean, though the figures are old.

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I can quickly cross-reference this with my upcoming dividend calendar for my dividend alerts. Additionally, I added an extra column on my spreadsheet for whether it's on or off.

I have reinvestment turned on at the moment for everything except for PFFD and DIV, with both of them trading above my cost basis. In the past, I found myself turning reinvestment off for specific companies. That led me to ask why I owned it if I didn't want more shares. In those situations, I've sold the shares.

Contributions

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I've been able to max out my plan for the past several years, and I hope to do so again in 2021. I receive a "true-up" contribution in March for fully funding my plan before the end of the prior year. However, my understanding is not everyone has this, so check with your plan sponsor.

Portfolio-Level Metrics

Here are high-level aggregate statistics for my portfolio. After peaking over 6% in March 2020, my portfolio yield has steadily declined with the rise in asset prices. The yield sits well under 4%, and I have a projected income of $16,056 over the next year.

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Projected Income - The sum of all known dividends for all holdings

Cash Ratio - Percentage of cash in the portfolio

For this next batch, the numerator in each calculation is my "Projected Income."

YOC (Divi Companies) = "Projected Income" / ("sum of invested capital" - (cash + cost of all non-dividend-paying companies)). The percent is my yield based on what I put in. The measure is separate from current market valuations.

Yield (Divi Companies) = "Projected Income" / ("Portfolio Value" - (cash + value of all non-dividend-paying companies)). Said another way, this is the yield from all my dividend-paying companies.

Portfolio Yield = "Projected Income" / ("Portfolio Value" - Cash). The percent is the yield based on all my invested money and their respective prices today. This would be the headline figure advertising the portfolio.

Yield w/Cash Drag = "Projected Income" / ("Portfolio Value"). All in, this is the yield, given my expected income divided by the full portfolio value.

The Portfolio

Here's the portfolio with a few of my data points highlighted.

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Here are the values behind the "CCC Status" category:

• Champion/Aristocrat: 25+ years
• Contender: 10-24 years
• Challenger: 5+ years
• King: 50+ years

Dividend Safety

I use the table below to keep tabs on the dividend safety score from Simply Safe Dividends and how that meshes with the S&P credit rating.

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This cut of data has led to a few insights and actionable items:

• I try to bundle my riskier companies into ETFs than individual exposure.
• I mostly own safe (60+ score) companies; Altria and Simon Property Group are the borderline safe ones.
• Out of dividend safety, dividend growth, and current yield, you can pick any two.
• Disney has no safety score because of dividend suspension, though it will return.

Performance

Here's my performance of my holdings versus their benchmark since I've first owned shares. Results are sorted against the benchmark, though actual results may not align perfectly with my own results due to subsequent purchases. I've been able to see whether I'm better off rolling money into an ETF or adding to my best winners. I've made actionable portfolio moves based on this data, generally selling underperforming holdings. Right now, SPG and TRV are my biggest laggards, and they are both on the chopping block.

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The data runs off the API I host over at Custom Stock Alerts (documentation here). This set comes from exposing the stock return calculator as an API call available on the web, MS Excel, or Google Sheets.

The next column allows flexibility to define what my benchmark can be. REITs, for example, compare against VNQ. Short of that, I generally compare everything to either SCHD or SPYD, depending on the yield/growth profile.

Versus S&P: This measure of the alpha generated (or not) versus the S&P 500 as a benchmark. I calculate using the stock return calculator here, and it uses the "Owned Since" column as the starting date. The results are not exact, as multiple purchases would change the figure. I can also set the benchmark at the individual ticker level. This table is how shares have performed since I first purchased them. I can compare versus both the S&P and another benchmark for each holding. Data is provided by the stock return calculator (there is also API access available for use in spreadsheets) that I built.

Correlation Matrix

I use the correlation matrix from Portfolio Analyzer. It's a table mapping out how one asset trades with another from a relation of -1 to 1. -1 means they move perfectly opposite another. 1 means they move in perfect lockstep.

I've used this information in the past to remove holdings that essentially move in lockstep (correlation > 0.90). It's also a factor when adding in a new position. It doesn't necessarily make sense to add something if another holding closely mirrors it. I've learned first-hand that all of this goes out the window during panics, as everything gets sold off indiscriminately. Bonds and preferred shares offered very little ballast.

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Dividend Increases

• Medtronic (NYSE:MDT) declares a $0.63/share quarterly dividend, an 8.6% increase from the prior dividend of $0.58.

Dividend Cuts

• None

Trade Summary

My Sells

None

My Buys

Abbott Laboratories

ABT had been one of the darlings in my portfolio for quite a while. Shares had rocketed close to $130 this year and had begun pulling back. Earnings looked good, and they've had a nice dividend increase this year. I nibbled early in May, which right now looks like I could have waited. It had been about 7 months since I had added any shares.

Disney

Disney was yet another darling of Wall Street for the past year. Shares peaked at $200 just back in March before sliding back down to their mid-$170 range. While they currently still have a suspended dividend, I'm expecting them to reinstate it as revenue becomes more predictable with COVID winding down here in the States. I had to go all the way back to 2017 for the last time I bought Disney shares.

Invesco Nasdaq 100 ETF (QQQM)

QQQM is a new holding for me to give that broader growth exposure. I became more interested in this as I saw how much Berkshire Hathaway has lagged while offering no dividend. Of course, this is a broad stroke of growth exposure, and I already have several top holdings. QQQM is also cheaper than the traditional QQQ ETF. If I sell my BRK shares, I'd probably roll them into QQQM.

WisdomTree Cloud Computing ETF (WCLD)

WCLD is another relatively new holding to my portfolio focusing on cloud computing companies. Based on prior analysis of my portfolio and my investing time horizon, it made sense to have more allocations to growth, which fits the bill for me.

Global X Data Center REITs & Digital Infrastructure ETF (VPN)

Similar to WCLD, I've only had this for about three months. The angle here that I like is the diversification and several REITs that I otherwise wouldn't have exposure to. Shares have also rocketed since I bought this and are sitting near an all-time high. The ETF also offers some yield through those REIT holdings.

Microsoft

Microsoft doesn't need any introduction, but they continue to put up phenomenal growth numbers, seemingly defying the "law of large numbers." Revenue was up 19% year over year, and I expect a nice double-digit dividend increase this fall. This is another core, generational holding that I think investors of all types can own. I'm working towards making this a larger part of my portfolio on any pullbacks.

Apple

Apple is another company that needs no introduction and is a great generational holding. It had been over two years since I bought any Apple shares, and it was long overdue adding. In fact, shares were below their 200-day moving average, which seems like a nice value for such an incredible company.

Nike

Nike is another company similar to Apple that has been sitting near its yearly low. Again, a strong company with a great brand and has just seen some near-term weakness. Shares might have gotten ahead of themselves with the 52-week high nearing $150, so adding in the low $130s made sense for me. It was also time to either add to this holding or just sell it. I had played in years past with options and selling overpriced shares, but honestly, it didn't work out, and I would have been so much better just holding and adding over time.

Realty Income

Finally, this month, I added some more shares of O. This was another holding that I had shares and played games with, selling at inopportune times instead of letting it compound.

Charts and Graphs

Dividends

This chart covers a rolling three-month average of my dividend income. The average view smooths out monthly variations. The data has also fit the blue trend-line pretty closely over time.

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After dropping and then flatlining through 2020, I've recovered and have a monthly average of about $1,240.

Over the past three years, I've been compounding at about 2.2% per month. Using the Rule of 72, I can expect to double my income about every 33 months. Using the 2.2% figure, I estimate an average of $2,000 a month around April of 2023. I'll be excited to see how well this continues to track.

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May wasn't exceptional; it wasn't my best May (last year was), nor did it improve quarter over quarter. February's dividends were boosted from a payment from JPMorgan that I would normally expect in May, but I also received a Starbucks payment in May that perhaps should have shown up in June.

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I'll get a better read at the end of June to compare Q1 vs. Q2 to see my progress.

Dividends by Position Size

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The bubble graph maps expected yearly dividends (y-axis) by the percentage in my portfolio (x-axis). The third data point, yield on cost, is represented by the size of the bubble.

AAPL, SPYD, and SCHD battle monthly to be my largest holding. SPYD has held the title for a few months since rallying at the end of 2020. Apple got a little boost from adding shares this month, but they would need to rise back to near their 52-week high to overtake SPYD.

On the y-axis, SPYD is also my top income provider, closely followed by SDIV. After those two, there is a grouping of REM, MO, FOF, SRET, and IDV.

Growth

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May was 15% lower than last May, essentially because I had sold AT&T and Tanger Outlets.

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With my projected income view, I improved more this month by adding more income through new shares and dividend increases. With half a year to go, I'm more than halfway towards my $17,000 goal for the year.

Portfolio Targets

My target portfolio is how I've aimed to split money across different asset classes.

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• "Dividend Growth" comprises both my individual dividend growing holdings as well as ETFs.
• "Fixed Income" contains my PFFD and HYLB allocations.
• "Growth" has my Amazon, Alphabet, Berkshire, QQQM, VPN, and WCLD holdings.
• "High Yield" has mostly the Global X income ETFs and FOF (the fund of funds).

Visualizations

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This chart shows the income provided by different sources. ETFs provide over 55% of my income (down slightly by adding to individual holdings this month). The rest is allocated over CEFs (FOF), bonds, preferred shares, and finally across common equity sectors.

Sector Allocations

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32% of my investment dollars are invested in ETFs. I receive more income from ETFs because I bundle up my high-yield holdings. Also, my dividend growth picks tend to yield less.

Champion, Contender, Challenger View

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I categorize my individual picks based on their dividend growth history.

• Kings 50+
• Champions 25+
• Contenders 10+
• Challengers 5+

I use this to help keep me focused on quality, and while it has been beneficial, it is not entirely predictive. My only king is Altria, and I mostly have contenders. I think that should be intuitive; these companies have seen great success and in the recent past decided to share that capital with shareholders.

This field on my spreadsheet is an automated pull from my API. I have a "King" status for those with streaks over 50 years. I want to note that the Abbotts per the CCC list are not Champions, though, by legacy S&P rules, they are both Dividend Aristocrats.

Things Coming Up/Action Items

I'm expecting June to be a monster month of dividends. The last month in any quarter is always my biggest payout, and I'm hoping to set another personal best.

With Medtronic announcing a nice dividend increase, I plan on reviewing them if I want to add more shares.

I still have several stop-limit orders set for some of my holdings for a variety of reasons. Generally, those holdings fall into one of two buckets; poor total returns or lackluster dividend increases. My current cash may be low, but approximately 15% of my portfolio could sell if we saw a decent-sized pullback in the market. If that were to happen, I have other current investments earmarked for the capital.

Conclusion

After months of recovery, May brought some cooldowns to many holdings in my portfolio. I opted to use cash available to add to many of my historical winners. Some of whom I hadn't added to in years.

I received $776 in dividends, down 15% from 2020. Through the first five months of the year, I've collected $5,220 in dividends, flat compared to 2020. My projected income moved to $16,056, up about 14% from this time last year.

As always, thanks for taking the time to read this.