My Dividend Growth Portfolio November Update: 27 Holdings, 7 Buys, 4 Sells (2024)

November saw new market highs, but fears around the Covid Omicron variant saw broad market selling at the end of the month. I finished down about 1.3% for the month to close with a balance of $513K.

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In November, I made some tough choices, including saying goodbye to a long-term holding.

Here are some of my notes from my final section in last month's article:

• As mentioned above, I've been getting a little frustrated with the high-yield funds not recovering over the past 18 months like almost everything else I own has. With my discussion around Disney, I need to see them lay out a plan to reinstate the dividend. Starting fresh today as a dividend investor, I wouldn't have Disney in my portfolio. I'm okay with giving holdings some slack, but I need my thesis to come back around.
• I reclassified SPYD as high-yield, which puts that slice above where I want it to be. It's possible I trim some more shares and spread it across other dividend investments.
• I have some homework with deciding what to do with Orion Office REIT shares following the merger of Realty Income and VEREIT.

A few exciting things happened during the month. Disney reported a quarter that was not well received by the market, with the stock trading off about 10% that day. That was it for me; I hoped for some brighter spots in the report and possibly even a dividend restatement. My comment struck me; I wouldn't include Disney if I started my portfolio today. I'll cover it more in the section, but I sold my Disney shares for these reasons and more.

I also got rid of two high-yield funds in REM and MLPA. These two have been informative, in the academic sense, that they have struggled mightily all during the fastest stock market recovery. As I've looked over my portfolio, these two, along with some others, perpetually have been underwater! They have not recovered, but they also see wilder swings than the broader market.

I decided to sell the Orion shares received from the O and VEREIT merger. I took that money (and some extra) and bought more O shares.

The final sell I'll cover is SPYD, that'll take a little more time to unwind the thesis there. I used that money to buy shares of better companies or ETFs on the flip side. I'm defining better as having provided both better historical returns and a bright future still ahead of them.

Last month, I made another point around adding more real estate exposure. I haven't figured out which way I'm going for that, but with funds freed up from SPYD, I should hopefully be able to make some decisions soon.

About Me

This article series covers my investing journey as a father of two towards my eventual retirement. Certain 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. I'm 36 and have 23 years before I can touch this money.

I write as a way also to assist other investors. I hope there are facets of my strategy that you find attractive and might 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 12%, this includes holdings I sold this year because of lackluster raises.
2. By 2022, I want to have a projected dividend income of at least $17,000. Currently $12,404.
3. I want to suffer no dividend cuts on my holdings. Currently I have zero cuts.

I've been happy with my dividend increases and not having any cuts on my holdings, but I will miss my income target for the whole year.

Portfolio Strategy

Buying Criteria

These are the general guidelines I will review to see if something is worth 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, and is it better than an existing holding or ETF?
• What are the risks and downsides?
• Are we near an all-time high?
• How long is its dividend growth streak, and is it safe (60+ on Simply Safe Dividends)?
• Chowder Rule (current yield + five-year growth rate) > 10%.
• I like to see shareholder-friendly management. Total shareholder yield is another valuable metric to analyze: the metric aggregates net dividends, buybacks, and debt reduction.

Selling Criteria

Here are my guidelines when I may consider a stock sale. I try to limit portfolio turnover, but I'll sell when circ*mstances change.

• Company degradation could be 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 paltry increases. The dividend increase is a visible outward sign of a company's success.
• Based on available information, I can focus capital 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 is a confirmation from the leadership team 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. You should check out my weekly article to get the complete list if this sounds interesting.

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.

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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 I own. In the past, I found myself turning reinvestment off for specific companies. That led me to ask why I held it if I didn't want more shares. In those situations, I've sold the shares.

Contributions

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I've maxed out my 401(k) again this year! I receive a "true-up" contribution every 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 whole portfolio currently yields 2.7%. I'm also in a bit of a high cash position, which has dropped my income.

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 yield is 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"). 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.

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. I also keep tabs on the recent dividend increases for my companies. I add the safety score and the growth score to develop an aggregate score. My superstar companies are the ones with a total score > 100.

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

• I bundle my riskier companies into ETFs than individual exposure.
• I mostly own safe (60+ score) companies; Altria and Domino's are borderline safe.
• Generally, out of dividend safety, dividend growth, and current yield, you can pick two.

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 results due to subsequent purchases. Viewing performance data helps me decide whether I'm better off rolling money into an ETF or adding to my best winners. I have and will sell underperforming holdings based on this data. Disney currently sticks out as a lackluster investment, though I'm up 70% on it. It's also somewhat emotional because my kids enjoy their content, and visiting the parks has been a magical family experience.

The data runs off the API I host over at Custom Stock Alerts. This set exposes 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 on Custom Stock Alerts, 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. My stock return calculator provides the data (there is also API access available for use in spreadsheets).

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. One means they move in perfect lockstep.

I've used this information to remove holdings that 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. This tool is only valid when markets are not in a panic like we saw in March 2020.

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Dividend Increases

• Mastercard (NYSE: MA) declares a $0.49/share quarterly dividend, an 11.4% increase from the prior dividend of $0.44.
• NIKE (NYSE: NKE) declares a $0.305/share quarterly dividend, a 10.9% increase from the previous dividend of $0.275.

Dividend Cuts

• None

Trade Summary

My Sells

iShares Mortgage Real Estate Capped ETF (REM)

REM was part of the income portion of my portfolio, but it's been a bit of a dog. It's still well-off its old highs before Covid, and again, I have a hard time justifying holding these types of holdings when everything else has seemingly recovered.

The other black eye that left me scratching my head was a low dividend payment the last time around. The September payment was meager, seemingly on no news from the underlying companies.

I haven't seen any explanation around it, but having a yield fund with a dropping yield and no price appreciation is not what I need. Selling REM and MLPA helped me fund more of my winners.

Global X MLP ETF (MLPA)

This fund has been another dud as it's down nearly 50% over the past five years. It's up 22% for the year but down 11% over the past six months. It also has a beta over one and can quickly move to the downside.

The risk-adjusted stats are terrible for both funds; they have much higher daily, monthly, and yearly standard deviations than vanilla SPY. Not only that, but the total returns have been terrible also.

Disney (DIS)

It was tough for me to part with Disney, as I mentioned above. It's not entirely based on their results; their 5-year total return chart compared to SCHD has periods of outperformance. It's the modest growth coupled with no dividend and the fact that I wouldn't have them in the portfolio if I were starting today.

I track my returns, and since my first purchase, DIS has trailed the overall market by 81% and SCHD 71%. The time to sell was earlier this year when bullishness was out of control for the stock.

I finished up about 58% total or just a hair under 10% per year. Disney was one of my oldest holdings, going back to 2015. I rolled all of this money into Domino's Pizza, which I'll cover more in that buy section.

SPDR S&P High Dividend ETF (SPYD)

I shared this chart last month that showed why I had started trimming my position.

While SPYD is low-cost, offers instant diversification and a high yield, it's had worse total returns than several other investments. There's no comparison to SCHD or DIVO for total return. SCHD is structurally different, focusing on dividend growth and fundamental metrics, albeit with a slightly lower yield historically around the 3% range. If I were at retirement or close to, I probably would have held on to the shares.

On the other hand, DIVO offers a similar yield but has still excelled versus SPYD because, at its heart, it focuses on quality dividend growth companies as well. I knew that eventually, I was going to unload my position.

Even if I backtrack and end the comparison at the end of 2019, the total returns still lack SCHD and DIVO.

In November, I set limit sell orders for SPYD when the market was hitting new all-time highs again. Some triggered on the 18th, the rest on the 26th when the Omicron variant initially spooked the market.

All those proceeds are currently sitting as cash that I have to deploy. For the short term, it's hurt my income projections as SPYD was providing approximately $1,800 a year. Overall, I finished at a 38% total return, 15.5% annualized.

I plan to spread this across my other investments, even if it is just SCHD and DIVO.

My Buys

Domino's Pizza (DPZ)

I had to have a replacement dividend growth holding in mind when considering selling Disney. Domino's has been on my watchlist for a while, and though their business model is different, it's straightforward to understand. That has helped translate into incredible returns for many years.

They've been growing their dividend for just seven years, but at a rapid clip, averaging 20% per year for the past five.

Domino's has also experienced rapid earnings growth, great margins, and a quickly reducing share count. The one strike against them is they are pretty levered, so that always has the potential to cause problems down the road.

• Realty Income (O)
• Cohen & Steers Opportunity CEF (FOF)
• Global X Data Center REITs & Digital Infrastructure (VPN)
• Amplify CWP Enhanced Dividend Income (DIVO)
• Pacer US Dividend Multiplier 400 (QDPL)
• Medtronic (MDT)

I'm going to cover these six as a group. These six purchases were directly funded by selling both REM and MLPA. There wasn't a powerful case for a significant investment in any of them; these were nibbles to increase my stake.

I've been working to build my position in O and bought enough to take my total stake to about $10,000. I also sold the Orion shares that I received post-merger with VEREIT.

FOF has been another holding I've enjoyed owning. I took the same comparison above and added FOF, and the total returns line up pretty close with DIVO and SCHD, albeit with the higher yield.

I like the concept behind the VPN ETF, and it was another holding that was relatively light with only a starter position. I added another 200 shares (50%) to bring it to about 2% of my portfolio.

DIVO, mentioned before, is another concept that I think works well for dividend investors. It has a quality core, dividend growth companies, with an options overlay to drive additional income. I picked up another 150 shares, bringing my total to 700.

QDPL is another recent ETF launch that I enjoy, it has 88% exposure to the broader S&P, but it owns dividend futures which allows it to juice its yield to, you probably guessed it, quadruple what the S&P offers typically. I added another 150 shares also.

Finally, MDT has recently been in the 52-week low range for the company after peaking at $135 in September. Medtronic is a dividend champion with over 44 years of consecutive increases, including close to a 9% increase in June.

Charts and Graphs

Dividends

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

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My progress was very steady and consistent for several years. I went through periods with more growth, and my dividends dropped; other times, I bought higher-yielding stocks and saw my average monthly dividend skyrocket. 2020 damaged some of that theme, with several yield-focused ETFs cutting their distributions. I've sold some higher-yielding products over the past several months; I'm still in a transition period. Ultimately, the investments feature a better blend of current income and future growth potential.

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 every 33 months. Calculating forward, I might reach my next big goal of $2,000 a month in April 2023.

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Here's who paid me this month (left-hand side) and the prior quarter (August).

Observations:

• Almost all my holdings paid more from incremental purchases made since August.
• I've closed out positions in PFFD and MLPA since August.

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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.

On the x-axis, SCHD is my largest holding, followed by AAPL and now DIVO. SPYD used to battle with SCHD and AAPL, but they are now gone. On the y-axis, SCHD is my top income provider, followed closely by MO, FOF, DIVO, and SDIV.

Growth

I created the following graphics to assist in charting my progress over time. This one shows my income per month for the current and prior year and any growth associated. November was 11% better than 2020, and I'm up 9.64% YTD. YTD, I had received $11,633 versus $10,610 last year.

The chart below is my projected income view (adding up all known dividend rates multiplied by owned shares). Right now, my best guess is a forward income of $12,404. That figure is up currently down 20% from a year ago. The drop in income is 100% related to selling 1100 shares of SPYD over the past month! I have some buying to do to course correct.

Portfolio Targets

My target portfolio is how I've aimed to split money across different asset classes. By selling all of my SPYD, my current cash position is relatively high.

• Dividend Growth" comprises my dividend growing holdings and ETFs like SCHD, DIVO, and QDPL.
• "Growth" has my Amazon, Alphabet, QQQM, QQQJ, 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 half 50% of my income. That amount has grown over time as I've reduced having individual holdings and indexing everything else. The rest I've allocated to common equity sectors and FOF.

Sector Allocations

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This chart shows how I've invested my money. I have 36% in ETFs (it was previously higher with SPYD), with the rest allocated across some sectors. I tilt heavily towards tech, and several sectors have no holdings (like industrials, energy, utilities, and materials).

Champion, Contender, Challenger View

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I categorize my 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.

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. Also, Altria now shows up as a Challenger and not a King. Adding Domino's this month added an extra challenger.

Things Coming Up/Action Items

I'm not waiting for any more dividend increases for 2021. Here's a look at the increases seen this year (Domino's increase was before I owned them, but here was this year for tracking purposes):

As 2021 winds down, my action item for the month involves how to allocate the $35,000 from selling SPYD.

• I have a few holdings that are small allocations in my portfolio, and I need to review them. Those primarily include NKE and QQQM.
• Selling SPYD left a big gap in my income figures that I'd like to patch up.

Conclusion

In November, I collected $1,067 in dividends and up 11% over 2020. By selling SPYD this month, I put myself behind the eight ball with my future-looking income. I plan on fixing that during December.

I've earned $12,700 in dividends YTD versus $13,314 for 2020. I should finish the year up around 8% in dividends received with a modest December. We'll see where the market indices end for the year, but my portfolio value is up nicely year to date so far.

In November, I closed out my positions in SPYD, DIS, REM, and MLPA. I added more shares to a slew of holdings (O, FOF, VPN, DIVO, QDPL, and MDT) and added a brand new holding in Domino's pizza.

Thanks for taking the time to read this, and happy investing!

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