Dividend Harvesting Week 86 Update: $8,600 Allocated, $630.84 In Annual Dividends

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As we head into what some would consider the most important week for earnings with big tech set to report, the S&P 500 rose 2.28% while the Nasdaq rose 2.31%. Since the end of week 83, the Dividend Harvesting Portfolio has regained 27.30% of its losses, as it closed week 86 at $7,836.39, down -8.88% (-$763.61) from its invested capital level. I was asked why I am continuing to invest throughout the downturn instead of waiting and deploying capital sometime in the future? I can’t predict tops and bottoms, and I certainly can’t predict short-term market fluctuations. I continue to deploy capital each week to this project because I see many opportunities within the Dividend Harvesting Portfolio to add more shares of positions I believe are undervalued and will continue to generate large dividends. I am building this portfolio as a long-term dividend-producing vehicle, and that means deploying capital in the worst of times and the best of times. When I am ready to retire, this portfolio will be an additional income-generating vehicle to fund my retirement.

At the end of week 86, the Dividend Harvesting Portfolio closed with an account value of $7,836.39. It’s annual projected income increased to $630.84, which is a forward yield of 8.05%. It was a slow week of dividends, as only 4 positions generated $1.94 of income. Throughout October, the Dividend Harvesting Portfolio has generated $28.12 of income from 22 positions. Throughout 2022, I have collected $357.30 in income from 413 individual dividends. I have reinvested each dividend, and through the combination of allocating capital and dividend reinvesting, I have grown my projected income to $630.84. There are 18 weeks left in year 2 of the Dividend Harvesting Portfolio series, and I am on pace to exceed $725 of projected annual income once year 2 has concluded. For many investors, 2022 hasn’t been a great investing environment, but I believe its been a great time for long-term investors to allocate capital. In week 86 I added an additional share to my positions in Enbridge (ENB), Walgreens Boots Alliance (WBA), AGNC Investment Corp (AGNC), Kinder Morgan (KMI), and the CBRE Global Real Estate Income Fund (IGR).

Steven Fiorillo

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 am 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 am going to address a question that continues to surface. I am 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 and Historical Performance

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 & 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

Steven Fiorillo

The Dividend Harvesting Portfolio Dividend Section

Here is how much dividend income is generated per investment basket:

  • Equities $200.81 (31.83%)
  • ETFs $139.40 (22.10%)
  • REITs $129.48 (20.53%)
  • CEFs $120.73 (19.14%)
  • BDCs $40.41 (6.41%)

Steven Fiorillo

Steven Fiorillo

Collecting dividends can serve many functions in a portfolio. Some investors utilize dividends to supplement their income and live off. I am building a dividend portfolio for myself 30 years into the future. Since I am reinvesting every dividend, they serve multiple purposes today. In 2022 alone, I have collected $357.30 in dividend income from 413 dividends across 42 weeks. This has allowed the Dividend Harvesting portfolio to stay in the black while growing the snowball effect.

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 am hoping to collect between $450 and $500 in dividends in 2022, which will be reinvested, and finish the year generating >$700 in annual dividends.

Steven Fiorillo

This next chart illustrates my monthly YoY dividend income progression. Since I started this series in April of 2021, that is where the dividend income starts, illustrated by the blue bars. My dividend income has increased substantially as April’s income has grown by 886.2% YoY, March 585.52% YoY, June 476.52% YoY, July’s 254.25% YoY, and August 247.13%.

The month of September just finished, and I collected $47.96 in dividend income. This is a YoY increase of $35.45 or 283.37%.

Steven Fiorillo

The Dividend Harvesting Portfolio is producing 588 annual dividends. I am not expecting this to change as I am focusing on dollar cost averaging on current positions.

Steven Fiorillo

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 12 total positions generating at least 100% of their share value in dividends within the Dividend Harvesting portfolio. This could fluctuate due to market volatility, but I am looking to have as many positions generating at least 1 share annually from their dividends as I can.

Steven Fiorillo

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 1 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.

Steven Fiorillo

In week 86, REITs remained the largest segment and grew a bit closer to my 20% threshold for an individual sector weight within the Dividend Harvesting Portfolio. Individual equities make up 46.03% of the portfolio and generate 31.83% 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 53.97% of the portfolio and generate 68.17% 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. In 2022, I will make an effort to even out these portfolio percentages. As more capital is deployed, the bottom half of the portfolio weighting will increase.

Industry

Investment

Portfolio Total

% of Portfolio

REIT

$1,442.75

$7,836.39

18.41%

ETFs

$1,283.69

$7,836.39

16.38%

Closed End Funds

$1,084.22

$7,836.39

13.84%

Oil, Gas & Consumable Fuels

$714.04

$7,836.39

9.11%

Consumer Staples

$544.51

$7,836.39

6.95%

Technology

$519.68

$7,836.39

6.63%

Financials

$498.61

$7,836.39

6.36%

Communication Services

$527.94

$7,836.39

6.74%

BDC

$418.12

$7,836.39

5.34%

Utility

$258.04

$7,836.39

3.29%

Pharmaceuticals

$225.12

$7,836.39

2.87%

Industrials

$120.66

$7,836.39

1.54%

Independent Power & Renewable Electricity Producers

$95.02

$7,836.39

1.21%

Food & Staple Retailing

$103.35

$7,836.39

1.32%

Cash

$1.33

$7,836.39

0.02%

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

In week 86, Exxon Mobil (XOM) regained the top spot as my largest position in the Dividend Harvesting Portfolio. I think it’s going to take some time to rebalance the portfolio, and a lot will depend on what the recovery cycle looks like.

Steven Fiorillo

Week 86 additions

In week 86 I used the $100 of allocated capital to purchase 1 share of each of the following companies:

  • Enbridge
  • Walgreens Boots Alliance
  • AGNC Investment Corp
  • Kinder Morgan
  • CBRE Global Real Estate Income Fund

Enbridge

  • ENB is one of my favorite energy infrastructure companies. It’s a toss-up between Energy Transfer (ET) and ENB. I believe ENB is the most diversified energy infrastructure company as they own their own utility company and a huge portfolio of renewable assets in addition to the traditional pipelines and storage facilities within the sector. ENB is a dividend powerhouse as it has paid a dividend for over 67 years, and over the past 27 years its dividend has grown at an average compound annual growth rate of 10%. With shares declining, ENB’s yield is just past 7% and it has once again become a buying opportunity for me.

Enbridge

Walgreens

  • I recently wrote an article on WBA after their Q4 beat. I feel that WBA is establishing a bottom, and shares represent an opportunity for dividend income and capital appreciation. I dollar cost averaged into the position as shares are yielding over 5.5%.

AGNC Investment Corp

  • AGNC has been one of the worst investments in the Dividend Harvesting Portfolio. I have made the decision to dollar cost average into a lower cost basis instead of exiting the position. I see long-term value, and even if shares don’t get back to where they used to trade anytime soon, I can reduce my cost and increase my monthly income from the position.

Kinder Morgan

  • I also wrote an article on KMI recently outlining why I am still bullish. KMI is one of the largest transporters of natural gas in the U.S and has significantly improved its balance sheet. Management has executed on its financial discipline plan and is gradually increasing its dividend. I think KMI is undervalued and will continue to add shares.

CBRE Global Real Estate Income Fund

  • This is similar to AGNC. IGR has gotten demolished in the rising rate environment. It’s a CEF run by the largest commercial real estate firm, and I believe regardless of the market, real estate is a good long-term investment. I will continue averaging into the position.

Week 87 Gameplan

If I can grab another share of ENB and KMI at attractive valuations, I may add them again in week 87. Other than that, I am considering Verizon (VZ) again due to its sell-off after earnings and another share of AT&T (T) as T has delivered a solid earnings beat.

Conclusion

Week 90 is rapidly approaching, and I am interested in seeing the reader’s suggestions, so please leave them in the comment section. I am enjoying seeing how this portfolio is progressing and handling the volatility, and hopefully, it will finish 2022 above its capital allocation line. Over the next several weeks, I will work on getting more companies closer to producing a share annually through reinvesting the dividends. I hope to add a few more to this category by the end of the year.

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