Welcome to my 2020 Q2 review of my portfolios.
This is a series I started which will highlight my journey to financial freedom. My goal with my portfolios is to generate cash flows in the form of dividends that I can use to cover my retirement expenses without having to touch the principal. To do this, I am utilizing dividend growth stocks and growth stocks along with some funds. All the stocks mentioned are held under my self-managed individual and ROTH IRA accounts, unless otherwise mentioned.
In sharing my journey, I hope my investment strategies and style can help other investors along their journey to financial freedom.
For some reference, I am currently 22 and will not need to touch the dividends my portfolio generates for another 23-28 years. This means I will be investing as much as I can until I get there.
With that being said, in my last article, My Dividend Growth Portfolio Q1 Update: 24 Holdings, 1 Sell, 4.21% Yield, I summarized my buying strategy, both my DivGro and ROTH IRA composition, portfolio transactions, dividends, and return compared to the S&P 500.
In this article, I will outline both my DivGro and ROTH portfolios, portfolio transactions that happened from April to June 2020, dividends, and return compared to the S&P 500.
My Goals For 2020
I have several goals for 2020 which I’ve been working towards. These are:
- I want to finish the year with a total of 30 holdings, currently 27, in my DivGro.
- I want my portfolio average dividend growth to beat my inflation estimate of 2.50%.
- I want to suffer no dividend cuts/suspensions.
- I want to have no individual holding make up more than 5% of the portfolio.
- I want to strategically add to my current positions and new positions when the stock is at an attractive valuation to its historical valuations.
From my last article, I stated that Ford (NYSE:F) suspended its dividend, so I’ve already missed one of my goals which was to suffer no dividend cuts/suspensions. I am also slightly below my target dividend yield. I modified a couple of my goals to help align with the current market and economic environment.
Seeking Alpha Income
Besides my typical monthly contributions, I am also going to be using all the income from Seeking Alpha to help fund my portfolios. I will be able to give my portfolios a boost from the income my articles generate while being transparent with my readers.
# of Articles Published
Income Earned to Date
Average Income Per Publication
*Table does not include this publication*
DivGro and ROTH IRA
- Kinder Morgan, Inc. (NYSE:KMI) declared $0.2625/share quarterly dividend, a 5.00% increase from the prior dividend of $0.2500
- International Business Machines Corporation (NYSE:IBM) declared $1.63/share quarterly dividend, a 0.62% increase from the prior dividend of $1.62
- MetLife, Inc. (NYSE:MET) declared $0.46/share quarterly dividend, a 4.55% increase from the prior dividend of $0.44
- Cardinal Health, Inc. (NYSE:CAH) declared $0.4859/share quarterly dividend, a 1.00% increase from the prior dividend of $0.4811
- Medtronic plc. (NYSE:MDT) declared $0.58/share quarterly dividend, a 7.41% increase from the prior dividend of $0.54
Average Dividend Growth for 2020: 3.04%
My dividend increases received from Q1 were incorporated in the overall 2020 dividend growth average. My dividend growth so far is slightly above my inflation estimate of 2.50%. To receive higher dividend growth, I will be looking for investments that fit my strategy while offering higher than normal increases. I will look more at the 5- and 10-year growth rates to get a better understanding of which companies have maintained higher than normal dividend growth rates.
Dividend Growth Portfolio
Here is my dividend growth portfolio with some key points:
|Company Name||Ticker Symbol||% of Portfolio||Dividend Title||Projected Annual Income||Dividend Reinvest?|
|Automatic Data Processing, Inc.||ADP||4.42%||Aristocrat||$6.37||Yes|
|A. O. Smith Corporation||AOS||1.23%||Challenger||$1.44||Yes|
|Atmos Energy Corporation||ATO||2.15%||Aristocrat||$2.91||Yes|
|Franklin Resources, Inc.||BEN||0.59%||Contender||$1.84||Yes|
|Cardinal Health, Inc.||CAH||5.62%||Contender||$13.33||Yes|
|Citizens & Northern Corporation||CZNC||4.34%||3 Years||$11.13||Yes|
|Consolidated Edison, Inc.||ED||1.65%||Aristocrat||$4.06||Yes|
|Ford Motor Company||F||9.38%||___||$0||___|
|Federal Realty Investment Trust||FRT||4.21%||King||$12.28||Yes|
|Genuine Parts Company||GPC||3.80%||King||$8.23||Yes|
|Hormel Foods Corporation||HRL||1.19%||King||$1.40||Yes|
|International Business Machines Corporation||IBM||4.07%||Contender||$12.76||Yes|
|Kinder Morgan, Inc.||KMI||7.03%||3 Years||$27.35||Yes|
|The Coca-Cola Company||KO||3.66%||King||$6.72||Yes|
|Southwest Airlines Co.||LUV||3.63%||Challenger||$2.90||Yes|
|Realty Income Corporation||O||4.35%||Aristocrat||$10.06||Yes|
|Regions Financial Corporation||RF||6.02%||Challenger||$15.81||Yes|
|Verizon Communications Inc.||VZ||3.92%||Contender||$10.67||Yes|
|Exxon Mobil Corporation||XOM||0.56%||Aristocrat||$2.41||Yes|
Sources: Seeking Alpha and Dividend.com
Here is my ROTH IRA with some key points:
|Holding Name||Ticker Symbol||% of Portfolio||Projected Annual Income||Dividend Reinvest?|
|SPDR Dow Jones Industrial Average ETF||DIA||10%||$0.45||Yes|
|Fidelity High Yield Factor ETF||FDHY||12.5%||$1.08||Yes|
|SPDR Bloomberg Barclays High Yield Bond ETF||JNK||12.5%||$1.35||Yes|
|ProShares S&P 500 Dividend Aristocrats ETF||NOBL||5%||$0.23||Yes|
|Fidelity Nasdaq Composite Index Tracking Stock||ONEQ||10%||$0.34||Yes|
|Invesco S&P 500 High Dividend Low Volatility Portfolio ETF||SPHD||5%||$0.57||Yes|
|Vanguard Small Cap ETF||VB||5%||$0.15||Yes|
|Vanguard FTSE Developed Markets ETF||VEA||7%||$0.37||Yes|
|Vanguard Real Estate ETF||VNQ||8%||$0.61||Yes|
|Vanguard S&P 500 ETF||VOO||10%||$0.35||Yes|
|Vanguard Total Stock Market ETF||VTI||6%||$0.22||Yes|
|Vanguard FTSE Emerging Markets ETF||VWO||4%||$0.29||Yes|
|Vanguard High Dividend Yield ETF||VYM||
Source: Seeking Alpha and Dividend.com
Total Forward Annual Income: $217.17
Total Forward Annual Income Per Month: $18.0975
As per requests from my previous quarterly update, here is my portfolio tracker. All you need to do is open the link, download it, and customize it to fit your portfolio.
Dividend Growth Portfolio:
- CAH – Purchased 6.944 shares @ $49.18/share.
- MDT – Purchased 3.969 shares @ $97.17/share.
- SBUX – Purchased 0.681 shares @ $73.4187/share.
- ABBV – Purchased 0.565 shares @ $89.84/share.
- ADP – Purchased 1.743 shares @ $153.19/share.
- ALB – Purchased 1.803 shares @ $79.95/share.
- AOS – Purchased 1.503 shares @ $49.58/share.
- ATO – Purchased 1.266 shares @ $103.20/share.
- BEN – Purchased 1.702 shares @ $20.92/share.
- ED – Purchased 1.328 shares @ $75.30/share.
- FRT – Purchased 2.923 shares @ $87.38/share.
- GPC – Purchased 2.582 shares @ $88.47/share.
- HRL – Purchased 1.505 shares @ $47.92/share.
- VZ – Purchased 4.336 shares @ $54.97/share.
- XOM – Purchased 0.693 shares @ $48.74/share.
- IBM – Purchased 0.627 shares @ $119.47/share.
- DIA – Purchased 0.049 shares @ $247.96/share.
- FDHY – Purchased 0.450 shares @ $52.44/share.
- JNK – Purchased 0.153 shares @ $100.65/share.
- NOBL – Purchased 0.096 shares @ $64.27/share.
- ONEQ – Purchased 0.032 shares @ $373.75/share.
- SPHD – Purchased 0.212 shares @ $31.56/share.
- VB – Purchased 0.044 shares @ $137.27/share.
- VEA – Purchased 0.230 shares @ $37.70/share.
- VNQ – Purchased 0.131 shares @ $75.95/share.
- VOO – Purchased 0.043 shares @ $274.19/share.
- VTI – Purchased 0.049 shares @ $149.80/share.
- VWO – Purchased 0.155 shares @ $38.13/share.
- VYM – Purchased 0.097 shares @ $76.19/share.
Dividend Growth Portfolio:
- Fidelity Communication Services Index ETF (FCOM) – Sold 2.011 shares @ $36.1602/share.
- Fidelity Consumer Discretionary Index ETF (FDIS) – Sold 1.007 shares @ $50.82/share.
- Fidelity Energy Index ETF (FENY) – Sold 3.123 shares @ $10.835/share.
- Fidelity Health Care Index ETF (FHLC) – Sold 1.009 shares @ $50.40/share.
- Fidelity Industrials Index ETF (FIDU) – Sold 2.018 shares @ $36.945/share.
- Fidelity Materials Index ETF (FMAT) – Sold 2.023 shares @ $31.865/share.
- Fidelity Financials Index ETF (FNCL) – Sold 1.016 shares @ $35.0801/share.
- Fidelity Real Estate Index ETF (FREL) – Sold 2.047 shares @ $24.3714/share.
- Fidelity Consumer Staples Index ETF (FSTA) – Sold 2.024 shares @ $35.6412/share.
- Fidelity Information Technology Index ETF (FTEC) – Sold 0.627 shares @ $78.59/share.
- Fidelity Utilities Index ETF (FUTY) – Sold 2.029 shares @ $39.8001/share.
- Fidelity Total Bond Fund No Load (FTBFX) – Sold 0.978 shares @ $11.30/share.
I sold my positions in each of the sector ETFs and moved the funds from each into individual dividend growth stocks that suited my portfolio strategy and investing style. This should give me more direct exposure to each sector rather than broad exposure with limited dividend potential.
Portfolio Allocation Goal
I am continuing to balance my portfolio sector-wise and have a specific goal in mind. I decided on the following sector make-up for my DivGro portfolio based on my risk tolerance and priorities. This is not the end-all-be-all, but a guideline that I can follow to maintain my personal risk tolerance. I have decided to have my portfolio health care and information technology oriented. I believe these two sectors will provide me with both defense against the broader market and huge long-term growth. Below is my portfolio breakdown by sector along with my goal and S&P composition. I am comparing my portfolio to the S&P since this is the index I began comparing my portfolio to and one of the three major U.S. indices.
|Sector||Current DivGro, %||
DivGro Goal, %
|S&P 500, %|
Source: Fidelity Sector Exposure for SPDR S&P 500 Trust ETF (SPY)
To show my dividend income one way would be through the Gifted Working Time Model. This model is a way to compare your dividend income to an hourly job. This way, you can see how much “time off” your dividends are allowing you to take off of your hourly job. For this, I will assume an average pay rate of $25/hour:
- In 2018, my portfolio generated 0.6988 hours of GWT which equates to $17.47 in dividends.
- In 2019, my portfolio generated 3.7448 hours of GWT which equates to $93.62 in dividends.
- In 2020, my portfolios have generated 2.6216 hours of GWT so far which equates to $65.54 in dividends.
Below is a bar graph of my monthly dividend income since I began my journey. This graph includes both my DivGro and ROTH IRA dividends since both will be contributing to my future retirement.
Source: Created by author using Microsoft Excel
So far, December of 2019 was by a hair the best month I have had in terms of dividend income. 2020 has beaten all previous years except during June. This was caused by the dividend suspension Ford made. Because of this, I received less than expected. However, I am confident that with my continuous investments and dripping, my dividend income will continue to be greater than past years.
Here are the dividends I received to date (Q1 and Q2 2020):
Source: Created by author using Microsoft Excel
*Stocks NLH = stocks no longer held
As per requests from my previous quarterly update, here is my dividend tracker. All you need to do is open the link, download it, and customize it to fit your portfolio.
Below are the DRIP transactions that took place during Q2:
|Ticker||Amount Reinvested||# of Shares||Share Price||Added Annual Income|
|Total of Reinvestments||$28.58||Total Income Added||
With the dividend income I have received so far, I am expecting to receive roughly $150.00 in dividends for the year 2020 not counting dripping.
Return Compared to the S&P and Factors Affecting It
At the beginning of the quarter, the S&P showed signs of recovery which stemmed from politicians and people wanting the economy to reopen. This started with some stores staying open later and getting back to their pre-pandemic schedules along with some county protests happening in certain areas around the country. These protests had the sole purpose of trying to force local governments to cut regulations added because of the COVID-19 outbreak. The outcome of political talks of reopening the economy saw the major indices steadily climbing during April.
On Monday, April 20th when the markets opened, May WTI oil contracts fell historically to “just a few cents above $10 per barrel.” Later in the day, they tanked even further into the negatives. This huge drop was caused by a bulk of supply coupled with little to no storage space for the abundance of oil reserves. The stock market along with my portfolios hardly reacted to this. The S&P 500 closed down (1.79%) and my DivGro and ROTH fell (1.98%) and (1.72%) respectively.
The very next day, Tuesday, April 21st, June WTI oil contracts “[tumbled] as much as 42% to $11.89/bbl.” Again, these are the consequences of supply and demand. The economy is partially closed and people are not traveling so there is very little demand for oil coupled with huge oil reserves. Because of this, “Saudi Arabia and other OPEC members aid they are considering cutting their oil production as soon as possible” in an effort to stabilize oil prices. Following this, the S&P fell (3.07%) and my DivGro and ROTH both fell (2.74%) and (2.36%) respectively.
The stock market went back and forth for weeks on news that the economy was partially reopening across the country. For instance, in Texas, businesses were allowed to open so long as they held no more than 25% capacity to reduce the risks of spreading the pandemic any further. On Wednesday, May 13th, the Fed Chairman Powell gave a “grim warning” for the economy which pushed stocks into the red across the board. The Dow, S&P, and Nasdaq all fell (2.1%), (1.7%), and (1.5%) respectively.
For the most part, the stock market looked to be recovering until late June when there was a surge in coronavirus cases country wide. The “second wave” rolled through the country. This, in my opinion, stemmed from nationwide protests and people not taking any precautions in general as the country reopened. This prompted local and state governments to halt any opening phases and enforce stricter guidelines (i.e. mandatory facial coverings, social distancing, reduced capacity in businesses).
At the end of Q1 2020, my DivGro had an all-time unrealized loss of (26.21%). My balance at the end of the quarter for my DivGro was $5,386.07 and ROTH was $195.97. I have invested roughly $6,072.61 into my DivGro and $185.57 into my ROTH (both including dripping). This equates to all-time unrealized gains/(loss) of (11.31%) for my DivGro and 5.60% for my ROTH. By simply subtracting the percentages, you can see that my portfolio returned 14.90% during Q2 compared to the S&P’s return of 25.49%. This is obviously sub-par compared to the S&P, and I am still working on generating greater returns. However, I am not focused on capital appreciation. I am focused on dividend growth. For all I care, my portfolio could drop to $5. So long as my dividends are reliable and growing, I am a happy camper. After all, I will not be touching the principal during my retirement days. The dividends will fuel my retirement.
In conclusion, my portfolio is growing at a relatively fast rate, and I am looking forward to my next update! I hope my updates are helpful or at least provide some sort of knowledge or different perspective to investing that you can utilize or be aware of.
At times it can be hard to watch as the value of your portfolio falls, but you have to remember you’re in it for the long term! So, you have to take emotion out of your investing and invest in what you know, trust, and love. As long as your investments make you happy and are helping you to reach your goals, then there is nothing to complain about.
Did you enjoy the update? If you did, like the article and give me a follow so you can stay up to date on my articles. Let me know in the comments how your portfolios have performed during the second quarter. As always, ’till next time.
Disclosure: I am/we are long ALL STOCKS MENTIONED. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.