Dividend growth investingWelcome to the September review of DivGro, my portfolio of dividend growth stocks. My goal with these reviews is to share updates to my portfolio and to detail the dividends I received during the month. Additionally, I look at how the month’s activities have impacted DivGro’s projected annual dividend income (PADI).

In September, I opened one new position and added shares to two existing positions. Ten DivGro stocks announced dividend increases in September. The net result of these changes is that PADI increased by about 2.1% in September. Year over year, PADI increased by 22%.

As for dividend income, in September I received dividends totaling $4,094 from 46 stocks in my portfolio, a year-over-year increase of 22%. I’m happy to say this amount sets a new record for dividend income in a single month!

So far in 2020, I’ve collected $21,659 in dividends or about 80% of my 2020 goal of $27,000.

Source: Author’s Blog (DivGro)

Given DivGro’s PADI of $31,473, I can expect to receive $2,623 in dividend income per month, on average, in perpetuity, assuming the status quo is maintained. But DivGro’s PADI should increase over time because I invest in dividend growth stocks. Furthermore, I plan to reinvest dividends until I retire, so DivGro’s PADI should continue to grow through dividend growth and through compounding.

Source: Author’s blog (DivGro)

Dividend Income

I received dividends from 46 different stocks, for a monthly total of $4,094 in dividend income:

Source: Author’s blog (DivGro)

September’s total is the highest I’ve ever recorded since I founded DivGro.

Here is a list of the dividends I collected in September:

  • Archer-Daniels-Midland Company (ADM) — income of $108.00
  • Aflac Incorporated (AFL) — income of $28.00
  • Amgen Inc (AMGN) — income of $80.00
  • Anthem, Inc (ANTM) — income of $9.50
  • Broadcom Inc (AVGO) — income of $97.50
  • BlackRock, Inc (BLK) — income of $127.05
  • Cummins Inc (CMI) — income of $78.66
  • Canadian National Railway Company (CNI) — income of $53.94
  • Chevron Corporation (CVX) — income of $129.00
  • Dominion Energy, Inc (D) — income of $94.00
  • Digital Realty Trust, Inc (DLR) — income of $50.40
  • Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund (ETO) — income of $142.50
  • Gilead Sciences, Inc (GILD) — income of $136.00
  • The Home Depot, Inc (HD) — income of $90.00
  • Honeywell International Inc (HON) — income of $63.00
  • International Business Machines Corporation (IBM) — income of $114.10
  • Intercontinental Exchange, Inc (ICE) — income of $30.00
  • Intel Corporation (INTC) — income of $99.00
  • Johnson & Johnson (JNJ) — income of $24.24
  • Lockheed Martin Corporation (LMT) — income of $72.00
  • Main Street Capital (MAIN) — income of $71.75
  • McDonald’s Corporation (MCD) — income of $33.75
  • 3M Company (MMM) — income of $147.00
  • Microsoft Corporation (MSFT) — income of $51.00
  • NextEra Energy, Inc (NEE) — income of $35.00
  • AllianzGI Equity & Convertible Income Fund (NIE) — income of $380.00
  • Northrop Grumman Corporation (NOC) — income of $14.50
  • Realty Income Corporation (O) — income of $23.35
  • PepsiCo, Inc (PEP) — income of $71.58
  • Pfizer Inc (PFE) — income of $114.00
  • Pinnacle West Capital Corporation (PNW) — income of $97.81
  • Public Storage (PSA) — income of $90.00
  • Public Storage (PSX) — income of $180.00
  • QUALCOMM Incorporated (QCOM) — income of $22.75
  • Raytheon Technologies Corporation (RTX) — income of $57.00
  • Snap-on Incorporated (SNA) — income of $64.80
  • T Rowe PriceT. Rowe Price Group, Inc (TROW) — income of $180.00
  • The Travelers Companies, Inc (TRV) — income of $85.00
  • UnitedHealth Group Incorporated (UNH) — income of $50.00
  • Union Pacific Corporation (UNP) — income of $46.56
  • United Parcel Service, Inc (UPS) — income of $101.00
  • Visa Inc (V) — income of $15.00
  • Valero Energy Corporation (VLO) — income of $181.30
  • Walgreens Boots Alliance, Inc (WBA) — income of $140.25
  • Wells Fargo & Company (WFC) — income of $40.00
  • Exxon Mobil Corporation (XOM) — income of $174.00

Here is a chart showing DivGro’s monthly dividends plotted against PMDI. It is clear that quarter-ending months are huge outliers:

Source: Author’s blog (DivGro)

This is one reason that I now create a rolling 12-month average of dividends received (the orange bars) plotted against a rolling 12-month average of PMDI (the blue, staggered line):

Source: Author’s blog (DivGro)

While I would prefer receiving more evenly distributed dividends, I wouldn’t let that influence my investment decisions.

Dividend Changes

In September, the following stocks announced dividend increases:

  • Accenture plc (ACN) — increase of 10.00%
  • Canadian National Railway Company (CNI) — increase of 2.19%
  • Honeywell International Inc (HON) — increase of 3.33%
  • Lockheed Martin Corporation (LMT) — increase of 8.33%
  • Microsoft Corporation (MSFT) — increase of 9.80%
  • Realty Income Corporation (O) — increase of 0.21%
  • Philip Morris International Inc (PM) — increase of 2.56%
  • Texas Instruments Incorporated (TXN) — increase of 13.33%
  • Verizon Communications Inc (VZ) — increase of 2.03%
  • W. P. Carey Inc (WPC) — increase of 0.19%

These changes will increase DivGro’s PADI by $117.

I like seeing dividend increases above 7%, and only four of the increases top my expectations. The arithmetic average of this month’s dividend increases is 5.2%, which easily beats inflation.

Transactions

Here is a summary of my transactions in September:

New Position

  • Public Service Enterprise Group Incorporated (PEG) — bought 100 shares following a put option assignment

The $55 put option I’d sold on Public Service Enterprise Group Incorporated (PEG) was assigned on Monday, 14 September, four days before expiration. This means I had to buy 100 shares of PEG at $55 per share while shares were priced around $52.48. While that looks like a bad deal, I did receive $3.60 per share for selling the put option in the first place. So, my effective cost basis is $51.40 per share.

This turned out to be a favorable assignment because, effectively, I paid less per share than the going price at the time. For additional context, PEG is now trading above $57 per share!

Increased Positions

  • Automatic Data Processing, Inc (ADP) — added 50 shares and increased position to 120 shares
  • Cisco Systems, Inc (CSCO) — added 100 shares and increased position to 300 shares

I highlighted ADP in two articles I wrote in September:

Please refer to those articles for details on why I think ADP is a good candidate at this time.

As for CSCO, I also uncovered the stock as an undervalued candidate using Dividend Radar’s new added value metrics. Additionally, CSCO was ranked #2 in last month’s 10 Dividend Growth Stocksarticle. Again, I won’t rehash any details here, so please check out those articles.

Adding PEG and increasing my ADP and CSCO positions increased DivGro’s PADI by about $522.

Markets

It is worth looking at the markets to understand the environment we’re investing in, even though I no longer compare DivGro’s performance to those of the markets:

In September, the DOW 30 dropped 2.3%, the S&P 500 dropped 3.9%, and the NASDAQ dropped 5.2%. The yield on the benchmark 10-year Treasury note fell to 0.677, while CBOE’s measure of market volatility, the VIX decreased by 0.2%.

DivGro led the market but was still down 1.83%. Here’s a one-month performance chart of DivGro’s dividend growth stocks:

Source: Created by the author

I was pleasantly surprised by the performance of both FedEx Corporation (FDX) and NIKE, Inc (NKE)!

NKE jumped about 8% after returning to a profit and revenue growth in its first fiscal quarter (FQ1). Likewise, FDX announced strong FQ1 results and gained on analyst upgrades.

Portfolio Statistics

Given DivGro’s current market value and the total capital invested, the portfolio has returned about 60% since inception. But calculating the IRR (internal rate of return) gives a better measure of portfolio performance, as IRR takes into account the timing and size of deposits since inception. DivGro’s IRR is 13.3%.

I track the yield on cost (YoC) for individual stocks, as well as an average YoC for my portfolio. DivGro’s average YoC increased from 3.65% last month to 3.66% this month.

Percentage payback relates dividend income to the amount of capital invested. DivGro’s average percentage payback is 17.3%, up from last month’s 16.9%.

Finally, DivGro’s projected annual yield is at 4.83%, up from last month’s value of 4.79%. I calculate the projected annual yield by dividing PADI ($31,473) by the total amount invested.

The following chart shows DivGro’s market value breakdown. Dividends are plotted at the base of the chart so we can see them grow over time:

Source: Author’s blog (DivGro)

Looking Ahead

It appears we’re moving into a volatile period as election date nears, and there are concerns about the potential of a contested election. I’m just hoping that democracy prevails, whichever way the election results go. We’ll see what happens…

Please see my Performance page for various visuals summarizing DivGro’s performance.

Thanks for reading and take care, everybody!

Disclosure: I am/we are long AAPL, ABBV, ACN, ADM, ADP, AFL, AMGN, AMZN, ANTM, APD, AVGO, BLK, BMY, BNS, CB, CMCSA, CMI, CNI, COST, CRM, CSCO, CVS, CVX, D, DIS, DLR, ETO, FDX, GD, GILD, GOOG, HD, HON, HRL, IBM, ICE, INTC, ITW, JNJ, JPM, KO, LMT, LOW, MA, MAIN, MCD, MDT, MMM, MO, MRK, MSFT, NEE, NFLX, NIE, NKE, NNN, NOC, O, ORCL, PEG, PEP, PFE, PG, PINS, PM, PNW, PSA, PSX, QCOM, ROST, RTX, RY, SBUX, SNA, SPG, SYK, T, TD, TJX, TROW, TRV, TSM, TXN, UNH, UNP, UPS, V, VLO, VZ, WBA, WFC, WPC, XEL, XOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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