Dividend Harvesting Portfolio Week 117: $11,700 Allocated, $980.26 In Projected Dividends

It was another interesting week as the debt ceiling debacle inched closer to the deadline. The S&P 500 declined by -0.02%, while the Nasdaq finished up 2.17% on the back of NVIDIA (NVDA) earnings. The next FOMC meeting is less than 20 days away, and the probability of another rate hike has spiked to 64.2% per the CME Group Fed Watch Tool. I am expecting the next several weeks to be choppy as a decision on the debt ceiling needs to occur, and even if a deal is reached and the markets look at it favorably, we still need to get past the June 14^th Fed meeting. I will continue allocating capital toward positions within the Dividend Harvesting Portfolio as I believe the long-term outlook is positive, despite the short-term narrative being cloudy.

After 117 weeks and $11,700 allocated, the balance of the Dividend Harvesting Portfolio is $11,381.73. The account has declined by -$318.27 or -2.72% on invested capital as it slid a bit further into the red. This was a small week for dividends as 3 positions generated $3.05 of dividend income, bringing 2023’s total dividend income generated to $335.65. In week 117, I started a position in Pfizer (PFE). I wrote a dedicated article on PFE (can be read here) outlining my investment thesis. I also added to my current positions in Enbridge (ENB), Starwood Property Trust (STWD), and AGNC Investment Corporation (AGNC). At the end of week 117, my projected annual dividend income increased by $7.65 or 0.79% to $980.11, which is a forward yield of 8.61%.

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’m feeling the pain as some of my favorite companies, including Alphabet (GOOG, GOOGL), Amazon (AMZN), and Meta Platforms (META), have been taken to the woodshed.

I’m going to address a question that continues to surface. I’m 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

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 and 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 of $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

The Dividend Harvesting Portfolio dividend section

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

• Equities $289.77 (29.56%)
• ETFs $234.71 (23.94%)
• REITs $207.61 (21.18%)
• CEFs $170.86 (17.43%)
• BDCs $77.19 (7.87%)

Collecting dividends can serve many functions in a portfolio. Some investors utilize dividends to supplement their income and live off of them. I’m building a dividend portfolio for myself 30 years into the future. In 2022, I collected $490.76 in dividend income from 533 dividends. In week 20 of 2023, I collected $3.05 in dividends, and in 2023 I generated $335.65 in dividend income. YTD, I have generated 68.39% of my 2022 dividend income from 249 dividends which is 46.72% of the dividends generated throughout 2022.

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’m hoping to collect around $1,000 in dividends in 2023, which will be reinvested.

May is ending, and next week there will be another month’s worth of data in the chart below. My YoY stats are very encouraging as my dividend income in the month of April increased by $26.32 (886.2%) YoY in 2022, then by another 107% YoY in 2023. From a dollar perspective, my April dividend income grew by $26.32 in 2022 and another $31.34 in 2023. At this rate, April’s dividend income in 2024 should be in the $90-$100 range.

I found a tool that can track and visualize my monthly and weekly dividend income. I plan on showing this graph rather than the full year as it’s a better visualization than what I had created. I really enjoy the payout calculator feature as this allows me to see my estimated monthly and weekly income and view every dividend rolling in one place. In the final two days of May, I am expecting 21 positions to generate roughly $18.54 of income, and another 7 positions to generate $20.79 in the first several days in June.

I changed this graphic a bit, so please let me know what you think. I have broken this into two sections, positions not generating at least one share per year through its dividend and positions that are. In the section for the positions that are, I have shaded it green and added how many shares annually are being generated and the new future dividend income those new shares will generate. There are currently 22 positions generating at least one new share annually from their dividends, and the new annual dividend income being generated from these shares is $65.18.

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 one 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.

ETFs continue to get closer to the 20% threshold, but in week 117, ETFs still remained the largest section of the Dividend Harvesting Portfolio’s composition. Individual equities make up 41.21% of the portfolio and generate 29.56% 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 58.79% of the portfolio and generate 70.44% 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. This is the first time I have exceeded 20% in a single sector of the portfolio. I will be allocating capital away from ETFs for a while to get this sector under 20%.

Industry	Investment	Portfolio Total	% of Portfolio
ETFs	$2,313.99	$11,381.73	20.33%
REIT	$2,069.97	$11,381.73	18.19%
Closed End Funds	$1,593.18	$11,381.73	14.00%
Oil, Gas & Consumable Fuels	$1,201.55	$11,381.73	10.56%
Financials	$827.24	$11,381.73	7.27%
BDC	$708.93	$11,381.73	6.23%
Communication Services	$707.02	$11,381.73	6.21%
Consumer Staples	$694.60	$11,381.73	6.10%
Utility	$291.99	$11,381.73	2.57%
Pharmaceuticals	$250.17	$11,381.73	2.20%
Technology	$244.22	$11,381.73	2.15%
Industrials	$199.70	$11,381.73	1.75%
Food & Staple Retailing	$183.27	$11,381.73	1.61%
Independent Power & Renewable Electricity Producers	$90.59	$11,381.73	0.80%
Cash	$2.63	$11,381.73	0.02%

Click to enlarge

In week 117, the JPMorgan Equity Premium Income ETF (JEPI) fell to my 3^rd largest holding within the Dividend Harvesting Portfolio. As ENB is now generating at least 1 share from its dividends annually, I will be focusing on other companies, and the top tier should continue to fall closer to the 4% level over the summer.

Week 117 additions

In week 117, I added a new position and added to existing positions.

• Pfizer
• Enbridge
• Starwood Property Trust
• AGNC Investment Corporation

Pfizer

• When I looked into PFE, I couldn’t pass up adding it to the Dividend Harvesting Portfolio. PFE had a dividend yield of 4.5% and a strong pipeline of products coming to market thru 2030. PFE has been a cash cow generating tens of billions in FCF and has been a dividend powerhouse, providing shareholders with 12 years of consecutive dividend growth, and a quarterly dividend that has increased from $0.15 to $0.41 since 2010.

Enbridge

• ENB was very close to generating an additional share per year through its dividend so I added the last share I needed to make this happen. ENB is one of my favorite energy infrastructure companies which has provided shareholders with 28 years of dividend growth with a 10% CAGR since 1995.

Starwood Property Trust

• STWD is a REIT that I will always allocate capital toward as long as Barry Sternlicht is at the helm. I think he is a best-in-class CEO, and I have been a shareholder of STWD since the end of 2016. I think its undervalued, and while it may not get back to the $20s anytime soon, I will take this opportunity to purchase more shares and collect the large dividend yield

AGNC Investment Corporation

• For AGNC, it was simple, I am in the red, and I dollar cost averaged into the position. I think things will turn around for REITs, and I am not looking to get rid of AGNC.

Week 118 Gameplan

In week 117, I am looking to add to my positions in Altria Group (MO), and FS KKR Capital Corp (FSK).

Conclusion

While the Dividend Harvesting Portfolio continues to flow in and out of positive territory, the dividends continue to roll in, and my projected annual dividend income continues to increase. I am not trying to beat the market, instead I am building a portfolio from the ground up that can withstand relentless economic factors and changing market dynamics. This style of investing isn’t for everyone, as its income-focused rather than looking for capital appreciation. Week 120 is creeping up on me, so please leave all your suggestions below, as I will be adding a position from the reading suggestions. Thanks for reading, and I will try to respond to as many comments as I can.