Dividend Harvesting Week 87 Update, $8,700 Allocated, $641.83 In Annual Dividends

Mongkol Onnuan

The most important week of earnings is in the books, and Apple (AAPL) saved the day, causing a large rally on Friday. The S&P 500 finished up 3.27% despite Meta Platforms (META) and Amazon (AMZN) experiencing sharp sell-offs. The Dividend Harvesting Portfolio had another good week, as the spread between its invested capital and account value tightened. Back in week 83, the Dividend Harvesting Portfolio was in the red by -12.65% as the spread between invested capital and its account value was -$1,116.81. Over the past 4 weeks, the combination of dollar cost averaging into positions, reinvesting the dividends, and the markets starting to rebound pushed the Dividend Harvesting Portfolio’s account value to $8,366.46. The Dividend Harvesting Portfolio has gained substantial momentum, and the spread between invested capital and account value is -3.83% or -$333.54. The S&P 500 is still down -18.67% YTD and -19.04% from its 52-week high. If this rally is sustainable and can be built upon, I believe that the Dividend Harvesting Portfolio will be back in positive territory sooner rather than later.

At the end of week 87, the Dividend Harvesting Portfolio closed with an account value of $8,366.46, generating $641.39 (7.67%) in projected annual income. There were 7 positions that generated $4.88 of income in week 87. As we go into November, I am estimating that there will be 52 positions generating roughly $59.38 worth of income before any future investments I may make before any upcoming ex-dividend dates. YTD, the Dividend Harvesting Portfolio, has generated $362.18 from 420 individual dividends. In week 87, I added 1 share to each of the following positions, Enbridge (ENB), Kinder Morgan (KMI), Global X S&P 500 Covered Call ETF (XYLD), and the CBRE Global Real Estate Income Fund (IGR). With 17 weeks remaining in the 2nd year of the Dividend Harvesting Portfolio, I believe it will end in positive territory, and my projection of exceeding $725 in projected annual income will be met.

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 $204.65 (31.89%)
  • ETFs $145.56 (22.68%)
  • REITs $129.57 (20.19%)
  • CEFs $121.46 (18.92%)
  • BDCs $40.58 (6.32%)

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

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 $362.18 in dividend income from 420 dividends across 43 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, Seeking Alpha

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, Seeking Alpha

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, Seeking Alpha

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, Seeking Alpha

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 87, 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 46.14% of the portfolio and generate 31.89% 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 53.86% of the portfolio and generate 68.11% 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

$1,554.92

$8,366.46

18.59%

ETFs

$1,350.65

$8,366.46

16.14%

Closed End Funds

$1,143.47

$8,366.46

13.67%

Oil, Gas & Consumable Fuels

$799.62

$8,366.46

9.56%

Consumer Staples

$576.74

$8,366.46

6.89%

Technology

$553.57

$8,366.46

6.62%

Financials

$522.21

$8,366.46

6.24%

Communication Services

$565.65

$8,366.46

6.76%

BDC

$456.49

$8,366.46

5.46%

Utility

$267.19

$8,366.46

3.19%

Pharmaceuticals

$230.41

$8,366.46

2.75%

Industrials

$130.78

$8,366.46

1.56%

Independent Power & Renewable Electricity Producers

$103.91

$8,366.46

1.24%

Food & Staple Retailing

$110.22

$8,366.46

1.32%

Cash

$0.63

$8,366.46

0.01%

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

Steven Fiorillo, Seeking Alpha

In week 87, Exxon Mobil (XOM) remained the Dividend Harvesting Portfolio’s largest position. Only XOM and Verizon (VZ) exceeded the 4% level, and I feel that none of my positions are in danger of creeping up to my 5% limit in the foreseeable future.

Steven Fiorillo, Seeking Alpha

Week 87 Additions

In week 87, I used the $100 of allocated capital to purchase 1 additional share of each of the following companies:

  • Enbridge (ENB)
  • Kinder Morgan (KMI)
  • Global X S&P 500 Covered Call ETF (XYLD)
  • CBRE Global Real Estate Income Fund (IGR)

Enbridge

  • ENB is a repeat from week 86. I feel ENB is on sale for under $40, and I wanted to add an additional share. 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%.

Kinder Morgan

  • KMI is also a repeat from week 86. I love pipelines, and I believe 2023 will be a great year for the energy infrastructure industry, just as 2022 has been a solid year. Natural gas is becoming more important, and KMI has one of the largest natural gas infrastructures globally. I plan on adding shares of KMI in the future under $19, and as its currently yielding 6.25%, this was an addition I couldn’t pass up.

Global X S&P 500 Covered Call ETF

  • XYLD is yielding just over 13%, and I wanted to add another share prior to big-techs earnings. My feeling is that if big-techs earnings were strong, a rally in the markets would occur, and I wanted to grab another share of this covered-call ETF. Regardless of when the markets eventually rebound, I plan on adding to this over time anywhere under $48.

CBRE Global Real Estate Income Fund

  • I am down on IGR, but I still believe it’s a good purchase for my long-term income plan. REITs have been hammered during the rising rate market, but I believe things will turn around in the back half of 2023. Eventually, the Fed will pivot, and when they do, I expect REITs to rally.

Week 88 Gameplan

I am considering adding to my positions in the JPMorgan Equity Premium Income ETF (JEPI), Intel Corporation (INTC), and possibly AT&T (T).

Conclusion

Reader Suggestion week is quickly approaching, and in week 90, I will be adding new positions suggested by the readers or adding to positions that have been added from their suggestions. Please leave your comments and suggestions in the comment section. The Dividend Harvesting Portfolio continues to navigate the waters quite well and is almost even in regard to invested capital. This portfolio is generating weekly income and producing a yield that exceeds 7% through a healthy diversification of positions. I am excited to continue allocating capital toward this project and documenting the process. Thank you for reading.

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