Dividend Harvesting Week 77 Update: $7,700 Allocated, $553.46 In Annual Dividends Yielding 6.98% Across 78 Positions

Adrian Vidal

New Data: In the Dividend Harvesting Portfolio dividend section of the article, I will now be showing the monthly YoY dividend income increases.

This was an interesting week as the markets started off strong and ended in the red. The S&P declined by -0.84%, and the Nasdaq declined by -2.6% on the week. Friday was particularly ugly as the Nasdaq declined by -2.01% and the S&P declined by -1.29%. The markets aren’t out of the woods yet, and some have indicated that another dip will occur this fall as we experience a period of increased quantitative tightening. The FED has been reducing its balance sheet by $47.5 billion monthly ($30 billion treasuries, $17.5 billion MBS) and is expected to increase its balance sheet reduction to $95 billion monthly ($60 billion treasuries, $35 billion MBS) in September. The markets are still down on the year (S&P -11.84%, Nasdaq -19.75%), and only time will tell if 2022 closes in the red. The Dividend Harvesting portfolio has completed its 77th week, and it marks the 69th week of closing in the black for a positive track record of 89.61%. When people see the title of this series, some are automatically turned off by the 78 positions within the portfolio, but extreme diversification is a critical component of my risk mitigation theory. I am not trying to time the markets or pivot as sentiment changes, as I would rather build a portfolio that can withstand turbulence, and 2022 has been a great environment to see how portfolios will react in the face of adversity.

After 77 weeks, I have allocated $7,700 to the Dividend Harvesting portfolio. Its current value is $7,931.31, placing it in the black by $231.31 (3%). There are 78 positions that are projected to generate $553.46 in annual income, which is a 6.98% portfolio yield or 7.19% yield on invested capital. In week 77, which was the 33rd week of 2022, I collected $16.26 in income from 13 dividends, and in 2022, my total income generated from this portfolio was $266.05 from 315 dividends. In week 77, I used my allocated capital of $100 to further increase my positions in New York Community Bancorp (NYCB), Ares Capital (ARCC), Owl Rock Capital Corporation (ORCC), PIMCO Dynamic Income Fund (PDI), Liberty All-Star Equity Fund (USA), and Eagle Point Credit Company (ECC). I felt there was an opportunity to decrease my price per share in some of these names while getting each of these companies closer to one of my portfolio goals of generating an additional share annually through reinvesting their dividends.

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

  1. Income generation
  2. Downside mitigation through diversification
  3. 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 $175.72 (31.75%)
  • ETFs $124.44 (22.48%)
  • CEFs $107.61 (19.44%)
  • REITs $106.63 (19.27%)
  • BDC $33.64 (6.08%)
  • ETNs $5.43 (1%)

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 $266.05 in dividend income from 315 dividends across 33 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-$500 in dividends in 2022, which will be reinvested, and finish the year generating >$700 in annual dividends.

Steven Fiorillo, Seeking Alpha

New Data – Please let me know if you like this chart and the data behind it.

I was thinking about what additional data points I could add and decided to calculate the dividend income by month and show the YoY 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, and July’s by 254.25% YoY. I plan on continuing to plot out this chart at the end of every month, and at the end of March, I will show the annual YoY progression in dividend income generated.

Steven Fiorillo, Seeking Alpha

The never-ending stream of dividend income keeps flowing into my account through weekly dividends. After adding WBA and NNN to the Dividend Harvesting portfolio in week 73, there are 584 annual dividends being produced. Each week income comes rolling in, and the snowball effect amplifies little by little.

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 is a newcomer to the list of companies generating 1 share or more annually from their dividends and its PDI. There are now 7 positions generating at least 1 share per year from their dividends, and over the next several weeks, I am going to try and get several other companies into this category.

Shares from Dividends Annually

0-9.9%

10-19.99%

20-29.99%

30-39.99%

40-49.99%

50-59.99%

60-69.99%

70-79.99%

80-89.99%

90-100%

Generating > 1 share

DIVO

C

XYLD

EXG

ORCC

ALTY

THW

OHI

ECC

QYLD

CCAP

MFC

IGR

NYCB

PFFA

GLDI

T

ARCC

PTY

CSCO

FOF

PFFD

INTC

MO

BST

USA

BRMK

BBDC

MLPX

KMI

SLVO

VZ

MPW

RYLD

AMZA

AQN

BTI

GSBD

BCAT

STWD

BP

BDJ

NUSI

RITM

AGNC

LGI

QYLG

UTF

PDI

KHC

ENB

JEPI

SPG

AMLP

XOM

UTG

CWEN

THQ

RQI

SO

XYLG

OKE

AY

WBA

NNN

STAG

O

VICI

MMM

ABBV

ORI

MAIN

ED

GLW

HPQ

BMY

KO

BAC

WBD

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 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, Seeking Alpha

In week 77, REITs remained as the largest sector of the Dividend Harvesting portfolio with a 17.49% portfolio weight, while ETFs maintained 2nd place, accounting for 16.22%. Individual equities make up 45.85% of the portfolio and generate 31.75% of the dividend income, while ETFs, CEFs, REITs, BDCs, and ETNs represent 54.15% of the portfolio and generate 68.25% 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

$1,387.18

$7,931.31

17.49%

ETFs

$1,286.28

$7,931.31

16.22%

Closed End Funds

$1,170.82

$7,931.31

14.76%

Oil, Gas & Consumable Fuels

$603.60

$7,931.31

7.61%

Technology

$568.84

$7,931.31

7.17%

Financials

$555.35

$7,931.31

7.00%

Communication Services

$538.24

$7,931.31

6.79%

Consumer Staples

$524.12

$7,931.31

6.61%

BDC

$409.58

$7,931.31

5.16%

Utility

$316.38

$7,931.31

3.99%

Pharmaceuticals

$222.95

$7,931.31

2.81%

Industrials

$148.25

$7,931.31

1.87%

Independent Power & Renewable Electricity Producers

$120.35

$7,931.31

1.52%

Food & Staple Retailing

$38.22

$7,931.31

0.48%

ETN

$38.28

$7,931.31

0.48%

Cash

$0.00

$7,931.31

0.00%

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

Steven Fiorillo, Seeking Alpha

There is a new top holding in the Dividend Harvesting Portfolio and its Omega Healthcare Investors (OHI). OHI has been on a tear since May as its up $8.53 (33.34%) from its lows of $24.81. I recently wrote an article about OHI outlining why I am still bullish on them after their recent appreciation. OHI has dethroned Intel Corporation (INTC) and now represents 4.12% of the portfolio.

Steven Fiorillo, Seeking Alpha

Week 77 Additions

In week 77 I added to my current positions of:

  • New York Community Bank
  • Ares Capital
  • Owl Rock Capital Corporation
  • PIMCO Dynamic Income Fund
  • Liberty All-Star Equity Fund
  • Eagle Point Credit Company

New York Community Bank

  • NYCB has bounced off its lows, and I recently wrote an article on them revisiting my investment thesis. I am still very bullish on NYCB as the market seems to be discounting its value compared to its peers. NYCB trades under book value, has almost 80% of its market cap in tangible book value, and is yielding over 6%, which is covered by a 51.91% payout ratio. I see value in its shares and added 2 shares of NYCB this week.

Ares Capital

  • This could become a rhetorical purchase as there is a strong possibility ARCC is added to again next week. I had an article published on why I was adding to ARCC (can be read here) as I see value in its shares. ARCC is also almost across the finish line as it produces 84.73% of its share price in dividends annually. I really want to get ARCC across the finish line and will probably add to them again next week.

Owl Rock Capital Corporation

  • ORCC was a position that was slightly in the red by a few percentage points, and when I looked at ARCC compared to its peers, I saw that ORCC is trading at a -7.04% to its NAV. I decided to add to the position, and its 9.21% yield is also enticing.

PIMCO Dynamic Income Fund

  • I was very close to getting PDI to the point where it was generating an additional share annually through its dividend, and I was slightly in the red. I took the opportunity to get PDI across the finish line, and dollar cost average

Liberty All-Star Fund

  • USA has been a battered CEF as it’s a tech and heavy financial fund. I was down on the position, and its yield crossed the double-digit mark, so I dollar cost averaged into the position.

Eagle Point Credit Company

  • ECC is also a similar theme this week as I was down roughly 12% on this position. I looked into ECC again, and I am not at the point where I will cut ties with it. While the credit markets have been tough, I am taking a long-term view and am willing to reinvest the dividends while the sector gets less challenging.

Week 78 Game Plan

I am leaning toward getting ARCC and USA into the group that produces 1 share or more annually through their dividends. I am also looking at Medical Properties Trust (MPW).

Conclusion

While the markets have bounced off their lows in 2022, they are still significantly in the red. The Dividend Harvesting Portfolio continues to navigate uncertainty well and has finished 69 out of 77 weeks in the black. The Dividend Harvesting portfolio is producing $553.46 in projected annual income and is yielding 6.98%. Dividend investing may seem like a slow grind to some investors, but I am extremely happy with this portfolio’s progress. Through weekly allocations, extreme diversification, and reinvesting all of the dividends, the Dividend Harvesting portfolio is accomplishing my investment goals for this portfolio. Reader suggestion week is quickly approaching, and in week 80, I will use that week’s capital to either add new positions suggested by the readers or add to previous companies I have added from the reader suggestions. Please leave all your suggestions in the comments, and thank you for reading.

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