Dividend Harvesting Portfolio Week 96 Update: $9,600 Allocated, Yielding 8%

2022 is in the history books, and the S&P 500 finished the year down -19.65% while the Nasdaq declined -33.51%. The Dividend Harvesting Portfolio finished the year down -3.97% as I have allocated $9,600, and the total portfolio value is $9,218.62, a loss of -$381.38. While everyone wants to end the year in positive territory, and I could have made some different decisions along the way, I am quite pleased with the Dividend Harvesting Portfolio performance in 2022. 2022 was a year of adversity for the markets, and since 1928 the S&P 500 has closed in the red only 26 times. After sticking with the core principles of the Dividend Harvesting Portfolio’s investment methodology, I believe that it mitigated downside risk quite well and proved that this investment strategy could hold up under immense pressure.

Nobody can predict the future, and if there is only one aspect of this series that people think about, I hope it’s diversification. If you’re an investor that is just investing in an index fund, that’s a perfectly sound long-term strategy as you are getting exposure to the 500 largest companies in America from an S&P 500 index fund. Diversification is important if you’re an investor that is picking individual stocks. If you had just stuck with big tech in 2022, your portfolio would look broken. By diversifying and not allocating all of your capital to just one position or sector, you can benefit from sector rotations and spread the risk across a wide net. Some readers may think that I have over-diversified as there are 80 positions in the Dividend Harvesting Portfolio, of which 79 pay a dividend. This was intentionally done, because I am not a short-term investor, and I am building an income-producing portfolio that can pivot with the markets.

At the end of week 96, the Dividend Harvesting Portfolio’s value was $9,218.62, down -3.97% from my invested capital. In week 96, $26.97 of dividend income was generated from 18 positions. In 2022 I collected $490.76 across 533 dividends. I added one share of Enbridge (ENB) and the JPMorgan Equity Premium Income ETF (JEPI) to the Dividend Harvesting Portfolio in week 96, which increased my annual projected dividend income to $735.25. I believe that this portfolio is structured to mitigate downside risk in tough markets and appreciate when the markets rise, but it will generate weekly dividend income throughout any economic cycle. I plan on continuing to document this series for years to come, and I am excited to see the progress along the way. My 2023 goals for this portfolio are to be in positive territory against my invested capital, increase the projected annual income to over $1,100, and generate over $850 in dividend income throughout the year.

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

The Dividend Harvesting Portfolio Dividend Section

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

• Equities $222.97 (30.33%)
• ETFs $185.86 (25.28%)
• CEFs $139.72 (19%)
• REITs $138.56 (18.85%)
• BDCs $48.14 (6.55%)

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. In 2022, I have collected $490.76 in dividend income from 533 dividends. 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 around $850 in dividends in 2023, which will be reinvested.

In December, I generated $63.44 in dividend income, a YoY increase of 124.49% or $35.18. It’s going to be interesting to see how this chart progresses throughout 2023 and what the YoY growth rates will be.

I haven’t added new positions since week 90, and the Dividend Harvesting Portfolio has 604 individual dividends flowing through its portfolio on a weekly basis.

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 17 total positions generating at least 100% of their share value in dividends within the Dividend Harvesting portfolio.

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.

In week 96, ETFs became the largest section of the Dividend Harvesting Portfolio’s composition. Individual equities make up 44.69% of the portfolio and generate 30.33% 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 55.31% of the portfolio and generate 69.67% 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
ETFs	$1,683.59	$9,218.62	18.26%
REIT	$1,626.04	$9,218.62	17.64%
Closed End Funds	$1,278.97	$9,218.62	13.87%
Oil, Gas & Consumable Fuels	$916.45	$9,218.62	9.94%
Communication Services	$629.03	$9,218.62	6.82%
Consumer Staples	$583.39	$9,218.62	6.33%
Technology	$578.53	$9,218.62	6.28%
Financials	$561.82	$9,218.62	6.09%
BDC	$500.96	$9,218.62	5.43%
Utility	$273.26	$9,218.62	2.96%
Pharmaceuticals	$241.95	$9,218.62	2.62%
Industrials	$125.32	$9,218.62	1.36%
Food & Staple Retailing	$113.91	$9,218.62	1.24%
Independent Power & Renewable Electricity Producers	$96.49	$9,218.62	1.05%
Cash	$8.91	$9,218.62	0.10%

Click to enlarge

In week 96, Verizon (VZ) remained the largest holding as it represented 4.42%. It’s getting too close to the 5% mark, and as much as I want to add another share I need it to get closer to 4% of the portfolio.

Week 96 Additions

In week 96 I added one share to each of the following positions:

• Enbridge (ENB)
• JPMorgan Equity Premium Income ETF (JEPI)

Enbridge

• I wrote a dedicated article on ENB outlining my investment thesis (can be read here). I think that energy demand will continue to increase and if that occurs then energy infrastructure companies will see increased contracted volumes across their networks. ENB has increased its dividend for 28 consecutive years, and this is a name I want to add to in 2023.

JPMorgan Equity Premium Income ETF

• Interestingly enough, JEPI had the 8th largest amount of inflows for all ETFs in 2022. JEPI has an interesting investment structure which I discussed in a dedicated article (can be read here). JEPI yields over 10% and has outperformed the market in 2022. If the markets turn in 2023, JEPI should do well while generating large amounts of yield, and it’s a position I want to add to.

Week 97 Gameplan

In week 97, I am thinking about adding to my positions in Omega Healthcare Investors (OHI), Starwood Property Trust (STWD), and some of the PIMCO CEFs I have.

Conclusion

2022 has come and gone, and the Dividend Harvesting Portfolio has withstood declining markets quite well. Throughout 2022 there were 533 dividends generated, which produced $490.76 in dividend income. The Dividend Harvesting Portfolio ended 2022 -3.97% on the year, with its forward projected annual income being $735.25 (7.98%). I am excited for 2023 and think that I will exceed $1,000 of projected annual income from this portfolio sometime over the summer. Please leave all of your comments and suggestions below, as week 100 is rapidly approaching.