Dividend Harvesting Week 79 Update: $7,900 Allocated, Yielding 7.43% Across 78 Positions

Following Jerome Powell’s speech and the disastrous market decline on 8/26, the markets fell further the week of 8/29. The S&P fell -2.76%, while the Nasdaq declined by -3.82% leaving the Nasdaq deep into bear market territory and the S&P knocking on the door. In week 79, the Dividend Harvesting Portfolio finished in the red as it dropped below its invested capital baseline, snapping a newly established string of positive weeks. The Dividend Harvesting Portfolio has finished 70/79 weeks in the black (88.61%), but the market dynamics were too powerful to stay on the right side of the baseline. That’s ok, as weakness in the markets creates long-term opportunities for adding additional shares to current positions, reinvesting dividends, and starting new positions. Regardless if the bottom falls out from under us and the June’s bottom is shattered or if the markets rally into 2023, I have a long-term time horizon and will continue building out this dividend-producing portfolio.

After 79 weeks, I have allocated $7,900 ($100 per week) to the Dividend Harvesting Portfolio. In week 79, the baseline of $7,900 was breached, and at the end of week 79, the Dividend Harvesting Portfolio closed at $7,693.03, down -$206.97 (-2.62%). As the indices declined, I added 1 share to each of the following positions Altria Group (MO), Intel Corporation (INTC), Owl Rock Capital Corporation (ORCC), and the CBRE Global Real Estate Income Fund (IGR). This portfolio is now projected to generate $571.25 in annual dividends, which is a forward yield of 7.43%. In week 79, $16.30 was generated in weekly income, and I have now collected and reinvested $287.32 in dividends throughout 2022. I am looking forward to the suggestions in this week’s article, as I will be allocating 100% of Week 80s capital to suggestions made by the readers. Please leave your comments below and let me know your favorite dividend investment and what you would like to see added in week 80.

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

The Dividend Harvesting Portfolio Dividend Section

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

• Equities $181.26 (31.73%)
• ETFs $125.34 (21.94%)
• CEFs $113.28 (19.83%)
• REITs $107.75 (18.86%)
• BDC $38.16 (6.68%)
• ETNs $5.46 (1%)

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 $287.32 in dividend income from 341 dividends across 35 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.

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, and July’s by 254.25% YoY.

The month of August has finished, and $46.62 of dividend income was generated and reinvested. This is a YoY increase of $33.19 or 247.13%. It will be interesting to see what happens as the years progress. I will continue plotting 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.

The never-ending stream of dividend income keeps flowing into my account through weekly dividends. I haven’t added new positions since 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. Week 80 is rapidly approaching, and I will be adding new positions which could bring me past 600 annual dividends.

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 9 total positions generating at least 100% of their share value in dividends within the Dividend Harvesting portfolio. By adding to ARCC and USA, these have become the newest addition to positions generating at least 1 share annually through their dividend income.

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.

In week 79, REITs remained as the largest sector of the Dividend Harvesting portfolio with a 17.08% portfolio weight, while ETFs maintained 2nd place, accounting for 15.95%. Individual equities make up 45.60% of the portfolio and generate 31.73% of the dividend income, while ETFs, CEFs, REITs, BDCs, and ETNs represent 54.40% of the portfolio and generate 68.27% 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	$1,313.61	$7,693.03	17.08%
ETFs	$1,226.89	$7,693.03	15.95%
Closed End Funds	$1,161.06	$7,693.03	15.09%
Oil, Gas & Consumable Fuels	$598.76	$7,693.03	7.78%
Technology	$541.91	$7,693.03	7.04%
Financials	$518.10	$7,693.03	6.73%
Communication Services	$501.08	$7,693.03	6.51%
Consumer Staples	$557.18	$7,693.03	7.24%
BDC	$444.26	$7,693.03	5.77%
Utility	$307.68	$7,693.03	4.00%
Pharmaceuticals	$210.35	$7,693.03	2.73%
Industrials	$124.20	$7,693.03	1.61%
Independent Power & Renewable Electricity Producers	$113.18	$7,693.03	1.47%
Food & Staple Retailing	$35.27	$7,693.03	0.46%
ETN	$37.61	$7,693.03	0.49%
Cash	$0.00	$7,693.03	0.00%

Click to enlarge

In week 79, INTC and Omega Healthcare Investors (OHI) were neck and neck for the largest position within the Dividend Harvesting portfolio. The portfolio is starting to round out and move away from having any positions close to my 5% threshold for an individual position.

Week 79 Additions

In week 79 I added to my current positions of:

• Altria Group (MO)
• Intel Corporation (INTC)
• Owl Rock Capital Corporation (ORCC)
• CBRE Global Real Estate Income Fund (IGR)

Altria Group

• MO just announced their anticipated dividend increase which came in at a quarterly increase of 4%, bringing the next dividend payable on 10/11 for shareholders of record on 9/15 to $0.94. MO is now yielding 8.36% as its annual dividend is $3.76 per share. I believe MO has fallen too far and will look to accumulate more shares under $50 in the future.

Intel Corporation

• I wrote a dedicated article on INTC, which can be read here, outlining why I am still bullish. INTC can fall further and has the potential to trade in the high $20s, depending on how the street takes its Q3 results. We know Q3 is going to be bad, but management is convinced that Q2 and Q3 will be the weakest quarters in its future outlook. Without speculating on what the future holds, when I look at the numbers, INTC is drastically undervalued compared to other semiconductor companies. Putting aside opinions about which technology is better, the fact is that INTC has generated over $154.64 billion in net income and $114.78 in FCF over the past decade, while NVIDIA (NVDA) has generated $126.21 billion of revenue, $36.88 billion in net income, and $25.03 billion in FCF, yet NVDA still has a market cap that is 264.84 larger than INTC. This is crazy, in my opinion, as INTC has generated more in pure profit than NVDA has generated in revenue. With INTC yielding over 4%, I decided to dollar cost average into the position and will continue buying shares into weakness.

Owl Rock Capital Corporation

• When I was looking to BDCs I noticed that ORCC is trading at a -11.12% discount to its NAV and is yielding 9.63%. I was heavy in Ares Capital (ARCC) on the BDC side of this portfolio and wanted to add a share of ORCC at a discount to its NAV and start decreasing how much ARCC makes up on the BDC side.

CBRE Global Real Estate Income Fund

• I have some cash left over and added another share of IGR building on last week’s addition. I think real estate is undervalued, and IGR has a great mix of REITs. This is a fund I am bullish on and plan on continuing to add to in the future

Week 80 Gameplan

Week 80 is Reader Suggestion week, where I will allocate week 80s capital toward positions suggested by the readers. I will either add new positions or invest in current positions which have been added through reader suggestions. Please leave all your favorite dividend investments in the comment section.

Conclusion

The markets continue to be volatile and decline. The jury is still out as to whether the June lows are retested. As a long-term investor, I look at weakness as an opportunity and will continue to add to my positions every week in the Dividend Harvesting portfolio. This strategy has mitigated downside risk and kept the Dividend Harvesting Portfolio close to its invested capital baseline during 2022’s decline. I am looking forward to reading all of the suggestions for week 80, so please leave your comments below.