Dividend Harvesting Week 83: $8,300 Allocated, $603.89 In Annual Dividends

The markets suffered another down week, and so did the Dividend Harvesting Portfolio. The S&P 500 declined -2.95%, down -25.25% on the year, while the Nasdaq dropped -3.18%, pushing it deeper into bear market territory as it’s now -33.2% YTD. The Dividend Harvesting Portfolio had another red week and closed with a portfolio value of $7,249.65, down -12.65% on invested capital. The dividend closed week 83 down -$1,050.35 compared to -$777.33 in week 82. This is the widest spread between the Dividend Harvesting Portfolio’s invested capital and portfolio value on a percentage basis since its inception. I look at the decline as an opportunity to invest for the future, and my time horizon is decades, not weeks. I will continue to dollar cost average into many of the portfolio’s positions and reinvest the dividends.

In week 83, the Credit Suisse Gold Shares Covered Call ETN (GLDI) and the Credit Suisse Silver Shares Covered Call ETN (SLVO) did a 20-1 reverse split. I didn’t have enough shares, so I was paid $36.57 since they amounted to a fractional share post reverse split. I utilized week 83’s original $100 in allocated capital to purchase an additional share of Simon Property Group (SPG) and Medical Properties Trust (MPW). After receiving $36.57 from the sale of GLDI and SLVO, I used that capital to purchase an additional share of Enbridge (ENB).

At the close of week 83, the Dividend Harvesting Portfolio generated $20.25 in dividend income from 23 individual dividends. The Dividend Harvesting Portfolio has produced $329.10 of income throughout 2022, and every dividend has been reinvested back into their original position. By adding an additional share of SPG, MPW, and ENB, my projected annual dividend income increased by $7.24 (1.21%) to $603.89, which is a portfolio yield of 8.33%. The market could keep going down for the foreseeable future, and that’s just fine with me. I will continue to build out the dividend income in this portfolio and lower my share price per share in as many positions as possible before the markets stage a sustainable rebound.

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

There is no longer an ETN section of the portfolio, and I am not sure if I will be adding ETNs again. Here is how much dividend income is generated per investment basket:

• Equities $196.72 (32.57%)
• ETFs $133.22 (22.06%)
• REITs $120.54 (19.96%)
• CEFs $118.60 (19.64%)
• BDC $40.35 (6.68%)

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 $329.10 in dividend income from 391 dividends across 39 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, 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%.

As SLVO and GLDI are no longer part of the Dividend Harvesting Portfolio, my annual dividend count declined from 588 to 564 this week. I am not planning on adding new positions for several weeks, so I expect this number to remain unchanged unless something looks very enticing to me.

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 11 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.

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 83, ETN’s disappeared from the Dividend Harvesting Portfolio. REITs remained the largest sector, representing 17.68% of the Dividend Harvesting Portfolio. ETFs are 2^nd with 16.67%, while CEFs are a closer 3^rd with 14.74%. Individual equities make up 45.36% of the portfolio and generate 32.57% of the dividend income, while ETFs, CEFs, REITs, BDCs, and ETNs represent 54.64% of the portfolio and generate 67.43% 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	$1,281.56	$7,249.65	17.68%
ETFs	$1,208.38	$7,249.65	16.67%
Closed End Funds	$1,068.50	$7,249.65	14.74%
Oil, Gas & Consumable Fuels	$581.66	$7,249.65	8.02%
Consumer Staples	$501.42	$7,249.65	6.92%
Communication Services	$493.14	$7,249.65	6.80%
Technology	$488.34	$7,249.65	6.74%
Financials	$472.73	$7,249.65	6.52%
BDC	$402.51	$7,249.65	5.55%
Utility	$267.06	$7,249.65	3.68%
Pharmaceuticals	$210.76	$7,249.65	2.91%
Industrials	$114.15	$7,249.65	1.57%
Independent Power & Renewable Electricity Producers	$95.68	$7,249.65	1.32%
Food & Staple Retailing	$63.21	$7,249.65	0.87%
Cash	$0.56	$7,249.65	0.01%

Click to enlarge

In week 83, Verizon (VZ) was still my largest position and the only position to exceed 4% of the portfolio. Over time I hope to even out the allocations but it’s still early in this series.

Week 83 Additions

In week 83, I used the $100 of weekly capital and the $36.57 from the ETNs to purchase an additional share of:

• Simon Property Group (SPG)
• Medical Properties Trust (MPW)
• Enbridge (ENB)

Simon Property Group

• In my opinion, REITs have been getting crushed due to rising rates as the cost of capital and debt service has increased. There is also a concern of lower occupancies in 2023. I still believe SPG is one of the best REITs to own, and it’s on sale at these levels. SPG has fell -44.01% YTD, and its dividend yield has been pushed to 7.8%. I will be adding more in the future.

Medical Properties Trust

• The sell-off in MPW is mind-boggling as there hasn’t been sufficient news to warrant what has happened. MPW has fallen -49.42% YTD, and its yield is now 9.78%. This reminds me of Omega Healthcare Investors (OHI) all over again. I am not worried about the hospital sector, and MPW is a screaming buy in my opinion, for long-term investors.

Enbridge

• ENB is one of my favorite dividend companies, and the recent decline has pushed its yield to 7.2%. ENB is the only energy infrastructure company that I know of which owns a full-scale utility company and a large renewable portfolio, in addition to one of the largest pipeline and exporting businesses in North America. I think ENB is very interesting under $40.

Week 84 Gameplan

In week 84, I plan on adding 1 share of Realty Income (O) and 1 share of the Global X S&P 500 Covered Call ETF (XYLD).

Conclusion

Thank you to everyone who continues to read this series. The Dividend Harvesting Portfolio has faced additional volatility the past several weeks, but it has also been presented with some good buying opportunities. Every week I look forward to allocating more capital and building out this portfolio. It will be interesting to see how the markets finish in 2022 and where the Dividend Harvesting Portfolio stands. Please leave your comments and ideas below.