ArtRachen01
Introduction
It is time to summarize another quarter. The third quarter of 2022 saw the S&P 500 decline around 5%, deepening the bear market we are currently in. While July was fantastic for the market, in September, the market declined more than 9%. The index was affected mainly by macro events. In turn, these events increase the risks of a recession in the short term. The geopolitical turmoil from the war in Europe and the high inflation weighed on the index, affecting consumer confidence and demand and forcing the federal reserve to increase rates.
In the coming quarter, we should expect to feel the effect of the war in Ukraine. The battles in Ukraine will continue contributing to mounting inflation, and the Federal Reserve plans to keep increasing the rates. In its latest projection, the Fed plans to raise rates by 1.25% in Q4. Higher interest rates will suppress investments and probably cause a recession affecting companies’ earnings. Higher rates are needed to fight inflation, but it means we should expect the volatility to continue.
In Q3, my dividend growth portfolio outperformed the market. The outperformance doesn’t surprise me, as dividend growth stocks tend to be more resilient with lower volatility. Thus, when the market is booming, it grows slower, but the lower volatility is a plus when the uncertainty is higher. I am not focusing on the total return in this portfolio but its income. I enjoyed several dividend increases during the quarter. Therefore, my dividend income has also been growing organically. My main goal is to achieve a growing stream of dividends, giving me some more financial freedom. In Q3 2022, my dividend income increased by 11.6% YoY, and I am delighted with this achievement as I allocated fewer funds to my dividend growth portfolio than I planned initially.
I plan to keep executing my investment thesis. I will keep allocating funds to my portfolio monthly. I will invest in stocks I believe are cheap or fairly valued. I will strive to achieve a higher dividend income and a high total return. I see no reason to amend my investment thesis at the moment, as it has worked for me over the past decade.
I see any sign of volatility as an opportunity that allows me to buy a future income at lower prices. If the market is volatile due to a recession or any other reason, I will stick to the safest blue chips, which are usually expensive. Their dividend is generally extremely safe, and any price change is a possible opportunity. I will also try to take advantage of significant drops and buy some of the stocks I find expensive now. I wish you all a great quarter.
Investment Allocation
My dividend growth portfolio used to be more than 83% of my assets. To balance it, I allocated more funds to my other accounts. I want to balance it to hedge myself against possible failures in my strategy. Being overconfident in the financial world can lead to devastating results. Therefore, I am trying to allocate my funds and ensure that my assets stay diversified.
My current goal is to make my dividend growth portfolio around 50% of my assets and to do it while I keep increasing its value and achieving a 10% dividend growth. I am a believer in diversification. In the future, I believe that when I buy a house as an investment or to live in, it will lower the percentage of the dividend growth portfolio in my assets.
My dividend growth portfolio is very well-diversified and contains a collection of 79 blue-chip companies. While I am proud of my achievements as a young investor, I must stay humble and diversify my investments wisely. The more I learn about investments, the humbler I become.
I already maxed out my Roth IRA in 2022. I have medium-term accounts that may serve as a down payment on a house. These two measures helped me diversify my holdings. While the Roth IRA, the pension, and the dividend growth portfolio are long-term investments, I plan to keep the rest of the accounts liquid.
Author
My Goals
Since I started setting goals, I have managed to achieve most of my goals. My goals for 2022 are to achieve at least 10% of dividend growth and diversify my investments, maximize my Roth IRA contribution, read at least twelve books, and travel abroad at least once following the challenges of 2021 and 2020 due to the pandemic. I keep track of my goals so I can achieve them.
By setting goals, you can organize your time better. I highly recommend it to everyone. It allows you to see your progress during the year. Just select some challenging but achievable goals, and make sure they are quantifiable. I believe I will achieve all my goals for 2022 as I am on track regarding investments, reading, and traveling.
Sector Allocation
My brokerage account is my most significant asset, so I keep allocating money there according to my optimal sector allocation. As I am still accumulating, I don’t mind buying stocks from sectors I am over-allocated. I don’t want to ignore my optimal allocation.
I probably will not add to sectors exceeding the optimal allocation, like the energy sector, unless an outstanding opportunity arises. I will probably invest more in sectors I lack exposure to in the coming quarters. I usually write articles regarding companies that I find attractive. I bought shares in some of them, while others are still on my radar.
In Q4, I will try to add some more dividend growth companies in the information technology and financial sectors.
| Sector | Current | Goal |
| Consumer Staples | 17.3% | 17.0% |
| Health Care | 13.1% | 12.5% |
| Industrials | 12.6% | 12.5% |
| Financials | 10.9% | 12.5% |
| Information Technology | 10.4% | 12.5% |
| Consumer Discretionary | 9.9% | 10.0% |
| Real Estate | 8.2% | 8.0% |
| Energy and Materials | 10.8% | 8.0% |
| Communication Services | 5.6% | 4.0% |
| Utilities | 3.1% | 3.0% |
My Portfolio
The following table shows the current holdings in my brokerage account. All the companies below are part of my dividend growth portfolio. Alphabet (GOOG) (GOOGL), Amazon (AMZN), Meta Platforms (META), and Disney (DIS) don’t pay dividends. However, they enjoy steady growth in their free cash flow. This metric is the basis of any dividend payment.
As a long-term investor, I don’t mind waiting until they are ready to share some of this wealth with their investors. Alphabet, Amazon, and Facebook have already started buyback programs. I hope that both will offer dividends in the years to come. Disney will hopefully reinstate the dividend soon. I kept a small portion of my Disney position as it was my first position (I don’t recommend having emotions in your decision-making process, but sometimes we can’t help it).
| Industry | Company | Ticker | % of portfolio | % of income |
| Information Technology | APPLE INC. | (AAPL) | 3.69% | 0.71% |
| Health Care | ABBVIE INC. | (ABBV) | 1.20% | 1.45% |
| Health Care | ABBOTT LABORATORIES | (ABT) | 2.17% | 1.21% |
| Consumer Staples | ARCHER-DANIELS-MIDLAND CO. | (ADM) | 1.80% | 1.03% |
| Financials | AFLAC INC. | (AFL) | 2.27% | 1.85% |
| Financials | AMERIPRISE FINL INC. | (AMP) | 1.17% | 0.64% |
| Consumer Discretionary | AMAZON.COM INC. | (AMZN) | 2.04% | 0.00% |
| Financials | BANK OF AMERICA CORP. | (BAC) | 1.64% | 1.36% |
| Health Care | BECTON DICKINSON & CO. | (BDX) | 0.60% | 0.27% |
| Health Care | BRISTOL MYERS SQUIBB CO. | (BMY) | 0.60% | 0.56% |
| Financials | CITIGROUP INC. COM | (C) | 0.56% | 0.79% |
| Health Care | CARDINAL HEALTH INC. | (CAH) | 1.47% | 1.27% |
| Industrials | CATERPILLAR INC. | (CAT) | 2.27% | 1.85% |
| Information Technology | CISCO SYSTEMS INC. | (CSCO) | 0.53% | 0.59% |
| Health Care | CVS HEALTH CORPORATION | (CVS) | 0.42% | 0.28% |
| Energy | CHEVRON CORPORATION | (CVX) | 2.65% | 2.92% |
| Communication Services | WALT DISNEY CO. | (DIS) | 0.43% | 0.00% |
| Real Estate | DIGITAL REALTY TRUST INC. | (DLR) | 1.29% | 1.88% |
| Utilities | DUKE ENERGY CORPORATION HOLDING COMPANY | (DUK) | 0.41% | 0.52% |
| Industrials | EMERSON ELECTRIC CO. | (EMR) | 1.65% | 1.32% |
| Energy | ENTERPRISE PRODUCTS PARTNERS LP | (EPD) | 2.09% | 4.88% |
| Industrials | EATON CORPORATION PLC | (ETN) | 1.21% | 0.83% |
| Industrials | GENERAL DYNAMICS CORP. | (GD) | 0.95% | 0.65% |
| Consumer Staples | GENERAL MILLS INC. | (GIS) | 1.32% | 1.11% |
| Communication Services | ALPHABET INC CLASS C CAPITAL STOCK | (GOOG) | 2.59% | 0.00% |
| Information Technology | INTERNATIONAL BUSINESS MACHINES CORP. | (IBM) | 0.53% | 0.85% |
| Health Care | JOHNSON & JOHNSON | (JNJ) | 3.49% | 2.90% |
| Financials | JPMORGAN CHASE & CO. | (JPM) | 1.42% | 1.54% |
| Consumer Staples | KELLOGG CO. | (K) | 0.30% | 0.30% |
| Consumer Staples | KIMBERLY CLARK CORP. | (KMB) | 1.47% | 1.79% |
| Energy | KINDER MORGAN INC. | (KMI) | 1.12% | 2.14% |
| Consumer Staples | COCA-COLA COMPANY (THE) | (KO) | 1.67% | 1.58% |
| Industrials | LOCKHEED MARTIN CORP. | (LMT) | 0.34% | 0.31% |
| Consumer Discretionary | LOWE’S COMPANIES | (LOW) | 0.42% | 0.27% |
| Consumer Discretionary | MCDONALD’S CORP. | (MCD) | 3.01% | 2.13% |
| Health Care | MCKESSON CORP. | (MCK) | 0.75% | 0.14% |
| Health Care | MEDTRONIC PLC COM | (MDT) | 1.07% | 1.05% |
| Communication Services | META PLATFORMS INC. | (META) | 1.18% | 0.00% |
| Industrials | 3M COMPANY | (MMM) | 0.97% | 1.53% |
| Energy | MAGELLAN MIDSTREAM PARTNERS LP UNIT REPSTG LTD PARTNER | (MMP) | 1.03% | 2.67% |
| Consumer Staples | ALTRIA GROUP INC. | (MO) | 1.07% | 2.90% |
| Energy | MPLX LP COM UNIT REPSTG LTD PARTNER INT | (MPLX) | 0.79% | 2.17% |
| Real Estate | MEDICAL PROPERTIES TRUST INC. | (MPW) | 1.01% | 2.98% |
| Health Care | MERCK & CO. INC. | (MRK) | 0.74% | 0.71% |
| Information Technology | MICROSOFT CORP. | (MSFT) | 1.05% | 0.35% |
| Industrials | MSC INDUSTRIAL DIRECT CO. INC. CL A | (MSM) | 0.65% | 0.77% |
| Utilities | NEXTERA ENERGY INC. | (NEE) | 0.56% | 0.35% |
| Consumer Discretionary | NIKE INC CLASS B COM | (NKE) | 0.75% | 0.31% |
| Industrials | NORFOLK SOUTHERN CORP. | (NSC) | 1.88% | 1.27% |
| Information Technology | NVIDIA CORP. | (NVDA) | 1.11% | 0.04% |
| Real Estate | REALTY INCOME CORP. | (O) | 2.54% | 3.82% |
| Real Estate | OMEGA HEALTHCARE INVESTORS INC. | (OHI) | 1.55% | 4.13% |
| Consumer Staples | PEPSICO INC COMMON STOCK | (PEP) | 2.81% | 2.36% |
| Health Care | PFIZER INC. | (PFE) | 0.37% | 0.41% |
| Consumer Staples | PROCTER & GAMBLE CO. | (PG) | 1.64% | 1.41% |
| Consumer Staples | PHILIP MORRIS INTERNATIONAL INC. | (PM) | 2.20% | 3.92% |
| Financials | PRUDENTIAL FINANCIAL INC. | (PRU) | 1.98% | 3.08% |
| Information Technology | QUALCOMM INC. | (QCOM) | 1.03% | 0.77% |
| Industrials | RAYTHEON TECHNOLOGIES CORPORATION COMMON STOCK | (RTX) | 0.72% | 0.57% |
| Consumer Discretionary | STARBUCKS CORP. | (SBUX) | 0.75% | 0.54% |
| Financials | CHARLES SCHWAB CORP. | (SCHW) | 0.64% | 0.23% |
| Utilities | SOUTH JERSEY INDUSTRIES INC. | (SJI) | 0.42% | 0.48% |
| Consumer Staples | SMUCKER J. M. COMPANY | (SJM) | 0.60% | 0.52% |
| Utilities | SOUTHERN CO. | (SO) | 0.89% | 1.05% |
| Consumer Staples | SYSCO CORP. | (SYY) | 0.63% | 0.50% |
| Consumer Discretionary | TARGET CORP. | (TGT) | 1.98% | 1.67% |
| Financials | PRICE T ROWE GROUP INC. | (TROW) | 0.95% | 1.23% |
| Consumer Staples | TYSON FOODS | (TSN) | 0.57% | 0.47% |
| Information Technology | TEXAS INSTRUMENTS INCORPORATED | (TXN) | 0.70% | 0.64% |
| Industrials | UNION PACIFIC CORP. | (UNP) | 1.73% | 1.34% |
| Information Technology | VISA INC. CL A COMMON STOCK | (V) | 1.56% | 0.39% |
| Consumer Discretionary | V.F. CORPORATION | (VFC) | 0.80% | 1.54% |
| Real Estate | VICI PROPERTIES | (VICI) | 0.40% | 0.60% |
| Energy | VALERO ENERGY CORP NEW | (VLO) | 0.49% | 0.50% |
| Communication Services | VERIZON COMMUNICATIONS | (VZ) | 1.34% | 2.68% |
| Utilities | WEC ENERGY GROUP INC. | (WEC) | 0.78% | 0.75% |
| Consumer Staples | WALMART INC COMMON STOCK | (WMT) | 0.90% | 0.46% |
| Real Estate | W. P. CAREY INC COM | (WPC) | 1.24% | 2.18% |
| Energy | EXXON MOBIL CORP. | (XOM) | 2.41% | 2.71% |
I currently own 79 companies in my portfolio. Over the quarter, I added to existing and new positions. I am not worried at all about the number of positions I hold. These blue-chip companies don’t need me to follow them daily. I wouldn’t mind keeping them even if the stock market is closed for a decade.
Acquisitions Made in Q3 2022
Healthcare – Merck & Co., Inc. (MRK) is trading for an attractive valuation, with a robust pipeline and a decent dividend. I initiated a position.
Financials – The Charles Schwab Corporation (SCHW) will continue to capitalize on low-cost investing trends with its ETFs and brokerage services.
Consumer Staples – Sysco Corporation (SYY) suffered immensely during the pandemic. Right now, analysts’ consensus, as seen on Seeking Alpha, expects it to grow at a double digits rate.
REITs – Medical Properties Trust (MPW) is attractively valued at the moment, and with the dividend yield above 9%, I believe the risk is worth it.
Sales Made In Q3 2022
Over the past quarter, I have not sold stocks in my portfolio, as they all maintained or increased their dividends.
What Am I Looking For?
When I look at my portfolio, I see a great collection of companies. I feel more confident about some companies yearly and less optimistic about others. That’s why diversification is critical. I am always looking for the weaker links in my portfolio, and I try to measure the effect of a possible dividend cut on my income.
In Q4, I will follow the information technology and financial sectors closely. You probably recognize the chart below, as it is part of my stock analysis. Using this mostly art contributes to my analysis thesis. I mostly keep looking for Type 2 stocks as they offer the best combination of growth and income.
Author
Conclusion
Q3 2022 was another challenging quarter for investors due to the high volatility declines. I managed to maintain the dividend income growth during the quarter. In the next quarter, I will keep executing my investment thesis as I invest in companies monthly. Hopefully, I will be able to achieve my goals and get closer to my long-term objectives.
The war in Europe and inflation across the globe are taking us into a challenging business environment. We see a recession coming and higher interest rates. The short-term risks are influencing the market heavily. However, I constantly learn that there is always a reason to avoid investing or be scared. Investors should ignore the noise and keep executing their plans. I wish you all a great quarter. I hope you all stay safe and healthy.
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