RomoloTavani
Another two months, another two steps towards financial freedom!
Sorry for the delay here – I’ve been very busy with work over the last month or so, which delayed my August portfolio review. So, instead of posting that so late into September, I decided to just wait until early October and published a combined August/September review piece for everyone who likes to follow along with my personal portfolio journey.
We’ve seen quite a bit of market volatility in recent months. It wasn’t all that long ago that we had rallied up double digits from the June lows and there was talk of the bear market being over. And yet, these days we’re sitting just off of new 52-week lows on both the Dow Jones Industrial average and the S&P 500. Without a doubt, fear is back in control of the markets.
And yet, I continue to sleep well at night with my portfolio, largely due to the fact that my passive income stream remains my top priority and therefore, I’m able to ignore the macro sentiment and the scary (and often sensationalized) headlines that I see in the financial news media and instead, maintain a disciplined focus on company fundamentals.
By closely following the fundamentals of my holdings, I can closely monitor their dividend safety and dividend growth prospects in an objective manner.
Short-term share price movements are generally driven by irrational market sentiment; however, for the most part – especially when we’re talking about blue chip dividend stocks with long, reliable, and sustainable dividend growth histories – dividends are based on profit-related metrics and management’s expectations of future growth.
And, with that research in mind, I’m not surprised at all to see that my portfolio has continued to generate reliable dividend growth, even in the face of the market’s most recent bearish downturn.
During the month of August, my passive income grew by 2.90% on a year-over-year basis.
This was my worst month of the year… and the only single-digit y/y dividend growth result that I’ve posted thus far during 2022.
August’s relatively poor performance was driven by AT&T’s recent dividend cut. AT&T is one of the largest contributors to my August quarterly cycle and its ~40% slash has been a large hurdle to clear. However, I am pleased to see positive results; when the cut was announced I took steps to bolster my portfolio’s income to make up for AT&T’s shortfall and it’s working. Next year, once T’s cut has already been factored into my year-over-year comparison, I expect to see strong growth during August once again.
During September, my portfolio regained its strong dividend growth footing, posting its best y/y dividend growth results of 2022: up 41.14% on a year-over-year basis.
Nick’s Dividends (Nick’s data)
Admittedly, much of this growth was due to the capital that I’ve invested during the market’s sell-off during 2022. I’ve been aggressively buying the dip throughout the year. Most recently I put my pre-planned -25% bear market basket to work (when the S&P 500 finally fell to 3,614). But, earlier in the year, I put large amounts of capital to work when the -10%, -15%, and -20% thresholds hit on the S&P 500 and now I’m seeing the dividends from those investments, alongside my monthly savings which I’ve continued to invest during each month of the year thus far, trickle down to my personal passive income stream.
This wonderful growth, in the face of market weakness, just goes to show that staying disciplined and buying blue chip dividend growth stocks… even during one of the worst bear markets in recent memory… can allow investors to reach their financial goals.
As I’ve said many times before, I’m not basing my retirement plans off of the size of my portfolio. I’m basing them off of the size of my passive income stream. To me, financial freedom occurs when someone’s passive income covers their lifestyle’s spending needs. I’m not there yet, but as my dividends compound every month, I get another step closer.
Nick’s Dividends (Nick’s data)
September of 2022 was my best month of all-time, in terms of dividends collected. And looking at forward projections, it’s very likely that December of 2022 will surpass that record once again.
This is one of the wonderful aspects of the dividend growth investing strategy. The market can be down 25% from its highs, yet investors like me still have records to celebrate. In terms of being able to sleep well at night… well, it doesn’t get much better than that.
August Trades
Because I have so many trades to discuss for both August and September, I’ve decided to use tables to highlight all of my recent moves.
First and foremost, I want to note that:
- All fair value estimates shown in the tables below are accurate as of 10/10/2022.
- All dividend yields shown in the tables below are relative to each trade’s purchase price.
Up first, we have my monthly selective re-investments, which were made on August 1st, 2022 (for those who don’t follow me regularly, during the first trading day of each month, I put all of the dividends that my portfolio generated during the prior month to work; when making these trades, I don’t focus on valuation, but instead, asset allocation).
| Date | Company | Ticker | Price | Dividend Yield |
Fair Value Estimate |
|
| 8/1/2022 | Palantir | Buy | PLTR | $10.19 | 0.00% | n/a |
| 8/1/2022 | Brookfield Asset Management | Buy | BAM | $49.43 | 1.13% | $50.00 |
| 8/1/2022 | Coca-Cola | Buy | KO | $64.49 | 2.73% | $54.00 |
| 8/1/2022 | PepsiCo | Buy | PEP | $176.00 | 2.61% | $152.00 |
| 8/1/2022 | Hormel | Buy | HRL | $49.47 | 2.10% | $40.00 |
| 8/1/2022 | Mid-America Apartments | Buy | MAA | $184.77 | 2.71% | $160.00 |
| 8/1/2022 | Prologis | Buy | PLD | $131.54 | 2.40% | $140.00 |
| 8/1/2022 | Meta Platform | Buy | META | $155.88 | 0.00% | $200.00 |
| 8/1/2022 | Amazon | Buy | AMZN | $134.48 | 0.00% | $140.00 |
Now, we’ll move onto the trades that I made with my monthly savings during August.
Every month I do my best to allocate disposable income to the markets. When putting this cash to work, I do focus intensely on valuation. The goal with monthly savings is to buy the highest quality companies that I can find trading with the widest margin of safety.
| Date | Company | Ticker | Price | Dividend Yield |
Fair Value Estimate |
|
| 8/17/2022 | Store Capital | Buy | STOR | 28.59 |
5.45% |
n/a |
| 8/26/2022 | Blackstone | Buy | BX | $99.76 | 5.14% | $115.00 |
| 8/29/2022 | Blackstone | Buy | BX | $96.37 | 5.32% | $115.00 |
| 8/30/2022 | Microsoft | Buy | MSFT | 262.65 | 1.04% | $251.00 |
September Trades
September is where things got really busy for me…
Not only did I make my monthly re-investments and put my monthly savings to work, but the S&P 500 hit the -25% threshold, which meant that I got to put that recession bucket to work, and I made a couple of trades as well (selling stocks is a fairly rare event for me, but I sold 2 positions in September); I’ll discuss those trades below.
Here are my monthly re-investment trades:
| Date | Company | Trade | Ticker | Price | Dividend Yield |
Fair Value Estimate |
| 9/1/2022 | Mid-American Apartments | Buy | MAA | $164.68 | 3.04% | $160.00 |
| 9/1/2022 | Prologis | Buy | PLD | $123.51 | 2.56% | $140.00 |
| 9/1/2022 | Intercontinental Exchange | Buy | ICE | $99.75 | 1.52% | $115.00 |
| 9/1/2022 | Sherwin-Williams | Buy | SHW | $231.59 | 1.04% | $231.00 |
| 9/1/2022 | Lowe’s | Buy | LOW | $193.68 | 2.17% | $243.00 |
| 9/1/2022 | Nvidia | Buy | NVDA | $141.92 | 0.11% | $143.00 |
Here are the stocks that I bought with my -25% sell-off bucket. I was so pleased to be able to put this cash to work. I love buying blue chips into weakness and admittedly, it’s hard to keep these sell-off buckets on the sidelines. I’ve definitely been tempted to let my greed win out over my market crash plan…but it feels good when the plan works out and allows me to add to high quality stocks into weakness. Now that the 3,614 level was hit, I’m looking forward to putting my next bear market bucket to work at 3,375 on the S&P 500, which represents the -30% threshold. I should note that I have cash set aside for the -30, the -35%, the -40%, and the -45% mark on the S&P 500 should the ongoing broad market sell-off persist. It’s hard not to touch with cash when there are so many bargains in the market today, but I do sleep well at night while the market is selling off knowing that I have dry powder ready to go to take advantage of ongoing weakness if it occurs.
| Date | Company | Trade | Ticker | Price | Dividend Yield |
Fair Value Estimate |
| 9/29/2022 | Nike | Buy | NKE | $94.72 | 1.29% | $92.00 |
| 9/29/2022 | Air Products and Chemicals | Buy | APD | $229.95 | 2.82% | $232.00 |
| 9/29/2022 | Raytheon | Buy | RTX | $81.73 | 2.69% | $100.00 |
| 9/29/2022 | Intercontinental Exchange | Buy | ICE | $90.77 | 1.68% | $115.00 |
| 9/29/2022 | Blackstone | Buy | BX | $83.30 | 6.16% | $115.00 |
| 9/29/2022 | Microsoft | Buy | MSFT | $234.87 | 1.16% | $251.00 |
| 9/29/2022 | Mid-American Apartments | Buy | MAA | $153.33 | 3.26% | $160.00 |
| 9/29/2022 | Prologis | Buy | PLD | $101.17 | 3.12% | $140.00 |
Unfortunately, shortly after making this NKE purchase the company posted disappointing earnings, causing me to slightly reduce my fair value estimate. I say this because at the time that I bought Nike, I thought shares were slightly undervalued. However, as fundamentals change, so do my fair value estimates. After the company’s most recent fundamental data and guidance was factored into my evaluation system, Nike’s FV estimate dropped. I say all of this because on 9/29/2022, I thought Nike was attractively valued. But, earnings misses happen from time to time. Thankfully, I still feel very confident about Nike’s growth prospects over the long-term, so while with the benefit of hindsight I obviously wish that I had waited a day to make this purchase, I’m still very happy to own these shares over the long-term.
Here are the stocks that I bought with my September savings:
| Date | Company | Trade | Ticker | Price | Dividend Yield |
Fair Value Estimate |
| 9/13/2022 | Accenture | Buy | ACN | $281.77 | 1.59% | $285.00 |
| 9/16/2022 | Prologis | Buy | PLD | $112.01 | 2.82% | $140.00 |
| 9/23/2022 | Accenture | Buy | ACN | $257.76 | 1.74% | $285.00 |
And how we arrived at the two trades that I made during September…
First of all, I sold my STOR position when it was announced that they were being acquired; often, with news like this happens, I go ahead and take advantage of the M&A premium, taking the bird in the hard, as opposed to the two in the bush approach.
Yes, I left a bit of upside on the table (the narrow merger arb spread + STOR’s Q3 dividend). But, overall, I was pleased to sell STOR, locking in profits (especially since I bought some STOR in August, allowing me to lock in quick profits on those shares).
My overall cost basis on my STOR position was $23.98, by selling at $32.21, I locked in profits of 34.7%.
Then, I immediately put the proceeds to work into a combination of other high yielding stocks + a beaten down growth stock. Anytime that I make a trade, I’m looking to bolster my passive income and that was definitely the case here. Overall, by selling STOR and adding Enbridge, Blackstone, Realty Income, and Adobe, I was able to use active management to increase my passive income stream by 18.17%.
| Date | Company | Trade | Ticker | Price | Dividend Yield |
Fair Value Estimate |
| 9/15/2022 | Store Capital | Sell | STOR | $32.21 | 4.84% | n/a |
| 9/15/2022 | Enbridge | Buy | ENB | $41.97 | 6.36% | $44.00 |
| 9/15/2022 | Blackstone | Buy | BX | 94.43 | 5.43% | $115.00 |
| 9/15/2022 | Realty Income | Buy | O | 64.45 | 4.62% | $72.00 |
| 9/15/2022 | Adobe | Buy | ADBE | $308.88 | 0.00% | $390.00 |
Lastly, we arrive at a trade that I made late in September…selling Pinnacle West and buying Ares Capital (plus some other blue chips).
| Date | Company | Trade | Ticker | Price | Dividend Yield |
Fair Value Estimate |
| 9/30/2022 | Pinnacle West | Sell | PNW | $64.89 | 5.24% | $63.00 |
| 9/30/2022 | Ares Capital Management | Buy | ARCC | $16.94 | 10.15% | $19.50 |
| 9/30/2022 | McDonalds | Buy | MCD | $232.10 | 2.38% | $225.00 |
| 9/30/2022 | Waste Management | Buy | WM | $161.36 | 1.61% | $152.00 |
| 9/30/2022 | Automatic Data Processing | Buy | ADP | $227.51 | 1.83% | $227.00 |
This trade deserves a bit of an explanation (because I rarely lock in losses), so here’s the trade report that I provided to Dividend Kings subscribers in real-time:
“All, just made my final trade of the month. I’ve been intrigued some some of the discussion that I’ve seen recently regarding BDCs after their recent sell-off and decided to swap out one of my lower quality high yielders (PNW, which I’ve been disappointed with for the last year or so) for shares of Ares Capital (ARCC). I sold my entire position in PNW at $64.89. Unfortunately, this did lock in losses (of roughly 20%). However, ARCC is down slightly more than PNW over the last month and it yields much more, so moving forward, I felt comfortable with the switch because it boosted my passive income stream in the short-term significantly and I believe that both companies have similar growth prospects. I bought a starter position in ARCC at $16.94. And here’s where things got fun…for me, at least. I had some cash left over from the trade and used to buy very small tracking positions in 3 names: MCD, WM, and ADP, after “discussing” things with my 3 year old daughter. I don’t really think that any of these 3 names offer a wide margin of safety at this point, but she likes hamburgers, she likes trash trucks, and she was drawn to the ADP ticker symbol for whatever reason…so I’ll be using these names to teach her about investing/compounding moving forward. Do I expect great returns from MCD, WM, or ADP in the near-term due to relatively high valuations? Not necessarily. But, they are all very high quality companies that I’m happy to own for the long-term. I was also happy to allocate some cash towards some experiential learning since she was showing some interest today and happened to be in the office when I was planning out the trade. Have a great weekend, everyone!”
In short, the discount on ARCC a couple of weeks ago was too attractive for me to ignore. I didn’t have any cash left over after putting my monthly savings to work and when looking through my holdings to raise capital, the PNW for ARCC trade made the most sense (PNW was slightly overvalued after poor EPS growth performance and I liked the idea of selling one high yielder with low growth prospects for another with potentially higher growth prospects).
In the meantime, I increased my passive income stream significantly here. Overall, using active management allowed me to increase my passive income by 67.8% relative to the PNW dividend.
Nicholas Ward’s Dividend Growth Portfolio
Finally, we arrive at my personal holdings, accurate as of 10/10/2022…
|
Core Dividend Growth |
58.75% | ||
| Company name | Ticker | Cost basis | Portfolio Weighting |
| Apple | AAPL | $24.26 | 14.34% |
| Microsoft | MSFT | $72.84 | 4.16% |
| Broadcom | AVGO | $234.30 | 2.93% |
| Qualcomm | QCOM | $76.44 | 2.45% |
| Johnson & Johnson | JNJ | $114.02 | 2.09% |
| Starbucks | SBUX | $48.10 | 1.95% |
| BlackRock | BLK | $413.84 | 1.87% |
| Cummins | CMI | $217.77 | 1.68% |
| Cisco | CSCO | $32.67 | 1.64% |
| Bristol Myers Squibb | BMY | $49.47 | 1.53% |
| Raytheon Technologies | RTX | $80.22 | 1.49% |
| Comcast | CMCSA | $38.54 | 1.44% |
| Lockheed Martin | LMT | $354.14 | 1.43% |
| PepsiCo | PEP | $94.75 | 1.41% |
| Merck | MRK | $73.71 | 1.27% |
| Deere & Co. | DE | $347.85 | 1.21% |
| Brookfield Renewable | BEPC | $33.49 | 1.14% |
| Honeywell | HON | $126.18 | 1.07% |
| Brookfield Asset Management | BAM | $35.70 | 1.06% |
| Coca-Cola | KO | $40.25 | 1.06% |
| Amgen | AMGN | $136.07 | 1.05% |
| Texas Instruments | TXN | $95.19 | 0.94% |
| Parker-Hannifin | PH | $255.96 | 0.90% |
| Brookfield Infrastructure | BIPC | $39.19 | 0.82% |
| Pfizer | PFE | $30.48 | 0.80% |
| Illinois Tool Works | ITW | $130.90 | 0.80% |
| Northrop Grumman | NOC | $376.97 | 0.66% |
| Air Products and Chemicals | APD | $234.91 | 0.55% |
| Prologis | PLD | $118.30 | 0.48% |
| Diageo | DEO | $107.91 | 0.47% |
| Essex Property Trust | ESS | $228.98 | 0.46% |
| AvalonBay Communities | AVB | $156.60 | 0.46% |
| Alexandria Real Estate | ARE | $130.96 | 0.46% |
| Medtronic | MDT | $73.94 | 0.41% |
| Hormel | HRL | $42.87 | 0.40% |
| Stanley Black & Decker | SWK | $139.75 | 0.36% |
| Digital Realty | DLR | $49.87 | 0.34% |
| Ecolab Inc. | ECL | $155.51 | 0.30% |
| McCormick | MKC | $35.71 | 0.26% |
| Mid-America Apartment | MAA | $163.02 | 0.21% |
| Automatic Data Processing | ADP | $227.52 | <0.10% |
| McDonald’s | MCD | $232.10 | <0.10% |
| Waste Management | WM | $161.37 | <0.10% |
| High Yield | 14.04% | ||
| Realty Income | O | $62.34 | 2.46% |
| Altria | MO | $49.68 | 1.63% |
| W. P. Carey | WPC | $65.23 | 1.52% |
| AbbVie | ABBV | $79.08 | 1.38% |
| Agree Realty | ADC | $65.85 | 1.35% |
| Enbridge | ENB | $39.33 | 1.32% |
| AT&T | T | $28.83 | 1.22% |
| British American Tobacco | BTI | $38.01 | 0.75% |
| Federal Realty Investment Trust | FRT | $115.13 | 0.63% |
| National Retail Properties | NNN | $36.57 | 0.57% |
| Philip Morris | PM | $96.12 | 0.55% |
| Prudential | PRU | $100.58 | 0.37% |
| Verizon | VZ | $45.20 | 0.29% |
|
High Dividend Growth |
11.61% | ||
| Visa | V | $74.29 | 2.23% |
| Lowe’s | LOW | $148.99 | 1.87% |
| Nike | NKE | $62.68 | 1.39% |
| Home Depot | HD | $250.58 | 1.09% |
| Mastercard | MA | $90.44 | 1.00% |
| L3Harris Technologies | LHX | $185.82 | 0.73% |
| Intercontinental Exchange | ICE | $97.23 | 0.67% |
| Domino’s Pizza | DPZ | $355.20 | 0.51% |
| Booz Allen Hamilton | BAH | $75.49 | 0.47% |
| Sherwin Williams | SHW | $219.30 | 0.43% |
| Accenture | ACN | $269.76 | 0.38% |
| Roper | ROP | $418.69 | 0.33% |
| S&P 500 Global | SPGI | $333.35 | 0.32% |
| ASML Holding | ASML | $643.47 | 0.19% |
| Non-Dividend | 9.35% | ||
| Alphabet | GOOGL | $44.34 | 4.83% |
| Amazon | AMZN | $88.19 | 2.37% |
| Adobe | ADBE | $439.36 | 0.64% |
| Meta Platforms | META | $179.21 | 0.38% |
| Netflix | NFLX | $304.53 | 0.37% |
| Salesforce | CRM | $213.13 | 0.31% |
| PayPal | PYPL | $201.72 | 0.23% |
| Chipotle | CMG | $1,298.41 | 0.22% |
| Palantir | PLTR | $15.11 | <0.10% |
|
Special Circumstance |
5.56% | ||
| Walt Disney | DIS | $91.92 | 2.01% |
| Blackstone | BX | $95.86 | 1.28% |
| NVIDIA | NVDA | $37.19 | 1.14% |
| Constellation Brands | STZ | $172.19 | 0.40% |
| Ares Capital Corp. | ARCC | $16.94 | 0.31% |
| Owl Rock Capital | ORCC | $14.94 | 0.21% |
| Carrier | CARR | $20.97 | 0.11% |
| Otis | OTIS | $58.65 | 0.10% |
| Scotts Miracle-Gro | SMG | $153.56 | <0.10% |
| Crypto | Diversified Basket | n/a | 0.49% |
| Cash | 0.20%* | ||
| Most | Recent | Update: | 10/10 |
*I keep most of my cash in my checking account as opposed to my brokerage accounts, so in reality, my investable cash position is more like 6%.
Conclusion
After making two trades that increased my dividend income and allocating so much capital to markets during August/September, I look forward to seeing what my dividend growth looks like in the coming quarters – all of these new investments will bolster my y/y growth numbers significantly.
It doesn’t matter to me whether or not my dividend growth is organic or inorganic; either way, a rising passive income stream is moving me closer and closer to retirement, which is the ultimate goal.
Without a doubt, 2022 has been a great year for my passive income stream thus far and all of the additions that I’ve made during the tail end of the year should help to get 2023 off to a great start as well.
I know it’s a scary time for investors right now. But, I continue to maintain a “this too will pass” sort of mindset when it comes to the current bear market. Therefore, I’m happy to allocate cash towards beaten down blue chips in today’s volatile marketplace because, historically speaking, anyone who was brave enough to buy blue chips during similar bear market conditions and hold them throughout the bearish period was handsomely rewarded when sentiment shifted and we headed back into a bull market.
I don’t know when that sentiment shift will occur, but I’m about 99% certain it will occur.
Every single bear market that the U.S. stock market has experienced in the past ended. I suspect this one will too. In the meantime, investors need to be patient and disciplined… and as difficult as this may be in the face of fear, focusing on my passive income stream helps me to maintain a long-term focus on my financial goals.
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