Dividend Harvesting Portfolio Week 161: $16,100 Allocated, $1,430.49 In Projected Dividends

seekingalpha04-04

US consumer spending increased by 0.8% MoM in February, the largest gain since January 2023.The Dividend Harvesting Portfolio finished week 161 with a balance of $18,205.27, up 13.08% on invested ...

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PM Images While this was a short trading week due to the markets being closed on Friday, several announcements helped the market move higher. Personal spending in the U.S. increased by 0.8% MoM in February, which was its largest gain since January of 2023. China's non-manufacturing PMI increased for the 4th consecutive month to 53 from 51.4. Lastly, the U.S. personal consumption expenditure price index (PCE) increased by 0.3% MoM in February, which came below the consensus of 0.4%. This led to the market claiming higher as the S&P 500 closed at 5,254.35, gaining 0.64%, while the Nasdaq finished the week at 16,379.46, up 0.2%. I find it interesting that a narrative was being built that a rate cut needed to occur in March, and when it didn't occur, the narrative changed to the strong economy and can endure a higher for longer environment. I have been leaning towards June for the Fed to pivot, and for all of last year, I have continuously indicated that I felt a rate cut in 2023 would not occur. While many Americans are feeling the pressure from a higher-rate environment combined with the lingering effects of inflation, the companies within the market have held up well, and earnings, for the most part, have expanded. My feeling is that we're in the early innings of a multi-year bull cycle that will be led by technology, as we haven't begun to really see the impacts of artificial intelligence (A.I) or robotics. While there could be pullbacks along the way, I think the market will continue to grow in 2024, and many of the investments that individuals were running from in 2022 will generate a positive return. Over the past 161 weeks, I have allocated $16,100 to the Dividend Harvesting Portfolio. More records were broken this week with the help of the market trending higher, as this was the second consecutive week that there was a double-digit return in the account. The Dividend Harvesting Portfolio finished week 161 with a balance of $18,205.27, placing it in the black by $2,105.27 or 13.08%. I came up short on the dividend goal, and with the market being closed on Friday, it could have impacted some dividends hitting the account. Nevertheless, $29.03 of dividend income was generated, which brought the total dividend income produced in March to $98.97. During week 161, I added to my positions at British American Tobacco (BTI) and The Kraft Heinz Company (KHC). The combination of adding to these positions and reinvesting the $29.03 of dividend income that was produced allowed the Dividend Harvesting Portfolio's forward projected income to increase by $9.99 (0.70%) to $1,430.49. At this rate, I think it's safe to assume that March will be the last month that double-digit dividend income will be produced and that $1,500 of annualized forward dividend income will be reached by the summer. I am looking forward to seeing how things progress throughout 2024.   Steven Fiorillo, Seeking Alpha The overall performance of the Dividend Harvesting Portfolio There are many data points throughout these articles as I try to document every aspect of the Dividend Harvesting account. The chart below looks at the invested capital, the current account balance, and the amount of dividend income being produced. This style of investing isn't for everyone, and if your focus is capital appreciation, I can completely understand how income investing wouldn't seem relevant. These are not my only investments, and certainly not my only income investments, as I am more of a hybrid investor who has capital allocated toward index funds, bug tech, growth, and income-producing investments. I started this series to document an income investing process from the ground up while allocating the same amount each week. There has been a narrative that a large amount of seed capital is needed to make income investing worth it. Everyone needs to start somewhere, and after allocating $100 per week and investing $16,100 into this account, the Dividend Harvesting Portfolio has a balance of $18,205.27 as it's up $2,105.27 (13.08%) on invested capital while generating $1,430.49 in forward dividend income which is a yield of 7.86%. I am happy with the performance of the Dividend Harvesting Portfolio as it is delivering on my investment goals. Despite a weak 2022, I continued to allocate capital each week as my time horizon spans decades before I will need this capital. I am building a portfolio that will help augment the income I will need in retirement, and my personal goal is to have enough income being generated from all my investments to live off the dividends without having to rely on any of my retirement accounts. There are currently 95 positions within the Dividend Harvesting Portfolio, and within the underlying holdings, there are 16 CEFs and 19 ETFs. I am building a personalized ETF comprised of individual equities, BDCs, REITs, CEFs, and ETFs to create extreme diversification. My investment goals are to generate recurring dividend income while mitigating downside risk. My secondary goal is to recognize capital appreciation. Looking at the graph below the Dividend Harvesting Portfolio has continued to deliver on these goals while acting as an enticing proxy for risk-free assets to generate yield.   Steven Fiorillo, Seeking Alpha The Dividend Harvesting Portfolio dividend section Here's how much dividend income is generated per investment basket:  Equities $403.62 (28.22%) ETFs $335.14 (23.43%) REITs $271.44 (18.98%) CEFs $255.63 (17.87%) BDCs $154.90 (10.83%) Treasuries $9.76 (0.68%)    Steven Fiorillo, Seeking Alpha  Steven Fiorillo, Seeking Alpha Collecting dividends can serve many functions in a portfolio. Some investors utilize dividends to supplement their income and live off of them. I'm building a dividend portfolio for myself 30 years into the future. In 2022, I collected $507.80 in dividend income from 533 dividends. In 2023, I collected $978.11 in dividend income from 660 dividends. After the first 13 weeks in 2024, I have collected $316.43 from 177 dividends. This is 32.42% of the total dividend income generated in 2023 from 26.82% of the dividends produced. 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. The Dividend Harvesting Portfolio finished strong in 2023, and I am looking to generate $1,800 of dividend income in 2024 while getting to the point where I never dip below $100 of monthly dividend income being generated.   Steven Fiorillo, Seeking Alpha  Steven Fiorillo, Seeking Alpha March is in the books, and to be honest, I am a bit surprised that I came up short on generating $100 of dividend income. January started the year off with a bang, and while February and March saw YoY growth, they both came up short. I do think that the first week in April will start off strong with a flurry of dividend income being generated, and that $100 will be generated throughout the month. I think that we're going to see triple-digit income throughout the remaining 9 months of 2024 and that this was the last month in which less than $100 will be generated.   Steven Fiorillo, Seeking Alpha While there are still 32 positions that are generating at least 1 share annually from reinvesting their dividends, there are several positions making their way to the 50% mark. Currently, roughly $101.45 of new income will be generated from the new shares of the 32 positions at the end of the year. I am hoping to have another 15-20 positions in the green section of the table below by the end of 2024 as I try to focus on getting more positions to generate at least 1 share per year from reinvesting their dividend income. This is where I feel the real dividend snowball effect will occur. While I will still continue allocating $100 per week of new capital, having 50 positions generating at least 1 share per year from reinvesting their dividends should help me significantly increase the amount of forward dividend income being generated.   Steven Fiorillo, Seeking Alpha The Dividend Harvesting Portfolio Composition   Steven Fiorillo, Seeking Alpha It's been at least several weeks since I added to one of my REIT positions, yet the sector increased to 19.7% of the Dividend Harvesting Portfolio. ETFs fell to 19.1%, and consumer staples increased from 6.2% to 6.7%. I am focusing on individual equities, and while I think REITs are going to appreciate significantly when the Fed starts its rate-cutting cycle, I am really trying to redirect fresh capital to other areas of the portfolio. I may add a share of Realty Income (O) here and there, but other than that, I am really trying to keep the REIT section under 20%. Individual equities now represent 37.81% of the Dividend Harvesting portfolio while generating 28.22% of the dividend income. REITs, ETFs, CEFs, and BDCs make up 62.19% of the portfolio and generate 71.78% of the forward income. I plan on adding to every asset class within the Dividend Harvesting Portfolio throughout 2024, but in the early stages, I will try to divert capital away from REITs in the short term.   Steven Fiorillo, Seeking Alpha  Steven Fiorillo, Seeking Alpha  Steven Fiorillo, Seeking Alpha The top-10 holdings didn't change in week 161, only their positions. The BlackRock Science and Technology Trust (BST) went from being the 8th largest position to the 10th largest, while Ares Capital (ARCC) moved into the 8th slot. Altria Group (MO) remains the largest position, and I don't think any positions will overtake it any time soon. Other than Altria and Verizon (VZ) the top-10 positions are leveling off, and I am going to do my best to get the chart below a bit more proportional. Over the next several months, I think there could be a shake-up as 3M Company (MMM) and Realty Income (O) may appear on the list. I wouldn't be surprised if British American Tobacco (BTI) makes an appearance as well.   Steven Fiorillo, Seeking Alpha I didn't have time to make a second table for the positions that represent the 11th – 20th largest holdings. I am going to make an effort in the coming weeks. As of now, I haven't added to any of the top-10 positions, and my allocated capital sits at $5,121.38. I have collected $507.10 in dividend income from these positions, which is 9.9% of the initial investment. The current value of the top-10 positions is $5,974.58, which is a profit of $853.20. I am projecting that the top 10 positions will generate $471.56 in forward dividend income, which will yield 9.21%. The top-10 positions represent 32.82% of the portfolio and are projected to generate 32.97% of the forward dividend income produced by the Dividend Harvesting Portfolio.   Steven Fiorillo, Seeking Alpha Week 161 Additions In week 161, I added to the following positions:  British American Tobacco (BTI) The Kraft Heinz Company (KHC)  British American Tobacco  I think that BTI represents one of the largest value plays at today's levels. BTI trades at 6.44 times 2024 earnings and 5.81 times 2026 earnings. BTI has a dividend yield of 9.63% and has increased its dividend for the past 20 years BTI is an FCF machine as it consistently exceeds $10 billion of annualized FCF I think that BTI is being punished because it's a tobacco company and I am willing to invest based on the fundamentals I think BTI is an opportunity for capital appreciation and dividend income  The Kraft Heinz Company  I recently wrote an article on my investment thesis regarding KHC (can be read here) KHC has been delivering financial stability over the past several years and has eliminated -36.63% ($11.87 billion) of the debt on its balance sheet since the end of 2016 KHC has a dividend yield that exceeds 4% and is paying out less than 60% of its EPS KHC is trading below its book value, and I believe there is room for top-line growth as the global population expands KHC looks like an opportunity for both dividend income and capital appreciation  Week 162 Gameplan In week 162, I plan on adding to BTI again and the Reaves Utility Income Fund (UTG). Conclusion The Dividend Harvesting Portfolio continues to progress in the right direction. While the past several months have been lucrative, I fully expect that the markets could correct a bit leading into the next Fed meeting. Part of the bull case for the market was that it was anticipating 4-6 rate cuts in 2024, and now that the Fed has closed the door on a March cut, it seems reasonable that a pullback will occur in the upcoming earnings season. Regardless of what occurs, the Dividend Harvesting Portfolio has done a tremendous job at mitigating downside risk, generating a continuous stream of dividend income. By just investing $100 per week, I have built an income-producing portfolio of 95 positions that is up 13.08% and is projected to generate $1,430.49 in forward dividend income, which is a 7.86% yield. It's going to be interesting to see how the rest of the year unfolds, and I look forward to building this stream of income for many years to come.    Steven Fiorillo, Seeking Alpha  Steven Fiorillo, Seeking Alpha","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2424399751"}