Dividend Harvesting Portfolio Week 163: $16,300 Allocated, $1,458.36 In Projected Dividends

seekingalpha04-18

The markets declined for the second consecutive week, causing a retracement in the Dividend Harvesting Portfolio.Dividend income generated in week 163 was light, but the portfolio's forward projected ...

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PM Images The CPI print came in hot at 3.5%, which was the highest level since September of 2023. Inflation is proving to be sticky, and to make matters worse, The University of Michigan consumer sentiment for the U.S. fell -1.5 points to 77.9 on Friday, 4/12. This caused a selloff in the markets, with the S&P 500 declining by -1.58% and the Nasdaq dropping by -0.51% for the week. The CME Group has updated their projections, and they are now forecasting that the probability of a rate cut in May is down to 5.9%, while there is only a 28.3% chance that a cut will occur at the June meeting. This is drastically different data than we had last week, and the commodity markets are not cooperating to add salt to the wounds. Oil is at $90 a barrel, while gold is hovering around $2,350 as I write this article. With inflation starting to go the wrong way, it's putting pressure on the Fed's previous outlook, and to go a level deeper, higher commodity prices increase manufacturing costs, which could have the opposite effect on prices than the Fed wants. Right now, there is a reason for oil traders to be bullish as U.S. production is declining, OPEC+ previously deepened their cuts, and the conflict between Iran and Israel is intensifying. We could see $100 per barrel sooner rather than later, and if we do, I wouldn't be too optimistic about the next CPI print. All eyes are going to be on Fed Chair Powell when he delivers remarks at the upcoming FOMC press conference on May 1st. The only saving grace is that earnings season is upon us, and big tech could save the day once again. If we have a strong earnings season with additional participation from the broader market, then the waters may not be as choppy, but if the conflict in the Middle East intensifies, and we see earnings surprises to the downside, we could see a retracement in the markets. No matter what happens, I will buy, as I don't invest in the short term, and I view fluctuations as opportunities. Well, it happened; in week 163, the markets declined, and after a 7-week stretch in the black, we're having a retracement as this is the 2nd consecutive week in the red. Over the past 163 weeks, I have allocated $16,300 to the Dividend Harvesting Portfolio. This week, the account balance was retraced from $370.95 to $17,703.91. While retracements occur, the Dividend Harvesting Portfolio is still well into the black as it's up $1,403.91 (8.61%) on invested capital. This was a light week, as only $3.03 of dividend income was generated. In week 163, I couldn't help myself, so I added to Realty Income (O) as it declined by -2.6% during the week. I also added to Pfizer (PFE) and of course, British American Tobacco (BTI), as I needed 1 more share to generate an additional share from its dividends on an annual basis. The combination of adding to these positions while reinvesting the $3.03 of dividend income that was produced increased the Dividend Harvesting Portfolio's forward projected income by $7.93 (0.55%) to $1,458.38. If we get a retracement in REITs going into the Fed meeting, I may have to add a few more shares of Realty Income because I think it will turn out to be an incredible long-term buying opportunity even though I am flirting with the 20% sector threshold for REITs within the portfolio. I'm approaching $1,500 of projected annualized dividend income quickly and feel this could be reached by June. While last week was an anomaly due to the 3M Company (MMM) spinoff, I have added $145.77 of forward dividend income in the first 15 weeks of 2024. At this rate, I should close out 2024, exceeding $1,800 of annualized dividend income being generated. I am excited to see how things unfold, and if we get a retracement in the market, I will be buying into weakness each week.   Steven Fiorillo, Seeking Alpha The overall performance of the Dividend Harvesting Portfolio This was the 2nd consecutive week that the Dividend Harvesting Portfolio has declined in value, and this could get a bit rocky due to CPI and consumer sentiment. We're going to see how the underlying holdings perform going into the next Fed meeting, and I expect things to get a bit volatile. Having 95 positions will certainly help mitigate risk to the downside, and that's exactly why I have built a portfolio that spans many industries and positions. If I had just built a REIT portfolio, there is a good chance that my downside risk would have been elevated compared to my current situation. The main premise was to treat this portfolio as a vehicle to generate ongoing income while mitigating risk. I wanted to generate higher yields than I would have investing in risk-free assets, while having the ability to capture capital appreciation. I fully expect price fluctuations and believe that the Dividend Harvesting Portfolio has demonstrated a strong ability to navigate any market cycle and eventually end up on the right side of my invested capital. I am looking forward to seeing how things play out as the forward income continues to grow, and the compounding effects are starting to be noticeable.   Steven Fiorillo, Seeking Alpha The Dividend Harvesting Portfolio dividend section Here's how much dividend income is generated per investment basket:  Equities $420.64 (28.84%) ETFs $336.07 (23.04%) REITs $275.05 (18.86%) CEFs $259.05 (17.76%) BDCs $157.78 (10.82%) Treasuries $9.76 (0.67%)    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 14 weeks in 2024, I have collected $373.50 from 196 dividends. This is 38.26 of the total dividend income generated in 2023 from 29.70% 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 Looking at last year, I knew this was going to be a weak week for dividend income. In April, $57.07 of dividend income was generated, and based on last year's outcome, there was roughly $52 of income generated over the next two weeks. I think the Dividend Harvesting Portfolio will have no trouble generating $100 of dividend income this month as I am already 57% of the way there, and there are about 2 ½ weeks to go. I will feel a bit better looking at the chart below when I see triple-digit income again, and I will be even better when this is extrapolated to the future months. Progress is certainly being made, and when I invest $100 per week in this portfolio, it's going to take a long time until the portfolio generates at least $1,000 per month from dividend income. Eventually, it will get there and play a role in my income production during retirement.   Steven Fiorillo, Seeking Alpha The selloff last week pushed several positions into the green section of the chart below. There are now 33 positions that are generating at least 1 share per year from their dividend income. The new shares are projected to add $107.83 of annualized forward dividend income. There are some positions on the move, as Realty Income is now producing 40-49.99% of its share value from its dividends, and Pfizer is producing between 50-59.99%. I am working on getting a bunch of positions to cross over the 100% threshold. While my plan of attack has changed from time to time, I still believe I will be able to get another 10-15 positions to cross over in 2024.   Steven Fiorillo, Seeking Alpha The Dividend Harvesting Portfolio Composition   Steven Fiorillo, Seeking Alpha REITs and ETFs are neck and neck. While I did add a share of Realty Income this week, REITs remain my 2nd largest holding. While I have been purposely trying to avoid investing in REITs to get their overall percentage below my 20% threshold, I am going to pre-disclose I plan on adding to Realty Income until it is generating at least 1 share per year from its dividends. The recent selloff is making Realty Income look like it could drop to $50, and I think it's a good long-term purchase. I plan on adding to many different individual equities and CEFs to balance the portfolio further. REITs could breach the 20% threshold in the short term, but I am fully committed to making sure they don't exceed 20% of the portfolio. Individual equities now represent 37.66% of the Dividend Harvesting portfolio while generating 28.84% of the dividend income. REITs, ETFs, CEFs, and BDCs make up 62.34% of the portfolio and generate 71.16% 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 Only one position remains above the 4% level, and that's Altria Group (MO). I am pleased with how the top-10 positions continue to level out, and eventually, I want the three largest positions to be more even with the rest. I have a feeling that Realty Income is going to make an appearance sooner than later on this list, as it's currently the 13th largest position in the Dividend Harvesting Portfolio. As Altria Group retraces back to the $40 level, I will closely watch its upcoming earnings, as I think it remains undervalued. I am going to try not add to any of the positions within the top-10 holdings until after earnings, as I want to reassess my investment thesis on these positions.   Steven Fiorillo, Seeking Alpha Not much has changed in the underlying data regarding the top-10 holdings within the Dividend Harvesting Portfolio, except their share prices. The down market has hurt profitability, but the positions as a collective are still in the black and are producing large amounts of cash flow on a percentage basis. The allocated capital hasn't changed at $5,121.38, but I am in the black by only $598.05, down from $869.04 last week, as these positions are now worth $5,719.43. I have collected 10.41% of the original investment in dividend income, as $533.36 has been generated. Overall, these positions are projected to generate $473.76 in forward dividend income, which is a 9.25% yield. The top 10 positions collectively represent 32.31% of the Dividend Harvesting Portfolio, while their forward dividend income is projected to generate 32.49% of the forward dividend income.   Steven Fiorillo, Seeking Alpha Week 163 Additions In week 163, I added to my positions in:  Realty Income Pfizer British American Tobacco  Realty Income  I recently wrote an article on Realty Income discussing my investment thesis, which can be read by clicking here. From a dividend perspective, this was a purchase I couldn't pass up as Realty Income has been retracing back to the $50 level. Realty Income pays a dividend of $3.08 which is a 5.97% yield Realty Income's dividend track record is impressive as it has a 4.3% compound annual dividend growth rate since 1994, has declared 646 monthly dividends, and provided investors with 106 quarterly dividend increases REITs have been getting hammered as what was expected to be a Fed pivot in the first half of 2024 is now uncertain. While I really don't want to add to REITs as I just got them below 20% of the portfolio, I think Realty Income is a great long-term buy. I plan on adding to Realty Income until it is producing at least 1 share from its dividend income and I will deal with getting REITs under 20% again in the future  Pfizer  Pfizer is another company that I am bullish on even though Mr. Market isn't. Pfizer is trading at 11.03 times 2024 earnings and 8.97 times 2026 earnings. I think I am adding shares at a great price for a long-term investment Pfizer has increased the dividend for 13 consecutive years and the yield is now 6.48%. I plan on adding to my position until my position is generating at least 1 share per year from its dividends Pfizer has a large pipeline of drugs and is a cash cow generating $11.52 billion in EBITDA and around $5 billion in Free Cash Flow (FCF) I think now is a good time to add to the position and while it may take another year or two to turn around, I'll be collecting and reinvesting the dividends  British American Tobacco  I needed another share of British American Tobacco to push it over the line to where it's generating at least 1 share annually from its dividends, so I added to the position again I think British American Tobacco is one of the most undervalued companies from a profitability standpoint. While they operate in a hated sector, this tobacco giant is generating $16.92 billion in EBITDA and over $13 billion in FCF As the dividend yield is around 10% I just couldn't resist, and I think shares will rebound in the second half of 2024  Week 164 Game Plan I have been contemplating several positions, and while I may add another share of Realty Income, I may also add to my position in Cisco Systems (CSCO) or The Coca-Cola Company (KO) going into earnings. Conclusion The amount of dividend income that is being generated continues to compound and grow as every dividend is reinvested. We could be in for a rough ride over the next several months, and a lot depends on Q1 earnings, and the FOMC conference on May 1st. So many factors are outside our control, and if the situation gets more unstable overseas, we could see a large spike in commodity prices, which could cause larger fluctuations in the market. Thankfully, this is capital I won't need for a long time, and its purpose is to generate income. The Dividend Harvesting portfolio has always done a good job mitigating downside risk, so we will see how it holds up this time. Luckily, down days don't worry me, as all of my dividends allow me to purchase more stock at lower prices. I fully anticipate turbulence and will be sitting here adding to positions each week. Based on the projected annual dividend income, I will generate roughly $28.05 per week. I am excited to see how everything progresses and look forward to interacting with everyone in the comment section.    Steven Fiorillo, Seeking Alpha  Steven Fiorillo, Seeking Alpha","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"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":"4.22.4","shortVersion":"4.22.4","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/2428596644"}