Friday, September 25, 2020

September 2020 Portfolio Update

After the recent market pullback, the portfolio has recently dropped back from its highs of around $1,010,000 USD to the present value of $962K USD. The market is around 8% from its highs, with the low point being close to 10% off the highs. The pullback offered some better prices, but most prices are still very over valued from what I was looking for. The buying time was definitely in late Q1 to early Q2 of this year. I am confident one day I will cross over the $1M mark again, as I had done so for my past "targets" like the first $100K, the quarter million, and the half million thresholds.

The graph below shows the total portfolio value over the last few weeks. The market movements now dictate how the portfolio behaves, from a total equity worth point of view. With around a million dollars invested, a 1% drop in the market is a $10,000 USD drop in the paper value. Quite a lot relative to what I can invest periodically. The contributions I make from my job or dividends are still relevant in helping the portfolio push itself upward, but its impact is not as strong as when I started.

With continued investment contributions from dividends and from my vocation, the portfolio made a strong recovery when a lot of capital was put to work at the bottom. The recent pull back is now noticeable in the chart below after the S&P500 corrected around 10%. Regarding dividends, the portfolio total dividends are still progressing forward at a steady rate. The dividends that have been cut so far in my portfolio this year include TJX and ROST, discount retail shops that had to be closed down temporarily due to COVID. The other dividend paying companies have continued their distributions and the large majority have raised their dividends so far this year. 2020 will likely be a year with very poor dividend increases as management is very conservative due to the COVID situation.

The portfolio allocation is updated below. I have, as of this week, sold out my TJX and ROST positions. Although both have pulled back noticeably from their original highs, both have around a 35% long term capital gain in my portfolio so this will have to be taxed. I cannot argue really, they still have decent gains, so I swapped those zero dividend payers with other companies that paid dividends. I will try to offset the gains with some tax loss harvesting this year, up to $3000 tax loss harvest.

For the sell reason for TJX and ROST, I sold because they cut the dividend several months ago. The prices held up well despite the cut and shutting down stores due to COVID. I do believe in the long term, after COVID is over, the pickup will allow TJX and ROST to continue and be successful. Both are very strong businesses and I enjoy shopping at the TJX branches of stores. But for me, I am focused on dividends and I could not wait for the two positions (which totaled around $30,000 USD) to sit at a 0% yield for that long. I added the $30K from the sell proceeds to Microsoft, Realty Income, Pepsico, P&G, and Home Depot to tack on some additional yields. I also added some to Costco after earnings. By putting some more capital to work, my dividend line in red on the graph above was able to shoot up to $24,026 annually.

Name Ticker Sector Value Weight Divies Yield SP Fin VL Fin VL Safety
Visa Inc V Financial $53,513.23 5.56% $325.56 0.6084% AA- A++ 1
NextEra Energy Inc NEE Utilities $42,889.28 4.46% $852.25 1.9871% A- A+ 1
Home Depot Inc HD Discret $41,691.85 4.33% $931.49 2.2342% A A++ 1
Microsoft Corporation MSFT Tech $41,478.02 4.31% $407.16 0.9816% AAA A++ 1
Johnson & Johnson JNJ Health $39,981.34 4.15% $1,108.92 2.7736% AAA A++ 1
Clorox Co CLX Staples $38,722.34 4.02% $776.24 2.0046% A- A 2
Realty Income Corp O REIT $38,586.73 4.01% $1,800.24 4.6654% A- A 2
PepsiCo PEP Staples $33,026.69 3.43% $1,011.45 3.0625% A+ A++ 1
Altria Group Inc MO Staples $32,478.52 3.37% $2,851.52 8.7797% BBB B++ 3
Philip Morris International Inc PM Staples $32,281.18 3.35% $2,003.66 6.2069% A B++ 3
Mastercard Inc MA Financial $30,863.14 3.21% $148.84 0.4822% A+ A++ 1
Air Products & Chemicals, Inc APD Materials $30,329.92 3.15% $559.21 1.8438% A A+ 1
Xcel Energy Inc XEL Utilities $26,324.01 2.74% $660.98 2.5109% A- A+ 1
Procter & Gamble Co PG Staples $25,215.97 2.62% $579.52 2.2982% AA- A++ 1
McCormick & Company MKC Staples $24,888.76 2.59% $322.20 1.2946% BBB A+ 1
Kimberly-Clark KMB Staples $24,251.31 2.52% $708.89 2.9231% A A++ 1
WEC Energy Group, Inc. WEC Utilities $23,390.26 2.43% $614.45 2.6269% A- A+ 1
Automatic Data Proc, Inc ADP Tech $23,165.85 2.41% $626.76 2.7055% AA A++ 1
Illinois Tool Works Inc. ITW Industrial $23,021.50 2.39% $511.51 2.2219% A+ A++ 1
Becton Dickinson and Co BDX Health $22,922.94 2.38% $323.26 1.4102% BBB A++ 1
Abbott Laboratories ABT Health $22,265.48 2.31% $309.93 1.3920% A- A++ 1
The Coca-Cola Co KO Staples $21,082.95 2.19% $709.69 3.3662% A+ A++ 1
3M Co MMM Industrial $20,974.29 2.18% $769.51 3.6688% A+ A++ 1
Church & Dwight CHD Staples $20,510.24 2.13% $211.83 1.0328% BBB+ A+ 1
Stryker Corporation SYK Health $19,826.03 2.06% $222.43 1.1219% A- A++ 1
AT&T Inc T Telecom $18,009.89 1.87% $1,335.97 7.4180% BBB A++ 1
General Mills, Inc. GIS Staples $16,892.92 1.76% $554.89 3.2847% BBB A 1
Starbucks Corporation SBUX Discret $16,304.62 1.69% $317.20 1.9454% BBB+ A++ 1
Costco Wholesale Corporation COST Staples $15,758.68 1.64% $128.80 0.8173% A+ A++ 1
Colgate-Palmolive Co CL Staples $15,604.72 1.62% $361.61 2.3173% AA- A+ 1
General Dynamics Corporation GD Industrial $14,896.55 1.55% $474.24 3.1836% A A++ 1
Dominion Energy, Inc. D Utilities $13,585.39 1.41% $662.96 4.8799% BBB+ B++ 2
McDonald's Corporation MCD Discret $11,681.44 1.21% $267.70 2.2917% BBB+ A++ 1
Honeywell International Inc. HON Industrial $11,030.46 1.15% $245.90 2.2292% A A++ 1
Medtronic plc MDT Health $10,875.07 1.13% $244.57 2.2489% A A++ 1
Misc Type ……….. Partial Totals Weight Yr Dividends Avg Yield …..832 …..9 …..82
Equity Stocks   $898,321.60 93.34% $23,941.31 2.6651%      
Investable US Dollars   $34,678.71 3.60%          
Toyota Vehicle Depreciate   $14,600.00 1.52%          
Miscellaneous Assets   $14,824.80 1.54% $85.00        
. .. Equity + Misc Weight …..2 ….. …..222 …22 …..223
Total     $962,425.11 100.00% $24,026.31        

Right now my portfolio's top positions are Visa, Next Era Energy, Home Depot, and Microsoft. Tobacco had held the top spots for a while in my portfolio in the past, but the tobacco industry has seen severe share price declines. Altria and Phillip Morris are still around $30K sized positions but their performance has been outclassed by others, which yield much less. I keep the tobacco stocks now for their dividends but do not plan to add anymore, due to their high debt and my need to diversify to other dividend paying companies.

The portfolio is concentrated in conservative and defensive companies. As a result, my performance at the market highs will languish behind the high growth companies in the indexes, like the Nasdaq or technology companies. This is fine, as the goal of the portfolio is not chasing returns or capital gains, but to protect and grow the dividend. I am able to participate in some of the technology rally through ownership in Microsoft and Visa and Mastercard, which now occupy a decent portion of the portfolio. My feeling is that when a market run is running towards the long-end of the cycle, it is time to prepare oneself for the next correction. Having a portfolio weighted like mine below will help prevent losses while maintaining a good income stream.

At the moment, I am not heavily buying. I recently bought the stocks mentioned previously after selling TJX and ROST due to portfolio rebalancing. But aside from that, there is no real action besides reinvesting dividends. Right now I hold around $30K in cash and will deploy that when I see further opportunity from pullbacks. If the S&P500 falls below 10% that will initiate the first batch of money to invest. If the S&P500 falls past 15% and then 20% and then 25%, additional funds will be used to purchase more shares.

I believe going forward, with the trade war issues with China on the news, the volatility and uncertainty associated with a new presidential election in the USA, and also the COVID-19 impact on the economy in the states, I believe there will be future buying opportunities coming shortly. The S&P500 has made several zig-zag moves before after it peaks and after it bottoms. We had just hit a peak in the last few weeks. September and October are also usually very volatile months in the year.  My $30,000 in cash, which is growing as well, will help the portfolio take advantage of new opportunities that arise.

Happy investing,


1 comment:

  1. Hi Young Dividend,

    Makes sense. However, in my opinion you should create an inverse position through options. Nothing crazy but for example my drop was only 5% while costing me very little. Thus, my take off return is at higher step. I basically do options very conservatively as insurance policy. I took Robert Schillers class and that is where he talk about small position to protect portfolio, basically decreasing standard deviation. I don't follow any technical, just common sense. The market has been going on for a while so at some point for what ever reason must come down.