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Dividend Harvesting Portfolio Week 90 Update: $9,000 Allocated, $670.24 In Projected Annual Dividends

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This was a relatively flat week as the S&P 500 declined by -0.46%, while the Nasdaq declined -0.74%. Week 90 has come to an end, and the Dividend Harvesting Portfolio’s invested retraced to $8,862.08, down -1.53%. In week 89, the Dividend Harvesting Portfolio put itself in a position to cross over back into positive territory but came up a bit short. That’s perfectly fine as I continue to allocate $100 each week toward this project, reinvest each dividend that is generated, and increase my projected annual income.

Nobody knows when the market will turn, but the Dividend Harvesting Portfolio has proven it can withstand volatility and not break down during a bear market. By sticking to my investment principles, being well diversified, and not overextending into a single position or sector, the Dividend Harvesting Portfolio has allowed me to sleep well at night and generate income every week throughout 2022.

Alright, week 90 has ended, which was reader suggestion week. There were some really good suggestions made, and some interesting ones are still on my watchlist. The new additions to the Dividend Harvesting Portfolio are the Schwab U.S. Dividend Equity ETF (SCHD), and PIMCO Dynamic Income Opportunities fund (PDO). I had some capital left over from last week, and with the remaining cash after adding SCHD and PDO, I added an additional share of New York Community Bank (NYCB).

The Dividend Harvesting Portfolio is now generating $670.24 in projected annual income, which is a forward yield of 7.56%. I have collected $414.48 from 462 individual dividends in 2022. I have 12 positions that are generating at least 1 share per year from their dividends and another 13 positions generating between 50-90% of their share value annually through dividends. Over the next several weeks, unless something catches my eye, I am going to focus on getting at least 8 of these positions to the point where their annual dividend income generates at least 1 new share annually. Once these 13 positions all cross over the 100% threshold, I plan on focusing on the bottom half of the portfolio and amplifying the snowball effect.

Steven Fiorillo

I allocate capital toward big tech, funds, dividends, and growth outside of my retirement accounts. These are not my only investments, but I did open a separate account, so I could easily track and document this series. I intentionally created broad diversification throughout the Dividend Harvesting portfolio so I could benefit from sector rotations and mitigate my downside risk. Investors who are too exposed to growth companies or large-cap tech have gotten crushed as the investment landscape changes. On the growth and tech side of my investments, I am feeling the pain as some of my favorite companies, including Alphabet (GOOGL, GOOG), Amazon (AMZN), and Meta Platforms (META), have been taken to the woodshed.

I am going to address a question that continues to surface. I am not trying to beat the market with this portfolio. I love index funds and am invested in several index funds. I love dividend investing due to the stream of cash flow it generates. I don’t want 100% of my assets outside of real estate tied to an S&P index fund. I have created a personal investment strategy that works to achieve my investment goals, and having a stream of income generated from dividends is part of my investment strategy. Low-cost index funds are one of the best investments anyone can make in my opinion, and the Dividend Harvesting portfolio is not meant to be a substitute for an index fund. I have read many questions about dividend investing and wanted to start a portfolio from the ground up and document its progress to disprove many misconceptions, including that you need a large amount of seed capital to make dividend investing work for you.

This series has never been about hitting a target yield, generating a certain amount of profit, or beating the market. I had two specific goals with this series. The first was to create a blueprint for constructing a dividend portfolio by documenting the journey starting from the beginning. The second goal was to illustrate how allocating capital each week toward investing, regardless of the amount, would be beneficial in the long run.

Too many people are under the illusion that you need tens of thousands or even hundreds of thousands to benefit from investing. Instead of using my real dividend portfolio as an example, I decided to start a new account, fund it with $100, and add $100 weekly, providing a step-by-step guide to dividend investing. This methodology doesn’t have to be used for dividend investing, and it could be as simple as an S&P index fund or a Total Market fund. Hopefully, this series is inspiring people to invest in their future to attain financial freedom.

A Historical Recap of the Dividend Harvesting Portfolio’s Investment Principles and Historical Performance

Investment Objectives

  • Income generation
  • Downside mitigation through diversification
  • Capital appreciation

Below are the fundamental rules I have put in place for this Portfolio:

  • Allocate $100 weekly to this Portfolio
  • Only invest in dividend-producing investments
  • No position can exceed 5% of the Portfolio
  • No sector can exceed 20% of the Portfolio
  • All dividends & distributions are to be reinvested

Below is a chart that extends from week 1 through the current week to illustrate the Dividend Harvesting Portfolio’s Progression

  • Blue line is my initial investment $100 in week 1, $1,000 in week 10, etc.
  • Red line is the account value at the end of each week
  • Yellow line is the annual dividend income the Dividend Harvesting Portfolio was projected to generate after that week’s investments and dividends reinvested

Steven Fiorillo

The Dividend Harvesting Portfolio Dividend Section

Here is how much dividend income is generated per investment basket:

  • Equities $210.38 (31.39%)
  • ETFs $156.08 (23.29%)
  • REITs $134.65 (20.09%)
  • CEFs $128.35 (19.15%)
  • BDCs $40.58 (6.06%)

Steven Fiorillo

Steven Fiorillo

Collecting dividends can serve many functions in a portfolio. Some investors utilize dividends to supplement their income and live off. I am building a dividend portfolio for myself 30 years into the future. Since I am reinvesting every dividend, they serve multiple purposes today. In 2022 alone, I have collected $414.48 in dividend income from 462 dividends across 46 weeks. This has allowed the Dividend Harvesting portfolio to stay in the black while growing the snowball effect.

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. I am hoping to collect between $450 and $500 in dividends in 2022, which will be reinvested, and finish the year generating >$700 in annual dividends.

Steven Fiorillo

October is in the books, and Thanksgiving is almost here. I am excited for 2022 to come to a close so I can see how much dividend income was generated and what the remaining YoY numbers look like.

Steven Fiorillo

The Dividend Harvesting Portfolio added 2 positions in week 90. SCHD pays a quarterly dividend, while PDO pays its dividend monthly. The Dividend Harvesting Portfolio now has 604 individual dividends flowing through its portfolio on a weekly basis. When I look at the grid below, it’s surreal, and I am excited to see what it looks like this time next year.

Steven Fiorillo, Seeking Alpha

The goal of generating enough income from the dividends to purchase an additional share per year has been the never-ending project of this portfolio. There are now 12 total positions generating at least 100% of their share value in dividends within the Dividend Harvesting portfolio. This could fluctuate due to market volatility, but I am looking to have as many positions generating at least 1 share annually from their dividends as I can.

Steven Fiorillo

The Dividend Harvesting Portfolio Composition

Many of the readers have asked if I could break down the individual positions within these sectors. I created pie charts for each individual sector and have illustrated how much each position represents of that sector of the Dividend Harvesting portfolio. Since I only have 1 position in Food & Staple Retailing and Industrials, I did not make a chart for those. 3M (MMM) and Walgreens Boots Alliance (WBA) represent 100% of those sectors. The charts will follow the normal portfolio total I have constructed. Please keep the ideas coming, as I am happy to add as much detail to this series as I can.

Steven Fiorillo

In week 89, REITs remained the largest segment and grew a bit closer to my 20% threshold for an individual sector weight within the Dividend Harvesting Portfolio. Individual equities make up 45.43% of the portfolio and generate 31.39% of the dividend income, while exchange-traded funds (“ETFs”), closed-end funds (“CEFs”), real estate investment trusts (“REITs”), business development companies (“BDCs”), and exchange-traded notes (“ETNs”) represent 54.57% of the portfolio and generate 68.461% of the dividend income.

I have a 20% maximum sector weight, so when a singular sector gets close to that level, I make sure capital is allocated away from that area to balance things out. In 2022, I will make an effort to even out these portfolio percentages. As more capital is deployed, the bottom half of the portfolio weighting will increase.

Industry

Investment

Portfolio Total

% of Portfolio

REIT

$1,600.19

$8,862.08

18.06%

ETFs

$1,529.18

$8,862.08

17.26%

Closed End Funds

$1,238.21

$8,862.08

13.97%

Oil, Gas & Consumable Fuels

$824.60

$8,862.08

9.30%

Technology

$627.41

$8,862.08

7.08%

Communication Services

$588.45

$8,862.08

6.64%

Financials

$566.72

$8,862.08

6.39%

Consumer Staples

$562.81

$8,862.08

6.35%

BDC

$461.79

$8,862.08

5.21%

Utility

$260.41

$8,862.08

2.94%

Pharmaceuticals

$240.72

$8,862.08

2.72%

Industrials

$130.94

$8,862.08

1.48%

Independent Power & Renewable Electricity Producers

$104.52

$8,862.08

1.18%

Food & Staple Retailing

$119.77

$8,862.08

1.35%

Cash

$4.24

$8,862.08

0.05%

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

Steven Fiorillo

In week 90, INTC retained the top spot as the largest allocation in the Dividend Harvesting Portfolio. INTC going above $30 has pushed it close to my 5% threshold, as it’s now 4.45% of the Dividend Harvesting Portfolio. I will be paying close attention to this as the week’s progress.

Steven Fiorillo

Week 90 Additions

In week 90, I added the following positions to the Dividend Harvesting Portfolio:

  • Schwab U.S. Dividend Equity ETF (SCHD)
  • PIMCO Dynamic Income Opportunities fund (PDO)
  • New York Community Bank (NYCB)

Schwab U.S Dividend Equity ETF

  • SCHD has been recommended by numerous readers throughout the series. I am currently a shareholder of SCHD on the ETF side of my portfolio, and SCHD has now found a new home in the Dividend Harvesting Portfolio. It’s hard to go wrong from a dividend perspective with SCHD. SCHD has a forward yield of 3.22%, and has increased its dividend for 9 consecutive years. Investors have been rewarded through a dividend growth program that has a 12.10% average growth rate over the past 5-years.

PIMCO Dynamic Income Opportunity Fund

  • I ended up adding PDO to add a further layer of diversification and expand my investment base outside of individual investments I can make on my own. PDO is a fixed-income, multi-sector CEF that focuses on high-conviction income-generating ideas across credit markets to seek current income as a primary objective and capital appreciation as a secondary objective. The fund will normally invest at least 25% of its total assets in mortgage-related assets issued by government agencies or other governmental entities or by private originators or issuers. The fund may invest up to 30% of its total assets in securities and instruments that are economically tied to “emerging market” countries; however, the fund may invest without limitation in short-term investment-grade sovereign debt issued by emerging market issuers. The fund may normally invest up to 40% of its total assets in bank loans (including, among others, senior loans, delayed funding loans, covenant-lite obligations, revolving credit facilities, and loan participations and assignments).

New York Community Bank

  • I had around $14 left in the account, and NYCB is on the list of companies I am trying to increase its annual dividend income from to generate at least 1 share per year from its dividends. I wanted to own more of NYCB anyway, so it worked out.

Week 91 Gameplan

I am leaning toward Owl Rock Capital Corporation (ORCC), Omega Healthcare Investors (OHI), and the Global X S&P 500 Covered Call ETF (XYLD) in week 91.

Conclusion

I really enjoyed the suggestions in the weeks leading up to week 90 and added SCHD and PDO to the Dividend Harvesting Portfolio. The Dividend Harvesting Portfolio is now generating over 600 individual dividends annually and is on its way to exceeding $700 in projected annual income. I am looking forward to how this project progresses and finishes in 2022. Please leave me suggestions for new positions and sections of the article below.

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