Saturday, December 18, 2021

Week in Review

As a new dividend growth investor, one of the mistakes I saw other dividend investors make was chasing yield at the expense of quality. As I've built the foundation for the Dividend Town portfolio, I've tried to avoid that mistake by constructing a high quality basket of companies that will deliver an optimal blend of the following:

  • Potential forward growth
  • 4+ year consistent dividend growth
  • Fast dividend growth
  • Targeted portfolio yield of 2.8% - 3.0%
  • Lower P/E, value oriented
So far I am pleased with the result. The chart below contains almost all the holdings of the DT portfolio ranked by score measured against P/E ratio. The higher quality stocks require a higher premium.  

DT Portfolio Rankings vs. P/E Score

If you look at the graph below, this compares the P/E vs. the yield. The higher quality companies provide a lower yield but a bigger opportunity for forward growth, while the lower ranked companies command a higher yield. With the exception of NVDA and KMI, each of the companies below has consistently raised dividends annually for 4+ years. 

DT Portfolio P/E vs. Yield

Assuming I only reinvest dividends into these stocks and their dividend growth streak continues, the dividend income per year rockets to $67K per year in 20 years. Not bad!

This week I received $204.09 in dividends, bringing the MTD total to $744.70!  That's a great milestone.

On the trading front things have slowed down as I'm pleased with the overall quality of the portfolio. I did make one upscale in quality however.
  • Sold 38 shares of IDA
  • Purchased 40 shares of ATO

Options activity has been challenging as I'm still trying to find the sweet spot on covered calls. 
  • Rolled over my $60 PFE 12/17 call into a $67 12/23 call as the price crept above the strike price on Thursday. Ultimately PFE closed under the strike price on Friday so this was a miss. Selling covered calls on Pfizer in this environment has been a losing battle. 
  • Bought back a $55 12/23 ATVI put. 
  • KMI options expired worthless.
  • MAIN long-call expired worthless.
  • Exercised a $95 cash-secured for WLK on 12/17. The premium was $134.35, and it closed for $92.23 yesterday, so while I did not get the stock at a discount it is considered a long-term hold.
Next week I'll be looking to deploy some contributions and evaluating January option activity.  

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