2018 December Dividend Summary

I have been really excited to compose this blog entry to not only report December's dividend income, but to also look back on the YTD activity as a whole compared to last year and also document where the portfolio stands at the of 2018 going into 2019.  Without further ado, let's take a look at how year in dividends came to close.

Now, per the above summary, one can see that the net change YoY is a mere 2.1%, however in allocating changes in the portfolio between the impact of rate increases and changes in volume (share count) you can glean a bit more into the "story" for December 2018.  First, had I made no changes to the portfolio for the past 12 months, I would have realized a 7.1% increase in portfolio income simply due to the cumulative impact of the dividend rate increases - which is fantastic result in and of itself, as it is roughly 3x higher than the 2018 rate of 2.2% inflation according to the consumer price index (CPI).  Excluding the new or closed positions (AVGO, DODFX, KHC and VHGEX) in 2018, the heavy lifters contributing to the nice over rate increase include GLW, GILD, LAMR, NSC, PSX, UNP, VDIGX, VLCAX, VWELX, and WFC - all of whom increased their annual rates > 10%!  Now, offsetting this favorable rate increases in the portfolio was the result of the reallocation of some funds.  In 2018, the portfolio exited positions in Dodge & Cox International Stock Fund (DODFX) and Vanguards Global Equity Fund (VHGEX).  In short, I made these moves because I was not seeing the frequent and consistently growing dividend income I have come to enjoy elsewhere in the market.  Both of these aforementioned funds only pay dividends once a year in December and although the net volume impact for December reflects an unfavorable variance of -5%, the net volume impact on the whole year from the redistribution of these funds into other positions is a net favorable volume variance (as the rate applied to the number of shares added in positions where capital was reallocated pay both a higher rate and more than once a year.)

2018 Year-to-date Rate vs. Volume Impact

Below is a summary of the 2018 dividend income received by month and allocated by rate and volume variance with 2017 dividend income by month as a reference.  Note, the dividend income summary reflected below for June 2017 excludes the one time special dividend of $216.30 received from NGG in that year.

Per the above summary, the PIV portfolio generated $2,159 (adj. for NGG special dividend in 2017) more dividend income than in the year prior - a 40.4% increase (or 33.4% when incl. the special dividend received from NGG in 2017)! The majority YoY increase was a result of reinvestment of dividend income as well as infusion of new capital into the portfolio.  Looking at the year on the whole, rates increase within the portfolio had a favorable impact of 6.7% and the the volume (net share purchases) favorable impact was 33.8%.

Annual Dividend Trend

Below is a graph of the dividend income the portfolio has generated since 2006.  I began investing small amounts into mutual funds back in 2002 while I was working part-time and going to college.  Investing in dividend paying equities did not become a focus until the year 2015 and the graphic below illustrates the impact of this focus nearly immediately starting the following year in 2016.




PIV Portfolio - Industry Allocation

Below is a current snapshot as of portfolio's allocation among the 11 industries per the Global Industries Classification Standard (GICS) as of the close of 2018.  As I've mentioned previously, I have no specific goal in mind with respect the to allocation below when it comes to buying stocks - as the saying goes "let the chips fall where they may."

Dividend Income Goal for 2019

For 2019, I hope to receive at least $9,600 in annual dividend income.  With the current portfolio positions combined with the following three factors: (1) modest dividend rate increases in 2019, (2) reinvestment of dividends received throughout the year and (3) additional capital contributions to the portfolio resulting in additional purchases.  If the market continues to experience significant volatility in the next 6-8 months, I may choose to be a bit more aggressive in my share purchases which would likely catapult 2019 dividend cross the $10,000 mark!  Stay tuned and we will see how the year develops.

Portfolio News

Below are some links to articles that caught my eye in recent weeks concerning current portfolio positions.

• Lamar acquires five new markets in $418.5M deal
• Campbell names Mark Clouse as CEO
• W.P. Carey reports $119M of property investments
• General Mills beats by $0.04, misses on revenue
• Phillip 66 unveils $2.3B capital spending program for 2019 - also reiterates its long-term objective to reinvest 60% of cash flow into the business and return 40% to shareholders through dividends and buybacks.
• Pfizer declares $0.36 dividend - a 5.9% increase from prior quarter with a forward yield of 3.3% at the time of announcement.
• AT&T declares $0.51 dividend - a 2% increase from prior dividend with a forward yield of 6.82% at the time of announcement.  
• Delta updates financial targets - The company expects revenue growth of 4% to 6% vs. +5.6% consensus and 2019 EPS of $6 to $7 vs. $6.70 consensus. Capacity growth of 3% is anticipated. Non-fuel unit cost growth of approximately one percent is seen.
• Activist investor Elliott takes on Bayer AG - Elliott has reportedly taken on a much bigger stake in Bayer and in order to get the attention of management.  It was only a matter of time before activist investors got a bit more noisy.
• Fed rejects Wells Fargo reform plan
• Bayer aims to grow annual sales 4-5% through 2022 - my favorite part of the expectations set by management is that cash flow is expected to grow ~18% per year compared to 2018.
• Chatham Lodging acquires downtown Dallas Courtyard for $49M 
• W.P. Carey declares $1.03 dividend - a 0.5% increase from prior divided.
• AT&T pledges 5G smartphone in first half of 2019