Dividend Harvesting Portfolio Week 99 Update: $9,900 Allocated, $766.99 In Projected Dividends

The Dividend Harvesting Portfolio has reached a new milestone as the portfolio balance finished week 99 at $10,027.06. If there is one takeaway that readers walk away with from this series, it should be that no matter how much you can afford to save or invest, doing so on a consistent basis will pay off in the long run. I wanted to demonstrate how anyone could make their money work for them and that starting with a large sum of capital isn’t a prerequisite to dividend investing. Friday was a big day as it led the Nasdaq out of another weekly decline, and Netflix (NFLX) looks to be setting the stage for big tech during earnings season. Regardless of what occurs, I will continue to allocate $100 per week toward this project, document the series, and build out the Dividend Harvesting Portfolio.

At the end of week 99, the Dividend Harvesting Portfolio finished with an account value of $10,027.06 and started a new sequence of weeks finishing in the black. In the 3rd week of 2023, the Dividend Harvesting Portfolio generated $2 of income from 6 individual dividends. In week 99, I had 3 positions that were tittering on the edge of generating 1 additional share annually through dividends, so I added a share to Tekla World Healthcare Fund (THW), Owl Rock Capital Corporation (ORCC), and New York Community Bank (NYCB). I also added an additional share to Walgreens Boots Alliance (WBA), and the Virtus InfraCap U.S. Preferred Stock ETF (PFFA). After adding these shares and reinvesting the dividends which were collected in week 99, my projected future dividend income increased by $8.11 (1.07%) to $766.99. So far in 2023, I have collected $47.44 of dividend income which is 9.67% of the total dividend income collected in 2022, through 36 dividends which are 6.75% of the dividends generated in 2022. It will be interesting to see where the statistics are after the first half of 2023.

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

The Dividend Harvesting Portfolio Dividend Section

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

• Equities $227.74 (29.66%)
• ETFs $196.39(25.61%)
• CEFs $148.72 (19.39%)
• REITs $144.37 (18.82%)
• BDCs $49.77 (6.49%)

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. In 2022, I collected $490.76 in dividend income from 533 dividends. This has allowed the Dividend Harvesting portfolio to stay in the black while growing the snowball effect. In week 3 of 2023, I collected $2 in dividends, and in 2023 I generated $47.44 in dividend income. YTD I have generated 9.67% of my 2022 dividend income from 36 dividends which is 6.75% of the dividends generated throughout 2022.

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 around $1,000 in dividends in 2023, which will be reinvested.

In December, I generated $63.44 in dividend income, a YoY increase of 124.49% or $35.18. It’s going to be interesting to see how this chart progresses throughout 2023 and what the YoY growth rates will be.

I haven’t added new positions since week 90, and the Dividend Harvesting Portfolio has 604 individual dividends flowing through its portfolio on a weekly basis.

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 18 total positions generating at least 100% of their share value in dividends within the Dividend Harvesting portfolio.

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.

In week 99, ETFs remained the largest section of the Dividend Harvesting Portfolio’s composition. Individual equities make up 42.92% of the portfolio and generate 29.69% 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 57.08% of the portfolio and generate 70.31% 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
ETFs	$1,861.21	$10,027.06	18.56%
REIT	$1,812.74	$10,027.06	18.08%
Closed End Funds	$1,463.43	$10,027.06	14.59%
Oil, Gas & Consumable Fuels	$955.93	$10,027.06	9.53%
Technology	$654.72	$10,027.06	6.53%
Communication Services	$645.11	$10,027.06	6.43%
Financials	$625.81	$10,027.06	6.24%
Consumer Staples	$575.06	$10,027.06	5.74%
BDC	$549.75	$10,027.06	5.48%
Utility	$279.50	$10,027.06	2.79%
Pharmaceuticals	$231.72	$10,027.06	2.31%
Industrials	$126.08	$10,027.06	1.26%
Food & Staple Retailing	$109.40	$10,027.06	1.09%
Independent Power & Renewable Electricity Producers	$100.62	$10,027.06	1.00%
Cash	$1.55	$10,027.06	0.02%

Click to enlarge

In week 99, Intel Corporation (INTC) regained the top spot and dethroned Verizon (VZ) as the largest position in the Dividend Harvesting Portfolio. INTC has a portfolio weight of 4.18%, while VZ’s portfolio weight is 4.12%. As both of these positions are between 60-80% of generating an additional share from their dividends annually, I will be looking to add shares over the next several weeks when the portfolio weighting gets a bit closer to 4%.

Week 99 Additions

In week 99, I added to the following positions:

• Tekla World Healthcare Fund (THW)
• Owl Rock Capital Corporation (ORCC)
• New York Community Bank (NYCB)
• Walgreens Boots Alliance (WBA)
• Virtus InfraCap U.S. Preferred Stock ETF (PFFA)

Tekla World Healthcare Fund

• THW was falling in, and out of the 100% category of generating an additional share annually through its dividends, so I added an additional share. This is an interesting CEF with a 9.52% yield and exposure to some of the largest global healthcare stocks.

Owl Rock Capital Corporation

• ORCC was another position that was on the edge of generating an additional share annually, so I added another share. I have been building a position in ORCC outside of this portfolio as it has become one of my favorite BDCs with Ares Capital (ARCC). I wrote an article (can be read here) that outlines my investment thesis for ORCC and why I believe management sent a strong message through its buyback initiative.

New York Community Bank

• This was the other company that was just shy of generating an additional share, so I added to the position. NYCB recently completed its merger with Flagstar, and I am excited to see the synergies between the two banks. I think NYCB is undervalued and will continue to add to my position.

Walgreens Boots Alliance

• WBA slipped after earnings, and its yield was above 5.25%. I see long-term value in its shares, and as this is one of the only Dividend Aristocrats with a 5% plus yield, I decided to add an additional share.

Virtus InfraCap U.S. Preferred Stock ETF

• PFFA is one of two ETFs that I have with exposure to preferred shares. I am a fan of Jay Hatfield, who runs PFFA, and the ETF has recently been grinding higher. PFFA also raised the dividend which is yielding 9.72% and is paid monthly. I plan on adding more shares in the future.

Week 100 Gameplan: Reader Suggestion Week

There have been a lot of good suggestions, and currently, the JPMorgan Nasdaq Equity Premium ETF (JEPQ) is a frontrunner. Please leave all your suggestions and input in the comment section, as I will be adding new positions from the reader comments in week 100.

Conclusion

The Dividend Harvesting Portfolio is hard at work, trying to establish an ongoing track record of finishing each week in the black. At the end of week 99, I had allocated $9,900 to this portfolio; the portfolio balance was$10,027.06 and is projected to generate $766.99 in annual income. This is a forward yield of 7.65% on 79 income-producing positions. I look forward to reading everyone’s comments and seeing what suggestions are left for week 100.