Dividendology - February Portfolio Update 2023

Big moves were made in my portfolio this month!

One of the questions I commonly get is “How many holdings should be in my dividend portfolio?”

If you’ve ever taken a college level finance course before and asked a question such as the one above, then you were probably disappointed with the answer. That’s because the answer to those types of questions in finance are always the same: “It depends.”

Taking a glance at my DIY Investor Tool Kit (which you can download here), you’ll notice one major difference from prior months. Go ahead and see if you can guess what it is.

If you noticed that the total holdings in my portfolio was reduced for the first time in about 6 months, then you guessed correctly! So what positions did I get rid of?

I sold out of:

• MAIN (6.85% Div. Yield)

• GSBD (11.7% Div. Yield)

• ACRE (11.5% Div. Yield)

These were positions I added to my portfolio, long before I understood the power of dividend growth investing, and it’s pretty clear that I was dividend yield chasing at the time. Continuing to hold onto these positions instead of choosing to allocate the capital to quality dividend growth companies would be a mistake long term. If you’d really like to see just how big of a mistake this could be, watch this video.

Making this move was also partly done in effort to trim the total amount of holdings I have in my portfolio. Ideally, I’d like to get this number somewhere between 25 - 35 holdings. You can expect to see cut a few more positions in the coming months.

The unfortunate downside of this, is this means I’ll be pulling in slightly less dividend income for the next few months. It also reduced my portfolio’s dividend yield to a little below my target of 3.5%.

Now, the fun part will be figuring out where to reallocate the new cash I have on hand, and while I’m still looking for good value opportunities in the market, I did go ahead and make one move.

Johnson and Johnson (JNJ) is right at a 52 week low. The company has been increasing dividends for over 60 years now, and has a 10 year compounded annual dividend growth rate of 6.36%.

I also added a few shares of Domino’s Pizza (DPZ). This company has been sneaky good over the past decade, up over 516% during that time. But the company is currently at a 52 week low as well. While the starting dividend yield is only around 1.63%, their 5 YR dividend CAGR is a staggering 19.05%. Dividend growth rates like that are what lead to extremely high dividend yields on cost down the road, which is exactly what I’m looking for.

You can find all this information on my favorite stock research website, Seeking Alpha. My contact there emailed me the other day and told me that they would be running a 59% off sale at my link, so if you’re interested in their services, now could be a good time to join.

In other news, Intel corporation announced that they will be cutting their dividend by over 65%! This is an unfortunate announcement to the shareholders enjoying the +5% dividend yield. This gives them a forward dividend yield of just 1.92%.

The company is now down over 43% on the year.

This just goes to show the importance of properly vetting a company and understanding the safety of their dividend. We all have a desire to jump into high yielding investments so that we can see instant results, but the reality is that dividend growth investing produces an immense compounding effect, far beyond the returns any high yielding investment can produce. Not to mention how much safer dividend growth investments can be.

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That’s a wrap on this months update. Thanks for reading!