Dividend Harvesting Portfolio Week 130: $13,000 Allocated, $1,112.40 In Projected Dividends

Reader suggestion week is here, and I added an interesting company that was previously suggested. In addition to the new position, it was an eventful week as Jerome Powell delivered a somewhat hawkish speech, the S&P 500 finished the week up 0.29%, the Nasdaq closed the week up 1.39%, and for the 2^nd time since I started this series one of my positions has reduced its dividend. I will do a full write-up on the dividend reduction and what it means for this position immediately after the opening. Nevertheless, I am pleased with the overall performance of the Dividend Harvesting Portfolio, and I am excited to capitalize on several positions that have declined in value. I have already mapped out the next several weeks of purchases as I see tremendous long-term value in several underlying positions within the Dividend Harvesting Portfolio.

Week 130 marks the 9^th consecutive week that the Dividend Harvesting Portfolio has finished in the black. I have now allocated $13,000 to this account, and after week 130 finished, the Dividend Harvesting Portfolio was up 1.4% ($182.47) on invested capital. No matter your investment style, I hope this series illustrates how you can start an account from $0 and grow it over time by being consistent with weekly or monthly deposits and sticking to a plan. For many, investing in an S&P 500 index fund will do the trick, and for others who are interested in dividend income, I hope this serves as a blueprint that disproves the idea that investors need to start with a large amount of capital to make their money work for them. In week 130, there was $7.42 of dividend income generated, which brought the amount of income I have collected in 2023 up to $586.08. In week 130, I invested in Morgan Stanley (MS), which was a reader suggestion that has been sitting on the watchlist for some time. As MS declined in value and the yield exceeded 4%, I decided it was a good time to make this the latest edition to the Dividend Harvesting Portfolio. My forward projected dividend income declined week over week to $1,112.40 from $1,118.76 because Medical Properties Trust (MPW) slashed its dividend by roughly -50%.

Medical Properties Trust slashed its quarterly dividend from $0.29 to $0.15

I have been bullish on MPW for some time, and on 8/23/23, I wrote a dedicated article discussing my disappointment in senior leadership and thoughts on what was occurring (can be read by clicking here). I will do a full write-up on MPW as it pertains to the Dividend Harvesting Portfolio and what my plan is.

MPW is the 2^nd company in the Dividend Harvesting Portfolio that has slashed its dividend by at least -50%. The first company was Intel Corporation (INTC). The long-term readers may ask what about AT&T (T) and Vornado (VNO)? AT&T didn’t slash their dividend, they readjusted the dividend payment due to the Warner Media spinoff as a percentage of free cash flow [FCF]. Since AT&T would be generating less FCF after the spinoff, the dividend payment was adjusted so I do not consider this a cut. As for Vornado, they suspended their dividend several months back, but the dividends will be paid out at the end of the year. Since the dividend was not eliminated or reduced, I am also not considering this a dividend cut.

Alright, I went through all of my transactions for MPW in the Dividend Harvesting Portfolio and created the table below. I had purchased 20 shares of MPW for $278.51, placing my average cost per share at $13.93. I have also collected $22.31 of dividend income from MPW over the course of 9 dividends. I am only looking at what my out-of-pocket cost is for this section, and I will not be including the dividend income.

As I indicated in my article, I am not pleased with management and felt they should have addressed everything on the Q2 conference call rather than waiting 2-weeks to reduce the dividend. Ultimately, while I am not bullish on MPW due to the damage in investor sentiment, I do think it is undervalued and, in the long run, they will be fine. I plan on adding 15 shares or so to my position in the future, and based on the current price, if I were to add 15 shares at $7.01, I would reduce my average price per share by -21.28%. MPW still has a $0.60 dividend which is a yield of 8.56%, and I have time to sit on my shares and wait for them to appreciate again.

This is exactly why I have built out an extremely diverse portfolio with a 5% individual position and 20% sector rule. I don’t get everything correct, and things happen. It would be catastrophic if MPW was 25% or 50% of my portfolio. This is yet another example of how the Dividend Harvesting Portfolio can absorb unwanted situations, and by spreading out my investments, I am able to mitigate downside risk. Since I started this series, comments criticizing the number of holdings continue to surface. If I had 5-10 holdings rather than 89 in the Dividend Harvesting Portfolio, the MPW dividend cut would be more impactful as it would represent a much larger portion of the portfolio’s value and dividend income.

MPW Share Purchases Excluding Dividends
Shares Purchased	20
Cost	$278.51
PPS Current	$13.93
Current Price	$7.01
Current Value	$140.20
Profit	-$138.31
	-49.66%
New Shares	15
Cost of New Shares	$105.15
Total Shares	35.00
Total Investment	$383.66
New PPS	$10.96
PPS Reduction	-$2.96
	-21.28%

Click to enlarge

The overall performance of the Dividend Harvesting Portfolio

While the overall balance has declined a bit, the Dividend Harvesting Portfolio is still in the black on invested capital. The reduction in MPW’s dividend and share price has minimally impacted the balance or the projected dividend income, and I am pleased that the construction of the portfolio’s holdings is doing exactly what they are designed to do. Dividend income generation and risk mitigation are the most important goals, and they are absolutely being met.

The Dividend Harvesting Portfolio dividend section

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

• Equities $335.33 (30.14%)
• ETFs $245.15 (22.04%)
• REITs $226.99 (20.41%)
• CEFs $175.60 (15.79%)
• BDCs $129.34 (11.63%)

Collecting dividends can serve many functions in a portfolio. Some investors utilize dividends to supplement their income and live off of them. I’m building a dividend portfolio for myself 30 years into the future. In 2022, I collected $507.80 in dividend income from 533 dividends. In week 33 of 2023, I collected $7.32 in dividends, and in 2023, I exceeded the amount of income generated from dividends compared to 2022. In 2022, I generated $490.76 from dividend income, and in 2023, I generated $586.08, which is 119.42% of my total 2022 dividend income. I have collected 408 dividends, 76.55% of the total dividends generated in 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’m hoping to collect around $1,000 in dividends in 2023, which will be reinvested. Eventually, this portfolio will be producing $100 per month of dividend income, and at some point in the future, if I continue down this path, it will generate over $1,000 per month of income.

So far in August, I have collected $73.53 in dividend income, and there are another 4 days of income being generated before the month ends. There is a good chance that August will finish with over $80 of dividend income generated. I am excited for the end of 2023 to occur so I can have another full year of data in the chart below. It’s going to be exciting to see what the monthly income looks like in 2024 and 2025.

I am using The Dividend Tracker to visualize my incoming dividend payments. It looks like 23 dividends should be paid this week, so we will see what hits my account before August is in the books. It’s going to be interesting to see how this develops as the years progress.

I have broken this into two sections, positions not generating at least one share per year through its dividend and positions that are. In the section for the positions that are, I have shaded it green and added how many shares annually are being generated and the new future dividend income those new shares will generate. In week 129, 26 positions were generating at least 1 share annually through their dividends. While MPW reduced its dividend, it is still producing 1.88 new shares annually. These new shares from the top 26 positions are projected to add $82.55 of dividend income annually. I will work on getting more positions over to the green block, with a new goal of generating an additional $100 of dividend income from new shares generated.

The Dividend Harvesting Portfolio Composition

Once again, REITs have crept back up just over the 20% threshold I have set. Over time I see this declining, but in the coming weeks, it will probably hover in this range as I plan on adding some capital to some of the positions that fall in the REIT category. Individual equities comprise 39.90% of the portfolio while generating 30.14% of the income, while ETFs, CEFs, BDCs, and REITs account for 60.10% of the portfolio and 69.86% of the dividend income.

While REITs are slightly above my 20% sector threshold, no position is above the 5% level, and the top 10 holdings make up 35.39% of the portfolio. Looking at other dividend portfolios, such as the Schwab U.S. Dividend Equity ETF (SCHD), its top 10 holdings represent 40.76% of its holdings across 104 positions. I plan on keeping track of this closely, and I may set a threshold for how much I want the top 10 positions to represent.

Week 130 Addition

In week 130 I added the following company from the Reader Suggestions:

• Morgan Stanley 1 share

Morgan Stanley

• MS is a company that has been on my watchlist for some time. I love the financials as MS generated $10.03 billion in net income from $53.19 billion of revenue in the trailing twelve months (TTM) for a profit margin of 18.86%. MS also produces an enormous amount of cash from operations at $33.97 billion in the TTM, placing their FCF over the TTM at $31.66 billion. MS has been a cash cow, and they continue to allocate large amounts of their profits toward shareholders.
• Coming out of the financial crisis, MS significantly reduced its quarterly Morgan Stanley (MS) Dividend History from $0.27 to $0.05. Since 2014, MS has increased its quarterly dividend by 1,600% from $0.05 to $0.85.
• MS currently pays $3.40 per share, which is a forward dividend yield of 4.09%. MS has a 52.75% payout ratio with a 24.77% 5-year dividend growth rate and has increased the dividend for 9 consecutive years. I feel that MS has the potential to continue generating large amounts of profits and rewarding shareholders through future dividend increases.
• I plan on adding more shares of MS in the future as this is a position that I feel can increase in value while growing its dividend.

Week 131 Gameplan

There are so many good buys, in my opinion, and in week 131, I am considering splitting my weekly allocation between Altria Group (MO), and Realty Income (O). I feel both are undervalued, and I want to own more of each company.

Conclusion

Thank you for all the great suggestions, in week 130, MS made it into the Dividend Harvesting Portfolio. It was an eventful week as MPW cut its dividend by -48.28%, and while this is not ideal, it demonstrated how resilient the Dividend Harvesting Portfolio is. The amount of projected future dividend income barely skipped a beat as the amount of diversification I have built this portfolio with is doing an excellent job of mitigating risk in both income production and declining value. I am excited to continue building out this portfolio and reaching my next goal of generating $1,200 of forward annual dividend income, which would be an average of $100 per month. I look forward to interacting with everyone in the comment section.