My Dividend Growth Portfolio – Q1 2022 Summary

Introduction

It is time to summarize another quarter. The first quarter of 2022 saw the S&P 500 declining 5% after at some point it has declined over 10% reaching correction territory. The index was mostly affected by macro events as the Q4 financial results mostly exceeded expectations. The geopolitical turmoil due to the war in Europe as well as the high inflation weighed on the index.

In the coming quarter, we are expected to keep following the war in Ukraine after Russia has invaded the country in February. The war is also expected to contribute to the mounting inflation, and the Federal Reserve is planning to keep increasing the rates following a first 0.25% increase in March. The war and the inflation have made many of us forget about debt ceiling fights, and the build back better agenda by President Biden. We are also scheduled to see more political fights regarding the debt ceiling.

In Q1 my dividend growth portfolio outperformed the market. This is not coming as a surprise as dividend growth stocks tend to be more resilient with lower volatility. Thus, when the market is booming, it grows slower, but the lower volatility is a plus when the uncertainty is higher. I am not focusing on the total return in this portfolio, but on the income, it generates. I enjoyed several dividends increases and one dividend cut. Therefore, my dividend income has also been growing organically. My main goal is to achieve a growing stream of dividends, giving me some more financial freedom. In Q1 2022, my dividend income grew by 3% QoQ and I am very pleased with this achievement as I allocated fewer funds to my dividend growth portfolio than I planned initially.

I plan to keep executing my investment thesis. I will keep allocating funds to my portfolio monthly. I will invest in stocks I believe are cheap or fairly valued. I will try to achieve a higher dividend income and a high total return. I see no reason to amend my investment thesis at the moment, as it has worked for me over the past several years.

I see any sign of volatility as an opportunity that allows me to buy a future income at cheaper prices. If the market will be volatile due to a recession or any other reason, I will stick to the safest blue chips, which are usually expensive. Their dividend is usually extremely safe, and any price change is a possible opportunity. I will also try to take advantage of significant drops and buy some of the stocks that I find expensive right now. I wish you all a great quarter and a happy new year.

Investment Allocation

My dividend growth portfolio used to be more than 83% of my assets. To try to balance it, I allocated more funds to my other accounts. I want to balance it to hedge myself against possible failures in my strategy. Being overconfident in the financial world can lead to devastating results. Therefore, I am making some effort to allocate my funds and make sure that my assets stay diversified.

My current goal is to make my dividend growth portfolio around 50% of my assets and to do it while I keep increasing its value and achieve a 10% dividend growth. I am a believer in diversification. In the future, I believe that when I buy a house as an investment or to live in, it will lower the percentage of the dividend growth portfolio in my assets. Right now, I am allocating mainly to the other accounts.

My dividend growth portfolio is very well-diversified and contains a collection of 73 blue-chip companies. While I am proud of my achievements as a young investor, I must stay humble and diversify my investments wisely. The more I learn about investments, the humbler I become.

I already maxed my Roth IRA in 2022. I have medium-term accounts that may serve as a down payment on a house. These two measures helped me diversify my holdings. While the Roth IRA, the pension, and the dividend growth portfolio are long-term investments, I plan to keep the rest of the accounts liquid.

My Goals

Since I started setting goals, I managed to achieve most of my goals. My goals for 2022 are to achieve at least 10% of dividend growth and diversify my investments, maximize my Roth IRA contribution, read at least twelve books, and travel abroad at least once following the challenging 2021 and 2020 due to the pandemic. I keep track of my goals so I can achieve them.

By setting goals, you can organize your time better. I highly recommend it to everyone. It allows you to see your progress during the year. Just set some goals that are challenging but achievable, and make sure they are quantifiable.

Sector Allocation

As my brokerage account is my largest asset, I keep allocating money there according to my optimal sector allocation. As I am still accumulating, I don’t mind buying stocks from sectors I am over-allocated. I don’t want to ignore my optimal allocation. Over the past quarter, I bought stocks across several sectors.

I probably will not add to sectors that are exceeding the optimal allocation like the energy and industrial sectors unless a great opportunity arises. In the coming quarter, I will probably invest more in sectors I lack exposure. I usually write articles regarding companies that I find attractive. I bought shares in some of them, while others are still on my radar. In Q2 I will try to add some more dividend growth companies in the consumer discretionary sector.

Sector	Current	Goal
Consumer Staples	17.5%	20.0%
Health Care	12.7%	12.5%
Industrials	13.6%	12.5%
Financials	10.8%	12.5%
Consumer Discretionary	8.8%	10.0%
Energy and Materials	10.5%	8.0%
Information Technology	9.5%	10.0%
Real Estate	7.5%	7.5%
Communication Services	5.7%	4.0%
Utilities	3.3%	3.0%

My Portfolio

The following table shows the current holdings in my brokerage account. All the companies below are part of my dividend growth portfolio. Alphabet (GOOG) (GOOGL) and Facebook (FB) and Disney (DIS) don’t pay dividends. However, they enjoy steady growth in their free cash flow. This metric is the basis of any dividend payment.

As a long-term investor, I don’t mind waiting until they are ready to share some of this wealth with their investors. Alphabet and Facebook have already started buyback programs. I hope that both will offer dividends in the years to come. Disney will hopefully reinstate the dividend soon. I kept a small portion of my Disney position as it was my first position (I don’t recommend having emotions in your decision-making process, but sometimes we can’t help it)

Industry	Company	Ticker	% of Portfolio	% of Income
Information Technology	APPLE INC	(AAPL)	4.29%	0.75%
Health Care	ABBVIE INC	(ABBV)	1.44%	1.60%
Health Care	ABBOTT LABORATORIES	(ABT)	2.56%	1.34%
Consumer Staples	ARCHER-DANIELS-MIDLAND CO	(ADM)	1.94%	1.14%
Financials	AFLAC INC	(AFL)	2.42%	2.05%
Financials	AMERIPRISE FINL INC	(AMP)	1.20%	0.64%
Financials	BANK OF AMERICA CORP	(BAC)	1.97%	1.43%
Health Care	BECTON, DICKINSON & CO	(BDX)	0.69%	0.30%
Financials	CITIGROUP INC COM	(C)	0.62%	0.87%
Health Care	CARDINAL HEALTH INC	(CAH)	1.22%	1.40%
Industrials	CATERPILLAR INC	(CAT)	2.70%	1.89%
Information Technology	CISCO SYSTEMS INC	(CSCO)	0.68%	0.65%
Health Care	CVS HEALTH CORPORATION	(CVS)	0.43%	0.31%
Energy	CHEVRON CORPORATION	(CVX)	2.75%	3.23%
Communication Services	WALT DISNEY CO	(DIS)	0.55%	0.00%
Real Estate	DIGITAL REALTY TRUST INC	(DLR)	1.85%	2.08%
Utilities	DUKE ENERGY CORPORATION HOLDING COMPANY	(DUK)	0.48%	0.56%
Industrials	EMERSON ELECTRIC CO	(EMR)	2.00%	1.47%
Energy	ENTERPRISE PRODUCTS PARTNERS LP	(EPD)	2.18%	5.29%
Industrials	EATON CORPORATION PLC	(ETN)	1.21%	0.92%
Communication Services	META PLATFORMS INC	(FB)	1.11%	0.00%
Industrials	GENERAL DYNAMICS CORP	(GD)	1.01%	0.72%
Consumer Staples	GENERAL MILLS INC	(GIS)	1.16%	1.16%
Communication Services	ALPHABET INC CLASS C CAPITAL STOCK	(GOOG)	2.27%	0.00%
Information Technology	INTERNATIONAL BUSINESS MACHINES CORP	(IBM)	0.53%	0.93%
Health Care	JOHNSON & JOHNSON	(JNJ)	3.83%	3.02%
Financials	JPMORGAN CHASE & CO	(JPM)	1.62%	1.71%
Consumer Staples	KELLOGG CO	(K)	0.34%	0.40%
Consumer Staples	KIMBERLY-CLARK CORP	(KMB)	1.59%	1.98%
Energy	KINDER MORGAN INC	(KMI)	1.19%	2.37%
Consumer Staples	COCA-COLA COMPANY	(KO)	1.86%	1.75%
Industrials	LOCKHEED MARTIN CORP	(LMT)	0.38%	0.32%
Consumer Discretionary	LOWE’S COMPANIES	(LOW)	0.42%	0.23%
Consumer Discretionary	MCDONALD’S CORP	(MCD)	3.18%	2.36%
Health Care	MCKESSON CORP	(MCK)	0.66%	0.13%
Health Care	MEDTRONIC PLC COM	(MDT)	1.41%	1.08%
Industrials	3M COMPANY	(MMM)	1.25%	1.70%
Energy	MAGELLAN MIDSTREAM PARTNERS LP UNIT REPSTG LTD PARTNER	(MMP)	1.02%	2.95%
Consumer Staples	ALTRIA GROUP INC	(MO)	1.34%	3.07%
Energy	MPLX LP COM UNIT REPSTG LTD PARTNER INT	(MPLX)	0.83%	2.41%
Real Estate	MEDICAL PROPERTIES TRUST INC	(MPW)	0.44%	0.83%
Information Technology	MICROSOFT CORP	(MSFT)	0.63%	0.18%
Industrials	MSC INDUSTRIAL DIRECT CO INC CL A	(MSM)	0.71%	0.85%
Utilities	NEXTERA ENERGY INC	(NEE)	0.58%	0.39%
Consumer Discretionary	NIKE INC CLASS B COM	(NKE)	1.07%	0.35%
Industrials	NORFOLK SOUTHERN CORP	(NSC)	2.13%	1.41%
Real Estate	REALTY INCOME CORP	(O)	2.08%	2.95%
Real Estate	OMEGA HEALTHCARE INVESTORS INC	(OHI)	1.44%	4.57%
Consumer Staples	PEPSICO INC COMMON STOCK	(PEP)	2.89%	2.62%
Health Care	PFIZER INC	(PFE)	0.46%	0.46%
Consumer Staples	PROCTER & GAMBLE CO	(PG)	2.00%	1.48%
Consumer Staples	PHILIP MORRIS INTERNATIONAL INC	(PM)	2.51%	4.27%
Financials	PRUDENTIAL FINANCIAL INC	(PRU)	2.36%	3.41%
Information Technology	QUALCOMM INC	(QCOM)	1.15%	0.85%
Industrials	RAYTHEON TECHNOLOGIES CORPORATION COMMON STOCK	(RTX)	0.83%	0.58%
Consumer Discretionary	STARBUCKS CORP	(SBUX)	0.69%	0.56%
Utilities	SOUTH JERSEY INDUSTRIES INC	(SJI)	0.43%	0.53%
Consumer Staples	SMUCKER J M COMPANY	(SJM)	0.58%	0.56%
Utilities	SOUTHERN CO	(SO)	0.95%	1.13%
Consumer Discretionary	TARGET CORP	(TGT)	2.79%	1.54%
Financials	PRICE T. ROWE GROUP INC	(TROW)	0.61%	0.68%
Consumer Staples	TYSON FOODS	(TSN)	0.23%	0.16%
Information Technology	TEXAS INSTRUMENTS INCORPORATED	(TXN)	0.44%	0.39%
Industrials	UNION PACIFIC CORP	(UNP)	1.41%	0.94%
Information Technology	VISA INC CL A COMMON STOCK	(V)	1.80%	0.43%
Consumer Discretionary	VF CORPORATION	(VFC)	0.70%	0.85%
Real Estate	VICI PROPERTIES	(VICI)	0.35%	0.61%
Energy	VALERO ENERGY CORP NEW	(VLO)	0.42%	0.56%
Communication Services	VERIZON COMMUNICATIONS	(VZ)	1.76%	2.91%
Utilities	WEC ENERGY GROUP INC	(WEC)	0.87%	0.83%
Consumer Staples	WALMART INC COMMON STOCK	(WMT)	1.04%	0.51%
Real Estate	W P CAREY INC COM	(WPC)	1.37%	2.41%
Energy	EXXON MOBIL CORP	(XOM)	2.09%	3.00%

I currently own 73 companies in my portfolio. Over the quarter, I added to existing positions. I am not worried at all about the number of positions I hold. These blue-chip companies don’t need me to follow them daily. I wouldn’t mind holding them even if the stock market is closed for a decade.

Acquisitions Made in Q1 2022

Over the last quarter, I bought shares in several companies. I bought shares in two sectors: real estate and consumer staples.

In the real estate sector, I bought more shares in Medical Properties Trust (MPW) which owns real estate used for hospitals. I don’t expect ultra-high growth as an understatement. The shares now yield 5.5%, and I expect dividend growth of roughly 4%-5% annually in the medium term. I added more as the price went down significantly over the last quarter. I also bought shares in Vici Properties as it is a promising REIT owning assets in prime locations in Las Vegas that yields over 5%, and I added to my blue-chip REIT Realty Income which I always do when the pricing is fair.

In the consumer discretionary sector, I bought shares in Tyson Foods. The company is trading for less than 11 times 2022 earnings, and the dividend yield is 2%, and extremely safe. I am very comfortable adding more to this position over the coming quarter if I have the opportunity.

Sales Made In Q1 2022

Over the past quarter, I have sold several stocks. I sold shares in AT&T (T) due to the dividend cut. I also sold shares in Viatris (VTRS), Kyndryl (KD), and Orion (ONL). All three companies were given to me in a spin-off. I started 2022 by cleaning my portfolio from these stocks. I had extremely tiny positions in every one of them and did not intend to buy more. Right now, I believe that most dividends in my portfolio are adequately safe. The riskiest dividend, in my opinion, is the one paid by Omega Healthcare.

What Am I Looking For?

When I look at my portfolio, I see a great collection of companies. Every year, I feel more confident about some companies and less confident about others. That’s why diversification is key. I am always looking for the weaker links in my portfolio, and I try to measure the effect of a possible dividend cut on my dividend income.

In Q2, I will keep following the consumer discretionary sector closely. Since we got out of the recession discretionary spending grows and people roam the streets as the pandemic fades. You probably recognize the chart below, as it is part of my stock analysis. Using this chart contributes to my analysis thesis. I keep looking for Type 2 stocks mostly, as they offer the best combination of growth and income.

Conclusion

Q1 2022 was very challenging for investors due to the high volatility. I managed to maintain the dividend income growth during the entire year. In the next quarter, I will keep executing my investment thesis, as I invest in companies monthly. Hopefully, I will be able to achieve my goals and get closer to my long-term objectives.

The pandemic has faded, yet now we have a war in Europe and inflation across the globe. The short-term risks are very much affected by these two incidents and the need for additional rate increases. However, what I constantly learn is that there is always a reason to avoid investing or to be scared. Investors should ignore the noises and keep executing their plans. I wish you all a great quarter. I hope you all stay safe and healthy.