Another month, another step towards financial freedom.

It never gets old typing that phrase. Simply put, writing these monthly portfolio reviews are some of the most enjoyable articles that I write here at Seeking Alpha because of the work involved in creating them. As a dividend growth investor, it doesn’t get much better than tallying up your dividend income, does it?

For the month of August, my dividend growth got back on track. If you remember from last month’s report, I posted – 1.5% y/y passive income growth in the month of July (due to Disney’s (DIS) dividend cut). However, I did note that if Disney had simply maintained its dividend, I would have posted 17.4% y/y growth. And even after the disappointing July result, my year-to-date dividend income was still up 10.5% compared to the first 7 months of 2019. Well, in August, I returned to my normal double-digit dividend growth trajectory. This month, my passive income was up 15.9% y/y. This has increased my year-to-date dividend growth to 11.14% compared to the first 8 months of 2019.

It feels good to be back on the double-digit y/y dividend growth train again. I’ve built my future plans on this reliable double-digit growth, and I continue to believe that it is achievable, over the long term, via a combination of organic dividend growth (dividend raises and selective dividend reinvestment compounding my passive income stream from within) and active portfolio management with regard to selling highly valued, low-yielding dividend growth stocks from time to time and using the proceeds from such sales to buy lower valued, higher-yielding dividend growth stocks.

Total Returns

What is probably even more impressive than the 15%+ y/y dividend growth that I generated in August is the 8.57% capital appreciation that my holdings generated during the month. I’ve had plenty of 15%+ dividend growth months, but it’s very rare to see such high total returns in such a short amount of time. My unrealized gains (plus the profits that I took on Disney – more on that in a bit) during the month of August pushed my year-to-date total returns up to 13.84%.

As of 8/31/2020, the S&P 500 was only up 8.38% YTD, meaning that my portfolio is generating significant outperformance.

August Trades

August was a pretty tame month in terms of trades. I continue to believe that the market is in bubble territory, from a macro perspective at least, and therefore, I am being very conservative with my cash position.

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I’ve actually been a net seller in recent months as I attempt to bolster my cash holdings so that I ensure I have ample dry powder on hand to take advantage of the next market sell-off.

During August, I trimmed my Disney position as a part of this effort to raise cash. I wrote about that trade in detail here. For those of you who prefer audio/video content, I also posted a video on my YouTube channel regarding that Disney sale.

In short, I trimmed roughly 17% of my Disney shares at $129.81 on 8/5/2020, locking in 21.75% profits. In doing so, I cut my DIS weighting down from ~6% of my portfolio to ~5% of my portfolio. Due to passive income and valuation concerns, I will be happy to trim that position again, in the $150 area, should Disney’s rally continue.

Even after selling the shares that I did, Disney remains a top-5 position for me. As you will see in a moment, at the end of August, it still represented nearly 4% of my portfolio.

The stock’s quick drop from ~5% of my holdings to ~4% is due, in large part, to the continued outperformance of several of my large, mega-cap tech positions, whose recent growth has has led to a significant amount of my returns, and therefore, their piece of my overall portfolio pie has increased rapidly.

The only other trades that I made during the month were my monthly selective dividend reinvestments.

On 8/3/2020, I bought shares of AvalonBay Communities (AVB) at $150.63, Essex Property Trust (ESS) at $214.56, Federal Realty Investment Trust (FRT) at $75.51, Brookfield Asset Management (BAM) at $31.77, and Bristol-Myers Squibb (BMY) at $59.11.

As I’ve said before, even though I am concerned about the market’s valuation and have taken active steps to raise cash, I view the cash generated by my passive income stream in a different light and have no plans to end my monthly selective reinvestment process. Constantly using my income stream to average into undervalued/underweight positions allows me to constantly rebalance my portfolio and ensure that I am constantly growing my dividend stream.

Portfolio Overview

Core Dividend Growth

48.20%
Company name Ticker Cost basis Portfolio Weighting
Apple AAPL $25.94 17.39%
Microsoft MSFT $53.17 4.58%
Cisco CSCO $32.95 2.75%
Bristol-Myers Squibb BMY $48.75 2.66%
Johnson & Johnson JNJ $113.07 2.39%
Qualcomm QCOM $60.29 2.39%
BlackRock BLK $413.84 2.37%
PepsiCo PEP $92.39 1.45%
Amgen AMGN $130.50 1.33%
Honeywell HON $123.87 1.23%
Coca-Cola KO $39.78 1.16%
Illinois Tool Works ITW $130.90 1.04%
Texas Instruments TXN $95.19 1.03%
Novo Nordisk NVO $37.74 0.97%
Pfizer PFE $31.94 0.86%
Brookfield Asset Management BAM $33.55 0.86%
Intel INTC $30.55 0.83%
Digital Realty DLR $49.87 0.70%
Medtronic MDT $73.94 0.66%
Diageo DEO $107.91 0.46%
McCormick MKC $71.43 0.45%
3M Company MMM $148.84 0.38%
Raytheon Technologies RTX $62.10 0.26%
High Yield 14.99%
AT&T T $37.70 2.99%
Altria MO $49.77 2.02%
W.P. Carey WPC $63.32 1.51%
AbbVie ABBV $74.09 1.41%
International Business Machines IBM $128.95 1.16%
Brookfield Renewables BEPC $43.86 1.01%
Brookfield Infrastructure BIPC $39.19 0.87%
STORE Capital Corp. STOR $22.91 0.74%
Reality Income O $51.85 0.73%
Federal Realty Investment Trust FRT $117.86 0.63%
Verizon VZ $44.42 0.54%
National Retail Properties NNN $36.17 0.45%
Enbridge ENB $31.07 0.31%
Essex Property Trust ESS $214.84 0.31%
AvalonBay Communities AVB $146.59 0.31%

High Dividend Growth

15.17%
Visa V $72.45 3.11%
Broadcom AVGO $234.30 2.70%
Starbucks SBUX $48.10 2.48%
Comcast CMCSA $37.70 2.28%
Nike NKE $58.75 1.97%
Mastercard MA $81.40 1.43%
Lowe’s LOW $95.77 0.63%
Home Depot HD $184.52 0.57%
Non-Dividend 7.78%
Alphabet GOOGL $741.39 4.43%
Amazon AMZN $849.74 2.50%
Facebook FB $162.99 0.85%

Special Circumstance

6.68%
Walt Disney DIS $92.40 3.89%
Nvidia NVDA $110.55 1.45%
ViacomCBS* VIAC $27.38 0.72%
Constellation Brands STZ $172.19 0.40%
Otis OTIS $58.65 0.11%
Carrier CARR $20.97 0.11%
Cash 7.18%
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*Since writing this article, I sold my VIAC position. Now my cash sits at ~8%.

Looking at my portfolio/weightings, the major question that I struggle with moving forward is what to do with my massive AAPL stake.

I never imagined that I’d let a single stock rise to such a high weighting. Single stock risk is real. However, I have such a hard time selling a blue-chip name liked AAPL.

I’ve trimmed my AAPL position twice before and ultimately regretted doing so. I’ve also regretted trimming names like Nvidia, Amazon, Alphabet, Visa, and Mastercard in the past as well. I’ve essentially come to the conclusion that these blue-chip growth stocks are best left alone, so long as they continue to meet my original investment thesis.

Yet, I’d be lying if I said I wasn’t tempted to trim again. Time will tell, I suppose. But at the end of the day, I realize that stressing over whether or not to take triple-digit profits on a highly overweight equity is a pretty good problem to have.

Other than the high Apple weighting, I feel pretty comfortable with where I am today. I will continue to take profits strategically if the broad market continues to rise irrationally. I will continue to manage my money in a way that prioritizes a reliably increasing income stream first, capital preservation second, and total returns third. And ultimately, I will continue to look forward to watching as my dividend stream compounds to the point where my passive income surpasses my active income and exceeds my lifestyle’s spending needs. Here’s to hoping that happens sooner rather than later.

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Oh, and if you prefer video/audio content, I’ve posted an August Portfolio Review video to my YouTube channel.

Best wishes, all!

This article was previously published for subscribers to The Dividend Kings.

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Disclosure: I am/we are long AAPL, ABBV, AMGN, AMZN, AVGO, BAM, BEPC, BIPC, BLK, BMY, CMCSA, CSC, O, D, DEO, DIS, DLR, ENB, FRT, GOOGL, HD, HON, INTC, ITW, JNJ, KO, LOW, MA, MDT, MKC, MMM, MO, MSFT, NKE, NNN, NVDA, NVO, PEP, PFE, QCOM, SBUX, STOR, STZ, T, TXN, RTX, V, VZ, IBM, OTIS, CARR, FB, ESS, AVB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.



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