Portfolio Update – October 2022

Dear Readers,

October is expected to be a slow month for me as far as dividend income. We are also right in the middle of a busy earnings season with several companies reporting their quarterly earnings in what is a very challenging macro-economic environment. I generally only look at quarterly earnings superficially as I am more focused on reading annual reports. That said, I will earmark a few companies for quarterly earnings study especially if I am seeing some worrying trends.

In this post though, I decided to take a closer look at my portfolio and see if there are some loose ends that need to be tied up. Nobody really knows how the markets will shape up in the coming few months, if we are heading into a recession or already in a recession, and for how long this recession will last and what will the recovery be like. One thing is for sure, we are already starting to see trends that denote a “reversion to the mean” like scenario atleast for some sectors. Will other sectors follow suit? Your guess is as good as mine.

It also seems like I have missed updating the portfolio section of my blog for a while. So this is a good excuse to update that. Lets get right into it.

Portfolio macro statistics

At the time of writing this, I have a total of 38 holdings which comprises individual stocks and also ETFs. These holdings are spread across a taxable brokerage account and also my other retirement vehicles such as IRA, HSA etc. The number of holdings is something that I used to care about at the start of my journey. Part of my psyche always prompted me to hold fewer positions, the rationale being: fewer positions, lesser research, less mental bandwidth expended to track these positions. While this makes sense in theory, I now realize that it is impossible to fine-tune this number. Companies split up for good and bad reasons into smaller/leaner businesses. Companies merge with other companies for good and bad reasons. Each of these movements will cause some ripples in my portfolio with the number of holdings growing and shrinking. So is this such a big deal? Maybe. But it is not something that I will pay that much attention to from hereon.

The overall yield of my portfolio is 3.213%. I am actually relatively happy with this number. I know a lot of folks in the community are boasting far higher portfolio yields than this. But everyone’s investing horizon and goals are different, even if we all are trying to use dividend growth investing as a strategy. Some of us are more risk-averse than others. I am certainly someone who values my sleep at night and therefore that much more conservative in my strategy. The weighted 3-year dividend CAGR for my portfolio is around 9.66%. I am particularly happy about this number, as this shows that I am prepared to sacrifice a little more of the current yield of my portfolio for more potential dividend growth. Considering my time horizon and my investing goals, this is far more important metric to me than the current yield.

Another important metric is the weighted yield-on-cost for my portfolio. This was a fairly difficult metric to calculate given that a few of my holdings such as REITs, ETFs are spread across several accounts. While I will not report it here for brevity, I am happy with this number as well. I have generally focused my buys at times when that particular sector was struggling. A few examples: I bought XOM during 2020 when Big Oil was struggling, I bought heavily into LMT during 2021 when I saw value there and similarly I have been buying into Tech for the majority of 2022 when this sector has been hit the hardest.

My top 10 largest dividend payers right now are:

Sl No.Company/ETF (ticker)
1Texas Instruments (TXN)
2T Rowe Price Group (TROW)
3Whirlpool Corp (WHR)
43M (MMM)
5Clorox (CLX)
6Lockheed Martin (LMT)
7Johnson and Johnson (JNJ)
8Verizon (VZ)
9JPMorgan Chase (JPM)
10The Home Depot (HD)

Other than maybe a couple of holdings, I am pretty happy with the overall composition of this list. I am particularly worried about 3M with their litigation risks. Other than 3M, Verizon is going to face a lot of headwinds in the near-term with their massive debt due to 5G expansion and also losing subscribers to T-Mobile. But with both these companies, I think the dividend is reasonably safe although dividend growth will be mediocre for the next few years.

If I look at the top 10 of my portfolio per weight, the table look as follows:

Sl No.Company / ETF (ticker)Category
1Texas Instruments (TXN)Core
2Microsoft (MSFT)Growth
3T Rowe Price Group (TROW)Growth
4Lockheed Martin (LMT)Growth
5Visa (V)Growth
6Johnson and Johnson (JNJ)Core
7Clorox (CLX)Core
8Whirlpool (WHR)Bond-like
9The Home Depot (HD)Growth
103M (MMM)Bond-like

While the above list is not particularly concerning, in the coming months, I would like to displace the “Bond-like” holdings with more “Core” holdings.

Sector allocation

Unlike the number of holdings, sector allocation and diversification is pretty important to me. I find it important to keep track of which sectors I am overweight or underweight in. I do not want to over-leverage myself in any one sector.

The following table shows what my current allocation is like and also my target allocation.

Consumer Discretionary11.32%8%
Consumer Staples12.22%17%
Information Technology22.14%17%

I was not surprised to see that I am currently overweight in the tech sector, as I have been buying pretty consistently into these holdings for the majority of this year. Similarly, the recent dip in TROW has allowed me to aggressively build up that position, which explains why Finance is also overweight.

As we head into the next few months, I will be looking for ways to increase my holdings in Consumer Staples and Healthcare.

Category allocation

One of the aspects of allocation that I care about is maintaining a tiered strategy in allocation. I call these individual tiers as “categories”, for lack of a better word. The four categories are: Core stocks, Growth-like stocks, Bond-like stocks and speculative stocks.

Core stocks represent the foundation of my portfolio. These are my sleep well at night stocks, classic blue-chip companies that have rewarded shareholders for decades and still have gas left in the tank to continue to do that for the next couple of decades atleast. Core stocks have predictable cash flows and dividend growth.

Growth-like stocks are companies that are relatively younger in their journey. They are in the midst of aggressive expansion and could possibly mature into core stocks within the next two or decades. These stocks have higher dividend growth rates but relatively low starting yield.

I do not intend on holding bonds in my portfolio but would like to use some bond-proxies to de-risk the portfolio. Bond-like stocks achieve this function in my portfolio. These stocks provide higher starting yields but have very slow dividend growth. Some of this could be due to the nature of the business and sector itself (eg. utilities and telecommunications), while sometimes this could be due to the life of the business having reached the twilight years of its lifecycle.

Speculative stocks are stocks that are incredibly risky and ones where I have the least confidence in. These will be the smallest allocation in portfolio.

Each of these stocks have a specific role to play in portfolio and as a part of the the overall portfolio help me play offense-defense in a balanced manner. This balance is a pretty important consideration for me and helps me safeguard the portfolio against my own biases. Without this balance, I will have a tendency to go on a buying spree and over-extend myself on category which could result in irreversible damage in the long-run.

At the time of writing this, my category allocation is as follows with the target allocations mentioned as a separate column:


The numbers in the target column are summed up from the target allocations for each holding in my portfolio. If I look at my current allocation, I am not too far off from my target percentages.


I hope you enjoyed this post and gathered a few ideas to structure your portfolio for the interesting times ahead. If you gathered some value from this post, please consider liking/sharing this content with your family and friend circles.

Stay strong and happy investing!

Disc: This post is NOT financial advice. Please consider doing your due diligence and research prior to investing in the stock market. Full disclaimer here.


Dividend Growth ETFs and their potential drawbacks

Dear Readers,

Due to the current bear market environment that we are in, a lot of previously popular growth stocks have been decimated. This has lured a lot of investors towards the “safety” of dividend stocks. Rather than jeering, I am actually very happy for these investors. This is a great entry point, with dividend yields at all-time highs and also attractive valuations for several popular dividend growth stocks.

Another popular entry option is that of owning a dividend growth Exchange Traded Fund (ETF) and there are several options available here as well. For those of you who are unfamiliar with what an ETF is, Investopedia defines an ETF as follows:

So essentially by owning a single ETF security, you are effectively owning a basket of stocks. And what type of stocks? Well that depends on the type of ETF. For example, a dividend growth ETF like SCHD would comprise of dividend growth companies through which the fund promises to yield some dividend income for its investor. And since the fund manager does the leg work of choosing the dividend growth stocks for the investor, the investor is charged some fees typically called the expense ratio.

At first glance, it is easy to see the attractiveness of the ETF option for dividend growth investing. After all, if the investor is hard-pressed for time and simply does not have the mental bandwidth or the interest to track individual companies, the investor can simply choose to own an ETF instead. As the saying goes, such investors simply choose to “ETF and chill”.

I ran into a question from a fellow investor on Twitter on this subject:

Great question. And as someone who owns a dividend growth ETF like SCHD in addition to several individual stocks, I wanted to pen down my thoughts on some potential drawbacks with a pure dividend growth ETF-based investing strategy. I will use the beloved and everyone’s favorite SCHD as an example.

That Dreaded Expense ratio

There is no free beer in this party. With SCHD, per the fund’s fact sheet, the expense ratio is 0.06% i.e. 0.06% of total investment in the fund are deducted annually. This might not seem like a lot initially, but when compounded over a long period of time, the same can account for a significant portion of the total investment returns. Ironically, while we as dividend growth investors rely on compounding to generate a stable cash flow, in this case, the expense ratio can cause compounding to work against us.

Choice in the basket of stocks

So the investor relies on the fund manager to choose high-quality dividend growth stocks. But do their definitions of “high-quality” align completely? What if the fund manager chooses some stocks that the investor believes to have dodgy fundamentals. This is yet another drawback with ETF i.e. the investor has little say in the basket of stocks that are contained with the ETF.

With SCHD, its top 3 holdings are Merck (ticker: MRK), Pepsi Co. (ticker: PEP) and IBM (ticker: IBM). While I do not have any particular issues with MRK and PEP (I hold PEP separately in my portfolio), I am not particularly comfortable with IBM. Having tracked the company for a few years now, I am not sure about the management and the business’s long-term growth prospects.

Souce: SCHD fact sheet


Let us assume that the investor chooses an ETF that has exactly the funds that he/she is interested in. Then there is the question of weight distribution among the various stocks and sector weightings within the fund. With SCHD, at the time of writing this, it owns 20.8 in Information Technology sector, 19.6% in Finance and 14.7 in Consumer Staples. Personally, I am not as comfortable with the allocations to Finance and Consumer Staples. In fact, I would have been more comfortable if the allocations were swapped.


The next issue is with regards to predictability of stocks contained in the fund. The fund manager can choose to trade in and out of different positions, while maintaining the overall objective of the fund performance i.e. in the case of SCHD, match the total returns of the Dow Jones US Dividend 100 Index. It becomes quite a challenge to track when and where these turnovers are happening. The whole aspect of tracking these changes defeats the objective of maintaining a “hands-off” investing strategy for the investor.

As an aside, since income obtained through a dividend growth ETF is due to the holdings contained in the ETF itself, it becomes a little harder to track the potential dividend growth rate of the ETF especially considering that the fund manager can trade in and out of positions. This makes retirement planning that much harder.

So why own an ETF then?

For me, there are two primary reasons:

  • Diversification: As a part of a diversified portfolio, an ETF can provide necessary diversification to the investor. In my case, I hold ETFs in separate accounts that are tied to retirement (HSA, IRA etc.)
  • With individual stocks held across different accounts, it becomes quite tedious (for me atleast) to keep track of my cost basis, last transaction date, weighting etc. for individual positions. The effort required to track these is non-trivial. Compare that with holding an ETF in these other accounts, I can save a lot of energy and time by going that route.

Let me know in the comments below if you agree/disagree with the above thoughts. Are there any popular dividend growth ETFs that you own in your portfolio?

Until the next post. Cheers!


Monthly Income Update – September 2022

Dear Readers,

It is the start of a new month and that usually means a new entry into the monthly income update post series. To say that this has been a rough month and a year for the markets is a bit of an understatement. That said, if you are a dividend growth investor, you would be absolutely LOVING these market moves. Why? Because you now have an opportunity to either start new positions into companies that were previously richly valued or add to your existing positions at valuations such that the resulting dividend yield and your cumulative yield-on-cost will improve. And if you are not focusing on your portfolio value but instead focusing on your income stream through dividends, you are probably sleeping a lot better at night.

At the risk of sounding like a broken record, THIS is yet another reason why this strategy works for an average Joe like myself. Through dividend growth investing, an investor will naturally gravitate towards the fundamental tenets of successful long-term value investing without even realizing they are doing so.

So how did this month go? Lets find out shall we.

Dividend Income Received

Sl No.Company / ETF (ticker)Amount
1AFLAC (AFL)$16.67
2Church and Dwight (CHD)$2.12
3Duke Energy (DUK)$5.17
4The Home Depot (HD)$19.22
5Intel (INTC)$10.65
6Johnson and Johnson (JNJ)$39.89
7Lockheed Martin (LMT)$47.41
83M (MMM)$53.94
9Microsoft (MSFT)$18.65
10NextEra Energy (NEE)$2.16
11Pepsi Co (PEP)$11.75
12Snap-On Inc. (SNA)$5.71
13Southern Company (SO)$11.21
14Target (TGT)$14.41
15T. Rowe Price Group (TROW)$76.84
16United Health (UNH)$3.34
17Visa (V)$11.52
18Whirlpool (WHR)$56.75
19Waste Management (WM)$0.66
20Exxon Mobil Co (XOM)$2.73
21Schwab US Equity Dividend ETF (SCHD)$39.37
22iShares Core Dividend Growth ETF (DGRO)$8.06
23Realty Income (O)$16.20
24Digital Realty Trust (DLR)$38.91
25STAG Industrial (STAG)$3.8
26JP Morgan Equity Premium Income ETF (JEPI)$5.05

A total of 26 companies + ETFs combined to give me a monthly income of $522.19. This is a record breaking month again as my portfolio breached the $500 mark for the first time since its inception. At the same time last year, I had earned a total of $144.15. I have been investing rather aggressively in the interim as 2022 has provided me with interesting opportunities to either build my existing positions or start new positions.

I did not write any option contracts during this month. Part of the reason was that I have been incredibly busy with my job, thus not having enough time to do a fair value estimate for positions that have been earmarked for the options strategy. That said, the current market scenario does not quite seem to be ideal for my strategy. In an overall bearish market, writing OTM covered calls does not seem attractive from a risk/reward standpoint. Also, writing OTM cash secured puts is challenging because I might end up getting stuck with large bag of shares at a valuation that is probably not the best, since the stock price is dropping. Not at all worth the risk, especially when I am generating enough income for the month through simple dividend growth investing.

My largest payment came from TROW, a stock that has been decimated for the major part of 2022. I view TROW as essentially a proxy to holding the market. So it is not at all surprising to me that the TROW ticker has struggled for the majority of this year. In my opinion, the stock is oversold and is a steal at current values. The fundamentals with this business look solid. Moreover, this company is blessed with a competent management team that has rewarded shareholders with special dividends when times were rosy. Moreover, with companies like Blackrock and T Rowe Price Group, folks with a bearish outlook are essentially betting that people will generally shy away from stock trading altogether in the near long term, a thesis that I certainly do NOT subscribe to.

I have so far made $2265.26 for the year in terms of passive income and as we head into the last quarter of the year, I am confident of breaching the $3000 mark, one of my goals that I had set at the start of this year.

Dividend Increases

So what is better than setting a record-breaking month for dividend income? Yes, the news that some of my holdings are increasing their quarterly dividend payment! There were a few noteworthy mentions here:

  • Microsoft (ticker: MSFT): announced an increase to their quarterly dividend, now amounting to $0.68/share, an increase of nearly 9.7%
  • Texas Instruments (ticker: TXN): announced an increase to their quarterly dividend, now amounting to $1.24/share, an increase of nearly 8%
  • Lockheed Martin (ticker: LMT): announced an increase to their quarterly dividend, now amounting to $3.00/share, an increase of nearly 7.14%
  • Realty Income (ticker: O): announced an increase to their monthly dividend, now amounting to 0.248/share, an increase of nearly 0.2%

In this environment, all pay increases should be celebrated, especially the ones from MSFT, TXN and LMT, which are “in-line with inflation” increases. I thank the hard-working employees and the management at all these corporations for thinking about long-term shareholders such as myself, who are intending to rely on the dividend income from these holdings towards our retirement goals.

Buys and Sells during this month

I did make a couple of sells during this month. Regular readers of this blog might know that my ideal holding time for stocks is forever. That said, if there are compelling reasons to exit a position, I will not hesitate to pull the trigger and sell after much thought and deliberation. I exited out of the following positions:

  • AT&T (ticker: T) : This investment was a huge mistake and, therefore, also a learning opportunity for me as an investor. When I first invested in this position back in 2020, I was relatively new to dividend growth investing. Like most amateurs, I followed the advice of content creators and did not focus on doing my own research. T was a name that came up quite frequently in most of the discussions around dividend growth investing. At the time, it was a dividend aristocrat, it had a nice juicy yield. My thought process was also clouded in that I viewed this as a conglomerate where they had their tentacles in different types of businesses: they were into media and entertainment, their bread and butter was cellular and they had a decent subscriber base. Also at the back of my head were the following thoughts: Maybe with the COVID pandemic WFH dynamics in 2020, folks would need to rely on their broadband offerings, their streaming business would take off etc. In all of my analysis though, I had not once taken a deeper look at the company fundamentals and its management. And that was it. It was a terrible mistake. There is a lot more to say here, so I will maybe reserve my thoughts for a future post.
  • Warner Bros & Discover (ticker: WBD): I was assigned WBD shared after T spun-off its Warner Media business and combined that with Discovery to form a new company. In my humble opinion, I really cannot understand how the streaming business can be a long-term profitable venture. These businesses simply cannot build a moat, the barriers to entry for a new large company are relatively small. The consumer “stickiness” is non-existent as consumers can easily move away from one streaming service to another after they have finished watching their favorite shows/movies on one service. Moreover, it is the quality of the content and also the value-add of the subscription service (by combining it with some other services and making it a package, eg. Amazon Prime) that might determine consistent revenues for these businesses. Considering all this, I did not see how WBD fit into my investing philosophy and I certainly could not see myself being a long-term investor in this business.

As far as buys, I used the massive sell-out in tech as an opportunity to add to my positions in MSFT and V. I do not consider the price in the discount territory, but they are in the fair-value range IMHO. I also added to my HD position this month.

In what might seem like a shallow and prolonged recessionary environment, I am going to be looking for opportunities to build up my core positions. These are the times to focus on buying high-quality stocks. Unfortunately, in my opinion, some of the core stocks that I am tracking like JNJ, PG, PEP etc. are holding up quite well even in this environment. PG and PEP are I think overvalued at this point and I would like them to drop some more before buying.


Another record-breaking month is in the books. Who knows what is in store as far as the economy. What I do know for sure is that those dividend checks are guaranteed to come in every month.

How did your month go? Do you hold any of the stocks from the list above? Let me know in the comments below.

Until next time…