Monthly Income Report – December 2022

Dear Readers,

I wish you and your families a Very Happy New Year 2023! Hope this new year brings a lot of joy and happiness to you and you find success in your pursuit towards financial independence, whether that is through dividend growth investing or otherwise. I hope that you had a good winter break and are ready to kick things off for the year ahead.

As for me, I took a well-deserved break from work, from blogging, from social media to spend some time with my family. I know several folks elsewhere in the country had to deal with horrendous weather over the last few weeks. It was not as bad over here in Texas, we had a “hard freeze” advisory for about a week. During this time my family and I were stuck in our home and watching old movies, drinking a lot of hot soup, hot tea etc. Last week, with the weather improving a lot, we decided to drive down to Corpus Christi and spend some time there, playing at the beach, eating some delicious sea-food and basically chilling out.

Here is a photograph from one of our stops at Corpus Christi, Snoopy’s Pier. Some of the best fried jumbo shrimps and Crab-stuffed jalapenos I have eaten in a while, and all that while sitting beside the bay and watching the sunset! What more can you ask for! 🙂

This experience brought an important lesson for me: While I am laser-focused on my journey towards financial independence, I cannot overlook of the fact that no amount of money can replace the moments I can spend with my family right here, right now. I think a lot of the FIRE community can sometimes lose sight of this and end up going too far in their quest for frugality. I understand living a modest lifestyle, but like everything, do it in moderation!

As far as other stuff, I decided to give this blog’s theme a bit of a makeover. It is a new year, so seemed like an opportune time for a new look for the blog.

Well, 2023 is here! But we cannot start the year without discussing the final month of 2022 and how my portfolio performed. Let us get into the numbers then, shall we?

Dividend Income Received

Sl No.Company / ETF (ticker)Amount
1Aflac (AFL)$16.78
2Church and Dwight (CHD)$2.12
3Duke Energy (DUK)$5.22
4Home Depot (HD)$30.75
5Intel (INTC)$11.79
6Johnson and Johnson (JNJ)$45.82
7Lockheed Martin (LMT)$51.13
83M (MMM)$53.94
9Microsoft (MSFT)$32.75
10NextEra Energy$2.12
11Snap-On Inc. (SNA)$9.79
12Southern Co (SO)$11.30
13Target (TGT)$18.82
14T. Rowe Price Group (TROW)$88.19
15UnitedHealthCare Group (UNH)$3.35
16Visa (V)$17.45
17Whirlpool (WHR)$66.16
18Waste Management (WM)$0.66
19Exxon Mobil (XOM)$2.85
20Schwab US Equity Dividend ETF (SCHD)$50.24
21Realty Income (O)$24.43
22JP Morgan Equity Premium Income ETF (JEPI)$7.23
23STAG Industrial (STAG)$3.97
24iShares Core Dividend Growth ETF (DGRO)$7.81
Total$564.72

So a total of 24 companies and ETFs contributed a grand total of $564.72, making this a record-breaking month for me yet again! My highest payer for this month has been TROW, a stock that has been crushed for the majority of this year. And while a lot of investors have exited their position in TROW, I am holding firm. It is worth noting that during rosier times not that long ago (Jun 2021 to be precise), this company rewarded its shareholders handsomely with a special cash dividend, as a statement of their commitment towards their shareholders. I have not forgotten that and continue to believe that TROW’s strong balance sheet and management quality will see them through turbulent times.

My second highest dividend payer is Whirlpool (WHR), another stock that has been beaten down during 2022 and quite understandably so. However, in this case too, I am confident that the overall quality of the brands under their umbrella and also their recent acquisition of Insinkerator will help in the company navigate the troubling times ahead.

I will go into the overall performance of the portfolio in a little bit. First let me cover all the Buys and Sells I made in December.

Buys and Sells during this month

I did not make any sells during this month. That said, I have shortlisted atleast a couple of positions that I might look to exit out of in the coming few months. I will announce these moves and the reasoning behind those in dedicated posts.

As far as new positions, I recently initiated a position in A.O.Smith (ticker: AOS). I wrote a twitter thread giving a snapshot of my investment thesis and why I like this business.

The story behind why I started looking into AOS is interesting. Some of the folks in the US might remember the winter-storm of 2020 here in Texas. This was the time when my family and I were left without food and water for nearly a week. The snow storm had blocked all major highways, there was shortage of gas. To top all that, our gas water heater broke down due to the extreme temperature drop leaving our family without hot water for nearly a month.

As things started to come back to normalcy, I started researching into buying a new water heater. If you have done a similar exercise, you are bound to run into a product from AOS. Along with Rheem, AOS dominates the North America water heater market. This gave me the impetus to start looking into their business model a lot closer and I liked what I saw. Since then I have been waiting for an ideal entry point and researching the business further. I finally pulled the trigger last month.

Portfolio performance

Since this is the last monthly update for the year 2022, I wanted to touch briefly on the performance aspects of the portfolio.

Annual Dividend Income

At the start of 2022, I set out a goal for myself to try and reach $3000 for annual dividend income. Well for 2022, I earned a total of $3,246, thus comfortably beating my goal. If I look at the annual dividend income received for year 2021, I had earned a total of $821. So the YoY growth in quite appreciable! Granted that a lot of this is due to my heavy allocation of capital in 2022, I still think seeing the growth is motivating to keep at this strategy.

Option Income

I earned a total of $257.58. While not a whole lot, I am still new to the option trading scene and it certainly helped me get myself over the annual income goal. That said, I mostly focused this year on selling covered calls often taking advantage of the market swings and option greeks. It is a very risky game overall, and one that I think I need to educate myself further before placing big bets.

Performance vs. Indexes

A common criticism that most retail investors face is why bother with the headache of picking individual stocks when you can simply buy a broad-based low-cost index fund and just perform just like the market. There is some merit to this argument. For instance, if my portfolio was only composed of typical “growth stocks”, it would have been slaughtered in 2022. And so if you are not beating the market, why bother with this strategy? Can’t you simply buy an index fund and chill?

Two issues with that statement:

  • What benchmark do I compare my portfolio against? SP500? Well is that a fair comparison? My goal with this specific portfolio is to build a passive income stream. If I were to buy an index fund/ETF that tracks SP500, say SPY, which is yielding about 1.62% at the time of writing, this would yield well below what my portfolio is currently yielding (3.2%+)
  • What if I am not happy with the composition of that index/ETF? What if the holdings and their respective percentages are not in accordance with my risk appetite as an investor? This is something I have highlighted in a previous post on this blog.

That said, I still wanted to compare my portfolio’s performance against some indexes for the heck of it. This is a tad difficult to do for my overall portfolio, since I have holdings across several different brokerages. But a majority of my portfolio is under a taxable brokerage account (with Fidelity) and they provide a performance graph for the last year. Here is what the data looks like:

EntryReturns for Trailing 12 month period
Portfolio Performance (time-weighted)-8.20%
Portfolio Performance (money-weighted)-4.81%
SP500 Index-18.11%
Index Blend 100% Stocks-18.32%
Index Blend 85% Stocks (taxable bonds)-17.43%
Dow Jones U.S. Total Stock Market Index-19.53%

This is not to brag or anything, but the downside protection that my portfolio offered compared to the broader market indexes was massive!! And this is a fairly important point that not a lot of the investing community talk about. A lot of us are hyper focused on returns during a bull market, but everyone tends to go quite (and understandably so) during a bear market situation. Downside protection is just as important as upside potential!

Losers

It has not been all song and dance in my portfolio. I had to exit out of my AT&T position (T) during this year after a rather humbling lesson in the importance of the quality of management when investing in any company. As we head into 2023, I am paying a very close attention to what happens with the lawsuits that MMM is involved with and also the progress in turn-around story with INTC.

Another business and stock that I am closely watching is JPM. They chose to keep their dividend flat and did not announce any increase in 2022 citing “capital allocation challenges”. I am keen on seeing how this story plays out in 2023.

Summary

Whew! If you are still with me and read through this post, thanks for sticking with me! 2022 has been an interesting year, but I am super excited about what 2023 has in store for us. I cannot wait to start looking around for interesting investment opportunities and bargains out there in the market.

How did your December go? Let me know in the comments below!

Cheers!

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6 thoughts on “Monthly Income Report – December 2022

  1. I’m with you on AOS, I compare them to a JNJ. It’s not a ticker with a lot of flash but just continues to push along and reward it’s shareholders. I’m long AOS.

    Liked by 1 person

    1. Thank for you stopping by and sharing your views on AOS. I would agree. AOS is rarely in the news but has been a steady compounder for several years. Exactly the kind of businesses that draw my attention.

      Like

  2. LWD, Congrats on the record dividend month and comfortably surpassing your annual income goal. Well done!
    Even better, that was some nice out-performance with regard to your portfolio return for 2022. My portfolio also performed well in 2022 relative to the S&P 500, as is the case in down markets – it typically trails during bull markets.
    I like the dividend total from MSFT. I’d like to reach that level.
    I think I’ve been overlooking WHR. Its dividend growth since 2010 has been good, and even better the past couple of years. Its current valuation seems attractive, even given the muted earnings growth expectations over the next 2-3 years. The 4.5% yield is attractive, too. A quick glance at their operating metrics leaves a positive impression. I’ll have to take a closer look.
    All the best to you in 2023!

    Liked by 1 person

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