Adrian Vidal/iStock via Getty Images

Adrian Vidal/iStock via Getty Images

Last week was the 2nd week in 64 consecutive weeks that the Dividend Harvesting Portfolio closed in the red as the portfolio value was -$6.85 under my invested capital. Once again, this was a short-lived stint in the red as the Dividend Harvesting Portfolio finished week 65 in the black once again. Over the course of 65 weeks, I have allocated $6,500 in capital, and when the markets closed on Friday, the portfolio value was $6,793.74. In 2022, I have collected $122.42 in dividend income, which has been reinvested, and this portfolio is projected to generate $455.64 in annual dividends for a forward yield of 6.71%. As I stated last week, I am glad that this portfolio was able to demonstrate its downside mitigation ability once again.

I am quite happy with the Dividend Harvesting Portfolio's performance as it accomplishes its main goals of capital preservation and generates a continuous flow of income through dividends and distributions. In the week of May 29th, I expect 18 positions to generate dividends as the income continues to flow into my account. Only time will tell if the markets are experiencing a dead cat bounce, a bear market bounce, or a sustainable rally. What has been proven is that this investment approach has held up under the most unpredictable conditions which have been thrown at the markets. With 65 weeks in the books, the Dividend Harvesting portfolio has closed out 63/65 (96.92%) of the weeks in the black. From an income investing standpoint, I consider many companies to be great buys. I am looking forward to the weeks ahead as I add additional shares to current positions and start new positions within the portfolio.

It's amazing how people click on this series and immediately write a negative comment without either reading the article or just skimming through it without grasping the concept. I started this series due to the number of questions I received regarding where to start with dividend investing. Every investor's situation is different, and a major misconception about dividend investing is that the initial seed capital needs to be large. I allocate capital toward big tech, funds, dividends, and growth outside of my retirement accounts. These are not my only investments, but I did open a separate account, so I could easily track and document this series. I intentionally created broad diversification throughout the Dividend Harvesting portfolio so I could benefit from sector rotations and mitigate my downside risk. Investors who are too exposed to growth companies or large-cap tech have gotten crushed as the investment landscape changes. On the growth and tech side of my investments, I am feeling the pain as some of my favorite companies, including Alphabet (GOOGL) (GOOG), Amazon (AMZN), and Meta Platforms (FB), have been taken to the woodshed.

This series has never been about hitting a target yield, generating a certain amount of profit, or beating the market. I had two specific goals with this series. The first was to create a blueprint for constructing a dividend portfolio by documenting the journey starting from the beginning. The second goal was to illustrate how allocating capital each week toward investing, regardless of the amount, would be beneficial in the long run. Too many people are under the illusion that you need tens of thousands or even hundreds of thousands to benefit from investing. Instead of using my real dividend portfolio as an example, I decided to start a new account, fund it with $100, and add $100 weekly, providing a step-by-step guide to dividend investing. This methodology doesn't have to be used for dividend investing, and it could be as simple as an S&P index fund or a Total Market fund. Hopefully, this series is inspiring people to invest in their future to attain financial freedom.

The Dividend Harvesting Portfolio Progression

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

Collecting dividends can serve many functions in a portfolio. Some investors utilize dividends to supplement their income and live off. I am building a dividend portfolio for myself 30 years into the future. Since I am reinvesting every dividend, they serve multiple purposes today. In 2022 alone, I have collected $152.42 in dividend income from 191 dividends across 21 weeks. This has allowed the Dividend Harvesting portfolio to stay in the black while growing the snowball effect. 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 am hoping to collect between $450-$500 in dividends in 2022, which will be reinvested, and finish the year generating >$700 in annual dividends.

The annual dividend count just got a bit larger in week 65. I added a new position, Main Street Capital (MAIN). MAIN pays a monthly dividend and the Dividend Harvesting portfolio's stream of never-ending individual dividends just increased from 532 to 544 annually.

The goal of generating enough income from the dividends to purchase an additional share per year has been the never-ending project of this portfolio. There are now 5 positions that are generating at least 1 share annually through their dividends which include the PIMCO Corporate & Income Opportunity Fund (PTY), Broadmark Realty Capital (BRMK), AGNC Investment Corp. (AGNC), the Global X Russell 2000 Covered Call ETF (RYLD), and the Global X NASDAQ 100 Covered Call ETF (QYLD). I am trying to get more of the current positions over the finish line. Eventually, more positions will generate one share per year in dividend income.

ETFs remain the largest segment of the Dividend Harvesting portfolio. Individual equities make up 49.80% of the portfolio and generate 33.39% of the dividend income, while ETFs, CEFs, REITs, BDCs, and ETNs represent 50.20% of the portfolio and generate 66.61% of the dividend income. I have a 20% maximum sector weight, so when a singular sector gets close to that level, I make sure capital is allocated away from that area to balance things out. In 2022, I will make an effort to even out these portfolio percentages. As more capital is deployed, the bottom half of the portfolio weighting will increase.

Oil, Gas & Consumable Fuels

Independent Power & Renewable Electricity Producers

There are 4 positions over 4% of the portfolio and Verizon (VZ) is closing in on 5%. Citigroup (C) crept into the top ten this week as I added another share on Monday prior to the Berkshire announcement. The top 4 positions should see their percentages decline over the next several weeks as I am not planning on adding to these positions.

In week 65 I added MAIN to the Dividend Harvesting Portfolio and added an additional share to Cisco Systems (CSCO) and Ares Capital (ARCC).

I recently wrote a dedicated article on MAIN as it feels into my buy zone. This has been a name that readers of the Dividend Harvesting series have recommended, and instead of waiting until week 70, I added it in week 65. Since its IPO, MAIN has done a fantastic job of growing its net investment income, net asset value, and dividend. MAIN's management and board of directors own 3.1 million shares, equivalent to 4.26% of the company, indicating that their interests are aligned with shareholders. MAIN pays a monthly dividend that is fully covered and should continue to grow. As MAIN had declined by more than -20% since its November highs I felt now was the time to add MAIN to the portfolio.

As I indicated last week, CSCO was a 100% buy-in week 65. Shares dropped from roughly $50.18 to $41.72 after their recent earnings report. Whenever CSCO's yield is pushed past 3% I think it's always a buy. This is one of the best technology dividend payers in the market. Today, CSCO pays $1.52 per share, it provided 10 years of dividend increases, and the current yield is 3.33%. The supply chain headwinds CSCO will get worked out, and as a long-term investor, I am very happy adding shares at these levels.

I recently wrote an article on Business Development Corporations' (BDCs) valuations and ARCC was one of the companies that stood out to me. ARCC is trading at a 6.97x multiple to its net investment income, which is low for the sector. ARCC currently pays a $1.68 dividend which is a forward yield of 8.45%. ARCC is one of the only BDCs that generates in excess of $1 billion in net investment income. Based on my research, ARCC looked to be trading at an interesting valuation, so I added another share to my current position.

I have been going back and forth on what I want to do, but I will be adding Simon Property Group (SPG) to the Dividend Harvesting Portfolio. I just wrote an article on SPG, which should be out Tuesday, and based on what I see, SPG is drastically undervalued.

Thank you to everyone who continues to read this series. Creating a passive income fund isn't an investment approach that everyone believes in, but it's one of my investment cornerstones. I have a comprehensive investment approach where I invest in growth companies, value companies, and dividend companies/funds. I also utilize an indexing approach with funds for my retirement accounts. Income generation is just one aspect that I focus on when planning for the future. The passive income I'm generating will act as additional income in retirement. I look at this as a Barbell approach because I utilize several aspects of investing in my overall approach.

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This article was written by

I am focused on growth and dividend income. My personal strategy revolves around setting myself up for an easy retirement by creating a portfolio which focuses on compounding dividend income and growth. Dividends are an intricate part of my strategy as I have structured my portfolio to have monthly dividend income which grows through dividend reinvestment and yearly increases. Feel free to reach out to me on Seeking Alpha or https://dividendincomestreams.substack.com/

Disclosure: I/we have a beneficial long position in the shares of MAIN, CSCO, ARES either through stock ownership, options, or other derivatives. 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.

Additional disclosure: I am long every position in the Dividend Harvesting portfolio. Disclaimer: I am not an investment advisor or professional. This article is my own personal opinion and is not meant to be a recommendation of the purchase or sale of stock. Investors should conduct their own research before investing to see if the companies discussed in this article fit into their portfolio parameters.