Dr. Dividend’s Financial Freedom Newsletter - Issue #1

Are you ready to build a passive income stream?

Dr. Dividend's Financial Freedom Newsletter

April 6, 2022, by Dr. Dividend

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Market Overview

March 2022 was a month that had investors’ heads spinning. Headlines from both the ongoing Russia-Ukraine conflict and Inflation Data had the market reeling at times. March was a highly volatile month that had some investors panicking but also had others taking advantage of the short-term dips in price. Remember, volatility is the price of admission in the stock market, the patient investor will be rewarded for holding through uncertainty. It’s times like this when you must have an investing plan and stick to it, consistency is key. You must also be able to keep your emotions sidelined, you don’t want a panicked decision to cause you immense loss and/or come back to bite you in the future.

Throughout March, prices went up and down, but I still got paid as a Dividend Growth Investor regardless. One of my favorite things about dividend investing is being rewarded for holding through uncertainty. In March, I wasn’t worried about the rapid rises and falls of stock prices because I knew I had a basket of proven companies in my portfolio that paid consistent dividends through times of uncertainty.

In March, I received $106.69 in dividends from 23 companies. I closed out of 3 positions and added to 12 positions and even started 1 brand new position. In the next segment, we’ll dive deeper into my portfolio, its dividends, and more!

The Portfolio

My portfolio consists of 34 long positions spread out over the 11 main sectors. My 5 biggest positions are in Home Depot, Microsoft, Visa, Apple, and Caterpillar. In my personal preference, 10% is my absolute limit for one individual stock to take up in my portfolio. (HD) is getting very close at 9.7% and I’ll be looking to add to other positions to reduce my overall income dependency and weight in HD.

Another personal rule I have is to not let 1 sector equate to more than 20% of my holdings. At this time, 21.6% of my portfolio is concentrated in Consumer Discretionary stocks, which I’ve found to be attractive. In high inflationary times, Consumer Discretionary stocks tend to fall out of favor and I’m looking to take advantage of discounted prices. I will, however, look to add positions in other sectors, particularly healthcare to diversify my holdings further.

At the time of writing, my portfolio has made gains in 29 of my 34 positions. You can check out my winners and losers as well as my portfolio position holdings and sector concentrations in the graphics at the bottom of the page.

Dividend Income

 Throughout March I received $106.69 from 23 companies, here’s how it broke down:

QUALIFIED DIVIDEND VISA (V) 1.88

ORDINARY DIVIDEND Nasdaq Covered Call ETF (QYLD) *Sold 2.25

QUALIFIED DIVIDEND Pfizer (PFE) *Sold 2.01

QUALIFIED DIVIDEND Johnson & Johnson (JNJ) 3.20

QUALIFIED DIVIDEND Exxon Mobil (XOM) 4.46

QUALIFIED DIVIDEND Scott’s MiracleGro (SMG) 1.98

QUALIFIED DIVIDEND United Parcel Service (UPS) 4.58

QUALIFIED DIVIDEND Target (TGT) 3.60

QUALIFIED DIVIDEND Microsoft (MSFT) 3.10

QUALIFIED DIVIDEND Honeywell (HON) 4.90

QUALIFIED DIVIDEND Walgreens Boots Alliance (WBA) 7.21

QUALIFIED DIVIDEND 3M (MMM) *Sold 7.51

QUALIFIED DIVIDEND Next Era Energy (NEE) 2.13

QUALIFIED DIVIDEND McDonald’s (MCD) 4.15

ORDINARY DIVIDEND Realty Income (O) 2.74

ORDINARY DIVIDEND Arbor Realty (ABR) 12.95

QUALIFIED DIVIDEND United Healthcare (UNH) 1.45

QUALIFIED DIVIDEND The Home Depot (HD) 19.22

QUALIFIED DIVIDEND Nvidia (NVDA) 0.12

QUALIFIED DIVIDEND Lockheed Martin Technology (LMT) 5.62

QUALIFIED DIVIDEND T. Rowe Price (TROW) 7.20

QUALIFIED DIVIDEND Waste Management (WM) 3.25

QUALIFIED DIVIDEND PepsiCo (PEP) 1.08

TOTAL- 106.69

My biggest contributors by far were The Home Depot (HD) with $19.22 paid this quarter and Arbor Realty (ABR) with $12.95 paid. HD is a consumer discretionary stock yielding 2.49% and ABR is a REIT that pays a hefty 8.55% yielding dividend. HD and ABR combined to payout 30.15% of my March income and for my taste are a bit too high. I’ll be looking to add to my other positions to reduce my overall dependency on HD and ABR.

Dividend Raises & Cuts

During March, 3 of my holdings raised their dividend payouts. Waste Management (WM) raised its dividend by an inflation stomping 13%, bringing its dividends per share to $2.60. WM has increased dividends annually for 18 consecutive years. W. P. Carey (WPC) also increased its dividend by 0.2% during March and is now paying $4.23 per share. WPC has raised its dividend for 24 consecutive years and is knocking on the door of becoming one of the prestigious companies known as Dividend Aristocrats. Speaking of Dividend Aristocrats, Realty Income (O) has raised its monthly dividend from $0.2465 to $0.247 per share. While this 0.2% rate increase isn’t going to knock your socks off, it is still nice to see the Dividend Aristocrat continue to reward shareholders.

What did I buy?

Over March, I added to 12 positions and opened 1 new position with Medical Properties Trust (MPW). I will be further breaking down the DD involved in my decision to start buying MPW in the next issue of my newsletter. Here’s a list of all my buys:

Bought 1 V @ 209

Bought 1 MCD @ 240.08

Bought 2 WMT @ 135.95

Bought 1 SBUX @ 89.75

Bought 1 V @ 199

Bought 1 TROW @ 139.33

Bought 1 MSFT @ 280

Bought 1 V @ 190.8399

Bought 2 PG @ 149.5

Bought 2 SMG @ 121

Bought 1 AAPL @ 154.98

Bought 2 SBUX @ 79.25

Bought 2 PEP @ 160.5

Bought 2 SBUX @ 86.65

Bought 1 MCD @ 237.95

Bought 4 O @ 66.88

Bought 10 MPW @ 21.3

Bought 10 MPW @ 21.5

Bought 5 WBA @ 45.25

TOTAL INVESTED: $4,127.40

Overall I invested $4,127.40 during March and these shares contribute to $102.04 of annual income over the next year. These purchases at the time of writing yield 2.32% on market value and 2.47% on cost and I’ve currently gained 6.53% on these purchases, equating to $270 of capital appreciation in less than a month.

What did I sell?

My ideal holding time for a dividend-paying stock is forever, but sometimes it makes sense to sell. Internal factors like high employee turnover or CEO resignations or external factors like losing market share to a competitor or supply chain constraints may cause you to question your thesis. I sold 3 of my positions this month, 3M (MMM), Cisco (CSCO), and Pfizer (PFE) each for different reasons.

I sold my shares in 3M at a loss due to the ongoing lawsuits regarding the earplugs issued to US veterans. Out of the 11 cases that have been settled, 3M has lost 6 of them and has had to pay $160 million combined. $160 million is a drop in the bucket for an $85 billion company, but the part that scares me is that they have over 280,000 more of these cases pending. If 3M were to lose half of these pending cases and pay $1,000,000 to each, 3M would be on the hook for $140 billion in reparations. This is not a risk I want in my long-term portfolio. This lawsuit coupled with low growth in products drove me to sell my position.

In the case of Cisco, I had invested in them due to their reach in the router, switches, and security software industry. After reviewing their latest earnings report I was disappointed in Cisco’s slowing revenue and their latest dividend raise was an anemic $.01 per share. Cisco is also reported to be losing market share to company Arista Networks and I don’t see them growing their products and revenues substantially in the coming years. As a dividend growth investor slowing revenues and anemic dividend raises are not going to help me beat inflation and therefore, I sold my position.

I sold my shares of Pfizer in an attempt to reduce the number of positions in my portfolio, especially in the healthcare sector. I expect a huge pullback to be coming to Pfizer due to the expected drop in demand for COVID-19 vaccinations and I was able to sell at a profit. Out of all my healthcare holdings, I expected Pfizer to perform the worst over time and I wanted to lock in profit and concentrate my holdings in the healthcare sector sooner rather than later.

What am I looking to add?

In the next month, I am looking to add to a few positions on a pullback. The S&P 500 index-tracking ETF SPY was down as low as $415.79 on 3/14 and in 11 trading days, it bullied its way back up to break $457, a mark that hadn’t been touched since 1/14/22. I expect a pullback due to there not being many if any, positive catalysts for the market, especially with CPI inflation data coming, which I’m expecting to be even higher than the previous 7.9% figure.

In this next pullback, I’m looking to add shares of pharmaceutical giant AbbVie (ABBV) to my existing position. In the wake of the Russia-Ukraine conflict and inflation data, ABBV’s share price has not flinched. This company has had the #1 selling drug in the world Humira since 2012 and has 52 drugs in its current pipeline, many of which are showing strong signs of success in the future. With its 5-year dividend growth rate CAGR of 17.71%, robust pipeline, and increasing revenues, ABBV is poised to continue growing in the future.

In the next pullback, I’ll also be looking to add shares to my United Healthcare (UNH) position. UNH services more than 26.5 million Americans through its healthcare segment by offering healthcare services and plans for large companies, individuals, and everyone in between. UNH also services its customers through its Optum segment. Optum offers mail-in prescriptions, health savings accounts, and payment processing for healthcare providers. UNH’s 10-year dividend growth rate CAGR is a jaw-dropping 24.47% and in the last year alone, UNH has bought back $5 billion worth of its shares. I’d like UNH to be one of my five biggest positions and I will allocate accordingly once the price reaches a favorable level.

Final Thoughts

While weathering the storm that was the month of March, it felt like we investors were constantly getting pummeled. Looking back, however, things truly worked out pretty well in the market, especially with macroeconomic concerns like war, supply chain, and inflationary issues looming over our heads. March presented me with plenty of buying opportunities and it was my highest income month to date with $106.69 received in dividends. Getting passive income is an unrivaled feeling and slowly but surely I feel closer to my goal of financial freedom. The most important advice I can offer is to create a strategy for your money where it works for you, have a reason for buying the stocks you buy, and don’t let emotions sway you from your goals! I wish you all a profitable April full of dividends!

If you liked this newsletter be sure to share it on Twitter and tell your friends! This newsletter takes a lot of effort to write and I appreciate any feedback and tips.

P.S.

Special shoutout to @theDividendKid on Twitter for the awesome portfolio tracker, be sure to follow him!

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