My Portfolio on December 7, 2021

[cemanuel]

Here is my taxable account portfolio as of market close on 12/7/21. I downloaded the excel file from Fidelity and deleted all columns except symbol and %. Not sure how it'll format here.

Symbol     Percent Of Account
Cash              1.17%
AAPL            13.21%
MSFT           11.50%
ABBV             8.20%
MO                5.94%
UNH              5.85%
GOOGL          5.75%
ITW              5.57%
LYB               5.50%
WSM             5.36%
PFE               4.66%
LMT              3.64%
CVS               3.43%
VZ                 3.01%
PM                2.92%
NEE              2.87%
BBY              2.48%
AOS              2.34%
ADM             1.88%
GD               1.82%
T                  1.72%
OGE              1.19%

A couple of notes. Some of you may look at this and ask, "If you wanted to fund your retirement completely from dividends, why in the world did you ever buy AAPL, MSFT, UNH - the list goes on, right? Well, there's a story here.

I first got into stocks on 3/8/2017. Until then I had been in real estate, primarily farmland.

I started selling my ground in late summer, 2016. I had this idea of how much it should bring and with cap gains decided it wasn't enough. I had looked into DGI, liked everything about it, but what I expected to receive wasn't enough to generate the kind of income I wanted. So when I first started I was looking for growth and cap gains and did a lot of different things.

So the property sales continued. Everything went for more than I expected and one sale that I received the check for in June, 2018 went for way more. Suddenly I had reached my number - that was how I thought of it, "my number."

Now I still wasn't a committed DGI investor. That came about in fall, 2018. I was leaning towards dividend-payers and the last three months of the year was a fire sale. I probably turned over 35% of my portfolio selling things like AMD, MU, NVDA, etc., to pick up dividend-payers.

Funny thing was, I didn't know it even then - it was early 2019 when dividends started rolling in from all the new companies that the light bulb went on that this could work. So I looked at every stock I owned to ask myself if it was a good company to hold. If something I owned had a low yield but was giving robust annual increases I kept it.

I could have - if I could have stomached the cap gains tax hit - sold, say, everything yielding under 2% to buy something yielding over 3 with an average of 4% and I'd be living completely off my dividends. But guess what - I like owning MSFT, UNH, even GOOGL and AAPL are OK. I call my buying these companies a "happy accident." I am happy to have the kind of mix I have even though it means I'll need to sell a little GOOGL and AAPL in retirement.

A few additional numbers, these come from my SA November Portfolio Review: https://seekingalpha.com/instablog/48196...-blog-post and are as of market close on November 30:

Yield: 2.67%
"Organic" (no dividend reinvestment, just 5-yr DGR balanced for position size) DGR: 8.99%

I am not worried about AAPL and MSFT making up over 10% of my value. I AM a little concerned about how much of my dividend income MO and ABBV contribute. As of the end of September, 15.75% and 12.21%, respectively. That's a chunk at risk if something catastrophic happens to either of them.

Those numbers come from my Third Quarter Portfolio Review at the end of September. You can find the dividend contribution - expected for the next 12 months -  in that post: https://seekingalpha.com/instablog/48196...retirement There are a couple of tables about 1/3 down the page.

And yes, I throw up a little in my mouth every time I see that I own T. It's down from about 85% of a full position at the start of the year to about a 40% full position now and I have my full $3k in tax loss sales.

That was more than a couple of notes - sorry. I can be an over-writer.

[crimsonghost747]

Looks like a decent portfolio overall.
I know you said you aren't worried about AAPL being such a huge percentage but I think that now I do understand why you feel like selling some AAPL (and GOOGL) periodically in order to supplement your cash flows. It just makes sense to trim, especially AAPL which is a huge percentage of your portfolio but provides a tiny part of the dividend income.

Unfortunately I do not think there are many good solutions for "fixing" the fact that MO and ABBV both generate over 10% of your dividend income. What I would do in your shoes, if I were adamant on fixing this issue, would be to sell a small part of AAPL and a small part of one or both of those high yielders and buy something in the 3-4% yield range that you like with the proceeds of those sales. You'll lower your exposure to AAPL, you'll lower your exposure to the dividend of MO&ABBV, and when calculated correctly these moves won't affect your dividend income at all.

[fenders53]

I have done a lot of portfolio adjusting as I get closer to retirement. I prefer to do it in smaller steps. We never know what a stock or the market is going to do in the short term. I feel better if I happen to get the timing completely wrong. Sometimes just stretching it out over a month or two can limit regrets.

[cemanuel]

(12-08-2021, 06:33 AM)crimsonghost747 Wrote: Looks like a decent portfolio overall.
I know you said you aren't worried about AAPL being such a huge percentage but I think that now I do understand why you feel like selling some AAPL (and GOOGL) periodically in order to supplement your cash flows. It just makes sense to trim, especially AAPL which is a huge percentage of your portfolio but provides a tiny part of the dividend income.

Unfortunately I do not think there are many good solutions for "fixing" the fact that MO and ABBV both generate over 10% of your dividend income. What I would do in your shoes, if I were adamant on fixing this issue, would be to sell a small part of AAPL and a small part of one or both of those high yielders and buy something in the 3-4% yield range that you like with the proceeds of those sales. You'll lower your exposure to AAPL, you'll lower your exposure to the dividend of MO&ABBV, and when calculated correctly these moves won't affect your dividend income at all.

The IRA rollover will give a "paper fix." At least for MO - I won't be buying it there. Good chance I add more ABBV. I won't generate the dividends in the IRA that I do in my Taxable Account but it will give me some so the MO % should drop.

I'm already short of dividend income in the taxable account and there aren't many ways to replace the lost ABBV/MO income so swapping them out isn't a very attractive option. I'm already going to feel a pinch once I do whatever the heck I'm gonna do with T. The income concentration is an issue but not a massive one - I have a very large (to me anyway) pool that I don't need to ever touch in the IRA, until the IRS makes me.

My GF likes to talk about high class problems. The same for my funding my retirement - I'm worried about massaging things for tax efficiency. I'm not worried about keeping gas in the cars, keeping the lights on or buying groceries. That IS a high-class problem. Which is weird as I've never had a high-class salary. 

Thank you for the comment.

[fenders53]

T has been the bane of most of us. The "announcement" was actually the straw that broke my back on yield traps. I noticed 10% of my stocks were usually causing 75% of my concern. Not something I wish to deal with. Not to mention their total return was trash anyway so T was gone and the rest left gradually when they had a few good days in a row. I don't miss them even a little. I'd rather sell a share or two of a company that actually grows if necessary. I understand you are dealing with a taxable account though.

[cemanuel]

(12-08-2021, 07:32 AM)fenders53 Wrote: T has been the bane of most of us.  The "announcement" was actually the straw that broke my back on yield traps.  I noticed 10% of my stocks were usually causing 75% of my concern.  Not something I wish to deal with.  Not to mention their total return was trash anyway so T was gone and the rest left gradually when they had a few good days in a row.  I don't miss them even a little.  I'd rather sell a share or two of a company that actually grows if necessary.  I understand you are dealing with a taxable account though.

I've already maxed out my $3k tax loss for 2021 from T. Waiting until the calendar rolls over to sell more, if I do. I know losses carry over but I typically try to make moves for a tax year within the tax year impacted. I'm getting older, helps me not to forget.

I honestly don't have a clear idea of what I'm doing with what I have left. If spinco, as advertised, doesn't pay a dividend, I'll sell that after receiving shares and treat it like a special - plus I'll have a tax loss just from it. If T gives $1.20 in a dividend post-transaction we're still talking 5%. I'm OK - not thrilled but OK - with keeping the amount I have until the spinoff. But an opportunity could come along, share price could recover - the "could" list is long.

[fenders53]

Somebody will get lucky and catch the bottom on T. Everyone else is a bagholder hoping to escape with a smaller loss than today. And that is why it's going nowhere IMO. Trust is gone years ago. Clinging to the high dividend ran out of gas.

[cemanuel]

The above was an experiment to see about adding an image after seeing what Kerim just posted on his portfolio thread. It represents my stocks, what % they are of my investments, and how much they contribute - on a % basis - to my overall dividend income. It's also outdated. I did it as part of my 3rd quarter portfolio review on Seeking Alpha so it's as of 9/30/21 market close.

I have since started tracking my taxable account separate from my Roth more closely as this is where my dividend income needs to come from in retirement. Happy to see how simple this is. I have a variety of running charts which may also interest people which I can occasionally post.

[cemanuel]

Want to celebrate but I'm not sure where to put it so I'll tuck it in here:

With MSFT paying this morning I have passed my dividend income total from 2020.

This is much later than in past years for three main reasons:

1 - Unlike past years many of my moves this year have reduced my income - getting out of REITs and BDCs, selling a bunch of T
2 - I stopped adding new money to my accounts or buying more dividend-payers this summer to build cash for retirement
3 - This is the big one. MSC Industrial. I owned MSM last year and it paid two big specials in 2020. Take those away and my date would be earlier and I'd also finish the year with more than a 10% increase.

We all have enough negatives in our lives - I like celebrating (bragging about?) even my little achievements when they come.

[crimsonghost747]

I guess this is indeed a good place for this celebration. I was quite surprised that it happened this late in the year but after seeing those points that you mentioned it makes sense. Those big special dividends can indeed make comparison a bit distorted, especially if they come from a company that doesn't usually pay a special dividend. I still do love receiving special dividends though!

Personally for me the time to surpass my previous years dividend income comes usually in September or October, then again that is mostly due to the fact that I keep adding new money on a monthly basis and reinvesting all dividends.

[fenders53]

Good for you! Merely matching last year would have been a win after those moves. I have been following Eric's public DGI port on SA for years. He is trying to hit 10% growth with no new money and it's getting challenging.

[cemanuel]

"Personally for me the time to surpass my previous years dividend income comes usually in September or October"

Last year mine was October 9. The year before sometime in September.