2022 Annual Review

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Image Source: Unsplash

Welcome to the tenth annual review of DivGro, my portfolio of dividend growth stocks. I created this portfolio in January 2013 to create the proverbial dividend-generating machine. It has grown beyond my wildest dreams and now generates dividend income averaging $3,824 per month. With less than ten years to go before I retire, I plan to continue reinvesting all dividends and allow my portfolio to grow even more. 

In annual reviews, I look at the portfolio's performance as measured by dividend income, dividend increases, annualized returns, and rate of return. I also share some highlights of the past year.


Introduction

The stock market had a brutal year in 2022. All three major indexes suffered their worst year since 2008. The Dow performed best, down "only" about 8.8%. The S&P 500 dropped 19.4% to more than 20% below its record high, and the Nasdaq tumbled 33.1%.

As Jesse Pound and Samantha Subin write: "Sticky inflation and aggressive rate hikes from the Federal Reserve battered growth and technology stocks and weighed on investor sentiment throughout the year. Geopolitical concerns and volatile economic data also kept markets on edge."

Last year, I increased my portfolio's projected annual dividend income (PADI) from $39,327 to $45,885, an increase of 16.68%. If I continue to increase PADI at the same rate every year for five years, the portfolio's PADI should approach $100,000 at the end of 2027. I'm very happy I switched to dividend growth investing in January 2013.

Buying shares of companies with a track record of paying regular and increasing dividends is a wonderful strategy. Much like rolling a snowball down a hill, the longer you're invested in dividend growth stocks, the larger your portfolio will grow, and the more dividend income it will produce every year. Reinvesting dividends will speed up the process for a double compounding effect.

Now, let's take a look at my dividend portfolio's performance in 2022.


Performance - Dividend Income

The main goal of this portfolio is to generate a reliable and growing dividend income stream. In 2022, it generated dividends totaling $47,646, an increase of about 26.33% over the 2021 total of $37,716.

Here are the dividend increases for the last five years:

2017-2018

2018-2019

2019-2020

2020-2021

2021-2022

37.06%

25.70%

17.54%

25.63%

26.33%

That's a five-year compound annual growth rate of 26.30%.


Dividend Increases

In dividend growth investing, regular dividend increases are just as important as dividend income. I use selection criteria that favor high-quality dividend growth stocks with safe dividends. In 2022, the following stocks in my portfolio paid or announced higher dividends:

One-Year Increase 

Company

 Ticker

Increase

 Annual Div

 New YoC

Outsized
(≥ 20%)

FedEx Corporation

FDX

53.33%

4.60

3.07%

United Parcel Service, Inc

UPS

49.02%

6.08

3.98%

AllianzGI Equity & Convertible Income Fund

NIE

31.58%

2.00

9.19%

Lowe's Companies, Inc

LOW

31.25%

4.20

4.54%

Canadian National Railway Company

CNI

⟡21.93%⟡

2.16

2.71%

Cintas Corporation

CTAS

21.05%

4.60

1.17%

Automatic Data Processing, Inc

ADP

20.19%

5.00

3.24%

Virtus Artificial Intelligence &
 Technology Opportunities Fund

AIO

20.00%

1.80

closed

Visa Inc

V

20.00%

1.80

0.88%

 Large
(≥ 10%
 but
< 20%)

BlackRock, Inc

BLK

18.16%

19.52

4.93%

Mastercard Incorporated

MA

16.33%

2.28

0.69%

Accenture plc

ACN

15.46%

4.48

2.55%

The Home Depot, Inc

HD

15.15%

7.60

3.39%

Intercontinental Exchange, Inc

ICE

15.15%

1.52

1.62%

Snap-on Incorporated

SNA

14.08%

6.48

4.18%

Costco Wholesale Corporation

COST

13.92%

3.60

1.32%

UnitedHealth Group Incorporated

UNH

13.79%

6.60

3.80%

The TJX Companies, Inc

TJX

13.46%

1.18

2.67%

Elevance Health, Inc

ELV

13.27%

5.12

1.78%

Broadcom Inc

AVGO

12.20%

18.40

6.78%

NIKE, Inc

NKE

11.48%

1.36

1.66%

T. Rowe Price Group, Inc

TROW

11.11%

4.80

6.46%

NextEra Energy, Inc

NEE

10.39%

1.70

4.17%

QUALCOMM Incorporated

QCOM

10.29%

3.00

2.73%

Northrop Grumman Corporation

NOC

10.19%

6.92

2.12%

Union Pacific Corporation

UNP

10.17%

5.20

3.09%

McDonald's Corporation

MCD

10.14%

6.08

4.09%

CVS Health Corporation

CVS

⟡10.00%⟡

2.42

4.61%

Mondelez International, Inc.

MDLZ

10.00%

1.54

2.52%

Medium
(≥ 5%
 but
< 10%) 

Amgen Inc

AMGN

9.79%

8.52

3.90%

Microsoft Corporation

MSFT

9.68%

2.72

5.83%

The Toronto-Dominion Bank

TD

⟡9.39%⟡

2.61

4.61%

Royal Bank of Canada

RY

⟡9.38%⟡

3.83

4.28%

American States Water Company

AWR

8.90%

1.59

1.72%

Atmos Energy Corporation

ATO

8.82%

2.96

3.31%

PACCAR Inc

PCAR

8.82%

1.48

1.85%

Cummins Inc

CMI

8.28%

6.28

4.07%

Starbucks Corporation

SBUX

8.16%

2.12

3.13%

Archer-Daniels-Midland Company

ADM

8.11%

1.60

3.77%

Air Products and Chemicals, Inc

APD

8.00%

6.48

4.10%

Comcast Corporation

CMCSA

8.00%

1.08

2.86%

Medtronic plc

MDT

7.94%

2.72

3.22%

Stryker Corporation

SYK

7.91%

3.00

1.43%

The Bank of Nova Scotia

BNS

⟡7.89%⟡

3.04

5.43%

Raytheon Technologies Corporation

RTX

7.84%

2.20

3.53%

Texas Instruments Incorporated

TXN

7.83%

4.96

4.56%

DTE Energy Company

DTE

7.63%

3.81

3.38%

Illinois Tool Works Inc

ITW

7.38%

5.24

2.37%

WEC Energy Group

WEC

7.22%

3.12

3.18%

Lockheed Martin Corporation

LMT

7.14%

12.00

3.87%

PepsiCo, Inc

PEP

6.98%

4.60

3.07%

Johnson & Johnson

JNJ

6.60%

4.52

2.91%

Xcel Energy Inc

XEL

6.56%

1.95

3.41%

Chevron Corporation

CVX

5.97%

5.68

6.06%

General Dynamics Corporation

GD

5.88%

5.04

4.17%

Public Service Enterprise Group
 Incorporated

PEG

5.88%

2.16

3.61%

Merck & Co., Inc

MRK

5.80%

2.92

3.79%

Hormel Foods Corporation

HRL

5.77%

1.10

2.67%

The Travelers Companies, Inc

TRV

5.68%

3.72

3.21%

Bristol-Myers Squibb Company

BMY

5.56%

2.28

3.93%

Digital Realty Trust, Inc

DLR

5.17%

4.88

4.42%

Honeywell International Inc

HON

5.10%

4.12

2.71%

Intel Corporation

INTC

5.04%

1.46

4.85%

The Procter & Gamble Company

PG

5.00%

3.65

2.81%

Aflac Incorporated

AFL

5.00%

1.68

4.21%

 Small
(≥ 2.5%
 but
< 5%) 

AbbVie Inc

ABBV

4.96%

5.92

9.78%

The Allstate Corporation

ALL

4.94%

3.40

2.86%

The Coca-Cola Company

KO

4.76%

1.76

4.26%

Apple Inc

AAPL

4.55%

0.92

4.01%

Altria Group, Inc

MO

4.44%

3.76

8.20%

Tyson Foods, Inc

TSN

4.35%

1.92

closed

Sempra

SRE

4.09%

4.58

3.12%

Enbridge Inc

ENB

⟡3.86%⟡

2.55

6.65%

National Retail Properties, Inc

NNN

3.77%

2.20

5.60%

Chubb Limited

CB

3.75%

3.32

2.72%

Gilead Sciences, Inc

GILD

2.82%

2.92

closed

Cisco Systems, Inc

CSCO

2.70%

1.52

3.67%

Pfizer Inc

PFE

2.50%

1.64

4.49%

  Tiny
(< 2.5%)

Main Street Capital

MAIN

⟡2.38%⟡

2.70

12.47%

Verizon Communications Inc

VZ

1.95%

2.61

5.31%

Pinnacle West Capital Corporation

PNW

1.76%

3.46

4.46%

Philip Morris International Inc

PM

1.60%

5.08

5.91%

American Tower Corporation

AMT

⟡0.72%⟡

6.24

closed

3M Company

MMM

0.68%

6.00

closed

International Business Machines
 Corporation

IBM

0.61%

6.60

closed

Realty Income Corporation

O

⟡0.20%⟡

2.98

5.25%

W. P. Carey Inc

WPC

⟡0.19%⟡

4.26

6.31%

Note: This ✧ symbol implies multiple increases.

The table includes the new yield on cost (YoC) for positions still in my portfolio. I like seeing dividend increases of 7% or higher, and I'm happy to note that 50 positions had dividend increases of at least 7% in 2022. The arithmetic average of the 87 increases above is 9.71%, up from last year's 8.66% from 82 increases. Note that I've closed one of these positions.


Annualized Returns

As mentioned earlier, the S&P 500 dropped 19.4% in 2022, while the Dow and Nasdaq dropped 8.8% and 33.1%, respectively. My portfolio easily outperformed all three indexes, with returns of -5.61% (excluding dividends). I'm thrilled that it outperformed the broader market in 2022, but a negative return is never a pleasing result.

As a dividend growth investor, I aim to generate a reliable and growing dividend stream. On that front, my portfolio's position-weighted average dividend yield of 3.27% in 2022 easily beats the 1.64% dividend yield of the S&P 500.

Source: S&P 500 Dividend Yield

Not many of my existing positions show positive gains for 2022.

Topping the list are Chevron (CVX), Merck (MRK), Northrop Grumman (NOC), Archer-Daniels-Midland (ADM), and Lockheed Martin (LMT), all with returns exceeding 30%. At the bottom of the list, we can find Intel (INTC), T. Rowe Price (TROW), Digital Realty Trust (DLR), QUALCOMM (QCOM), and Virtus Equity & Convertible Income Fund (NIE), all with negative returns of at least 40%.  

Here is a chart showing the lifetime returns of all positions in my portfolio (including dividends, where applicable).

By far, Microsoft and Apple are my portfolio's most profitable positions, with total returns exceeding 600% and 500%, respectively, as of Feb. 17, 2023.

In 2022, the portfolio added only 2 home runs, which are stocks in my portfolio that achieve total returns topping 100%. Here are those home runs with returns as of Dec. 31, 2022:

  • Home run #42: CVS Health Corporation (CVS) — up 92% (25% annualized).
  • Home run #43: Archer-Daniels-Midland (ADM) — up 131% (37% annualized).

Once a stock achieves home run status, it retains that status even if the stock price drops and the total returns dip below the 100% mark. Also, if I buy additional shares of a home run stock at a higher cost basis, the calculated total returns could drop below 100%.

Here are DivGro's top performers sorted by annualized returns as of Dec. 31 2022:

  1. Apple Inc (AAPL) — up 487% (73% annualized).
  2. Microsoft (MSFT) — up 447% (63% annualized).
  3. Chevron (CVX) — up 102% (61% annualized).
  4. UnitedHealth (UNH) — up 221% (40% annualized).
  5. Northrop Grumman (NOC) — up 71% (40% annualized).
  6. Archer-Daniels-Midland (ADM) — up 131% (37% annualized).
  7. Raytheon Technologies (RTX) — up 68% (36% annualized).
  8. Broadcom Inc (AVGO) — up 125 (35% annualized).
  9. AbbVie (ABBV) — up 210 (35% annualized).
  10. Aflac (AFL) — up 95% (31% annualized).


Rate of Return

This portfolio's IRR (internal rate of return) provides the best measure of overall portfolio performance, as IRR considers the timing and size of deposits since inception. On Dec. 31, 2022, the portfolio's IRR was 13.7%, down from the 17.5% reported in 2021


Other Statistics

At the end of 2022, the portfolio's average YoC was 41.7%, up from the 3.97% reported last year. Over time, as stocks I own pay higher dividends, the portfolio's average YoC should increase.

The portfolio's payback increased from 26.4% at the end of 2021 to 31.1% at the end of 2022. Payback is the proportion of capital returned as dividends. I consider it to be a reasonable measure of portfolio maturity.

Main Street Capital (MAIN) tops the chart, mainly because the company pays a generous dividend, and it is the stock I've owned the longest in my portfolio. 


2022 Highlights - Page Views

Here are some highlights of 2022. My page views climbed to 3.45 million on Dec. 17, 2022, an increase of 630,000 over the 2.33 million page views I had on Dec. 31, 2020. That's an average of 1,731 page views per day in 2021. 

 Dec. 31, 2021

 average since inception:
 901 page views per day

  

 Dec. 17, 2022

 average since inception: 
 949 page views per day


Popular Posts

In 2022, I posted 100 articles on my website.


2023 Outlook

After ten years of blogging about and sharing my portfolio publicly, I've decided to make a few changes. While the content of my work will remain intact, my portfolio page will no longer be updated automatically. In fact, it will be a snapshot of the portfolio as of Dec. 31, 2022. 

I plan to move my portfolio to another platform where registered readers can continue to follow my journey of dividend growth investing and options trading. I'm continuing to work with Portfolio Insight, and we have some exciting features in development, including the creation of model portfolios. 

Thanks for reading, and all the best with your investments in 2023.


More By This Author:

My Best And Worst Performers In 2022
10 Dividend Growth Stocks For October 2022
How To Identify Quality Dividend Growth Stocks

Disclaimer: I'm not an investment professional or a licensed financial advisor. This article represents my personal views and decisions, which may not be appropriate for other investors. ...

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