2020 was the seventh year for the DGI For The DIY portfolio, and it proved to be one of the most challenging ones yet. A recession and global pandemic led to a volatile stock market, and impaired earnings caused multiple dividend cuts in the portfolio. Yet despite those headwinds, the portfolio reached its goal for double-digit income growth and ended the year at new all-time highs.
It was also a challenging and rewarding year at home, as my family endured remote learning, social distancing, work from home, and our own bout with COVID-19, while also enjoying more time with the kids, summer baseball, camping and hunting trips, and the news that my wife is expecting and will be having our fourth child in March.
For all the doom and gloom seen on the news, my kids had a different view of the pandemic. Sure, they hate wearing masks and wish we could do more things in public, but they’ve enjoyed having mom and dad around more and getting to do more things together as a family.
As with all things in life, perspective matters. I’m thankful they are looking at the glass half-full and putting a positive spin on an unfortunate and challenging situation.
Market Overview
One might think that a global pandemic and forced economic recession would be bad for the market. But while it was a horrible year for main street, as social distancing and restricted capacity led to many closed restaurants and retail businesses, it was an incredible year for Wall Street, as fiscal and monetary stimulus goosed the markets and drove stocks higher.
The markets all corrected by 25%+ in March but still saw price increases for the year, as the Dow Jones gained 7.25%, the S&P 500 gained 16.26%, and the NASDAQ grew by an incredible 43.64%.
Another good reminder that it’s impossible to time or predict the market, and that one should never fight the Fed.
Portfolio Overview
My portfolio operated in a similar manner, taking a big hit in March before steadily gaining the rest of the year to finish at all-time highs.
The portfolio dropped by nearly 20% in the first quarter before rallying to finish with a nearly 10% gain for the year. This lagged the NASDAQ and S&P, but easily beat the 7.25% gains from the DOW.
The final dividend payment of the year came from Broadcom on December 31st, and that payment pushed me past the 10% growth mark in the portfolio for 2020. This was the second year in a row that Broadcom gave the final push to meet my double-digit goal.
I’m proud of making the 10% growth this year, as the recession and weak economy led to dividend cuts in the portfolio from Cracker Barrel, Ross Stores, Wells Fargo, Dominion Energy, and Occidental Petroleum.
Thanks to zero commissions I was able to maneuver around those cuts and make up for the losses, but it wasn’t easy. However, I don’t see any of my current holdings in danger of cutting dividends, so hopefully, 2021 is a less volatile year for the portfolio.
2020 Vs. 2019 Dividend Income
I hit the double-digit mark for the portfolio as a whole, but it’s also good to look at things on an individual basis to see how each company is performing.
Here is an income breakdown for each stock:
I’m not going to bore you by going through every position, as there were so many changes in the portfolio over the last year with buy/sell and add/trim trades. The most important thing is there is more green and yellow than red, which means many of the stocks are producing strong income growth.
These income growth numbers come from both higher payouts and reinvestment of dividends. AT&T for example produced 8.3% higher income in 2020 than in 2019, while its dividend was increased by just 2%.
Its recent decision not to increase the dividend on schedule wasn’t great news, but considering the high yield on shares, my income will continue to grow with the holding regardless. I will be watching it closer now though, as an unexpected dividend freeze adds some scrutiny to the position.
December Dividend Income
I typically report my monthly income totals in these updates, so I will continue with that tradition. December was a very busy month with twenty-six payments hitting the account.
At just 4.1%, December didn’t set any records for growth, but it was just enough to push me past the double-digit growth mark for the year.
The standouts were Amgen, American Water Works, Home Depot, Lockheed Martin, UnitedHealth Group, and WEC Energy, which all produced double-digit income growth.
The two biggest laggards were Norfolk Southern and Union Pacific, as their income growth came solely from dividend reinvestment. Hopefully, we have a rebounding economy in 2021, which would help earnings for railroads, and allow both to get back on the dividend growth track once again.
December Dividend Increase Announcements
December was a good month for announcements, as seven companies announced new payouts, with an average increase of over ten percent.
| Date | Company | Ticker | Prev. Rate | New Rate | Seq. Inc. | LY Rate | YoY Inc. | Div. Yield | Link |
| 12/03/20 | WEC Energy | $WEC | $0.6325 | $0.6775 | 7.11% | $0.6325 | 7.11% | 3.08% | LINK |
| 12/08/20 | Mastercard | $MA | $0.4000 | $0.4400 | 10.00% | $0.4000 | 10.00% | 0.54% | LINK |
| 12/09/20 | Realty Income | $O | $0.2340 | $0.2345 | 0.21% | $0.2275 | 3.08% | 4.84% | LINK |
| 12/10/20 | Bristol-Myers Squibb | $BMY | $0.4500 | $0.4900 | 8.89% | $0.4500 | 8.89% | 2.94% | LINK |
| 12/10/20 | Broadcom | $AVGO | $3.2500 | $3.6000 | 10.77% | $3.2500 | 10.77% | 3.14% | LINK |
| 12/11/20 | Abbott Labs | $ABT | $0.3600 | $0.4500 | 25.00% | $0.3600 | 25.00% | 1.60% | LINK |
| 12/16/20 | Amgen | $AMGN | $1.6000 | $1.7600 | 10.00% | $1.6000 | 10.00% | 2.84% | LINK |
| Average: | 10.28% | 10.69% | 2.71% |
Abbott Labs was a big surprise, as it announced a whopping 25% boost to the dividend on December 11th. According to FAST Graphs, this was the biggest increase in over 20 years for the company, and was the second-largest in the portfolio this year, trailing only EOG’s 70% increase from February.
Other solid increases came from WEC Energy group (7.11%), Mastercard (10%), Bristol-Myers Squibb (8.89%), Broadcom (10.77%), and Amgen (10%).
Bristol-Myers’ increase was great to see, as my prediction that it was about to step up dividend growth played out. Last year’s 9.8% increase was the first time over 3% since 2012, so to see a follow-through of 8.9% is certainly encouraging.
Even with the increase, the payout ratio is quite reasonable at just over 30%. With analysts predicting EPS growth of around 10% going forward, I expect that dividend growth will continue in a similar manner.
Overall, a great month of increases, which sets the portfolio up well for 2021.
Recent Dividend Growth Articles
I published one new article in December, which was my Q3 portfolio update on Seeking Alpha.
DGI For The DIY: Q3 2020 Dividend Portfolio Update
There I shared my reasons for trading out of Wells Fargo and trimming Dominion Energy and adding to my positions in Chevron, Kinder Morgan, Altria, and Philip Morris.
I also highlighted Lockheed Martin and Abbvie, which look like attractive candidates for income portfolios.
In other reading, I enjoyed David Van Knapp’s update to his Dividend Growth Portfolio, which passed the 10% yield-on-cost “YOC” mark for the first time. With a portfolio value now approaching $150,000, that double-digit YOC is starting to become meaningful.
Another update came from Mike Nadel on his Dividend Growth 50 project.
A Sea Of Calm In A Turbulent 2020
Despite dividend cuts from Wells Fargo and Dominion, the portfolio still produced nearly 8% income growth in 2020, led by a 30% increase from Conoco Phillips and a 24% increase from Baxter.
Other topics that may be of interest are the DGR Chit Chat and Crowdsourcing Investment Wisdom blogs at Seeking Alpha. They are great places to bounce ideas off other dividend growth investors and get ideas from what others are buying in this market.
Closing Thoughts
It was an eventful and difficult year, but 2020 ended up being a successful one for the portfolio. It once again hit the 10% income growth mark and set new all-time highs for valuation.
With vaccines being distributed, I’m hopeful that we are nearing the end of the pandemic, and we can get back to “normal” again by mid-year. I’m looking forward to a less active year managing the portfolio, as I much prefer boring buy and hold to trading around dividend cuts.
I hope the new year is treating you all well, and as always, Happy Investing!