It’s unusual, to say the least, to have a dividend portfolio match the returns on the Standard & Poor’s 500–especially in a year when the S&P 500 was setting an all time high–but that’s what happened in 2020.
My Dividend Portfolio showed a price gain of 12.28% for 2020. Add in the 3.43% dividend yield and the total return for the portfolio for the year was 15.71.%
For the year the S&P 500 returned 16% and the Dow Jones Industrial Average returned 7%.
Of course, the total return for the NASDAQ Composite of 40% for 2020 crushed all those other returns.
But remember that a Dividend Portfolio with a 3.43% yield is less risky than the NASDAQ Composite. And that the NASDAQ Composite yields just 0.55%. Not a great dividend rate for any investor looking to produce income.
But then 2020 wasn’t a great year for finding income anywhere. The December 31 yield on the 10-year U.S. Treasury was just 0.94%. The 3-month Treasury showed a yield of just 0.05%.
In terms of individual stocks, the portfolio benefited by being very light on energy stocks. The sole stock in that category in the portfolio was Kinder Morgan (KMI), which lost 30.53% for 2020. I’ve kept the stock in this portfolio because the dividend looks safe and at a 7.68% yield I’m willing to hold while I wait for a recovery in the U.S. oil and natural gas sector.
Going into 2021, I’m relatively heavy in utility stocks such as NextEra Energy (NEE), Duke Energy (DUK), and AES (AES). That strikes me as a good thing as we look forward to an uptick in the U.S. economy when we finally roll out a coronavirus vaccine in sufficient quantities to end this pandemic.
In terms of potential post-vaccine outperforms I also like the Dividend Portfolio’s exposure to Coca-Cola (KO) and to commodity producer Southern Copper (SCCO).
The one change that I’m making today as part of this review is to sell the Vanguard Short-term Treasury ETF (VGSH) out of the portfolio. With the 3-month Treasury yield at 0.05% and the Federal Reserve promising to keep its 0% to 0.25% benchmark rate in force until 2023, I don’t see any price appreciation in the short-end of the bond market to offset the very low yield. I’ve got a 0.16% loss on this position since I added it to this portfolio on March 3, 2020.