Another year, another weighted dividend growth post arriving a bit later in the year than I’d prefer.  Still… I do crank it out, and I do enjoy looking at the results.

With all the dividend freezes, not to mention some dividend cuts and suspensions, I feel like dividend growth within my Portfolio in 2020 is going to end up being lower than normal.

In my Monthly Dividend Income (Dec. 2020) report, I showed that my Portfolio’s 2020 dividend raises resulted in just over $503 in additional forward dividend income.  This was a step down from the nearly $684 in 2019 (which led to 9.97% weighted dividend growth, by the way).  Now you can understand why I suspect my weighted dividend growth in 2020 might be in for a decline.  $503 in 2020 is still a nice income boost though.

Yet, how does that translate to weighted dividend growth, and how does this year’s weighted dividend growth compare to previous years?  And which raises from which stocks resulted in the biggest contribution to the Portfolio’s weighted dividend growth?  We’ll get the answers to these questions right here, in my annual look at my Portfolio’s weighted dividend growth.

This is now the 4th year I’ve done this.  I started in 2017 after reading a Dividend Growth Checkup post from JC over at Passive Income Pursuit.  At that time, I was inspired to go back and calculate my weighted dividend growth for 2015, 2016 and 2017 and share the results.  I then followed that up by reviewing my 2018 & 2019 results after those years.

This time I’ll be calculating the weighted dividend growth in my Portfolio for 2020.  When done, I’ll compare it to my results from previous years.  I’ll also share my thoughts on any interesting nuggets of information as we go along.

Let’s get to those numbers…

 

Weighted Dividend Growth Calculation

To determine the weighted growth percentage contributed by an individual stock, its dividend growth percentage for the year is multiplied by the dividend amount that company paid me for the year, divided by the total dividends for the portfolio for the year, or…

Div Growth % for Stock * (Div Paid by Stock / Div Paid by Portfolio)

Each of these individual dividend growth percentages is then added up to obtain the weighted dividend growth percentage for the entire portfolio of stocks.

Note – I did not include special dividends in the weighted dividend growth calculations, as these are usually a one-time occurrence, and they skew the percentages up and then down from year-to-year.  Fastenal (FAST) was my only stock in 2020 to pay special dividends.

 

Weighted Dividend Growth for my Portfolio

First, here’s some info to help understand what you see in the first table below.  Tickers in blue are for stocks that exited my Portfolio in 2020.  Tickers in red are for stocks added to my Portfolio in 2020.  Tickers in purple are for stocks that both joined and left my Portfolio all within 2020.  Due to these stocks not having a full year of participation in my Portfolio, their contributions tend to be muted.

The stocks are listed in order of weighted dividend growth, best to worst, so that you can quickly discern their contributions to my total.

In the ‘Div Growth’ column, I show the Dividend Growth for each stock.  This growth percentage is for the change in 2019 total dividends paid to 2020 total dividends paid, as opposed to the percentage of the dividend raise the company provided in 2020.  The size of the 2020 dividend raise, and the timing of the 2020 dividend raise within the calendar year, results in the difference between these two numbers.

Last year, I added a ‘Div Rank’ column, which shows the dividends paid ranking for a particular stock within my Portfolio for the year.  The higher the Div Rank, the more impact a raise from that company can have.  Basically, a high ‘Div Rank’ coupled with a large ‘Div Growth’ percentage leads to a more significant ‘Weighted Div Growth’.

 

 

Review of 2020 Results

My Portfolio’s weighted dividend growth for 2020 settled at 6.54%.  Given what transpired in 2020, this doesn’t seem so bad.

My weighted dividend growth target for my Portfolio is 8%, so I fell short in that regard.  I transitioned my target from 7% to 8% after last year, as I was regularly surpassing that 8% threshold (i.e. 4 out of the previous 5 years).

For the first time in three years, AbbVie (ABBV) didn’t secure the top spot for providing the biggest contribution to my weighted dividend growth.  This year it was T. Rowe Price Group (TROW), which delivered 0.66% in 2020.  TROW’s #5 Div Rank coupled with its #3 Div Growth led to the best weighted dividend growth for any Portfolio holding.  ABBV had to settle for 2nd this year.

Once again, no stocks crossed the 1% threshold for me this year.  Stocks contributing 1% weighted dividend growth to my Portfolio may not happen again either, thanks to more stocks entering my Portfolio and each stock’s value weighting decreasing over time.

High percentage dividend growth rates from Nexstar Media Group (NXST), Skyworks Solutions (SWKS), Texas Instruments (TXN), Air Lease (AL) and Starbucks (SBUX) allowed them to finish in the top 10, despite them all having a ‘Div Rank’ in the 20s.

As for some disappointments, standing out are Procter & Gamble (PG), Pepsico (PEP), Qualcomm (QCOM) and Altria Group (MO).  These were all top 10 dividend payers for me in 2020, but they ended up outside the top 10 in weighted dividend growth due to their subpar dividend growth during the year.  I’d like to see better dividend growth from these top dividend payers.

Additional stocks that I’d like to see better dividend growth from include RPM International (RPM), 3M Co. (MMM) and W.P. Carey (WPC).

Poor dividend growth from Exxon Mobil (XOM) and a suspended dividend from Kontoor Brands (KTB) were part of the reason for their departures from my Portfolio in 2020.

In general, I try to have any new Portfolio stocks (red shading) arrive with a history of strong dividend growth.  Other than Walgreens Boots Alliance (WBA) and The Walt Disney Co. (DIS), the dividend growth for my new holdings looks solid.  Finding stocks that provide good dividend growth is always a factor in my Portfolio adjustments, and it should help my Portfolio’s weighted dividend growth stay elevated in future years.

You’ll see that I had 11 stocks showing 0% weighted dividend growth in 2020.  These 0% stocks always require some explanation…

Broadcom (AVGO), Automatic Data Processing (ADP), Sysco (SYY) and WBA all had dividend growth in 2020, but their raises occurred before I purchased the stocks, so I didn’t count their potential contributions (a total of 0.92%… most of that coming from AVGO).

Portfolio additions Amgen (AMGN) and Merck & Co. (MRK) had nice dividend growth in 2020, but show 0% weighted dividend growth since I purchased each stock late in the year and a dividend was not paid to me by either company in 2020.

Weighted dividend growth from DIS was 0%, instead of negative (dividend suspension), since I never collected a DIS dividend payment in 2019 or 2020.

I recorded a 0% weighted dividend growth from Target (TGT) since I exited the position early in 2020, before I’d received any dividend for the year.

Weighted dividend growth from The Cheesecake Factory (CAKE) ended up being 0% since I sold the stock prior to their dividend suspension.

The 0% weighted dividend growth from VF Corp (VFC) was the result of dividend reduction in 2019 with the KTB spinoff, that was cancelled out by the raise they provided in 2020.

Lastly, CVS Health (CVS) did not provide a dividend increase in 2020 (CVS is still de-leveraging from the Aetna purchase), and thus their weighted dividend growth is correctly calculated as 0%.

Unfortunately, I had a couple of negative weighted dividend growth numbers posted by KTB (dividend suspension) and Wells Fargo & Co. (WFC) (dividend cut).  These are rather punishing to the overall growth, as you can imagine.  Both stocks were jettisoned from my Portfolio before we closed out 2020.

One piece of interesting information extracted from the table above… I had 56 total stocks in my table, and the top 28 stocks (i.e top half) contributed 6.24% of the total 6.54% of weighted dividend growth for my Portfolio in 2020.

 

Comparison of 2020 Results to Previous Years

In the next table below, I show the weighted dividend growth from 2020 against those calculated from previous years.  Tickers are now in alphabetical order.

Tickers in red are for stocks new to my Portfolio in 2020.

Tickers in blue are for stocks that I no longer own.  These stocks have weighted dividend growth cells that are empty and shaded blue once they no longer contributed to my results.

Cells that are empty and shaded gray are for stocks that I didn’t own yet, and thus did not contribute to the weighted dividend growth calculation in that year.

Here’s the weighted dividend growth for my Portfolio in each of the past 6 years…

 

 

To summarize the weighted dividend growth for my Portfolio:

• 2015 – 10.24%
• 2016 – 6.94%
• 2017 – 8.62%
• 2018 – 11.60%
• 2019 – 9.97%
• 2020 – 6.54%

 

2020 was my worst year of the bunch, but that’s probably to be expected.  However, if I can post 6.54% weighted dividend growth in such an outlier of a year, then I feel like I’m in good shape overall.

I had several companies freeze their dividend payments in 2020.  If those companies can get back to raising their dividends again, and we see stronger raises from companies in 2021 compared to 2020, just think what weighted dividend growth could look like next year.

Of course, I’ll be working to find companies with strong dividend growth histories to add to my Portfolio, while either lightening up on, or removing stocks with slow dividend growth.  That will help boost my results as well.

Dividend raises are the #1 contributor to my annual forward dividend income every year, so keeping the weighted dividend growth elevated is important if I want to keep my Portfolio working hard for me.

I feel fairly confident I can get back 8% or better weighted dividend growth in 2021.

 

Summary

With all the dividend freezes, cuts and suspensions in 2020, it seemed that posting 8% weighted dividend growth was going to be a challenge.  And that proved to be the case.

Weighted dividend growth came in a 6.54% for 2020, which was my lowest yearly total since I’ve been calculating it.

I have reason for optimism in 2021 though.  Some better raises from a few of my larger dividend payers, in addition to positive contributions from many or all of those stocks that showed 0% weighted dividend growth in 2020, can lead to an even better percentage next year.

My Portfolio continues to lean more toward growth than yield.  Thus, the companies in my Portfolio tend to offer more aggressive dividend growth increases than slower-growing companies offering a high yield in exchange.  I believe this continues to be a factor in my good weighted dividend growth percentages.

 

You haven’t calculated the weighted dividend growth for your portfolio before?  The calculations are pretty straightforward, so why not give it a shot.  Then share your results in the comments!