US dividend portfolio and FIRE update…
Bulk of my passive income comes from dividend income from US stocks. My US dividend portfolio is made up of REIT/BDC/ETF and Dividend growth stocks. US REIT/BDCs/Covered Calls ETFs are my hunting ground for searching for high dividend yield with prospect of good total return. Overall portfolio dividend is growing 11% CAGR since last 7 years. Here is the portfolio breakdown with allocation
SCHD 22% —> IMO it’s the best dividend growth/oriented ETF one can get in the entire world stock market as of today, primarily consists of Buffett-like stocks that have impeccable balance sheet, cash flow and dividend growth potential. Last 10 years total CAGR return even beats S&P 500 returns. Whenever possible I keep on averaging at steady clip since year 2016. I can clearly notice the so called snowball effect of dividend income from this investment.
SCHB 20% —> ETF tracks S&P 500, dividend growth 9% CAGR
SCHA 14% → ETF tracks US Small cap, dividend growth 8% CAGR
QYLD 6% → This is a unique ETF that is not available in the India market. This is a Covered call ETF whose underlying asset is made up of Nasdaq 100. It distributes monthly dividends as it earns premium by selling covered call options on its underlying asset. Dividend yield is high, close to 14%
MSFT 6% → Microsoft is Number 1 software company in the world. It has now created AI hype with chatGPT, an emerging AI app. My primary reason to stay invested in MSFT is for its dividend growth which is growing 10% CAGR since last 7 years.
NVDA 6% → Does not matter whether MSFT or Google or other companies win the AI race, the world needs NVIDIA’s GPUs to train AI models. I kept on investing in NVDA shares last year during the Nasdaq rout. Since then it has recovered nicely. Right now it’s a picks and shovels play during AI hype time, but one needs to be careful as it may very well turn out to be like another Cisco after the dotcom bust. It also pays and grows dividends – which is like Icing on the cake.
KNSL 6% → Kinsale Capital is Small cap US based specialty insurance company. It operates in a niche insurance segment. Though I had to sell HDFC life insurance in India at a loss but I recovered more from this investment in US.
NKE 4% → Nike is leader in its respective segment. Invested since 2016. Dividend growth CAGR is 10%
PSEC 4% —> Business development company, pays monthly dividend and total return beats S&P 500. Dividend yield is 9.8%
GAIN 4% → Another Business development company, pays monthly dividend with quarterly supplemental dividend and total return beats S&P 500. Dividend yield is 6.5%. Last year it increased its dividend when other BDCs either slashed/suspended their dividend due to tough macro condition.
ABR 4% → Arbor reality is the best REIT one can get from US market. This is the only REIT whose total return beats S&P 500 return by wide margin in last 9 years. It also increases its dividend almost each and every quarter. I am fortunate to find this company early and remain invested since last 4 years. Current dividend yield is 10%.
V 3% → All of us knows about fintech leader Visa, its dividend grows 10% CAGR
INTU 1% → Intuit is leader in tax software, now they are diversifying their business with Credit Karma/Mailchimp acquisition. Again it’s a 10% dividend grower.
I am holding most of these investments since 2016. Whenever possible I keep on averaging these stocks with specific dividend income target in mind. I also have separate growth portfolio made up of some crazy US small cap stocks which is bleeding badly after Nasdaq rout. I follow the plan where beside dividend re-investment, I sometime book profit from growth portfolio and invest more in these companies to utilize dividend snowball effect in long run. Since last 7 years portfolio has returned close to 14% CAGR VS 12% CAGR S&P 500 return.
Now dividend income from this portfolio is enough to cover 3X of my family yearly expenses. I plan to call it quits as soon as it covers 4X of my family expenses, hopefully by the year 2024:)
Disc. This is not a buy/sell recommendation. Biased as invested in all stocks discussed above. Not a SEBI registered advisor.
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