My favorite asset, by a long shot, is my non-qualified dividend fund. The idea that one day I may have truly passive income in the form of dividends is exciting to me. Granted, at this point (and I have been at it for years) it is nowhere near my largest asset. While I use some leverage that I outline below, it is just not something I want to get too deep as I have enough leverage built into my real estate.

I have a couple of goals for 2024 and beyond that I want to outline and define for myself:

  1. Clean Up My Holdings
  2. Define how I will use Income in 2024
  3. My Screen for 2024 for individual holdings

Cleaning Up My Holdings

As of writing this post, I have 40 Holdings! I guess that is the only natural result of the way I purchased individual stocks in the past which was to screen for small purchases weekly, monthly or quarterly. Notwithstanding, I want to refocus my efforts on creating more concentrated bets where appropriate and letting the rest ride on broad based ETFs.

Selling Off Small Positions

The first thing I am going to do is sell off positions that are smaller than $1,000. Even if these positions 3x any time soon it still won’t make a difference given the portfolio’s size. Realistically speaking I should absolutely go higher than the $1,000 floor but this drastic change is already giving me an uneasy feeling so let’s keep it here for now. This move will eliminate about a quarter of my holdings! Again, I could do some tax planning, but at these amounts, it really doesn’t matter all that much.

Analyze Remaining Holdings

With the remaining holdings that are not ETFs I think I owe it to myself to start digging into each one. Each holding will go through both a quantitative and qualitative review. For the quant portion of the review, I will look that the company:

  1. Hasn’t stalled on dividend growth – In the end, this account is truly for dividend growth companies, and if they paused or halted that initial goal then they are gone.
  2. Has a ‘normal’ P/E – if it is completely out of whack (either too low or too high) figure out why. Maybe there is a reasonable explanation, but maybe not.
  3. Has a reasonable Payout Ratio – Need to make sure that the dividend is safe.

For the qualitative portion, I want to read a bull and bear account. If I am not willing to read well-thought out arguments on both sides of the coin I shouldn’t be allowed to own the equity in this account. It is my hope to do this quarterly or semi-annually.

Income from My Short Puts

My goal in 2023 was to clear $55/trading day. With 242 trading days into 2023 I have cleared an average of $68/day for approximately $16,000 of cleared cash. In previous years I would take that income, and buy individual stocks using a variety of screens, and then this year, I had the idea of putting the first 6months into dividend focused ETFs.

For 2024 I am going to change it up even more. For every dollar I earn:

  • 25cents will go to an individual long term purchase – Given my above desire to get rid of smaller positions, this will take a long time to accumulate the cash before I make a single purchase.
  • 25cents will go to ETF purchases – I am going to continue to purchase the same ETFS. This will happen way more often than individual purchases as I won’t mind buying one or two shares vs the concentrated purchases.
  • 25cents will go to long term debt. I have a huge desire to kill off long term debt for my family, so I am hoping to use this “income source” to compound that desire in 2024.
  • 25cents will go to pure cash – As I discussed in my last post, I am no where near my cash accumulation goals. Again, I’d like to use this “income source” as a way to supplement my savings plan.

My 2024 Dividend Growth Screen

I am not sure how many times I will actually purchase a “lot” but I think my minimum purchase size for 2024 will be $2,500. Upon reaching that amount of cleared naked put income I will use the following screen to find an individual company to purchase.

  • History of 25 years of increasing dividends
  • P/E Under 20
  • Payout Ratio of under 40%
  • Dividend yield of 3%+
  • Positive EPS for past 5 years

I know from screening for individual stocks for the past decade or so, there will come a time when I do not find an acceptable equity to purchase. At that point, I will continue to allocate the free cash flow as above and check weekly until something pops up for me. If it doesn’t happen then so be it!

My 2024 ETF Purchases

Last year, I started purchasing dividend focused ETFs reallocating each time a new purchase was made to keep the proportion below:

  • SCHD – 35%
  • VIG – 35%
  • VIGI – 10%
  • SMDV – 20%

This year, I want to add a boring S&P500 into the mix. So I am thinking

  • SCHD – 30%
  • VIG – 30%
  • VIGI – 10%
  • SMDV – 15%
  • IVV – 15%

Like last time around instead of rebalancing by buying and selling, I will simply use the cleared naked put income (25%) to start and build a position in IVV. Then at some point in 2024 I will then start to purchase other ETFs to get me to my allocation goal.

Dividends

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