The Year-end Rally in December saw the S&P500 (SPY) soar 4.5% and cap off a phenomenal year with a 26.3% gain, marking one of the best years in the past decade. This remarkable performance was largely driven by the Magnificent 7 and the underlying AI rally, as well as expectations surrounding the Fed’s potential shift towards a series of rate cuts in 2024. Throughout the last quarter, interest rates remained unchanged as the Fed kept its target rate range at 5.25% to 5.50%. All eyes will once again be on the Fed in 2024.
Amidst lingering doubts regarding a soft landing, it seems unlikely that there will be any type of recession; at most, it might lead to a technical one. If it does occur, it may be as short-lived as the brief 2022 bear market in stocks, an event that, in my view, was not noteworthy.
Personally, December was an enriching and memorable month as I ventured to South East Asia for the first time, relishing almost four wonderful weeks in Vietnam. Experiences like these are priceless and the ultimate reward to spend dividends on. While I am driven to invest as much as possible in the markets in pursuit of financial independence, I believe it’s crucial not to sacrifice life’s treasures and experiences for mere cash.
December Portfolio Adjustments
Due to my vacation covering most of December and the time zone differences between Vietnam and the USA, investment activity was notably lower. Nevertheless, I managed a couple of purchases, totaling around $1,500. I directed most of my investments towards BDCs like Hercules Capital (HTGC), MidCap Financial Investment Corporation (MFIC), and the bellwether stock Ares Capital Corporation (ARCC). Although buying opportunities are diminishing, I remain resolute in favoring BDCs even with lower yields.
My most significant December purchases were several small transactions to acquire more shares of Ares Capital, which remains my #1 dividend payer in the entire portfolio and led to a record dividend income in December. I also made several investments in Hercules Capital, MidCap Financial Investment Corporation, and Main Street Capital Corporation (MAIN).
Overall, I managed to add $116 in forward annual dividend income this month, bringing the total 2023 added annual dividend income to a record $1,640, in line with the 2022 figure of $1,680.
All net purchases in December can be found below:
December 2023 Dividend Income
The dividend income hit a new high of $935, marking a 35% year-over-year growth and remaining flat sequentially. Excluding special dividends, the biggest income driver is Ares Capital, with dividends quickly approaching the next big milestone of $200. Dividend income from MFIC is also rising rapidly, approaching $70. Net dividends from monthly payers have comfortably surpassed $100 thanks to supplemental dividends from Main Street Capital and Gladstone Investment. The dividend income from my top-3 payers in December continues to grow, pushing the 2023 average to a staggering $270, compared to just around $118 in 2022.
