Tuesday, November 12, 2019

October 2019 Dividend Income

Can you even believe it? The fourth quarter of 2019 is well under way, with one month under our belt and only two remaining!

That means we'll be examining what my dividend portfolio was able to produce in dividends during the month of October.



Analysis:

Overall, I collected $41.91 in dividends during the month of October.

This represents a 23.8% quarterly growth rate compared to July 2019's $33.84 in dividend income, and a 96.6% YOY growth rate compared to October 2018's $21.32 in dividend income.

Breaking this during further, $35.63 originated from 12 companies in my Robinhood account, 2 in my Webull portfolio totaling $6.03, and $0.25 from 13 companies in my M1 finance that paid dividends during the month.

There were a variety of developments that accounted for the $8.07 increase in dividend income from July to October.

I received a $0.12 increase in my dividend income as a result of Philip Morris' (PM) dividend increase announced in September.

I also received an additional $3.51 in dividend income as a result of my purchase of 3 shares of PM before the ex-dividend date in my Webull account.

In addition, I received $2.52 in additional dividends from Altria Group (MO) because of my purchase of 3 shares of MO before the ex-dividend date in my Webull account.

I also benefited from a $0.28 increase in dividends as a result of MO's dividend increase announced in August, as well as an additional $1.68 in dividend income from my purchase of 2 MO shares in my Robinhood account following its dividend increase.

WP Carey (WPC) increased its quarterly dividend and with that increase, my dividend income was boosted $0.01 following WPC's dividend increase in September.

GlaxoSmithKline (GSK) paid $0.05 less in dividends compared to July 2019 because of its varying dividend rate.

Summary:

October was yet another month of significant progress for the portfolio, and there's a chance that this will be the portfolio's final month of dividend income coming in under $50.

We're so fortunate to be living in a time of low/no cost trading commissions.

At the time of writing, the portfolio now consists of 65 stocks and my mutual fund holding, CAIBX. I'm receiving 272 dividend payments each year as a result of the portfolio's diversification.

Not many years ago, this level of diversification for a portfolio worth less than $20k wouldn't have been economically feasible.

Heck, I'm not even sure if a $100k portfolio in that many names would have been possible a decade ago due to the fees of building out such a diversified portfolio.

Discussion:

How was your October for dividend income? Did you have any new dividend payers during the month?

As always, thanks for reading and I look forward to any comments that you may leave in the comment section below.

Tuesday, November 5, 2019

October 2019 Dividend Stock Purchases

Another month has passed us by and for those of us in the Midwest, arctic temperatures, massive snowfalls, and dangerous driving conditions are just around the corner.

On that poignant note, we'll be examining a much more upbeat and exciting topic - which is of course, my dividend stock purchase activity for the month of October. Let's delve into it, shall we?




As illustrated above, I started October by adding to my position in Energy Transfer (ET) by purchasing a unit at $13.00. I added to my a unit to my position in ET two more times in my Robinhood portfolio, and opened a position in ET in my Webull account, purchasing a couple more units, bringing my total unit count to 29 to end the month.

In total, this increased my annual forward distributions by $6.10 across the 5 units that I added. My cost basis on each unit for the month was $12.66 against the $1.22 annualized distribution, for a yield of 9.64%. For a more comprehensive rationale on my decision to add to my position in ET, I would refer interested readers to my most recent article on the company on Seeking Alpha.

The next purchase for the month was UnitedHealth Group (UNH). I began the month of October with a bang, opening a position in 3 different companies in the first couple days of the month.

My 1 share starter position in UNH was initiated at a cost of $216.68, for an entry yield of 1.99%. I detailed my thoughts on what would eventually support my decision to open a position in UNH in a guest post on Sick Economics for those that would like a more detailed analysis of the company.

This purchase increased my annual forward dividends by $4.32.

The second position that I would open during the month of October was Wells Fargo (WFC).

I opened a 5 share starter position in WFC at an average cost basis of $48.58 a share, for an entry yield of 4.20%. This purchase boosted my annual forward dividends by $10.20.

Yet again, I would refer interested readers to my recent article on WFC on Seeking Alpha.

The third position that I opened during the month of October was Lockheed Martin (LMT).

My 1 share starter position in LMT was initiated at a cost of $375.45, for an entry yield of 2.56%, which increased my annual forward dividends by $9.60.

I also covered my thoughts which led to me initiate a position in LMT the week prior to my article being published on Seeking Alpha for those interested in an in-depth analysis of the company.

The final position that I initiated in my taxable accounts came in the last week of October, with a 2 share purchase to initiate a position in Visa (V).

For readers that have been paying particularly close attention to my blog posts and my articles on Seeking Alpha, they'll notice that over the past 4 months or so, I've very positively mentioned V at least 3 separate times while writing about other companies.

While I've known V to be a great company for years now, it wasn't until I was writing an article discussing my first major investing revelation in a blog post a few months back that I began to truly appreciate the likes of companies such as V.

Until I actually did the math and looked at the payback periods on a company like V versus AT&T (T) and the yield on cost of both after a couple decades, I never fully realized how necessary rapid dividend growers like V are to a dividend growth portfolio.

T may bring the massive dividend at this point in time, but there's no doubt V brings tremendous growth through the secular tailwind of actual cash becoming a rarer and less preferred commodity to pay for goods and services.

I've since adopted more of an affinity to evenly split my investments between low yield/high dividend growth, moderate yield/moderate dividend growth, and high yield/low dividend growth companies.

In the days ahead, I anticipate writing an article on Seeking Alpha with a more detailed analysis of what led me to specifically choose V as a fast growth investment now that we've discussed in a bit more detail my recent shift in dividend investing strategy.

My 2 share starter position in V was initiated at an average cost per share of $178.69, for an entry yield of 0.67%, adding $2.40 in annual forward dividends.

The other activity in my investment portfolio, but more specifically in my retirement account, is that I I was able to add 3.806 shares of my mutual fund holding, CAIBX during the month of October.

This increased my annual forward dividends by $8.14 (assuming the same $0.14 special dividend that was paid last year).

Summary:

My annual forward dividends/distributions increased were boosted by $40.76 due to the $1,499.71 in capital that I deployed during the month of October.

This equates to an average yield of 2.72%, which demonstrates my commitment to adding more of the classic companies when one thinks of a DGI portfolio to balance out the heavy hitters in the portfolio in terms of yield.

The four new positions that I initiated this month brings the number of whole share positions in my portfolio to 42 while I also own 23 different names in my 50 stock M1 Finance portfolio with fractional shares, bringing the total number of stocks in my portfolio to 65 and CAIBX.

Overall, the portfolio continues to make massive strides in being built to the ultimate goal of about 100 different stocks.

At the time of writing, the only dividend/distribution increase that I have received during the month of October is the 0.6% increase in Enterprise Products Partner's quarterly distribution from $0.44/unit to $0.4425/unit.

I do believe that Iron Mountain (IRM) will increase its dividend in the course of the next few days, however.

At any rate, my annual forward dividends/distributions increased $40.95 as a result of my investments and EPD's distribution increase.

Over the past month, I was able to increase my annual forward dividends/distributions by 5.7% from $717.51 to $758.46.

I will also have enough saved up to fully finance the purchase of a 3 to 4 year old car with less than 30k miles by early to mid-January in spite of my strong investments the last couple months.

Besides that, I will also have a small emergency fund built up by this spring and the ability to pay off my ~$2,000 in credit card debt that is interest free until next June.

Discussion:

Are you dreading the thought of winter weather as much as I am? Did you add any new names to your portfolio? How did you do in terms of deploying capital in the month of October?

Thanks for reading and I look forward to replying to any comments that you leave below!




Tuesday, October 29, 2019

Expected Dividend Increases for November 2019

As I write this post, the NFL season is in full swing and the Packers are looking impressive thus far. I'm not sure how this season is going to end for the green and gold, but I'm certainly excited to find out after the past couple seasons have been uncharacteristically disappointing.

Meanwhile, my true passion of NBA basketball, and more specifically, Bucks basketball is back! Despite the new faces of Kyle Korver, Robin Lopez, Thanasis Antetokounmpo, and Wesley Matthews, the Bucks appear to have retained much of that same chemistry from last season as evidenced by their win over the Rockets to open the season in Houston. It may only be one game, but given the outcome of last season and the lessons from it, I'm brimming with optimism that this will be the year that the Bucks win it all!

But that's enough of the football and basketball talk for now. We'll be discussing the dividend/distribution increases I received during the month of October and looking ahead to dividend increases that I'm expecting for November.



Distribution Increase: Enterprise Products Partners (EPD)

EPD extended its streak of consecutive quarterly distribution increases to 61, having raised its quarterly distribution from $0.44/unit to $0.4425/unit a couple weeks ago. It's this level of consistency from EPD that prompted me to write another bullish article on the company on Seeking Alpha recently, and this consistency is also why EPD is the largest energy position in my portfolio in terms of portfolio weighting.

Across my 19 units of EPD, this increased my forward annual dividends/distributions by $0.19.

Distribution Freeze: EQM Midstream Partners (EQM)

Readers will notice EQM actually opted to keep its quarterly distribution steady at $1.16/unit rather than continuing upon its recent trend of raising the quarterly distribution by $0.015.

While this isn't quite what I was expecting to occur, I can understand in hindsight why EQM opted to freeze its dividend for the time being.

EQM recently announced that its key Mountain Valley Pipeline project is expected to experience yet another delay and increase in costs. The project's completion date was pushed back from mid-2020 to late-2020 while expected costs rose from $4.8-5.0 billion to $5.3-5.5 billion.

Meanwhile, EQM's distribution is hanging on by a few threads at a coverage ratio of 1.03. For context, Simply Safe Dividends considers a coverage ratio of 1.10 or greater to be ideal for MLPs such as EQM. Assuming the eventual completion of MVP (which accounts for about 2/3 of EQM's organic growth going forward), EQM's distribution coverage would increase to help the company meet its long-term coverage ratio goal of 1.20.

Fortunately, I believe that because MVP is about 90% complete, the sunk cost of the pipeline to date will be a motivating factor for management to complete this project in the next year to year and a half.

Admittedly, this is more of a speculative position within my portfolio and it's arguably the least safe dividend/distribution in my portfolio. I have weighted it as such in my portfolio, with it accounting for barely 2% of my dividend/distribution income and less than 1% of my portfolio value. It certainly isn't on the level of EPD or Energy Transfer (ET), but I still believe it's a good midstream company.

Not Yet Announced Dividend Increase: Iron Mountain (IRM)

While IRM has announced its dividend about a week before the end of October the last couple years, the company has apparently decided to depart from this trend to establish a new one as it has yet to announce a dividend increase as I'm writing this on October 26.

I don't really have any doubts that IRM will fail to deliver a dividend increase in the realm of what I was expecting in my previous dividend increase post, but it's just a matter of waiting until the week that this blog post is published before I'm able to update this section of the post when the company will presumably announce its dividend increase.

Until that time, I'm assuming that IRM will increase its quarterly dividend from $0.611/share to $0.638/share. Should IRM follow through on my prediction, this would increase my annual forward dividends by $0.432.

Bonus Distribution Increase: Magellan Midstream Partners (MMP)

I somehow forgot all about the fact that MMP increases is distribution at near the end of the first month of each quarter. MMP increased its quarterly distribution 0.7% from $1.0125/unit to $1.02/unit. Across my 3 shares, this increased my annual forward distributions by $0.09.

With consistent raises each and every quarter, I wonder how much longer I'll forget about MMP.

Expected Dividend Increases for November

Hormel Foods Corporation (HRL):

HRL is one of only two dividend increases that I'm expecting within my 65 stock portfolio (including 23 M1 Finance holdings that each account for less than 0.1% of my net worth and dividends) for the month of November.

With that said, I believe HRL is in a great position to reward its shareholders with a 9.5% increase in its quarterly dividend from $0.21/share to $0.23/share.

When we consider that HRL is paying out a bit less than half of its earnings, possesses a nearly flawless balance sheet, and is likely to grow its earnings in the mid to high-single digits over the long-term, I believe the above dividend growth estimate is reasonable.

This will have no impact on my dividend income (a bit less than $0.005) because HRL is less than even 0.1% of my total dividend income.

The reason that this will actually have no impact on my dividend income is that M1 Finance rounds to the nearest cent for quarterly dividends/distributions and I'm already getting the benefit of rounding in this case.

Starbucks (SBUX):

SBUX is the second of two dividend increases that I'm expecting for the month.

Similar to HRL, SBUX accounts for less than 0.1% of my total dividend income and the impact that this raise will have on total dividend/distribution income will be nothing.

However, I do expect a very strong dividend increase from SBUX in the low to mid-teen percent range given the company's fairly strong balance sheet and projected earnings growth.

Concluding Thoughts:

As of the last few days of October, this month has brought a little bit of everything between EPD delivering as expected, EQM freezing its distribution (as I should have expected in hindsight), and IRM seemingly trolling shareholders by going back to a late October or early November dividend announcement.

Thus far, my annual forward dividends/distributions have increased by $0.28 while I await the increase from IRM. It will be interesting to see whether the company increases its dividend on or before Halloween or if it will increase its dividend on Friday, November 1. The $0.28 in increases for the month thus far would require a $7.00 investment at a 4% yield to duplicate.

After many consecutive months of receiving at least a few dividend/distribution increases, we've reached my slowest month of the year for dividend/distribution increases, with none of my 42 whole share holdings expected to increase their dividends/distributions this month.

There are plenty of companies that are expected to increase their dividends this month aside from HRL and SBUX, such as Nike (NKE), Walt Disney (DIS), and McCormick, which I recently covered on Seeking Alpha (MKC).

Unfortunately, I don't yet own them.

However, I do believe the slowdown for November will motivate me to take action between now and next October, so that I can benefit from some of these increases next November.

The upside is that December is primed to be my strongest or second strongest month of the year for dividend/distribution increases in terms of quantity and its overall boost to income.

Discussion:

Are you as optimistic toward your favorite NFL team and NBA team as I am? Will November be a slow month for you in terms of dividend/distribution increases?

As always, thanks for reading this post. I look forward to reading any comments that you leave below.


Tuesday, October 22, 2019

Financial Lessons To Draw From The Holidays

With Halloween just around the corner, a few thoughts couldn't help cross my mind pertaining to the spooky holiday. In a society that is plagued by consumerism seemingly everywhere one can look, it's quite apparent that the commercialization of holidays for the benefit of businesses has been highly successful and has infiltrated American culture. With that said, we'll be examining the impact of this consumerism on the finances of Americans. We'll also be taking a look at how something as simple as trick or treating during Halloween could indirectly teach kids a lesson about fiscal responsibility.



Lesson #1: Americans Spare No Expense Celebrating Holidays

It really shouldn't come as a surprise that in a country that is as materialistic as the United States, Americans are spending a fortune on holidays.

But in order to fully highlight the absurdity of such spending, we'll be delving into the details of this spending, and discussing the implication that can be drawn from this analysis.

While on the topic of Halloween, it's only appropriate that we will start with Halloween specific spending first and then transition to overall holiday spending throughout the year.

For 2019, the National Retail Federation or NRF is expecting that Americans will spend $8.8 billion on Halloween costumes, decorations, and candy. Shoppers say that they expect to spend an average of $86.27 this year.

While this amount alone doesn't seem like much, it becomes considerably more when we delve into the spending on major holidays such as Thanksgiving, Christmas, Hanukkah, and Kwanzaa, whether its for gifts, decorations, candy, food, or travel.

According to Alliant Credit Union, Americans planned to spend an average of $1,007.24 last holiday season (covering Thanksgiving, Christmas, Hanukkah, and Kwanzaa), with $638 of that being allocated to gifts for family, friends, and coworkers, $215 being spent on non-gift holiday purchases such as food and decoration, and $155 being spent on other non-gift purchases for themselves and their families.

Perhaps the most glaring spending category in my opinion is the $638 being spent on gifts. It seems a bit excessive to me to spend that amount of money giving gifts to family and friends that in all likelihood, will probably end up being thrown out within a year or two anyway.

This doesn't even include holidays, such as Mother's Day, Valentine's Day, Easter, the quintessential American holiday of Super Bowl weekend, Father's Day, or St. Patrick's Day, where Americans collectively spent almost another $100 billion each year.

When we take into consideration that the average American household will somewhere in the ballpark of $1,500 this year on holiday related expenses, this equates to roughly 2.3% of the median household income of $63,688 (as of January 2019).

While it may not sound like much, that couple percent of spending could instead be allocated to saving and investing.

Even what seems like a measly 2% when applied to the average American savings rate of 8.1% as of August 2019 (keep in mind this savings rate is in the midst of the lowest unemployment numbers of 50 years and that the next recession will eat into this savings rate considerably), results in a 10.1% savings rate.



Using the Mustachian time to financial independence calculator and assuming that someone is starting from $0 in net worth, that extra 2% is the difference between having to wait almost 63 years to be financially independent versus 57 years.

You read that right! When we take into consideration the rather anemic savings rating of Americans, that extra 2% in savings equates to a difference of over 5 years!

Now, obviously if one is serious about financial independence, holiday spending is going to be maybe the fifth or sixth place to look at optimizing spending.

For optimal control of one's spending, the first three categories that are beneficial to conquer are the big 3 (housing, food, and transportation).

But it just goes to show how cutting the fat on seemingly minimal expenses can make a difference of several months for even a household that has their big 3 expenses well under control.

I'm not saying that we shouldn't spend on the holidays whatsoever, but a bit more mindful and purposeful spending could go a long way in reducing that holiday spending above. If Americans take this financial lesson to heart, I believe it's entirely possible that we could cut holiday spending in half. An extra percent savings rate for many Americans would be a noticeable bump in their savings increase due to the fact that the savings rate sits at about 8%, and it would be the start of remedying the underlying retirement crisis.

The implications of this excessive spending and the excessive spending of Americans in every notable budget category in general are that these reckless spending habits are the result of financial illiteracy. This is the very reason that even in a relatively robust economy, Americans feel as if they can't get ahead.

If one doesn't have an understanding of personal finances and of their personal financial situation, then how can they ever hope to retire? It's this very financial illiteracy that is the reason many Americans will never be able to retire without the aid of the government through Social Security and/or via pensions from their employers.

Lesson #2: Trick or Treating Can Teach Kids A Valuable Lesson

Now, it seems a bit contradictory that a holiday as pointless and frivolous as Halloween (my personal opinion now that I'm a solid decade beyond trick or treating and don't have any children to take trick or treating) could actually teach kids a valuable financial lesson, but hear me out on this one.

From the time I began trick or treating to when I stopped, I remember taking stock of my massive piles of Halloween candy.

I'm not sure if I am alone in this innate behavior that I displayed as a child, but I recall my tendency to gradually eat my candy over a period of several weeks. My candy would last at least through Thanksgiving each year.

My parents never really had to tell me to slow down on the candy consumption as a kid because I've always had the saving and delayed gratification mindset.

I knew that if I devoured all of my candy in a few days, that would mean I would be out of candy and I wouldn't be able to get as much enjoyment as I would if I savored my candy.

Even as an adult, the concept remains similar. Instead of talking about candy, we're now talking about money as the primary consideration in my day to day life choices. Like candy, money is a somewhat finite commodity that we must earn more of if we would like to spend more of it.

As a rule of thumb, I generally take a couple of days to contemplate a purchase before I go ahead with that purchase, regardless of the dollar amount. If I can still justify that purchase a couple days later, chances are that the purchase will meaningfully improve my life and that the cost is worth it.

I never equated something as simple as trick or treating for Halloween candy and the decision to ration that candy as having an impact on my future financial decisions, but I truly believe it has had some impact in that it formed the foundation of how I make financial decisions.

Concluding Thoughts:

While I do enjoy the holidays and the month of October is a month that I enjoy watching reruns of Halloween movies, I've found that holidays in the United States are somewhat tainted due to the commercialization aspect. Companies spend billions of dollars every year to hype up the commercial aspect of holidays such as Halloween, Thanksgiving, Christmas, and Easter.

While I'm not saying that Americans should completely refrain from holiday spending, I believe it would be beneficial for Americans to take a bit more of a mindful and purposeful spending approach toward this budget category, along with others. I always knew there was some level of spending around the holidays, but it took me a bit by surprise that it amounted to this much for the average household.

Finally, trick or treating every Halloween and rationing candy was the foundation of what would eventually shape my spending habits and my mindset toward spending.

Discussion:

Were you surprised at the amount that Americans spend during the holidays throughout the year? Did you also conserve your Halloween candy each year rather than eating it in the span of a couple days?

As always, I'd like to thank readers for reading my thoughts on holiday spending in the United States. I look forward to replying to any comments you may leave below in the comment section.