Tuesday, May 14, 2019

Why I Chose Dividend Growth Investing

While I'm a huge proponent of dividend growth investing, I don't believe I've ever taken the time to explain my the rationale for why I'm a dividend growth investor. Ever since I learned about the DGI movement 5+ years ago, I've become absolutely obsessed with it and the possibilities that it can bestow upon someone that diligently and consistently invests capital over time. Without further ado, here are five reasons I'm a dividend growth investor.



First Reason: I Love To Own Companies Whose Products I Know And Love

As I alluded to in my blog post discussing the tangibility aspect of dividends, this is one of the major selling points for dividend growth investing, in my opinion. One can drive into their town and be greeted with the likes of companies such as Royal Dutch Shell (RDS.B) gas stations, Exxon Mobil (XOM) gas stations, BP (BP) gas stations, a CVS Health (CVS) store, an AT&T (T) store, and within those stores products of companies such as PepsiCo (PEP) and Johnson & Johnson (JNJ).

The core of my portfolio is comprised of companies whose products and services I use on a constant basis. As a shareholder in PepsiCo, I find myself buying Aquafina water on a weekly basis while also eating Lay's chips on a weekly basis. Simiilarly, my phone's wireless service is through Cricket Wireless, which as you might guess, is a wholly owned subsidiary of AT&T. 

Graham of Reverse The Crush had an excellent piece on method investing a couple months back, and before that article, I didn't even know it but I was also somewhat of a method investor. 

It's really great when you're able to purchase pieces of ownership in a company whose products you believe in and use on a consistent basis, which is one of the major reasons I chose DGI.

Second Reason: I Can Focus On Cash Flow To Measure The Success Of My Portfolio

The benefit to DGI is that rather than focusing on the value of your investment portfolio, you're able to continually focus on the income the portfolio is producing for you. This reduces the chances of you acting on your emotions and doing something stupid that you shouldn't do.

I believe the mere fact that most investors dramatically underperform the broader market is because they let emotion influence their investment decisions. Part of that could be because rather than seeing the companies in their investment portfolio as excellent companies to own for the long-term, they choose to rent them and try to flip them for a profit.

I view stocks in a completely different manner. While net worth is a cool metric to gauge your progress, I prefer focusing on cash flow to measure the success of my portfolio. After all, portfolio value is entirely dependent upon the mere opinions of the market over the short-term. However, as the legendary Ben Graham put it, "In the short run, the market is a voting machine but in the long run, it is a weighing machine." I believe that while the market is inefficient over the short-term and medium term (and this presents opportunities for stock pickers that indexing simply doesn't), everything evens out eventually and stocks receive the valuation that they deserve over the long-term.

At the time of my writing this article, I am receiving $544.40 in annual dividend income from dozens of excellent companies simply for owning their shares. Given that I don't plan on selling these shares ever (unless fundamentals of the companies deteriorate), I really could care less about the value of my portfolio. I'd actually prefer it go down so I could double or triple down on the stocks that I own.

Third Reason: You Don't Have To Sell Your Portfolio Off Constantly To Raise Capital

I won't explain this point in too much detail as I believe the post by Jason Fieber over at Dividend Mantra titled "Why I Vastly Prefer Dividend Growth Investing to Index Investing" so eloquently proves this point.

As one may guess, yield matters and with the S&P 500 currently yielding a paltry 1.86%, this simply isn't enough for most investors to live off of unless they have over 50 times expenses saved up. 

Having to sell of wonderful assets at valuations that are dictated by the market because of the extremely low yield seems undesirable to me when an investor could pick companies that are more fairly priced with higher yields to support one's lifestyle without having to sell off assets just makes more sense to me.

Fourth Reason: DGI By Its Nature Invests In Only Quality Companies

While there are the inevitable General Electrics in every portfolio eventually, the companies an investor invests in as a dividend growth investor are by their very nature fantastic companies. The bedrock of most DGI portfolios in this community is built upon the Johnson & Johnsons, PepsiCos, and Realty Incomes of the world.

As one could imagine, it takes a fantastic company with a great business model to sustain dividend increases long enough to become a Dividend Champion or Aristocrat. 

Even if a company contributing 3% to an investor's overall dividend income completely suspends their dividend, the other 97% of an investor's dividend income will likely increase more than enough to make up for the elimination of the dividend by that one company in the portfolio. 

Fifth Reason: I Love The Process Of Investing

While DGI may not be for everyone due to the amount of work that goes into the selection process of stocks and monitoring them periodically, I love investing. I wouldn't have it any other way. While I also enjoy following my Milwaukee baseball and basketball, and Green Bay football, there's just something about investing that I enjoy more than my other hobbies and I can't really put it into words. 

Conclusion:

Discussion: Do you DGI? If not, what investing strategy do you use? As always, thanks for reading and I look forward to replying to your comments.

Tuesday, May 7, 2019

April 2019 Dividend Income

May is already upon us, which is pretty difficult to believe. The time sure flies by between work, school, the blog, and writing for Seeking Alpha. Watching the Bucks make their deep playoff run also helps pass the time. In just three months, I'll be finished with my undergrad days and possibly most formal education aside from a certification or two. With that said, the passage of another month means it's time to examine what April provided to us in dividends.




$31.67 in total dividends, of which $31.42 were from Robinhood companies and the remaining $0.25 originated from M1 Finance.

Overall, I received $31.67 in total dividends during the month of April. Of this, $31.42 came from 10 companies in my Robinhood account while the remaining $0.25 came from 11 companies in my M1 Finance account.

This is an incredible 196.3% YOY growth rate compared to the $10.67 that I collected in April 2018. Moreover, it's a 22.7% quarterly growth rate compared to the $25.81 in dividends that I collected in January 2019.

Breaking it down, the $5.86 difference in April's dividend income versus that of January's dividend income include the following:

An additional $1.60 received from Altria (MO) due to my first dividends received on the two shares I purchased shortly after the ex-dividend date.

An additional $0.01 received from WP Carey (WPC) from the most recent dividend increase.

An additional $0.02 received from Realty Income (O) from their most recent dividend increase.

An additional $0.76 from GlaxoSmithKline (GSK) as their dividend fluctuates from quarter to quarter.

The notable subtraction from January to April is Pepsico (PEP) as their dividend schedule is a bit wacky with a dividend being paid in January and then March rather than April, and then June and September as expected. This made a $1.86 difference.

Notably, I received my first dividend from my 4 share position in Philip Morris International (PM) stock. This provided an additional $4.56 for me in dividends.

An additional $0.61 from Iron Mountain (IRM) as I received my first dividend on one of the shares I bought a couple months back.

An additional $0.13 from Genuine Parts Company (GPC) from their most recent dividend increase.

An additional $0.02 from PPL Corp (PPL) from their most recent dividend increase.

I also received an additional $0.01 from my M1 Finance account compared to January.

Summary: 

Overall, April marked my first $30+ month for the first month of the quarter. I also am continuing to make strides in increasing my income for the first month of the quarter with some anticipated purchases in the near future, which I will discuss in more detail soon. While my first month of the quarter income will never equal the other months, it would be ideal to come close to evening out my dividend income with the middle and end month of the quarters just for a steadier, less lumpy dividend income.

Discussion:

Did you reach any significant milestones in April? Did you add any new dividend payers like I did? As always, thanks for reading and I look forward to reading and replying to your comments.







Tuesday, April 30, 2019

Expected Dividend Increases for May 2019

Can you believe it? It's the end of April and the year is officially one third of the way over. The Milwaukee Bucks are continuing to make their push toward their first ECF appearance in 18 years and I believe they'll do us loyal Bucks fans proud this season despite that nasty blowout loss in Game 1 against the Celtics. With that said, it's time for us to analyze our dividend increases from April. Buckle in because this was quite the month!



April Dividend Increases:

Increase #1: Exxon Mobil (XOM)

Exxon Mobil (XOM) announced a 6.1% increase in their quarterly dividend from $0.82 to $0.87/share. This was actually slightly higher than the raise that I was expecting from them. This increased my annual forward dividends by $1.20 across my 6 shares.

Increase #2: Johnson & Johnson (JNJ)

Johnson & Johnson (JNJ) announced a 5.6% increase in their quarterly dividend from $0.90 to $0.95/share. This community has always said JNJ is as steady as they come and having received my first raise from them, I certainly back that statement! This increased my annual forward dividends by $0.40 across my 2 shares.

Increase #3: Enterprise Products Partners (EPD)

Enterprise Products Partners (EPD) announced a 0.6% increase in their quarterly dividend from $0.435 to $0.4375/share. This was another increase that was exactly as expected and it increased my annual forward dividends by $0.10 across my 10 shares.

Increase #4: Southern Company (SO)

Southern Company (SO) announced a 3.3% increase in their quarterly dividend from $0.60 to $0.62/share. This was yet another increase that was exactly as I expected it to be, and I couldn't be happier with it. My annual forward dividends increased by $0.40 across my 5 shares as a result of this increase.

Increase #5: EQM Midstream Partners (EQM)

EQM Midstream Partners (EQM) announced a 1.3% increase in its quarterly dividend from $1.13 to $1.145, which was slightly below my expectation. This increased my annual forward dividends by $0.24 across my 4 shares.


Expected Dividend Increases for May:

Expected Dividend Increase #1: International Business Machines (IBM)

It appears as though IBM is breaking from its usual pattern of announcing dividend increases in April, so I'd expect IBM to announce a raise in May. Given the Red Hat acquisition last year, I'd assume management will deliver a raise to the tune of around 4%, increasing the quarterly dividend from $1.57 to $1.64/share. This would increase my annual forward dividends by $0.84 across my 3 shares.


Expected Dividend Increase #2: Lowe's Companies (LOW)

LOW is a wild card and could also be announced in June. Nonetheless, I would expect that LOW will continue its trend of strong dividend increases, with a 15% dividend increase. This would mean the quarterly dividend would increase from $0.48/share to $0.55/share. If this does happen, my annual forward annual dividends will increase by $0.56 across my 2 shares.

Expected Dividend Increase #3: Leggett & Platt Incorporated (LEG)

I expect that LEG will continue its recent trend of increasing its quarterly dividend by $0.02 per share. This would equate to a 5.3% increase in the quarterly dividend, from $0.38/share to $0.40/share. If this does occur, my annual forward dividends would increase by $0.40 across my 5 shares.

Summary:

April provided me with $2.34 in increases, which would take $58.50 in fresh capital deployed at a 4% yield to match. This is really the power of DGI on a small scale at work here! Overall, I'm expecting $1.80 in dividend increases for May due to IBM likely delaying their dividend increase from April to May. This would take $45.00 of fresh capital to match, assuming a 4% yield.

Discussion:

How many dividend increases are you expecting in May? Do you have any stocks that aren't mentioned on this list?





Tuesday, April 23, 2019

My Recent Financial Epiphany Involving Seeking Alpha And My First Job

The past couple of years have been a renaissance of sorts in financial terms for me. It was just the other day that I stumbled upon a financial epiphany. I have essentially worked my way up from a two year degree in accounting to a four year degree in accounting. I went from a cashier job at the soon to be closed retail chain Shopko that barely paid above minimum wage to my current position that pays over 60% more than that. I'll even soon be achieving one of my goals for 2019 as this June I will be moving into an entry level finance/accounting position at my current employer, with a new wage that will be over double what I was making preceding July 2017.

As great as all of that news is, the point of this article is to discuss my experience with Seeking Alpha and how it compares to my experience at my former cashiering job with Shopko.

Since I began writing for Seeking Alpha in December 2018, I've been incredibly blessed to build up the following that I have thus far. The 20 articles that I have wrote to date have allowed me to build a base of nearly 1,000 followers. While this is still a small number of followers compared to the more popular writers on Seeking Alpha, the significance is not lost on me in a few ways.

First, that many followers is actually more followers than people that live in smaller towns. Secondly, I've only been writing for Seeking Alpha for 4 months and the momentum is starting to snowball much in the same way a dividend portfolio snowballs with each passing month and year.

Aside from the benefits which include making me a better writer, researcher, and investor, writing for Seeking Alpha has proven to be somewhat financially rewarding. How rewarding, you ask?

In Q1 2019 alone, I earned over $1,200 gross income on the 16 articles I wrote while spending around 100 hours writing, editing, and replying to comments on those articles. While earning $12/hr on side hustles isn't exactly going to make me a millionaire in my 20s, it's important to note that even after the roughly $300 in self-employment, federal, and state taxes, I'm earning $9/hr.

The significance of that is that it's still more than the $7.51/hr I earned dealing with disgruntled customers at my former workplace as a cashier. While a lot of people wouldn't feel comfortable giving this much information, the reason I do this is as a sort of time capsule for me to look back on some day and more importantly, to inspire others.

Writing for Seeking Alpha was something I thought about doing for over a year (credit to my friends and family for encouraging me to do it btw), but I kept putting it off with the excuse that I wasn't qualified and didn't know what I was doing.

It's important for us all to remember or to have someone remind us that dreams are worth pursuing for the reasons I outlined in this post.

Takeaways:

The lesson in this are 1) the master at anything was once just a beginner like you, so great things take time and dedication 2) once you find your hobby or your passion, it becomes pretty manageable to monetize it in the Information Age we live in 3) Side hustles like Seeking Alpha are a great way to not only earn more income, but to invest more, become a better investor, and ultimately be able to possibly become financially independent much faster and 4) Side hustles also could evolve into lucrative enough work for you to ditch your day job and focus on your side hustle with your investments to back you up, if you please.

Discussion:

Do you earn more from your side hustles or hobbies than you earned from your first job? How does that make you feel? As always, thanks for reading and I look forward to replying to your comments.







Tuesday, April 16, 2019

Portfolio Update: The Reason I Closed A Position

As a dividend growth investor, I like to think that my strategy tends to provide more guidance to me than those that simply trade stocks. While this is likely to be the case, it doesn't mean that I don't make mistakes and end up having to close a position for one reason or another. I recently completed the sale of my entire remaining position in Omega Healthcare Investors (OHI), and redeployed the proceeds from the sale into a couple other companies already in my Robinhood portfolio.





A Brief History:

When I initiated my position in OHI back on November 28, 2017, I was focused on the income that it would provide to me and the long-term thesis that OHI would do well in an environment with an aging population that will use more healthcare in the years ahead.

I ended up selling 7 of my 16 shares on February 23, 2018. I held on to my remaining 9 shares until earlier this year. I then ended up selling another 4 shares and redeploying the proceeds into other companies within the portfolio this year. Finally, on March 26 of this year, I sold my remaining 5 shares.

The Rationale:

While it isn't always fun to discuss the closing of a position within barely a year of initiating the position, I believe mistakes are life's greatest teacher.

Overall, the position produced a 27% gain for me with dividends included, so it wasn't as if it was a mistake in that regard. However, I have the goal of holding my positions for decades, unless an issue arises that makes that not feasible.

Image Source: Simply Safe Dividends

The first issue that I had with continuing to hold OHI was that the dividend safety score is currently ranked as 43, per the reputable research firm, Simply Safe Dividends. A score of 41-60 indicates that the dividend is average and at a borderline risk of being cut in the years ahead. When we add to the fact that the industry in which OHI operates is facing very anemic growth in the short to medium-term, OHI doesn't fit the objective of my portfolio, which is to create as safe of dividend income as possible while also growing, on average, at a clip of 6% per year (with higher yielding companies like OHI in the lower single digits and lower yielding companies such as Lowe's and Home Depot making up for those lower increases).

Ideally, I'd like to have nearly 90% of my dividend income originate from companies with a dividend safety score of greater than 60. This allows a portfolio to grow its dividends and distributions, regardless of economic or political conditions.

It was this very reason that led me to reinvest my proceeds into companies such as Dominion Energy, AbbVie, and Magellan Midstream Partners. All three companies have dividend safety scores greater than 60 and while none quite offer the yield of OHI, the safety and growth profiles of the dividends more than make up for that, in my opinion.

The other reason that led me to close my position in OHI was the fact it was also trading well above its 5 year average in terms of price to adjusted funds from operations or price to AFFO. The price to AFFO at the time of my final sale of shares was around 13.6 compared to the 5 year average of 11.6. This type of overvaluation on a company with a dividend that is by no means a safe bet was a great time for me to take a profit and get out of a company that I view as less certain than the three I redeployed my capital into this year and Southern Company that I deployed proceeds from last year's sale to.

Summary:

While the 16 shares I initially owned of OHI provided annualized dividends of $42.24, I simply wasn't comfortable having such a large amount of my overall dividends rely on one company that doesn't possess at least a safe dividend safety score from Simply Safe Dividends. I am pleased to own 4 other companies all with dividend safety scores over 60, that still produce annual dividends of $29.52 and that grow their dividends in the mid single digits like Southern and Magellan Midstream Partners, high single digits like Dominion, and low double digits like AbbVie.

Discussion:

Have you ever closed a position? Was there a perfect storm brewing leading to the closure of that position like in my case? Did you learn your lessons from it? As always, thanks for reading and I look forward to replying to your comments.

Tuesday, April 9, 2019

March 2019 Dividend Income

April is upon us and I'm set to turn 22 on the 15th (I know, what a coincidence that I was born on the day that is typically Tax Day in the US and that I enjoy personal finance). The NBA Playoffs are set to begin in just a few days, with my Milwaukee Bucks looking like a legitimate contender in the East. With that said, it's time to examine our dividend income for March.





Analysis:

We received a total of $57.53 between our Robinhood account, our retirement account, and our M1 Finance account. This represents a total YOY growth of 192.5% compared to the $19.67 collected in March 2018. We also had a QOQ growth of 6.9% compared to the $53.84 in dividends collected in December 2018, although as we'll discuss later this growth is a bit inflated because of an additional payer in March.

The $57.53 received in March represents yet another personal best in dividends collected to date.

Of the $57.53, a total of $33.51 originated from our Robinhood account, with 13 companies paying me during the month of March. This is compared to the $29.85 collected in December from 12 companies. We'll discuss the math behind the $3.66 increase from December 2018 to March.

I received $1.86 in dividends from Pepsico (PEP) in March compared to no dividend in December (due to it being paid in January).

I benefited from a dividend raise from Dominion Energy (D) and was paid dividends for an additional share of D as I reduced a position in my portfolio to add to D and AbbVie (ABBV), which is a subject I'll discuss in a few weeks. This resulted in a $1.16 increase in dividends collected from D.

I also benefited from another dividend raise from Realty Income (O) to the tune of $0.02.

While on the subject of dividend increases, I also received a massive dividend raise from The Home Depot (HD), which helped increase my dividends from HD by $0.33.

Yet another dividend increase that increased dividend income was the raise from Amgen (AMGN) which increased dividends by $0.13.

The last activity pertaining to the Robinhood account was the raise from Pfizer (PFE) that increased my dividends collected by $0.16.

Moving on to the retirement account through my employer, I received $23.54 in dividends from my mutual fund holding CAIBX compared to the $23.55 in dividends from December, when including the $5.15 special dividend.

Finally, the M1 Finance account provided $0.48 in dividends compared to the $0.44 in December.

Summary: 

March was yet another record month in dividends collected for me. I continue to inch closer to the $100 month mark, although that likely won't happen until early next year. Even when we factor out the Pepsi dividend and the additional share of Dominion that resulted in higher income for March and will result in lower income in May for the position I partially sold a few weeks back, we still arrive at close to $55 in dividends.

Although this is very little growth, any growth is welcomed while I finish out the last 4 months of undergrad and continue to focus on paying tuition, in addition to paying for a car in cash later this year, as per my 2019 goals.

Discussion: 

What was your dividend income for March? What was your YOY and QOQ growth? As always, thanks for reading and I look forward to replying to your comments.

Tuesday, April 2, 2019

The Two Profiles In Finance And Life

As a dividend growth investor in the accumulation phase of my journey to achieve financial independence, I have realized over time, that there are two types of profiles in finance and life. For one that is seeking financial independence, they should lean more towards one of these profiles rather than the other. The two profiles in finance and life that I am referring to include the producer/provider/investor and the consumer.

Although it's impossible to purely fit the characteristics and preferences of either one of these profiles, I do believe that there is a balancing act that must go into ensuring that either one of these preferences don't become too powerful in one's life. 

With that said, let's first delve into each of the profiles in finance and life by first defining what each profile is and what the characteristics of each encompasses.



Profile #1: The Producer/Provider/Investor

The producer can take on many different forms, but for the intents and purposes of this post, I will define the producer as follows:

Producer: Anyone that provides value to society through various channels.

The first channel that a producer provides valuable goods and/or services through is their labor at their employer or through self-employment. I refer to this as a direct channel, with the rationale that they are directly producing the valuable goods and/or services for society. This is how most of us are able to pay our bills and survive in our society that uses "money" as a trading mechanism. Rather than produce everything ourselves, we purchase goods and services from others because it would be incredibly difficult to hand produce all of the things that we take for granted these days. 

Without the society we currently have, we would all have to grow our own food, produce our own clothes, produce our own entertainment/leisure, and in the process of fulfilling such arduous tasks, we would lose the free time that many of us also take for granted. We value the goods/services that someone provides to us by the price we pay to attain those goods/services. 

The second channel of providing valuable goods and/or services to society is on a more passive basis, primarily through investments that produce dividends, interest, and rent.

As a dividend investor, you're an owner in some of the most vital businesses to our everyday functioning in our modern economy. As an owner of Exxon Mobil, you're providing the world with the fuel necessary to allow hundreds of millions of consumers around the world to commute to work via their own vehicle or public transit. As an owner of Johnson & Johnson, you're providing the world with valuable consumer staples, such as Band-Aids, Neutrogena, and Listerine. You're also providing patients with medical devices that drastically improve their health, and ultimately, their quality of life. As a lender, you are extending credit to a consumer or a business to purchase their first home or to expand their business, possibly providing more value to others. Finally, as a landlord, you are providing a tenant with a safe, comfortable place to live. 

It's the combination of the direct channel of production and the financial benefit provided to you, in combination with the utilization of the indirect channel of production that can allow you to rapidly amass wealth, and passive income as a result. 

Suffice to say, the more value you provide to society, the more you will economically benefit. This will allow you to eventually become financially independent, indirectly providing value to those around you in a passive manner. This isn't to say you should stop your efforts to provide value in an active manner, but it extends more freedom to you to be able to choose how you want to provide that value to society. In my case, I have found that I enjoy writing and inspiring others to take action toward living their best life, as well as providing viable investment ideas over at Seeking Alpha to allow readers to eventually unlock financial freedom.


Profile #2: The Consumer

As we've discussed already discussed above, the producer is actively providing value to others through the provision of goods and/or services.

As you can imagine, the consumer is the one on the other end of the spectrum that is benefiting from the goods and/or services they are obtaining from the producer. 

The consumer would be the customer that is benefiting from the Exxon-Mobil branded gasoline they purchase from an Exxon-Mobil gas station, the Band-Aids, Neutrogena, or Listerine they are indirectly purchasing from Johnson & Johnson, and the house or apartment they are renting from their landlord, or the mortgage payments they are paying to their lender. 

Although there is nothing wrong with being a consumer and it's a necessary part of life (unless you'd like to be completely self-sufficient, living in the mountains or something), one must be careful to balance being a consumer and a producer.

This is to say that if you are consuming more than you are producing (i.e. spending more than you earn), you will go into debt. It is this debt that will require you to actively produce more (primarily work at your day job). 

The takeaway is that if you are unable to produce more than you consume, you will never have the luxury of attaining financial independence. This would mean that you're never able to live your life the way you would like, which is on your terms. Of course, if you enjoy your life the way it currently is with whatever job you currently hold, the reason for producing more than you consume would be in the event that you are eventually laid off from the job you love or are unable to perform the job anymore, you would still have the financial means to be able to consume the vital goods and/or services that are necessary to one's basic survival. 

On the other hand, this isn't to say that you should blindly produce tremendous value for society while depriving yourself of the necessary goods and/or services in life. 

As with everything in life, I believe one must strike a balance between producing and providing for their future needs while also meeting their current needs. After all, investing is worthless if you are depriving yourself of what you need today for what you need tomorrow.

Discussion:

What are your thoughts on the balance between being a producer and a consumer? Are you balancing your production and consumption adequately, in your opinion? As always, thanks for reading my thoughts and I look forward to reading yours in the comment section below.











Tuesday, March 26, 2019

Expected Dividend Increases for April 2019

The month of March is nearly complete as I write this and warmer, more pleasant weather is finally upon us here in the Midwest. The Milwaukee Bucks are gearing up for what I'm hoping will be a deep playoff push and the Brewers are beginning what should be another exciting season as well. With March nearly complete, it's also time for me to examine the dividend increases I received for the month and look ahead to the increases expected for April.


March Dividend Increases:

Increase #1: Williams Sonoma (WSM)

Williams Sonoma (WSM) announced an 11.6% increase in their quarterly dividend from $0.43/share to $0.48/share. This was a bit above the 9.3% increase I was expecting for my dividend increases in March 2019 article. Overall, my annual forward dividends increased by $1.20 across my 6 shares.

Increase #2: Realty Income (O)

Realty Income (O) announced a 0.2% increase in its monthly dividend from $0.2255/share to $0.226/share. This was exactly what I was expecting. Overall, my annual forward dividends increased by $0.024 across my 4 shares.

Increase #3: WP Carey (WPC)

WP Carey (WPC) announced a 0.2% increase in its quarterly dividend from $1.03/share to $1.032/share. This was actually a bit below what I predicted. Overall, my annual forward dividends increased by $0.024 across my 3 shares.


Expected Dividend Increase #1: Exxon Mobil (XOM)

I'm expecting XOM to raise its quarterly dividend by 4.9% from $0.82/share to $0.86/share. This would increase annual forward dividends by $0.96 across my 6 shares.

Expected Dividend Increase #2: International Business Machines (IBM)

Given the $34 billion acquisition of Red Hat last October, I'm expecting a lighter dividend increase from IBM than in past years. I'm projecting a quarterly dividend increase of 1.9% from $1.57/share quarterly dividend to $1.60/share. This would mean an increase in annual forward dividends of $0.36 across my 3 shares.

Expected Dividend Increase #3: Johnson & Johnson (JNJ)

I'm expecting a 5.6% increase in JNJ's quarterly dividend from $0.90/share to $0.95/share. This would increase annual forward dividends by $0.40 across my 2 shares.

Expected Dividend Increase #4: Enterprise Products Partners (EPD)

I'm expecting a routine 0.6% increase in EPD's quarterly dividend of $0.435/share to $0.4375/share. This would increase my annual forward dividends by $0.09 across my 9 shares.

Expected Dividend Increase #5: Southern Company (SO)

I'm expecting a 3.3% increase in SO's quarterly dividend of $0.60/share to $0.62/share. This would increase my annual forward dividends by $0.40 across my 5 shares.

Expected Dividend Increase #6: EQM Midstream Partners (EQM)

I'm expecting an increase of 1.8% in EQM's quarterly dividend of  $1.13/share to $1.15/share. This would result in an increase of $0.32 across my 4 shares.

Summary: 

The month of March produced $1.248 in dividend raises, with one raise being above what I expected, one being exactly what I expected, and one being below what I expected. It would take $31.20 invested at 4% to replicate the increases I received during March. Looking ahead to April,  I'm expecting a $2.53 increase in annual forward dividends from dividend raises alone. To match this increase in dividend income by investing fresh capital, this would require an investment of $63.25, assuming a 4% dividend yield.

Discussion:

Are you expecting April to be as busy a month as I am? Are you expecting dividend increases from any names not mentioned in this post?

Tuesday, March 19, 2019

The Compounding Power of Dividends

Since I began my dividend growth investing journey at the age of 20 in September 2017, it has really set in how blessed I am to have discovered DGI in my early teens. I always knew how powerful dividend growth can be with the hypothetical scenarios of "x dollars invested in x company 30 years ago would now be producing y in dividends." Well, now that I've began investing in dividend paying stocks and that I am at $495 in annual forward dividends as of January 18, 2019, I thought it would be interesting to examine the compounding effects of these dividends in the coming decades. Interestingly, this whole discussion randomly came about in conversation with my mother one day and she thought that my situation was pretty impressive for someone my age (credit to my mother for this post).

                                              Image Source: Pexels

For illustrative purposes, I'll be factoring in what I believe to be realistic assumptions for our model. I will use the following variables:

  • 4% dividend yield
  • 6% long-term annual dividend growth rate (DGR)
  • Reinvestment of dividends
  • No fresh capital contributions
  • Average of 5% annual stock price appreciation (almost in line with my long-term DGR)
  • 4% average annual inflation rate
  • Assuming starting annual dividends of $500 (roughly where I am at the time of writing)
The 4% dividend yield is considerably below my current dividend yield of 4.64%, including my retirement account mutual fund holding. Over time, I'll lower my average dividend yield to around 4% to attain more dividend growth (allowing me to better combat inflation and maintain purchasing power).

As shown below, my current 5 year annual dividend growth rate stands at 6.1%. This is right in line with our projections. We do have to take into account that the past 5 years of economic conditions have been favorable for companies, but with that said, I do believe that as I prioritize dividend growth in the future, the portfolio should be able to at least maintain the current dividend growth rate for the long term.

We'll be factoring in an average annual inflation rate of 4% as it's a bit above the historical average. We'll also assume that I continue to reinvest dividends selectively along the way into companies with attractive starting yields and growth profiles, with no additional capital contributions. This allows us to best illustrate the power of compounding. 

Image Source: Simply Safe Dividends screenshot


Having laid out the assumptions of 4% dividend yield and a 6% annual dividend growth rate above, we'll now examine the impact of dividend reinvestment in terms of nominal dollars and inflation adjusted dollars over the following time frames:


  • 5 years: $738.30 nominal annual dividends ($606.83 in 2019 dollars)
  • 10 years: $1,212.01 nominal annual dividends ($818.79 in 2019 dollars)
  • 20 years: $3,365.94 nominal annual dividends ($1,536.17 in 2019 dollars)
  • 30 years: $9,761.96 nominal annual dividends ($3,009.80 in 2019 dollars)
  • 40 years: $29,692.56 nominal annual dividends ($6,184.64 in 2019 dollars)
As a side note, I referred to the fantastic dividend investment calculator over at Investopedia to arrive at these calculations. If you haven't checked it out, I highly encourage you do so. I've found it to be a great illustrative tool when you're curious what your dividends could become. You can even incorporate regular capital contributions into the assumptions as well.

Conclusion:

The results above really speak for themselves. We can see that even a bit of planning in your teens or twenties can pay massive dividends (pun intended). If one would simply max an IRA or Roth IRA upon college graduation for 2 years, they could put themselves in my same position. By the time they would reach the traditional retirement age of their early to mid 60s, they would be collecting over $6,000 a year in dividends in today's dollars if they never contributed another dime. In other words, if they completely failed in life and were never able to contribute another dime to their investment account, they would still receive over $6,000 a year in dividends from their retirement account (that also likely wouldn't be able to be touched by creditors due to the protection of retirement accounts in general). 


One can only imagine the impact of fresh capital contributions on top of this capital base for several years or even decades. When one amasses even $500 a year in dividends in their early 20s, they at a minimum set themselves up for $6,000+ a year in inflation adjusted dividends. When combined with regular capital contributions and a high savings rate, it becomes very possible for dividends to unlock financial independence at an early age in life. If you don't believe me, just take Jason Fieber's word for it. He's living his dream life in Thailand entirely because of years of diligent saving and dividend growth investing.

Discussion:

Have you ever used the dividend investment calculator at Investopedia? Have you ever projected dividends 5 years, 10 years, or even 20+ years into the future? What are you thoughts on the compounding magic of dividends? As always, thanks for reading and I look forward to reading and responding to your comments.











Tuesday, March 12, 2019

February 2019 Dividend Income

Another month has passed and we are already approaching the Ides of March. March Madness will soon be upon us, the NBA Playoffs will begin in just a few weeks, and the MLB will soon begin its regular season. Spring will soon actually be in the air. But until that point in time, it's probably best for me to get some writing in while the weather is still awful. With that said, it's time to delve into how much dividend income our holdings provided for us in February.



Overall, I received $43.09 between my Robinhood and M1 Finance portfolios. Of that $43.09, $42.80 originated from 12 companies in my Robinhood portfolio. The remaining $0.29 came from 15 companies in my M1 Finance portfolio.

This is a 4% quarter over quarter increase compared to the $41.42 collected in November 2018 and a 31.7% YOY increase compared to the $32.71 collected in February 2018!

Breaking it down, the $0.29 that came from M1 Finance is the same as the results from last November, but there were some notable changes that led to the $1.67 increase compared to the previous quarter, including the following:

Being paid dividends for the additional share that I picked up shortly after AbbVie (ABBV) went ex-dividend on the prior dividend, in addition to the 11.5% raise announced by AbbVie since the November dividend was paid. This resulted in a $1.40 increase in income.

I also collected an additional $0.02 from Realty Income (O) as a result of its 2% dividend increase compared to November 2018.

I collected an additional $0.06 from EQM Midstream Partners (EQM) compared to November 2018 as a result of its 1.3% increase announced shortly after the previous dividend was paid.

Moreover, I collected an additional $0.03 from Enterprise Products Partners (EPD) as a result of its  0.6% dividend increase announced shortly after the previous dividend was paid.

Finally, I collected an additional $0.16 in dividends from AT&T (T) as a result of its 2% dividend increase.

Conclusion:
Although I didn't add any shares to any of these companies in over 4 months or initiate any new positions for the middle months of quarters, my income increased a bit and that's all I can ask as I finish paying my way through my last few months of undergrad and save to buy a car in cash. Fresh capital will continue to remain relatively limited, so dividend increases and reinvestment will be the driving force for growth in dividends for the last 10 months of this year.

Discussion:

How was your February? Did you add any new names to your portfolio? As always, thanks for reading and I look forward to reading and replying to your comments.




Tuesday, March 5, 2019

Expected Dividend Increases for March 2019

The Milwaukee Bucks are still in 1st place in the Eastern Conference and the month of February is now behind us, although it doesn't seem as thought the snow is done hitting Central Wisconsin. With that said, it's time to examine the dividend increases from February and look ahead to the dividend increases predicted for the month of March.



February Dividend Increases:

Increase #1: Genuine Parts Company (GPC)

Genuine Parts Company announced a 5.9% increase in its dividend, hiking the quarterly dividend from $0.72/share to $0.7625/share. GPC increased its dividend a bit more than the $0.76 that I was projecting, so I'm quite pleased with this raise. Overall, it increased my annual forward dividends by $0.51 across my 3 shares.

Increase #2: The Home Depot (HD)

The Home Depot announced a 32% increase in its dividend, skyrocketing the quarterly dividend from $1.03/share to $1.36/share! This raise was considerably higher than I think anyone in the community expected. This massive raise from HD increased my annual forward dividends by $1.32 across my single share.

Increase #3: PPL Corp (PPL)

PPL Corp announced a 0.6% increase in its dividend, raising it from $0.41/share to $0.4125/share. This dividend increase was quite anemic and well below the increase that I was expecting. Overall, it did manage to increase my annual forward dividends by $0.08 across my 8 shares.

Bonus Increase: Tanger Factory Outlet Centers (SKT)

Tanger announced a 1.4% increase in their quarterly dividend, raising it from $0.35/share to $0.355/share. This raise increased my annual forward dividends by $0.22 across my 11 shares.


Expected Dividend Increase #1: Williams Sonoma (WSM)

I'm expecting a 9.3% dividend increase from WSM, raising the quarterly dividend from $0.43 to $0.47. This would increase annual forward dividends by $0.96 across my 6 shares.


Expected Dividend Increase #2: Realty Income (O)

I'm expecting a 0.2% dividend increase from O, raising the monthly dividend from $0.2255 to $0.2260. This would equate to an increase in my annual forward dividends of ~$0.024 across my 4 shares.

Expected Dividend Increase #3: WP Carey (WPC)

I'm expecting a routine 0.5% dividend increase from WPC, raising the quarterly dividend from $1.03 to $1.035. This would result in an increase to annual forward dividends of $0.06 across my 3 shares.

Summary: 

February was a month with a little bit of everything. There was the GPC raise that was as expected, the HD raise that exceeded expectations tremendously, and the PPL raise that was rather disappointing. The point is that despite all that news, my dividend income continues to increase without much input from me. These great businesses continue to churn out profits to support their dividend increases while I let them do their thing. I received $2.13 in dividend increases in February. Assuming a 4% dividend yield, this would require an investment of $53.25 to duplicate! Furthermore, $1.044 of increases are expected in March for my annual forward dividends. This would require an investment of $26.10 in fresh capital, assuming a 4% dividend yield.


Discussion:

How many dividend increases are you expecting in March? Are you expecting dividend increases from any names not mentioned in this post?

Tuesday, February 26, 2019

The Phases of Dividend Growth Investing

Since I began dividend growth investing in September 2017, I've gradually noticed that there is a common evolution of dividend growth investing from an idea, into what eventually becomes a mindset, and even a lifestyle.

In my own life, I've noticed that since I discovered the concept of dividend growth investing and how I could leverage this concept to unlock financial independence at an early age, I have wholeheartedly adopted this idea as a mindset. I'm as passionate about dividend growth investing as some are about CrossFit and veganism.

With that said, let's take a look at how I believe dividend growth investing evolves from merely an idea, into a mindset, and even a lifestyle.



Phases of Dividend Income:

Phase 0: Theoretical phase

Every eventual fanatic dividend growth investor starts at what I like to call the "theoretical phase." This is the phase in which one experiences an epiphany. They one day randomly stumble upon the concept of passive income, and upon learning of this information, they are intrigued from the start. They will do more research and come to find that one of the absolute most passive forms of income to support a lifestyle are dividend growth stocks.

They then eagerly learn as much about dividend growth investing as they can, from the selection process of stocks, evaluation of stocks, and so on. Once a potential dividend growth investor reaches the end level of this phase, they then move into the next phase of this marvelous concept.

Phase 1: Practicality phase

When a potential dividend growth investor learns of the benefits of dividend growth investing, they begin to move from the theoretical phase into what I refer to as the "practicality phase." This is when someone simply becomes so eager to move from the theoretical phase of dividend growth investing, into the phase of actually implementing dividend growth investing in their own life.

They move on from the novelty of the hypotheticals of what an investment in X company 20 years ago would be throwing off in dividends now with dividends reinvested, to the point of actually desiring to make that hypothetical a reality. The practicality phase can't happen unless an individual embraces the idea of dividend growth investing. Although it's a very practical and near sure fire way to create meaningful passive income over time, dividend growth investing is often a slow process of accumulating fresh capital contributions, reinvesting dividends, and benefiting from dividend increases, often referred to as the trinity of dividend growth investing.

The amount that a would be dividend growth investor actually eventually invests in dividend growth stocks can range from investments of less than $100 (enabled with the recent rise of brokers such as Robinhood) to tens or even hundreds of thousands of dollars. Everyone discovers the concept of dividend growth investing at different phases of their life. Some may discover it at an early age in life, such as in middle school (like myself) or they may be in their 30s or 40s with a family even. This means that everyone starts at different investment amounts and becomes a DGIer to varying degrees.

In my case, I didn't start investing until I was 20. Being as young as I was when I began investing, I started with an investment of just over $2,000 in 6 different companies. It was this investment that would radically transform my mindset from one of hypotheticals into one of practicalities. This set the stage for the next phase of DGI.

Phase 2: Collecting Your First Dividend And Embracing DGI


Once I began investing in September 2017, shortly thereafter I received my first dividend from Genuine Parts Company (GPC). It wasn't much. I owned 2 shares at the time and collected $1.35 in dividends, but it was the beginning of that radical shift in my mindset. With every dividend I received thereafter, I became more and more convinced that dividend growth investing was my path from an employee to an owner; I viewed "harnessing the power of dividend growth investing to unlock financial freedom" as a mindset and a lifestyle. It's what ultimately led to the inspiration and motto of this blog. I began to think in terms of an owner rather than a employee/consumer. Rather than seeing $100 as a mechanism of acquiring goods/services, I began to see that $100 as a way of acquiring a share of Pepsi, two shares of Altria, or three shares of AT&T. In other words, the $100 could generate an immediate income of $3-6 in relatively safe, growing dividends for me in the years/decades to come.

With dividend growth investing, I realized that average, ordinary people were becoming financially independent over the course of years or multiple decades, depending upon how aggressively they invested in terms of the percentage of their salary they invested.

At a minimum, I believe DGI to be the practical solution to the retirement epidemic that America is facing. Rather than Millennials such as myself simply assuming that Social Security will be there for us when we reach retirement age (if it isn't drastically altered by then), the wisest course of action would be for us to start investing as soon as possible. If given 30-40 years, investments can compound considerably, transforming small contributions into massive piles of capital throwing off considerable dividends.

The best-case scenario for someone that aggressively saves 50%+ of their income and invests in quality, dividend growth stocks trading at fair or better prices for over a decade, is that they will be in a very enviable position in life, allowing them to focus on their passions rather than a paycheck. They will be financially independent or close enough that they won't be chained to a job they aren't engaged in, as is the case with over two-thirds of Americans.

It's the above information that enables me to feel the way I do about DGI. It is more than an investment strategy; it is a mindset that can free you from the obligation of a job that you don't feel engaged in, a boss that you dislike, or whatever it may be. You can truly be the architect of your own life when you are financially free

It's at the end of this phase that DGIers fully commit to the concept and lifestyle that accompanies DGI. I'm personally at this stage and will be for the next several years. They will continue to accumulate positions in dividend growth stocks for years before reaching the next phase.

Phase 3: Semi-Financial Independence/Continued Conviction In DGI Strategy

This is also a phase one can be in for several years or possibly even decades, depending upon how we describe semi-financial independence. This is the point at which one is actively collecting dividends that are becoming more and more meaningful with the passage of every month. It may be $100 here or $500 there, but the key takeaway from this phase is that an individual is starting to collect enough in dividends to enable either:

A) regularly reinvest dividends along with other fresh capital contributions to accelerate the path to complete financial independence.

B) use the dividends to pay for expenses or enjoy life.

C) some combination of the two previous situations.

Within this phase, the only thing that changes non-financially speaking is that the conviction in the DGI strategy continues to be reinforced as one collects dividends for simply owning shares in a company and continuing to survive. The bar for collecting dividends is really set that low; select quality companies at reasonable valuations and wake up in the morning, so to speak.

At this point, the strategy is really on auto-pilot and there is no need to radically change it. There may be some tweaks here and there to the selection and evaluation process of investing in dividend stocks, but the philosophy of DGI stays largely the same.

With the passage of several more years and the continued trinity of dividends, the investor will eventually transition into the holy grail of dividend growth investing.

Phase 4: Financial Independence

After a long, grueling road of investing and reinvesting tens of thousands or hundreds of thousands of dollars diligently, along with years of dividend increases from the quality companies in their portfolios, the investor has finally achieved the end-goal of financial independence. This phase is characterized by the freedom of the investor in question to pursue passions, hobbies, and interests at their own leisure.

If they work at a job they enjoy, they may continue to work, allowing them to continue to contribute fresh capital, reinvest dividends, and benefit from dividend increases on a magnitude that most can't even fathom.

This would allow them to reach potentially the uber wealthy phase of financial independence, in which abundance is a part of their lives. They could use this capital to fund philanthropic endeavors, political campaigns, or just continue to reinvest it.

If one works at a job they don't enjoy or find fulfillment in, they will probably have an idea of what they would like to do with free time by the time they reach this stage as it takes a minimum of several years and potentially decades to attain.

Whatever one decides to do upon reaching financial independence, the choice is absolutely theirs. They have earned their freedom after years of dedication to the very concept that made this life possible for them to begin with.

Discussion:

What phase of dividend growth investing are you at? How close or far away are you from Phase 4? Did I miss any phases, in your opinion? As always, I look forward to reading your thoughts and thanks for reading mine.








Tuesday, February 19, 2019

The Importance of Income Diversification

As someone who is striving to be financially independent by the age of 35, I need to diversify my income away from my day job and into passive income, as well as other more active income streams such as Seeking Alpha. As such, I'll discuss the 3 reasons that I believe income diversification is of utmost importance to not just those that are aiming to achieve FIRE, but for everyone.


Image Source: Pexels

Reason #1: Financial Peace Of Mind In Times Of Emergency

If you're like the vast majority of Americans, you're probably reliant upon a paycheck to cover your expenses. According to CNBC, 78% of Americans indicated that they live paycheck to paycheck. The even more terrifying statistic is that nearly 10% of Americans that earn more than $100,000 per year are living paycheck to paycheck. 

This is the precise reason that I believe this country faces a major financial illiteracy crisis. When you're earning over $100,000 a year and you can't at least have an emergency fund to get you through a few months of being laid off or whatever the emergency is, you are in need of a reality check.

When half the world lives on less than $5.50 a day and you're complaining about how hard life is while sipping on your $5-6 Starbucks Ultra Caramel Frappuccino, you need to realize that you're the 1% of the world and check your privilege at the door. You're living better than 99.9% of humanity has lived and yet you're still living paycheck to paycheck. 

Many people here in the United States like to tear apart the 1% in our country, while not even realizing that those around the world would be tearing into them as they are the 1% of the world. It's the textbook definition of hypocrisy. Sure, I'll admit that there are flaws in our country, but let's face the facts and realize that there is arguably no better country in the world to create wealth than in the United States. Despite our flaws, I truly believe we are still the land of opportunity.

Aside from this rant, income diversification is paramount to your financial peace of mind. If you are laid off, you receive your paycheck a couple days late, have to purchase new tires for your car, etc., you will be in a state of financial bliss while others are panicking about how they're going to pay for these emergencies. 

If we take my case for example, I have streams of income from my employer, Seeking Alpha, and the 57 companies and 1 mutual fund that I own (33 in Robinhood and an additional 24 different names in my M1 Finance account). Although I'm still in the early stages of my journey to diversify my income, around 13% of my income originates from Seeking Alpha and dividends. This is 13% of my income that is completely independent or free from the whims of my employer. As long as I continue to write content for Seeking Alpha that provides value to readers and as long as I continue to hold my ownership stakes in my dividend paying companies, I'll continue to receive this income.

When you are diversified and have multiple streams of income, you are less reliant on the less stable income sources (i.e. an employer) to support your livelihood. This leads me into my next point.

Reason #2: Autonomy From An Employer

As I briefly alluded to above, I consider an employer to be one of the least stable sources of income, which necessitates income diversification all the more. As employees, we are subject to the whims of an employer that is trying to increase their profits while hedging their risk. This means that employers are constantly trying to find ways to automate our positions to realize cost savings. 

According to CNN, 38% of jobs are in danger of being replaced by robots and AI by 2032.  While this will create opportunity for high skilled workers, it does mean that many in the financial services sector in the United States could be replaced in the next 10 or so years. With AI capable of doing even tasks we never thought possible before (i.e. composing music), AI and robots replacing a sizable portion of the workforce in the next decade is very viable.

When you're on the other end of this trend, you're benefiting considerably. We all know that as an employee, your employer can fire you for whatever reason they'd like (i.e. you don't fit the company culture, your boss simply doesn't like you, etc). 

This is a stark contrast to when you are an investor. The CEO of Exxon Mobil isn't going to fire you because "you don't fit the culture here." They work for you, the investor. They are going to be working for you and doing everything they can to ensure that Exxon Mobil becomes more efficient of a business and more profitable in the future. 

When you reach a point that your passive income within your taxable accounts is approaching your living expenses, you are able to pursue the passions of your choice. Perhaps there is a job that you would like to take in the future that you would find more purpose in, but it pays less. When your passive income comes close to your expenses, you simply have more autonomy from your employer.

It's that gradual shift from an employee to an investor that enables you eventual autonomy from your employer, allowing you the ability to create the purpose in your life rather than having your employer create your purpose.


Reason #3: A Decline In One Income Source Could Be Offset By Other Income Sources

Building off of the first reason, it is necessary to have income diversification because when you do reach a point in which you're relatively independent of your active income source to support your lifestyle, you need to be reasonably sure that your passive income is safe and will grow at least in line with inflation.

Diversification is a necessary component of a sound financial plan because investments like General Electric are bound to happen eventually. From a fundamental standpoint, the cut from General Electric could be predicted. However, what happens when a dividend paying company such as MercadoLibre decides it would be better off eliminating its dividend to focus on growth? 

Even though MercadoLibre was a dividend safety score of 79 per Simply Safe Dividends prior to the suspension of its dividend, sometimes you just can't predict a mercurial change in capital allocation policy like that. Although you could probably sell off the position at a slight loss and buy into another dividend paying company, it's very comforting when you limit a position to no more than 3-4% of your dividend income. As such, this outright elimination would probably be easily replaced by other consistent dividend raises in your portfolio from Johnson & Johnson, Pepsico, and Genuine Parts Company. 

One could suffer a dividend elimination like that, resulting in a 3-4% reduction in their total income, but benefit from raises from other companies to the tune of 6-7% and still walk away from that dividend suspension richer than they were the year before. 

This speaks volumes of the power and safety of mind in the diversification of your passive income. Even though a far from ideal result occurred, you still ended up better off than you were the year before.

Summary: Income Diversification Is Necessary For Everyone

Whether you're aiming for FIRE like I am or you're planning for a more traditional retirement, one thing is for certain: income diversification is a necessary component to either strategy. When you have several streams of income, events that are often emergencies to others become nonevents to you. Moreover, you're not completely bound to your day job as most Americans are. To make matters even worse for Americans, most generally dislike their jobs. Finally, a decline in one income source doesn't spell financial turbulence for you as it would for most. It is for the aforementioned reasons that I believe income diversification is a necessary piece of any strategy to achieve financial peace of mind.


Discussion: 

What are your thoughts on income diversification? How much of your total income originates from non-employer related sources? As always, thanks for reading my thoughts and I look forward to reading and replying to your thoughts in the comment section below.





Tuesday, February 12, 2019

Reaching A Dividend Milestone & Recent Purchases

In order to achieve my financial goals for 2019, I need to aggressively invest whenever I am presented with an opportunity. As such, I made a couple investments recently.



As I've detailed before, I believe the recent volatility has provided investors with many compelling opportunities.

Of those investment opportunities, I believe the tobacco industry to be one of the most attractive spaces for investment, which led me to add to my positions in Altria Group (MO) and Philip Morris International (PM) yet again.

I won't delve too far into specifics on each company as I've already recently analyzed both Altria and Philip Morris International on Seeking Alpha. I will refer interested readers to the links provided further in this post.

Regarding Altria, I view the 7%+ dividend yield from a soon to be Dividend King that grows its dividend in the mid to high single digits to be too good of an opportunity to pass up. That 7% yield is well above the historical average. Despite the risks of smoking volume declines continuing to accelerate, the regulatory risks with the FDA taking aim at JUUL, and the considerable premiums paid by Altria for stakes in JUUL and Cronos Group, I also believe management is taking the steps necessary to continue on the past 49 years of dividend increases. Since I wrote about Altria last December, the company has also announced an agreement with Lexaria Bioscience to explore innovation in oral, reduced risk nicotine products. Quite simply, management is continuing to implement its strategy to diversify revenues. I believe my thesis remains intact and the continued decline in Altria since my article has allowed me to lower my cost basis from $62.25 a share to $56.47 a share. Although I'm sitting on huge paper losses currently, I believe in the medium to long-term, I will be just fine with this position.

Like Altria, I also believe the 6%+ dividend yield of Philip Morris International is one heck of a bargain while giving investors international exposure.

Though the company is facing currency headwinds for the past 5 years, I believe internationally, the market for Tobacco remaibs strong. Philip Morris also has a tremendous opportunity to convert smokers of other brands to their IQOS device, which I discuss in more detail in my analysis of Philip Morris International over at Seeking Alpha.

Both of these companies offer above average dividend yields historically speaking, as well as trounce the 2% yield of the S&P 500. This should reward investors with safe, strong, and growing dividends for years to come while also offering investors capital appreciation eventually.

Overall, the share of MO added and the share of PM contributed another $7.76 in forward annual dividends, bringing my forward annual dividends to $505.99 (as of January 26, 2019).

Discussion:

What purchases have you made lately? What sectors do you find most attractive currently? As always, thanks for reading and replying to my thoughts and I look forward to reading and replying to yours.


Tuesday, February 5, 2019

January 2019 Dividend Income

With the first month of the year in the books and the Milwaukee Bucks in first place in the Eastern Conference, it's time to examine the amount of dividends that our portfolio provided for me in January.




Overall, I received $25.81 in dividends in the month of January. Of this, I received $25.57 from 10 companies in my Robinhood account. The remaining $0.24 came from 12 companies in my M1 Finance account.

The $25.81 received in January represents a 21.1% growth compared to the $21.32 that I collected in October. Moreover, this is a 298.9% YOY growth compared to the $6.47 in dividends that I collected in January 2018!

Breaking it down further, I collected $25.57 in dividends from my Robinhood account investments compared to $21.13 in October.

This $4.44 difference can be accounted for by the following events:

The Pepsi dividend of $1.86 across my two shares being paid in January.

The acquisition of 4 Iron Mountain shares, with 3 paying dividends in January for a total of $1.83.

Collecting $0.07 less from GlaxoSmithKline for the month compared to October ($3.47 in October vs $3.40 in January).

An additional share of Altria that added $0.80 to income (and another share added shortly after the ex-dividend date).

Collecting an extra $0.01 from Ventas compared to October due to a dividend raise in December. ($3.16 in October vs $3.17 in January).

Collecting an extra $0.01 from WP Carey due to a dividend raise in December ($3.07 in October vs $3.08 in January).

I also collected $0.24 in January compared to $0.19 in October from my M1 Finance October; $0.05 more due to the Pepsi dividend of $0.02 for my small stake and $0.03 from GlaxoSmithKline as I set up my M1 Finance account shortly after the ex-dividend date, so I wasn't able to collect a dividend from them in my M1 Finance account back in October.

Summary:

Overall, January marked a small milestone. It's the first time my first month of the quarter income eclipsed $25, and yet another record for the first month of the quarter. How great are dividends?! I am looking forward to continuing to build my first month of the quarter income and hope to add a couple more shares of Iron Mountain over the next few months.

April income should be considerably better as I will receive an extra share of dividends from Altria and Iron Mountain, even if I don't continue to add to my positions. My decisions to add to my Altria and Iron Mountain positions after their ex dividend dates in December will quite literally, pay dividends in April. There will also be a few dividend increases from some of these names factored into that month. My goal is to test $30 for April. With no additions, I'll be near $28 so I believe it can be done.

Discussion:

Did you have a record January? Are you working in purchases to increase your first month of the quarter income? If so, what have you been purchasing lately?









Tuesday, January 29, 2019

Expected Dividend Increases for February 2019

The first month of 2019 is already almost in the books! With that said, the month is drawing to a close. That means it's time to examine the next month of dividend increases. Prior to discussing the next month of dividend increases, I'll recap the dividend increases that we received in January thus far.

Image Source: Pexels

January Dividend Increases:

Increase #1: Realty Income (O)

Realty Income announced a 2.0% dividend increase from a monthly dividend of $0.2210/share to $0.2255/share. Overall, this was a bit below the $0.2290 monthly dividend that I was expecting to be announced. However, I'm perfectly fine with raises like this from Realty Income when we also consider that they'll raise their dividend several more times this year. Small, frequent raises add up too. This increased my annual forward dividends by $0.216 across my 4 shares.

Increase #2: Enterprise Products Partners (EPD)

Enterprise Products Partners announced a 0.6% dividend increase from a quarterly dividend of $0.4325/share to $0.435/share. This was exactly what I expected in the previous Expected Dividend Increases series. My annual forward dividends increased by $0.09 across my 9 shares.

Increase #3: EQM Midstream Partners (EQM)

EQM Midstream Partners announced a 1.3% dividend increase from a quarterly of $1.115/share to $1.13/share. This was below the $1.14 dividend that I predicted they would declare, but EQM also raises their dividend quarterly so this isn't as devastating as it would be if they only increased their dividend once per year. This increased my annual forward dividends by $0.24 across my 4 shares.


Expected Dividend Increase #1: Genuine Parts Company (GPC)

Assuming the continuation of GPC's 5.5% 3 year DGR, the company will increase its quarterly dividend from $0.72/share to $0.76/share. This would increase annual forward dividends by $0.48 across my 3 shares.

Expected Dividend Increase #2: The Home Depot (HD)

I'm assuming that HD will increase its dividend roughly in line with its previous dividend increase of 15.7%. This should result in the quarterly dividend of $1.03/share increasing to $1.19/share. This would lead to an increase in my annual forward dividends of $0.64 across my single share.

Expected Dividend Increase #3: PPL Corp (PPL)

If the past couple years are any indication, I suspect that PPL will increase its quarterly dividend by the same $0.015 fixed amount. This would result in a 3.7% dividend increase, from a quarterly dividend of $0.41 to $0.425. This would increase my annual forward dividends by $0.48 across my 8 shares.

Summary:

We added $0.546 in dividends through increases in the month of January, which would require a capital investment of $13.65 at a 4% yield to replicate. This was a fairly light month in terms of dividend increases, with all of my dividend increases being from companies that increase their dividend quarterly rather than annually, so that explains the light month. However, we can see that next month will be much more promising, with a projection of a $1.60 increase in annual forward dividends. Should my predictions in February be correct, it would require a fresh capital contribution of $40.00 to replicate the $1.56 increase in annual forward dividends, assuming a 4% dividend yield.

Discussion: 

How many dividend increases are you expecting in February? Are you expecting dividend increases from any names not mentioned in this post?