Tuesday, September 17, 2019

Hobby Versus Side Hustle: Breaking Them Both Down

As a relative newcomer to actually implementing side hustles, it wasn't until I started this blog that I began to notice the key differences between side hustles and hobbies. It was for this reason I thought it would be helpful to identify my observations of the key differences between side hustles and hobbies.

We'll start by offering my definitions of both a hobby and a side hustle and describe the key similarity between a hobby and a side hustle before delving into the key differences.

Hobby: An activity performed solely for the enjoyment and not for monetary gain.

Side hustle: Activity performed for monetary gain, and possibly for enjoyment.

The major similarity between a side hustle and a hobby is the fact that they both could be performed for enjoyment. Another element is that as long as the hobby or side hustle isn't overdone, both can provide an outlet for us to escape the everyday monotony that is often associated with a day job.

In my particular case, two of my primary hobbies include this blog and watching sports.

While it's entirely possible that this blog could one day make money, that isn't the primary motivation. If it was a major motivation, I would have gave up long ago because this blog has yet to technically make a dime on its own (although it may have theoretically funneled a bit of traffic to my side hustle on Seeking Alpha). But regardless of whether this blog does or doesn't eventually make money, it's quite clear that it doesn't matter to me.

The sole purpose of this blog when I started it was to serve as 1) a creative and productive outlet for me so that 2) I could someday look back on it as I document my journey to financial independence and 3) proof that an average guy or gal can attain financial independence in a relatively quick amount of time with the right mindset and that you don't have to be a successful pro athlete, musician, actor, or startup billionaire to attain financial independence and security.

There are numerous other examples of hobbies that many of us engage in on a daily basis, such as watching sports, spending time with family, and so forth. As a very casual sports fan (aside from NBA basketball where I have more of an intermediate understanding of the game), sports is another way to escape from the day to day grind that is important to our mental health.

As I alluded to above when defining a side hustle and a hobby, the key difference is the ability for monetary gain. A hobby is often a side hustle without the earning capability and a side hustle is often a hobby with earning potential (if you're doing it right, as I believe your side hustle shouldn't feel like actual work or it negates one of the purposes of a side hustle which is to escape the feeling of tedious work).

In my case, I generally write a couple articles a week over at Seeking Alpha. It has proven to be a fairly decent side hustle when we consider that I enjoy the process of researching and writing about investment opportunities.

It's generally a nice way for me to spend part of my weekend finding investment opportunities for both myself and others, which helps from a mental health standpoint as I feel I am doing something productive with my life, even with part of my downtime.

Concluding Thoughts:

As we've shown, both side hustles and hobbies serve as a respite from the sometimes dull nature of our day jobs. I couldn't even imagine working 80+ hours a week at a job you despise while having no time for yourself. Perhaps it's immature and misguided of me to believe that side hustles and hobbies can serve as distractions from our day jobs, especially when we spend so much of our lives at our day jobs, but I've found that hobbies and side hustles can bring meaning to our lives in ways that jobs often can't because they aren't designed for our pleasure.

Discussion:

What are your side hustles? What are your favorite hobbies? Are there any new side hustles or hobbies that you are soon considering participating in?

If you've made it this far through this sometimes aimless rant, I applaud you and thank you for reading. This post served as a bit more of one from the soul with less of the formal writing style that I often include in my posts. As always, I welcome any comments you may have below.

Tuesday, September 10, 2019

August 2019 Dividend Income

The month of August has come to a close and that means that the beginning of the NFL regular season will be upon us in a matter of days. My Green Bay Packers are set to open the season against the Chicago Bears two days after this blog post will be published.

More importantly, the end of August means two additional things. It means that we only need to get through September and half of October before the NBA preseason begins, and the regular season begins two weeks after that. I'm more excited now for the Milwaukee Bucks than I ever have been in the 15+ years that I have been a fan. This very well could be their season to win it all.

Secondly, it's time for us to examine the amount of dividend income our portfolio generated for us in the month of August.

Before we delve into that, I'd just like to announce that I opened a Webull brokerage account last month and have since purchased 7 additional units in Enterprise Products Partners (EPD) and I initiated a new position position in The GEO Group (GEO), which I recently discussed in a Seeking Alpha article on GEO.





Analysis:

I received total dividends of $48.93 during the month of August, which is an 11.1% growth rate compared to the $44.04 in dividends that I received in May, and an 18.8% YOY growth rate compared to the $41.19 in dividends I received in August 2018.

Breaking it down a bit further, $45.51 originated from 12 companies in my Robinhood account, $3.08 from EPD in my Webull account, and the remaining $0.34 from 15 companies in my M1 Finance account.

The $4.89 increase in my dividend income compared to May is due to a variety of factors discussed below:

Since May, I have purchased an additional 3 units of Energy Transfer (ET), which accounts for the additional $0.61 of distributions received from ET.

Magellan Midstream Partners (MMP) also provided an additional $0.02 in distributions due to a distribution increase it announced since the distribution paid in May.

Realty Income (O) also paid an additional $0.01 in dividends compared to May 2019 due to its quarterly dividend increases doing their magic.

I also collected an additional $0.06 in distributions from EQM Midstream Partners (EQM) compared to May.

I benefited from both a distribution increase from EPD and the purchase of an additional unit, which explains the additional $0.46 in distributions.

Lowe's (LOW) provided an additional $0.14 in dividends compared to May due to its massive dividend increase it announced at the end of May.

I also benefited from owning an additional share of AT&T (T), which increased my dividend income by $0.51 compared to May.

The largest reason for the increase in my dividend income from May to August was the purchase of 7 units in EPD through my new Webull brokerage account. This accounted for $3.08 in additional distributions.

Conclusion:

I'm quite pleased with the dividend income that I collected in August 2019. I'm coming very close to approaching that $50 milestone for the middle months of each quarter, which is very encouraging. Given that I expect to invest a small amount in a new position in the near future that pays a dividend in the middle month of each quarter, this will be my last middle of the quarter month below $50 in dividend income.

More encouragingly, I continue to make progress on my goal of increasing dividend income in the first month of each quarter. I'd like to catch up my first month of the quarter income with the other months, and get those months above $50 by the end of the year. Fortunately, I believe that goal is well within reach.

Discussion:

How was your August? Did you have any new dividend payers? Was your August another record for the middle month of the quarter as mine was? As always, thanks for reading and I look forward to any comments you may have.


Tuesday, September 3, 2019

August 2019 Dividend Stock Purchases

While the past few months had been quiet on the capital deployment front for the past few months heading into August, that changed majorly because of two factors. First, I felt like I wanted to reward myself for having recently finished undergrad (and what better way to do so than by purchasing ownership in fantastic businesses that will pay me for many years to come?). And secondly, although I do still have to save up to purchase a car and I have a couple other expenses to prepare for, I did have a bit of flexibility with capital deployment for the month.

With that said, we'll take a look at how I deployed over $500 in capital in August (aside from the $231.80 in net retirement contributions) to begin my new series on my purchases each month.



As illustrated above, I started off August like how I start off many months. I was simply deploying capital I had amassed from dividends received by purchasing another unit of Energy Transfer (ET) for $14.25 in my Robinhood account.

As detailed in my most recent Seeking Alpha article on Energy Transfer a few weeks ago, I believe this company is rather mispriced given its strong operating fundamentals.

At a basic level, the concerns over an escalation in the US-China trade war and the 5 year bear market in the midstream sector, along with the industry wide concern of pipeline projects being halted by environmental activists have left Energy Transfer's unit price absurdly low.

This purchase of Energy Transfer added $1.22 in annual distributions. The yield on this purchase was 8.56%.

I then initiated a position in GEO Group (GEO) in my Webull brokerage account. I initially purchased 8 shares of the company for $17.96 a share and I added 3 shares to my Robinhood account.

Like Energy Transfer, GEO Group is also grossly mispriced in my opinion. I recently highlighted my decision to initiate a position in the company for those that would like a more comprehensive explanation on why I added GEO Group to my portfolio.

In spite of GEO Group's relatively strong operating fundamentals, my cost basis on GEO Group of $17.77 a share means that the price to AFFO that I paid for my position in GEO Group is 6.56 using the midpoint AFFO figure for 2019 of $2.71 a share.

GEO Group has been beaten down due in large part because its balance sheet is a bit lacking (although it isn't terrible per se), and that there are also political concerns, such as the uncertainty of funding from its revolving credit facilities beyond 2024, not to mention the risk that the 2020 elections are perceived to bring into the mix.

These purchases of GEO Group added $21.12 in annual dividends. The yield on my purchases to date is 10.8%.

Another position that I decided to add to just a few days ago was Prudential Financial (PRU). While I technically have a fractional share of Prudential in my M1 Finance account, this purchase marked the first purchase of whole shares in Prudential.

Since I wrote about the company on Seeking Alpha back in May, the stock price has plunged from $101 a share to a touch above $80 a share as I write this post on the last day of August.

For context, that is barely above its absolute bargain price of $75 a share when the market experienced a meltdown last December, culminating in a precipitous Christmas Eve sell off.

When we consider that Prudential is likely to generate at least $12 in EPS during this fiscal year, that implies that Prudential is trading at less than 7 times EPS using my cost basis of $77.98 a share.

While falling interest rates certainly aren't a boon to Prudential's business and the threat of a recession in another year or two isn't encouraging either, the company is priced quite attractively over the long-term.

The long-term value proposition has shifted dramatically from the time that I wrote about Prudential in May to now so much that I envision writing about Prudential once again in the near future.

The 3 shares of Prudential that I added to my portfolio will add $12.00 in annual dividends at an entry yield of 5.13%.

Finally, I added to my position in Altria Group (MO) following the announcement of its 5% dividend increase in the week prior.

The company is trading at a highly compelling valuation and the past week of rumors and now news that Altria and Philip Morris International (PM) are considering reuniting since they split 11 years ago has sent both stocks plunging.

While I think that the merger could be great for both in a number of ways (i.e. PM's expertise in operating in international markets and the ability for both companies to reduce redundancies within their operations), I believe that Altria is priced for favorable results regardless of whether the merger actually occurs.

At my purchase price of $44.25 a share, Altria is yielding 7.59%. With a yield that high, it simply doesn't take much for Altria to prove itself as a great investment over the long-term.

The 2 shares of Altria that I added to my portfolio will add $6.72 in annual dividends.

Summary:

I was debating starting a series summarizing my monthly purchases due to the fact that outside of this month, I won't be able to make any meaningful fresh capital contributions until early next year, once my car is funded and I have a 3 month emergency fund.

However, I came to the realization that over the past two years that I have been investing, my account has slowly been built up outside of a couple of $1,000+ buying sprees spread out over a number of stocks.

I see this as a great opportunity to encourage other newcomers to DGI that this strategy produces results for everyone. It just takes time for those results to amount to a life changing passive income.

I have also been curious to track how much my annual dividends grow from month to month as I have never actually tracked that figure.

In summary, the $41.06 in dividend income that I have added through purchases in my taxable accounts and the $8.29 in dividends that I have added through contributions to my retirement account have increased my annual dividend income from roughly the $600 mark to $649.56.

I'm very much looking forward to building upon these results and despite the lack of capital available for the rest of the year, I am confident I'll be able to end 2019 with $700+ in forward annual dividends.

Discussion:

Have you initiated any new positions lately? What positioned have you recently expanded? Was August as great of a month on the capital deployment front for you as it was for me?

As always, I thank each and every one of you for reading. I look forward to replying to any comments that you may have.

Tuesday, August 27, 2019

Expected Dividend Increases for September 2019

As this is published, the last few days of August are here and September is fast approaching. Fall is fast approaching. This means that we're in the last month of the MLB regular season as teams are gearing up for the postseason. The Bucks will be opening the season in Houston on October 24 before we know it and all the excitement that I find in watching NBA basketball will soon be here. The last few days of each month also bring with it a reflection of the past month of dividend increases and predictions of dividend increases for the next month. With that said, we'll delve into my dividend increases for August before we discuss what I'm expecting in September.


The Only Dividend Increase for August Was A Great One

Altria Group (MO) announced a 5% raise in its quarterly dividend (as was predicted by myself last month), from $0.80/share to $0.84/share. While this is well below the company's 5 year DGR of nearly 10% (due one heck of a 2018 that featured two raises!), the company managed to extend its dividend increase streak to 50 years, providing 54 raises during the past 50 years. 

When we take into consideration that Altria acquired a 35% stake in JUUL Labs for $12.8 billion and a 45% stake in Cronos Group for $1.8 billion last December, it's understandable that management is being conservative and keeping its payout ratio around the 80% long-term target payout ratio. Using the company's midpoint adjusted diluted EPS of $4.31, Altria's payout ratio is a touch below 80% at 79.8%. This allows Altria to retain the other 20.2% of its earnings to begin to deleverage to return its balance sheet to its strength prior to its acquisition spree last December aimed at reshaping the company for many more decades of dividend increases. The company will be able to reduce its net debt to EBITDA ratio of 2.7 to below 2 by both repaying debt and growing its EBITDA in the years ahead.

Although high single digit dividend increases probably won't occur for the next few years, I believe Altria has taken the right steps in making sure it stays relevant in an industry that is rapidly changing. If there is any company that I have faith in, Altria is right up there with the best of them. Without going into too much detail, there are many reasons that Altria delivered 17% annual total returns from 1925 to 2003, and a competent company culture that is skillful at navigating the litigious and highly regulated industry of tobacco is certainly one of those reasons.

With a yield on cost near 6% on my shares of Altria, I'll gladly take mid-single digit dividend growth, especially when I'm confident the company is taking the necessary steps to stay relevant as a company. Across my 7 shares, this increased my annual forward dividends by $1.12.

Having discussed my sole raise for the month of August, we'll now transition into my expected dividend increases for September.

Expected Dividend Increase #1: Philip Morris International (PM)

I'm expecting a raise from PM similar to that of Altria. I believe its likely PM will announce a 4.4% increase in its quarterly dividend from $1.14/share to $1.19/share. Across my 4 shares, this would increase my annual forward dividends by $0.80.

Expected Dividend Increase #2: Realty Income (O)

I am expecting Realty Income to continue its trend of the first first dividend increase of the year being in the 2-4% range, with the others throughout the year being $0.005/share increases in the monthly dividend. Therefore, Realty Income's likely monthly dividend will be increased 0.2% from $0.2265/share to $0.2270/share. This would increase my annual forward dividends by $0.024 across my 4 shares.

Expected Dividend Increase #3: WP Carey (WPC)

Like Realty Income, I would expect WPC to increase its dividend by the same rate as it did in its previous increase. As a result, I'm expecting WPC to increase its quarterly dividend from $1.034/share to $1.036/share. Across my 3 shares, would increase my annual forward dividends by $0.024.

Summary:

August may have been a slow month in terms of the quantity of dividend increase, but when we consider that Altria is one of my largest positions, a 5% raise in its dividend was able to boost my annual forward dividends by $1.12. It would take an investment of $28.00 at a yield of 4% to replicate this completely organic increase in dividend income. This was a pretty typical month for me. The dividend increases continue to come in and along with reinvestment and fresh capital, compounding is becoming more noticeable with each passing month, quarter, and year. The joy of the DGI strategy is that the results continue to speak for themselves. There's no need for me to constantly stress out about my net worth because I know that what matters most to me is a growing dividend income.


Discussion:

Did you benefit from the raise from Altria as well? Was the raise from Altria satisfactory to you? Did you have receive any other dividend raises during August? As always, thanks for taking the time to read this post and I look forward to any comments you are free to leave below.

Tuesday, August 20, 2019

The Case for A Side Hustle: 3 Reasons Why Everyone Needs A Side Hustle

I was reflecting the other day on how it has been about 8 months since I began my Seeking Alpha side hustle. This reflection led me into thinking about how this side hustle has positively impacted me in several ways. I'll be discussing the three ways my side hustle has improved my finances and my life.

Reason #1: A Decent Income Generator



As a personal finance blogger, I'm all for transparency, which is why I believe in revealing the income that I have generated from my Seeking Alpha side hustle. While it's not an absolutely life changing amount, my earnings from Seeking Alpha are actually on track to surpass the income I generated at my first part-time gig in the first two years of college. That still manages to blow my mind.

As illustrated above, in nearly 8 months I've been writing for Seeking Alpha, I have earned just over $3,800 (my first article was published Christmas Eve last year). This works out to about a $500/month average, although recent months have been higher due to the fact I generally write 2 articles a week.

Even net of all taxes, I've still managed to earn about $3,000. This works out to nearly $400/month in additional income.

As I pointed out in my post on the impact of many side hustles, this income that I'm generating not only allows me to save and invest more, but it also means that I theoretically need less to eventually stop working the day job to cover my expenses.

After all, if I am already able to write a couple articles a week working a full-time job, there's no reason I couldn't write at least another couple a week as part of my semi-FI schedule.

Reason #2: It's Something I Find Enjoyment In Doing

While I do sometimes find some enjoyment in my day job, there are just as many days where I don't, and I feel a bit stressed out to say the least.

The great thing about side hustles is that I believe there is a side hustle for just about anybody.

Are you artistic and creative? Perhaps you could start a graphic design side hustle and pull in a few hundred dollars a month doing something you enjoy as a service to small businesses.

Are you analytical and do you enjoy investing? You could start an investment research side hustle and rake in at least a few hundred dollars a month with a bit of effort while also doing something you enjoy.

Whatever it is that you enjoy, chances are there is some type of way you can monetize it and also have fun doing it.

In my case, I find that the interaction with the Seeking Alpha community has improved my knowledge as an investor and some readers have provided me with fresh perspectives that I wouldn't otherwise have came across if I didn't write for Seeking Alpha.

Financial Panther has a great blog post that discusses how side hustles are often more than just the money, and I couldn't agree more. Side hustles can distract you and take your mind off whatever other stresses you have in your life when you maintain a balance with them.

While I wouldn't suggest someone side hustle 30 or 40 hours a week on top of a 9 to 5, there's certainly a case for side hustles to be a part of everyone's life.

Some Seeking Alpha readers have even private messaged me asking for my thoughts on particular stocks, and I have wrote about stocks to address their inquiry, which leads me into my final reason.

Reason #3: Other Opportunities Are Bound To Come To You

One final thing that is interesting about quite a few side hustles is that while many stay pretty casual and as a way to release stress for the side hustler, there is often the possibility that the side hustle could eventually turn into something much bigger, and lead to other opportunities.

In my case, writing for Seeking Alpha attracted the attention of dividend research firm, Sure Dividend. While I haven't yet wrote any pieces for them, I do intend to in the near future and the option is on the table for me.

Had I never started writing for Seeking Alpha, I likely never would have received this offer to write for Sure Dividend. It's also great because besides the dividends I'm receiving from the companies I own, my paycheck from my employer, and earnings from Seeking Alpha, I'll also have an additional income source through Sure Dividend.

The more we are able to diversify our income, the better off we'll be at dealing with the loss of any one of those incomes.

The great thing about a side hustle for a site like Seeking Alpha or Sure Dividend is that you never really know who is reading your work. I even once received a private message from the CEO of a mid-cap REIT that I wrote about, which was pretty cool.

You may even receive a full-time job offer at an investment firm or if you keep at your side hustle diligently for a few years, your following could become so large that it may eventually become worthwhile to quit your job and focus on your side hustle full-time.

While I'm a long ways away from being able to consider focusing considerably more on my side hustles, I know that the longer I write, the more my online presence will grow.

As I continue to increase my income and keep my expenses fairly low, my net worth and passive income will both grow. This could eventually give me the courage to make the leap toward making my side hustle my full-time job as my following and my income both grow.

Conclusion:

Beyond just the financial benefits of a side hustle, there is also the added benefit of side hustles being able to take your mind off of any stress at work, school, or with your family/friends. Some may find side hustles as a therapeutic release to help them cope with whatever issues are going on in their life.

Obviously, the financial benefits of a side hustle are quite notable. They can be a great way to earn hundreds, if not thousands of dollars a month in extra income which can be allocated to paying off student loans, building an emergency fund, investing, or even rewarding oneself through purposeful spending.

And in some cases, side hustles can lead to other opportunities and interesting interactions with others. The possibility of one day being able to turn your small-time side hustle into lucrative full-time work is just another reason to consider a side hustle.

Discussion:

Did I miss any reasons why we all need a side hustle? Are there any examples you can think of to further support my reasons for a side hustle? As always, thanks for reading and I look forward to replying to any comments you may have.



Tuesday, August 13, 2019

Why I Embrace "Failure"

Oftentimes, as Americans, we see how embedded the fear of "failure" is in our culture.

The fear of "failure" is the single greatest obstacle to success. It prevents us from taking action and pursuing our dreams.

We'll explore the reasons I have come to embrace "failure" in recent years, how it has dramatically changed the course of my life, and how it can change yours as well.

As I prefaced in my introduction above, the greatest obstacle to success is the fear of failure.

We first need to begin by redefining failure, and recognizing that an inability to capture success precisely when we want success doesn't necessarily constitute failure.

How many times have we seen people make New Year's resolutions or set goals only to give up on them, instead of reevaluating their situation, making small tweaks to their plan, and proceeding from that point?

This is more of what I would consider a set back. As Ross Perot stated years ago, "Most people give up just when they're about to achieve success. They quit on the one yard line. They give up at the last minute of the game one foot from a winning touchdown."

Unfortunately, more times than I can recall. We need to understand that life is not this linear progression, but rather a journey of peaks and valleys.

Our success in life is merely the sum of our past successes and failures. The more one fails in life, the more they'll typically succeed as well. This is because as Michael Jordan put it, "I've missed more than 9000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed."

In my own case, I am aiming for FIRE by the age of 35. While some people would probably reprimand me, asking me of the consequences if I fail to achieve that goal, I see it in a completely different way.

If I don't reach my goal, the worst case scenario is that I come somewhat close, and I still eventually achieve financial independence, whereas most never will.

If I worried too much about the possibility of not reaching my goal, don't you think I would have never even made an attempt at achieving it?

But if I do achieve my goal, I have achieved something most people never manage to do precisely when most of my peers will be just approaching the prime of their careers. If it weren't for the fact the FI community has grown rapidly in recent years and people actually have achieved it, you would swear that's an insurmountable feat based upon reports from most of the mainstream financial media. 50 years ago this month we achieved an unprecedented feat by putting a man on the moon, so why the hell shouldn't I try to become financially independent?

There will come a day in all of our lives that we approach the end and we are left to take stock of our lives. The most painful thing we can live with in that moment is the regret of the path we didn't take because we were too scared to embark upon an uncertain journey with no guarantee of success. If you aren't making mistakes, you truly aren't living. Just remember that the legends make more mistakes than the rest of us, but it's for that reason they eventually triumphed and became legends.

Every goal that once seemed impossible, became a reality when the crazy dreamers ignored the criticisms and excuses of others, and they just did it.

Moving to the second point, mistakes or "failures" can actually be a great thing if it happens earlier in your life.

When you're first starting out as an investor, a bad investment is disappointing, but it becomes especially costly in absolute terms later in your life.

Take for instance the fact that 99.7% of Warren Buffett's wealth was built after the age of 52, and we begin to understand that mistakes become more costly as we age.

This is one of the two reasons why we should invest as early as possible.

Not only do we benefit more from the power of compound interest, but we also benefit from learnings from our mistakes of the past. When we apply those lessons in the present, it makes us less likely to commit those same mistakes in the future.

I equate this to the adage that you can fall behind by 20 in the first quarter of a basketball game, but you better not be behind 20 with a few minutes left in the fourth quarter.

The further we progress in life, the more costly mistakes become in absolute terms, which is why we should aim to front load our mistakes.

Conclusion:

In order for us to achieve success, we first need to start by acknowledging that just because things don't go our way, it doesn't mean we failed. You only fail when you give up and learn nothing from your mistakes.

The most painful thing anyone can say on their deathbed is "what if I had opened that business" or "what if I had climbed Mount Everest?" Well, you didn't, and now that will be the last thought on your mind as you take your last breath on Earth.

Because you can't learn everything you'll need to know from the mistakes of others, you should be as open to making mistakes in your early years as possible because it is only then you will gain the wisdom that comes with the pain of mistakes and the valleys in your life. As the John Michael Montgomery song states, "life's a dance, you learn as you go."

We only live once, so I believe it's our duty to make every day count. We can only do that by letting go of this notion of the fear of "failure."

Discussion:

Have you dismissed the fear of "failure?" If so, have you noticed a complete transformation in your mindset? As always, thanks for reading and I look forward to replying to any comments you may have.

Tuesday, August 6, 2019

July 2019 Dividend Income

As I'm writing this, July has officially come to a close and the calendar has turned to August. The NFL regular season is just weeks away from starting, the MLB regular season has two months left, and the NBA regular season is still almost 3 months away.

As an NBA fan, I'm most looking forward to the regular season beginning. With all the big moves made this offseason, the NBA title picture is wide open for the taking. Fortunately, my Bucks very much remain in the picture after a decent offseason overall.

But most importantly for the intent of this post, we'll delve into the dividends I received during July.




I collected $33.84 in dividends during the month of July. Of which, $33.59 originated from the 13 companies in my Robinhood account and the remaining $0.25 originated from 11 companies in my M1 Finance account.

The $33.84 in dividends collected this month represents 6.9% quarter over quarter growth compared to the $31.67 in dividends collected in April 2019, and even more astonishingly, a 101.1% YOY growth rate compared to the $16.83 in dividends that I collected in July 2018.

There were a number of changes from April to July that accounted for the $2.17 difference in dividend income, which happened entirely in my Robinhood account as my M1 Finance account was unchanged from April to July:

I collected an additional $0.01 in dividend income from the monthly dividend payer, Realty Income (O) due to its consistent quarterly dividend increases. I love all my companies about equally like a parent loves their children, but of the 59 companies I own between my Robinhood account and M1 Finance account, Realty Income holds a special place in my heart as the only monthly dividend paying company I own.

I also collected an additional $0.10 in dividend income from Leggett & Platt (LEG), which was because of the 5.3% dividend increase they announced a while back.

I received $0.90 less from GlaxoSmithKline (GSK) compared to April, which is due to their varying earnings and target payout ratio.

Relative newcomer to the portfolio, Albemarle (ALB) contributed to $1.10 in dividends. For those interested, I have provided an in-depth analysis of Albemarle on Seeking Alpha, which led me to initiate a position in the company back in May.

Like Albemarle, I also added Eastman Chemical (EMN) to my portfolio in May, following an analysis of the company on Seeking Alpha. This added $1.86 in dividend income compared to April 2019.

Summary:

While the growth from April to July of this year was satisfactory, the most breathtaking takeaway from this post was the fact that my dividend income literally DOUBLED from July 2018 to July 2019. Admittedly, this was because of a relatively low starting point in terms of dividend income. However, I could argue that during this time, I wasn't even investing on a very regular basis due to paying my way through undergrad.

The real fun will begin early next year once I have my car fully paid in cash, a few other obligations paid off, and a small emergency fund built up. In addition to the increased impact of dividend growth and reinvestment that comes with a larger base of dividends, I will also be able to aggressively invest 60-70% of my net income into dividend companies. This will act as rocket fuel being thrown on the dividend flame, which I couldn't be more excited about.

Conclusion:

Did you have any new dividend payers during July? Did you reach any dividend milestones? As always, thanks for reading and I look forward to reading and replying to your comments.

Tuesday, July 30, 2019

Expected Dividend Increases for August 2019

The MLB's regular season is just starting to heat up and the start of the NBA season is still almost 3 months away. With that said, it's late July and time for us to recap our dividend increases for the month. We'll also look ahead to the dividend increases I'm expecting for August.



July Dividend Increases

Increase #1: Enterprise Products Partners (EPD)

Enterprise Products Partners announced a 0.6% increase in its quarterly distribution, from $0.4375/unit to $0.4400/unit. EPD is the largest position in my portfolio and the level of consistency with which it raises its distribution, along with the strong operating results and aligned interests of ownership with other unit holders are major reasons I am so bullish on this stock. Prior to the dividend increase, I added 7 shares of EPD to my new Webull brokerage account. I also added a share following the distribution announcement. For a more in depth analysis of EPD, I will provide the link to my recent article here. Across my 17 shares prior to the announcement, this increased my annual forward dividends/distributions by $0.17.

Increase #2: EQM Midstream Partners (EQM)

EQM Midstream Partners announced a 1.3% increase in its quarterly distribution, from $1.145/unit to $1.16/unit. This increase was also precisely what I was predicting in my previous expected dividend increases post. Across my 4 shares, this distribution announcement increased my annual forward dividend/distribution income by $0.24.

Increase #3: JM Smucker (SJM)

JM Smucker announced a 3.5% increase in its quarterly dividend, from $0.85/share to $0.88/share. This was the one and only dividend increase that I was sure would play out which didn't turn out as I expected. Unfortunately, SJM increased its dividend at barely half of what I was otherwise expecting. Regardless, my annual forward dividends increased by $0.24 as a result of this announcement. While I would have liked to see a raise of 6-7%, I trust that SJM knows what it is doing and look forward to hopefully a bit larger dividend increase next year.

Increase #4: Magellan Midstream Partners (MMP)

As of July 30th, I just noticed that Magellan Midstream Partners announced a distribution increase last week and I somehow missed it! MMP announced a 0.7% increase in its quarterly distribution, from $1.005/unit to $1.0125/unit. While 0.7% doesn't seem like much on the surface, MMP increases its distribution every quarter just like EPD and EQM. Across my 3 units, this increased my annual forward dividends/distributions by $0.09. It isn't much, but it's $0.09 a year more than I thought I had when I woke up today.

Update:

BP elected to announce a quarterly dividend in line with the previous of $0.615. While I was hoping for a small increase, I'm confident BP will reward shareholders with a nice increase in the next couple years. 

Expected Dividend Increase for August

Expected Dividend Increase #1: Altria Group (MO)

While Altria announced two dividend increases last year, that certainly won't be the case this year. Following the acquisitions of both a 35% stake in JUUL for $12.8 billion and a 45% stake in Cronos Group (with the option of increasing that stake to 55%), the company's balance sheet has notably become more leveraged. Although it isn't leveraged to the point of danger, deleveraging will be an emphasis for the company over the next few years. With a target payout ratio of around 80% and the company reaffirming its 2019 adjusted diluted EPS of $4.15-4.27, it seems reasonable to infer that the company's quarterly dividend will be raised 5%, from $0.80/share to $0.84/share. Across my 7 shares, this would increase my annual forward dividends by $1.12.

Conclusion:

My annual forward dividends/distributions increased by $0.74 in the month of July. At a 4% yield, this would take an investment of $18.50 in fresh capital to replicate. This month was largely what I predicted it would be aside from the disappointing announcement from SJM, but I can't really complain about getting increases in income from simply holding my shares and units in these great businesses.

Discussion:

How many dividend/distribution increases did you receive in July? Did you experience any pleasant surprises or disappointments in terms of increases? As always, thanks for reading and I look forward to reading any comments you may have.

Tuesday, July 23, 2019

Why Every Day Is A "Lucky" Day To Be A Dividend Growth Investor

I find it quite interesting how happenstance seems to be the inspiration for a great number of my articles not involving my dividend income summaries or dividend increase series. It was just the other day that I happened to stumble upon a Canadian penny in my yard. I'm not sure how it got there, but it did remind me that even though I found that penny, there was still the effort of picking it up in order for me to claim it. It got me thinking just how incredible it is to be a dividend growth investor for a couple of reasons.


Image Source: imgflip

The First Reason: Beyond A Bit Of Portfolio Monitoring, DGI Is Almost Purely Passive

While I had to pick up that penny to earn it and you would have to pick up that $10 bill to earn it, the incredible thing about DGI is that all you have to do is expend the initial effort through earning the money to finance your investment purchases, whether that is through a side hustle, your day job, or other means of generating an income.

Once you have generated the ~$78 to purchase that share of Exxon Mobil (XOM), the share is yours until you sell it. It will generate $3.48 in dividend income for you in the first year of holding it, ~$3.68 in the second year of holding it, and so on. This is the equivalent to basically finding a penny every single day, and the income will continually increase so long as a company continues to do well over time. The great part is all you need to do is hold your share of XOM and make sure that the company's fundamentals are relatively intact and financial results are continuing to steadily improve over time. Outside of that limited monitoring, the income you earn from that share of XOM is passive. It is deposited straight into your brokerage account. You don't even have to walk to your mailbox to collect your dividend check anymore.

And you can scale that up to whatever amount you'd like to earn every day in average dividends. If you'd like to earn $100 a day without having to reach down to pick up a Benjamin Franklin, you'd need to amass roughly 10,000 shares of XOM (although you'd obviously diversify into at least a couple dozen companies besides XOM).

The Second Reason: Dividend Growth Investing Also Isn't Based Upon One-Time Lucky Events

While it does take a bit of luck to be able to generate an income large enough for one to comfortably cover their expenses and invest the excess into dividend paying companies, it really isn't that difficult to become a dividend growth investor nowadays.

Although I got started with a bit over $2,000 when I was 20, you could start even start with considerably less than that. Robinhood has been incredible in my experience and although I haven't yet received any dividend paying companies in free stock from Robinhood, one could receive enough free stock (up to $500 if they refer enough friends and family) to buy actual blue-chip dividend stocks like Johnson & Johnson (JNJ), Lowe's (LOW), and Altria Group (MO).

And let's be honest, how often have you ever encountered a quarter in a parking lot let alone a $50 or $100 bill? While I'm not a mathematician, I'd venture to say that the odds of finding real money laying somewhere for the taking are very slim. Outside of finding a $50 bill in a parking lot once, I only have really encountered dimes or less.

Fortunately, dividend growth investing is based on your selection of companies, how much time you have to invest, and how much capital you have available to invest. These three variables are all at least somewhat in your control, which means that you can sort of create your own luck and routinely make money without having to even pick it up.

Conclusion:

Dividend growth investing is incredible not just for the reasons we've discussed in the past, but also for the fact that unlike one-time type events such as finding a $50 bill, dividends continue to funnel into your brokerage account as long as your companies continue to retain the ability to earn enough to comfortably be able to pay those dividends. And not only do you continue to receive those dividends if you have invested in high-quality companies (which isn't that hard to do when there are so many out there), you also have the fortune of receiving dividend increases as your companies become more profitable. You're not only collecting your own steady source of easy income, but you're collecting a growing source of income as the years pass.

Discussion:

Do you agree that every day is a lucky day to be a dividend growth investor? Can you think of any other reasons why it's a lucky day to be a dividend growth investor? What's the most "free" money you've ever found? As always, thanks for reading and I look forward to replying to any comments you may have.

Tuesday, July 16, 2019

Perspiration, Persistence, & Patience: The Three Traits Key to Success

Patience, persistence and perspiration make an unbeatable combination for success. - Napoleon Hill
Image Source: BrainyQuote

Often attributed to a quote by American self-help author Napoleon Hill, I believe that perspiration, persistence, and patience are three traits an individual can develop over time that when properly harnessed can lead to unbelievable success. I'll discuss each of these traits in more detail and describe why each is as important as the other.

The Willingness to Perspire Is the First Step to Greatness

If you do the work you get rewarded. There are no shortcuts in life. - Michael Jordan
Image Source: AZ Quotes

The first step to greatness is the willingness to put in the work. As the saying goes, "every master was once a beginner. Every pro was once an amateur." Whatever you decide is worthy of mastering, you're going to have to put in a tremendous amount of work. Michael Jordan put in tens of thousands of hours into his game, which led to his eventual succession into the GOAT discussion. 

How often have we been told by infomercials and people trying to sell us stuff that you can lose 10 pounds in a month without watching your diet or exercising, or that you can earn more money working from home than you can at your day job and put in 10% of the effort? Not surprisingly, the foundation of America has been built upon convenience. If I told you that you could achieve all you ever want in life with very little work, you'd probably be skeptical but you'd still watch my infomercial and maybe even buy my product. 

The inconvenient universal truth in life is that in order to be the best, you need to work unlike anyone else is willing to work. If it was easy to be great, don't you think everyone would do it? There is only one Michael Jordan because he was willing to dedicate tens of thousands of hours of his life to his craft. The same goes with Warren Buffett and any other wildly successful person you name.

The Ability to Persist Separates the Best from the Rest

Image result for churchill if you're going through hell, keep going quote
Image Source: izquotes

While hard work is absolutely necessary to building success, it is only the starting point. Although the quote often attributed to Churchill was quite literally referring to the hell of war and what the British endured during World War II, we're all probably aware that life isn't always going to be a picnic at all times. Even if you're doing what you love, there will undoubtedly be days that you don't want to do it. 

Do you think that Michael Jordan ever felt like taking it easy or slacking off? I think we can agree that Michael Jordan is a human, so he has in fact felt that way before. 

A key difference between someone that is successful and someone that could have been successful is in their ability to persist through the obstacles that life throws at them. We've probably all experienced in our own lives or witnessed someone embark upon a goal only to give up when meeting a slight bit of resistance. 

Think of the New Year's resolutions that that many of us set and then give up on within a few weeks. Maybe we had a goal to lose 10 pounds for the year and a month into the year, we actually gained 5 pounds. We're going to encounter trying times where we feel like giving up, but we need to realize that with every setback comes opportunity (link to post about why I embrace failure). 

The Capability to Remain Patient Allows One to Stay the Course 

Image result for warren buffett patience babies
Image Source: AZ Quotes

Among my favorite quotes of the sage Warren Buffett, is undoubtedly the one illustrated above. Applying his quote from an investing standpoint, I often think of the example that when I was starting out as a dividend growth investor. I invested a bit over $2,000 and my annual dividends at that time were around $80. 

While I'm still in the early innings of my investing career, the incredible thing is that I've managed to amass an investment portfolio worth about $14,000 which generates over $600 a year in dividends for me. Between dividend reinvestment and dividend increases, my annual dividend income is practically increasing by that $80 mark I started at. This will only accelerate as time progresses and compounding does the heavy lifting for me.

Unless you're basically a millionaire already, you won't be a millionaire tomorrow, next week, next month, or next year. Outside of winning the lottery or inheriting a fortune from a long lost uncle, it doesn't matter how hard you work in the next few months or the next year. 

If you have the expectation of achieving success in a very short time span, you'll eventually give up when you inevitably don't achieve the results you desire. The only way to achieve your financial goals or any goal in life for that matter, is to remain patient and stay the course. Nobody ever achieved success by giving up.
Conclusion:

The first step in achieving any success is the willingness to work harder than everyone else. There are no shortcuts to achieving incredible goals. Expanding upon this, you have to be willing to endure your fair share of challenges and obstacles along the way. Life is not a linear progression. There are peaks and valleys throughout life. And, finally, nothing in life worth achieving is going to be able to be achieved in the time it took for me to write this post or for you to read it. Great things take time, and no amount of effort is going to change that. If we're able to develop and implement these three traits into our lives over time, there is very little that isn't possible for us to achieve. I believe we're only limited by our willingness to put in the work, our ability to endure adversity, and to remain patient.
Discussion:

What do you think of the three keys to success? Are there any others that come to your mind? As always, thanks for taking time out of your schedule to read this post. I look forward to any comments you may have.

Tuesday, July 9, 2019

Net Worth Versus Dividends: Why I Prefer Measuring Dividends

As a dividend growth investor and a personal finance enthusiast in general, I track both my net worth and my dividend income. While I track both of these figures, I place more emphasis in one over the other. One can probably deduce which figure I support more than the other (hint: it's in the name of the blog).


Image Source: imgflip

The Practicality of Using Net Worth to Measure Financial Success

Don't get me wrong. Although I prefer tracking dividends and place more emphasis on that, I certainly see the value in also tracking net worth. Net worth is a fantastic measure of your financial success because you can only become financially independent on a sufficient asset base. There are downsides to net worth if you don't properly track it and you include everything in the number.

I prefer to only include assets that generate an income for me. While your car may help you get to work so you can make money, chances are it probably won't generate an income for you. The same concept applies to a house.

The other notable drawback to using net worth to measure your financial success is that depending upon your asset allocation, your net worth may be highly volatile and subject to market downturns.

Without also measuring the dividends that one is receiving, one may be discouraged whenever the next bear market hits and their stock holdings are down 30, 40, or even 50%.

For those that are index fund investors, market downturns are actually even more discouraging because due to the low yield of index funds, this means that any downturn in the market forces retirees to sell off their index funds at the worst time to make up the difference between the cost of their lifestyle and the amount of dividends they collect from their index funds.

Why Using Dividend Income To Measure Financial Success Is Ideal

As they the personal finance mantra goes, cash is king. More specifically, ample cash flow to cover one's expenses renders one financially independent.

One of the many great things about dividend income is that regardless of what the market does, as long as one is diversified into great companies across most sectors of the economy, the cash flow will continue to increase right through a recessionary period.

While equating one's net worth with financial success can be a recipe for disappointment in a bear market, using dividend income to measure financial success can be a factor for motivation or comfort. If an investor is a retiree, they can sleep well at night knowing their stock holdings continue to generate an ever increasing amount of dividends. If an investor is still working, they can view the decline in their net worth as an opportunity to buy dividend stocks at very appealing valuations.

Conclusion:

I view both net worth and dividend income as very important metrics to track. Without an ample net worth, one can't become financially independent. After all, $100,000 can only generate so much in dividends for an investor without sacrificing a good bit of dividend safety and growth. But at the same time, when that $100,000 seemingly evaporates to $50,000 in the midst of a bear market, investors can take solace in knowing that their dividend income is largely independent of market volatility, which can actually help them take advantage of the market turmoil.

Discussion:

Do you measure your net worth? How about your dividend income? Do you see the case for tracking both, but placing more emphasis on dividend income than net worth? As always, thanks for reading and I look forward to replying to your comments.

Tuesday, July 2, 2019

June 2019 Dividend Income

Another month has come and gone, which means that July will be my last full month of undergrad, and it may even possibly be my last full month of formalized education for the rest of my life, aside from a certification or two in the future. Adding to the excitement of the fact I only have about a month left of school, I also benefited from setting a new personal record in terms of dividend income collected during the month of June. Without further ado, we'll delve straight into my results for June 2019.






Overall analysis:

In total, I received a personal record of $63.11 in dividends between my Robinhood account, retirement account, and M1 Finance account for June 2019. This is an quarter over quarter increase of 9.7% compared to the $57.53 I collected in March 2019, and an even more impressive YOY increase of 63.3% compared to June 2018 dividend income of $38.64. I collected $34.21 from my Robinhood account for the month, $28.42 from my retirement account, and $0.48 from my M1 Finance account.

Quarter Over Quarter Growth Analysis:

Breaking it down, there were a variety of factors in play that contributed to the 9.7% or $5.58 growth over March, which included the following:

The $28.42 in dividends collected from my retirement account mutual fund (CAIBX) increased my dividend income by $4.88 compared to March 2019.

I benefited from a dividend increase from Pepsico (PEP), which increased my dividends by $0.05 compared to March.

Johnson & Johnson (JNJ) increased my dividend income by $0.10 compared to March.

International Business Machines (IBM) increased my dividend income by $0.15 compared to March.

Exxon Mobil (XOM) increased my dividend income by $0.30 compared to March.

Southern Company (SO) increased my dividend income by $0.10 compared to March.

Year Over Year Analysis:

Taking it one step further, there were a number of material developments that allowed my dividend income to grow 63.3% YOY or by $24.47, which include the following:

My dividend income collected from CAIBX increased $21.29 compared to June 2018.

PEP increased my dividend income by $0.05 compared to June 2018.

British Petroleum (BP) increased my dividend income by $0.06 compared to June 2018.

I also benefited from an additional share of Dominion Energy (D) and a dividend increase, which caused me to collect an extra $1.16 from them compared to June 2018.

I received a dividend increase from Realty Income (O), which helped me collect an extra $0.02 from them compared to June 2018.

Home Depot (HD) announced a massive 32% dividend increase since June 2018, which increased my dividend income by $0.33 compared to June 2018.

JNJ accounted for $0.10 of my additional dividend income compared to June 2018.

XOM added another $0.30 to my dividend income compared to June 2018.

IBM accounted for $0.15 of my additional dividend income compared to June 2018.

Amgen (AMGN) added another $0.13 in dividend income compared to June 2018.

SO accounted for $0.10 of my additional dividend income compared to June 2018.

Pfizer (PFE) added another $0.16 to my dividend income compared to June 2018.

JM Smucker (SJM) accounted for $0.14 of my additional dividend income compared to June 2018.

Finally, the creation of my M1 Finance portfolio last September added $0.48 compared to the goose egg I collected from it last June.

Summary:

It's incredible to think that a year has gone by so fast after my portfolio's first June last year. I'm very pleased with both the 9.7% quarterly growth and the 63.3% YOY growth, but next year is set to be infinitely more exciting as I'll be able to contribute more capital than I ever have before. While 63.3% YOY growth is incredible, I fully believe I'll be able to more than double my dividend income collected next June from dividend increases, reinvestment of dividends into my Robinhood and retirement accounts, and fresh capital contributions to my retirement account and Robinhood account. It has been an incredible 2 years of investing, and the best is yet to come! I couldn't be more excited!

Discussion: 

How was your June? Did you have a record month? Did you have any new dividend payers for June? As always, I very much appreciate everyone for reading this post and I look forward to reading and replying to your comments!










Tuesday, June 25, 2019

Expected Dividend Increases for July 2019

With NBA free agency set to start in just a few more days, this offseason is sure to be one that will shape the landscape of the NBA for at least several years. If things play out right, the Milwaukee Bucks could again return to their glory days in the early to mid 1970s, which is beyond exciting to me. With that said, June is nearly over and with it, the year is incredibly half over. It's time for another post detailing the dividend increases I received in June, while we also look ahead to the raises I'm expecting in July.


June Dividend Increases: 

Dividend Increase #1: Realty Income (O)

As I expected in the previous dividend increase post, Realty Income raised its monthly dividend 0.2%, from $0.2260/share to $0.2265/share. This increased my annual forward dividends by $0.024 across my 4 shares.

Dividend Increase #2: WP Carey (WPC)

WP Carey came in with another quarter of somewhat disappointing dividend growth, announcing a 0.2% increase in its quarterly dividend, from $1.032/share to $1.034/share. This increased my annual forward dividends by $0.024 across my 3 shares.

Wild Card: Philip Morris International (PM)

Unless Philip Morris announces a last minute dividend increase in June, the company didn't increase its dividend in June like it did last year. I would assume the increase last June was an anomaly as the company felt compelled to keep up with its peer, Altria and the two dividend increases it announced last year. At any rate, we should definitely be receiving a dividend increase from Philip Morris in September.

Expected July Dividend Increases:

Expected Dividend Increase #1: JM Smucker (SJM)

While JM Smucker has a very strong 5 year DGR of 8% and a most recent increase of 9%, I wouldn't be surprised to see a bit of a deceleration from prior years, with a 6-7% increase being the most likely outcome from my perspective. This would translate into an increase in the quarterly dividend from $0.85/share to $0.90-$0.91/share. Across my two shares, my annual forward dividend income would increase $0.40-$0.48.

Expected Dividend Increase #2: EQM Midstream Partners

I'm expecting EQM Midstream Partners to continue with the status quo of $0.015 quarterly dividend increases, which is fine with me considering my yield on cost is approaching 9%. A 1.3% increase in its quarterly dividend, from $1.145 to $1.16 is an outcome I am quite confident in. Across my 4 shares, this would increase my annual forward dividends by $0.24.

Expected Dividend Increase #3: Enterprise Products Partners (EPD)

Enterprise is another name that I'm quite confident will be predictable. A 0.6% increase in the company's quarterly dividend, from $0.4375 to $0.44 is yet another outcome I am confident will materialize. If this does occur, my annual forward dividends would increase $0.09 across my 9 shares.

Wild Card Increase: British Petroleum (BP) 

It was around this same time last year, BP announced a rare dividend increase on the last day of July. The real question is if it was a one time event that won't happen for another 4 or 5 years, or if it will be a repeatable event. While I believe this is like the flip of a coin, I'll assume a 2.4% increase in the quarterly dividend from $0.615/share to $0.63/share. Across my 4 shares, this would increase my annual forward dividends by $0.24.

Summary: 

Overall, I received only $0.048 in dividend increases for the month of June, which would take $1.20 in fresh capital to replicate at a 4% yield. While June was a pretty disappointing month in terms of dividend increases, my upcoming dividend income post for the month will more than make up for it. Spoiler alert: I set a new personal best for dividends received in a month! In regards to July, my annual forward dividends could increase $0.73 or upwards of $1.05, which would take investments of $18.25 to $26.25 to replicate, respectively, assuming a 4% dividend yield.

Discussion: 

How was your June in terms of dividend increases? If it was a bit disappointing like mine, did you at least have a record dividend income month as a consolation prize? As always, thanks for reading and I look forward to replying to your comments.

Tuesday, June 18, 2019

My First Major Dividend Growth Investing Revelation

Since I began dividend growth investing in September 2017, I've primarily been an investor that focuses more on yield than on dividend growth. While I own plenty of companies with high dividend growth, such as Home Depot (HD), Lowe's (LOW), and Williams Sonoma (WSM), it's no secret that my portfolio is chalk full of companies with high dividend yields and low single-digit dividend growth or maybe even no growth, such as AT&T (T) and Royal Dutch Shell (RDS.B). Recently, I've come to see the value in low yield, high growth companies, such as Visa (V), TJX Companies (TJX), and Lockheed Martin (LMT).


Image Source: imgflip

As I've grown older and more experienced as an investor, and as my dividend income has continued to grow, I've become less fixated on yield and more focused on the dividend growth aspect of investing. After all, it's the dividend growth of a portfolio that helps an investor crush inflation and build long term wealth that can be generational.

While I believe it's important to own high yielding companies like AT&T, I'd argue it's equally as important to own low yielding, high growth dividend companies.

The case for an investment in companies like AT&T is obvious. The higher amount of current income one receives, the more they can reinvest, which acts as one of the three growth mechanisms for dividend income, with the other two being dividend increases and fresh capital contributions.

At the time of writing, AT&T offers a 6.31% dividend yield and ~2% dividend increases each year, which will probably accelerate to 3% a year once AT&T has completed its deleveraging plan. For the sake of calculation purposes, we'll assume that 2% dividend increases continue to be the norm. According to BuyUpside's dividend payback period calculator, it would take 14 years for one to recover their initial investment in dividends from AT&T, which they could also reinvest in other attractive buying opportunities along the way. While investors with a 30, 40, or 50+ year time span are better off with a low yielding company, high growth company like Visa, it's quite easy to see why high yielders with reasonably sustainable dividends like that of AT&T received my preference for the past two years, and why companies like AT&T are crucial to a dividend investor.

At the time of writing, Visa offers a 0.59% dividend yield and the potential for 16% dividend increases each year for the next couple decades due to its lucrative, high growth business, and low payout ratio. If we assume a very conservative 12% CAGR for earnings over the next 20 years, Visa could increase its dividend each year by 16% and its payout ratio would double from 19% to a still manageable ~38%. Before we plug in how long it would take to recover an investment in Visa in dividends, I'd like you to estimate how long it would take for this to occur.

If you properly considered the power of compounding dividends, you would have replied it would take 22 years to recover your investment in Visa.

When we consider that Visa's starting yield is less than a tenth of what AT&T's is, this is absolutely mind boggling and I never gave enough merit to companies like Visa until I was configuring a model dividend growth with a 3.3% yield, a 9% 5 year DGR, and a 8% 10 year DGR. I found that companies like Visa were like adding gasoline to the dividend growth fire, so to speak.

Even if we assume AT&T manages to achieve a long-term dividend growth rate of 3%, the yield on cost of AT&T after 25 years barely doubles from the current 6.31% to 12.83%, using the yield on cost calculator.

If we take Visa and plug in an even more conservative dividend growth rate of 14% a year over the next 25 years, we arrive at a monstrous yield on cost of 13.70% from the current 0.59%.

While I always understood the power of compounding dividends, I never truly understood it until I stopped and took a few moments to analyze what a comparison like the one above looks like in action.

Admittedly, there may be flaws in the above long-term projections (AT&T's long-term dividend growth could be 3-4%, and Visa's could be a bit lower than the 14% over the next 25 years), but I think the illustrative nature of this example could help other investors to let go of their shortsightedness and fixation on yield like I recently did.

I've always been a long-term thinker, but until I did this experiment, I would typically only think about 5 years from now or 10 years from now. Sure, it may be difficult to predict what the future holds two decades from now for AT&T and Visa, but it's quite enlightening to see that each company holds its own purpose in a DGI portfolio.

It is my hope that the above demonstration will prevent others from chasing yield too often like I did in the past. It's understandable for one to question "how can I increase my dividend income faster" when one is just starting out and they receive their first dividend check for a few dollars like the $1.35 I received from Genuine Parts Company in October 2017.

But I believe as one continues to invest and their dividend income grows, they feel less of a need to chase yield and they start to include high growth dividend payers in the mix. This is my perspective as a relatively new investor, and I'm thrilled to share with readers how my overall thoughts on DGI change as I become a more experienced investor.

Discussion:

Did you have a tendency to chase higher yields when you first began dividend investing? Or were you already well aware of the power of rapidly growing dividends? As always, thanks for reading and I look forward to replying to your comments.

Tuesday, June 11, 2019

May 2019 Dividend Income

It's incredible to think that summer is unofficially here (we had our first 90 degree day of the year in Wisconsin) and that the MLB All-Star Game is just around the corner. With that said, it's time for us to discuss how much May provided for us in terms of dividend income.




Analysis

Overall, I collected $44.04 in dividends during the month of May. Of this, $43.70 came from 12 companies in my Robinhood portfolio. The remaining $0.34 came from 15 companies in my M1 Finance portfolio. The $44.04 in dividends represents a 2.1% quarter over quarter growth compared to February 2019, and a 30.1% YOY growth compared to May 2018.

There were a number of changes from February 2019 to May 2019 including the following that accounted for the $0.95 increase in dividend income:

Williams Sonoma's (WSM) dividend recent dividend increase accounted for an additional $0.30 in dividends per quarter for me, which showed up in May.

I also received dividends on an additional 5 shares of Energy Transfer (ET), which increased my dividend income by $1.52 from February to May.

I also received dividends on an additional share of AbbVie (ABBV), which was a result of my recent sale of Omega Healthcare Investors (OHI) shares to close my position. This increased my dividend income by $1.07.

Speaking of OHI, the two sales of OHI reduced my dividend income by $5.94 and were used to buy a share in ABBV, Dominion Energy (D), and Magellan Midstream Partners (MMP).

The addition of MMP shares to my portfolio increased dividend income by $3.02.

I also benefited from both a dividend increase from Tanger Factory Outlet Centers (SKT) and an additional share. This increased my dividend income by $0.41.

A dividend increase from EQM Midstream Partners (EQM) also raised my dividend income by $0.06.

An additional share of Enterprise Products Partners (EPD) and a dividend increase raised my income by $0.46.

Conclusion:

While this month wasn't spectacular growth compared to February, it was still growth and I consider that decent progress for where I'm at in life. I'll soon be graduating college and I'll have significantly more capital to invest next year after I have a car paid for in cash and a small emergency fund established.

Discussion:

How was your month? Did you have any new dividend payers? Close any positions like I did? As always, thanks for reading and I look forward to replying to your comments.


Tuesday, June 4, 2019

Expected Dividend Increases for June 2019

The Milwaukee Bucks had a disappointing end to their otherwise strong season after taking a 2-0 lead in the Eastern Conference Finals against the Raptors. Despite the heartbreaking ending, I don't believe this will be the last we see of Giannis and Co in the ECFs for quite a few years. Aside from that, yet another month is nearly over and that means it's time to examine the dividend increases we've received for May (so far) and look ahead to June.



May Dividend Increases:

Dividend Increase #1: Lowe's Companies (LOW)

As I predicted LOW would, they increased their quarterly dividend by 14.6% from $0.48/share to $0.55. This increased my annual forward dividends by $0.56 across my 2 shares.

Dividend Increase #2: Leggett & Platt Incorporated (LEG)

LEG did exactly as I predicted they would, increasing their quarterly dividend by 5.3% from $0.38/share to $0.40. This resulted in a $0.40 increase to my annual forward dividend income across my 5 shares.

Expected Dividend Increases:

Expected Dividend Increase #1: Realty Income (O)

I am expecting O to continue its trend of increasing its dividend by roughly 0.3% in the last month of each quarter, in addition to the 3-4% increases in January. Therefore, I'd expect a raise in the monthly dividend from $0.2260/share to $0.2265. That would increase my annual forward dividends by $0.024 across my 4 shares.

Expected Dividend Increase #2: WP Carey (WPC)

I am also expecting WPC to remain predictable with the $0.005/share quarterly increases. An increase in the quarterly dividend from $1.032/share to $1.035 seems to be a likely occurrence, which would increase my annual forward dividend income by $0.036 across my 3 shares.

Expected Dividend Increase #3: Philip Morris International (PM)

This one is a complete wildcard. Although PM increased its dividend last June, it has historically raised its dividend in September. Given the reputation PM has for increasing its dividend around mid-single digits, I'd assume a dividend raise from the current quarterly dividend of $1.14/share to $1.20 seems like a reasonable prediction. This would increase my annual forward dividends by $0.96 across my 4 shares.

Conclusion:

While the month of May didn't come close to April in terms of dividend increases, I still received two strong increases that were exactly what I expected they would be. These two raises increased my annual forward dividends by $0.96, which is equivalent to an investment of $24.00 at a 4% dividend yield.

Overall, June could result in a $0.06 increase to my annual forward dividends or a possible $1.02 increase in my dividends if PM announces a second consecutive dividend increase in June. Overall, the $1.02 in expected dividend increases for the month of June would take $25.50 of fresh capital invested at a 4% dividend yield. The trifecta of dividend increases, reinvestment, and occasional fresh capital continues to work its magic, and I couldn't be more pleased.



Tuesday, May 28, 2019

Why Others May Not Choose Dividend Growth Investing

As a follow up to my article on why I chose dividend growth investing, I thought it would be useful to examine the other side of the argument and determine why people don't choose DGI as their investment strategy. After all, the thing about personal finance and investing is that there isn't a one size fits all approach, as with just about anything in life.



First Reason: Maybe They Have No Strategy And Underestimate DGI

It's entirely possible that one may underestimate the power of DGI and feel the need for a get rich quick strategy. Sadly, no viable get rich quick strategy exists. If it did, do you really think some "expert" would teach you for just 5 easy payments of $19.95? The dreaded short-term trader mindset is unfortunate because there are hundreds of fantastic companies out there for investors to choose from and own over the long-term, rather than rent for the short-term with the hope of making a profit. This short-term mindset is the very reason most investors underperform the market.

It's the long-term mindset coupled with aggressive savings that have allowed idols of mine such as Jason Fieber to unlock financial independence at such an early age to enable them to live their ideal life. Jason's story is absolutely incredible and really demonstrates the power of DGI better than I could even put it into words. It's absolutely breathtaking what a high savings rate and DGI is able to accomplish in such a relatively short amount of time.

Sure, you probably won't be able to support a lifestyle in which you buy a Lamborghini for each of your vacation homes on every continent besides Antarctica while also maintaining closets full of $5,000 suits through DGI. DGI isn't exactly a way to a quick windfall like winning the lottery or anything, but it's actually a viable and reproducible way to build wealth unlike winning the lottery.

But the real takeaway is that regardless of whether you need $20,000 a year to meet your expenses or $500,000, the concept of DGI is viable for both of those needs. You simply need to be able to identify excellent companies and what the fair value is for those excellent companies. Then it's just a matter of consistently investing capital in those types of companies at or below fair value for 5, 10, 15, or 20+ years, and the results become meaningful.

But it's completely understandable that many just go by what the financial media tells them and maybe some of these people without a real strategy simply don't have the time to educate themselves enough to be disciplined and rational with their investment strategy, which leads me into the next point.

Second Reason: Maybe They Don't Have The Time Commitment Or Passion Necessary

In the world we find ourselves in, many people simply don't have the time and/or passion necessary to commit to learning an investing strategy such as DGI or growth investing. It is very time consuming initially and there is quite a bit to learn in terms of analyzing companies and determining reasonable prices to pay for ownership in such companies, not to mention the occasional monitoring that goes into all these investment holdings.

While Americans technically benefit from the marvelous advances in technology over the past century, many have used that extra "free time" to grind it out at work in the hopes of moving up the corporate ladder and generating more income. And as long as they are keeping their major 3 expenses (housing, food, transportation) under control, I certainly don't blame them for doing so. After all, you can only cut expenses so much before there is nothing left that you can realistically cut.

While I'm not going to say income is completely infinite, just about all of us could be doing more to increase our income for the better of our financial futures if that is a priority for us in our own lives.

Learning new skills can increase one's value to society and if they would like a more hands-off approach to investing, index investing is absolutely, without a doubt, the best investment strategy for them to do.

If Warren Buffett advises most people to choose index investing, who the heck am I to disagree? In the words of famed economist Gene Fama Jr., "Your money is like a bar of soap. The more you handle it, the less you'll have." Index investing takes out all of the emotion that often goes into investing, which reduces the risk of stupid decisions that basically all of us as humans are susceptible to. Simplicity is incredibly powerful and the utility of index investing can't be overstated.

Third Reason: Perhaps They Equate GE Dividend Cuts With A Failure Of The Strategy

Yet another reason people may not choose DGI as their investing strategy is that maybe they hear horror stories of companies like GE and steer clear of DGI because of these stories. They fail to realize that a well-diversified DGI portfolio can withstand massive dividend cuts or even dividend suspensions.

Even if a company whose dividends account for 3% of an investor's income decides to completely suspend its dividend, the likely 5-7% dividend growth from the other 97% of dividend payers. So even in a worst-case scenario with a couple of outright dividend suspensions, an investor can roughly tread water excluding inflation. It's also important to note that these dividend cuts can often be predicted.

As was the case with GE, Simply Safe Dividends predicted GE's dividend cuts by issuing dividend safety scores of 18 and 10, before the cuts in 2017 and 2018. Simply Safe Dividends has predicted 98% of dividend cuts since its formation in 2015. While there are some exceptions like small caps which have more dynamic capital allocation policies and the Pacific Gas & Electric Company wildfire disaster that have led to dividend cuts and suspensions, these are abnormalities and are the exception to the rule that investing in excellent companies with strong fundamentals over the long-term works wonders when one is properly diversified.

Although sticking with only companies of dividend safety scores higher than 60 likely won't prevent an investor from experiencing a single dividend cut over the course of their investing lifetime, it will go a very long way in doing so. After all, the selection process is arguably just as important as the occasional monitoring of investments.

If you're looking for dividend ideas, you can even visit Seeking Alpha for great ideas (including mine, I mean I had to fit that in there). I generally only present actionable and timely ideas for companies with dividend safety scores of 60+, which indicates the dividend is safe or very safe for the foreseeable future.

Conclusion: 

While dividend growth investing is an incredible investment strategy for many, it simply won't be the appropriate strategy for everyone, and that's perfectly fine. The overall takeaway is that regardless of your investment strategy (be it growth investing, index investing, you name it), you absolutely MUST have the courage and conviction to stick with it through both good and bad times. You can certainly tweak or refine your strategy here and there, but abandoning a strategy every time you encounter adversity is a recipe for failure.

Discussion: 

Are you a DGIer? Or are you an index fund investor? A growth investor? As always, thanks for reading and I look forward to replying to your comments.