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?