Tuesday, May 25, 2021

June 2021 Dividend Stock Watch List

As I'm writing this blog post, Memorial Day, the unofficial start of summer, is just 8 days away. We have been fortunate enough here in Central Wisconsin to receive meaningful precipitation over the past week, which was more than welcomed by yours truly, especially considering my rant last week about it looking more like a desert where I live by the day.

With that aside, I will be going over a few of my dividend stock picks heading into June.

Massive spoiler alert: This list marks arguably my first of the series that tilts more toward value and yield-oriented picks than growth-oriented picks.

100 US Dollar Banknotes

                                                          Image Source: Pexels

Dividend Stock #1: Philip Morris International (PM)

What would be more fitting to start off an income-oriented dividend stock watch list than Philip Morris International (hereafter referred to by its ticker, PM)?

To be fair, I actually believe that PM is more of an income and growth hybrid pick given its reputation as the ultimate ESG pick of its industry.

Since I last covered PM in March on Seeking Alpha, PM produced strong operating results in the first quarter, with the company posting 2.9% YoY net revenue growth and a 590 basis point expansion in adjusted operating income margins, which helped the company to generate an all-time high adjusted diluted EPS figure of $1.57, marking a 21.5% YoY growth rate (data sourced from PM's 2021 First-Quarter Results Presentation).

PM continued to make tremendous progress on its stated mission of building a smoke-free future, with its smoke-free product revenues growing from 21.7% of total revenues in Q1 2020 to an astounding 28.0% in Q1 2021.

Simply put, PM is transitioning to not only a less harmful product line in the future, but the product line is more profitable than the legacy business, which explains why adjusted OI margins expanded significantly. 

To that point, Yahoo Finance analysts are forecasting 12.8% annual earnings growth over the next 5 years, while PM is trading at merely 16 times this year's forecasted earnings.

At the current share price of $97.42 (as of May 23, 2021), I believe that PM offers a clear path to 10%+ annual total returns over the next decade with its 4.9% yield, conservative mid-single digits annual earnings growth, and slight multiple expansion over the long-term.

Dividend Stock #2: STORE Capital (STOR)

The next stock on my list is STORE Capital (hereafter referred to by its ticker, STOR), which despite the slightly disappointing operating results in the first quarter, is a solid pick IMO.

First, STOR is trading at about 17 times this year's AFFO/share guidance of $1.90-$1.96 (based on the $33.65 share price as of May 23, 2021).

Despite the fact that STOR's AFFO/share of $0.47 was below last year's figure of $0.49 (per STOR's Q1 2021 earnings call), it's worth noting that the bulk of Q1 2020 was without COVID-19's significant impact, whereas all of Q1 2021 was subject to some COVID disruptions.

Cash collections continued to improve from 93% in Q1 2021 to 95% at the start of Q2 2021 in April, which is an encouraging trend that I will continue following.

After a 2019 that saw AFFO/share of $1.99, STOR is looking to recover from the impact of COVID, which I estimate the company will rebound from to deliver AFFO/share growth over 2019 levels next year.

Despite the challenges of the past year, STOR remains a company that I believe has the potential to deliver annual mid-single digit AFFO/share growth on a consistent basis.

STOR's 4.3% yield, annual mid-single digit AFFO/share growth potential, and roughly static valuation multiple would allow for the stock to meet my 10% annual total return target over the next decade from the current share price.

Dividend Stock #3: American Electric Power (AEP)

Wrapping up my dividend stock watch list, is American Power (hereafter referred to by its ticker, AEP).

AEP delivered solid operating results to start off 2021, with operating EPS surging 12.7% from $1.02 in Q1 2020 to $1.15 in Q1 2021 (data sourced from AEP's 1st Quarter 2021 Earnings Release Presentation).

AEP reaffirmed its guidance of $4.55-$4.75 in operating EPS, which would fall just outside AEP's 5-7% long-term growth target at the midpoint.

Using AEP's midpoint operating EPS figure of $4.65 and comparing it to the current share price of $86.65 (as of May 23, 2021), AEP is trading at just under 19 times this year's earnings, which I believe is reasonable for a utility growing firmly in the mid-single digits annually.

I believe that AEP's 3.4% yield, mid-single digit annual earnings growth potential, and slight multiple expansion should translate into the stock meeting my 10% annual total return requirement over the next decade.

Concluding Thoughts:

While the past few months of capital deployment have been heavily concentrated into growthier dividend stocks, I anticipate that I will be returning to more of a value and income-oriented approach for June.

That's not to say that I won't also be adding to more growth-oriented dividend stocks in June, but it certainly won't be to the extent of the past few months.

Discussion:

Are any of PM, STOR, or AEP on your watch list heading into June 2021?

If not, what dividend stocks are on your watch list?

As always, thank you for your readership and I look forward to your comments in the comment section below!


Tuesday, May 18, 2021

April 2021 Dividend Income

 As I'm writing this blog post, it's mid-May and we haven't received any meaningful precipitation in Central Wisconsin for almost two weeks!

To make matters worse, the temperatures have heated up the last few days to highs in the 70s Fahrenheit, which has led to persistently high risk of wildfires in my area.

Hopefully, we will receive more than trace amounts of precipitation in the near future as it's starting to resemble more of a desert here by the day.

With that aside, I will be delving into the intent of this post, which is to discuss the dividend income that I received during April 2021.



Analysis:

During the month of April 2021, I received $89.03 in net dividends.

Compared to the $80.26 in net dividends that I received in January 2021, this works out to a 10.9% quarterly growth rate.

Additionally, the $89.03 in net dividends collected in April 2021 equates to a staggering 79.8% YoY growth rate compared to the $49.52 in net dividends received in April 2020.

Going into detail by account, I received $78.99 in net dividends from 16 companies in my Robinhood account, $9.79 in net dividends from 5 companies in my Webull account, and $0.25 in net dividends from 11 companies in my M1 Finance account.

The following activity within my respective accounts resulted in an $8.77 increase in my net dividends from January 2021 to April 2021:

My net dividends increased $8.38 within my Robinhood account as a result of the elimination of my margin ($3.38 boost in net dividends) and the cancellation of my Robinhood Gold expense ($5.00 boost).

I received an additional $0.11 in net dividends from Cisco (CSCO) in my Robinhood account due to the recent dividend increase.

Another dividend increase that resulted in an extra $0.01 in net dividends in my Robinhood account came from Realty Income (O).

I received a $1.06 boost in my net dividends received from my W.P. Carey (WPC) position within my Robinhood account, which was due to a combination of the recent dividend increase and my recent purchase of an additional share of the stock.

My net dividends received from STORE Capital (STOR) increased $0.36 in my Robinhood account as a result of my recent purchase of an extra share of the stock.

I also received an additional $1.20 in net dividends from Philip Morris International (PM) within my Robinhood account due to my recent purchase of an additional share of the stock.

My net dividends received from GlaxoSmithKline (GSK) within my Robinhood and M1 Finance accounts were $2.10 higher as a result of my purchase of extra shares in my Robinhood account and the historically higher second quarter dividend.

I received an additional $0.02 from Albemarle (ALB) across my Robinhood and Webull accounts as a result of the recent dividend increase.

My net dividends received from Genuine Parts Company (GPC) within my Robinhood account were $0.94 higher due to the recent dividend increase and my purchase of an additional share of the stock.

Due to PepsiCo's (PEP) dividend payment schedule, my net dividends within my Robinhood and M1 Finance accounts were $2.07 lower.

The timing of Digital Realty Trust's (DLR) dividend payment resulted in a $3.36 reduction in my net dividends received within my Robinhood account.

Finally, the timing of JPMorgan Chase's (JPM) dividend payment within my M1 Finance account led to an additional $0.02 in net dividends.

Concluding Thoughts: 

Due to several dividend increases and consistent capital deployment over the past several months, my net dividends logged a solid 10.9% quarterly growth rate from January 2021 to April 2021.

What really is a testament to the power of dividend growth investing and consistent capital deployment, is the 79.8% YoY growth rate in net dividends from April 2020 to April 2021.

Since I'm anticipating that I'll be able to continue deploying $1,500-$2,000/month in capital for the foreseeable future, I'm forecasting that I will be very close to surpassing $100 in net dividends during July 2021, depending on what dividend stocks look attractive the next few months, and their payment schedules.

Discussion:

How was your April in terms of dividend income?

As always, thanks for reading and I look forward to your comments in the comment section below!

Tuesday, May 11, 2021

April 2021 Dividend Stock Purchases

 As I'm writing this blog post, it's officially mid-May. Even though the weather over the past few weeks has mostly been mild, the last few days have brought a cold front to Central Wisconsin, with temperatures peaking in the 50s Fahrenheit during the day and dipping down just below freezing at night.

With that aside, I will be delving into my capital deployment during the month of April 2021. 



Beginning with my retirement account, I deployed $378.00 in capital between my 7% contribution to my Capital Income Builder (CAIBX) position and my employer's 3% contribution.

Adjusting for the 3.5% sales charge on the contributions of myself and my employer, I deployed $364.78 in capital during April 2021.

The capital contributions made during April helped my CAIBX position to grow from 157.983 shares entering April to 163.409 shares heading into May.

Factoring in $2.13 in net annual dividends/share (which was the net annual dividends/share paid out by CAIBX last year), my net annual forward dividends were boosted by $11.56 as a result of my capital deployment, which works out to a 3.17% net yield.

Moving to my taxable accounts, I added to an existing position and initiated 3 new positions during April, all of which were on my watch list for April 2021.

I started April off by adding a share of Johnson & Johnson (JNJ) at a cost of $163.64, which equates to a 2.47% net yield when factoring in the $4.04 (ahead of the dividend increase) that was added to my net annual forward dividends that were added to my portfolio due to the purchase. JNJ's recent dividend increase was yet again well in excess of inflation, which means that the only year of JNJ's 59 year dividend increase streak that JNJ failed to beat inflation with its dividend increase was in 1980 when inflation was 13.5%!

Next, I initiated a 4 share position in T. Rowe Price Group (TROW) at an average cost of $178.69 a share as TROW, which works out to a 2.42% net yield when considering the $17.28 in net annual forward dividends that were added to my portfolio as a result of the purchase.

The second position that I added to my portfolio was 1 share of BlackRock (BLK) at a cost of $829.00, which equates to a 1.99% net yield when factoring in the $16.52 in net annual forward dividends that were added to my portfolio due to the purchase. 

The third and final position that I added to my portfolio was 1 share of American Tower (AMT) at a cost of $250.00, which works out to a 1.98% net yield when considering the $4.96 in net annual forward dividends that were added to my portfolio as a result of the purchase.

Concluding Thoughts:

When factoring in the $2,322.18 in net capital that I deployed during April 2021 and the $54.36 in net annual forward dividends that were added to my portfolio as a result of my purchases, I deployed capital at an average weighted net yield of 2.34%.

While my capital deployment was a bit lower than I anticipated due to the timing of my transfer to my brokerage account, the lower than anticipated capital deployment in April will lead to just over $3,000 in available capital for deployment during May.

Heading into May, my net annual forward dividends are just over $1,650.

Discussion:

How was your April in terms of capital deployment?

Did you initiate any new positions during April as I did with AMT, BLK, and TROW?

Tuesday, May 4, 2021

Expected Dividend Increases for May 2021

As I'm writing this blog post, we have went from ideal high temperatures in the 60s Fahrenheit here in Central Wisconsin just a few days ago to muggy highs in the low 80s. It's safe to say that although summer is officially 7 weeks away, summer has unofficially began here in Central Wisconsin.

With that aside, I'll be discussing my portfolio's dividend announcements during the month of April and looking ahead to dividend announcements that I'm expecting in May.

Actual Dividend Announcements for April 2021

Dividend Freeze #1: Exxon Mobil (XOM)

While I was anticipating that Exxon Mobil would have announced a dividend increase in April as was customary pre-COVID for more than 3 decades, XOM opted to keep its quarterly dividend in line with the previous of $0.87/share.

Although a bit disappointing, I can understand why XOM opted to freeze its dividend. It will be interesting to see whether the company will raise its dividend by the end of the year in order to maintain its status as a Dividend Aristocrat.

Distribution Freeze #1: Enterprise Products Partners (EPD)

When Enterprise Products Partners announced that it was keeping its distribution in line with the previous of $0.45/unit, it was somewhat surprising. 

Given that EPD had just resumed distribution increases with a nice 1.1% raise in January, WTI crude has since stabilized to an average price of $59.06/barrel through April of this year, and that natural gas has settled at an average price of $3.30/MMBtu, I was anticipating a 0.6% increase in the quarterly distribution to $0.4525/unit.

At any rate, EPD's distribution is well-covered and since the company is a high-yielding component of my portfolio, I don't need distribution increases every quarter to be pleased with the strong income that it throws off for my portfolio.

Dividend Increase #1: Johnson & Johnson (JNJ)

Johnson & Johnson announced a 5.0% increase in its quarterly dividend from $1.01/share to $1.06/share, which was slightly below my expectation of a 6.9% increase in the quarterly dividend to $1.08/share.

Regardless, JNJ's dividend increase once again easily beat inflation, and the only year of the 59 consecutive years of dividend increases that JNJ failed to beat inflation was in 1980 when inflation was a staggering 13.5%.

Across my 4 shares of the stock, my net annual forward dividends increased by $0.80 as a result of JNJ's dividend announcement.

Dividend Increase #2: Southern (SO) 

Southern announced a 3.1% increase in its quarterly dividend from $0.64/share to $0.66/share, which was precisely what I predicted.

My net annual forward dividends advanced by $0.40 across my 5 shares of the stock due to SO's dividend announcement.

Dividend Increase #3: International Business Machines (IBM)

Wrapping up April's dividend announcements with a disappointing dividend increase from International Business Machines, IBM did the bare minimum to extend its consecutive dividend increase streak to 26 years, announcing a 0.6% increase to the quarterly dividend from $1.63/share to $1.64/share.

Despite this disappointing dividend increase, IBM remains a cash flow machine poised to throw off $11-$12 billion in FCF in 2021 (against a dividend obligation of roughly $6 billion), which bodes well for the repayment of the company's ~$56 billion in debt in the years ahead.

Across my 4 shares of the stock, my net annual forward dividends increased by $0.16 as a result of IBM's dividend announcement.

Expected Dividend Increases for May 2021

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

It will be interesting to see whether Lowe's resumes its pre-COVID dividend increase schedule of late May or early June since the company just raised its dividend last August.

In light of the favorable operating environment for LOW, Yahoo Finance is forecasting that the company will grow its earnings 14.2% annually over the next 5 years. 

With this in mind, I am anticipating that whether LOW's dividend increase is in late May/early June or August again, LOW will announce a 10.0% increase in its quarterly dividend from $0.60/share to $0.66/share.

Should this dividend increase manifest itself, my net annual forward dividends would be boosted by $0.96 across my 4 shares of the stock.

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

Since Leggett & Platt hasn't announced a dividend increase since May 2019, it will be interesting to see whether LEG makes up with a decent dividend increase this time around.

I'm anticipating that LEG will announce a 5.0% increase in its quarterly dividend from $0.40/share to $0.42/share, which takes into consideration that LEG is recovering from the impact of COVID-19.

If this dividend increase plays out as I expect, my net annual forward dividends would advance by $0.64 across my 8 shares of the stock.

Expected Dividend Increase #3: American Tower (AMT)

Rounding out my list of dividend increases that I'm forecasting for May is the hyper-dividend growth stock, American Tower.

What makes AMT interesting, is that aside from its commitment to growing its dividend by around 15% for 2021, AMT regularly increases its dividend each quarter.

Since AMT's dividend increases announced in May are typically the smallest, I am anticipating that AMT will announce a 1.6% increase in its quarterly dividend from $1.24/share to $1.26/share.

Should this dividend increase play out, my net annual forward dividends would be boosted by $0.24 across my 3 shares of the stock (since I will be purchasing another 2 shares of the stock the first week of May ahead of the dividend increase).

Concluding Thoughts:

Since XOM and EPD didn't increase their dividend/distribution, my net annual forward dividends only advanced by $1.36 during April. Regardless, this would require a $34.00 capital investment at a 4% yield to replicate.

Looking ahead to May, I am anticipating that I will receive $1.84 in dividend increases during the month, which would require $46.00 in fresh capital invested at a 4% yield to match.

Discussion:

Did you experience disappointing dividend announcements as I did with IBM's paltry dividend increase?

Are you expecting any first time dividend increases as I am with AMT?

I appreciate your readership and welcome your comments in the comment section below!