Tuesday, October 12, 2021

September 2021 Dividend Income

As I'm writing this blog post, the seasonally warm temperatures have continued into October here in Central Wisconsin. The next week of forecasts will see high temperatures range in the low to mid-70s Fahrenheit.

Since it's early October, it's time for me to go over my dividend income for September 2021. Because I received dividends a day early from Visa (V) and Wells Fargo (WFC) in my Webull account, those will appear to be in August despite official pay dates in September. Also of note, I had several dividends from Sept. 30 in my Robinhood account that I didn't receive until Oct. 1.






Analysis:

During the month of September 2021, I collected a record $229.54 in net dividends against the $197.54 in net dividends that were received in June 2021. This works out to a 16.2% quarterly growth rate.

The dividends that I collected in September 2021 also equate to a 64.6% year over year growth rate compared to the $139.46 in net dividends received in September 2020.

Delving deeper into the details, I collected $146.33 in net dividends from 33 companies in my Robinhood account during the month (as a result of the timing of Simon Property Group's dividend, as well as first-time dividends from KeyCorp, Pinnacle West Capital, and Essential Utilities). What's more, I received $70.00 in net dividends from the Capital Income Builder mutual fund (CAIBX) in my retirement account. I also collected $12.74 in net dividends from six companies in my Webull account. Finally, I received $0.47 in net dividends from 23 companies in my M1 Finance account.

The $32.00 increase in net dividends collected from June 2021 to September 2021 was the result of the following activity within my portfolios:

Starting within my retirement account, my net annual dividends received from CAIBX were $2.52 higher due to an increased share balance from my last few paycheck contributions at my day job before I started to write for Motley Fool and Seeking Alpha essentially full-time.

I also collected an additional $0.80 from WFC within my Robinhood and Webull accounts, which was due to the recent doubling of the stock's quarterly dividend.

My net dividends received from Simon Property Group (SPG) were $9.00 higher in my Robinhood account than in June because SPG's previous dividend was paid in July. SPG also increased its quarterly dividend recently.

I collected an extra $0.13 in net dividends from British Petroleum (BP) within my Robinhood account as a result of its dividend increase in August.

I also collected an additional $1.26 in net dividends from Dominion Energy (D) during the month within my Robinhood account, which was the result of my August 2021 dividend stock purchases.

My net dividends received from Royal Dutch Shell (RDS.B) in my Robinhood account were $1.20 higher, which was due to its 38.3% hike in its quarterly dividend.

I collected an extra $2.86 in net dividends from Viatris (VTRS) within my Robinhood account, which was the result of my July 2021 dividend stock purchases and August 2021 dividend stock purchases.

My net dividends received from KeyCorp (KEY) were $4.07 higher in my Robinhood account because it was the first dividend payment received from the stock, which was due to my July 2021 and August 2021 dividend stock purchases.

I collected an additional $1.48 in net dividends from American Electric Power (AEP) within my Robinhood account, which was the result of my June 2021 dividend stock purchases.

My net dividends received from Essential Utilities (WTRG) were $2.68 higher than in June because this was the first dividend from them in my Robinhood account, which was due to my July 2021 dividend stock purchases. 

I collected an extra $0.18 from J.M. Smucker (SJM) within my Robinhood account, which was the result of a 10% dividend increase in July.

My net dividends received from Pinnacle West Capital (PNW) were $5.81 higher than June because this was the first dividend from them in my Robinhood account, which was due to my July 2021 dividend stock purchases.

I collected an additional $0.01 from RDS.B within my M1 Finance account, which was due to the aforementioned dividend hike.

Concluding Thoughts:

I have collected over $1,218.20 in net dividends through September. And based on the fact that I'm expecting more than $500 in net dividends in the final three months of this year, I appear to be on track to meet my goal of collecting $1,800 in net dividends for 2021. With nearly $2,030 in net annual forward dividends heading into October, I also am on track to end this year with well over my goal of $2,200 in net annual forward dividends to start 2022.

With my capital contributions, dividend increases, and dividend reinvestment, I wouldn't be surprised if my net dividends were to surpass $250 in December of this year.

Discussion:

How was your dividend income in September?

Did you receive any first-time dividends during the month like I did from KEY, PNW, and WTRG?

As always, I'm grateful for your readership and look forward to your comments!

Tuesday, October 5, 2021

September 2021 Dividend Stock Purchases

As I'm writing this blog post, it's the last day of September. It's hard to believe, but there are only three months left in the year! Fall is here in Central Wisconsin, but you wouldn't know it based on the temperatures in the high-70s Fahrenheit today.

At any rate, it's time for me to discuss my capital deployment activity in September 2021 and the dividend stocks that I purchased for the month.


As I explained in my previous post of this series, it will be rare going forward that I discuss capital deployment within my employer-sponsored retirement account. That's because I stopped working there nearly three months ago to pursue writing on a near full-time basis with The Motley Fool and Seeking Alpha.

The only time I will be deploying capital in the account will be when dividends are paid and automatically reinvested to purchase more shares of the Capital Income Builder (CAIBX) mutual fund, which is what happened in September 2021.

The $70.00 in net dividends that I received during the month was reinvested into 1.018 shares of CAIBX, which should produce $2.17 in net annual forward dividends. This works out to a 3.10% net yield.

I started off September by first adding a share to my position in Altria Group (MO) at a cost of $50.91, which was just days after I wrote an article on the stock on Seeking Alpha discussing the recent 4.7% dividend increase.

MO isn't the flashiest stock, but its 7%+ dividend yield is supported by a sub-80% payout ratio and healthy fundamentals. That's why I added a share to my portfolio at a net yield of 7.07%, boosting my net annual forward dividends by $3.60 in the process.

The next stock that I purchased in September was VICI Properties (VICI), which was a new addition to my portfolio.

As I explained in a recent Motley Fool article on Realty Income (O) and VICI, there are a number of things that I like about the latter, such as its industry-leading weighted average lease term, 100% occupancy rate, and robust AFFO per share growth to support a safe and growing dividend.

That's why I added 21 shares of the stock to my portfolio at an average cost of $31.36 a share. Compared to the $30.24 in net annual forward dividends added from the purchase, this equates to a 4.59% net yield.

The other stock that I added to my portfolio in September was Bristol Myers Squibb (BMY), which is because outside of its top three drugs (Revlimid, Eliquis, and Opdivo) whose patents will all be expiring this decade, the company has a number of promising drugs in various stages of development.

The 10 shares of BMY that I added was at an average cost of $60.98 a share, which works out to a 3.21% net yield factoring in the $19.60 in net annual forward dividends that the purchases put in the portfolio.

I also added a share to my position in Lockheed Martin (LMT) at a cost of $339.82, which was just days before the stock announced a 7.7% increase in its quarterly dividend per share to $2.80.

As I explained in my dividend stock watch list post for September 2021, I planned on adding to my position in LMT because it is off to a great start this year, the balance sheet is strong, and the dividend is well covered.

Since I purchased before the dividend increase, my starting net yield was 3.06%. And with the dividend increase, my yield on cost is now 3.30%.

Since first opening a position in Visa (V) nearly two years ago, I added another share of the stock at a cost of $220.55.

With the global economic reopening playing out, V's low payout ratio, and top-notch balance sheet, I wanted to add to my position.

Compared to the $1.28 in net annual dividends that this purchase added to my portfolio, my net yield on this purchase was 0.58%.

Finally, I added a share to my position in Merck (MRK) at a cost of $71.85 a share.

The reason for adding to my position in MRK is that while its oncology segment led by Keytruda is important to the company, MRK is so much more than just oncology with its vaccines and animal health segments as I explained in a recent Motley Fool article.

Weighed against the $2.60 in net annual forward dividends that my purchase added to my portfolio, my net yield on the purchase was 3.62%.

Concluding Thoughts:

September 2021 was the third straight month in which I deployed over $2,000 in capital (when including the dividends received that I always selectively reinvest), which is having a remarkable impact on the growth of the portfolio's net annual forward dividends.

I invested $2,021.41 in September 2021, which added $69.89 in net annual forward dividends across the seven positions that I added to or initiated during the month. This works out to a respectable average weighted net yield of 3.46%, which is right around the 3.5% range that I want to be near going forward.

When also considering that dividend increases received during the month added $9.93 to my net annual forward dividends, my net annual forward dividends surged from approximately $1,950 to enter the month to nearly $2,030 heading into October.

And since I'm expecting that I'll deploy $2,700 in capital (including reinvested dividends) in October 2021, I should end up around $2,125 in net annual forward dividends by the end of the month.

Discussion:

How was your September for capital deployment?

Did you add any new positions to your portfolio during the month as I did with VICI and BMY?

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

Tuesday, September 28, 2021

Expected Dividend Increases for October 2021

As I'm writing this blog post, fall just started a couple days ago and September will be over in less than a week. It won't be long before we'll need to set our clocks back an hour here in Central Wisconsin and it'll be dark by 5 PM.

That means it's time to talk about the eight dividend increases that I received in September. I accidentally lumped in Visa (V) with expected September dividend increases despite the company routinely announcing its dividend increases in October (not sure how that happened!).

Even though I'm only expecting three dividend increases for October, the month should still be a nice boost to my portfolio.

Actual Dividend Increases in September

Dividend Increase #1: Realty Income (O)

The only monthly paying Dividend Aristocrat, Realty Income delivered with a 0.2% increase in its monthly dividend from $0.2355 per share to $0.2360 per share. This was once again perfectly in line with my prediction from last month in the previous post of this series.

Across my 13 shares of O, my net annual forward dividends ticked up by $0.078 due to the stock's dividend increase.

Dividend Increase #2: W.P. Carey (WPC)

Another real estate investment trust in my portfolio that managed to meet my expectations was W.P. Carey. The REIT upped its quarterly dividend 0.2% from $1.05 per share to $1.052 per share.

My net annual forward dividends edged up $0.056 across my seven shares of WPC as a result of its dividend increase.

Dividend Increase #3: Philip Morris International (PM)

Philip Morris International was the third dividend increase in my portfolio to meet my expectations, with the tobacco giant boosting its quarterly dividend 4.2% from $1.20 per share to $1.25 per share.

Across my 13 shares of PM, my net annual forward dividends were boosted by $2.60 due to the payout increase.

Dividend Increase #4: Lockheed Martin (LMT)

Lockheed Martin was the fourth dividend increase of September, which also met my expectations. LMT raised its quarterly dividend 7.7% from $2.60 per share to $2.80 per share. 

Since I added a share of LMT to my portfolio days before the dividend increase, my net annual forward dividends spiked by $3.20 across my four shares of the stock as a result of the dividend increase.

Dividend Increase #5: STORE Capital (STOR)

STORE Capital is the fifth dividend increase of September, but unlike the previous four, the stock exceeded my expectations with its dividend increase.

Whereas I was expecting a 5.6% increase in the quarterly dividend, STOR actually announced a 6.9% increase in its quarterly dividend from $0.36 per share to $0.385 per share.

Across my 19 shares of STOR, my net annual forward dividends increased by $1.90 due to the dividend increase.

Dividend Increase #6: Verizon (VZ)

Verizon was the only stock in my portfolio during the month that fell a bit short of my expectations, announcing a 2% increase in its quarterly dividend from $0.6275 per share to $0.64 per share. This was a tad less than the $0.645 per share quarterly dividend that I was expecting, but I can't complain that much as VZ continues to bring 5G to customers across the U.S. 

My net annual forward dividends advanced by $0.90 across my 18 shares of VZ as a result of the dividend increase.

Dividend Increase #7: American Tower (AMT)

The second dividend stock in my portfolio to beat my expectations was American Tower. 

While I anticipated a 2.4% increase in the quarterly dividend, AMT announced a 3.1% increase in its quarterly dividend from $1.27 per share to $1.31 per share.

This dividend increase helped my net annual forward dividends to move $0.48 higher across my three shares of AMT.

Dividend Increase #8: Microsoft (MSFT)

Microsoft was the fifth dividend stock to meet my expectations with its September dividend increase.

MSFT announced a 10.7% increase in its quarterly dividend from $0.56 per share to $0.62 per share.

Across my three shares of MSFT, this dividend increase boosted my net annual forward dividends by $0.72.

Dividend Freeze: General Mills (GIS)

General Mills announced its fifth straight quarterly dividend of $0.51 per share.

This is a bit disappointing considering that I was expecting a near 4% raise. But perhaps General Mills will make up for this at some point in the near future with a surprise dividend increase.

Expected Dividend Increases for October

Dividend Increase #1: Visa (V)

As I pointed out in my previous post of this series, I believe that Visa will be announcing a 12.5% increase in its quarterly dividend from $0.32 per share to $0.36 per share.

That's because analysts are forecasting that V's EPS will surge 15.7% to $5.83 this year.

After purchasing another share of V earlier this month, my net annual forward dividends would inch $0.48 higher across my three shares if my prediction is correct.

Dividend Increase #2: American Electric Power (AEP)

The second dividend increase that I'm expecting in October would actually be my first raise from the utility American Electric Power since opening a position earlier this year in January.

Based on the fact that analysts expect AEP's EPS will advance 5.4% to $4.68 this year, I'm expecting an identical percentage increase in the quarterly dividend from $0.74 per share to $0.78 per share.

Across my nine shares of AEP, my net annual forward dividends would be boosted by $1.44 from this dividend increase.

Dividend Increase #3: Pinnacle West Capital (PNW)

The third and final raise that I'm anticipating for October is once again from a utility, but this time from Pinnacle West Capital. Like AEP, this will be my first dividend increase from PNW since I started a position in the stock in July.

I'm expecting a 4.8% increase in PNW's quarterly dividend from $0.83 per share to $0.87 per share.

This would work out to a $1.12 increase in my net annual forward dividends across my 7 shares of the stock.

Concluding Thoughts:

My net annual forward dividends surged $9.934 as a result of the eight dividend increases that I received in September.

At a 3.5% average weighted yield, I would need to invest $283.83 to replicate this additional dividend income with fresh capital. 

And with the three dividend increases that I'm forecasting for October expected to bump up my net annual forward dividends by $3.04, this would require $86.86 in fresh capital at a 3.5% yield to replicate.

Since I also expect that I will be contributing around $2,700 between my fresh capital contributions and the dividends that I'll be reinvesting, I believe that my net annual forward dividends should advance from just under $2,030 to begin October to over $2,100 heading into November.

Discussion:

How was your September in terms of dividend increases?

Are you expecting any first-time dividend increases from new holdings next month as I am with AEP and PNW?

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

Tuesday, September 21, 2021

October 2021 Dividend Stock Watch List

As I'm writing this blog post, the start date of fall is just one week away. Even more importantly, October is a couple weeks away.

Why is October so significant?

Because I will be receiving three paychecks during the month as opposed to the usual two, so I will have even more funds than normal to invest. Let's take a look at three dividend stocks not already in my portfolio that I am keeping my eyes on for October.

Image Source: Pexels

Dividend Stock #1: Omnicom (OMC)

The first stock on my watch list for October is the large-cap advertising and marketing conglomerate, Omnicom.

Omnicom's diluted EPS declined nearly 28% from $6.06 in 2019 to $4.37 last year.

While Omnicom was predictably hit somewhat hard in 2020 with COVID-19 emerging as a pandemic and the resulting drag on the economy, the company is set to rebound this year and beyond.

Omnicom's diluted EPS is set to advance slightly higher than 2019's figure of $6.06 to $6.09 this year as the economy picks back up and advertising spending recovers based on the average analyst estimate. Better yet, analysts expect that Omnicom will resume mid-single-digit earnings growth, when diluted EPS is anticipated to increase 4.4% from $6.09 this year to $6.36 next year.

Through the first six months of this year, Omnicom also maintained an interest coverage ratio just under 8 ($1.05 billion in earnings before interest and taxes/$134 million in interest costs). This implies that the balance sheet is relatively healthy and that interest expenses can easily be covered by EBIT.

Despite this news, Omnicom is trading at less than 12 times this year's forecasted diluted EPS. This is moderately lower than the company's historical P/E ratio around 15 to 16, which makes Omnicom a good value play.

With $2.75 in dividends per share scheduled to be paid out this year, Omnicom's diluted EPS payout ratio will be in the mid-40% range. I believe that this makes Omnicom's current 3.91% dividend yield (based on the current share price of $71.67 as of September 12, 2021) safe.

Dividend Stock #2: McDonald's (MCD)

The second dividend stock on my watch list for October is the massive fast-food chain McDonald's.

Similar to Omnicom, McDonald's was adversely impacted by the onset of COVID-19 last year. This resulted in McDonald's adjusted diluted EPS declining 22.8% from $7.84 in 2019 to $6.05 in 2020.

However, McDonald's is on track to fully recover and then some this year, with analysts expecting adjusted diluted EPS to surge 50.1% from $6.05 last year to $9.08 this year.

McDonald's also was able to generate an interest coverage ratio of slightly over 8 through the first half of this year ($4.93 billion in EBIT/$597 million in interest expense), which like Omnicom, indicates that McDonald's can handily service its debt.

While McDonald's isn't a bargain at 26 times this year's earnings and 24 times next year's earnings, it also isn't too expensive considering the quality of the business. I have wanted to own McDonald's for years and have never purchased it because I was always waiting for the perfect price, but I've come to learn over the years that a fair price is good enough for a world-class business. McDonald's can do the rest in the wealth creating process.

McDonald's will likely pay out $5.25 in dividends per share (assuming a 7% increase in the quarterly dividend in September to $1.38) against $9.08 in EPS this year, which would be a dividend payout ratio in the high-50% range.

McDonald's 2.16% yield at $239.18 a share (and soon to be around 2.3% yield with the upcoming dividend increase) appears to be safe based on a quick analysis of the balance sheet and dividend obligation, which are two of the main reasons I want to own the stock.

Dividend Stock #3: Raytheon Technologies (RTX)

The final stock that is on my watch list for October is the behemoth aerospace and defense contractor Raytheon Technologies.

RTX was hit hard by the COVID-19 pandemic due to the decreased revenues in its Collins Aerospace segment and aerospace engine segment known as Pratt & Whitney, which is what led its adjusted diluted EPS to plummet 44.8% from $4.95 in 2019 to $2.73 in 2020.

With commercial aviation recovering amid increasing global vaccination rates, analysts expect RTX's adjusted diluted EPS to rebound to $4.07 this year and to return to growth next year with adjusted diluted EPS of $5.04.

With an interest coverage ratio of just under 4 through the first half of this year, it may appear as though RTX's balance sheet is weak. However, this is negatively skewed only because the company's earnings power hasn't yet fully recovered to pre-pandemic levels.

When that recovery occurs next year, RTX's interest coverage ratio will be much healthier.

RTX's dividend also appears fairly secure considering that even with adjusted diluted EPS estimates of $4.07 for this year (still well below pre-pandemic levels), RTX's payout ratio will be a tad under 50%. Next year, RTX's payout ratio should be well below 50%. This is what leads me to believe that the current 2.46% yield is safe (based on the current share price of $83.00).

At 20 times this year's expected earnings and a price of $83.00 a share, RTX may not seem cheap. But again, that's only because the company is still recovering from COVID. RTX is trading at just 16 times next year's earnings, which makes it a good recovery play.

Concluding Thoughts:

My net annual forward dividends will end this month at around $2,025, which is another all-time high for my portfolio. And since I'm expecting around $2,500 available to invest for October between my capital contributions and dividends, October will be one of my heaviest months of capital deployment for this year.

I'm very much looking forward to seeing if I can reach the $2,100 mark or so for the month with my capital deployment and the dividend increases that I'm expecting for October.

Discussion:

Are any of OMC, MCD, or RTX on your watch list for October 2021?

If not, what stocks do you have your eye on for next month?

I appreciate your readership and look forward to your comments in the comment section below!