Putting Money Where My Mouth Is: Buying ABBV, BLK, ITW & SWK

The last two weeks were memorable for my DGI portfolio. I’m heavily invested in REIT’s and depend quite a bit on their dividends (I know I should write distributions instead 😊). The total dividend I receive from five REIT’s make about 38% of my total dividend income.

Some readers asked me why I didn’t allocate more money on high-growth, low-yield stocks. A good question, indeed. But after failing to obtain solid investment returns by investing in Magic Formula stocks and microcap stocks it felt good to invest my money in some low-growth, high-yield stocks. Finally, I saw money coming my way. I continued doing this and sometimes built a position in stocks with other characteristics like CVS, DAL, PEP and SBUX. But these were more exceptions to the rule.

New positions

As I wrote, the last two weeks were a breakthrough for my DGI portfolio. At least, it felt that way. I initiated positions in Blackrock (BLK), Illinois Tool Works (ITW), Stanley Black and Decker (SWK) and added to my position in Abbvie (ABBV). These stocks have been in my league of buy candidates for a longer period of time, but they tend to trade against multiples which I considered too high. But as they say, quality comes with a price. So when trading prices came down substantially and I had some ammunition left, I decided to buy some shares of these wonderful companies.

Fundamentals

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I guess the weighted average yield on cost of my DGI portfolio sits around 5%. As you can see, the yield on cost of all these stocks is way lower. But, the dividend growth rate over three years is extremely high. Right now, I think the dividend growth rate of my DGI portfolio is also around 5%. This is caused by my relatively large positions (in comparison to my other positions) in businesses which pay a high-yield, low-growth dividend. Besides the five REIT’s that I hold, these companies are Philip Morris (PM), Souhern Company (SO), AT&T (T) and Exxon Mobil (XOM). Luckily, the dividends of my four new positions are extremely safe. So there’s enough room for high dividend growth numbers out of their earnings per share and even more if earnings continue to rise. By buying these stocks my DGI portfolio got a nice quality boost.

I do believe that there’s no harm in missing out better opportunities at the moment like AT&T (6.7% yield) and Kimco Realty (7.1% yield) which I already own. It was attempting to add more shares to my existing positions, but I have to overcome my bias for having a fat yield at the moment and missing the buy opportunities which will do well for me over a longer period of time. As the Rolling Stones sing “Time is on my Side” if I invest with at least a 20 year horizon. I feel very excited with these new positions! 🤩

What did you buy with the current market dip? Please let me know. Thanks for your time.

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A Step Back For The Month Of September 2018, DGI Down 11% YoY

After posting my progress for the month of August 2018 I decided to follow up quickly. Today I’m writing about my progress in building up a dividend income during the month of September. My dividend income growth YoY for July was +342% and for August +230%. Ready, set, GO!

Income Numbers

The amount of dividend income for month 2018/09 was $122.93. In this month I got several raises as compared to the dividend payment three months ago. The big Bank of America gave me a nice raise of their dividend with 25%. They have a short, but impressive streak of growing their dividends for 3 years. Very rewarding until now! Cummins paid me 5.6% more than last quarter. The companies Norfolk Southern and Union Pacific increased their dividends for the second time in one year! NSC with 11.11% and UNP with 9.6%. So, I’m pleased, very pleased with that. This month excluded the dividend increase of 14.5% by Delta Airlines (paid in August). This all sums up to:

Bank of America (BAC) – $5.85

Cummins (CMI) – $11.40

Emerson Electric (EMR) – $4.85

General Motors (GM) – $26.98

Norfolk Southern (NSC) – $4.80

Realty Income (O) – $3.74

PepsiCo (PEP) – $8.35

Southern Company (SO) – $21.00

Union Pacific (UNP) – $4.80

Exxon Mobil (XOM) – $31.16

Breakdown of Dividend Income YoY

My passive income in the month of June last year was $137.55 so that’s a decrease of 11%. Too bad, but this has everything to do with my selling of COP, IBM, WFC and WMT during  the end of 2017 and buying stocks which pay their dividends in other months. The big YoY growth in the months July and August come from these moves. The progress QoQ was a -3%. The missing payment by Delta Airlines for September was mostly compensated by the dividend increases of the above mentioned companies BAC, CMI, NSC and UNP.

The dividend income for the month of September leads to the next graph:

F155909B-1DEA-4422-918E-0AE1AD2E5DD4.pngLooking Forward

In order to raise my dividend income for this month going forward I searched the usual pay dates of the companies I love to buy and are om my watchlist. As I wrote earlier, I need to diversify in business sectors, companies and dividend growth rates. I found that Blackrock (BLK), General Mills (GIS) and STAG Industrial (STAG) pay their dividends in the month of September. It’s not the most relevant factor in my decision making process as the focus should always be on quality and valuation, but it’s a nice to bonus if a buy candidate pays a dividend in your months which lag a bit behind other months.

Dividend Income FY2018

We have three quarters of 2018 behind us and I already collected $1,264.38 this year whereas my total dividend income in 2017 was $827.81. It’s truly inspiring to see that the total YTD 2018 dividend income already leads to more than a 50% beat as compared to FY dividend income 2017.

I’m very curious how you did this month. Please share your progress and insights.

Wow! A 230% YoY Growth In Dividend Income For August 2018

Sorry folks, I’m late. Unusually late. I’m sorry for that. Summer holiday, my part time post-master education for becoming an IT Auditor, the first weeks of the new school year for our daughters got me away from writing a blog post. That means I have some serious blogging to do. Today I’ll start with sharing my progress in generating a nice and steadily growing dividend income for the month of August. During July I realized a substantial 342% dividend growth YoY. That was an incredible move upwards. Let’s start right away to see what numbers are in the books for month 2018/08!

Income numbers

My total amount of dividend income in the month of August was $209.12. This is my first monthly dividend income above the $200 threshold. Wow, another inspiring record for me! In this month a couple of companies paid me more (for doing nothing ☺️) than the last time: Delta Airlines paid me 14.8% more and good old Realty Income decided to pay me 0.45% more in comparison with last month. My dividend income for this month was divided by payments of 8 well-known and great companies:

Apple (AAPL) – $16.06

CVS Caremark (CVS) – $2.00

Delta Airlines (DAL) – $8.05

Realty Income (O) – $3.74

Omega Healthcare (OHI) – $66.00

Starbucks (SBUX) – $16.92

Tanger Factory Outlets (SKT) – $38.85

AT&T (T) – $57.50

This makes the total amount of dividend income for this month a nice $209.12. My dividend income for the month of April 2018 was $153.68 so that’s a serious 36% increase QoQ. I don’t pay too much attention to this number as I think the YoY growth rate shows the development over a longer term and is more relevant in this regard.

My passive income for the month of August in 2017 was $63.44 so that’s an increase of 230% YoY. Holy smoke, this is some serious business! Delta Airlines paid their dividend in August, a month earlier as compared to their quarterly payments in March and June. Also, Starbucks paid me my first dividend. I’m very excited to see their first and fast rising contribution and I’m sure many will follow. The dividends of OHI, SKT and T are the big ones this month. Right now, I really depend on these names and yields. I’ll have to diversify with other names, business sectors, dividend yields and growth rates in order to keep growing in terms of dollar amounts and relative growth numbers. Keep pushing forward! Here is the graph that shows all monthly dividends YTD as compared to last year:

873755CF-C905-4463-B89E-7D467369164DLooking Forward

Some very interesting companies got a lot cheaper recently and especially last week. BLK, ITW, STAG, TXN, VTR are on my watchlist. Big names with attractive yields and growth rates looking back 3, 5 or 10 years. Some members of the DGI community already hit the buy button recently and added (more of) these stocks to their dividend growth portfolio. Hopefully I’m also able to benefit from these price declines by collecting a few bucks here and there and reprioritizing some expenses. We’ll see.

I’ll be posting my progress for the month of September the coming week. Stay tuned ☺️.

July 2018 Dividend Income Up 342% YoY

Well, the month of July is already in the books. And it was a hot month in the Netherlands this year. Man! We had two heat waves in two weeks, unfortunately without Martha Reeves and the Vandellas. ☺️ I can’t wait to write another blog post about the progress of my dividend income. These blog posts are my favourites. As months go by I can clearly see the solid YoY growth and where I’m heading for FY 2018. This is gong to be a very good year in terms of growth and diversification. But, for now the month of July!

Income Numbers 

The total amount of dividend income in the month of July was $165.45. In this month two companies paid me more dividends per share than three months ago. Good old Realty Income increased their dividend with 0.46% and Philip Morris paid me 6.54% more than last quarter. My dividend income for this month was divided by:

Bank of Nova Scotia (BNS) – $28.23

Kimco Realty (KIM) – $58.80

Walt Disney (DIS) – $4.20

Altria (MO) – $27.30

Realty Income (O) – $3.74

Philip Morris (PM) – $6.84

Ventas (VTR) – $36.34

This totals to an amount of $165.45. My dividend income in the month of April was $134.49 so that’s a very welcome increase of 23% QoQ.

My passive income in the month of July last year was $37.45 so that’s a big increase of 342%. Wow! The difference comes from backing up the truck with various REIT stocks which have traded at very low valuations last year. This led to very high dividend yields at that time. REIT stocks have climbed out of the valley lows last weeks. As I wrote two months earlier: if prices continue to increase; I’m good with that. In case of another price decline I may add to my position of Kimco Realty and Ventas. I think these are terrific, well-run companies with well covered yields by FFO. So, according to me, there isn’t really a bad case scenario. During the month of July I also benefited from my nice position in MO which I’ve been building up quite conscientiously the last twelve months. The share price of this beaten down stock and PM still look very attractive although they’re facing some challenges. BNS has been a solid deliverer for me: always a higher than average dividend yield and a nice annual increase. What more could you wish for?

This leads to the next graph:

5157DBC5-EE33-4CBA-B6D7-02BEB26D4150.png

I already collected $932.23 this year whereas my total dividend income in 2017 was $827.71. Hitting it! We’ve only just begun with the second half year of 2018 so I’m very pleased with my progress in terms of percentages and dollars.

Stock Positions

One of my priorities for the coming months is to diversify my dividend growth stock portfolio. Only seven companies paid me a nice dividend and at the same time I’m heavily dependent of a small number of REIT’s. We’ll see which stocks are on sale in the upcoming period. Last month I added to my position in AT&T by buying 24 more stocks at a share price lower than the average price of my stake. Stocks which I would love to buy at a low or at least a reasonable valuation are Cisco (CSCO), Illinois Tool Works (ITW), Kimberly-Clark (KMB), Legget & Platt (LEG), Medtronic (MDT), Stag Industrial (STAG), STORE Capital (STOR) and Toronto-Dominion Bank (TD) for example.

I’m very curious how you did this month. Please share your progress and insights. I’m sure you had a good month too.

Thanks for reading.

Latest Purchase: AT&T

Last week I wrote a blog post about my candidate stocks for purchase in the month of July. It seemed like a tough call between DAL, GIS, LUV and T. I felt the competition was eventually between the companies LUV and T. Unfortunately for me, LUV published a very strong quarter report, which made the price increase from the low 50’s all up to $57. So I concluded: “Let’s wait on that one to come down again”.

But days after my article the stock price of T dropped just short of 4%. That’s what we like to see if we’re ready to buy a dividend growth stock; a lower price means a higher dividend yield. The reason for the price decline was their announcement of the second quarter report for 2018. AT&T beat their earnings estimates, but missed the revenue expectations, the first one to incorporate results from its new WarnerMedia unit (sixteen days included).

They also reported good news like the better-than-hoped wireless overall business trends and raised their guidance on full-year adjusted EPS, forecasting a $3.50 number versus an expected $3.38. Management also boosted free cash flow expectations to the high end of $21B range (inclusive of deal/integration costs).

Much has been written about AT&T over the last year. Its declining subscriber base due to cord-cutting, the necessity of the TWX merger and the massive debt load have all been covered numerous times by analysts. According to me, there are some good arguments for the bull and bear case.

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Ray Dalio – Principles: Life & Work

 

A few months ago I listened to the episode of the Masters in Business podcast in which Barry Ritholtz interviewed the legendary investor Ray Dalio. During this interview the founder of the successful hedge fund Bridgewater Associates told about his successes, mistakes and how he came about his principles for personal and professional life. I highly recommend this interview. Dalio describes these principles as timeless and absolute truths which are essential to achieve success, whatever the definition of success may be. I was intrigued by his philosophy of radical truthfulness and radical transparency. This really resonated with me and eventually got me starting this blog two months ago.

I haven’t read his highly acclaimed book Principles: Life & Work yet. But it sure is high on my list. While browsing the internet for reviews of this book and searching for interviews with Ray Dalio on youtube I came across the video below. It’s a nice introduction to the foundation of Dalio’s book. I can highly recommend it. It’s very enjoyable. How many times do you get the chance of a billionaire explaining you what to do to achieve success?

 

 

Attractive Stocks For July 2018

I’m back again. This is my first blog post in two weeks, unfortunately. 🙁 I would have loved to write a post earlier in time but had to dedicate most of my spare time on studying for the last exam of my first year of the post-master education IT Audit & Assurance.

The last two weeks I’ve been thinking about my strategy for the upcoming six months, because I have to save a lot of money for the second year of my post-master education. So, I’m inclined to invest half the amount of money I usually invest every month. Another argument for holding back a bit is I’d like to have some extra money to invest in stocks if the financial markets get more turbulent as a reaction to the upcoming trade war between the U.S. and China, Brexit, Italian economy and so forth. Right now, I fully invest all my monthly savings in dividend growth stocks. So I’m shifting a bit towards timing the market instead of the very rewarding principle time-in-market. This shift is actually against my philosophy to monthly invest my savings in order to fully benefit of the compounding effect, but I like to be in a more comfortable position when stock prices go down. This means I’ll probably invest about $700 a month in dividend growth stocks. That’s still a nice amount for the remainder of 2018, but defintely less than my target of a monthly $1.000.

So for the month of July… What am I thinking of? Although stock prices have gone up for consumer staples like Clorox (CLX), PepsiCo (PEP) and Procter & Gamble (PG) the last couple of weeks, companies like General Mills (GIS) and Kimberly-Clark (KMB) are bouncing back to price levels which I think make them attractive again. They’re yielding around 4% and have a low single digit forward growth rate. If GIS gets down to a price of $41 I’m willing to make a deal with this guy Mr. Market. I think the sentiment on GIS will prove to be too negative in two years time. The market was also very negative about two years ago on Target (TGT), T. Rowe Price (TROW) and VF (VFC), remember? And look where they’re trading right now. Earnings, revenues and cash flow are up again in contrary to the headlines and analysts’ consensus. That’s the beauty of investing in companies which have grown their dividend twenty, thirty, or fourty years. They withstood multiple challenges along the way and know how to ride the storm. That’s why they’re able to grow their dividends every year.

Another strong candidate is, off course, AT&T (T). The merger has been approved, but some worries remain about their growth rate, free cash flow and debt levels. Their business model definitely improved by their merger with TWX, so I’m not too worried about their payout ratio. Free cash flow will go up significantly. Besides, their first quarter results are always on the low side as compared to other quarterly numbers. I’m about 15% red on my position with an average price around $36. So by buying T I’m also lowering the average price of my position. That’s a nice side-effect.

Delta Airlines (DAL) is also on my radar. This airline company increased their dividend lately with 15% and trades around 10 times earnings. They’re able to hedge against rising oil prices because of their refinery and will benefit from the growing U.S. economy. Right now I own a half position and would like to buy some extra shares. Southwest Airlines (LUV) was also on my watchlist when they traded for $50. They yield slightly above 1%. This is a company which will never trade for a dividend yield of 2.5% so it’s likely to never be a real candidate judged by this measure. But their dividend growth rate is massive (5-year YoC 10.03%), the dividend payout ratio extremely low (8%), their management is known for their extraordinary customer focus and the stock price has gone up 300% in three to four years.

For me, the finalists are GIS, T, DAL and LUV.

What did you buy, are you going to buy and which company would you advise me to buy in this hot month of July? 😎

In case you’re interested, I passed my exam. There was only one guy with a higher grade. 😊 👊