It’s that time of the month again. ☺️ This is only the second time I’m publishing my monthly dividend income and I have to say I already like these regular posts very much. The DGI community reaches out to eachother to read, learn and motivate. My blog is a success already as it gives me the opportunity to communicate with so many people around the world who are in the same boat. It’s so cool! And it motivates me even more to buy (new) dividend growth stocks to only see the snowball effect getting bigger and bigger with time. Just like we want it. Last month my dividend income grew 869% YoY. Let’s see how I did this month.
Dividend Income & Two Increases
The amount of dividend income for June was $127.26. In this month I got two raises as compared to the dividend payment three months ago. Southern Company gave me a nice raise of their dividend with 3.45%. They have a respectful streak of growing their dividends for 16 years. Exxon Mobil paid me 6.49% more than last quarter which was their 35th time increasing their annual dividend. Wow! I’m very pleased with the increase of this Big Oil company after a lower growth rate during the last couple of years. This month excluded dividend payments by the companies ConocoPhilips, IBM, Wells Fargo and Walmart as I sold these positions at the end of 2017 and at the start of 2018. ConocoPhilips paid me $2.28 back in April, whereas IBM, Wells Fargo and Walmart respectively contributed $19.50, $14.82 and $12.75 to my quarterly dividend income.
In June I bought 27 stocks of Starbucks for a price of $54.00. The stock currently trades for about $48 a share, which equals an all-time high of 3% dividend for this company. In the coming days I’ll probably buy another bunch in order to average up my yield on cost. If management sustains the 20% dividend increases a year for the coming two years, then stepping in at a price of $48 will result in a yield on cost of 4.3% in 2020. Surreal!
Selling IBM, Wells Fargo & Walmart
My positions in IBM and Wells Fargo were partially based on Warren Buffett owning large stakes in these companies. When I first bought IBM in 2015 I thought they would hit back in two or three years after finding a formula for monetizing Watson and their big patent portfolio. I was convinced IBM was a regular turnaround story so I built up a nice position in two years. Reality set in when the Oracle of Omaha sold a part of his IBM position for Berkshire Hathaway. Only then I realized that margins would stay under pressure for a longer period of time because of increased competition by more successful competitors in the cloud computing business like Amazon, Apple, Google and Microsoft. Their most recent dividend increase showed a lower growth rate than the years before. So after that announcement I sold my entire position in IBM.
The story of Wells Fargo is more or less the same; I sold my shares because of a slower dividend growth rate. I built my position during two years. It used to be a terrific company, a bit boring, but a steady deliverer. But the stock tanked when Wells Fargo announced they had discovered millions of fake bank and credit card accounts. This is a company which will do fine sooner or later, but I didn’t feel comfortable owning it any longer. In fact, the other day I read Wells Fargo announced an increase of their quarterly dividend with 10%. So they may be already on their way back.
I sold Walmart after the sales and earnings numbers of the fourth quarter of 2017 showed pressured margins and deceleration in e-commerce sales growth. The company increased their dividend with only 2%. At that period in time, Mr. Market offered better alternatives in terms of dividend yield, growth prospects and valuation.
Now, I didn’t sell these positions with a loss, but I surely missed out big wins with Apple, Boeing and JP Morgan as these were the companies I considered as an alternative back then. So my loss is actually the missed compounding of investment in those businesses. Boeing is already a triple and JP Morgan a double as compared to the price levels at which I decided not to buy these stocks but IBM, WFC and WMT. These flawed investments show how important it is to have a smart buy strategy. The oppprtunity costs can be huge.
Breakdown of Dividend Income YoY
My passive income in the month of June last year was $110.30 so that’s an increase of more than 15%. I know that isn’t close to the YoY dividend growth of 869% for the month of May. But when building a dividend growth stock portfolio you happen to have months that grow bigger and faster than others. A dividend growth of 15% YoY is still solid considering the shake up of my portfolio. You can see the loss of the above mentioned dividend payments has nearly been compensated by the quarterly dividend of DAL, O, PEP, SO and XOM. In June I benefited nicely from my position in XOM which I’ve been building up quite consistently the last three years. The share prices of DAL, O, SO and XOM still look attractive these days.
The dividend income for the month of June leads to the next graph:
Dividend Income QoQ
My dividend income in the month of March was $130.14 so that’s a decrease of 2.2%. I really don’t like a setback, but sometimes you need to step back and re-assess your portfolio. In contrary, I’m more than pleased that all months of 2018 show a steady upward dividend income in comparison with the same months last year. I really hope the QoQ growth number for September 2018 will be higher than my $127.26 for this month.
Dividend Income FY2018
We are halfway 2018 so the total dividend amount for the first six months is a good indication where I’m heading for this year. I already collected $763.35 this year whereas my total dividend income in 2017 was $827.81. It’s truly inspiring to foresee that the total YoY growth number will be amazing for 2018. The snowball is still rolling. That’s for sure.
I’m very curious how you did this month. Please share your progress and insights.