$$$ 136% Increase YoY In Passive Income For 2017/11 $$$

Finally, I have some time to write a blog post. Time does fly! This blog post, as the title suggests, is about my progress in dividend income for the month of November. The year 2018 has almost come to an end. Next year is going to be as excited and turbulent as 2018. At least, I hope so… Because with turbulence comes oportunities for our DGI community. But first, the numbers for the month of November.

Income numbers

The total amount of dividend income in the month of November was $230.73. This is my second monthly dividend income above the $200 threshold after the month of August. I like to see my income passing all kind of psychological numbers like $100, $200, $250, etc. It’s very encouraging, because these numbers look past the horizon when you just start with dividend growth investing. Only one company paid me more than last quarter as as consequence of a raise: good ol’ Realty Income with an increase of $0.01 ☺️. My dividend income for this month was divided by payments of 9 well-known and great companies:

Apple (AAPL) – $16.06

Abbvie (ABBV) – $9.60

CVS Caremark (CVS) – $2.00

Delta Airlines (DAL) – $8.05

Realty Income (O) – $3.75

Omega Healthcare (OHI) – $66.00

Starbucks (SBUX) – $16.92

Tanger Factory Outlets (SKT) – $38.85

AT&T (T) – $69.50

This makes the total amount of dividend income for this month a nice $230.73. My dividend income for the month of August 2018 was $209.12 so that’s an increase of 10% QoQ. Always nice to see a double-digit growth number here, although I’m more interested in the YoY growth.

YoY Growth

My passive income for November 2017 was $97.84 so that’s an increase of 136% YoY. This means a triple-digit growth number, I love it! Abbvie paid me my first dividend of $9.60 and my income from AT&T increased from $57.50 to $69.50 YoY. I’m very excited to have Abbvie and Starbucks in my basket. They’ll average up my dividend growth numbers. The dividends of OHI, SKT and T are the big ones this month. Here is the graph that shows all monthly dividends YTD as compared to last year:

66290F0B-4458-4B3E-97D2-2E4A277DD240

Buys In November

During November I added to my positions in Altria (MO) and AT&T (T). I bought 16 stocks of Altria at a price of $53.58 on November 28th and 29 stocks of AT&T as cheap as $30.28 on November 16th. Happily, these buys also lowered the average price of both positions. I always like that as it will increase my total return as I plan to never sell these positions.

In summary, November was a good month with solid growth numbers YoY and additions to my positions at very attractive prices. I’ll post my progress for the month of December this weekend.

Happy investing!

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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.

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 ☺️.

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.

Read More »

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. 😊 👊

My First Years of Investing, Part I

In my first article I wrote about my decision to start a blog and my purpose for investing: to achieve financial independence at the age of 55. I truly believe this is within reach if I consistently invest my savings in good dividend growth stocks at a low or reasonable valuation in the years to come. So this will take discipline; discipline to not spend my money on unnecessary things, but also discipline to take into consideration the valuation metrics of dividend growth stocks in my buy decisions.

But, dividend investing hasn’t always been my preferred investing strategy. In fact, I considered it a boring and ineffective way of investing when I started in 2013. I thought it would be insightful to share my last 5 years in investing, my investing results and the psychological aspects which made me decide to radically change my method for achieving financial independence. Hopefully, by reading these series you won’t have to learn some essential lessons in investing the hard way. Like I did. In a strange way, I can now fully reflect on my motivation and (in)decisions in the past. I believe this has only been possible because I’ve found peace of mind by investing in dividend growth stocks instead of chasing the hottest microcaps, hoping for price increases and calculating my returns.

I think it will be a three part series, but we’ll see if that will do.

A Great Idea Without Action Is Not Always A Regret

I’ve always been a guy spending his money. In another era you had physical objects like CDs and hardcopy books. Just like any other person in that epoch I bought a good amount of that stuff. I even liked the sight of CDs and books in my closet and did my best to solve the existential problem of how to archive all that stuff: books on author, age, topic? CDs on performer, music label, music style, era? Besides these cultural doings I also bought a ton of expensive Italian clothing items. I loved the craftmanship, materials and the idea of clothing like a gentilhomme. At the time of all these spending habits of mine (I was 26 at that time) the Stock Market Crash of 2008 set in. It was a horrorshow. Stocks prices fell like crazy. Also in my country, the Nerherlands, beloved stocks of companies like Royal Dutch Shell, Unilever and ING were on sale. A certain stock of a company in the banking and insurance business (I can’t remember its name) traded at prices of a pair of pennies. I still remember me telling my father that if I only had more money I would certainly have bought tens of thousands of stocks of that company, because last year it was selling for tenfold prices. At that time, I was really bummed that I didn’t have more money, because I truly believed that I would have made more than a 1000% return in maybe two, or three years. My father had some doubts about my presumption. He has this laugh, you know. Within a year the company was out of business…

The years after my overconfidence I regularly filled in some forms of online broker firms to open an account. At that time the stock TomTom (AMS: TOM2) had collapsed from €60+ prices in 2008 to €5 (it now trades for €8.50) in 2011-2012. I had often heard some colleagues in the pre-crisis years saying “you should buy TomTom”. This second occurence of a stock price gone south stopped me from opening an online brokerage account. It seemed like gambling. Nobody had foreseen these price movements. The case of TomTom was pretty simple. They sold user friendly navigation software & hardware in the price range of €250 to €400 a piece. It was a total package just like Garmin, everybody bought one. But with the launch of smartphones the only thing necessary for destroying their business model at those days was having an interactive digital map on your smartphone. As these smartphones got more and more capacities and turned into minicomputers, that was exactly what happened. Bye, bye business model. In hindsight, it’s no rocket science. But the smartphone was new, a truly disruptive product. Nobody saw it coming. So I hesitated for a longer period of time to buy stocks.

Things Are Getting Pretty Serious

In 2012 my oldest daughter was born, a true star. I had already transformed from a guy spending his money into a man saving his money to be able of taking care of my family. But, a new human life, totally dependent and pure, completely changed my thinking habits. I rethinked every expense before actually spending my money. Is it necessary? For whom is it necessary? Do I need the expensive version? Do I overpay? My material needs were gone. I saved every pennie I had. Sometimes I considered investing again, but that seemed too risky.

During the years before I subscribed to several newsletters about investing. One newsletter caught my attention. It was about value investing and Warren Buffett. The guy behind this newsletter had written a book about value investing and shared one chapter of that book with its subscribers for free. I read it and was stunned by the track records of the investors mentioned in the books: Benjamin Graham, Warren Buffett, Joel Greenblatt, Mohnish Pabrai and Seth Klarman. And in some way, these guys shared the same investing strategy. The shareholder returns of Joel Greenblatt stuck with me: his Gotham Capital had achieved 40% annualized returns over a period of 20 years, from 1986 to 2006 with only a small portfolio of 5 or 6 stocks. It also said something about his newest investing style: magic formula investing. I laid my hands on a digital version of Greenblatt’s book The Little Book that Beats the Market printed it and read it on the train on my way to work.

The simplicity and logic of Greenblatt’s magic formula for investing struck me. I remember staring out of the window and concluded that financial independence was suddenly within reach. A list of out of favor stocks are on the website http://www.magicformulainvesting.com so I didn’t have to calculate the earnings yield and return on capital by myself. The only thing I had to do was be patient; it’s what makes this formula unpopular, and therefor effective. So I started an online brokerage account at Interactive Brokers. At those days I also found a website called http://www.GuruFocus.com with detailed information about US companies and investments of all the big names I read about earlier. Man, I spent many hours a day reading articles and case studies, watching videos, browsing websites, printing stuff, archiving interesting information about companies. Texts which touched subjects of having a long term view, the short term orientation of hedge funds, the necessity of going against the herd and the concept of a margin of safety really resonated with me. So I thought I was ready for the job. And, I just couldn’t wait to buy my first stock.

“It’s not supposed to be easy. Anyone who finds it easy is stupid.”

This expression is Charlie Munger’s. It’s why value investing will always work; people underestimate how difficult it is to stay focused, to not get carried away and to make sure that every action to buy, sell and do nothing is based on rational analysis and a thorough decision-making process. Psychological factors will challenge you: do not miss the boat or step out, it’s getting rough or my favourite act, the price is at a 52-week low. I read it, I read it all, but I was good in selecting quotes (sometimes twisting them a bit 😕) and justifying my buy and sell actions by those quotes. So, dying for action, I bought stocks of companies like Alaska Communications Systems, Alcoa, Apollo Exucation, Chesapeake Energy, Deckers Oudoor, Digital River, Exco Resources, ITT Educations, J2 Global, J.C. Penney, Kronos Worldwide, Sears, Tempur Sealy International and so many others. In practice, my rationale to buy a stock came down to:

1) Is the company on the list of magic formula stocks?

2) Has a big name in the investing world a stake in this company?

3) Can I step in around the same price as the big investor had paid?

Sure, I also looked at the metrics of Return on Assets, Return on Capital, Debt-to-Equity ratio, Free Cash Flow and so forth. But eventually, I bought stakes in companies because a well-known investor had also invested money in these businesses and who am I to doubt them and their analysis? Hey, and the stocks certainly were out-of-favor. No doubt about that. Prices had fallen because of declining sales, falling earnings, shrinking margins, increasing pressure of government regulation and heavy debt loads for example. Life was simple back then (pun intended): if prices increased I was right and if prices fell I was offered a great opportunity to average down. And if the stock really crashed, this big investor turned out to be a [BLEEP]. I would describe my first year and a half as Buy High, Sell Low. Three or four times a day I checked the price action of the stocks I held in my portfolio. I watched the 52-week low stocks for new ideas and checked the stocks that sold for 52-week high prices for learning which shares I should have bought. Price movements of the markets in general and the shares I owned, determined my mood. Because of my poor investments returns I got short-tempered and grumpy. I wasn’t a nice person back then. This couldn’t continue so after a while I decided to change my investing strategy.

In part II of this series I will cover my second investing strategy, my investment results and the misalignment between this strategy and my character. It wasn’t a succesful period…