DGI For The DIY_Summer Portfolio Update

DGI For The DIY: Summer Dividend Income Update

Greetings and welcome to the summer edition of the DGI For The DIY dividend income review. My apologies for the lack of updates in recent months, I’m sure you’ve all been on the edge of your seats in anticipation of a new article!

As is likely the case with most of you, it’s been an incredibly busy summer for my household. It seems I make this comment with every update, but free time has become even more difficult to find in recent months.

If you’ve followed me for a while, you’ve likely heard me comment about my wife being in the military. She’s been in the Air Guard for nearly fifteen years now, and served two tours overseas before we met, but had not been deployed in the nine years we’ve been together.

Family Picture
Deployment Day

That changed in July, when she was deployed for an overseas mission with her unit. Before I say anything else, I’ll just say how tremendously proud I am of her. She is an amazing wife and mother, and I know this is probably tougher on her than it is on me. This is the first time she’s been away from the kids for anything more than three days, so to leave for several months is quite a sacrifice for her.

Needless to say, this has been an adjustment for me as well. My wife is the prototypical “Super Mom”, who runs her own business, keeps the house in order, and keeps me on schedule. With her gone, I’ve had to step up and fill her shoes, which is a tall task to handle with three little ones and a full-time job.

Thankfully, we’ve been blessed with a tremendous support system of family, friends, and an understanding and flexible employer. I’m also extremely thankful for today’s technology that allows us to video chat nearly every day, which is a huge help in keeping us connected, limiting her homesickness, and cheering up the kids when they are missing mommy.

I debated whether to share our story, but I’ve always tried to be as transparent as possible over the years, and thought people would like to know why I’ve neglected the site in recent months. We don’t have an exact date yet for her return, but it will likely be a few months yet before her tour ends. So my posts will continue to be sporadic, but I’m going to do my best to keep going with the updates.

Stock Market Overview

It’s been a tremendous last few months for the stock market, with all major averages up sharply during the period.

Stock Market Returns: June to August
Stock Market Returns: June to August

My portfolio has also done quite well, hitting new all-time highs in both valuation and dividends received. In fact, since my Q2 portfolio update at the end of June, the value has increased from $71,596 to $77,419, a gain of over 8%!

Dividend Income Report

Capital gains are great, but my focus is on dividend income, and the portfolio also performed well on that metric this summer.

My apologies for the long list, but with three months’ worth of dividends, every stock in the portfolio makes an appearance on the comparison.

Dividend Income Comparison

Dividend Income Comparison
DGI For The DIY: June to August Income Comparison

2018 dividend income increased by 13.24% over last year’s totals, which was driven by three factors: dividend increases, dividend reinvestment purchasing more shares, and new purchases in the portfolio.

The biggest organic increases came from AbbVie Inc. $ABBV (+54.77%), Kinder Morgan Inc. $KMI (+65.48%), Ross Stores $ROST (+42.21%), and Starbucks Corp. (+47.13%). Norfolk Southern $NSC, Visa $V, and Union Pacific $UNP also saw nice gains of better than 20%.

Meanwhile, new or add-on purchases led to increased income from American Water Works $AWK, Dominion Energy $D, Hormel Foods $HRL, Johnson & Johnson $JNJ, Mastercard $MA, McCormick $MKC, 3M $MMM, Altria Group $MO, and NextEra Energy $NEE.

Not all of those purchases were made with new cash, as several were the result of re-positioning in the portfolio. This is noted with the 100% loss in income from the liquidation of AmerisourceBergen $ABC, Dr Pepper Snapple Group $DPS, General Electric $GE, MDU Resources $MDU, and Gamestop $GME.

You can read my thoughts on some of these moves in these articles I wrote for Seeking Alpha:

Altria: Buying “Big MO” At A 4% Yield

Recent Buy: Dominion Energy

Shuffling My Dividend Growth Deck

All in all, it was a successful summer for the portfolio, as the overall income growth of 13.24% far outpaced my 10% growth target.

Portfolio Dividend Income History

For some perspective on how the portfolio has progressed over time, I’ve created this table showing all income collected since its start in 2013.

DGI For The DIY: Dividend Income History
DGI For The DIY: Dividend Income History

Through the first eight months of 2018 dividend income has grown by 15.2%, and based on recent dividend declarations, the percentage increase should move even higher by the end of the year.

My forward income keeps growing with each dividend reinvestment, and following this week’s automatic purchase of new shares in 3M Company and Walgreens, forward income now stands at $2,326.56.

If you are interested in seeing the portfolio holdings on a real-time basis, check out my portfolio page, which includes a snapshot of the Google Docs spreadsheet with which I track the portfolio.

Recent Dividend Increase Announcements

I track all dividend increases for the portfolio, and maintain a spreadsheet of every announcement made in the portfolio going back to 2013.

The summer months are generally slower than other times of the year for dividend increases, but there’s still been plenty of activity in the portfolio, with thirteen announcements made during the summer months.

Announce DateCompanyTickerPrevious Payout RateNew Payout RateSequential IncreaseYear Ago Payout RateYoY IncreaseDividend YieldLink
6/1/2018Lowe’s Companies, Inc.LOW$0.4100$0.480017.07%$0.41017.07%1.70%LINK
6/8/2018Philip Morris International Inc.PM$1.0700$1.14006.54%$1.0706.54%5.72%LINK
6/13/2018Target CorporationTGT$0.6200$0.64003.23%$0.6203.23%2.91%LINK
6/19/2018Starbucks CorporationSBUX$0.3000$0.360020.00%$0.25044.00%2.62%LINK
6/20/2018Realty Income CorpO$0.2195$0.22000.23%$0.21154.02%4.54%LINK
6/28/2018Walgreens Boots Alliance IncWBA$0.4000$0.440010.00%$0.400010.00%2.50%LINK
6/28/2018Wells Fargo & CoWFC$0.3900$0.430010.26%$0.390010.26%3.13%LINK
7/10/2018Cummins Inc.CMI$1.0800$1.14005.56%$1.08005.56%3.21%LINK
7/12/2018Occidental Petroleum CorporationOXY$0.7700$0.78001.30%$0.77001.30%4.07%LINK
7/26/2018Union Pacific CorporationUNP$0.7300$0.80009.59%$0.605032.23%2.04%LINK
7/27/2018Norfolk Southern Corp.NSC$0.7200$0.800011.11%$0.610031.15%1.80%LINK
8/2/2018EOG Resources IncEOG$0.1850$0.220018.92%$0.167531.34%0.75%LINK
8/2/2018Altria Group IncMO$0.7000$0.800014.29%$0.660021.21%5.21%LINK
Averages:9.85%16.76%3.09%

Those thirteen increases averaged 9.85% on a sequential basis and 16.76% on a year-over-year basis, putting me well on track to smashing my goal of 10% income growth.

It was really an outstanding couple of months, with Starbucks $SBUX, Union Pacific $UNP, Norfolk Southern $NSC, EOG Resources $EOG, and Altria $MO all providing annual dividend growth of greater than 20%.

There were a few laggards in the group, as Target Corp. $TGT, Realty Income $O, Cummins $CMI, and Occidental Petroleum $OXY all announced annual increases of less than 6%. However, this is to be expected in a large portfolio, as different industries and different companies go through different different business cycles.

Portfolio Transactions

No trades were made during the June to August period, but I did make a move on September 12th, selling out of my position in Chatham Lodging Trust $CLDT and using the proceeds to fill out my position in Altria Group $MO.

Chatham had been in the portfolio since May of 2015, and simply wasn’t meeting my expectations for income growth. The lodging REIT has seen declining FFO every year that I’ve owned it, and has paid out the same $0.11 monthly dividend since March of 2016.

10YR FAST Graph: Chatham Lodging Trust (CLDT)
10YR FAST Graph: Chatham Lodging Trust (CLDT)

I think Chatham is a quality company, but the lodging sector as a whole has struggled to produce growth, and the fact that this is the case in a booming economy concerned me. Eventually we will experience another recession, and when we do, the lodging sector will take a hit.

Meanwhile, Altria just continues to pump out higher and higher dividends, making it a perfect stock for a dividend growth portfolio. The company has grown earnings at 8% or better every year since the split from Philip Morris, and analysts are expecting double-digit growth going forward.

10YR FAST Graph: Altria Group (MO)
10YR FAST Graph: Altria Group (MO)

I do give up a little in current income with the swap, but in the long run I think this is a good move for the portfolio. I was able to add Altria at a 5%+ yield, and am confident that it will continue to grow that dividend at a high single-digit rate going forward.

Other Writings

For those who may have missed them, I published two other articles in Seeking Alpha in recent months.

The first was my long overdue update on stocks from the water utility sector. This article provides my updated spreadsheets for the nine water utilities that I follow, and presents my picks for the best buys at current prices.

Top Water Utility Stocks For Dividend Growth And Income

The other Seeking Alpha article was about four companies I own that look like attractive opportunities following their recent dividend increase announcements: Philip Morris $PM, Starbucks $SBUX, Walgreens Boots Alliance $WBA, and Wells Fargo Corp. $WFC.

Four Stocks To Buy Following Recent Dividend Increases

The article has FAST Graphs for each of the companies, my reactions to their announced dividend increases, and my thoughts on where dividend growth is headed with them going forward.

Conclusion

I haven’t been able to put as much time into following and writing about this portfolio, but despite (or perhaps because of) my limited participation, it continues to perform quite well.

The portfolio value continues hitting new all-time highs, and the passive income it produces is growing well above my 10% targeted rate.

I hope this update finds you well. Happy investing!

5 thoughts on “DGI For The DIY: Summer Dividend Income Update”

    1. Bert,

      Thanks for the words of encouragement. Recent increases from McDonalds, Microsoft, and Lockheed Martin should keep the snowball rolling!

      I’ve been following your reports too, looks like you’ve been making some great progress as well. Nearly 38% YoY growth is quite impressive!

      Have a great weekend.

      Eric

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