Dividend Income – October 2019

It’s quite an exciting time that we’re witnessing in the investment world at the moment. The market is firing on all cylinders, reaching new highs almost every month. As a result, the valuations have touched a level that many would consider as excessively high. In fact, current prices are rich when compared to historical valuations. However, we do have different market conditions today than 5 or 10 years ago. Earnings are at all-time highs, interest rates are near all-time lows. The economy is expanding. Of course, stocks are going to be valued at a premium to historical levels. If you want quality, you have to pay for it unless we are in a down market, and we aren’t in a down market at all. People have to consider these market conditions.

That’s why I’m not too concerned with valuations and that’s why I keep on executing my plan. The plan is to buy in small increments and build positions over time. The plan is to focus on quality and don’t let valuations keep me out of owning wonderful businesses. I’ve been too cute on valuations in the past. In retrospect, it was one of my biggest mistakes. I learned from this. Recently, I have been building out my portfolio by investing in utilities. My goal is to increase the defensive share – and utilities are quite underrepresented there. Many would consider utilities (and consumer staples) to be overvalued today. I think, over time things should work out favorably. However, this is a topic for a separate post. Today, it’s all about the dividend income for the month of October. Here it is.

Dividend Income: October 2019

In October, 4 different companies have rewarded me with a dividend payment:

  • Coca-Cola (KO): €7.36
  • Illinois Tool Works (ITW): €9.40
  • Philip Morris (PM): €8.91
  • JP Morgan Chase (JPM): €16.78

October’s dividend income total came in at €46.78 ($51.70). Compared to October 2018, this is a decline of 14%.

Month2019
2018
+/-
Total€ 1,355.12€ 1,163.80
January€ 97.98€ 25.26+ 288%
February€ 89.69€ 55.35+ 62%
March€ 166.57€ 107.33+ 55%
April€ 84.59€ 84.92+/- 0%
May€ 326.18€ 177.26+ 84%
June€ 160.66€ 103.13+ 56%
July€ 78.05€ 50.96+ 53%
August€ 119.56€ 190.84- 37%
September€ 185.06€ 125.87+ 47%
October€ 46.78€ 54.34- 14%
November€ 71.56
December€ 116.98

Usually, October is the weakest month for me when it comes to dividend payments. I have even lowered its contribution by selling out my Altria (MO) position back in April. As MO used to be my biggest position, this disposal had a significant impact on the cash flow in January, April, July, and October (the payment months of MO). Although I’ve increased my stake in KO and JPM during the year, I couldn’t offset the income reduction caused by the Altria sell. This is basically the reason for the small YoY decrease in October’s income.

However, since the cumulative income for the year is up by high percentages, I don’t mind accepting a small monthly decline. Anyway, my goal is to grow the annual income. And this goal is being met so far. As of the end of October 2019, this portfolio has generated €1,355 ($1,500) in yearly dividends. Thus the cash flow has increased by 39% compared to the same period in 2018. I think it’s not bad. Not bad at all.

Finally, and looking ahead, I expect this portfolio to produce €1.630 ($1,800) in annual income (= projected annual income) at the end of 2019. Although I might manage to do one or two small acquisitions in the remaining two months, it still will be challenging to reach my personal target of €1.650 ($1,825). In order for that to happen, I will need the support that comes from organic dividend increases. And recently this support has been overwhelming!

Dividend Increases

Let’s have a quick look at how overwhelming the organic dividend growth has been in the past month. In October 2019, the following companies have announced a dividend increase:

  • AbbVie (ABBV) is raising its annual dividend by 10.3% from $1.07/share quarterly to $1.18/share quarterly. Folks consider that ABBV’s yield is already pretty high (5.5%). On top of that high yield, we are getting rewarded with a double-digit dividend hike. Hell yes, I take it!
  • Starbucks (SBUX) is raising its annual dividend by 13.9% from $0.36/share quarterly to $0.41/share quarterly. I was very excited to see what SBUX is going to announce. SBUX shareholders have been spoiled by high dividend raises in the past. The 5-yr DGR of 24% is simply outstanding. Although the increase came in at a lower rate compared to the 5-yr DGR, I’m still more than happy with this announcement.
  • Visa (V) is raising its annual dividend by 20% from $0.25/share quarterly to $0.30/share quarterly. V is an evergreen. Low yield but very bright growth prospects. Thus V is a growth rather than an income play for me. However, you won’t see me complaining about a 20% income raise either.

Summary

While this portfolio has experienced a minor decline in income this month, the overall picture is pretty strong. The cumulative cash flow is up by almost 40% and the portfolio market value is at an all-time high. So life’s good. Anyhow, I continue to execute my plan. This plan is to invest small amounts regularly and prioritize quality above all. In this regard, I have made some changes to this portfolio during the past five weeks. I plan to shed more light on it in my next blog post. Stay tuned.

10 Comments

  1. Doug November 10, 2019 at 5:42 pm

    Nice job. You almost overcame the sell so it won’t be long before you blow past that previous amount

    Reply
    1. Snugfortune November 11, 2019 at 11:08 am

      I hope so, Doug.
      With XEL, I have already added one company that is going to boost the cash flow in January, April, July, and October.
      Hopefully some more will follow.
      Cheers

      Reply
  2. Druss November 10, 2019 at 8:04 pm

    Hello Snugfortnue.
    Interesting porfolio and enviable progress in 2 years. Glad I discovered your very nice blog (thanks to Broke Investor).
    I’ll watch and hopefully learn something 🙂
    Good luck.

    Reply
    1. Snugfortune November 11, 2019 at 11:16 am

      Hi & welcome LegendofIncome!
      Take a look around here and feel free to learn from my mistakes. I still do many of them 🙂
      Great that you came via Broke Investor. I like to follow him too. He is almost a veteran among DGI people.
      All the best.

      Reply
  3. Engineering Dividends November 10, 2019 at 11:51 pm

    Even though you saw a reduction in dividend income, that’s a nice group of dividend payers for October, SF. Your plan to keep investing in small increments, despite the market high sounds like a great plan. Years from now you’ll most likely still be investing, and the valuations here will seem like a bargain.
    I’m happy that I got to share in all 3 of your noted dividend raises (V, SBUX, ABBV). With help like that for our portfolios, we’ll get to the finish line sooner than expected.
    You reminded me about your MO sale, but I see you’re still collecting from PM. Any plans to exit PM in the future as well?
    $1,800 in forward dividend income sounds like a done deal by year’s end. That’s a nice $150/mo. average to expect each month in the future. Congrats! 2020 starts your march to $200/mo (and more…)

    Reply
    1. Snugfortune November 11, 2019 at 11:56 am

      Exactly, ED! That’s my point of view: buy small & buy often and today’s prices will look like a bargain in 10-15 years from now.
      At some point I looked back and realized that I missed so many opportunities just because I thought the valuation was unreasonably high. However the prices kept climbing..sometimes 40% or more. This way the market told me that I had no clue about the real value of a business. And frankly speaking, I still don’t have a clue:) Today, however, I’m sure that the real value of a business is not in the past but in the future. A company might be overvalued compared to historical levels, but if this company is performing well (beating earnings and revenue expectations) and raising guidance going forward, its share price most likely will be higher in the future.

      To answer your question regarding PM: yes, I’m going to exit PM as well. I haven’t sold it yet because of tax reasons and also because the income cut would be even harder to compensate taking into account the MO disposal. I think the dividend safety of MO and PM is still rated as borderline safe. So it’s highly unlikely that we will see a cut or freeze anytime soon. However, looking ahead, personally I don’t feel comfortable to build those positions up in size. And as I don’t like building them up, it is only consequent not to own them at all. That’s my view. Other may have a different opinion. You know, there are 1000 roads to success in life as well as in investing 🙂
      I might have taken a different decision if I were close to retirement. I would probably hold them and collect the dividends (hoping that the dividend will remain safe). But I still have a long way to go until retirement. So different circumstances, different decisions. There is no wrong or right.
      Cheers

      Reply
  4. JC November 11, 2019 at 10:49 pm

    Overall it looks like a solid month even though there was a small decline. The longer I’ve been investing the more I’ve come to realize that quality businesses are more important than the right valuation, within reason. Especially if you’re investing small amounts. The larger the amount invested on a $ or % basis the more attention that needs to be paid to valuation. That’s my $0.02 though. I’d love to see us cross $8k in forward dividends by the end of 2019, but I don’t think that’s going to happen since we’re about $290 short with around 1.5 months left. But we’ve still made great progress this year so I can’t really complain. All the best!

    Reply
    1. Snugfortune November 12, 2019 at 12:47 am

      [“The larger the amount invested on a $ or % basis the more attention that needs to be paid to valuation”]
      Yup, JC, you’ve nailed it on the head. If you are Warren Buffett and your guns are loaded with tons of cash to make an elephant acquisition, then it’s a different game. Then valuation is more crucial. But I’m not Warren Buffett Jr. (unfortunately) and I don’t even try to pretend to act like Warren Buffett Jr.
      I keep building my positions by investing small amounts and focusing on strength (at least as long as the market is showing strength).
      I wish you good fortune in order to achieve your desired annual income target.

      Reply
  5. DivHut November 12, 2019 at 2:01 am

    Nice job collecting dividends even w/o your MO holdings. Bottom line, you put money to work elsewhere and despite the market being at all time highs and valuations getting skewed higher you stay in the game and continue to collect those dividends. That’s what DGI is all about. We can never time or know what the market will do. Just stay in the game.

    Reply
    1. Snugfortune November 12, 2019 at 1:21 pm

      Very true, DivHut! Time in the market beats timing the market. That’s the way to go.
      Thanks for stopping by.
      Cheers

      Reply

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