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%.
|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%|
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!
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.
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.