Dividend Income April 2020

Dividends, dividends, dividends… In times like this with huge uncertainty about the evolution of the coronavirus and its impact on the economy and rising unemployment rates to level never seen before, it is a save heaven. Safe? Well, not as safe as in recent history as even dividend aristocates review their policy and like in the case of Royal Dutch Shell (RDS.B) cut the dividend by a whooping 66%.

 

With such an outlok it is critical for dividend investors to focus on high quality companies with preferibly a low debt and financial risk and also a low payout ratio. The actual dividend yield comes second. Avoiding a cut and counting in future growth should do the trick.

After the March madness and me having to adjust my portfolio due to options and margin obligations, I took this as an opportunity to shift my portfolio into high quality dividend growth companies with the input from FerdiS and his blog DivGro as well as FAST Graphs (not affiliated with neither of them in any way) and used the lower entry levels for buying these kind of high quality dividend groth stock. Some of these have now started to pay me dividends. So, witout further ado, let’s look at the dividends received in April.

During the month of March I received $283.80 in dividends from 10 different companies:

• Comcast (CMCSA) – income of $6.90
• Cisco (CSCO) – income of $10.80
• Gladstone Investment Corp (GAIN) – income of $7.00
• Gladstone Commercial Corp (GOOD) – income of $12.52
• Iron Mountain (IRM) – income of $30.92
• Medtronic (MDT) – income of $8.11
• Altria (MO) – income of $151.20
• MSC Industrial (MSM) – income of $37.50
• Realty (O) – income of $11.65
• Oracle (ORCL) – income of $7.20

First time contributors to my dividend income are: Comcast (CMCSA), Cisco (CSCO), Medtronic (MDT) and Oracle (ORCL). It is heavily focused on technology, a sector which has always been with a low weight in my portfolio due to high valuations. With the crisis leading to more reasonable prices, I picked some of them up. There is always opportunity in the market.

The following chart shows my monthly dividend income over time. In April 2020 I received $283.80 compared to April 2019 with $144.55. This is an increase of $139.25 or 96%. On a year-to-date basis, from January to April I increase my dividend income from $675.41 in 2019 to $1,639.54 in 2020, an increase of $964.13 or 164%. I am still on track to make this a great year!

Dividend Increases

In April the following stocks in my portfolio announced dividend increases:

Johnson & Johnson (JNJ) – increase from $0.95 to $1.01 (6.2%) – I hold 10 shares so that my PADI increases by $2.40

Kinder Morgan (KMI) – increase from $0.25 to $0.2625 (5.0%) – I hold 50 shares so that my PADI increases by $2.50

Gladstone Investment Corp (GAIN) – supplemental payout of $0.09 in June – I hold 50 shares so that adds to my dividend income $9.00. I do not consider this a dividend increase for my PADI as it may not be paid in the future.

International Business Machines (IBM) – increase from $1.62 to $1.63 (0.6%) – I hold 10 shares so that my PADI increases by $0.40

Invesco (IVZ) – decrease from $0.31 to $0.155 (-50.0%) – I hold 300 shares so that my PADI decreases by $186.00 – Ouch!

The dominant change obviously is the dividend cut from Invesco. I will still hold on to the stock as I believe they have a great recovery potential on the stock valuation. As a result of this change, my PADI decreases by $180.70. At a yield of 3.0%, to recover this dividend income I would have to deploy $6023, so this has been a heavy hit.

I like to see dividend increases above 7%, and the criteria has not been met by a single stock this time. And with the drop it just can’t keep up with inflation this month.

Exxon (XOM), typically raises its dividend in April but this year the decision was made to maintain the dividend, at least no cut given the circumstances and comparing to other peers in the sector. This is the first time since 2007 that the company has not increased the dividend in Q2, but Exxon could still maintain Dividend Aristocrat status if it manages to hike the payout before year-end.

Expected Dividend Increases for May

There is not a single company in my portfolio which last year raised the dividend in May. So, unfortunately, I don’t expect any positive news. At the same time, with the Covid-19 impact not yet fully visible for everyone, there will be big question marks around each and every company about their dividend policy. I would like to see no further cuts like the one from Invesco (IVZ) this month.

 

Projected Annual Dividend Income (PADI)

My new PADI is back up to $4,567 at the end of April, up from $4,089 in March. This is a rise of $478 or 11.7%. The main reason is that I placed several orders for companies I was interested in buying at a reasonable price. Quite a few of them got executed and helped to offset the dividend cut from Invesco (IVZ).

To be fully truthful, some of these purchases were done on margin, so that my future contributions to my portfolio will have to cover these and, as a result, reduce my capacity to increase my PADI for the rest of the year.

One of the main contributors here was a more speculative move on Ladder Capital (LADR). I picked them up at an average cost of $3.60 and a dividend yield of – hold your breath – 37.8%. What? Yes, that’s right: 37.8%. By no means is this one of the high-quality dividend stocks I referred to earlier and I may not hold them forever. At the same time, the stock trades currently at around $8 and is the first stock in my portfolio to have reached a 100%+ absolute return. If they maintain their dividend, this one will be a gold mine.

Last year in April my PADI stood at $2,775. That’s a fantastic increase of $1,792 or 65% year over year. Again, this percentage increase unfortunately will drop in the near future as some great opportunities have passed and I need to reduce the risk in my portfolio with future contributions, not being able to buy much more stock. My plan is to use 50% of my contribution to just refund my portfolio, the other 50% to continue to invest in high quality dividend stock which I deem undervalued.

The investment yield for my dividend growth portfolio is 5.4%. For this I compare the current dividend income with the purchase price of the underlying shares. My yield on cost (YoC) is lower at 4.4% because of losses taken from options which also required additional funding. The current yield of the shares in my portfolio is 5.8% and, therefore, higher than my investment yield. This is due to the significant drop in the markets and some of my positions still with a massive, but unrealized loss.

Conclusion

The dividend income for April was $283.80 from 10 companies. New additions to my portfolio have offset the dividend cut from Invesco (IVZ) and allowed me to raise my PADI again, but at the expense of using some of my account margin. My PADI stands at $4,567 and it looks like we are back on track for the dividend income target set for this year.

Disclosure: At time of writing long on all above mentioned

Disclaimer: I am not a professional investment or financial advisor. The information presented on this site represents my personal dividend growth journey and it is for informational purposes only. Opinions expressed are my own and should NOT be relied on or taken as investing advice. I have no knowledge about your personal situation and before you make any investment decision you should exercise due diligence and must do your own research. Always consider seeking advice from a professional financial and tax advisor.