Dividend Income January 2021

The first month of 2021 is already over and the dividend income is in the books. It is time to review the earnings of my dividend growth strategy. A total of 16 companies paid me and I received $598.42 in dividends.

My dividend income has been growing steadily over the last few months as I keep deploying more and more capital. It is a pleasure to see the fruits of your hard work every single month.

New year, new opportunities, more dividend growth. Let’s look at the results from January. Last month I received dividends from 16 different companies which totaled $598.42:

Advanced Data Processing (ADP) – income of $27.90
Comcast (CMCSA) – income of $9.20
Cisco Systems (CSCO) – income of $27.00
Gladstone Investment Corp (GAIN) – income of $7.00
Gladstone Commercial Corp (GOOD) – income of $12.52
HP Inc. (HPQ) – income of $9.69
Iron Mountain (IRM) – income of $61.85
Ladder Capital (LADR) – income of $160.00
Medtronic (MDT) – income of $8.69
Altria (MO) – income of $154.80
Merck (MRK) – income of $13.00
MSC Industrial (MSM) – income of $37.50
NetApp (NTAP) – income of $12.00
Realty (O) – income of $14.07
Oracle (ORCL) – income of $7.20
Phillip Morris (PM) – income of $36.00

LADR and MO are my main contributors with $160 and $154 respectively. I plan to reduce their weight in the future by deploying capital to other stocks. At the same time, I do not focus on the dividend payment schedule by month.

The above chart shows my monthly dividend income over time. In January 2021 I received $598.42 compared to January 2020 with $257.64 of income. This is an increase of $340.78 or 132%. This is a fantastic growth over last year.

Check out my current Dividend Income Table for 2021 and the full overview of all the stocks.

Dividend Changes

In January there have been three dividend increases and one dividend re-installment in my portfolio. The table below summarizes the total impact of $88.40, with an average increase of 42.7%.

Unfortunately, these number are distorted by the re-installment of SKTs dividend. The real increases give me an increase of $17.40 with a weighted average of 8.1%.

ANTM increased their dividend by 18.9% – wow.

CMCSA showed a very nice increase of 8.7% which I am happy with.

INTC still brought in an increase of 5.3%, given the recent developments but the outlook still should support further increases.

The main surprise came for me from SKT. They re-installed their dividend which was cut last year. And that adds $71.00 to my PADI. My yield stands now at 4.1%.

I am looking to receive an average increase of 7% to outrank inflation by a large margin. Hence, January has hit that goal with 8.3% and the SKT dividend is just the icing of the cake.

As a result of this change, my PADI increased by $88.40. At a yield of 3.0%, to achieve this dividend income I would have to deploy $2,947. But this is not necessary. The dividend increases take care of that and that’s the beauty of dividend growth investing.

Expected Dividend Increases for February

The following companies in my dividend growth portfolio have raised their dividend typically in February:

Cisco Systems, Inc. (CSCO) – I would expect another $0.01 increase in 2021

Home Depot (HD) – Last year we saw a 10% hike and the numbers this year do not look to bad, another 10% this year?

3M (MMM) – a dividend Aristocrat, let’s see what is possible – oh no, they already announced an increase of only $0.01 – this is a bit disappointing but there is a lot of uncertainty about the economic outlook

Prudential Financial (PRU) – again, they already announced their dividend increase and as expected in 2021 it was significantly lower than last year, still a respectable $0.05 or 4.5%

The Dividend Growth Portfolio

In the Dividend Growth Portfolio I hold 56 different companies. Here is an overview of the status as of Jan. 31^st.

Purchases

With the New Year new opportunities arise and I took the chance to broaden my portfolio into more “future” dividend payers and some more growth stocks and option plays. In the table below you can see that I added to one of my existing positions (LMT) and re-opened again a position in AAPL and MSFT. Additionally, I opened 5 new positions, all of which are actually not dividend payers.

Apple Inc (AAPL)

Apple designs, manufactures, and markets a wide variety of consumer electronic devices, including smartphones (iPhone), tablets (iPad), PCs (Mac), smartwatches (Apple Watch), and TV boxes (Apple TV), among others. The iPhone makes up the majority of Apple’s total revenue. In addition, Apple offers its customers a variety of services such as Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, Apple Card, and Apple Pay, among others. Apple’s products run internally developed software and semiconductors, and the firm is well known for its integration of hardware, software and services. Apple’s products are distributed online as well as through company-owned stores and third-party retailers. The company generates roughly 40% of its revenue from the Americas, with the remainder earned internationally. Apple was founded in 1977 and is headquartered in Cupertino, California.

Dropbox (DBX)

Dropbox provides a collaboration platform worldwide. The company’s platform allows individuals, teams, and organizations to collaborate and provides cloud-based file storage and sharing. As of December 31, 2019, it had approximately 600 million registered users across 180 countries. The company was formerly known as Evenflow and changed its name to Dropbox in October 2009. Dropbox was founded in 2007 and is headquartered in San Francisco, California.

Facebook Inc (FB)

Facebook is the world’s largest online social network, with 2.5 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Facebook refers to this as Facebook Watch. The firm’s ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktops. Advertising revenue represents more than 90% of the firm’s total revenue, with 50% coming from the U.S. and Canada and 25% from Europe. With gross margins above 80%, Facebook operates at a 30%-plus margin. Facebook was founded in 2004 and is headquartered in Menlo Park, California.

Lockheed Martin Corporation (LMT)

Lockheed Martin is the largest defense contractor globally and has dominated the Western market for high-end fighter aircraft since being awarded the F-35 program in 2001. Lockheed’s largest segment is Aeronautics, which is dominated by the massive F-35 program. Lockheed’s remaining segments are rotary & mission systems, which is mainly the Sikorsky helicopter business; missiles and fire control, which creates missiles and missile defense systems; and space systems, which produces satellites and receives equity income from the United Launch Alliance joint venture. Lockheed Martin was founded in 1912 and is headquartered in Bethesda, Maryland.

Microsoft Corp (MSFT)

Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite. The company is organized into three equally sized broad segments: productivity and business processes (legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), intelligence cloud (infrastructure- and platform-as-a-service offerings Azure, Windows Server OS, SQL Server), and more personal computing (Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops). The company was founded in 1975 and is headquartered in Redmond, Washington.

Nano Dimensions Ltd (NNDM)

Nano Dimension Ltd is engaged in research and development of a three-dimensional printer that prints electronic circuit boards, also known as printed circuit boards, and ink materials and products based on nanotechnology. Its products consist of two main product lines – Dragonfly 2020 3D printer and proprietary ink products. The company’s Dragonfly 2020 3D printer currently in development uses proprietary ink and integrated software to quickly create fully functioning PCB prototypes. Geographically, it generates maximum revenue from the USA followed by the Asia Pacific and Europe and Israel. It serves the Commercial, Research and Printing services industries. The company was founded in 2012 and is headquartered in Ness Ziona, Israel.

Planet 13 Holdings Inc (PLNHF)

Planet 13 Holdings Inc operate as an integrated cannabis company based in Nevada, with cultivation, production and dispensary operations in Las Vegas. The company is focused on providing an unparalleled dispensary experience and optimizing cultivation efficiencies through its technology as the vanguard of cannabis. Planet 13 Holdings is headquartered in Las Vegas, Nevada.

Tattooed Chef Inc (TTCF)

Tattooed Chef Inc is a plant-based food company offering a broad portfolio of plant-based food products that taste great and are sustainably sourced. The company’s signature products include ready-to-cook bowls, zucchini spirals, riced cauliflower, acai and smoothie bowls, and cauliflower pizza crusts, which are available in the frozen food sections of national retail food stores across the United States. Tattooed Chef provides great-tasting, approachable, and innovative products not only to the growing group of consumers who seek to adopt a plant-based lifestyle, but to any of the People Who Give a Crop. Tattooed Chef was founded in 2018 and is headquartered in Paramount, California.

There you have it. These are the companies I invested in this month. As a result, I have added $132.40 of dividend income to my PADI. On an investment amount of $15,878.77 including fees it comes to an average dividend yield of 0.83% and a weighted Dividend Safety Score of 88.4 points. Typically, the higher the Dividend Safety Score the lower the dividend yield.

You may say: But five out of these nine don’t pay any dividends at all. That’s right. I have decided to allocate a certain amount of my portfolio to growth stocks and option covers to boost my income. Additionally, I think that companies like AAPL, MSFT, FB will be the great dividend payers in the future.

Check out my current Dividend Growth Portfolio and the full overview of all the stocks I hold in it.

Dividend Safety

One of the key metrics for my future passive income is how safe it is. For this reason I have started to track my Dividend Safety Score. For this score I use the weighted dividend safety punctuation from Simply Save Dividends combined with the dividend income of each of my stocks. The higher the score the safer the dividend income.

Dividend Safety Score

For January, the Dividend Safety Score is 61.9 for my dividend growth portfolio, with no change over December.

An increase is due to the deployment of money into stocks with a higher than previous average score and the raises of dividends. At the same time, if anything is pushed below the average like the reset of the SKT dividend it can have an adverse effect.

I consider the score of below 60 somewhat at the lower acceptable end and my target is a score of 70. I want to have achieved this by the end of 2021. My plan is not to sell low rated stocks but instead re-balancing to high scoring ones when deploying more money.

I strive to continuously add to my portfolio and here really the focus is on high quality stocks. The re-balancing happens over time as new money deployed lowers the proportion of the low scoring stocks. I have seen that this works just fine for other dividend growth investor portfolios.

Let’s look at the actual distribution. I use the same classification as Simply Safe Dividends as it makes it easy to spot the categories.

The different categories and their respective score ranges from very unsafe to very safe are:

In my portfolio 51% is in the Safe and Very Safe category which has very little risk of being cut. Another 30% is Borderline Safe. The remaining 19% are Unsafe or Very Unsafe. I need to monitor especially the unsafe positions closely.

My Very Safe and Safe proportion dropped by 1% percent points even though the additions in stocks in these categories had an average of 88 points. At the same time, the new dividend from SKT within the Borderline Safe category automatically dropped its percentage. Hence, a mixed picture, but acceptable.

For each individual stock in my portfolio the current score is as follows:

I hold now 17 companies in the highest category, of which 9 actually have the highest score of 99 including MSFT and AAPL, and another 16 companies is the second highest category. Overall, my portfolio contains many high quality dividend stocks with a safe dividend score.

On the other end we see the red alarming light with LUMN (formerly CTL). Luckily this is only a small position and I have also a sold option which boosts the return. I am not concerned about this one.

LADR as it is my largest position for dividend income and as such gives me the most exposure to a potential dividend cut. GOOD and ET are also smaller positions and not require any further attention. The score for IRM surprises me as I consider the business model valid. A new addition in December was PPL and their score is also only 40. I will have to monitor closely if there are any negative signs.

When combining the dividend safety score with the income the picture looks as follows:

You can see that the largest group is the Safe category, closely followed by the Borderline Safe one. However, the Very Safe category has become a sizable portion of my portfolio. I am very happy with this.

Another way of looking at the dividend safety is by yield and score. For each of my holdings I compare these values to visualize the figures which clearly lets you draw some general conclusions.

The dots represent my yield-on-cost with the color of the dividend safety score. The blue lines indicate the current yield of these stocks. The grey dots represent companies that either do not pay a dividend or are not covered by SSD. The light grey bars represent the percentage of the stock value in my portfolio.

There is a clear correlation between yield and safety score. On the left hand side (apart from the grey dots) we have the low yield, high safety score companies. The further we go to the right, the lower the dividend safety score becomes but it typically comes with a higher yield.

In the midst of the market crash in March 2020 I decided to focus more on high quality dividend stocks and this is shown nicely in this chart. There are quite a lot of darker green dots and the blue line (current yield) is below the dot (yield on cost). Companies recovered quite nicely after the lows.

At the same time, there a quite a few companies, especially of the mid to low safety score, which have not recovered and the blue line is above the dot, typically for oil and gas companies and the finance sector.

On the right hand side you can also see the extreme values that stocks can take on. ET and LADR have still a yield on cost of above 10%, even after the dividend cuts. However, one of my goals going forward is not to chase the yield as we can so clearly see that it comes with a lot of risk.

Projected Annual Dividend Income (PADI)

With more money deployed in January my PADI increased accordingly, too. It stands now at $7,312 compared to $7,092 at the end of December. This is a rise of $220 or 3.1%.

My journey continues to invest in high quality dividend growth stocks. However, the stock market shows less and less opportunities. I maintain myself firm to invest in undervalued stocks and this months it was LMT. At the same time, I try to boost my returns by selling options.

Portfolio Dividend Yield

The current yield of the shares in my portfolio is 3.8%, a decrease of -0.6 compared to last month. A result of my investments in non-dividend paying stock and the latest market rally to new record highs.

The investment yield for my dividend growth portfolio is 4.5%, a decrease of -0.4 compared to December. For this yield I compare the current dividend income with the purchase price of the underlying shares.

My yield on cost (YoC) is lower at 4.6%, down -0.1%, because of losses taken from options which also required additional funding without adding new dividend income.

Conclusion

The dividend income for January was $598.42 from 16 different companies, a 132% increase over January last year. My PADI stands at $7,312 which marks again a new record. My target for this year is to hit the of $8,000 mark with the help of new money injected and options income.

The dividend safety score of my portfolio is 61.9, no change over December and still significantly below my recently set target of 70. My analysis has shown that 50% of my dividend income is categorized as safe, but there are still a few stocks with a high risk of being cut.

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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.