Dividend Income May and June 2021

It was already late in June when I started to catch up on my monthly dividend reporting for May. Now we closed also June and I decided to give a joint update for May and June. June was my best month ever for dividend income (apart from special dividends). I received $758.84 in dividends. I also reached a new record for my PADI in June with $8,528 and are very close to my originally set target for 2021 of $8,600.

The dividends just keep coming in as expected. For me this is the beauty of the dividend investing strategy. You get to see the results directly in your account in cash. For me it is the confirmation that I am on the right path and that dividend growth investing is the right strategy for me.

 

In May my dividend growth journey portfolio returned a respectable amount of $649.76 in dividends which a total of 18 companies paid me. Here is my dividend income in detail:

Apple (AAPL) – income of $4.40
AbbVie (ABBV) – income of $65.00
Bristol-Myers Squibb Co (BMY) – income of $29.40
Cornerstone Strategic Value Fund (CLM) – income of $32.04
CVS Health (CVS) – income of $20.00
Energy Transfer (ET) – income of $30.50
Gladstone Investment Corp (GAIN) – income of $7.00
General Dynamics (GD) – income of $59.50
General Mills (GIS) – income of $15.30
Gladstone Commercial Corp (GOOD) – income of $12.52
Highland Global Allocation Fund (ETF) (HGLB) – income of $21.30
KinderMorgan (KMI) – income of $13.50
Realty (O) – income of $14.10
Omega Health Care (OHI) – income of $40.20
Starbucks (SBUX) – income of $9.00
Tanger Factory Outlet Centers (SKT) – income of $17.75
AT&T (T) – income of $130.00
Unum Group (UNM) – income of $128.25

 

T and UNM are my main contributors with $130 and $128.25 respectively. ABBV and GD both have grown to a reasonable size in my portfolio. First time contributor is CLM. Starbucks paid now again in May compared to the previous late payout in March.

 

In June my dividend growth journey portfolio returned a respectable amount of $758.84 in dividends which a total of 26 companies paid me. Here is my dividend income in detail:

Anthem (ANTM) – income of $11.30
Broadcom (AVGO) – income of $14.40
Cornerstone Strategic Value Fund (CLM) – income of $32.04
Discovery Financial Services (DFS) – income of $26.40
Ebix (EBIX) – income of $3.00
Enbridge (ENB) – income of $34.65
Gladstone Investment Corp (GAIN) – income of $13.00 (including a $6.00 special dividend)
Gladstone Commercial Corp (GOOD) – income of $12.52
Home Depot (HD) – income of $26.40
Highland Global Allocation Fund (ETF) (HGLB) – income of $21.30
Huntington Ingalls Ind. (HII) – income of $11.40
International Business Machines (IBM) – income of $49.20
Intel (INTC) – income of $34.75
Invesco (IVZ) – income of $51.00
Johnson & Johnson (JNJ) – income of $31.80
Lockheed Martin (LMT) – income of $33.80
Lumen (LUMN), formerly CenturyLink (CTL) – income of $25.00
3M (MMM) – income of $29.60
Microsoft (MSFT) – income of $5.60
Realty (O) – income of $14.10
Principal Financial Group (PFG) – income of $30.50
Prudential (PRU) – income of $115.00
Snap-on (SNA) – income of $24.60
Visa (V) – income of $3.20
Walgreens Boots Alliance (WBA) – income of $60.78
Exxon (XOM) – income of $43.50

PRU and WBA are my main contributors with $115 and $60.78 respectively. PRU has become a significant position in my portfolio after the recovery. First time contributor is HII.

 

Overall, I have a very well diversified portfolio with a nice split of dividend income across most of my holdings to reduce the impact of any potential dividend cuts.

The above chart shows my monthly dividend income over time.

In May 2021 I received $649.76 compared to May 2020 with $398.60 of income. This is an increase of $251.16 or 63%. My aggressive adding to the portfolio since the lows in April 2020 comes to show and the setback on the options did not stop me. I continued to try to generate additional income with option premiums.

In June 2021 I received $758.84 compared to June 2020 with $432.57 of income. This is an increase of $326.28 or 75%.

Year over year I managed to increase my income from $2,470.70 in the period January to June 2020 to $3,916.23 in the same period in 2021. That is an increase of $1,445.53 or 59%.

These growth rates always give me a boost and show me that the effort it takes actually pays off.

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

 

Dividend Changes

In May there have been two dividend increases in my portfolio. The table below summarizes the total impact of $28.18, with an average increase of only 4.5%.

CAH increased their dividend by only 1.0% – not much and I have to count on stock value appreciation. I do not see a dividend growth story here yet.

UNM which is my largest position in stock value and 6% of my dividend income raised their divided by a reasonable 5.3%. This is in line with previous increases.

In June there have also been two dividend increases in my portfolio. In total the impact is only $2.12, with an average increase of only 2.0%.

As a result of this change, my PADI increased by $30.30 in new yearly dividends. At a yield of 3.0%, to achieve this dividend income I would have to deploy $1,010 of fresh capital. But this is not necessary. The dividend increases take care of that and that’s the beauty of dividend growth investing and the compound effect in action.

I aim for an average dividend increase of at least 5%. Only UNM could match this threshold. The overall increase for May and June was 4.1%, below my target to keep up with inflation.

 

Expected Dividend Increases for July

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

Altria (MO) – A heavy-weight in my portfolio and I expect a dividend increase by 2 cents to $0.88 per quarter representing 2.3%.

Walgreens Boots Alliance (WBA) – My expectation would be an increase to $0.48 cents per quarter. This would mean an increase of 2.7%.

 

The Dividend Growth Portfolio

In the Dividend Growth Portfolio I hold 58 different companies. Here is an overview of the status as of April 30^th.

 

Purchases

In May I added one new position to my dividend growth portfolio. Just like in April (see article here) I explored an alternative investment to the pure dividend stocks.

Cornerstone Strategic Value Fund, Inc. (CLM)

The Global Allocation Fund is a diversified, closed-end management investment company. The Fund’s investment objective is to seek long-term capital appreciation through investment in equity securities of U.S. and non-U.S. companies. In determining which securities to buy for the Fund’s portfolio, the Fund’s investment adviser uses a balanced approach, including “value” and “growth” investing by seeking out companies at reasonable prices, without regard to sector or industry. Unlike mutual funds, closed-end funds generally can stay more fully invested in securities consistent with the closed-end fund’s investment objectives and policies. Cornerstone Strategic Value Fund was incorporated in Maryland in 1987.

Additionally, I got assigned 1,000 shares of Nano Dimensions Ltd (NNDM) which is part of my options wheel strategy. I hold in total 1,400 shares of NNDM and sold a call option against it for August to generate income.

In June I did not add to any new stocks to my dividend growth portfolio.

This is all for this month of May and June. I bought 200 shares even though the fund is trading above its Net Asset Value. It pays a dividend of $0.1602 on a monthly basis. As a result, I have added $384.48 of dividend income to my Projected Annual Dividend Income (PADI). On an investment amount of $2,358.74 including fees it comes to an average dividend yield of 16.70%. OMG. Again, this is what is so intriguing about this type of investment. I will track this for the next year very closely because if the fund value decline outpaces the distributions then I will have to reconsider. For this fund no SSD score has been given.

 

Sales

My main strategy is buy and hold. Still, in May I decided to sell my shares of Medtronic (MDT).

There are two reasons for my decision to sell. First, the stock has run up quite a bit since I purchased it back in March 2020 and as per the FastGraphs chart it looks significantly overvalued. Second, the company if registered in Ireland which for tax purposes is adding additional fiscal pressure.

I purchased MDT in March 2020 and sold in May 2021 with a profit of $793.80. On top I received $42.87 in dividends. The absolute return is 71.0% while the IRR is 61.6%. Not bad for a dividend stock.

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 June, the Dividend Safety Score is 57.4 for my dividend growth portfolio and has dropped from 60.8 compared to April.

This decrease is due to the deployment of money into the Cornerstone Strategic Value Fund, Inc. (CLM) which is not scored by Simply Safe Dividends and, hence, has a score of 0 assigned. Additionally, the sale of MDT with a SSD score of 99 has negatively affected my average number.

I consider the score of below 60 somewhat at the lower acceptable end and my target is a score of 70. This means I am now even below my lower end threshold. As such for the remainder of the year I will focus only on highly dividend safety scored stocks.

My target was to have achieved the 70% mark by the end of 2021. I feel this is getting out of reach. My plan is not to sell low rated stocks but instead re-balance to high scoring ones when deploying more money. Surely for May and June I deviated from this plan. And I might continue as PPL is a potential sale candidate.

 

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. You see that the unclassified category has increased quite a bit.

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

In my portfolio 46% is in the Safe and Very Safe category which has very little risk of being cut. Another 29% is Borderline Safe. The remaining 17% are Unsafe or Very Unsafe. 8% are unclassified and have a score of 0. I need to monitor especially the unsafe positions closely.

In May there has been a significant shift between categories. AT&T (T) announced the spin-off of its media content for 2022 together with Discovery creating a standalone company. As there is a clear expectation that AT&T will then cut there dividend the SSD score has been dropped from 60 to 40 shifting it into the Unsafe category.

On the positive side AbbVie (ABBV) received a score increase from 50 to 70 moving it from Borderline Safe to Safe.

 

Dividend Safety Score Stock by Stock

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

I hold now 16 companies in the highest category of Very Safe, of which 8 actually have the highest score of 99, and another 17 companies is the second highest category Safe. 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). It is only a small position and 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 PPL are also smaller positions. I might consider to let PPL go as the outlook with the UK business may lead to a dividend cut. AT&T (T) is the new concern. Does it make sense to sell or should I wait for the spin-off and re-evaluate. I will have to monitor closely if there are any negative signs.

 

Dividend Safety of Income Distribution

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

You can see that the largest group remains the Borderline Safe category, closely followed by the Safe one. However, the Unsafe category has also become a sizable portion of my portfolio thanks to the shift of AT&T into that category. So, my focus has to be on expanding the Very Safe category for the rest of the year.

 

Dividend Safety and Yield

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.

If the blue line (current yield) is below the dot (yield on cost) it means that either the stock has appreciated in price or the dividend was raised or both. Companies recovered quite nicely after the lows in March 2020 and most of my stocks have a lower current yield than my yield on cost.

On the right hand side you can also see the extreme values that stocks can take on. My latest additions HGLB and CLM are high yield funds. 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. Still if I see an opportunity I am open to explore it.

 

Projected Annual Dividend Income (PADI)

My Projected Annual Dividend Income (PADI) increased to $8,528 in June compared to $8,170 at the end of April. This is a rise of $358 or 4.4%.

In large the increase was fueled by newly deployed money with $368 and further $30 by dividend raises, less the $39 from the sale of MDT.

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. However, this month I focused on alternative investment options like a closed-end fund and a pure growth stock.

At the same time, I try to boost my returns by selling options. I also give a monthly Options update. Check out my latest one here. The review for the second quarter in in the writing.

 

For my target of $8,600 for this year I am very well on the way of reaching it early. It only took me six months to go from $7,092 to $8,528 which is an increase of $1,436 in total or $239 per month. In order to hit my target I planned for $126 per month on average. This means this year I am racing at almost twice the pace originally planned. For the remainder of the year I will focus on high quality, very safe dividend stocks. Depending on the options income this may be more or less I can deploy.

 

Portfolio Dividend Yield

The current yield of the shares in my portfolio is 3.58%, an increase of 0.10 compared to last month. Price pressure on the stock that I hold plus dividend increases result in the change.

The investment yield for my dividend growth portfolio is 4.60%, a decrease of 0.22 compared to April. For this yield I compare the current dividend income with the purchase price of the underlying shares.

My yield on cost (YoC) is higher this month at 5.43%, up 0.26%, because of new dividend and option income as well as further dividend raises.

 

Conclusion

The dividend income for May was $649.76 from 18 different companies and in June was $758.84 from 26 different companies, a 75% increase compared to June last year. My PADI stands at $8,528 and is very close to my originally set target for 2021.

The dividend safety score of my portfolio is 57.4, a drop of 3.4 points over April and still significantly below my set target of 70 for the end of the year 2021. My analysis has shown that 46% of my dividend income is categorized as safe, but there are still a few stocks with a high risk of being cut. The unclassified proportion has increased to 8% of my portfolio dividend income.

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Disclosure: At time of writing long on all above mentioned, except for MDT which I sold in May

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.