Expected Dividend Increases for November 2018

The Milwaukee Bucks remain the only unbeaten team in the NBA and another month has passed us by, which means it is time for another installment of the expected dividend increases series. Prior to delving into the dividend increases that I anticipate for the DGI portfolio for the month of November, I'll start by recapping the dividend increases from October, and their impact on my dividend income.

As expected, there were 3 raises in the month of October. However, the dividend raise from Dominion Energy (D) that I expected didn't materialize. I suspected that Dominion would continue a trend that began last year with them increasing their dividend by a small amount in October, but that raise appeared to be a one time event. Luckily, I do anticipate a high single digit dividend increase from D in January as that has been the month in which they have announced dividend increases for years now. Instead, the dividend increase came from a recent purchase as I'll detail below.

Dividend Increase #1: 

Iron Mountain (IRM) announced a dividend increase of 4% from a quarterly dividend of $0.5875 a share to $0.611 a share. Furthermore, the company also posted strong Q3 results with 12% YOY revenue growth and 9% YOY adjusted funds from operations (AFFO) growth. Unfortunately, IRM wasn't able to make any progress on the deleveraging front in paying down their debt, as they have debt that is above average when compared to their peers in the self storage and data center segments. On the plus side, they were also able to avoid issuing any new shares which would dilute their strong growth. This increase added $0.19 in annual dividend income across my 2 share position which I intend to add to over the next couple of months. Overall, I'm very pleased with my recent purchase of IRM and I'm confident that they will successfully deleverage their balance sheet, and subsequently receive a credit upgrade.

Dividend Increase #2:

Enterprise Products Partners (EPD) announced a dividend increase of 0.6% from a quarterly dividend of $0.43 a share to $0.4325 a share. This dividend increase was exactly as I expected as EPD continues to increase its dividend by a small amount every quarter. This increase added $0.09 in annual dividend income across my 9 shares.

Dividend Increase #3:

EQT Midstream Partners (EQM) announced a dividend increase of 2.3% from a quarterly dividend of $1.09 a share to $1.115 a share. This dividend increase was also as I predicted in my expected dividend increases in October post. This raise increased my annual dividend income by $0.40.

Although I'm not expecting any dividend increases across my 32 holdings in my Robinhood portfolio, I am expecting a dividend raise that others in the community are also eagerly awaiting in my recently opened M1 Finance brokerage account.

Predicted Dividend Increase #1:

Hormel Foods Corporation (HRL) is one of 50 roughly equal positions in my rather small M1 Finance portfolio. HRL is a company with a reasonable payout ratio that could likely expand a bit in the coming years as the payout ratio is a bit over 40%. With earnings expected to grow in the high single digits to low double digits over the next 5 years, I wouldn't be surprised if HRL announced at least a 9% increase in their quarterly dividend from $0.188 a share to $0.205 a share. This would increase annual dividend income by just under $0.005.

Conclusion:

Overall, my forward annual dividend income increased by $0.68 from dividend increases alone. This doesn't even include the continued retirement contributions and occasional Robinhood portfolio purchases, which will soon manifest themselves in my monthly dividend income reports. Although I'm only expecting 1 dividend increase in November and it's not even from my Robinhood holdings, I'm expecting quite a few in the months beyond November.

Discussion:

What was the impact of October dividend increases on your annual dividend income going forward? Are you expecting any dividend increases in November or are you expecting a light month as I am?

Why Today Is The Day You Need To Pursue Your Dreams

What do you believe is the single greatest reason that most people decide to never pursue their dreams? I personally believe that failure is the single greatest fear that most people have. For whatever reason, people are embarrassed of failure. It leaves them in paralysis with fear. They defer their dreams because maybe other people don't support their dreams, and they need that support. Perhaps you have a dieting goal, a fitness goal, a goal to start a blog, or to achieve financial independence. Whatever it may be, there's no logical reason to keep deferring your dream. There will never be a better time to start pursuing your dreams than today. If you keep waiting for the "perfect time," you'll never take action. I'm going to provide you with 3 reasons to pursue your dreams, regardless of if they are FIRE related.

First Reason: Avoiding Regret

It's understandable that people are afraid of failure. It's difficult to put yourself out there, giving everything you have only to come up short. What you have to remember about failure is that it doesn't have to be the end. Failure is just the beginning. As Thomas Edison said to a reporter of his 1,000 failures to invent the light bulb, "I didn't fail 1,000 times. The light bulb was an invention with 1,000 steps." When you reframe your failure as Thomas Edison did, you continue to keep trying until you eventually find success in whatever goal it is you are pursuing. Another inspirational story is the story of Abraham Lincoln. Born into poverty, Lincoln endured a life of failure. He lost 8 elections, failed twice in business, suffered a nervous breakdown...oh yeah, and then became arguably the single greatest president in American history. The incredible thing about dreams is that you never really know what could happen until you take massive action towards fulfilling them. Imagine if Thomas Edison gave up on the light bulb. How much longer would it have taken to illuminate the world? What if Abraham Lincoln gave up before he lost 8 elections, failed twice in business, and before he suffered a nervous breakdown? Would the United States have survived the Civil War to achieve its place in history among greatest countries had it not been for Lincoln? Thankfully, we'll never know because Lincoln pushed through the adversity in his life to cement his legacy as an all time great president. It's not the failure that defines you, unless you quit. It's the success that comes despite all of your failures that defines you. The definition of a winner is a loser that never quits. Many never even knew that Lincoln failed as much as he did. We all remember him for his success.

Second Reason: You Are The Author Of Your Life

You are the director, producer, writer, and main protagonist in your life. Before you can achieve great things, you need to let this fact of life soak in. Because you are the author of your life, you must decide the life that you want to live. Do NOT let anyone else tell you how you are supposed to live your life. If you surrender your life to the whims of society, you will lead a life unfulfilled. Societal norms are not a one size fits all solution to life. Perhaps some people are apt to work at jobs they dislike for the best decades of their lives, to purchase items they don't need with money they don't have to impress people they don't even like. If you're reading this blog, I'm very willing to bet that you are not one of those people. If you want to break away from the mindset that the majority of people have, you need to develop the "minority mindset" as Jaspreet Singh puts it on his Youtube channel. If you don't want to live like the majority live, you need to stop thinking similar to how the majority thinks.

Third Reason: You Can Be An Inspiration to Others

Dreams come in many different shapes and sizes. Jason Fieber is one such person that is an inspiration to me and many others in the FIRE community. His story of going from a 27 year old below broke college dropout to financially independent at 33 is so empowering because Jason proves that just about anyone can achieve financial independence at a relatively young age with discipline and determination. There are also more well known figures that have endured quite a bit of adversity on the arduous journey to success. JK Rowling is one such figure that comes to mind. After she suffered a miscarriage in Portugal and gave birth to her daughter, Jessica, Rowling moved back to England as a divorced and destitute single parent living off welfare benefits. As we all know, JK Rowling went on to publish Harry Potter, subsequently becoming a billionaire. She is an inspiration to aspiring writers around the world. No matter the size or scope of your dreams, you can be an inspiration to others just as Jason Fieber and JK Rowling are.

Takeaways: 

If you never take action towards your dreams, you'll never really know what you could have been. The feeling of regret is not a feeling you want to experience. I'd rather fail than never try. Ultimately, you are the author of your life. Do not conform to societal norms as they are not a one size fits all approach to life. Live your life the way you design it, rather than how society thinks you should live it. Lastly, you can be an inspiration to others. Chasing your dreams takes courage. You'll probably be ridiculed along the way, but just remember that when you succeed, you will pave the way for countless others to forge their own path.

Discussion:

Because I've only provided 3 reasons to chase your dreams, I'm certain that I've missed several great reasons to pursue your dreams. Are you able to think of any additional compelling reasons to chase your dreams?

Recent Stock Purchase - Iron Mountain Inc (IRM)

It was about 3 weeks ago that I last added another share of AT&T (T) to my portfolio. If anyone has checked my Portfolio page recently, they would have possibly noticed that I recently initiated a position into Iron Mountain Inc (IRM). IRM has been quite a popular stock in the DGI community as of late with Dividend Diplomats and Dividend Sensei of SeekingAlpha recently mentioning them. With that said, I'll discuss a few reasons into my decision to initiate a position in this REIT.

Iron Mountain Company Overview

Iron Mountain is the largest physical records storage provider in the world. The core business of physical records management accounts for 63% of revenue. IRM serves over 225,000 customers in 53 countries on all 6 of the inhabited continents through its 1400 storage facilities.

Reason #1: Strong Customer Base

I was delighted to learn that IRM's clientele includes 95% of global Fortune 1000 companies. It is this kind of positioning among many of the largest and most powerful corporations on the planet that gives IRM a strong competitive advantage over its competitors. 

Reason #2: Resilient, Recession Resistant Business

Because of the necessity of record management in today's information driven business environment, IRM has an incredibly stable cash flow with annual customer retention rates of 98%. According to Eric Compton of Morningstar, monthly storage prices are roughly 19 times cheaper than storage retrieval prices. This gives the 225,000 customers of IRM strong incentive to continue to store their records rather than remove them from storage, and explains the strong customer retention rates.

Reason #3: Exciting Future Growth Plans

IRM is expanding its presence into data centers, which supports the incredible growth in cloud computing. IRM's data centers are situated in some of the top tech hotspots in the world such as Singapore, London, and New York City, with 90% occupancy and average remaining leases of nearly 3.5 years. Management expects that by 2020, its rapidly growing data center business will account for 10% of operating cash flows. 

Reason #4: Strong, Safe Yield

With my entry yield into IRM being 7.4%, IRM doesn't even have to grow very much to be an attractive long-term investment. My entry yield of 7.4% compares very favorably to the 5 year average yield of 5.9%. Of course, a dividend yield can't solely be the basis of an investment decision unless one believes that the dividend is safe. IRM's adjusted funds from operations payout ratio currently sits at a reasonable 81%, with expected AFFO/share growth of 5% through 2019 and nearly quadruple that growth in 2020, that will reduce the AFFO payout ratio to around 73% as the company's multitude of growth projects are completed. This growth in the AFFO/share should lead to 4% dividend growth over the next couple years. The concern in the near term with IRM is its junk bond rating. With an interest coverage ratio of 3.6 and debt to EBITDA of 5.6, the company's IC ratio is slightly better than the sector average of 3.5 while the company's debt to EBITDA ratio is slightly better than the sector average of 6.0. With management planning to reduce its long term leverage ratio to only 4.75, it is reasonable to assume that IRM will receive a credit upgrade in the next few years though. 

Closing Thoughts:

The initiation of a position of 2 shares in IRM has increased my forward annual dividends by $4.70, with a very strong starting yield that is expected to at least keep pace with inflation. The primary risk of buying IRM currently lies in the concerns that investors have over long-term interest rates spiking higher. Rather than delve into this into further detail, I'll leave the link to Dividend Sensei's recent article on IRM as he does a fantastic job of providing an in-depth analysis of IRM that served as part of my motivation to initiate this position in IRM. 

Discussion: 

What recent purchases have you made? Do you have a position in IRM? If not, do you expect to initiate a position in IRM at some point?

September 2018 Dividend Income

The beginning of the month is my favorite time. It's a time to look ahead at increasing your dividends, and a time to reflect on the previous month. Another month has gone by, which means it's time to examine what the dividend portfolio provided for me in dividends for the month of September.

Overall, I collected $44.26 in dividends for the month of September from 13 different companies and 1 mutual fund. $31.73 of the dividends originated from the 13 companies in my Robinhood account that paid dividends this month and $0.04 came from my recently opened M1 Finance brokerage account. The remaining $12.49 came from CAIBX in my Simple IRA through my employer.

Analysis

When examining my dividends, I noticed that I received two dividend increases that accounted for the $0.22 increase in Robinhood account dividend income from June to September. BP announced a 3.4% raise from a quarterly dividend of $0.595 to $0.615 at the end of July that increased the quarterly income I collected from my 4 shares by $0.08. Also, JM Smucker announced a near 9% raise from a quarterly dividend of $0.78 to $0.85 that increased my quarterly dividend income by $0.14.

Of course, the real growth in my dividend income came in my Simple IRA account as CAIBX paid dividends of $7.13 in June compared to the $12.49 it paid me in September. This came as a result of my continued contributions to my retirement account over the past few months.

Overall, my dividend income increased from $38.64 in June to $44.26 in September. This is a quarter over quarter (QOQ) growth rate of 14.5%. I consider this to be satisfactory given that I didn't initiate any new positions or add to positions in my Robinhood account that paid me in September. Of the $5.62 increase in dividend income from June to September, $0.22 or 3.9% of it was derived from dividend increases, $0.04 or 0.7% of it came from the newly opened M1 Finance account, and the remaining 95.4% came from continued contributions into my retirement account.

Discussion:

How was your September? Did you set a personal best in September? Did you have any new dividend payers for the month?

Expected Dividend Increases for October 2018

Another month has passed us by, which means it is time for another installment of the expected dividend increases series. Prior to delving into the dividend increases that I anticipate for the DGI portfolio for the month of October, I'll start by recapping the dividend increase(s) from September, and their impact on my dividend income.

As expected, there were two raises for the month of September. This isn't surprising as I've found that most of my dividend raises are concentrated in the last couple months of the year and the first couple months of the year.

Dividend Increase #1: 

Realty Income (O) announced a 0.2% dividend increase from $0.22/month per share to $0.2205/month per share. This dividend increase was about in line with what I expected. This raise in the annual payout from $2.64/share to $2.646 increased dividend income across my 4 shares by $0.024. Not the most impressive raise, but I'm most excited for O's raise that will be announced early next year as O's first raise of the year is historically the largest (at around 4%).

Dividend Increase #2:

WP Carey (WPC) announced a 0.5% dividend increase from $1.02/quarter per share to $1.025/quarter per share. This dividend increase was also in line with what I expected as WPC has raised its quarterly dividend by $0.005 every quarter for the past 2 years. This raise in the annual payout from $4.08 to $4.10/share increased dividend income across my 3 shares by $0.06. Again, a small raise but when considering that my yield on cost (YOC) is 6.8%, I'm not expecting gang buster raises from WPC. There are other companies in my portfolio that will augment my dividend increases, such as Abbvie (ABBV), Lowe's (LOW), and Home Depot (HD) to name a few.

Expected Dividend Increases for October

#1: Enterprise Products Partners (EPD) will likely be announcing a dividend increase some time this month. If EPD continues to follow the pattern that they have been for the past 3 quarters, they should be raising their dividend by 0.6% yet again from $0.43/quarter per share to $0.4325 per share. If this is the case, my annual dividend income will increase $0.09 across my 9 shares.

#2: EQT Midstream Partners (EQM) will likely be announcing a dividend increase some time during this month. I believe that EQM will announce a raise similar to the last one. That would mean that the dividend will be increased 2.3% from $1.09/quarter per share to $1.115/quarter per share. If this does happen, my annual dividend income would increase $0.40 across my 4 shares.

#3: Dominion Energy (D) is the wild card of this group as they did announce a small dividend increase around this time last year, but they historically announce their largest dividend increases in January. If D does announce a raise this month, I'd expect it to be in the low single digit range like 2% or so, from $0.835/quarter per share to $0.85/quarter per share. If this happens, my annual dividend income would increase $0.18 across my 3 shares.

Conclusion:

September was a fairly light month in terms of dividend increases, but for this time of year, that is to be expected. Although the total impact on my annual dividend income was only $0.084 in dividend raises, the important point is that my income is continuing to grow through dividend raises, reinvestment, and the fresh capital being contributed to my retirement account with each paycheck. 

Discussion:

How many dividend raises are you expecting for the month of October? Are you expecting any large raises (i.e. double digits)? What will be the total dollar impact of the raises that you are expecting?