Expected Dividend Increases for November 2019

As I write this post, the NFL season is in full swing and the Packers are looking impressive thus far. I'm not sure how this season is going to end for the green and gold, but I'm certainly excited to find out after the past couple seasons have been uncharacteristically disappointing.

Meanwhile, my true passion of NBA basketball, and more specifically, Bucks basketball is back! Despite the new faces of Kyle Korver, Robin Lopez, Thanasis Antetokounmpo, and Wesley Matthews, the Bucks appear to have retained much of that same chemistry from last season as evidenced by their win over the Rockets to open the season in Houston. It may only be one game, but given the outcome of last season and the lessons from it, I'm brimming with optimism that this will be the year that the Bucks win it all!

But that's enough of the football and basketball talk for now. We'll be discussing the dividend/distribution increases I received during the month of October and looking ahead to dividend increases that I'm expecting for November.



Distribution Increase: Enterprise Products Partners (EPD)

EPD extended its streak of consecutive quarterly distribution increases to 61, having raised its quarterly distribution from $0.44/unit to $0.4425/unit a couple weeks ago. It's this level of consistency from EPD that prompted me to write another bullish article on the company on Seeking Alpha recently, and this consistency is also why EPD is the largest energy position in my portfolio in terms of portfolio weighting.

Across my 19 units of EPD, this increased my forward annual dividends/distributions by $0.19.

Distribution Freeze: EQM Midstream Partners (EQM)

Readers will notice EQM actually opted to keep its quarterly distribution steady at $1.16/unit rather than continuing upon its recent trend of raising the quarterly distribution by $0.015.

While this isn't quite what I was expecting to occur, I can understand in hindsight why EQM opted to freeze its dividend for the time being.

EQM recently announced that its key Mountain Valley Pipeline project is expected to experience yet another delay and increase in costs. The project's completion date was pushed back from mid-2020 to late-2020 while expected costs rose from $4.8-5.0 billion to $5.3-5.5 billion.

Meanwhile, EQM's distribution is hanging on by a few threads at a coverage ratio of 1.03. For context, Simply Safe Dividends considers a coverage ratio of 1.10 or greater to be ideal for MLPs such as EQM. Assuming the eventual completion of MVP (which accounts for about 2/3 of EQM's organic growth going forward), EQM's distribution coverage would increase to help the company meet its long-term coverage ratio goal of 1.20.

Fortunately, I believe that because MVP is about 90% complete, the sunk cost of the pipeline to date will be a motivating factor for management to complete this project in the next year to year and a half.

Admittedly, this is more of a speculative position within my portfolio and it's arguably the least safe dividend/distribution in my portfolio. I have weighted it as such in my portfolio, with it accounting for barely 2% of my dividend/distribution income and less than 1% of my portfolio value. It certainly isn't on the level of EPD or Energy Transfer (ET), but I still believe it's a good midstream company.

Not Yet Announced Dividend Increase: Iron Mountain (IRM)

While IRM has announced its dividend about a week before the end of October the last couple years, the company has apparently decided to depart from this trend to establish a new one as it has yet to announce a dividend increase as I'm writing this on October 26.

I don't really have any doubts that IRM will fail to deliver a dividend increase in the realm of what I was expecting in my previous dividend increase post, but it's just a matter of waiting until the week that this blog post is published before I'm able to update this section of the post when the company will presumably announce its dividend increase.

Until that time, I'm assuming that IRM will increase its quarterly dividend from $0.611/share to $0.638/share. Should IRM follow through on my prediction, this would increase my annual forward dividends by $0.432.

Bonus Distribution Increase: Magellan Midstream Partners (MMP)

I somehow forgot all about the fact that MMP increases is distribution at near the end of the first month of each quarter. MMP increased its quarterly distribution 0.7% from $1.0125/unit to $1.02/unit. Across my 3 shares, this increased my annual forward distributions by $0.09.

With consistent raises each and every quarter, I wonder how much longer I'll forget about MMP.

Expected Dividend Increases for November

Hormel Foods Corporation (HRL):

HRL is one of only two dividend increases that I'm expecting within my 65 stock portfolio (including 23 M1 Finance holdings that each account for less than 0.1% of my net worth and dividends) for the month of November.

With that said, I believe HRL is in a great position to reward its shareholders with a 9.5% increase in its quarterly dividend from $0.21/share to $0.23/share.

When we consider that HRL is paying out a bit less than half of its earnings, possesses a nearly flawless balance sheet, and is likely to grow its earnings in the mid to high-single digits over the long-term, I believe the above dividend growth estimate is reasonable.

This will have no impact on my dividend income (a bit less than $0.005) because HRL is less than even 0.1% of my total dividend income.

The reason that this will actually have no impact on my dividend income is that M1 Finance rounds to the nearest cent for quarterly dividends/distributions and I'm already getting the benefit of rounding in this case.

Starbucks (SBUX):

SBUX is the second of two dividend increases that I'm expecting for the month.

Similar to HRL, SBUX accounts for less than 0.1% of my total dividend income and the impact that this raise will have on total dividend/distribution income will be nothing.

However, I do expect a very strong dividend increase from SBUX in the low to mid-teen percent range given the company's fairly strong balance sheet and projected earnings growth.

Concluding Thoughts:

As of the last few days of October, this month has brought a little bit of everything between EPD delivering as expected, EQM freezing its distribution (as I should have expected in hindsight), and IRM seemingly trolling shareholders by going back to a late October or early November dividend announcement.

Thus far, my annual forward dividends/distributions have increased by $0.28 while I await the increase from IRM. It will be interesting to see whether the company increases its dividend on or before Halloween or if it will increase its dividend on Friday, November 1. The $0.28 in increases for the month thus far would require a $7.00 investment at a 4% yield to duplicate.

After many consecutive months of receiving at least a few dividend/distribution increases, we've reached my slowest month of the year for dividend/distribution increases, with none of my 42 whole share holdings expected to increase their dividends/distributions this month.

There are plenty of companies that are expected to increase their dividends this month aside from HRL and SBUX, such as Nike (NKE), Walt Disney (DIS), and McCormick, which I recently covered on Seeking Alpha (MKC).

Unfortunately, I don't yet own them.

However, I do believe the slowdown for November will motivate me to take action between now and next October, so that I can benefit from some of these increases next November.

The upside is that December is primed to be my strongest or second strongest month of the year for dividend/distribution increases in terms of quantity and its overall boost to income.

Discussion:

Are you as optimistic toward your favorite NFL team and NBA team as I am? Will November be a slow month for you in terms of dividend/distribution increases?

As always, thanks for reading this post. I look forward to reading any comments that you leave below.

Financial Lessons To Draw From The Holidays

With Halloween just around the corner, a few thoughts couldn't help cross my mind pertaining to the spooky holiday. In a society that is plagued by consumerism seemingly everywhere one can look, it's quite apparent that the commercialization of holidays for the benefit of businesses has been highly successful and has infiltrated American culture. With that said, we'll be examining the impact of this consumerism on the finances of Americans. We'll also be taking a look at how something as simple as trick or treating during Halloween could indirectly teach kids a lesson about fiscal responsibility.



Lesson #1: Americans Spare No Expense Celebrating Holidays

It really shouldn't come as a surprise that in a country that is as materialistic as the United States, Americans are spending a fortune on holidays.

But in order to fully highlight the absurdity of such spending, we'll be delving into the details of this spending, and discussing the implication that can be drawn from this analysis.

While on the topic of Halloween, it's only appropriate that we will start with Halloween specific spending first and then transition to overall holiday spending throughout the year.

For 2019, the National Retail Federation or NRF is expecting that Americans will spend $8.8 billion on Halloween costumes, decorations, and candy. Shoppers say that they expect to spend an average of $86.27 this year.

While this amount alone doesn't seem like much, it becomes considerably more when we delve into the spending on major holidays such as Thanksgiving, Christmas, Hanukkah, and Kwanzaa, whether its for gifts, decorations, candy, food, or travel.

According to Alliant Credit Union, Americans planned to spend an average of $1,007.24 last holiday season (covering Thanksgiving, Christmas, Hanukkah, and Kwanzaa), with $638 of that being allocated to gifts for family, friends, and coworkers, $215 being spent on non-gift holiday purchases such as food and decoration, and $155 being spent on other non-gift purchases for themselves and their families.

Perhaps the most glaring spending category in my opinion is the $638 being spent on gifts. It seems a bit excessive to me to spend that amount of money giving gifts to family and friends that in all likelihood, will probably end up being thrown out within a year or two anyway.

This doesn't even include holidays, such as Mother's Day, Valentine's Day, Easter, the quintessential American holiday of Super Bowl weekend, Father's Day, or St. Patrick's Day, where Americans collectively spent almost another $100 billion each year.

When we take into consideration that the average American household will somewhere in the ballpark of $1,500 this year on holiday related expenses, this equates to roughly 2.3% of the median household income of $63,688 (as of January 2019).

While it may not sound like much, that couple percent of spending could instead be allocated to saving and investing.

Even what seems like a measly 2% when applied to the average American savings rate of 8.1% as of August 2019 (keep in mind this savings rate is in the midst of the lowest unemployment numbers of 50 years and that the next recession will eat into this savings rate considerably), results in a 10.1% savings rate.

Using the Mustachian time to financial independence calculator and assuming that someone is starting from $0 in net worth, that extra 2% is the difference between having to wait almost 63 years to be financially independent versus 57 years.

You read that right! When we take into consideration the rather anemic savings rating of Americans, that extra 2% in savings equates to a difference of over 5 years!

Now, obviously if one is serious about financial independence, holiday spending is going to be maybe the fifth or sixth place to look at optimizing spending.

For optimal control of one's spending, the first three categories that are beneficial to conquer are the big 3 (housing, food, and transportation).

But it just goes to show how cutting the fat on seemingly minimal expenses can make a difference of several months for even a household that has their big 3 expenses well under control.

I'm not saying that we shouldn't spend on the holidays whatsoever, but a bit more mindful and purposeful spending could go a long way in reducing that holiday spending above. If Americans take this financial lesson to heart, I believe it's entirely possible that we could cut holiday spending in half. An extra percent savings rate for many Americans would be a noticeable bump in their savings increase due to the fact that the savings rate sits at about 8%, and it would be the start of remedying the underlying retirement crisis.

The implications of this excessive spending and the excessive spending of Americans in every notable budget category in general are that these reckless spending habits are the result of financial illiteracy. This is the very reason that even in a relatively robust economy, Americans feel as if they can't get ahead.

If one doesn't have an understanding of personal finances and of their personal financial situation, then how can they ever hope to retire? It's this very financial illiteracy that is the reason many Americans will never be able to retire without the aid of the government through Social Security and/or via pensions from their employers.

Lesson #2: Trick or Treating Can Teach Kids A Valuable Lesson

Now, it seems a bit contradictory that a holiday as pointless and frivolous as Halloween (my personal opinion now that I'm a solid decade beyond trick or treating and don't have any children to take trick or treating) could actually teach kids a valuable financial lesson, but hear me out on this one.

From the time I began trick or treating to when I stopped, I remember taking stock of my massive piles of Halloween candy.

I'm not sure if I am alone in this innate behavior that I displayed as a child, but I recall my tendency to gradually eat my candy over a period of several weeks. My candy would last at least through Thanksgiving each year.

My parents never really had to tell me to slow down on the candy consumption as a kid because I've always had the saving and delayed gratification mindset.

I knew that if I devoured all of my candy in a few days, that would mean I would be out of candy and I wouldn't be able to get as much enjoyment as I would if I savored my candy.

Even as an adult, the concept remains similar. Instead of talking about candy, we're now talking about money as the primary consideration in my day to day life choices. Like candy, money is a somewhat finite commodity that we must earn more of if we would like to spend more of it.

As a rule of thumb, I generally take a couple of days to contemplate a purchase before I go ahead with that purchase, regardless of the dollar amount. If I can still justify that purchase a couple days later, chances are that the purchase will meaningfully improve my life and that the cost is worth it.

I never equated something as simple as trick or treating for Halloween candy and the decision to ration that candy as having an impact on my future financial decisions, but I truly believe it has had some impact in that it formed the foundation of how I make financial decisions.

Concluding Thoughts:

While I do enjoy the holidays and the month of October is a month that I enjoy watching reruns of Halloween movies, I've found that holidays in the United States are somewhat tainted due to the commercialization aspect. Companies spend billions of dollars every year to hype up the commercial aspect of holidays such as Halloween, Thanksgiving, Christmas, and Easter.

While I'm not saying that Americans should completely refrain from holiday spending, I believe it would be beneficial for Americans to take a bit more of a mindful and purposeful spending approach toward this budget category, along with others. I always knew there was some level of spending around the holidays, but it took me a bit by surprise that it amounted to this much for the average household.

Finally, trick or treating every Halloween and rationing candy was the foundation of what would eventually shape my spending habits and my mindset toward spending.

Discussion:

Were you surprised at the amount that Americans spend during the holidays throughout the year? Did you also conserve your Halloween candy each year rather than eating it in the span of a couple days?

As always, I'd like to thank readers for reading my thoughts on holiday spending in the United States. I look forward to replying to any comments you may leave below in the comment section.

My Stance on the Relationship Between Ethics and Investing

In our highly divisive and litigious society, it's becoming increasingly common to hear those around us and those in the mainstream media portraying companies as evil. There are even some investors that allegedly refuse to invest in specific sectors (i.e. tobacco, oil, pharma), citing moral or ethical reasons.

In this post, I intend to outline my thoughts on the relationship between ethics and investing.

I'll start by citing that 17.5% of the dividends in my taxable account and 13.9% of my total dividends originate from the big 3 publicly traded tobacco companies (PM, BTI, and MO).

There are some that may question why I receive a significant portion of my dividends from an industry that can be as harmful as tobacco.

It comes down to 3 reasons in my mind.

Image Source: imgflip

Reason #1: I Prioritize Making Money From My Investments

While there are those that refrain from what they believe are unethical or controversial sectors, they forget or disregard that in the most literal sense, your job as an investor is to find the most lucrative investments that you can.

It's often the most hated industries in the stock market that deliver the best returns over time because when you're buying a company with a high dividend yield, at a perpetually reasonable or underpriced valuation, and moderate earnings growth, you're positioning yourself for success.

When we take for instance that money is ultimately a tool that can be used for good or evil, we begin to understand that an investment doesn't really define us.

While there are negative consequences to the products that tobacco companies provide to their customers, they have proven to be the most lucrative industry for many decades.

The money earned from those investments over the decades have done many great things for society, whether its the tobacco companies paying taxes to the government or shareholders leaving behind massive fortunes to fund their favorite non-profit organizations.

If the wealth an investor amasses from their investments is ultimately used for good, then that really offsets the negative consequences in my mind.

Reason #2: Companies Will Profit Regardless Of If You Own Them

One thing that we often forget when we balk at investing in specific companies for whatever reason is that our not buying shares has no negative impact on the company (unless that company is issuing additional shares to raise capital for additional investments in R&D, marketing, etc, and isn't able to raise capital due to moral concerns of potential investors).

Regardless of whether retail and institutional investors shun investing in a company, this company will be largely unaffected.

In fact, when investors refuse to invest in a company for whatever reason, they are likely undermining their intent.

When a company trades at depressed valuations, share buybacks prove very lucrative to long-term shareholders, making them considerably richer in spite of ethical investors refusing to purchase shares in that company.

Reason #3: It All Comes Down To Personal Responsibility And Perspective

Everything could be portrayed as unethical or evil if framed properly. A misguided cynic could portray fast food as unhealthy and the root cause for the obesity epidemic. They could also argue that tobacco companies are the ones to blame for smoking-related deaths. We could blame oil companies for every single oil spill. However, we need to keep in mind that these companies are simply providing us what we demand.

As much as fast food, tobacco, oil, you name it is at fault for whatever ails society, we each make individual choices everyday that enrich these industries.

Whenever we purchase a supersized fry, a pack of cigarettes, or fill up our gas tank, we're funding these companies.

While it does pain me that the families of smokers are also impacted by second hand smoke and premature deaths in the family, cigarettes have never been the root cause of the nearly half million people a year in the US that die from smoking related illnesses.

It was the decisions of those individuals to partake in a vice or bad habit that negatively affected them and/or their family.

Regardless of whether cigarettes are legal or illegal, people will still obtain them. It doesn't make the tobacco company evil for supplying a product that customers demand, especially knowing all that we do about the harmful effects of smoking.

Concluding Thoughts:

As an investor, your goal should be to enrich yourself as much as possible. You can then use these funds to fight for the causes you believe in as you grow older or pass away.

Aside from refusing to purchase products from what you believe are unethical industries or companies, you have absolutely no control over the existence of unethical industries. They will profit regardless of whether or not you invest in them.

We shouldn't limit ourselves to investments that are entirely ethical because there really are none as far as I'm concerned.

We could argue all day about certain industries and for as much good they do for society, we would conclude they also harmed or wronged society in some way at some point.

Discussion:

What are your beliefs on the relationship between ethics and investing? Are there any industries you refrain from owning for ethical reasons?




As always, thanks for reading and I look forward to replying to any comment(s) below.

September 2019 Dividend Stock Purchases

As I write this, it's the last week of September and I'm at the tail end of recovering from my wisdom teeth removal a few day ago.

With that said, my purchases for the month of September are etched in stone at this point as I don't anticipate any additional investments until October.

I know I had indicated in my inaugural post for this series that I didn't believe I would be making any large investments in the near future, but I'm front loading my investments now. This decision can be explained by the fact that I was trying to get myself through my wisdom teeth extraction earlier this month, as well as my inability to delay my source of gratification, which is investing (ironic that a DGIer is that impatient, I know).

As we'll discuss below, September was a massive month in terms of capital deployment and dividend income added since the previous post.

I started off my buying spree by adding to my stake in Philip Morris International (PM) on September 9, purchasing 1 share for $73.50. This added $4.56 in annual forward dividends at the time of my purchase.

The next day I added a unit to my position in Energy Transfer (ET) at a cost of $13.95, which added $1.22 in annual forward distributions.

I began a buying spree on September 12, adding a unit to my Enterprise Products Partners (EPD) stake at a cost of $28.93. This purchase added $1.76 in annual forward distributions.

Later that day, I added to my position in Albemarle (ALB), purchasing 2 shares at a cost of $69.95 a share, which added $2.94 in annual forward dividends.

I continued my buying spree that day, adding 3 more shares to my Altria Group (MO) position at an average cost of $44.96 a share. This purchase added $10.08 in annual forward dividends.

I concluded my purchases that day by adding 2 more shares to my PM position at an average cost of $75.40 a share, adding $9.36 in annual forward dividends due to PM's dividend increase the prior day.

I added to my position in ET again on September 20, at a cost of $13.64 on the unit I purchased, adding $1.22 in annual forward distributions.

Besides the developments in my taxable accounts, the contributions and dividends in my retirement account added 4.372 shares and $9.36 in annual forward dividends.

I concluded the month with my largest purchase of the month. 

I finally initiated a 10 share position in British American Tobacco (BTI) on September 23 (the day of my wisdom teeth removal), at an average cost of $35.74 a share. This purchase increased my annual forward dividends by $26.80.

Summary:

My annual forward dividends increased by $67.30 as a result of my capital investments and another $0.65 in dividend increases in September, increasing my annual forward dividends by $67.95, from $649.56 to $717.51.

September was an incredible month in terms of capital deployment, with $1,181.26 invested during the month. The $67.30 added from capital investment and reinvestment equates to a 5.70% yield. 

Overall, September was a great month in terms of both dividend income added and capital deployed. 

I'm looking forward to reaching the $1,000 annual forward dividend mark, and believe that will occur sometime next spring.

Discussion:

How was capital deployment for yourself in September? What did you purchase during the month? Did you initiate any new positions? 

As always, thanks for reading and I look forward to replying to any comments you may leave below.

September 2019 Dividend Income

As I write this, we're in the final week of September and it will be the first day of October when this post is published. Overall, I'm making incredible progress on my goals for this year, and I'll probably be releasing an update on my progress with all my goals for the year.

At the very least, I'm on track to accomplish all of my goals, and I'm on track to crush some of them (which really warrants revisions to a few of the goals). The first day of October also marks the last quarter that we have to work toward achieving our goals for this year, so I'd encourage others to examine their goals. You may be as surprised as I am at the progress you've made thus far.

With that aside, we'll now delve into our dividend income for the month of September.

During the month of September, I collected $70.00 in dividends in total between my Robinhood account, retirement account, and M1 Finance account. Overall, that figure is good enough for a 10.9% quarterly growth rate compared to June 2019's dividend income, and a 58.2% YOY growth rate compared to September 2018's dividend income.

Breaking it down by account, I collected $34.28 from the 13 companies in my Robinhood account that paid dividends during September, which is a $0.07 improvement from the $34.21 collected in June 2019. I also collected $35.24 in dividends from my retirement account during September, which was a $6.82 increase from June 2019. Finally, I collected $0.48 in dividends from the 24 companies in my M1 Finance account, which remains the same compared to June 2019.

Quarterly growth in each account is as follows:

Robinhood:

The quarterly growth in the dividends collected in my Robinhood account stemmed from receiving a dividend increase from Realty Income (O), which boosted dividend income by $0.01.

The remaining $0.06 of increased income originated from JM Smucker's (SJM) raised announced a couple months back.

Retirement:

The $6.82 in additional dividends from my retirement account originated solely from reinvestment of the previous dividend in June and additional contributions.

YOY growth in each account is as follows:

Robinhood: 

I received an additional $0.05 from Pepsico (PEP) due to its dividend increase a while back.

I netted $0.02 less from British Petroleum (BP) due to the ADR fee associated with dividends from BP.

I was paid an extra $1.16 from Dominion Energy due to the purchase of an additional share of the company following my decision to sell off my remaining shares in Omega Healthcare Investors (OHI) at a nice profit.

Realty Income paid me an additional $0.03 in dividends as a result of a number of raises since last September.

Home Depot (HD) sent an additional $0.33 my way due to its massive raised announced a number of months ago.

Johnson & Johnson (JNJ) also paid me an additional $0.10 in dividends due to its raise that was announced in April.

International Business Machines (IBM) sent me an extra $0.15 due to its dividend increase announced in April.

Exxon Mobil (XOM) paid me an extra $0.30 as a result of its dividend increase announced in April as well (we can notice a trend that April is a fantastic month for dividend increases).

Southern Company (SO) paid an additional $0.10 to me from its dividend increase announced in...you guessed it - April.

Amgen (AMGN) sent an additional $0.15 to me because of its dividend increase announced last December.

JM Smucker paid an extra $0.06 as a result of its dividend increase.

Last but not least, Pfizer (PFE) paid me an additional $0.16 from its dividend increase announced last December.

Retirement:

The entirety of the $22.75 in additional dividends received from my retirement account originated from the sole holding in my retirement account, which is the mutual fund, CAIBX.

Conclusion:

September was yet another record month for me in terms of total dividend income. In fact, I actually passed my dividend income for 2018 this month!

Fortunately, I'm not quite done yet with record total dividend income as December still remains, and that will likely include a special dividend of some sort from my mutual fund holding, which may possibly push dividend income over $100 in December to end the year. Talk about ending the year with a bang! Triple digits would be a great way to end 2019 and usher in 2020!

Discussion:

Was your September a record month for you as well? Did you benefit from as many dividend increases I have have since June, and especially since last September?

As always, thanks for reading! I look forward to replying to any comments you leave below.