Expected Dividend Increases for May 2020

As indicated in the title above, I'll be reviewing the dividend announcements in my portfolio for the month of April and previewing the dividend announcements that I am expecting for May.

April Dividend Increases

Increase #1: Johnson & Johnson (JNJ)

As a testament to Johnson & Johnson's dependability as a company, JNJ announced a dividend increase that slightly exceeded what I was expecting as outlined in my previous post in this series.

JNJ announced a 6.3% increase in its quarterly dividend, taking it from $0.95/share to $1.01/share.
As a result of this dividend announcement, my annual forward dividend income increased by $0.48 across my 2 shares.

Increase #2: Southern Company (SO)

The other dividend increase that I have benefited from as of April 27 came from Southern Company.
SO raised its quarterly dividend by 3.2% from $0.62/share to $0.64/share.

Across the 5 shares that I own, my annual forward dividend income was boosted by $0.40.

Increase #3: International Business Machines (IBM)

International Business Machines announced a 0.6% increase in its quarterly dividend from $1.62/share to $1.63/share.

While this is bellow my expectation, I understand that IBM is being conservative with its dividend at this time, with the idea they can reward shareholders with a greater raise later down the road.

Across my 4 shares of IBM, my annual forward dividend income was boosted by $0.16 due to IBM's announcement.

Freeze #1: ONEOK (OKE)

Due to the supply and demand shock in energy at this time, it wasn't a surprise to learn that ONEOK froze its quarterly dividend at $0.935/share.

As the business environment stabilizes in the next couple quarters, I anticipate OKE to resume dividend increases.

Freeze #2: Magellan Midstream Partners (MMP)

Similar to OKE, Magellan Midstream Partners announced a freeze in its quarterly distribution at $1.0275/unit.

Again, I expect MMP to resume distribution increases likely within the next 6 months.

Freeze #3: Exxon Mobil (XOM)

Exxon Mobil announced that it would be maintaining its quarterly dividend at $0.87/share.

Given the downturn throughout the economy, and especially in energy, XOM's announce of a dividend freeze wasn't too surprising.

Like other energy companies, I expect that XOM will announce a dividend increase later in the year as economic activity picks back up.

Dividend Cut: EQM Midstream Partners (EQM)

Although EQM Midstream Partners announced in February that it would be cutting its distribution in the future, EQM officially announced that it would cut its distribution on the day that I am writing this post.

The quarterly distribution was slashed 66.6% from $1.16/unit to $0.3875/unit, which will free up a tremendous amount of capital for EQM and make it much more sustainable for the long-term as it lowers its DCF payout ratio considerably.

Across my 4 units of EQM, this cut resulted in a $12.36 decrease in annual forward distributions.

Expected Dividend Increases in May

Expected Dividend Increase #1: Lowe's (LOW)

Under normal circumstances, I would expect Lowe's to announce a high single-digit to low-double digit dividend increase in LOW's dividend.

Unfortunately, COVID-19 complicates matters and makes it nearly impossible to accurately predict what LOW will announce as its next dividend.

Should LOW announce a dividend increase, I suspect that increase will be in the mid-single digits.
I'm predicting a 5.5% increase in LOW's quarterly dividend from $0.55/share to $0.58/share.

In a less likely event, I wouldn't be too surprised to find that LOW announced a temporary dividend freeze until the full economic impact of COVID-19 is known.

Expected Dividend Increase #2: Leggett & Platt (LEG)

Similar to LOW, I'm not sure what Leggett & Platt will announce as its next quarterly dividend due to these extraordinary times.

If LEG does announce a dividend increase in May, I expect that the company will announce a 2.5% increase in its quarterly dividend from $0.40/share to $0.41/share.

Once the economic impact of COVID-19 begins to ease, I believe that LEG will announce another smaller dividend increase to likely $0.42/share later in the year.

Expected Dividend Increase #3: Main Street Capital (MAIN)

In the case of Main Street Capital, I am expecting that MAIN announces a 2.4% increase in its monthly dividend from $0.205/share to $0.210/share, though this will be partially offset by a $0.01 reduction in MAIN's semiannual special dividend from $0.24/share to $0.23/share.

Across my 16 shares of MAIN, this announcement would increase my annual forward dividends by $0.64.

Concluding Thoughts:

Outside of the distribution cut from EQM, this month was fairly decent in terms of dividend increases.

As a result of EQM's significant distribution cut, my annual forward dividend income declined $11.32. Besides the effective distribution cut when Energy Transfer Partners merged with Energy Transfer Equity to form Energy Transfer (ET) in 2018, this is the first month that my dividend income decreased from dividend announcements.

As unfortunate as this pandemic is in terms of the loss of life and financial uncertainty for tens of millions of Americans, one of the rare positives to come out of this in my opinion, is that I'm able to test the dividend growth investing strategy in real time through a very difficult business environment for the first time in my investing career.

Should my dividend income come out of this pandemic relatively unscathed as I suspect it will, this would go another step further in affirming my belief in DGI as a sustainable strategy to achieve financial independence.

Discussion:

How was your April in terms of dividend increases?

Did you experience any dividend cuts?


Are you expecting any dividend increases from newer stocks in your portfolio as I am with MAIN?

March 2020 Dividend Stock Purchases

Delving directly into the intent of this post, I indicated my rationale for my decision to use Robinhood Gold and nearly $5,000 of margin beyond the first $1,000 of interest free margin in my previous blog post.

Today, I'll be detailing the purchases that I executed last month as a result of the margin used in my Robinhood account and my retirement account purchases.

Starting with the purchases in the retirement account, I deployed $292.36 in capital with the dividends received during the month included and $281.38 net of sales charges.

As a result of these contributions and dividends, I was able to increase my Capital Income Builder (CAIBX) holdings from 94.776 shares entering March to 100.088 shares entering into April.

The 5.312 shares of CAIBX that were added during the month of March boosted my annual forward dividends by $11.37.

Starting from the top of the screenshots, I added 12 shares of ONEOK (OKE) at an average cost per share of $37.06 and a total cost of $444.77.

Across the 12 shares that I purchased, I increased my annual forward dividends by $44.88 and deployed capital at a yield of 10.09%.

I also added 3 shares of Realty Income (O) at an average cost of $48.88 a share and a total cost of $146.63.

The $8.39 in annual forward dividends added as a result of my purchase of O equates to a yield of 5.72%.

While on the subject of triple net lease REITs, I also added 2 shares of WP Carey (WPC) to my portfolio at an average cost of $51.47 a share and a total cost of $102.93.

The $8.32 in annual forward dividends that were added as a result of my purchase of WPC works out to a yield of 8.08%.

Rounding out the triple net lease REITs, I opened a position in STORE Capital (STOR) by purchasing 16 shares at an average cost of $29.18 a share and a total cost of $466.93.

The initiation of this position resulted in an addition of $22.40 in annual forward dividends, which is a yield of 4.80%.

Moving to the BDC industry, I initiated a 16 share position in Main Street Capital (MAIN) at an average cost of $31.45 a share and a total cost of $503.15.

Including the special dividends, the MAIN position added $47.04 in annual forward dividend income, which works out to a 9.35% yield.

Moving to the semi-conductor industry, I added to my overall position in Broadcom (AVGO) (which was started in my Webull brokerage account) and initiated a position in the stock in my Robinhood portfolio.

The 2 shares of AVGO that I purchased last month were at an average cost of $236.99 a share and a total cost of $473.97.

When factoring in the $26.00 in annual forward dividends that were added to my portfolio, my investment in AVGO was at an average yield of 5.49%.

Transitioning back to REITs, but more specifically, prison REITs, I added 4 shares to my position in The GEO Group (GEO) at an average cost of $11.95 a share and a total cost of $47.80.

The $7.68 in annual forward dividends equates to an average yield of 16.07%.

I also added 6 shares of Prudential Financial (PRU) at an average cost of $59.86 a share and a total cost of $359.14.

When considering the $26.40 in annual forward dividends that were added as a result of my purchase of PRU shares, the capital that I deployed into PRU was at an average yield of 7.35%.

Moving back to REITs and more specifically to mall REITs, I added 3 shares to my position in Simon Property Group (SPG) at an average cost of $97.09 a share and total cost of $291.26.

The $25.20 in annual forward dividends that were added due to the purchase of SPG shares works out to an average yield of 8.65%.

Moving to tobacco, I added 2 shares of Philip Morris International (PM) at an average cost of $73.62 a share and a total cost of of $147.23.

When factoring in the $9.36 in annual forward dividends that were added as a result of my purchase of PM shares, the capital deployed into PM was at a yield of 6.36%.

I added 3 shares of Ventas (VTR) at an average cost of $24.71 a share and a total cost of $74.13, which works out to an average yield of 12.83% on the $9.51 of annual forward dividends generated as a result of my purchase.

What's more, I added a share of The Home Depot (HD) at a cost of $161.70, which is a yield of 3.71% on the $6.00 of annual forward dividends produced in the portfolio as a result of my purchase.

 On the tobacco front once again, I added 4 shares of Altria Group (MO) to my portfolio at an average cost of $38.98 a share and a total cost of $155.92.

The $13.44 in annual forward dividends added as a result of the MO purchases were at an average yield of 8.62%.

Concluding with tobacco industry purchases, I added 3 shares to my position of British American Tobacco (BTI) at an average cost of $30.55 and a total cost of $91.65.

When considering the $8.06 in annual forward dividends due to my purchase of BTI shares, my cost basis on this block of shares works out to a yield of 8.80%.

I also added 3 shares to my position in Leggett & Platt (LEG) at an average cost of $24.40 and a total cost of $73.20.

Against the $4.80 in annual forward dividends added from this purchase, I deployed capital at a yield of 6.56%.

Furthermore, I added 2 shares of Genuine Parts Company (GPC) at an average cost of $58.88 a share and a total cost of $117.76.

The $6.32 in annual forward dividends added from this purchase work out to a 5.37% yield.

Moving to the multi-conglomerate AT&T (T), I added 3 shares at an average cost of $28.93 a share and a total cost of $86.79.

When I factor in the $6.24 in annual forward dividends added as a result of this purchase, the capital invested in T was at an average yield of 7.19%.

Moving to the tech giant International Business Machines (IBM), I added a share to my position at a cost of $96.80.

Against the $6.48 in annual forward dividends added by the purchase of IBM, this works out to a yield of 6.69%.

Transitioning back to the home improvement industry, I also added 2 shares of Lowe's (LOW) at an average cost of $69.42 a share and a total cost of $138.84.

When I consider the $4.40 in annual forward dividends added by the purchase of LOW stock, this works out to a yield of 3.17%.

I also added 3 shares of Williams Sonoma (WSM) at an average cost of $36.30 a share and a total cost of $108.90, which equates to a yield of 5.29% against the $5.76 in annual forward dividends added.

Moving to the financial sector, I added 3 shares of Wells Fargo (WFC) to my portfolio at an average cost of $33.51 a share and a total cost of $100.52.

When I factor in the $6.12 in annual forward dividends added by my purchase of WFC shares, this works out to a yield of 6.09%.

Transitioning to logistics, I opened a 4 share position in United Parcel Service (UPS) at an average cost of $90.17 a share and a total cost of $360.66.

Against the $16.16 in annual forward dividends added by the purchase of UPS shares, this is a yield of 4.48%.

On the midstream front, I added 10 units to my position in Energy Transfer (ET) at an average cost of $8.40 a unit and a total cost of $84.00.

When I consider the $12.20 in annual forward distributions that I added as a result of my purchase, this works out to a yield of 14.52%.

Additionally, I added 5 units to my position in Enterprise Products Partners (EPD) at an average cost of $18.99 a unit and a total cost of $94.95.

The $8.90 in annual forward distributions added as a result of my EPD purchase equates to a yield of 9.37%.

Within the energy industry, I also added 5 shares of Royal Dutch Shell (RDS.B) at an average cost of $39.05 a share and a total cost of $195.24.

When I factor in the $18.80 in annual forward dividends added due to my purchase of RDS.B shares, my purchase works out to an average yield of 9.63%.

Staying on the subject of supermajors, I also added 7 shares of British Petroleum (BP) at an average cost of $28.22 a share and a total cost of $197.54.

Against the $17.50 in annual forward dividends added as a result of the purchase, my investment works out to an average yield of 8.86%.

Concluding with the supermajors, I added 5 shares of Exxon Mobil (XOM) at an average cost of $48.87 a share and a total cost of $234.34.

When I consider the $17.40 in annual forward dividends added due to my purchase of XOM shares, the capital deployed equates to an average yield of 7.43%.

I added 2 shares of Magellan Midstream Partners (MMP) to my portfolio at an average cost of $47.17 a share and a total cost of $94.34.

The $8.22 in annual forward distributions added to my portfolio as a result of my purchase works out to a 8.71% yield.

Furthermore, I added a share of Eastman Chemical Company (EMN) at a cost of $53.05.

Against the $2.64 in annual forward dividends added by my purchase of EMN, the capital deployed equates to a yield of 4.98%.

Moving to the pharmaceutical industry, I added 4 shares of Pfizer (PFE) to my portfolio at an average cost of $34.35 a share and a total cost of $137.40.

This added $6.04 in annual forward dividends to my portfolio, which works out to a yield of 4.40%.

Concluding my activity within the industry, I added a share of AbbVie (ABBV) to my portfolio at a cost of $87.92.

The $4.72 in annual forward dividends works out to a 5.37% yield.

Wrapping up my purchases, I added to my position in General Dynamics with the purchase of 1 share at a cost of $164.45.

When considering the $4.08 in annual forward dividends added by my purchase of GD, the capital was deployed at a yield of 2.48%.

It is important to note that as a result of my decision to subscribe to Robinhood Gold and use margin, I am positioned to incur $60 in annual subscriber costs and $219.95 in annual margin interest for total costs of $279.95.

Concluding Thoughts:

Against the $430.83 in annual forward income added as a result of dividend stock purchases and the reinvestment of my retirement account dividends, I added $150.88 in annual forward dividends.

When I include the $1.81 in annual forward dividends that were added due to dividend increases last month, I added $152.69 in annual forward dividends during the month of March.

I deployed $6,175.29 in capital during the month of March, which equates to an average yield of 6.98%.

Heading into the month of April, my annual forward dividend income is approaching $1,100.

Give yourself a pat on the back if you read this post from start to finish because my fingers are practically sore from typing this post! Fortunately and unfortunately, my investment activity will be dropping off quite a bit as I deleverage my Robinhood margin down to about $1,000.

Discussion:

Did you add any new positions last month as I did with my purchases of OKE, STOR, MAIN, and UPS?

How was your month in terms of capital deployment?

As always, thanks for reading and I look forward to replying to your comments in the comment section below. 

Why I Decided To Use Robinhood Gold And Margin

As I'm writing this post, the number of confirmed COVID-19 cases continues to significantly increase.

When I wrote my post last week discussing my dividend income for the month of March 2020, the number of confirmed COVID-19 cases just surpassed 1 million, and they are now approaching 2 million, with over 1.8 million cases confirmed as of April 12.

Deaths have tragically surged from 66,000 to over 113,000 in the past week and our lives continue to be different in virtually every aspect compared to just a few weeks ago.

Just as tragic as the deaths themselves is the economic impact on the lives of millions of Americans as unemployment claims in the United States over the past 3 weeks are around 17 million.

With that aside, I'll be delving into the intent of this post, which is to provide rationale for my recent decision to subscribe to Robinhood Gold and use margin in my Robinhood portfolio.

Robinhood Gold Offers Valuable Insights from Morningstar

One of the primary reasons that led me to subscribe to Robinhood Gold was the fact that Robinhood Gold comes with free Morningstar reports on just about every company in my 72 stock portfolio (including fractional share holdings in M1 Finance).

These Morningstar reports are very comprehensive, including an investment thesis, fair value estimate, economic moat rating, risk summaries, and stewardship rating.

Without even considering the next point, Robinhood Gold and its accompanying Morningstar reports provide valuable insight into prospective investments and are a helpful facet of my investment research process.

Margin Offered A Way For Me To Sustainably Leverage Capital

The $5/month cost of Robinhood Gold is offset by the $1,000 of interest free margin provided by Robinhood Financial, which means the reports from Morningstar are essentially paid for by the dividend income produced by the first $1,000 of margin.

While using nearly $5,800 of margin on a portfolio that is barely worth $10,000 is a fair amount of margin, I don't believe it is unmanageable in light of my liquidity situation given that I have nearly $2,000 of available liquidity in my savings account and my car is nearly paid off, which is my only meaningful liability.

Because of this, I will be able to completely pay off the interest portion of the margin in the next 3 months.

Further supporting this point, I will soon be paying off $2,000 of margin, which will help improve my margin maintenance.

When I take into account that my portfolio would have to fall a bit more than 50% as it is, I feel comfortable with my current situation, though I will be paying off all but the $1,000 of the interest free portion in the next 3 months.

Concluding Thoughts:

So, there you have it. Robinhood Gold itself offers insights from Morningstar, which include a discussion of risks facing stocks, fair value, and other helpful tools. This alone is worth the $5/month cost of Robinhood Gold, which comes with an interest free $1,000 of capital to deploy into high-quality dividend stocks.

It was my perception that the recent downturn and plummeting into a bear market offered a great opportunity to purchase equities at bargain prices relative to the interest rate charged by Robinhood Financial (which I'll detail in my post next week) while I'm also only 3 months away from obtaining the capital necessary to pay off my margin balance aside from the interest free $1,000 of margin (not to mention the remaining debt on my car).

It would have taken a significant further plunge into a bear market we have not seen since the likes of the Great Depression for a margin call to be issued, which gave me some sense of comfort that I was not overleveraged and at a heightened risk of a margin call.

While it's still too early to tell whether we will go back into a bear market and I have no intention of remaining leveraged beyond the $1,000 mark, I do believe that we have ultimately entered into a new bull market and the American economy will be back up and running before this summer arrives.

Discussion:

Do you use margin or do you refrain from using margin?

What is your rationale for your decision?

As always, I appreciate your readership and welcome any comments in the comment section below.

March 2020 Dividend Income

As I'm writing this post, the COVID-19 pandemic reached an unfortunate milestone as a virus: 1+ million infected and a heartbreaking 66,000 deaths worldwide.

In my state of Wisconsin, there are 2,112 confirmed cases and 56 deaths reported as of April 5.

Aside from writing weekly blog posts and articles, it's difficult to find an aspect of my life that remains the same in the midst of this pandemic.

While some of the outcomes have been beneficial in my case, such as being able to work from home and saving time and money in the process, other outcomes such as no Bucks basketball have been difficult to endure.

In the meantime, I am just content with the fact that none of my immediate family members have exhibited symptoms of COVID-19 to date and we are doing everything we can to get through this outbreak as millions across the world are doing as well.

With that aside, let's delve into one other factor that has remained relatively constant in my life, which is my dividend income for the month of March 2020.

During the month of March, I collected $90.31 in dividends net of the $14.95 in Robinhood Gold membership fees and interest on the margin (I'll be going over my recent decision to use a bit of margin in a couple weeks).

Adjusting for the $7.14 in special dividends received in December 2019 from my CAIBX holding when I collected $91.63 in total dividends and the PepsiCo (PEP) dividend, this represents a quarterly growth rate of 4.6%.

Against the $57.53 in dividends that I collected in March 2019 and factoring out the PEP dividend, this represents a YOY growth rate of 53.7%!

Breaking things down a bit more, I collected $48.36 in dividends from my CAIBX retirement holding, $43.21 in net dividends from the 16 companies in my Robinhood portfolio that paid dividends during the month, $13.18 in dividends from the 6 companies in my Webull portfolio that paid dividends during the month, and $0.51 in dividends from the 25 companies in my M1 Finance portfolio that paid dividends during the month.

The additional $5.82 in dividends collected during the month was as a result of the following developments in the portfolio:

Starting with the retirement account, I received an additional $6.35 in dividends from my Capital Income Builder (CAIBX) holding as a result of the continued retirement contributions from myself and my employer.

I received my first dividend from Broadcom (AVGO) since I initiated a position back in December 2019, which boosted my dividend income by $6.50 across my Webull portfolio and Robinhood portfolios.

The other activity in my Webull account was the dividend increase from Prudential Financial (PRU) in February, which added $0.30 to my dividend income.

The timing of the PEP dividend boosted my dividend income by $1.91.

The purchase of shares in Digital Realty Trust (DLR) last December added another $3.36 to my dividend income.

My purchase of shares in L3 Harris Technologies (LHX) in November 2019 and the dividend increase in February resulted in a $1.70 addition to my dividend income.

British Petroleum's (BP) dividend increase announced earlier this year increased my dividend income by $0.06.

Sticking with the trend of dividend increases, Home Depot's (HD) dividend increase announced in February generated an extra $0.14 in dividend income during the month.

Yet another dividend increase for me was the increase announced by Dominion Energy (D) last December, which boosted my dividend income by $0.09.

Realty Income's (O) dividend increase announced in January added $0.02 to my dividend income during the month.

Amgen's (AMGN) dividend increase announced in December boosted my dividend income by $0.15.

Rounding out dividend increases that boosted my dividend income during the month is the increase from Pfizer (PFE), which added $0.16 to my dividend income.

Robinhood Gold fees and interest on margin resulted in a $14.95 expense for the portfolio during the month of March.

The final bit of activity came in my M1 Finance portfolio. Aside from the timing of the PEP dividend which added $0.02 to dividend income, the notable activity was an increase in the dividends that I collected from my position in PRU, which also boosted my dividend income by $0.01.

Concluding Thoughts:

The portfolio continues to slowly advance and given the timing of some of my purchases where I used margin and my continued retirement contributions, I expect to surpass $100 in net dividend income in June.

As I conclude paying off my car and federal tax liabilities in the weeks ahead, I plan to use all of my disposable income to either pay off my margin or opportunistically add to positions.

Discussion:

How was your March in terms of dividend income?

Did you have any new dividend payers as I did with DLR, AVGO, and LHX?

As always, thanks for your readership and I look forward to reading the comments that you are free to leave in the comment section below.