As a whole set of factors should be negatively impacting markets, such as the ongoing pandemic, an uncertain path to economic recovery and the even more uncertain November U.S. Presidential Elections, markets are shaking off these concerns and racing to new highs almost every single day in August.
Most of that surge is fueled by SaaS and cloud stocks, winners of the pandemic, and the trillion dollar club of Apple (AAPL), Amazon (AMZN), Google (GOOG) (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) setting records one after another. Stock splits by Apple and Tesla (NASDAQ:TSLA) seem to have only ignited even more buying.
Fortunately, from my point of view, September has started in the complete opposite fashion with a tepid sell-off on September 2 and a big sell-off on September 3. Unfortunately, the sell-off happened just days after my monthly savings plans were triggered on the 1st.
Regardless of whatever the markets are doing, I am continuing to pile money mostly into attractively valued dividend stocks while spicing up the portfolio with some purchases of the mega caps and hot technology stocks.
I am fully aware that markets are in a bubble, but as hot air is released from that bubble, I am more than happy to cost average down without deploying too much cash. I am certainly reserving some cash for November, as I am very confident that whatever the outcome is, it will lead to some interesting opportunities.
Portfolio Changes in August
Overall, I deployed around $2,500 in August, which is almost double my investment amount in July. Most of that is tied to my bi-weekly investment plans as well as additional purchases of some REITs and utilities.
Due to the nature of how the monthly investment plan process works, I am investing relatively equally into these stocks at two points of time during the month – at the beginning of the month and mid-month – which break down as shown below. Figures are in Euro and show that, for instance, at the beginning of the month I am investing between 50 and 75 EUR each into Microsoft, The Home Depot (HD), Visa (V), W.P. Carey (WPC) and BP (NYSE:BP). Mid-month, I am adding between 33 and 40 EUR each into STAG Industrial (NYSE:STAG), AT&T (NYSE:T), NextEra Energy (NEE), TD Bank (TD), Main Street Capital (MAIN) and JPMorgan (JPM). I have added Square (SQ) to my savings plans in August, and while massively overvalued, I am happy to average down over time:
Source: designed by author
It will take a pretty long time (2-3 years) before most of these positions will have turned into at least a $1,000 investment, but I want to diversify broadly, have the patience to ride this out, and see in what shape and form these companies will exist in 2022/2023 and beyond.
On top of that, I bought additional shares of STORE Capital (STOR) and W.P. Carey, as I consider both companies undervalued and far less impacted by the pandemic at this stage than what the stock prices imply.
STORE has seen its rent collections continue to rise month after month, and now that we are more than 5 months into the pandemic, they have reached 85% of rent collected for August. As such, the dividend is safe for now, and with the risk of a second lockdown being very minor (it is true that cases are still rising, but the mortality is fortunately much lower than in the early months of March and April), I expect at least stability going forward.
As far as W.P. Carey is concerned, the situation is even better. I wrote extensively about it and termed it “W.P. Carey: Shockingly Insulated From COVID-19” and that puts the message in a nutshell:
“Five months into the pandemic, it becomes blatantly obvious that W.P. Carey’s business model and tenant selection are second-to-none and have enabled the REIT to master this crisis unlike many of its peers in the net lease sector.
Rent collections close to 100%, ongoing investment activity, a greatly diversified portfolio, an attractive dividend and sufficient liquidity current make W.P. Carey a corona-resilient stock pick for income investors. The REIT is positioned for future growth, and while it is too early to officially speak about a “return to normal”, it certainly looks like that for W.P. Carey.”
All those purchases substantially raised forward annual dividend income – even though over the next quarters, not all of this is likely to be realized (the color indicates the degree of safety for the next 2 dividend payments based on my assessment) – breaking down as follows:
All net purchases in August can be found below:
Dividend Income: What Happened on The Dividend Side?
August was a decent month in terms of dividend income but nothing spectacular as the strong euro weighed heavily on my mostly dollar-denominated dividends (I am tracking my dividend income in Euro and then converting it into U.S. Dollar for these updates).
My dividend income from 24 corporations amounted to $264.66, an increase of roughly 11% Y/Y and down 26% sequentially, with the latter entirely driven by the annual dividend payments of German companies in May 2020.
I am happy that Y/Y dividend income continued to increase even if most of that is driven by ongoing purchases than organic dividend growth. Especially, my top dividend stock in August, AT&T, with its anemic 2% dividend growth rate, will predominantly lead to rising dividend income via these ongoing and past purchases.
It will be very interesting to see how dividend income develops over the next 12 months. I am expecting significant declines in the energy, automobile, hospitality, REITs and financial sectors. I am getting more anxious about the potential sea change that COVID-19 could bring to retail and office REITs, as it is totally unclear whether, once the pandemic is over – which obviously will take a lot longer than expected given renewed and accelerating outbreak in the Americas and elsewhere – if people will just return to their normal spending and dining habits or choose e-commerce and working and cooking at and from home. I don’t know, and that’s why I am investing more in the broad S&P 500 (SPY) and the NASDAQ now via index funds.
By looking at the development of the top 3 dividend payments in August from AbbVie (ABBV), Apple and AT&T, we can clearly see that over the last 4 years, the average amount of net dividends received in the months of February, May and August from these three companies has tripled as I have continually invested into these stocks throughout all these years.
I had also recently started adding high-yielding AbbVie to my investment plans, so I can’t wait to see these additional investments generating further dividend income going forward.
In relative terms, AT&T’s dividend income dominance in August is very strong with almost 1/3 of monthly dividends attributable. Although I am confident that AT&T won’t cut the dividend, this overreliance on one company is something I need to diversify. In the past, Omega Healthcare Investors (OHI) played a very important role for my dividend income, and given that it is currently yielding above 8% again, I am very tempted to restart a position in this stock.
Here is a look at my favorite chart: the net dividend income development by month over time between 2015 and 2020, where you can easily see the development of my dividend income as well as the average annual dividend in a given year:
Next, I have scattered all the individual dividend payments I have ever received and colored them by year, rearranging the years side by side rather than horizontally as in previous updates:
This view looks very cluttered at first, but it is very rich in information. It shows every single dividend payment I have received since I started my journey in 2015 in the shape of circle colored differently by year and size, based upon their contribution. The view is broken down by month and by year (not by year and by month), and thus allows to better see the development over time. For every year of a certain month, a white rectangle indicates the average monthly dividend. The area where dividends fall below that average is filled dark red, whereas the area above is colored dark green. Personally, I absolutely love this redesigned view of my old “bubbles chart,” as it is much clearer to identify developments and trends in my dividend income.
Now, zooming in on August, we can immediately that there is a big blue circle for OHI but none in pink or lime green as I sold out OHI like 2 years ago and thereby forfeited substantial dividend income as I was concerned about their financial situation back then. Hopefully, I will be able to slowly rebuild that position and focus my mind on the long-term demographic trends rather than some short-term hiccups with select operators who are struggling.
Another way to express the monthly dividend income is in terms of Gifted Working Time (GWT).
I am assuming an average hourly rate of $25.75 for 2020 here:
- In 2018, I generated 121 hours in GWT, equaling slightly more than $3,000 in annual net dividends.
- In 2019, I generated 142 hours in GWT, equaling almost $3,600 in annual net dividends.
- In 2020, I am targeting to reach $4,000 in annual net dividends, equaling roughly 155 hours in GWT. That was a rather conservative estimate, as it only reflects around 12% growth driven by organic dividend growth and new purchases. However, due to a series of dividend cuts already during this year, it will be interesting to see if and to what extent my new investments can offset them.
The view below shows YTD dividends for every year since 2015 – in this case, total net dividends for January for each year. The lower section depicts YTD Y/Y growth, i.e., as the year progresses, that green bar should creep up to at least 12%, so I will be able to hit my growth target. Right now, it stands at +9% (up from 1% as of end of July) due to the reasons mentioned above. As such, it is not really possible to say how I am trending Y/Y, as I am expecting more dividend cuts (most notably Wells Fargo (NYSE:WFC), BP and the Commonwealth Bank of Australia (OTCPK:CBAUF)) in future months but will also continue to see the impact of the heavy buying since March.
Expressed in GWT, it presents itself as follows:
What this shows is as follows:
- All time (blue area) – Around 477 hours, or 60 days, of active work have been replaced with passive income since the start of my dividend journey. Assuming a five-day workweek, that equals more than 11 weeks of vacation funded via dividends.
- YTD (green bars) – Around 101 hours, or 12.7 days, of active work have been replaced with passive income in 2020 already.
- Highlighted in pink is the accumulated YTD total at the end of the current reporting month (August) across each year.
Upcoming September Dividends
September is packed with dividend payment dates in the second half, and I am really looking forward to it. The snapshot below is taken from my newly and free-for-all released Dividend Calendar (make sure to follow instructions in the video) and show my expected dividend payments in September.
My Dividend Portfolio Composition (Excludes Non-Dividend-Paying Companies)
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At end of August, my dividend portfolio is composed as follows:
|Company Name||Ticker||% Market Value||Market Value (€)|
|Visa Inc Class A||(V)||6.00%||6,542|
|Cisco Systems, Inc.||(CSCO)||3.32%||3,625|
|Johnson & Johnson||(JNJ)||3.04%||3,319|
|Commonwealth Bank of Australia||(OTCPK:CBAUF)||2.60%||2,840|
|Altria Group Inc.||(MO)||2.25%||2,453|
|Gilead Sciences, Inc.||(GILD)||1.94%||2,119|
|Main Street Capital Corporation||(MAIN)||1.78%||1,946|
|Royal Dutch Shell Plc Class B||(RDS.B)||1.75%||1,905|
|Texas Instruments Incorporated||(TXN)||1.64%||1,787|
|JPMorgan Chase & Co.||(JPM)||1.40%||1,522|
|Procter & Gamble Co||(PG)||1.38%||1,507|
|Wells Fargo & Co||(WFC)||1.22%||1,334|
|Bank of Nova Scotia||(BNS)||1.18%||1,289|
|B&G Foods, Inc.||(BGS)||1.16%||1,267|
|Philip Morris International Inc.||(PM)||1.07%||1,165|
|Bayerische Motoren Werke AG Preference Shares||(OTCPK:BMWYY)||1.05%||1,142|
|Honeywell International Inc.||(HON)||1.03%||1,127|
|Verizon Communications Inc.||(VZ)||1.01%||1,102|
|Canadian Imperial Bank of Commerce||(CM)||0.99%||1,078|
|Bank of America Corp.||(NYSE:BAC.PK)||0.93%||1,009|
|Dominion Energy Inc.||(D)||0.91%||994|
|Unilever NV ADR||(UN)||0.90%||978|
|Blackstone Group LP||(BX)||0.82%||895|
|STAG Industrial Inc.||(STAG)||0.81%||884|
|The Coca-Cola Co.||(KO)||0.78%||855|
|NextEra Energy Partners LP||(NEP)||0.61%||663|
|Medical Properties Trust||(MPW)||0.60%||653|
|Royal Bank of Canada||(RY)||0.58%||627|
|Ares Capital Corporation||(ARCC)||0.55%||595|
|Apple Hospitality REIT||(APLE)||0.52%||563|
|Walt Disney Co.||(DIS)||0.51%||558|
|QTS Realty Trust Inc. Class A||(QTS)||0.51%||551|
|General Mills, Inc.||(GIS)||0.49%||533|
|Starwood Property Trust, Inc.||(STWD)||0.45%||489|
|CoreSite Realty Corp.||(COR)||0.36%||394|
|Enterprise Products Partners L.P.||(EPD)||0.33%||365|
|Energy Transfer Partners||(ETE)||0.28%||306|
|Kinder Morgan Inc.||(KMI)||0.26%||285|
|Antero Midstream Corporation||(AM)||0.26%||279|
|Walgreens Boots Alliance Inc||(WBA)||0.24%||262|
|Shell Midstream Partners LP||(SHLX)||0.24%||259|
|Brookfield Infrastructure Partners L.P.||(BIP)||0.21%||230|
|Exxon Mobil Corporation||(XOM)||0.18%||195|
|Diversified Healthcare Trust||(NASDAQ:DHC)||0.16%||169|
|Uniti Group Inc.||(UNIT)||0.15%||159|
|Fresenius Medial Care||(FMS)||0.13%||141|
|Apollo Commercial Real Est. Finance Inc.||(ARI)||0.12%||131|
|AGNC Investment Corporation||(AGNC)||0.11%||117|
|Macquarie Infrastructure Corp.||(MIC)||0.11%||117|
|Realty Income Corp.||(O)||0.10%||105|
|CVS Health Corp.||(CVS)||0.08%||89|
|The GEO Group Inc.||(GEO)||0.06%||65|
|EQT Midstream Partners||(EQT)||0.05%||60|
|Brookfield Property Planners||(BPY)||0.05%||57|
|General Electric Company||(GE)||0.04%||43|
Disclosure: I am/we are long ALL STOCKS MENTIONED. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.