There’s no sleep for the investor on the road to financial freedom. Dividend stock purchase activity was much better in June than May, as the stock market provided better opportunities. We were able to add triple-digit dividend income, increasing our passive income source this past month.
Dividend stock purchase and dividend income: Path to financial freedom
Investing consistently in dividend income stocks allows you to create and build another income source. Dividend income is our primary vehicle on the road to financial freedom, which you can see through my dividend portfolio, which continues to build and build. Further, I have written about every stock purchase and month of dividend income since we started this site, plenty of dividend history for you, the reader.
How do I make dividend stock purchases and screen for dividend stocks? I usually put the stocks through our Dividend Diplomat Stock Screener and trade on Ally Bank’s investment platform (one of our Financial Freedom Products).
Purchasing dividend stocks takes capital or money. How do I build the capital to make these stock purchases? I save anywhere from 60-85% of my take-home pay and strongly believe financial freedom does not happen by hitting a home run on an investment. Nothing matters more than your savings rate on your journey to financial freedom, plain and simple. Therefore, I work my butt off to make sure expenses remain in-check and that my savings rate is meeting our investment and financial independence goals. Then, you rinse and repeat.
Dividend stock purchase activity
My dividend stock portfolio was burnt by dividend cuts and lost over $800+ in forward dividend income. Therefore, I was ready to get back to basics and acquire more shares in the best quality dividend stocks out there.
Since May was a very dry/less active month, I was ready to make June count. I was eager more than ever to make moves to financial freedom, adding passive income in the form of dividend income. Who doesn’t love this income stream?! I know, there is bias, but the cycle of a dividend stock is a beautiful thing. However, I digress. Time to see the dividend stock purchases below.
Pfizer is a beast in the pharmaceutical industry. Yes, I’ll say it – they produce Viagra, which is what everyone knows them for. However, recently, they are known for something far superior at this time. That is – Pfizer has been working on a coronavirus vaccine, which (surprisingly) actually hasn’t caused their stock price to change much.
Pfizer has also been a dividend investor dream over the last 10 years. See the statistics below from the Dividend Diplomat Stock Screener:
Price to Earnings: 8 analysts are projecting $3.09 in earnings for 2021. Therefore, at an average dividend stock purchase price of $34.44, that equates to a P/E ratio of approximately 11.14. This is significantly lower than the S&P 500 Index P/E ratio of 22.73.
Payout Ratio: Pfizer pays $1.52 in dividends per year, per share. PFE’s earnings projection is at $3.09. Therefore, this equates to a dividend payout ratio of 49%. This dividend payout ratio is in the perfect range we like to see, between 40% and 60%. Again, this shows that they continue to reinvest earnings into their business to grow those earnings. However, they also like to send almost 50% of their earnings back to shareholders.
- Dividend Growth: Pfizer is going on 10 years of dividend increases. It’s okay that they aren’t quite at the dividend aristocrat status, but you have to start somewhere. Further, their dividend growth rate is typically in 6.00% to 7.00%, far outpacing inflation. In fact, Pfizer’s dividend increase typically is 2x the national inflation rate. See the lovely chart below, if you don’t believe it.
In total, my dividend stock purchase of Pfizer totaled $551.00, acquiring 16 total shares. This added $24.32 in forward dividend income. My Pfizer position is at ~144 shares and I would like to reach 150 shares, at the right price and valuations.
Dividend stock Purchase Summary (Plus the ~$500 and Less)
Now that most of us here in the U.S. have the ability to trade, my stock purchases can be smaller than usual. The brokerages really have paved the way to making it “easier” or at least, less costly, for investors. Thank you Robinhood, Charles Schwab, E-Trade, you name it. I easily have saved hundreds of dollars this year alone in trading fees.
Given that, I don’t want to dive into so much detail on smaller purchases. Therefore, the remaining dividend stock purchases will be reflected in a screenshot below, from the brokerage that I use – Ally Investing.
Here are the screenshots from my June Dividend Stock purchases.
Roth IRA: No purchases in the Roth IRA for June.
No new positions were added to my dividend portfolio. Due to the global pandemic, it’s definitely easier to buy dividend aristocrats, especially those stocks that are set to do very well during this time period. In this video, we talk about insurance and technology being strong industries, with Aflac (NYSE:AFL) and Cisco (NASDAQ:CSCO) showing signs of undervaluation as a dividend stock.
In total, I deployed a total amount of $1,574.85 and added $60.36 to our forward dividend income, equating to an average dividend yield of 3.83%.
My Wife’s Dividend Stock Purchase summary
My wife has accounts where we also make dividend stock purchases. Though we are married, we are still running two separate, individual, taxable accounts. All is good, especially because we use the same platform, but just haven’t wanted to deal with the administrative tasks of combining. In actuality, I don’t think it’s even possible to combine on the retirement-based accounts.
During June, we definitely started to add more capital to my wife’s dividend investing account. The dividend income added from Dividend Aristocrats, including two of our top 5 foundation dividend stocks for your portfolio are in the mix.
Roth IRA: No retirement stock purchases for the month of June
We continued to add to Consolidated Edison (NYSE:ED) and Johnson & Johnson (NYSE:JNJ), two massive dividend aristocrats. Further, the largest single move we made was Tyson Foods (NYSE:TSN), as with factories shutting down, this caused a decline in the stock price. Lastly, Unilever (NYSE:UL) has remained around the same price for some time, so we continued to beef up that position for the portfolio.
Lastly, we added a few shares to Walgreens (NASDAQ:WBA), another dividend aristocrat that showed signs of undervaluation, not to mention the 2.2% dividend increase we received. My wife’s portfolio is typically full of safe and sound dividend investments, and since we’ve been together, her portfolio has been blossoming into an extremely significant part of our family’s finances.
In total, $2,237.04 was put into investments, producing $71.78 in dividend income going forward. This is an average dividend yield of 3.21%.
Summary & Conclusion
June was a significantly different story than May. July has already started with a bang, and the dividend purchases have been aplenty. Combined, my wife and I invested $3,811.89 for June and added $132.14 to our forward dividend income total (3.47% yield overall).
I will maintain my main message. Stick to the strategy that works for you, but review if there is anything that may impact your strategy going forward. You are in control and the emotion button is hard to turn off. Persevere and stay consistent, if you are able to. Time to lock in and stay ready for further opportunities. This was one step closer to financial freedom and I hope to continue making strides. Lastly, my dividend portfolio has been updated to reflect all dividend stock purchases above (outside of my wife’s).
I am continually looking at my July dividend stock watch list and always keeping an eye on the stocks on Bert’s list of expected dividend increases this month. It is all about the road to financial freedom and I cannot wait to have that crossover point. That crossover point where the passive income from dividends overcomes the total expenses in a given month.
I know I’ve said it many times, but each and every month we do make inches towards the financial freedom goal. We will get there and we are very excited you have joined us on the journey – whether you are on your own, learning from ours and simply are entertained by the articles.
Thank you for stopping by, good luck and happy investing out there!
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.