Monthly Dividend Income: September 2014

My favorite post to write each month. :) This is when I get to share all my dividend income for the previous month. These dividends are what I’ll eventually use to live off of when I become financially independent.

I share these figures along with monthly income/expenses to not only track my progress towards financial independence but also to hopefully show others that it is possible to get started with dividend growth investing with a low income. The hardest part is weathering the first few years of small dividend payments and allow the compounding snowball to get rolling.

Here is September’s dividend income from my 3 stock investment accounts: Roth IRA, Loyal3, and Taxable Brokerage. I automatically reinvest all dividends in my Roth and taxable brokerage and selectively reinvest dividends, combining them with fresh capital every month or two, in the Loyal3 account. Note: I only recently made the switch to dripping all dividends in my taxable account so that change won’t take effect until mid-September.

Roth IRA

Aflac (AFL): $8.19-reinvested into .133 shares @ $61.50 per share.

Visa (V): $2.81-reinvested into .013 shares @ $214.91 per share.

Chevron (CVX): $11.06-reinvested into .087 shares @ $126.82 per share.

Realty Income (O): $2.88-reinvested into .065 shares @ $44.19 per share.

Royal Dutch Shell Class B (RDSB): $13.16-reinvested into .166 shares @ $79.40 per share.

Loyal3

Target (TGT): $8.50

McDonalds (MCD): $4.67

Taxable Brokerage

Wal-Mart (WMT): $0.96

IBM (IBM): $9.90

Chevron (CVX): $5.35

Target (TGT): $1.04

Realty Income (O): $19.92

BP (BP): $9.95

September Total: $98.39. Getting soooo close to breaking that $100 mark! ;) I thought I might reach it this month, but fell just short. At my current dividend income rate, I can now consistently cover my car insurance and cell phone bell each month which feels pretty awesome. With recent additions to my small McDonald’s position I should be hitting $100 for the first time in December when all these companies payout again.

 

Full Disclosure: I am long all stocks mentioned. This post is not intended to be a buy or sell recommendation for any stock mentioned and is for entertainment/educational uses only.

How was your September for dividend income (or portfolio gains for any growth investors)? Share below with a comment and thanks for reading!

Monthly Investing Recaps: September 2014

At the start of each month I detail all the buy/sell activity here for each of my 3 individual stock portfolios: Loyal3, Roth IRA, and Taxable Brokerage accounts. It’s just one way I am chronicling my journey to financial independence here at Starting From Zero.

In addition to these 3 accounts, I also continued investing in my Thrift Savings Plan (TSP) again this month. Right now I’m contributing 4% of my base pay but may adjust this in the future. The majority of my investing will still be in my taxable and Roth accounts. The TSP is basically a 401k plan for federal employees including the military. It only offers index funds but does have probably the lowest expense ratios around, even lower than Vanguard. Right now I’m putting my contributions in the C Fund which mirrors the S&P 500 and the S Fund which is a small cap index fund. Since these deposits typically take a while to reach my account, I won’t be detailing those transactions here.

Loyal3 Account

Buys

.1064 shares of McDonalds (MCD) @ $93.90 per share=$10 invested. After accumulating over $10 in my account for the first time this past month from dividends, I used the money to add some McDonalds stock.

1.5912 shares of McDonalds (MCD) @ $94.26 per share=$150 invested.

Quick Hits: With much of my time this month occupied with school and then a very busy couple weeks of work, I only made a few small purchases this month through Loyal3. With slowing revenue growth and a smaller than expected dividend increase this year, MCD has fallen into what I consider fair value for the dividend champion and I plan on continuing to dollar cost average into the stock below ~96 per share.

 

Roth IRA

No activity this month.

 

Taxable Brokerage

Buys

7 shares of Visa (V) @ $213.47 per share=$1503.24 invested including commission.

Quick Hits: With Visa pulling back below $215 this past month I felt like the stock presented a good value so I doubled my position in the global payment processing company, slightly raising my cost basis. With its excellent balance sheet, low payout ratio, and high earnings per share growth, Visa looks primed to continue their high dividend growth going forward.

 

Full Disclosure: I am long all stocks mentioned. This post is not intended to be a buy or sell recommendation for any stock mentioned and is intended for educational/entertainment purposes only.

How was your September for investing? What do you think of my stock picks this month? Share with a comment below and thank you for reading!

Monthly Dividend Income: August 2014

My favorite post to write each month. :) This is when I get to share all my dividend income for the previous month. These dividends are what I’ll eventually use to live off of when I become financially independent.

I share these figures along with monthly income/expenses to not only track my progress towards financial independence but also to hopefully show others that it is possible to get started with dividend growth investing with a low income. The hardest part is weathering the first few years of small dividend payments and allow the compounding snowball to get rolling.

Here is August’s dividend income from my 3 stock investment accounts: Roth IRA, Loyal3, and Taxable Brokerage. I automatically reinvest all dividends in my Roth and taxable brokerage and selectively reinvest dividends, combining them with fresh capital every month or two, in the Loyal3 account. Note: I only recently made the switch to dripping all dividends in my taxable account so that change won’t take effect until mid-September.

Roth IRA

AT&T (T): $12.44-reinvested into .348 shares @ $35.65 per share.

Deere (DE): $13.80-reinvested into .162 shares @ $85.04 per share.

Realty Income: $2.86-reinvested into .064 shares @ $44.69 per share.

Kinder Morgan Inc. (KMI): $14.35-reinvested into .347 shares @$41.36 per share.

Loyal3

No dividends this month.

Taxable Brokerage

AT&T: $18.86

Realty Income (O): $19.92

August Total: $82.23. :) Nice increase from May’s total of $74.46 and a huge increase year over year from 2013 when I only made $18.47 in August. Amazing how quickly dividends can start adding up with regular stock purchases.

 

Full Disclosure: I am long all stocks mentioned. This post is not intended to be a buy or sell recommendation for any stock mentioned and is for entertainment/educational uses only.

How was your August for dividend income (or portfolio gains for any growth investors)? Share below with a comment and thanks for reading!

August 2014 Balance Sheet

Today I’ll be sharing my personal balance sheet, listing all of my assets and liabilities to figure out what my current net worth is. Tracking your net worth is a good exercise in my opinion since it provides you a quick snapshot of your financial life.

Overall August was a solid month. With so much of my time devoted to school work for Airman Leadership School I almost completely ignored stock research and blogging for most of the month, making only some small purchases through Loyal3 so I’ve built up quite a bit of cash here lately that I’m looking forward to be putting to work here soon. Note: the +/- after each category total represents the change only from the prior month.

Assets

Emergency Fund: $4502.14 (+.38). Yay for interest! ;)

Cash Savings: $4045.80 (+142.67). As mentioned above, I’ll be spending some of this on stocks here in the next few weeks.

Roth IRA: $13,207.58 (+339.76). Just following the ups and downs of the market for now as I maxed out the account with my purchase of Deere (DE) in June.

Brokerage: $12,126.62 (+102.07). No activity this month.

Loyal3: $3090.38 (+676.13). Made a lot of small purchases in August through my commission free Loyal3 account, buying shares in McDonalds, Coca-Cola, Target and Wal-Mart.

Thrift Savings Plan: $1495.98 (+148.43). I started contributing a small portion of my paycheck to the TSP in March, splitting my contributions between a S&P 500 and a small-cap stock index fund. This is the one portfolio where I’m investing primarily for total return as these funds do not pay dividends. However, they do have some of the lowest expense ratios you can fund in a retirement plan.

Auto Worth: $4840.00 (-145.00). The value of my ‘ole Chevy sedan continues to slowly decline as to be expected. The only reason I include it here is that is is the one non-financial “asset” that if I ever needed to sell, could probably get close to its market value. Also a nice reminder each month to not think of cars as an investment.

Assets Total: $43,308.50 (+1264.44).

Liabilities

Credit Cards: $276.45 (-711.16). As I never carry a balance on my cards and the billing cycles ends in the middle of each month, this is simply my current balance at the end of the month. Like a lot of personal finance bloggers, I’m only in it for the rewards! ;)

Net Worth: $43,032.05 (+1975.60). After my first month over month loss from June to July, back on the positive side this month.

 

Disclosure: I am long DE, WMT, MCD, TGT and KO.

How was your August for finances? Do you track your net worth and if so, are there any other items you track? Share below with a comment and thanks for reading!

Income/Expense Report: August 2014

As I do every month, I’m sharing all of my income and expenses this month in hopes of being as open as I can about my finances here to chronicle my journey to financial independence. Keeping my expenses low each month will allow me to have more money to set aside and invest in high quality, dividend growth stocks that I will use to reach financial independence. I hope that by sharing these monthly updates I can also prove that it is possible to take control of your financial life and invest a high percentage of your income, even on a small salary.

So how’d I do in August? Well, after a very expense heavy July, things got back to normal. Since I spent most of the month in school/training, I didn’t have a whole lot of time for anything else which definitely helped keep expenses down.

So here’s how it all broke down:

Income

Job Income: $2636.51. First full month of receiving my new housing allowance.

Expenses

Rent/Utilities: $529.02. Rent is $500 a month and I’m also responsible for the electric bill which includes heating costs. So far seems to be running between $30-40 a month.

Renter’s Insurance: $0. I decided to pay this all up front just to take care of it for the next 6 months in July.

Food/Drinks: $187.51. One of my lower spending totals in this category in quite a while.

Dining Out/Fast-Food: $25.78.

Household/Personal Expenses: $97.43. Ended up spending more than I expected as I found I had other items to buy as I settled in to my new place. Spending $37 on printer ink for school work didn’t help either. Why is that stuff soooo expensive? ;)

Clothing/Shoes: $126.99. Had quite a bit of clothing expenses for work this month: new shoes for my service dress uniform, new ribbon racks, and some other misc. blues items.

Gas: $50.01. Sadly the days of $20 or under gas months is over with me living further away from work now. I figure my gas budget should be around $40 a month. As much as I’d like to be able to ride my bike to work, at least for the rest of summer, the amount of gear that I have to carry with me on a daily basis makes that idea very hard to do.

Auto Insurance: $163.28. Switched to liability last month, cutting my monthly bill down to less than $40 a month. Decided to just pay for the remainder of this year so I don’t have to worry about it until January.

Phone: $43.86. Been looking at various other options, but with the limited service choices in my area and having gotten used to having a smart phone, I’ll be sticking with Net10 for the forseeable future. Still not a bad deal, compared to the monthly rates companies like Verizon charge for their contacts.

Internet: $54.99.

Entertainment: $7.99. Good ole Netflix.

Donation: $25.00. This will be a new monthly category here as I’ve decided to donate $25 a month to start off to Child Fund International, a great charity that my family has been donating to for quite a while and I’ve donated randomly to over the last few years. This month and going forward I’m donating to their “Essentials for Survival” fund which provides basic necessities like access to water, food and healthcare to children around the world.

Other: $3.22.

 

Total Expenses: $1315.08. Managed to get back on track with my goal of saving at least 50% of my net income per month.

Expense Rate: 50%

Savings Rate: 50%

How did you do in August, did you meet all of your budgeting goals?

Blog and Watchlist Update

Hello all!  I’ve been away from the blogging world here the last 4 weeks as I’ve been very busy going through a training school for work.  I’ve spent this time learning the basics of everything I’ll need to become a supervisor in my work center and be responsible for my own troops.  Kind of felt like I was in high school again with all the homework.  ;)  Now that I’m almost done, it’s time to get back to updating the blog.  Over the next few days I’ll be posting my progress updates for August.

Since I didn’t invest a whole lot in August, I’m sitting on some cash right now trying to decide which stock to invest in next in my taxable brokerage account.  Some of the stocks on my watchlist include Deere (DE) which has pulled back some after I initiated a purchase earlier this summer, Phillip Morris (PM) which is continuing to trade near the price I bought shares at in July and Visa (V).  Although Visa has increased a bit since my first purchase, the high growth dividend challenger is still trading at what I think is a fair valuation relative to their growth prospects.  Over at Loyal3, I plan on continuing to dollar cost average into Coca-Cola (KO), McDonalds (MCD) and Wal-Mart (WMT).  I’ll be sure to share once I make a purchase.

Hope everyone had a great summer!

-SFZ

 

Also, be sure to follow me on Twitter @startingfrzero where I like sharing some of the great blog posts and financial articles from around the web that I read.

 

Disclosure:  I am long all stocks mentioned.

Monthly Investing Recaps: August 2014

At the start of each month I detail all the buy/sell activity here for each of my 3 individual stock portfolios: Loyal3, Roth IRA, and Taxable Brokerage accounts. It’s just one way I am chronicling my journey to financial independence here at Starting From Zero.

In addition to these 3 accounts, I also continued investing in my Thrift Savings Plan (TSP) again this month. Right now I’m contributing 4% of my base pay but may adjust this in the future. The majority of my investing will still be in my taxable and Roth accounts. The TSP is basically a 401k plan for federal employees including the military. It only offers index funds but does have probably the lowest expense ratios around, even lower than Vanguard. Right now I’m putting my contributions in the C Fund which mirrors the S&P 500 and the S Fund which is a small cap index fund. Since these deposits typically take a while to reach my account, I won’t be detailing those transactions here.

Loyal3 Account

Buys

1.0686 shares of McDonalds (MCD) @ $93.58 per share.

.5314 shares of McDonalds (MCD) @ $94.10 per share.

1.0668 shares of McDonalds (MCD) @ $93.73 per share.

2.5164 shares of Coca-Cola (KO) @ $39.74 per share.

.8351 shares of Target (TGT) @ $59.87 per share.

1.3354 shares of Wal-Mart (WMT) @ $74.88 per share.

1.3204 shares of Wal-Mart (WMT) @ $75.74 per share.

Quick Hits: With too much time spent on school work this past month, I only made some small purchases through this account throughout the month. I plan on continuing to dollar cost average into KO anytime the stock dips below $40. With WMT, MCD and TGT all presenting good value at different times throughout the month I also continued dollar cost averaging into those stocks.

 

Roth IRA

Sells

.539 shares of RDSA @ 80.54 per share=$43.41. Realized gain of $4.71.

Quick Hits: I currently hold both my taxable brokerage and Roth IRA through my bank’s brokerage service. They recently  converted their brokerage service to a separate company and any holdings that were less than 1 share were automatically sold. Since dividends from Royal Dutch Shell’s class B shares (RDSB) can only be reinvested into class A shares (RDSA), this is how I ended up with a a fractional amount.

 

Taxable Brokerage

No activity this month.

 

Full Disclosure: I am long MCD, KO, TGT, WMT and RDSB. This post is not intended to be a buy or sell recommendation for any stock mentioned and is intended for educational/entertainment purposes only.

How was your August for investing? What do you think of my stock picks this month? Share with a comment below and thank you for reading!

How to Narrow Down Candidates for Your Dividend Growth Portfolio

This is a guest post from Ben Reynolds, founder of Sure Dividend.  Sure Dividend is dedicated to high quality dividend growth stocks suitable for long-term investing using quantitative analysis.

There are 2,315 publicly listed stocks that pay a dividend on the stock screener Finviz.  That is a lot of stocks to choose from!  Obviously, you don’t have the time to analyze each business individually and determine its long-term investing merits.  So what is a dividend growth investor to do?  This article shows how to narrow down the investible universe of dividend growth stocks to find stocks suitable for long-term holdings.

What is a Dividend Growth Stock, Anyway?

I suppose technically any stock that has increased its dividend from the previous year is a dividend growth stock.  When I think of a dividend growth stock, I think of businesses that have a history of raising their dividend payments year after year.  I think the minimum amount of annual dividend increases to really be certain a company is committed to raising the dividend payment year after year is 5 years.

Looking only at businesses with 5 years or more of historical dividend increases greatly reduces the number of businesses to analyze, and gives you a view of only businesses that are committed to raising their dividends year after year.  David Fish has an excellent (and free) spreadsheet that details many businesses with 5 or more years of dividend increases.  All in all, there are 553 businesses with 5 or more years of consecutive dividend increases.

Demand Proof of a Strong Competitive Advantage

A company that has 5 years of consecutive dividend increases may not have a lasting competitive advantage.  Five years is a relatively short period of time in the business world.  The forces of creative destruction will eat up the margins of businesses that do not have lasting competitive advantages.  It can be very difficult to identify companies with lasting competitive advantages beforehand.

One way to find businesses with lasting competitive advantages is to look for businesses that have proven they can thrive through a variety of economic, political, and competitive environments.  The Dividend Aristocrats are a group of businesses that have increased their dividend payments for 25 or more consecutive years in a row.  There are currently only 54 Dividend Aristocrats stocks due to the exacting standards for inclusion.

Many Dividend Aristocrats are household name stocks; companies like Coca-Cola, Wal-Mart, and McDonald’s (if you haven’t heard of these, you must live on mars).  Not surprisingly considering the durable competitive advantages these businesses possess, Dividend Aristocrats have outperformed the market by 2.29 percentage points per year over the last decade.  Dividend Aristocrats make excellent DRIP candidates as well.

Invest for Quality and Value

The Dividend Aristocrats index has performed very well over the last decade.  Each individual Dividend Aristocrat should be analyzed based on its own merits.  Of the 54 Dividend Aristocrat stocks, only 2 have dividend yields above 5% (AT&T and HCP,Inc.).  There are several Dividend Aristocrats with dividend yields above 3%; companies like McDonald’s, Target, Clorox, and Chevron.

Instead of looking solely at yield, one can also look for undervalued Dividend Aristocrats based on their P/E ratios.  In this analysis AFLAC is the cheapest Dividend Aristocrat, with a P/E ratio of just 9.45.  AT&T, Chubb, ExxonMobil, and Chevron all have P/E ratios under 13, which is especially cheap in today’s market where the S&P500 has a P/E ratio over 19.

Pulling It All Together

Hopefully, some of the information in this article gives you a good starting point for finding high quality dividend growth stocks.  Sure Dividend uses the 8 Rules of Dividend Investing to systematically rank 132 businesses with 25 or more years of dividend payments without a reduction over several quantitative metrics including yield, volatility, and growth.  Investing in high quality dividend growth stocks is an excellent way to build your passive income over time, as these businesses tend to raise their dividend payments year after year because they have strong competitive advantages.

 

Note from SFZ:  Thanks Ben for writing an excellent post here on Starting From Zero!  For more information, be sure to check out Ben’s site and his Seeking Alpha articles.

Switching to Drips

For the last two years I’ve been dripping only stocks in my Roth IRA. In the taxable brokerage account I’ve been taking them as cash and combining them with fresh capital every few months to make a separate stock purchase or use it towards paying off my credit card bill by buying stock through Loyal3.

Well that changed a few days ago as I’ve decided to start dripping all my dividends in both my Roth and taxable brokerage accounts. Due to the service being unavailable, dividends received from Loyal3 will continue to be selectively reinvested.

So why the change?

First off, I haven’t been making as many regular large purchases as I originally planned on doing so, meaning it sometimes goes several months between even touching my taxable account. Since I prefer to keep my commission costs less than .5%, I like to save up around $1400 before I buy more stock. By automating how I handle dividends and choosing to drip all of them, this puts the capital to work instantly, buying more shares which in turn will produce more dividends. Nice way to keep growing the account even when fresh capital for purchases is limited.

Second, I’ve been reading a lot of articles and blog posts recently that show just how much of a stark difference there is in total returns when you take dividends as cash vs. reinvesting them in the stock. Dividend growth is also accelerated a lot as well. Granted, I’ve always reinvested dividends by doing so selectively but it usually took a long time to do so. Looking through my Roth IRA transactions I can see that when I initially bought 15 shares of Realty Income I was earning $2.73 a month in dividends. Now, fast forward to today, I am earning $2.86 per month. There has been a few small dividend increases (less than 1 cent) from Realty since then. Everything else has been the result of dripping. Now that’s a small increase on a pretty small position in that account. Not a big deal, right?

Now imagine if I had done this with the 109 shares of O I have in my taxable account. The $19.92 I am currently earning each month in that account could buy almost another 1/2 share per month. Over the course of the year, that is almost 6 additional shares that I didn’t have before.

But what about valuation?

Looking through the stocks in my portfolio there isn’t a single one that is so overvalued that I wouldn’t consider buying more shares out right, if those were my only investing choices. With a long-term investing timeline, I’m comfortable overpaying a bit for shares in quality companies like those in my portfolio since there is plenty of time for earnings to increase and “grow into the valuation.” Besides paying up for at most, half a share in a company per month isn’t that big of a deal. It just allows the compounding snowball to grow that much quicker.

Simplifying Things

Dripping dividends and automating that part of your investing activity also makes it much simpler. No more transferring money around to take dividends from one account to use in another account toward a purchase. Just let everything run on autopilot and add more stock through fresh capital when it’s available. It also takes away the temptation to spend those dividends as you can’t spend money you don’t have.

Going Forward

Like most things, I imagine my thoughts on this topic will change as the years go by. That’s all right and what makes this fun. Can’t just do the same thing all the time, right? Gotta mix it up every once in a while and try new ways of doing things. I could see myself switching back to selectively reinvesting dividends, combining them with fresh capital each month to make a purchase once (1) I have the income necessary to make a normal sized purchase each month and (2) once my account is producing a significant amount of dividends. An extra 50 bucks or so doesn’t really help me out getting the required amount to invest each month. Once that figure climbs to be several hundred, maybe I’ll rethink this strategy.

 

Disclosure: I am long O. Please see my portfolio page for a complete list of my holdings.

So what are your opinions on the subject of dripping vs. selectively reinvesting? Or do you not reinvest dividends and simply use them to supplement your current income? Sound off in the comments and let me know what you think! :)

July 2014 Balance Sheet

Today I’ll be sharing my personal balance sheet, listing all of my assets and liabilities to figure out what my current net worth is. Tracking your net worth is a good exercise in my opinion since it provides you a quick snapshot of your financial life.

Overall July was an all right month, considering the high level of expenses that I had. Used up a lot of my cash reserves with apartment related expenses plus added to my position in Philip Morris (PM) toward the end of the month. Note: the +/- after each category total represents the change only from the prior month.

Assets

Emergency Fund: $4501.76 (+.38). Yay for interest! ;)

Cash Savings: $3903.13 (-976.40). Combining this amount with the increase in credit card debt accounted for all of my initial apartment costs-security deposit, first month’s rent, renter’s insurance, furniture, etc.

Roth IRA: $12867.82 (-301.82). Just following the ups and downs of the market for now as I maxed out the account with my purchase of Deere (DE) in June.

Brokerage: $12024.55 (+1172.71). Added to my position in Phillip Morris (PM).

Loyal3: $2414.25 (-65.43). No activity this month except for a small dividend check from Coca-Cola. Investing some cash here is one of my goals for August with both Coca-Cola and McDonald’s recently dipping into my price range.

Thrift Savings Plan: $1347.55 (+42.17). I started contributing a small portion of my paycheck to the TSP in March, splitting my contributions between a S&P 500 and a small-cap stock index fund. This is the one portfolio where I’m investing primarily for total return as these funds do not pay dividends. However, they do have some of the lowest expense ratios you can fund in a retirement plan.

Auto Worth: $4985.00 (-313.00). The value of my ‘ole Chevy sedan continues to slowly decline as to be expected. The only reason I include it here is that is is the one non-financial “asset” that if I ever needed to sell, could probably get close to its market value. Also a nice reminder each month to not think of cars as an investment.

Assets Total: $42,044.06 (-441.39).

Liabilities

Credit Cards: $987.61 (+894.48). As I never carry a balance on my cards and the billing cycles ends in the middle of each month, this is simply my current balance at the end of the month. Like a lot of personal finance bloggers, I’m only in it for the rewards! ;)

Net Worth: $41,056.45 (-1335.87). First month over month loss since I started tracking this back in January which was to be expected considering all of the expenses I had planned for July. Depending on the markets, I plan on getting back to positive increases here in August.

 

Disclosure: I am long DE, PM, MCD, and KO.

How was your July for finances? Do you track your net worth and if so, are there any other items you track? Share below with a comment and thanks for reading!