Dividend Progress Report: October 2009

Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income rose in October, extending the streak to 8 months after February 2009’s decline. Since I began publicly tracking annualized dividend income in November 2007, it has increased in 22 of the last 23 months.

My goals were defined in this December 1, 2007 Investing Goals post and updated in my 2009 Investing Goals post. Below is an updated version of the table found in the original post.

Description	Dividend Income Annualized	Yield on Cost
2027 Goal	110,000	20.00%
2017 Goal	30,000	10.00%
2009 Goal	8,000	5.00%
December/2008	5,636	5.28%
Purchases YTD	3,635	-0.22%
Div. Changes YTD	(483)	-0.42%
Sales YTD	(1,964)	0.30%
October/2009	6,824	4.94%
Purchases	359	-0.04%
Div. Changes	(37)	-0.04%
Sales	(153)	0.02%
September/2009	6,655	5.00%

The above information covers the current month and year-to-date through the current month.

Click here for a Detailed Historical Progress Table.

For the month, annualized dividend income increased $169, and Yield on Cost (YOC) decreased (0.06%). This month’s changes were a net of new purchases, dividend changes and sales. Let’s examine each of the these categories:

Purchases: The $359 increase in annual dividend income and (0.04%) decrease in YOC related to the following purchases (yield at the time of purchase):

• $84 Emerson Electric Co. (EMR) 3.34%

• $77 Procter & Gamble Co. (PG) 3.04%

• $198 PowerShares Emerging Mkts Sovereign Debt (PCY) 6.15%

All the purchases, except PCY, lowered my YOC. As noted in earlier updates, I generally expect YOC to drop each month since most new investments will yield less than my current YOC, and dividend increases will not be sufficient to offset it.

Dividend Changes: The $37 decrease in annual dividend income and (0.04%) decrease in YOC related to the following dividend changes (a=dividend stated in annual terms, q=quarterly, m=monthly):

• $3 Canadian National Railway Company (CNI) $0.217q>$0.236q 0.00%

• ($3) Vanguard Intermediate-Term Bond ETF (BIV) $3.46a>$3.41a 0.00%

• ($15) Vanguard Long-Term Bond ETF (BLV) $3.46a>$3.90a -0.01%

• ($6) iShares iBoxx $ Invest Grade Corp Bond (LQD) $5.79a>$5.72a -0.01%

• ($17) Eaton Vance Tax-Adv. Global Dividend Fund (ETO) $1.59m>$1.53m -0.02%

• $1 Realty Income Corp. (O) $0.14237m>0.14268m 0.00%

Sales: The ($153) decrease in annual dividend income and 0.02% increase in YOC related to the following sale:

• ($153) Vanguard REIT Index ETF (VNQ) 0.01%

In October I continued the process of trimming back my ETFs/CEFs income holdings with the sale of VNQ and have now sold all the ETFs that currently I plan to sell. I will continue to evaluate the performance of the ones I continue to hold.

Based on year-to-date results, I am on target to meet or exceed my revised estimate of annualized dividend income on December 31, 2009 of $7,000. This is $1,000 below my original goal of $8,000.

That’s it for this time. The next monthly progress update will be early December.

Comments

[David Van K...:]

Thanks for sharing. Question: Do you add new money (from the outside, not from dividends) to this account? Given your age, I'm assuming you are adding new money (each month?), so the account size change is a blended result of new money added, dividends coming in, and price changes in the stocks owned. A corollary to that would be that new purchases are made with a combination of new money + accumulated dividends + proceeds from sales of existing shares.

Thanks, Dave

Nov 08 11:34 AM

[Dividends4Life:]

David: Purchases are primarily new money. As you noted, it also includes reinvested dividends and any sold securities. It is roughly 90% new money 10% dividends reinvested, with any sales layered on top of that.

Best Wishes,
D4L

Nov 08 04:49 PM

[David Van K...:]

Thanks. The reason I asked is that you may not be giving yourself enough credit for the yield on cost of the overall strategy. You are correct that new purchases made mostly with new money will usually "start you over" with a lower yield on cost than has been achieved by purchases made in the past. That obscures your (presumed) increasing YOC results on prior purchases that result from their increasing dividends. It's probably not amenable to a simple presentation (since you're adding new money so often), but it would be cool to have a way to show your yield on cost growing for past purchases . Perhaps yearly...YOC on holdings as of end of 2007, end of 2008, etc.?

Nov 08 07:37 PM

[Dividends4Life:]

David: You are correct on the YOC. On of the ironies is that you have to go back several years to see the real story. The 2008 market implosion allowed me add positions at prices not seen for quite a longtime for many securities.

Best Wishes,
D4L

Nov 09 08:18 AM

[stink726:]

I read today that the House health care bill passed this past Saturday was written to apply the 5.4% surcharge tax to modified adjusted gross income, which includes capital gains and dividends. So dividend income after 2010 will be taxed at ones regular income tax rate plus 5.4%. I wonder if this will be bad for dividend paying stocks?

Nov 09 08:02 PM

[gmwright:]

I believe D4L dividend stocks are mostly in 401K and IRA accounts so I would guess the surcharge tax would not affect those. If you are speaking more generally, since this also applies to capital gains I would think it would affect growth and dividend stocks equally.

Nov 10 09:05 AM