Free Market Capitalist June Dividend Income

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Includes: ABBV, ABT, APU, BDX, CLX, DOW, EMR, FPI, GE, GIS, JNJ, LMT, MCD, MMM, MSFT, PEP, RY, SYY, T
by: Penny Dividend Fortress

Summary

June 2016 income update.

Second straight month of Realty Income as Buy of the month.

Added to our stakes in ABT, GIS, GE, APU, RY, T, and O.

Introduction

I have been investing for 13 years now, and it's a major passion of mine. Over the years I have owned many different companies. Most were good investments, and some were not so good investments. I have learned a lot from the bad investments. I've also sold companies at the wrong times when I should have been buying instead. We all live and learn. Twelve years of studying the markets and economy has lead me to put together this portfolio of companies. I hate to use the word "stocks". Taking pride in company ownership sounds much better to me.

Our (my wife and I) investing strategy is to only buy dividend paying companies to create a passive income for retirement and financial independence. We buy small to large cap companies with promising futures. A company's commitment to dividend growth is our most important measure followed by capital growth. We have a long-term investing view. We buy our stocks through a low cost taxable brokerage account. Our goal 29 years from now is to have at least 14% yield on cost. We believe we have created a very strong portfolio capable of achieving this goal.

End of June 2016 Dividend Yield on Cost 2045 Dividend Yield Goal
3.7% 14%
Click to enlarge

Starting with the month of April 2016, I will provide a monthly update that will analyze the performance and portfolio characteristics of our company stakes. Now let's get to the meat of the story.

June 2016 Income Results

From January of this year to the end of June, our portfolio is up 13.79% -- very easily beating the S&P 500 gain of 2.69%. For the month of June, our portfolio performed well, rising 4.82% compared to a 0.09% gain for the S&P 500. Below is a chart of March dividends vs. June dividends. I have a retirement account at work that is included in the chart below. June dividends increased 5.4% higher from March; every company paid a higher amount.

March EMR $0.32 June EMR $0.54 +68.8%
March JNJ $0.24 June JNJ $0.33 +37.5%
March MMM $0.25 June MMM $0.50 +100%
March MCD $0.28 June MCD $0.35 +25%
March MSFT $0.14 June MSFT $0.20 +42.8%
March O $0.37 June O $0.54 +45.9%
March LMT $1.32 June LMT $1.66 +25.7%
March PEP $0.18 June PEP $0.27 +50%
March BDX $0.12 June BDX $0.16 +33.3%
March Work Ret. $59.06 June Work Ret. $61.08 +3.4%
Total $62.08 $65.63 +5.4%
Click to enlarge

June Stock Purchases and Why We Bought Them

For the second straight month, my Buy of the Month was Realty Income Corp (NYSE:O). I snatched up .1555 shares at $64.31 on June 21st. As of July 5th, Realty Income closed at $71.47, a 11.1% gain. The best way I can describe Realty's resent big run up is it's a flight to high quality companies in a challenging economic environment. I think it's not overpriced till it's done going higher and so far it's not done going higher. I'm a buyer for the long term.

General Electric (NYSE:GE): We just had to buy GE on the Brexit fallout when it fell below $30 a share. Our buy price was $29.72. We knew it wasn't going to stay under $30 for very long and it didn't. In a surprisingly nice announcement, GE recently had its SIFI (Systemically Important Financial Institution) label removed from the federal government. This is a big regulatory weight off GE so they can be a normal industrial company again and return capital back to shareholders faster.

General Mills (NYSE:GIS): On June 29th, General Mills reported fourth-quarter earnings that beat and a dividend boost. Adjusted earnings were 66 cents per share; analyst had expected earnings of 60 cents per share. Revenue fell 8.6% to $3.93 billion vs. the $3.86 billion analysts had predicted. The sale of its Green Giant brand had an impact on the sales decline. The quarterly dividend was increased by 4.3% to 48 cents per share from 46 cents per share. GIS has done a good job of getting rid of artificial flavors and making gluten free products to get people to buy more of their cereal. GIS is a dividend powerhouse that we will continue to buy.

AT&T (NYSE:T): Looking ahead, AT&T will begin 5G testing later this year in Austin, TX. 5G will be around 10-100 times faster than 4G speed. It may be 2020 until we see widespread 5G coverage in the United States, however, will be exciting to see all new possible experiences like virtual reality, smart cities, healthcare, and self-driving cars that 5G will help make happen. We like AT&T for its solid 4.4% yield. Over the coming years I think T will head towards $60 a share.

Royal Bank of Canada (NYSE:RY): If you're looking for a well run bank, look no further than Royal Bank of Canada. Royal is Canada's largest bank measured by assets and market cap. The Los Angeles, CA-based City National acquisition by Royal is going very well. Royal's Chief Financial Officer Janice Fukakusa said, "City National should add $350 million in earnings for 2016. Through 2020, Royal has projected $1 billion in earnings from City National." Expanding in the U.S. in now a priority for Royal. The bank has a history of increasing its dividend every six months that should continue well into the future.

AmeriGas Partners LP (NYSE:APU): AmeriGas serves nearly 2 million residential, commercial, industrial, agricultural, wholesale, and motor fuel customers in all 50 states. If you live in a rural area propane may be the only and best choice you have to heat your house or cook a steak on the grill. APU last increased their quarterly distribution on 4/28/2016 by 2.1% to 94 cents per share. This now marks 12 consecutive years of distribution increases. APU yields 8.09%.

Abbott Labs (NYSE:ABT): On June 21st, Edward Jones upgraded ABT to a buy from a hold. Abbott has a low dividend payout ratio of 64% and yields 2.6%. ABT has been able to increase its dividend for 43 straight years. Year to date ABT stock is down nearly 12%. I believe now is a great time to get a good starting dividend yield on this great company. Over the next few years dividend growth will probably slow sown as ABT completes its two big acquisitions.

We did not sell any companies in June. The chart below lists what companies and how many shares we purchased in June. We are bullish on all the companies we purchased and are very happy to have more of each company.

T .4844 shares
GE .1346 shares
O .1555 shares
GIS .2255 shares
ABT .5218 shares
RY .1626 shares
APU .2241 shares
Click to enlarge

The last two times we sold a company was on 1/28/2016, when Arlington Asset Investment Corp and was replaced by Dow Chemical. Then on 12/22/2015, we sold ConocoPhillips (NYSE:COP) and replaced it with Microsoft (NYSE:MSFT). We sold Conoco before the dividend cut and picked up a much more reliable dividend payer in Microsoft.

Current Portfolio Positions

We believe that by picking superior individual companies we can achieve greater returns than just picking a market matching ETF or mutual fund. So far this year we are beating the S&P 500 by a good amount. We are bullish on every company we own. If we weren't, we would not own them in the first place.

We stay 100% invested in equities at all times. We do not invest in bonds because there is no growth in a bond's yield. Our cash level always stays around 0%-1% of the portfolio. As a man of action, I'm not going to have money sitting around in the money market sidelines. The more income we can produce now will mean more income well into the future.

Company # of shares Avg Purchase Price Yearly Income % of portfolio income
Abbvie (NYSE:ABBV) 0.6302 $60.65 $1.42 2.1%
Abbott Labs 1.8098 $40.08 $1.88 2.8%
Automatic Data Processing (NASDAQ:ADP .7252 $84.74 $1.54 2.2%
Amerigas Partners 1.2774 $40.46 $4.80 7.1%
Becton Dickinson & Co (NYSE:BDX) .2445 $144.70 $0.64 1.0%
Clorox (NYSE:CLX) .6303 $118.10 $2.01 2.9%
Dow Chemical (NYSE:DOW) 1.1350 $47.88 $2.09 3.1%
Emerson Electric (NYSE:EMR) 1.1503 $51.44 $2.16 3.2%
FarmLand Partners (NYSE:FPI) 11.0076 $10.96 $5.61 8.3%
General Electric 9.8944 $28.69 $9.10 13.4%
General Mills .9362 $59.71 $1.80 2.7%
Johnson & Johnson (NYSE:JNJ) .4114 $104.08 $1.32 1.9%
Lockheed Martin (NYSE:LMT) 1.0119 $196.11 $6.63 9.8%
McDonald's (NYSE:MCD) .3958 $110.46 $1.38 2.0%
3M (NYSE:MMM) .4573 $157.45 $2.01 3.0%
Microsoft (MSFT) .5704 $54.70 $0.80 1.2%
Realty Income 3.1790 $54.70 $7.20 11.2%
Pepsico (NYSE:PEP) .3557 $100.25 $1.00 1.4%
Royal Bank of Canada 2.0213 $58.77 $4.99 7.4%
Sysco Corp (NYSE:SYY) .9381 $43.13 $1.16 1.7%
AT&T 4.0719 $36.30 $7.81 11.5%
Work Retirement Dividends $732.96
Total Yearly Dividends $800.74
Click to enlarge

In 2014 the portfolio had a return of 8.86%. For 2015 our portfolio returned 6.08%. Looking at the past year from 6/29/15 to 6/30/16, we've had a nice 16.18% return. As a long-term investor, I'm looking to hold all these companies for the next 10, 20, or 30 years.

Conclusion

We strive to produce a safe, reliable income, while not taking on too much dividend risk. As you can see, a lot of my purchases are currently small. Most range in the $10-$50 per stock purchase. One does not need to make big stock purchases to march towards financial independence. Picking the right companies to buy is much more important. With my monthly articles, I hope to be a good investing role model.

I hope you found my portfolio interesting and looking forward to more articles from me. Feel free to ask any questions and follow me.

Disclosure: I am/we are long DOW, MSFT, EMR, LMT, FPI, RY, T, MMM, GE, GIS, MCD, SYY, O, ADP, ABBV, ABT, BDX, APU, CLX, PEP, JNJ.

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.

Additional disclosure: Before you buy any stock you must do your own research. I may buy or sell any stock listed in my article in the next three business days.