Free Market Capitalist July Dividend Income

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

Summary

July 2016 income update.

Buy of the month was Microsoft.

Added to our stake in MSFT, PEP, JNJ, GE, BDX, MMM, MCD, LMT, EMR and O.

I have been investing for 13 years now. Investing is 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. Thirteen 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 July 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.

July 2016 Income Results

From January of this year to the end of July our portfolio is up a huge 16.65%-- surpassing the S&P 500 gain of 7.7%. This shows that superior companies produce great results. For the month of July, our portfolio had a good month, rising another 2.23%, compared to a 3.69% gain for the S&P 500. Below is a chart of April dividends vs July dividends. We re-invest the dividends back into the same company that paid them. I have a retirement account at work that is included in the chart below. July dividends increased 11.7% higher from April and every company paid a higher amount.

April ADP $0.26 July ADP $0.38 +46.1%
April FPI $1.05 July FPI $1.40 +33.3%
April 0 $0.44 July 0 $0.63 +43.1%
April GE $1.64 July GE $2.24 +36.5%
April SYY $0.23 July SYY $0.29 +26%
April DOW $0.34 July DOW $0.52 +52.9%
April Stock Dividends $3.69 July Stock Dividends $5.46 +48%
April Work Retirement $58.59 July Work Retirement $64.41 +9.9%
Total $62.55 Total $69.87 +11.7%
Click to enlarge

July Stock Purchases and Why We Bought Them

My Buy of the Month was Microsoft (NASDAQ:MSFT) snatching up .1882 shares at $53.14 on July 12th. As of August 5th, Microsoft closed at $57.91 a 8.9% gain. CEO Satya Nadella has done a wonderful job at Microsoft turning the culture around. More and more people are using Microsoft products again. Microsoft cloud services is seeing significant customer gains. Azure revenue shot up 102% in the last three month period ending June 30, 2016. Revenue in Intelligent Cloud rose 7% to $6.7 billion in the same time period. In December, a dividend raise will be in the cards.

3M (NYSE:MMM): 3M recently posted solid 2nd quarter results. EPS came in at $2.08 per share, an increase of 3% from 2nd quarter 2015. Sales did decline 0.3% to $7.7 billion. Full year profit target was raised to $8.15-$8.30 from $8.10-$8.45. The dividend payout ratio is a very safe 53%. 3M shares have risen 18.4% this year and are trading at all-time highs. We will continue buy 3M every chance we get.

McDonald's (NYSE:MCD): We bought more McDonald's because they are simply the best restaurant operators available. MCD has never cut its dividend since they began paying a dividend in 1976. The dividend payout ratio stands at 71%. MCD just posted its fourth consecutive quarter of increased comparable sales across all business segments. I sure like their improved hamburgers.

General Electric (NYSE:GE): General Electric continues to earn orders from around the globe. Ranging from, locomotive orders from Brazil, helping Saudi Arabia to advance their industrial diversification, and to reinforce Egypt's national grid. GE's backlog rose 17% to $320 billion in 2nd quarter 2016, from $272 billion of 2nd quarter 2015. I expect GE to increase its dividend in the first quarter of next year.

Lockheed Martin (NYSE:LMT): In a exciting development the U.S. Air Force just announced the F-35 is combat ready. The Air Force plans on operating more than 1,700 F-35 planes in the future. Also, soon Lockheed and the Pentagon should be announcing a batch a new plane orders. Like I said back in April, the stock price is getting closer and closer to $300. It will be fun to watch Lockheed.

Becton Dickinson (NYSE:BDX): Becton has been a rock solid performer this year. BDX is up 12.7% year to date. The CareFusion acquisition has been working out great. BDX has raised its dividend for 43 straight years and should continue for many more years. The starting dividend yield is low at 1.5%, but with dividend increases of 10% or more every year, this is a great company to pick up.

Realty Income (NYSE:O): On July 27, 2016 Realty increased the monthly dividend by 1% to $0.2015 a share, payable on September 15, 2016. A 4.9% increase over the same month a year ago. Realty recently increased their 2016 acquisitions guidance to $1.25 billion from prior estimate of $900 million. These acquisitions will provide ample dividends for the years to come. During the second quarter, Moody's and Standard & Poor's raised their credit ratings on Realty to Baa1 and BBB+, respectively. Realty is the highest rated company in the net-lease sector. I'm a big supporter of O.

Johnson & Johnson (NYSE:JNJ): It sure seems JNJ's sales and earnings never fall. On July 19th, JNJ reported 2nd quarter sales of $18.5 billion, an increase of 3.9% from 2nd quarter 2015. Earnings per share came in at $1.43. JNJ also increased its full year revenue range to $71.5-$72.2 billion. Also, increasing its adjusted earnings guidance to $6.63-$6.73 per share. I enjoy seeing upward EPS guidance.

Pepsi (NYSE:PEP): At its current price I think PEP is still worth buying. Pepsi's snack division has 40% global market share. Talk about being a dominant player. Pepsi more than Coke can withstand the decline in soda consumption. That's why I prefer Pepsi. PEP average return on equity has been 35% over the past 5 years. PEP currently yields 2.7%

Emerson Electric (NYSE:EMR): Lately, I had been buying Emerson for the upcoming spinoff of its Network Power Division. I was looking forward to receiving a new company. However, on August 3rd, Emerson announced it will be selling the Network Power division to Platinum Equity, for $4 billion. Emerson also sold its motors & electricity generation unit for $1.2 billion. It looks like Emerson will be using their new cash infusion on acquisitions. Emerson wants to be a growing business, not a shrinking one. Their dividend is very strong and well covered. I still like Emerson for the long term.

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

EMR .2808 shares
MSFT .1882 shares
O .1432 shares
LMT .0392 shares
MMM .0567 shares
MCD .0822 shares
JNJ .0814 shares
PEP .0922 shares
BDX .0577 shares
GE .3181 shares
Click to enlarge

The last two times we sold a company was on 1/28/2016 Arlington Asset Investment Corp and was replaced by Dow Chemical. Then on 12/22/2015 we sold ConocoPhillips (NYSE:COP) and was replaced by Microsoft . 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 big amount. We are bullish on every company we own, if not 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 bonds 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) .6302 $60.65 $1.43 2.0%
Abbott Labs (NYSE:ABT) 1.8098 $40.08 $1.88 2.6%
Automatic Data Processing (NASDAQ:ADP) .7293 $84.74 $1.54 2.1%
AmeriGas Partners(NYSE:APU) 1.2774 $40.46 $4.80 6.7%
Becton Dickinson .3022 $150.17 $0.80 1.1%
Clorox (NYSE:CLX) .6303 $118.10 $2.01 2.8%
Dow Chemical (NYSE:DOW) 1.1447 $47.93 $2.10 2.9%
Emerson 1.4311 $51.84 $2.72 3.8%
FarmLand Partners (NYSE:FPI) 11.1297 $10.96 $5.67 7.9%
General Electric 10.5920 $28.90 $9.74 13.6%
General Mills (NYSE:GIS) .9362 $59.71 $1.80 2.5%
Johnson & Johnson .4928 $107.18 $1.58 2.2%
Lockheed Martin 1.0511 $198.13 $6.94 9.7%
McDonald's .4780 $112.38 $1.70 2.3%
3M .5140 $159.53 $2.28 3.2%
Microsoft .7586 $54.50 $1.09 1.5%
Realty Income 3.2312 $55.39 $8.05 11.2%
Pepsico .4479 $101.94 $1.35 1.9%
Royal Bank of Canada (NYSE:RY) 2.0213 $58.77 $4.97 6.9%
Sysco Corp (NYSE:SYY) .9437 $43.18 $1.17 1.6%
AT&T (NYSE:T) 4.0719 $36.30 $7.81 10.9%
Stock Retirement Dividends $71.43
Work Retirement Dividends $772.92
Total $844.35
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 7/30/15 to 7/29/16 a cool 18.48% return. As a long term investor, I'm looking to hold all these companies for the next 10, 20, or 30 years from now.

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 article interesting and looking forward to more articles from me. Feel free to ask any questions and follow me.

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

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.