Free Market Capitalist October Dividend Income

by: Penny Dividend Fortress


October 2016 income update.

Buy of the month was Lockheed Martin.

Added a new company Xylem to our portfolio.

Added to our stake in MSFT, BDX, EMR, JNJ, MMM, GE, LMT, XYL, MCD 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 led 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.

In this low yield environment we are fortunate that our yield on cost has been holding steady at 3.7%. Currently, seven of our companies yield more than our yield on cost. They are AT&T (NYSE:T) 4.7%, AbbVie (NYSE:ABBV) 4.6%, Royal Bank of Canada (NYSE:RY) 4.1%, Emerson Electric (NYSE:EMR) 3.8%, Realty Income (NYSE:O) 4.2%, AmeriGas Partners (NYSE:APU) 8.2%, and Farmland Partners (NYSE:FPI) 4.5%.

End of October 2016 Dividend Yield on Cost 2045 Dividend Yield Goal
3.7% 14%
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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.

October 2016 Income Results

From January of this year to the end of October our portfolio is up 8.7%-- surpassing the S&P 500 gain of 5.6%. For the month of October, our portfolio had a return of -2.9%, compared to a -1.89% loss for the S&P 500. October marks the third straight monthly decline for the S&P 500. Below is a chart of July dividends vs October dividends. We re-invest the dividends back into the same company that paid them. September dividends increased 16.7% from June, every company paid a higher amount.

Starting last month I will not include my retirement account at work. I'll wait to actually count that money at a later date when it's not in a work account. I'll use that money later on to buy more companies.

July ADP $0.38 October ADP $0.47 +23.7%
July FPI $1.40 October FPI $1.58 +12.9%
July GE $2.24 October GE $2.58 +15.2%
July SYY $0.29 October SYY $0.35 +20.7%

July DOW

$0.52 October DOW $0.61 +17.3%
July O $0.63 October O $0.77 +22.2%
July Stock Dividends $5.46 October Stock Dividends $6.36 +16.5%
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October Stock Purchases and Why We Bought Them

My Buy of the Month was Lockheed Martin (NYSE:LMT) snatching up .0461 shares at $238.46 on October 4th. As of November 14th, Lockheed closed at $267.24 a 12.1% gain. In the Trump presidency, more military spending, ending of the sequester, and the F-35 is powering Lockheed higher. Lockheed should be able to keep the 10% yearly dividend increases coming and buying back a good amount of stock also. Lockheed currently yields a strong 2.8%

McDonalds (NYSE:MCD): In a effort to make ordering and paying easier for customers, McDonald's will be offering a mobile ordering/pay app in 2017. To help increase sales, a robust, easy to use app is absolutely required for McDonald's to stay a industry leader. In the 4th quarter of this year McDonald's will pay out nearly $800 million in dividends. This includes the 6% dividend increase announced at the end of September. McDonald's knows what it takes to stay a industry leader and keep the dividends flowing.

General Electric (NYSE:GE): Since November 3rd, GE's stock has made a nice rebound. On November 3rd GE was trading at $28.28. As of November 11th, GE has risen to $30.71, a 8.6% gain. The Bakers Hughes merger will allow GE to show how its Predix software can make oil service companies much "smarter". Time will tell if GE bought in at good price in the oil cycle. With Donald Trump in the White House a more favorable environment is in store for energy companies.

Johnson & Johnson (NYSE:JNJ): The future at JNJ looks exciting. Verb Surgical the partnership between JNJ and Google (NASDAQ:GOOG) is planning on having a fully working prototype by the end of this year. Verb's digital surgery robots could be a real earnings driver in a couple of years. A patch from JNJ was just approved by the FDA. that works wonders. This patch called Evarrest can help stop unexpected bleeding during surgery. the patch helps blood clot fast and is safely absorbed by the body. JNJ is a dividend powerhouse.

3M (NYSE:MMM): December 12th, will mark the 4th consecutive dividend payment of $1.11. November 16th is the ex-dividend date. I expect the dividend to go up to $4.70 for 2017. The dividend is typically increased in December or February. I like the fact that 3M invents a great product and is then able to create ways to make that product even better. For example, 3M's Scotch Clean Removal Strapping Tape that will not leave sticky residue damage on items. 3M is now up to 100 consecutive years of dividends paid without interruption.

Realty Income (O): At $54.39 Realty is now down 24.6% from its 52 week high of $72.30. Realty is now yielding 4.5%. For us long term investors this pullback is a welcome gift. We are taking advantage of this great deal. Realty just declared its 557th consecutive monthly dividend on November 11th, of $0.202 per share, payable on December 15th. The ex-dividend date is November 29th.

Xylem (NYSE:XYL): Our brand new company position. We had been looking for a pure play water company for awhile and we found it in Xylem. Xylem was spun off by ITT Corporation in 2011. The stock price has done very well since 2011, up over 100%. The growth prospects look very good. Xylem has the solutions Public Utilities, Construction, Agriculture and other industries need to move and clean water. Xylem has increased their dividend for four years in a row. The current yield is 1.22%.

Becton Dickinson (NYSE:BDX): On November 3rd, Becton announced 2016 4th quarter and full year earnings ending September 30th, 2016. 4th quarter adjusted diluted earnings came in at $2.12, compared to $1.94 in the same period a year ago. A increase of 9.3%. Diluted net income came in at $0.09 per share versus $0.84 per share a year ago. Full year diluted earnings per share were $4.49 vs $3.35 in the same year ago period. A 34% year over year increase in profits. Around December 10th, BD should be announcing another 10%+ increase in its dividend. The current $0.66 quarterly has been paid for consecutive quarters now. BD currently yields 1.5%

Microsoft (NASDAQ:MSFT): Microsoft is finally climbing back to its all-time high above $58 a share. The strategy to get their products on more platforms is working. Being able to buy and use Microsoft products on Apple computers to Android phones is doing a lot of good. With nearly $100 Billion in cash overseas a tax repatriation holiday would be good news for shareholders. The cash could be used to pay down debt, product innovation, or dividend increases. In September, Microsoft raised it's quarterly dividend 8.3% to $0.39 from $0.36.

Emerson (EMR): Emerson is continuing its acquisition spree by recently buying the Blending & Transfers business from FMC Technologies. The financial terms were not disclosed. This acquisition increases Emerson's presence in the advanced flow measurement & control technologies. On November 1st Emerson announced a 1% dividend increase payable on December 9th. The small dividend increase shows that 2017 will also be a challenging year for EMR. We believe that Emerson will be able to handle this downturn in revenue and profits. Emerson is a core holding for us.

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

BDX .0583 Shares
GE .4440 Shares
0 .0636 Shares
MSFT .2460 Shares
MCD .1311 Shares
MMM .0588 Shares
EMR .1865 Shares
XYL .1914 Shares
LMT .0461 Shares
JNJ .0880 Shares
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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 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. Share Cost Yearly Income % of Portfolio Income
Abbvie (NYSE:) 0.8724 $61.42 $2.23 2.7%
Abbott Labs (NYSE:ABT) 2.0595 $40.30 $2.14 2.5%
Automatic Data Processing (NASDAQ:ADP) 0.9009 $85.80 $2.05 2.4%
Amerigas Partners 1.9140 $42.26 $7.20 8.6%
Becton Dickinson& Co 0.3616 $153.71 $0.95 1.1%
Clorox (NYSE:CLX) 0.7146 $118.86 $2..28 2.7%
Dow Chemical (NYSE:DOW) 1.3430 $48.75 $2.45 2.9%
Emerson 1.6305 $52.05 $3.10 3.7%
FarmLand Partners 12.5673 $11.03 $6.40 7.6%
General Electric (NYSE:) 11.7696 $29.03 $10.82 12.9%
General Mills (NYSE:GIS) 0.9425 $59.80 $1.80 2.0%
Johnson & Johnson (NYSE:) 0.5841 $108.22 $1.87 2.1%
Lockheed Martin (NYSE:) 1.1042 $200.30 $8.03 9.6%
McDonald's (NYSE:) 0.6128 $112.84 $2.30 2.7%
3M (NYSE:) 0.5760 $160.71 $2.55 3.0%
Microsoft Corp 1.0093 $56.09 $1.57 1.9%
Realty Income 3.9616 $56.96 $9.60 11.4%
Pepsico (NYSE:PEP) 0.4511 $101.97 $1.35 1.6%
Royal Bank of Canada 2.1964 $59.12 $4.97 5.9%
Sysco Corp (NYSE:SYY) 1.1397 $44.84 $1.40 1.7%
AT&T 4.4806 $36.78 $8.78 10.5%
Xylem 0.1914 $52.25 $0.12 0.1%
Yearly Stock Retirement Dividends $83.96
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In 2014 the portfolio had a return of 8.86%. For 2015 our portfolio returned 6.08%. Looking at the past year from 10/30/15 to 10/31/16 a 8.07% return. As a long term investor, I'm looking to hold all these companies for the next 10, 20, or 30 years from now.


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

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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, XYL.

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.