Building A Monthly Income Portfolio

|
Includes: AYR, CVX, GE, GSK, O, PBCT, RSG, RY, SAFT, SO, STON, TUP, VZ
by: James Jenckes

Summary

Building a portfolio that pays equal monthly payments is not too hard.

You can simplify your monthly account withdrawals.

You can know exactly what you make each month.

There's nothing like being regularly rewarded for your hard work. At our day jobs we normally receive a pay check at least monthly. However, when we start investing we notice that our investments usually pay us on a quarterly basis. And not all of our investments start their payments in the same month. Some start dividend payments in January, others, in February and many others in March. This can cause gaps in payments for our portfolio throughout the year. Some months you may receive little or no dividend payments. Wouldn't it be nice to receive the same or close to the same amount of cash dividends each month? It certainly would make budgeting cash withdrawals from your portfolio accounts much easier!

Well, I have developed a dividend growth portfolio that essentially pays out the same cash flow in each month. The portfolio contains 13 dividend growers that all, but one, can be found in David Fish's currently available Champions, Contenders and Challengers or CCC spreadsheet. The stock not in the spreadsheet is GlaxoSmithKline PLC (NYSE:GSK). Glaxo doesn't show up on the CCC list because of uneven dividend payments that seem to be typical of many foreign stocks. But GSK is no slacker when it comes to dividend growth. Its five-year dividend growth rate is 7.45% and it sports a current dividend yield of 6.18%.

One other stock in the portfolio needs a special mention. Aircastle Ltd. (NYSE:AYR) is a Near Challenger at the present time. Which means it only has streak of four years of dividend increases. However, I believe it is on track to become a Challenger this year.

In order to get the payout equal each month, I found 4 stocks each that begin dividend payments in January, 4 that started payments in February and 4 that started payments in March. Then to sweeten the deal I added one stock that pays a dividend each and every month of the year. This was also done to make sure I had some good diversification in the portfolio. I tried to cover all the bases. There is one utility, one REIT, one telecom, one big pharma, one insurance, one oil and gas, one consumer discretionary, two banks, and three industrials. To make the dividends equal for each month I chose $1000 as the amount I wanted each investment to pay annually. Then I simply divided the annual dividend payment of each stock into $1000 in order to find how many shares I needed to buy for each stock.

The portfolio includes the following stocks: Realty Income Corp. (NYSE:O), General Electric Co (NYSE:GE), GlaxoSmithKline PLC , Republic Services Inc. (NYSE:RSG), Tupperware Brands Corp. (NYSE:TUP), People's United Financial Inc. (NASDAQ:PBCT), Royal Bank of Canada (NYSE:RY), StoneMor Partners (NYSE:STON), Verizon Communications (NYSE:VZ), Aircastle Ltd. , Chevron Corp. (NYSE:CVX), Safety Insurance Group (NASDAQ:SAFT), Southern Co (NYSE:SO).

Symbol

Price

Annual Dividend

Yield

Month of First Dividend

Shares per $1000

Cost

Annual Income

O

$52.21

$2.20

4.21%

Pays Monthly

454.55

$23,732

$1,000

GE

$23.58

$0.92

3.90%

January

1,086.96

$25,630

$1,000

GSK

$42.91

$2.65

6.18%

January

377.36

$16,192

$1,000

RSG

$40.04

$1.12

2.80%

January

892.86

$35,750

$1,000

TUP

$60.98

$2.72

4.46%

January

367.65

$22,419

$1,000

PBCT

$14.17

$0.66

4.66%

February

1,515.15

$21,470

$1,000

RY

$62.79

$2.58

4.11%

February

387.60

$24,337

$1,000

STON

$25.93

$2.48

9.56%

February

403.23

$10,456

$1,000

VZ

$47.10

$2.20

4.67%

February

454.55

$21,409

$1,000

AYR

$20.38

$0.88

4.32%

March

1,136.36

$23,159

$1,000

CVX

$102.67

$4.28

4.17%

March

233.64

$23,988

$1,000

SAFT

$62.44

$2.80

4.48%

March

357.14

$22,300

$1,000

SO

$50.80

$2.10

4.13%

March

476.19

$24,190

$1,000

$295,033

$13,000

The average annual yield on this portfolio is 4.41%. Compare that to the S&P 500 which is only 1.9%.

To increase your income simply add more cash to each investment or add three of your favorite stocks. Just make sure they each start dividend payments in a different month. That way you can keep your monthly income equal.

In this article I will not go into a summary of each position. Most of you are well familiar with all these stocks and they are easily researched on the web. Also, some of these positions may not suit your goals or expectations. So, obviously you can do what you will, this is just an idea and a starting point for further development.

If you are considering buying any of these securities make sure you aren't going to overpay. Some of these stocks may be overvalued and need to come down before they can be considered a buy. Check out the chart on Realty Income. It's at a new 52 week high.

Chart Courtesy of stockcharts.com

In the case of Chevron, the only oil and gas stock in the portfolio, you may want to wait on this one to see where it's going to bottom out. Check the chart below. When you think crude oil has hit bottom that may be the time to back up the truck on CVX.

Chart Courtesy of stockcharts.com

Disclosure: The author is long O, AYR, VZ, PBCT, STON, GE, TUP, GSK, RSG, RY, SO, SAFT, CVX.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I'm not recommending anyone buy any stock mentioned in this article. This article is intended for educational purposes only.