Free Market Capitalist May Dividend Income

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

Summary

May 2016 Dividend Income.

Increasing dividends quarter after quarter.

Increased our stakes in GE, ADP, FPI, DOW, SYY, ABT, and O.

Introduction:

I have been investing for 12 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. 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) cms.seekingalpha.com/article/3974042-free-market-capitalist-april-dividend-incomeinvesting 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 in about 30 years from now is to have a 14% yield on cost. We believe we have created a very strong portfolio capable of achieving this goal.

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

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.

May 2016 Income Results:

From January of this year to the end of May our portfolio is up 8.19%, while the S&P 500 is up 2.71%. For the month of May, our portfolio had a very small loss of 0.11%, compared to a 1.5% gain for the S&P 500. Below is a chart of February dividends vs. May dividends. I have a retirement account at work that is included in the chart below. May dividends increased 16.1% higher from February; every company paid a higher amount.

February T $1.40 May T $1.70 +21.4%
Feb. GIS $0.24 May GIS $0.32 +33.3%
Feb. ABT $0.16 May ABT $0.22 +37.5%
Feb. ABBV $0.25 May ABBV $0.36 +44%
Feb. CLX $0.42 May CLX $0.48 +14.3%
Feb. O $0.33 May O $0.47 +42.4%
Feb. RY $0.66 May RY $0.98 +48.4%
Feb APU $0.50 May APU $0.97 +94%
Feb. Work Ret $53.99 May Work Ret $61.80 +14.4%
Total $57.95 May Total $67.30 +16.1%

May Stock Purchases and why we bought them:

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

My buy of the month was Realty Income Corp (NYSE:O), snatching up .3186 shares at $59.64 on May 31st. As of June 9th, Realty Income closed at $63.98, a 6.7% gain. Realty Income just recently upped its 2016 acquisition guidance to $900 million from $750 million. That either means properties are getting more expensive or they plan on going on a even bigger shopping spree than originally planned. I believe it's the latter. Even at current prices I plan on buying more Realty every month. Even during bad times, Realty Income keeps its occupancy rate very high. With its above-average yield and a dividend raise every three months, Realty is very hard to beat.

Sysco (NYSE:SYY): We added more Sysco because they offer the slow but steady growth that we want. Recently, Sysco has made several good acquisitions:

  • On February 22, 2016 the acquisition of the Brakes Group, a leading European foodservice distributor.
  • Then on September 21, 2015 a Sysco subsidiary acquired Gilchrist & Soames, one of the leading luxury personal care amenity in the hospitality industry.

Increased sales and smart acquisitions led Sysco to report strong 3rd quarter fiscal 2016 growth of 2.2% to $12 billion. Gross profit increased 4.1% to $2.1 billion; adjusted Earnings Per Share increased $0.06 to $0.46.

FarmLand Partners (NYSE:FPI): This is one of my top rated REITs. This is a fairly new company, having been public just over two years now. I believe they have the best management and potential of all the public farming REITs. They have grown from 38 farms to the current 265 farms and 111,107 acres. They seek to acquire only high-quality farmland to produce the best crops. First quarter 2016 adjusted funds from operations (AFFO) was $0.11 for the quarter ended March 31, 2016, a 186% increase over the same period last year. Operating revenues of $4.7 million, a 123% increase over the same period last year.

Abbot Labs (NYSE:ABT): Year to date Abbott is down 14.5%. We believe this sharp sell-off represents a great long-term buying opportunity. Abbott's short interest has jumped sharply higher in the last month. To me this means buy, buy, buy this great company. The recent Alere acquisition may or may not help Abbott much, but I believe the St. Jude Medical (NYSE:STJ) purchase was very smart. The dividend is very secure.

General Electric (NYSE:GE): We believe the rally in GE is just getting started. With its strong push into the Industrial Internet with its Predix software, that has revenue already reaching $5 billion-$6 billion. GE is taking the future into its own hands. With massive buybacks, no major finance division, and a return to industrial roots, the future looks bright.

Dow Chemical (NYSE:DOW): Dow Chemical has been a good pickup for us in January, gaining 11.5%. We believe the DuPont merger and future three way company split will drive big gains. Dow has done a wonderful job increasing its dividend lately.

Automatic Data Processing (NASDAQ:ADP): ADP is a leader in human capital management and business payroll processing. A very reliable company with 41 years of dividend increases. Its dividend payout ratio is low at 65% of earnings. Its low payout ratio should provide many more years a dividend increases. On November 10, 2015 ADP increased its quarterly dividend 8.1%. A great company to own.

FPI

2.6062 shares
GE 1.2906 shares
O .6434 shares
DOW .3861 shares
ABT .4185 shares
ADP .2275 shares
SYY .2007 shares

The last two times we sold a company was on 1/28/2016, Arlington Asset Investment Corp (NYSE:AI) and was replaced by Dow Chemical. Then on 12/22/2015 we sold ConocoPhillips (NYSE:COP), and was replaced by Microsoft (NASDAQ: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 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 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) .6302 $60.65 $1.42 2.2%
Abbott Labs 1.3180 $42.04 $1.34 2.1%
Automatic Data Processing .7252 $84.74 $1.54 2.4%
Amerigas Partners 1.0533 $39.57 $3.88 6.1%
Becton Dickinson (NYSE:BDX) .2435 $144.64 $0.64 1.0%
Clorox (NYSE:CLX) .6303 $118.10 $2.01 3.2%
Dow Chemical 1.1350 $47.88 $2.09 3.3%
Emerson Electric (NYSE:EMR) 1.1402 $51.44 $2.16 3.4%
FarmLand Partners 11.0076 $10.96 $5.61 8.8%
General Electric 9.7598 $28.68 $8.98 14.2%
General Mills (NYSE:GIS) .7107 $57.55 $1.30 2.1%
Johnson & Johnson (NYSE:JNJ) .4085 $104.01 $1.32 2.1%
Lockheed Martin (NYSE:LMT) 1.0050 $195.80 $6.63 10.5%
McDonalds (NYSE:MCD) .3929 $110.38 $1.38 2.2%
3M (NYSE:MMM) .4543 $157.38 $2.01 3.2%
Microsoft .5666 $54.96 $0.80 1.3%
Realty Income (NYSE:0) 3.0151 $54.18 $7.20 11.4%
Pepsico (NYSE:PEP) .3531 $100.23 $1.00 1.6%
Royal Bank of Canada (NYSE:RY) 1.8587 $58.53 $3.92 6.2%
Sysco Corp .9381 $43.13 $1.16 1.8%
AT&T (NYSE:T) 3.5875 $35.63 $6.88 10.9%
Work Retirement Dividends $741.60
Total Yearly Dividends $804.87

In 2014 the portfolio had a return of 8.86%. For 2015 our portfolio returned 6.08%. Looking at the past year from 6/01/15 to 5/29/16 -- a decent 9.69% 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 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.

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