Penny Dividend Fortress February Dividend Income

by: Penny Dividend Fortress

Summary

Taking discipline with a February financial overhaul.

Automatic Data Processing jumps higher.

Added to our stake in ADP, O, DOW, FPI, GE, and SYY.

On February 22nd, 2017 my wife and I overhauled the way we spend, save and invest for our financial freedom. We are saving money first and putting spending money second. We switched to a 80/10/10 approach to spending, saving, and investing. We can now only spend up to 80% of our take home pay, 10% goes into a savings account, and 10% goes into buying stocks. This new approach for us will allow us to put almost $200 more per month into stocks than what we were contributing before. It will be very nice watching our dividend income grow even faster now. Making saving money the highest priority will make achieving financial freedom even easier task to achieve. It takes discipline to put saving first and not spending all your paycheck. Stay tuned on how our new disciplined financial approach works.

The Dow Jones, NASDAQ, and S&P 500 have been staying very strong. Even on days when the market is selling off, the moves lower have been very small. The low volatility is a sign of good things to come. We believe the market is very ready for less regulation, repatriation of overseas cash, and corporate tax relief that could help companies increase earnings per shares by 5%-9%. Any dips in the market are good buying opportunities, as the trend is still going higher.

Background

Our (my wife and I) investing strategy is to only buy dividend paying companies to create a passive income for retirement and financial independence. Investing is a major passion of mine, with 14 years of experience. 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 28 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 search of Yield and Dividend Goals

In this low yield environment we are fortunate that our yield is at 3.6%. Currently, five of our companies yield more than our yield on cost. They are AbbVie (NYSE:ABBV) 3.88%, Realty Income (O) 4.29%, AmeriGas Partners (APU) 8.38%, AT&T (T) 4.62%, and Farmland Partners (NYSE:FPI) 4.79%.

End of February 2017 Dividend Yield on cost 2045 Dividend Yield Goal
3.64% 14%
2016 Dividend Total Year-to-date 2017 Dividends Received 2017 Dividend Total Goal 2045 Yearly Dividend Total Goal
$60.21 $13.28 $123.80 $64,400.00

February 2017 Income Results

From January 2nd, to the end of February our portfolio was up 3.09%. For the month of February, our portfolio had a nice return of 3.44%. Below is a chart of November 2016 dividends vs February 2017 dividends. We re-invest the dividends back into the same company that paid them. February dividends decreased -31.2.8% from November. The negative growth is only temporary and we are working on getting AT&T (T) and Royal Bank of Canada (NYSE:RY) rebought.

November T $2.15 February T $0.12 -94.4%
Nov. GIS $0.45 Febr. GIS $0.53 +17.8%
Nov. ABT $0.54 Febr. ABT $0.55 +1.9%
Nov. ABBV $0.50 Febr. ABBV $0.67 +34.0%
Nov. CLX $0.57 Febr. CLX $0.58 +1.8%
Nov. APU $1.80 Febr. APU $2.05 +13.9%
Nov. O $0.80 Febr. O $0.97 +21.3%
Nov. RY $1.14 Febr. RY $0.00 NA
November Stock Dividends $7.95 February Stock Dividends $5.47 -31.2%

February Stock Purchases and Why We Bought Them

My Buy of the Month was Automatic Data Processing (ADP) picking up .1040 shares at $96.17. As of March 17th, ADP wad trading at $105.11 representing a 9.3% gain. It's just not banks that will benefit from the Federal Reserve's recent rate hike. ADP will be able to collect more interest revenue on funds held for clients. ADP is very well diversified among its clients and is very well run. In November 2016 ADP increased its dividend for the 42nd year in a row to a annualized $2.28. ADP is the leader in Human Resource Management.

Dow Chemical (NYSE:DOW): It now looks like the merger with DuPont is pretty much a done deal. The European Union has approved, now we need the U.S. approval. Dow now expects the merger to close in the 2nd quarter of this year. We now want to accumulate as many shares as possible for the upcoming three way split. It won't happen for nearly two years, but we are planning for it now.

Farmland Partners (NYSE:FPI): On March 16th, the Lincoln Journal Star reported that ag-land values in the State of Nebraska have fallen 10% to $2,805 per acre in the past year and about 15% lower since 2014 when land peaked in value at $3,315 per acre. Nebraska has nearly 45 million acres for agriculture. Low corn and soybean prices continue to way on farmers. Fortunately, for Farmland Partners most of the land they own in Nebraska is in the Central Eastern part of the state where land values are still averaging $6,330 per acre. Farmland Partners owns about 5,208 acres in Nebraska. We believe the current price of $10.72 is a good price to be buying and a potential dividend increase this year.

General Electric (NYSE:GE): We continue to buyers of GE in the $29-$30 range. The last 10 days of been rough for the price of a barrel oil falling below $49.00. The oversupply and disagreement between countries over what productions levels should be help to increase oil prices are obviously not working. We believe the Baker Hughes merger will be a win in long term for shareholders. In 2015, GE sold $2.99 Billion worth of items to the U.S. Military. In order to grow that business I wonder if GE would acquire someone like L3 (NYSE:LLL) or Harris Corporation (NYSE:HRS) to really help jumpstart earning per share growth.

Realty Income (O): I've never been so happy to get a check for $1.00. Our March monthly dividend check was over $1.00 and will be growing faster now with more money to invest per month. Lately Realty has been on a roll with the dividend increases. Two dividend increases have been announced in the first three months of the year. It would be great to see a total of 5-6 dividend increases this year.

Sysco (SYY): I love seeing the Sysco trucks driving around town delivering food to restaurants and schools. Having Nelson Peltz as a fellow investor is a great sign Sysco is on the right path to growth. On February 6th Sysco posted increased 2017 2nd quarter earnings. GAAP EPS increased to $0.50 per share from $0.48 year over year. Sales also increased by a good 10.7% to $13.5 billion. Sysco is positioned to provided slow and steady earnings and dividend growth.

The chart below list what companies and how many shares we purchased in February. We are bullish on all the companies we purchased and are very happy to have more of each company.

ADP .1040 Shares
DOW .4906 Shares
GE .8706 Shares
O .6754 Shares
FPI 2.2867 Shares
SYY .2846 Shares

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. Shares Cost Yearly Income % of Portfolio Income
Abbvie 1.0536 $61.46 $2.66 3.4%
Abbott Labs (NYSE:ABT) 2.0859 $40.31 $2.20 2.8%
Automatic Data Processing (NASDAQ:ADP) 1.1188 $87.49 $2.55 3.3%
Amerigas Partners (NYSE:APU) 2.2181 $42.71 $8.18 10.5%
Becton Dickinson (NYSE:BDX) .3632 $153.74 $1.04 1.3%
Clorox (NYSE:CLX) .7242 $118.88 $2.28 2.9%
Dow Chemical 2.3019 $52.66 $4.23 5.4%
Emerson (NYSE:EMR) 1.8139 $52.73 $3.48 4.5%
FarmLand Partners 15.9134 $11.08 $8.11 10.4%
General Electric 13.9977 $29.19 $13.43 17.3%
General Mills (NYSE:GIS) 1.1196 $60.14 $2.14 2.8%
Johnson & Johnson (NYSE:JNJ) .5883 $108.24 $1.87 2.4%
McDonalds (NYSE:MCD) .7002 $113.87 $2.63 3.4%
3M (NYSE:MMM) .6367 $162.10 $2.99 3.8%
Microsoft (NASDAQ:MSFT) 1.4144 $57.98 $2.20 2.8%
Realty Income (NYSE:O) 5.3211 $57.09 $13.46 17.3%
PepsiCo (NYSE:PEP) .4543 $102.00 $1.35 1.7%
Sysco Corp. (NYSE:SYY) 1.7102 $47.70 $2.25 2.9%
AT&T (NYSE:T) .2575 $41.41 $0.50 0.6%
Xylem (NYSE:XYL) .1920 $52.24 $0.12 0.1%
Yearly Stock Retirement Dividends $77.67

In 2014 the portfolio had a return of 8.86%. For 2015 our portfolio returned 6.08%. Last year in 2016 we had a 15.02% return. Looking at the past year from 02/29/16 to 02/28/17 a 17.24% 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 are taking a new approach to financial freedom for the three month old new year. We believe the market will continue to surprise people with its resilience and continue to climb higher. Any dips are buying opportunities. In our next article will discuss why we added a new company to our portfolio, Pattern Energy (NASDAQ:PEGI).

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. I enjoy answering your questions.

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

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