May Update: Growth In Dividend Income Is Exploding

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Includes: AAPL, ABBV, AFL, BA, CMI, COST, CSCO, CVS, CVX, D, DIS, GE, GILD, GIS, HON, JNJ, JPM, KO, LMT, MA, MMM, MO, MSFT, NKE, O, PEP, PG, PM, QCOM, SBUX, T, TGT, V, VFC, VTR, VZ, XOM
by: The Dividend Bro

Summary

Our portfolio is up more than 7% year to date.

In May, we bought shares of Costco and Pepsi.

Our dividend income is up 34% when compared to 2016.

As a teacher, I cannot begin to tell you how exciting it is to see the calendar turn to the month of June. School is almost done for the year. Instead of meetings and lesson plans there are field days and graduations. Instead of worrying about grading, I get to say goodbye to students and wish good luck to those moving on to high school. And if it is a new month, it also means I get to examine how my wife's and my dividend growth portfolio is doing.

While I am mostly focused on the growth of our dividend income, I like to see how our portfolio is performing overall. Year to date, counting just dividends and not new money added to our accounts, our portfolio is up 7.24%. For reference, the S&P 500 is up about 8.16% including dividends. We are slightly below the market index, but our income growth year over year has simply been astounding. More on that later. Now let's examine our leaders and laggards for the year.

Apple (NASDAQ:AAPL) continues its strong 2017. It has been a top performer all year and has been our best performing stock for the past three months. Shares are up 32% in 2017. Philip Morris (NYSE:PM) has been our best or second best performing stock every month this year except for one. Shares of the tobacco giant have gained 31% so far this year. Visa (NYSE:V) has also been a mainstay as a leader in our portfolio as the strong seem to be getting stronger. Shares of the credit card company have climbed 22% since the beginning of the year. Boeing (NYSE:BA) keeps flying high (see what I did there?) and the share price has shown a 20.5% improvement year to date. Boeing had a decent 2016 and has done rather well this year. MasterCard (NYSE:MA) makes an appearance on our top 5 performers list. Shares are up 19% year to date. Of these stocks, Philip Morris and Boeing are full positions, but I would have no problem adding to the others at the right price.

As far as our bottom 5 are concerned, the line "the song remains the same" seems to be apropos. Target (NYSE:TGT) has been our worst performer this year, losing 23.65%. With the growth in online shopping, brick and mortar retailers have really struggled. General Electric (NYSE:GE) has also suffered a rough year, dropping 13.35%. Verizon (NYSE:VZ) maintains a spot on our laggards list as the stock has lost 12.63% this year. Qualcomm (NASDAQ:QCOM), while it has lost 12.16% this year, has fought back slightly and lessened some of its earlier losses. Chevron (NYSE:CVX) rounds out the bottom 5 performers, having lost just over 12% year to date. Of these positions, only General Electric is a full position. I would have no problem adding to Chevron or Verizon as they are near core holding status for me. I am taking a wait-and-see approach with Target. If the company is able to show some progress and produce some earnings numbers that can surpass low expectations, then I would consider the stock for purchase. That could show that Target is improving. Qualcomm is interesting as investors may have overreacted to their dispute with Apple. I also think the purchase of NXP Semiconductors (NASDAQ:NXPI) helps to diversify the company's revenue stream. There is some news that investors want the company to ask Qualcomm for a higher purchase price.

May Purchases

We were able to make two purchases this month:

Costco (NASDAQ:COST) was bought on 5/5/2017 at $180.53. You can see a more detailed explanation for our purchase here. We bought in time to receive the $7 special dividend. A company that is able to offer investors a special dividend of that size must feel that its prospects for growth are pretty good. I should note that even though the stock dropped 7 points after the special dividend, it is just about back to where we bought it earlier in May. That shows some strength.

Next, we added to one of our Core Holdings when we bought PepsiCo (NYSE:PEP) at $114.82 on 5/22/2017. With 45 years of dividend growth, Pepsi has endured numerous economic cycles and has proven it can continue to raise dividends. In the interest of space, I won't go into the details all that much. For a longer explanation, please click here.

Current Positions

After this month's activity, our portfolio now consists of the following 37 companies:

3M (NYSE:MMM), AbbVie (NYSE:ABBV), Aflac (NYSE:AFL), Altria (NYSE:MO), Apple, AT&T (NYSE:T), Boeing, Chevron, Cisco (NASDAQ:CSCO), Coca-Cola (NYSE:KO), Costco, Cummins (NYSE:CMI), CVS Health (NYSE:CVS), Disney (NYSE:DIS), Dominion Energy (NYSE:D), Exxon Mobil (NYSE:XOM), General Electric, General Mills (NYSE:GIS), Gilead Sciences (NASDAQ:GILD), Honeywell International (NYSE:HON), Johnson & Johnson (NYSE:JNJ), JPMorgan Chase (NYSE:JPM), Lockheed Martin (NYSE:LMT), MasterCard, Microsoft (NASDAQ:MSFT), Nike (NYSE:NKE), Pepsi, Philip Morris, Procter & Gamble (NYSE:PG), Qualcomm, Realty Income (NYSE:O), Starbucks (NASDAQ:SBUX), Target, Ventas (NYSE:VTR), Verizon, V. F. Corp (NYSE:VFC) and Visa.

May Dividends

Most of our companies pay dividends in March, June, September and December, so it is not surprising that these months are often our best months for dividends. However, May's dividend total was the best month we have ever had other than December 2016 and March 2017. Part of the reason is the $7 dividend from Costco that I referenced earlier. Take that out and this month becomes "just" our 5th best month ever. Not too shabby.

This month's dividend haul easily thumped our previous records. May's income was 62.46%, 78.31% and 189.31% better than May 2016, 2015 and 2014, respectively. For the year, our income is up 34.17% compared to 2016, 72.38% above 2015 and 133.94% higher than 2014 at the same time.

I don't list these numbers every month to try to prove that I am some sort of fantastic investor or financial guru. I would be fooling myself if I thought so. I've made my fair share of mistakes and have spoken of them publicly here on Seeking Alpha. I still sometimes hem and haw over a decision and I'm not always right. No, I discuss these increases in income to remind myself and to show people who read these articles that by investing in companies that pay and raise dividends, you can create a snowball effect where your income continues to accelerate. I can't wait to see how our monthly income looks 10 years from now.

11 companies paid us dividends this month: AT&T, Verizon, General Mills, CVS Health, MasterCard, Apple, Realty Income, AbbVie, Procter & Gamble, Starbucks and Costco (quarterly and special dividends)

Conclusion

Our portfolio continues to perform well, though we are slightly behind the market index. As always, I'm mostly concerned with our dividend income and the previous section shows that it really has been kicking butt. Folks on TV like to use a lot of financial jargon and make things seem more complicated than they really are. All you need is to find a system that works for you, buy shares of attractively priced companies that show a history of dividend raises and then let the portfolio run. We are going to let others chase whatever high flying stock is out there these days. We'll keep adding companies like Pepsi and Costco and let them do the work for us.

What do you think of our buys this month? What stocks are on your watch list? Feel free to leave a comment. If you liked what you have read, please consider clicking the follow button at the top.

Disclosure: I am/we are long ABBV, AFL, CMI,CVX, GILD, GIS, HON, JPM, KO, XOM,MA, MMM,MO, MSFT,PG, PM, QCOM, T, TGT, V, VFC, VTR, AAPL, BA, CSCO, CVS, DIS, GE, JNJ, O, PEP, SBUX, VZ, NKE, LMT,D, COST.

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: We are not financial professionals. Please do your own research prior to making an investing decision.