June 2017 Portfolio Income Update

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Includes: CMI, CVX, EMCF, GME, GNC, HP, IBM, LYB, MDP, NOV, ORI, SSI, VLO, WM
by: Lino Patti

Summary

Discuss why receiving dividends is so pleasurable.

Discuss my portfolio’s dividends and premiums for June 2017.

Discuss my portfolio’s income goals.

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”
–John D. Rockefeller

Receiving a dividend is one of the most pleasurable parts of my week. In 2016 I received 77 separate dividend payments. That is equivalent to receiving a dividend every 4 to 5 days. Every week I receive a dividend, and every dividend puts a huge smile on my face. Dividends give me pleasure because they remind me that I am entitled to a portion of profits from numerous high quality companies that I partially own. It’s a good feeling to know that every time someone fills up their gas tank at a Chevron (CVX) or Valero (VLO) gas station, I receive some of that profit. Every time someone uses a Verizon (VZ) carrier phone, I get a piece of that action. A lot of hard working men and women are making sure that I get paid every week no matter what I do with my time. As long as I hold my shares in these great companies, I will get paid through dividends.

As a value-oriented dividend growth investor, I spend a lot of time hunting for companies with high yields that are trading at a discount compared to their intrinsic value. Not only do I want to grow my income stream through the purchase of dividend stocks, but I also want to make sure I am buying companies at a good price with strong financials so they can pay a dividend far into the future. I use a stock rating system to help me determine if a company is worthy of a spot in my dividend growth portfolio. To learn about my in depth “10 Minute Stock Rating System”, click here.

In this article I will provide my June 2017 dividend results and discuss my goals.

June 2017 Portfolio Income

Last month I posted $137.90 of portfolio income. Results of May 2017 can be viewed here.

The table below shows the income I have received from my portfolio for the month of June:

Stock Owned

Type of Income

Amount

Waste Mangement (WM)

Dividend

$1.61

Meredith (MDP)

Dividend

$1.37

Chevron

Dividend

$16.37

Stage Stores (SSI)

Dividend

$4.85

Cummins (CMI)

Dividend

$112.75

Helmerich & Payne (HP)

Dividend

$16.80

International Business Machines (IBM)

Dividend

$49.50

LyondellBasell Industries (LYB)

Dividend

$90.00

Gamestop (GME)

Dividend

$38.00

Valero Energy

Dividend

$65.80

Emclaire Financial Corp (EMCF)

Dividend

$27.00

Old Republic International (ORI)

Dividend

$19.00

GNC Holdings (GNC)

Option Premium

$19.44

National Oilwell Varco (NOV)

Option Premium

$25.44

Total Income:

$487.93

Source: Author Calculations

The total income I received in June was $487.93 which is a 22.2% year over year gain over last June 2016. Last June I received $399.37 in portfolio income. The $443.05 received due to dividends is a new personal record as it is the most I’ve ever received in one month.

You will notice $44.88 of option premium in the above chart. I received this income by writing secured calls on GNC and NOV. If you are unfamiliar with how this income strategy works, please read my article here that explains it in depth.

These results are very pleasurable for someone who just started building an income portfolio a few years ago. Almost $500 of passive portfolio income in a month is good enough to pay all my fire insurance, water, electric, condo fee, car insurance, Netflix (NFLX), and Amazon (AMZN) Prime bills combined for the month of June. I don’t average ~$500 of portfolio income a month yet, but when I reach this goal, I can pay these bills for the rest of my life and barely have to lift a finger. This is the power of dividend investing. I am one step closer to early retirement.

During the last year, a few of my holdings raised their quarterly dividend payments. I had to do nothing to earn these raises. One holding also decided to cut their dividend due to harsh economic headwinds in the retail sector. The table below shows the changes in quarterly dividend payments over the last year for these specific holdings:

Holding

2016 June Payment

2017 June Payment

Change

WM

$1.55

$1.61

3.87%

MDP

$1.30

$1.37

5.38%

CVX

$16.22

$16.37

0.92%

SSI

$14.55

$4.85

-66.67%

CMI

$107.25

$112.75

5.13%

HP

$16.50

$16.80

1.82%

IBM

$46.20

$49.50

7.14%

Source: Author Calculations

I did suffer a dividend cut with SSI but I continue to hold and wait for management to turn things around as I am a buy-and-hold investor with a lot of risk tolerance.

On dividend raises, you can see that nearly all raises were greater than current inflation rate of 1.9%. This table shows that when I reach early retirement, I won’t have to worry about my income being eaten by inflation. In fact it looks like I will be able to beat inflation by a wide margin. The income lost from the SSI dividend cut is significant but is a rare event in my portfolio that doesn’t happen often like dividend raises. Dividend raises are one of the biggest benefits of dividend growth investing.

Goals

I have received a total of $1523.07 in dividend income and $388.64 of option premium income for 2017. Going forward my portfolio is expected to bring in $2,948.09 worth of dividends in the next year. I am happy with this number because my total dividends received in 2016 from my portfolio were $2,303.24. The snowball building machine is in full effect. Please take note that I do not predict premium income for the year because I only use options to move in or out of a position. In other words, they are not part of a program or schedule like dividends are and are very hard to predict.

My overall goal is to make $3000 or more of dividends this year and to grow an income stream of $40,000 by the time I’m 40 (I’m 30 years old). The first goal is very achievable and I expect to reach it by purchasing more undervalued dividend growth stocks this year using my “10 Minute Stock Rating System”. The second goal is lofty and a lot harder to achieve as I am only 7.37% of the way there. But if I stay motivated, focused, and stay disciplined, I think I can reach my goals with a little bit of hard work and determination.

Conclusion

Owning many profitable businesses is enjoyable, but owning businesses that pay you a portion of profits every quarter is a lot more pleasurable. The best part about dividend growth investing, is that you receive these profits without working for the company or doing any manual labor. I work hard at my full time electrical engineering job and I get paid well for my hard work. But getting paid for my hard work is not as enjoyable as getting paid for sitting on a beach, sipping a beer with my feet in the sun because someone paid WM, I company that I partially own, to pick up their trash.

The income produced from my portfolio in the month of June increased year over year due to dividend raises and additional purchases of shares of dividend growth companies.

I am actively working towards my goals of producing $3000 of dividends in 2017 and a $40,000 income stream by the time I turn 40. The latter goal is lofty but with some focus and hard work, I know I will achieve it.

Disclosure: I am/we are long WM, MDP, CVX, SSI, CMI, HP, IBM, LYB, GME, VLO, EMCF, ORI, GNC, NOV, VZ.

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.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.