John's April Dividend Income Tracker - Retirement Accounts

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Includes: AAPL, AMZN, APLE, BA, BP, CBRL, CLDT, CONE, CVLY, D, DUK, EAFAX, EPR, FRT, GD, HTA, IRM, KMI, KO, KRG, LTC, LXP, MAIN, MKC, MO, O, OHI, OMI, ORCL, OXY, PACW, PEGI, PEP, PK, PONAX, POR, RF, SBUX, SCG, SCL, SHBI, T, TD, UMPQ, V, VLY, VTR, WELL, WMT, WPC, XOM
by: Matthew Utesch

Summary

This is the second month I have officially tracked dividend income (in an article) for John's Traditional and Roth IRA Accounts. His combined dividend income totaled $1789.12.

John's retirement accounts are focused on generating consistent dividend income that can be used in retirement.

John's retirement accounts maintain smaller cash reserves than his wife Jane's does because the primary goal is to maximize dividends over capital growth.

Altria, Realty Income, Toronto-Dominion Bank, Umpqua Bank, Wal-Mart, and WP Carey all paid increased dividends during the month of April.

Investment Thesis

April marks the second month that I have tracked John's dividend income from his Traditional and Roth IRAs. Unlike the taxable account, we did not start making significant changes to John's retirement accounts until after the first of the year. Because of this, there are a number of stocks in John's retirement accounts that have yet to pay a dividend but this trend will quickly change as more of his stock purchases become seasoned.

John's portfolio contains a number of core holdings that are similar to his wife Jane's portfolio that I summarize in the article Jane's April Dividend Income Tracker - Retirement Accounts. The primary difference between their portfolios is that John's takes a more defensive approach by focusing on utilities, telecoms, and consumer goods. John has also officially retired and so his portfolio is focused on generating income and capital preservation.

Like the article on the taxable account, John And Jane - April Dividend Income Tracker - Taxable Account, the goal is to create a database that allows year-over-year (YoY) comparisons that demonstrate the power and simplicity of dividend investing from a retiree's perspective. In addition to documenting the past, I also like to forecast the upcoming month's dividend payments. The last difference between John's retirement accounts and his taxable portfolio is that there will be some active trading done within the retirement portfolio.

As always, I would like to include a disclaimer that this article is based on an actual portfolio for clients' of mine and that all figures and trades stated in this article actually took place (unless otherwise noted).

Traditional and Roth IRAs Vs. Taxable Account

Instead of regurgitating this section from Jane's article I will list bullet points to summarize this part of my strategy:

  • Actively buying and selling does not mean we are constantly trading the portfolio in a ridiculous attempt to create outsized gains.
  • I focus on purchasing shares of high-quality companies that we can either choose to hold onto or sell if our price target is reached.
  • Buying and selling within a Traditional or Roth IRA shields John and Jane from the threat of taxes on capital gains.

Dividend And Distribution Increases

It's worth noting that three of the six companies that paid increased dividends in the month of April, Altria (MO), Realty Income (O) and W.P. Carey (WPC), are the same ones that were mentioned in my article John And Jane - April Dividend Income Tracker - Taxable Account. One of the six companies that paid increased dividends, Toronto-Dominion (TD) was mentioned in my article Jane's April Dividend Income Tracker - Retirement Accounts. For this reason, I won't rehash what has already been said other than stating what the increase was. This leaves two new companies to review: Umpqua Bank (UMPQ) and Wal-Mart (WMT).

Altria (MO) - The dividend was increased from $.66/share per quarter to $.70/share per quarter. This represents an annualized increase of 6.1% and makes it the second dividend increase in the last three quarters. This results in a current yield of 5.04% based on a current share price of $55.54.

Toronto-Dominion Bank (TD) - The dividend was increased from $.60/share CAD per quarter to $.67/share CAD per quarter. This represents an increase of 11% over the previous quarter's dividend. This results in a current yield of just over 3.60% based on a current share price of $58.67 USD.

Realty Income (O) - The dividend was increased from $.2190/share per month to $.2195/share per month or an increase of .2%. This results in a current yield of 5.10% based on a current share price of $51.66. Since the beginning of the year O has grown its dividend from $.2125/month to $.2195/month and if the dividend were frozen at these levels it would represent $2.55/share and $2.63/share respectively.

Umpqua Bank (UMPQ) - I'll start by emphasizing that I am an employee of Umpqua Bank and my writing about the company is not an endorsement of the stock or an attempt to get others to buy it. To prevent a conflict of interest I will not comment on anything more than the general trend of its stock price and the dividend. The stock price has recently benefited from a strong earnings beat which was largely due to recently passed tax cuts. Fortunately, Umpqua decided to raise the dividend for the second time in six months as they seek to improve shareholder returns. Umpqua's stock price has experienced significant growth over the last six months and even more so over the last year.

Chart UMPQ data by

YCharts

UMPQ's dividend was increased from $.18/share per quarter to $.20/share per quarter. This represents an increase of 11.1% over the previous quarter's dividend. This results in a current yield of 3.38% based on a current share price of $23.65.

Walmart (WMT) - Walmart announced its increase back in February and paid the first increase in April. In the most recent earnings report, Walmart exceeded expectations of e-commerce sales growth by producing quarter-over-quarter sales growth of 33% (analyst consensus estimate was 30%). Even with the strong results, Walmart stock has reached new lows that have not been seen since prior to November 2017 and pushed its dividend yield up to approximately 2.5%. Although the dividend increase lacked luster at 2% year-over-year, Walmart is making efforts to increase its competitiveness and expand internationally so that it can better compete with rival Amazon (AMZN).

Chart WMT data by

YCharts

WMT's dividend was increased from $.51/share per quarter to $.52/share per quarter. This represents an increase of 2% over the previous quarter's dividend. This results in a current yield of 2.49% based on a current share price of $83.64.

W.P. Carey (WPC) - The dividend was increased from $1.01/share per quarter to $1.015/share per quarter. This represents an increase of .5% since the last quarter and continues the streak of subsequent quarterly increases. This results in a current yield of 6.3% based on a current share price of $64.44.

Active Trading As A Way To Reduce Risk

I want to dispel all assumptions from the beginning by emphasizing that my trades within the retirement account are not initiated in some crazy day-trading ploy to make John wealthier by subjecting him to increased risk. My trading philosophy is based on a couple of key items:

  1. Worthy of being held on a long-term basis - Some of the trades that I make can play out over a very short period of time while others can take months depending on various events. Because of the risk associated with regular trades, I will only purchase companies that I deem worthy of being held on a long-term basis. By purchasing only high-quality stocks, we are able to mitigate much of the risk associated with the process.
  2. Pays a dividend - Stocks that make my list almost always pay a dividend which is important because this means that even while they are being temporarily held, they are fitting in perfectly with my strategy, which at its core, is focused on consistent dividend income.

Here are some examples of trades I made in the month of April that utilize this strategy:

Starbucks (SBUX) - We sold all 100 shares of SBUX on April 26, 2018, after shares came close to my price target of $60/share amid concerns about growth. This trade ended up playing out extremely well as SBUX stock has dropped back close to our original cost basis.

Chart SBUX data by

YCharts

SBUX has constantly toyed with the $60/share line which is why I use this as my price target. After failing to hit this mark a little over a month ago I decided that $59.87/share would be enough gain to satisfy John. During this time John also received $30 of dividend in the month of February.

Boeing (BA) - A partial position of Boeing (25 shares) was sold on April 18, 2018, and resulted in realized loss of $-133.65 in total. These shares were sold not because Boeing's price target had been hit but because I saw more opportunity in Pepsi (PEP) and had been wanting to reduce John's total exposure to Boeing. Even with the sale of these 25 shares John still has a total of 75 shares of Boeing stock.

This minor realized loss was more than offset by the gains from other trades.

Visa (V) - The last two sales of Visa shares were completed on April 5th and April 14 and since then we have not repurchased any shares as the stock broke out of the range that we had grown comfortable with. I liked buying Visa under $120/share. These two trades in the month of April combined for a total realized gain of $412.64.

Chart V data by

YCharts

Based on current trends, I do not plan on trading Visa in the near-term.

John received a total of $413.67 in realized gains from his Traditional IRA and $466.63 from his Roth IRA. Therefore John's retirement account trades for the month of April added a total of $880.30 of income.

April Income Chart and May Estimates

I have created the following charts to assist with keeping track of John's retirement portfolios, with the intention of maintaining a database that can be compared on a month-to-month and YoY basis. Green is used to show when dividends were actually received while yellow represents dividend estimates that haven't occurred yet (estimates). Red indicates a position that no longer held.

**Due to time constraints I was not able to follow through with the suggestion of adding the DIV % in the charts below. My plan is to make that happen going forward in May's publications.

John's Traditional IRA:

John's Roth IRA:

Below is a chart that shows the total dividends received in the Traditional and Roth IRA accounts, respectively, for the first four months of the year.

With the dividend income starting to roll in, we can begin to appreciate the dividend-focused strategy since it is producing tangible results. While my focus is on the dividend income produced, it is worth noting that John has also benefitted from realized gains in his retirement accounts totaling $2,464.31 from February 1, 2018, to April 30, 2018. This gain comes from the trading strategy we have implemented and excludes all capital gains from the sale of mutual funds that were purchased under his previous advisor.

Conclusion

John's retirement portfolio has performed well as we continue to see more of our recently added dividend stocks become seasoned and start to pay a dividend. If we add up all the dividends and realized gains (excluding the sale of mutual funds that were selected by the previous advisor) John is sitting at a total gain of $6,819.56 as of April 30, 2018, which equates to a monthly average income from his Traditional and Roth IRA's of $1,704.89.

I believe that John should be receiving a total of approximately $653.45 of dividend income between the Traditional and Roth IRA accounts during the month of May.

It can be difficult to keep track of all the available investments out there, so I would love to hear some feedback in the comment section about any investments you think would be beneficial for John's portfolio. I want to thank all of you who have provided suggestions for stocks/funds.

In John's Traditional and Roth IRA's he is currently long the following mentioned in this article: (AAPL) Apple, (APLE) Apple REIT, (BA) Boeing, (BML/PRL) Bank of America Preferred Series L, (BP) British Petroleum, (CBRL) Cracker Barrel, (CLDT) Chatham Lodging Trust, (CONE) Cyrus One, (CVLY) Codorus Valley Bancorp, (D) Dominion Energy, (DLR/PRJ) Digital Realty Preferred Series J, (DUK) Duke Energy, (EAFAX) Eaton Vance Floating-Rate Advantage Fund A , (EPR) EPR Properties, (EPR/PRG) EPR Properties Preferred Series G, (FRT) Federal Realty Trust, (FRT/PRC) Federal Realty Trust Preferred Series C, (GD) General Dynamics, (HTA) Healthcare Trust of America, (IRM) Iron Mountain, (KIM/PRL) Kimco Preferred Series L, (KMI) Kinder Morgan, (KMI/PRA) Kinder Morgan Preferred Series A,(KO) Coca-Cola, (KRG) Kite Realty Group, (LTC) LTC Properties, (LXP) Lexington Realty Trust, (MAIN) Main Street Capital, (MKC) McCormick, (MO) Altria, (O) Realty Income, (OHI) Omega Healthcare, (OMI) Owens & Minor, (ORCL) Oracle, (OXY) Occidental Petroleum Corp, (PACW) PacWest Bancorp, (PCG/PRD) Pacific Gas & Electric Preferred Series D, (PEGI) Pattern Energy, (PEP) Pepsi, (PK) Park Hotels & Resorts, (PONAX) PIMCO Income Fund Class A, (POR) Portland General Electric, (RF) Regions Financial, (SCE/PRD) South California Edison Preferred Series D, (SCG) Scana Corporation, (SCL) Stepan Co, (SHBI) Shore Bancshares, (T) AT&T, (TD) Toronto-Dominion Bank, (VLY) Valley National Banc,(UMPQ) Umpqua Bank, (VTR) Ventas, (WELL) Welltower, (WMT) Wal-Mart, (WPC) WP Carey, (XOM) Exxon Mobil.

Disclosure: I am/we are long SCL, T, GD, PFBC, OHI, PEP, KMI, UMPQ.

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: This article reflects my own personal views and is not meant to be taken as investment advice. It is recommended that you do your own research. This article was written on my own and does not reflect the views or opinions of my employer. I would like to re-emphasize that am employed by Umpqua Bank which is a company held in John's Retirement Portfolio. The inclusion of this stock is for informational purposes only and is not an attempt to promote this stock. Please understand that I will not answer any questions that are specifically related to Umpqua Bank.