Jane's July Dividend Increases And Income Tracker - Retirement Accounts

by: Matthew Utesch

This is the fifth month I have officially tracked dividend income (in an article) for Jane's Traditional and Roth IRA Accounts. Her dividend income totaled $1,610.61.

Jane's IRAs have a slightly different focus because she still has several years before retirement, which gives us time to maximize her dividend income.

During the month of July, we took advantage of several trades that added an additional $2,815.86 of income to her Roth and Traditional IRA accounts.

Four companies paid increased or supplemental dividends during the month of July.

I created this series to serve as a helpful guide for the aspiring DIY investor.

Investment Thesis

July marks the fifth month that I have tracked Jane's dividend income from her Traditional and Roth IRAs. Unlike the Taxable Account, we did not start making significant changes to her retirement accounts until after the first of the year. Because of this, there were a number of stocks in her retirement accounts that didn't register their first dividend until April or May. Now that the majority of companies are seasoned, we are seeing a steady stream of dividend income rolling in for Jane.

From February 1st to June 30th of 2018, Jane's retirement accounts have generated the following income characteristics:

  • Traditional IRA - $3,851.64 of dividend income.
  • Roth IRA - $1,564.32 of dividend income.
  • Realized capital gains of $5,974.05.
  • An average monthly income from all gains of $1,898.34/month.

Currently, Jane still works a full-time job and does not plan to retire for another couple of years. This has allowed me to position her portfolio slightly more aggressively so that we can improve her financial situation as much as possible before she becomes dependent on it for income in retirement. Fortunately, Jane has multiple sources of income and has been an excellent saver her entire life. I can confidently say that if we were to combine all of Jane's income sources (current and potential), that she would be generating a monthly income that is equal to or greater than her current paycheck.

I've decided to write Jane's retirement review as a separate series than the taxable account because the approach we are using is slightly different than the approach used in developing the taxable account. The primary difference between the retirement accounts and the taxable account is that there will be active trading done within Jane's retirement accounts. (I provide examples and explain this part of the strategy more clearly later in the article). By actively trading in the retirement accounts will help shield her from unnecessary capital gains.

Although this may sound repetitive, I would like to include a disclaimer that this article is based on an actual portfolio for clients of mine. The goal is to build a portfolio of dividend-paying stocks, bonds, etc. that will continue to produce a growing and long-lasting income stream and simultaneously preserve capital. Capital appreciation is the least important characteristic of this portfolio. It is important that you do your own research when creating a portfolio that meets your needs!

Dividend And Distribution Increases

Companies that increased their dividend or paid a special dividend include:

  • Realty Income (O)
  • Philip Morris (PM)
  • Preferred Bank (PFBC)
  • W.P. Carey (WPC)

Since I have already provided my thoughts on Realty Income and W.P. Carey in my Taxable Portfolio John And Jane's July Dividend Increases And Income Tracker - Taxable Account, I will only provide a summary of the dividend increase for both REITs.

Realty Income - O's dividend was increased from $.2195/share per month to $.22/share per month or an increase of .2%. This results in a current yield of 4.49% based on a current share price of $58.85. Since the beginning of the year, O has grown its dividend from $.2125/month to $.22/month, and if the dividend were frozen at these levels, it would represent a starting payout of $2.55/share and a current annual payout of $2.64/share, respectively.

Philip Morris - PM's share price has seen better days but the dividend keeps growing in a way that DGI's can appreciate. With 10 years of growth under its belt, PM still has a long ways to go. One of the more appealing aspects of PM is that its portfolio is focused on Europe, the Middle East, Africa, Asia, Latin America, and Canada. This international exposure complements Altria's (MO) US-based tobacco operations. Although currency fluctuations (primarily Turkey) remain the most significant risk (IMHO) to PM's long-term viability.

Chart PM data by YCharts

PM's dividend was increased from $1.07/share per quarter to $1.14/share per quarter. This represents an increase of 6.5% and a new full-year payout of $4.56/share compared with the previous $4.28/share. This results in a current yield of 5.36% based on a share price of $85.05.

Preferred Bank - PFBC stock price recently achieved its 52-week high of $69.48/share after it was added to the S&P SmallCap 600. It didn't take long for the stock price to come tumbling down close to its 26-week low of $61/share. This presents another excellent buying opportunity for those who are interested. PFBC's fundamentals are strong as it remains one of the most efficiently run banks I keep tabs on. Even with its new payout of $.25/quarter, the bank provides a payout ratio of 24.1% based on the last four quarters of reported earnings. I would also like to note that PFBC continues to be a stock that I regularly trade (and for a good reason). Just look at share price fluctuations demonstrated over the last six months.

Chart PFBC data by YCharts

PFBC's dividend was increased from $.22/share per quarter to $.25/share per quarter. This represents an increase of 13.6% and a new full-year payout of $1.00/share compared with the previous $.88/share. This results in a current yield of 1.61% based on a share price of $62.30.

W.P. Carey - WPC's dividend was increased from $1.015/share per quarter to $1.02/share per quarter. This represents an increase of .5% and a new full-year payout of $4.08/share compared with the previous $4.06/share. This results in a current yield of 6.16% based on a share price of $66.28.

Active Trading Log

As noted at the beginning of my article, I have utilized an active trading method in tandem with a dividend growth model. This is not day-trading, nor is it some crazy scheme to make a lot of money quickly.

My trading philosophy is based on a couple of key rules:

  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 trading, I will only purchase companies that I deem worthy of being held on a long-term basis (in the event that they do not reach my sellable price target). 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 (at least that seems to be the case so far), which is important because this means that even while they are being temporarily held, they are fitting in perfectly with my dividend strategy - which, at its core, is focused on consistent dividend income. The primary reason for holding strong dividend-paying stocks is that it is the only reasonable way to be compensated for risk while waiting for the share price to recover (in the event of a downturn).
  3. Set price targets - This rule tends to be the most difficult one for people to implement and is in many ways the most important aspect of my strategy. The biggest problem that we all face with an active trading strategy (yes, myself included) is that most people do not initiate a price target at which they are willing to sell all or part of a position. Too many investors will "hold-on" hoping for an extra dollar per share even only to find that the market turns the other way and that their opportunity to sell at a reasonable price has slipped away. Every stock in Jane's portfolio has a specified price target that I regularly update based on changes in fundamentals and cost basis. On occasion, I will ignore this rule when I see a short-term opportunity.

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

Preferred Bank - As I just mentioned, PFBC is one of my favorite stocks to trade as its price movements tend to be highly predictable. With its low yield of 1.6%, I feel much more compelled to forego the potential dividend income in exchange for capital gains. So far in 2018, we have bought and sold shares two times and Jane currently holds 225 shares in her Roth IRA.

Source: Charles Schwab

The last time we traded PFBC it took over a month to play out and resulted in capital gains of $222.15. This time, the trade took approximately 10 days and resulted in $367.35 plus the July dividend of $18.75 for a total gain of $386.10.

Microsoft (MSFT) - Microsoft represented the most profitable trade in July as we decided to take some of our gains off the table after a strong run. Jane continues to hold half the original position and will consider purchasing more shares based on any potential weakness. MSFT looks fully-valued with a PE Ratio of close to 28 and with a dividend yield of 1.56% we see better opportunities for Jane's money. It is also worth noting that the CEO Satya Nadella recently sold 328,000 shares at $109.44/share (representing 1/3 of his vested ownership) as outlined in the Statement of Changes in Beneficial Ownership. I personally don't believe that this means MSFT is in trouble, but I do believe that the recent three-month run-up in price is due for a small correction (which we will gladly take advantage of when it arrives).

Chart MSFT data by YCharts

Based on first-in-first-out accounting Jane still has 50 shares of MSFT at a cost basis of $92.13/share.

Source: Charles Schwab

It took nearly five months for this trade to play out, and it netted capital gains of $660.47 during that time.

As the conclusion to the trades section of Jane's retirement portfolio, I want to emphasize that it is absolutely imperative for investors to consider the risks associated with this type of active trading. I have chosen this strategy because I am choosing to buy and sell high-quality names that are regular long-term holds in Jane's portfolio. In order for an investor to be successful with the strategy, it is critical that you focus on high-quality, dividend-paying stocks because this acts as your safety net in the event that the trade doesn't play out in the time frame you expected. It is also important to familiarize yourself with the trends of select companies and to "test" new companies that you haven't invested in yet.

For the month of July, Jane realized a gain of $2815.86 in capital gains between her Roth and Traditional IRAs.

Source: Consistent Dividend Investor, LLC

Since February 1, 2018, to July 31, 2018, Jane's Traditional and Roth IRAs have benefited from realized capital gains totaling $8,789.91 or an average of roughly $1,465.00/month.

July Income Chart And August Income Estimates

I have created the following chart to assist with keeping track of John and Jane's taxable portfolio. As mentioned in the intro, I've built these tables so that we can easily compare month-to-month and YoY changes.

  • Green represents when dividends were actually received.
  • Yellow represents dividend estimates.

Jane's Traditional IRA

Source: Consistent Dividend Investor, LLC.

Jane's Roth IRA

Source: Consistent Dividend Investor, LLC.

Below are four tables that show the total dividends received in the Traditional and Roth IRA accounts (smaller secondary charts are dividends received for stocks no longer held), respectively, for the first seven months of the year.

In total, Jane's Traditional IRA has produced $4,906.65 of dividend income from January to the end of July.

In total, Jane's Roth IRA has produced $2,119.92 of dividend income from January to the end of July.

In total, Jane has received total earnings (dividends and capital gains) in the amount of $15,816.48 over the course of seven months (January through July), resulting in an average monthly income of $2,259.50.


By focusing on a DGI model end of utilizing active trading, we were able to increase Jane's average monthly income from $1,898.34 in June to more than $2,250/mo in July. This hybrid DGI/active trading model isn't for everyone and I have received a fair amount of criticism for it. The model I use has benefited from a strong economy and favorable market conditions, so for that, I am thankful. However, I believe that this model will be incredibly beneficial during difficult market conditions as the dividend income will serve as the "core" income and will be supplemented by the occasional trade.

Even though dividend income was difficult to come by in the first several months of 2018, it is expected that Jane's Traditional and Roth IRA's will produce a combined dividend income of $13,256.97 for 2018 (based on already collected and projected dividends).

Based on initial calculations, I believe that Jane should be receiving a total of $826.00 of dividend income between the Traditional and ROTH IRA accounts during the month of August.

Over the last several months I have received feedback from readers with suggestions of how to adjust the charts for tracking dividend income. With many of the changes now in place, I would appreciate additional feedback to see if this new format resolves the problems created by my previous charts. As always, I welcome all forms of constructive feedback and appreciate those who take the time to do so.

Final Note: If you enjoy my articles, please take the time to follow me. While I enjoy performing analysis, following me is the best method for showing me that SA subscribers is finding my work useful. I welcome all meaningful feedback, and I enjoy using the Seeking Alpha platform to enhance and improve my own knowledge as well. My promise to readers is to be as open and transparent as I can be. The numbers presented are accurate as of the time I wrote this article.

In Jane's Traditional and Roth IRAs, she is currently long the following mentioned in this article: AbbVie (ABBV), Aflac (AFL), Archer Daniels Midland (NYSE:ADM), Bank of America (BAC), Bank of Nova Scotia (BNS), British Petroleum (BP), CBL Properties (CBL.PD), CLX, Canadian Imperial Bank of Commerce (CM), Cummins (CMI), CenturyLink (CTL), Digital Realty (DLR), Duke Energy (DUK), Eaton Vance Floating-Rate Advantage Fund A (MUTF:EAFAX), Enbridge (NYSE:ENB), Eaton Corporation (NYSE:ETN), Emera Inc. (OTCPK:EMRAF), General Dynamics (NYSE:GD), General Mills (NYSE:GIS), Gilead Sciences (GILD), Hershey (NYSE:HSY), International Business Machines (NYSE:IBM), Illinois Tool Works (ITW), Intel (NASDAQ:INTC), Investors Real Estate Trust (NASDAQ:IRET), Iron Mountain (NYSE:IRM), Johnson Controls (NYSE:JCI), Johnson & Johnson (NYSE:JNJ), LyondellBasell (NYSE:LYB), Main Street Capital (NYSE:MAIN), 3M (NYSE:MMM), Mesabi Trust (NYSE:MSB), Microsoft (NASDAQ:MSFT), Altria (NYSE:MO), Realty Income (NYSE:O), Old Republic International (NYSE:ORI), Oxford Lane Capital Corp 6.75% Cum Red Pdf Shs Series 2024 (NASDAQ:OXLCM), Preferred Bank (NASDAQ:PFBC), Pfizer (NYSE:PFE), Philip Morris (NYSE:PM), PolyOne Corp. (NYSE:POL), PPL Corporation (NYSE:PPL), Royal Bank of Canada (NYSE:RY), Schwab International Equity ETF (SCHF), Synnex Corp. (NYSE:SNX), Toronto-Dominion Bank (NYSE:TD), Travelers Co. (NYSE:TRV), US Bank Preferred H-Series (USB.PH), Verizon (NYSE:VZ), Walgreens (NASDAQ:WBA), Williams Companies (WMB), W.P. Carey (NYSE:WPC).

Disclosure: I am/we are long CTL, GD, GIS, SNX. 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 discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.