Road To Financial Independence: New Dividend Record In March

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Includes: AAOI, AAPL, ABBV, AINV, AMD, ARCC, ARI, ATVI, AVGO, AYX, AZSEY, BABA, BAC, BASFY, BAYZF, BEP, BGS, BIP, BMWYY, BNS, BP, BX, BZUN, C, CBAUF, CL, CM, COR, CSCO, CTL, CVS, D, DATA, DDAIF, DHT, DIS, DRHKF, ED, EPD, EQT, FB, FDX, FMS, FSNUF, GE, GILD, GIS, GM, HCR, HD, HON, HUYA, INCY, INTC, IQ, JD, JNJ, JPM, KMI, KO, LNXSF, MAIN, MCD, MDGEF, MIC, MMM, MO, MOMO, MS, MSFT, MU, NEP, NVDA, OHI, OSAGF, PEB, PEP, PFE, PG, PM, QCOM, QTS, RDS.B, RY, SHE, SHLX, SNH, SO, STAG, STWD, SXTSY, T, TD, TEAM, TGT, TNK, TTWO, TXN, UN, UNIT, V, VONOY, VZ, WB, WBA, WFC, WRCDF, XOM
by: Stefan Redlich
Summary

Dividend income hit $400 in March, up 43% Y/Y and 34% sequentially.

The big increase is heavily boosted by the semi-annual dividend payment from a big Australian bank as well as ongoing investments.

Breaking down dividend growth reveals some heavy dividend growth in relative terms, but in absolute terms, most of the increase stems from new purchases.

I outline the portfolio composition by sector and portfolio weight for every holding.

We all love records, and March was a record month, as for the very first time I was able to hit $400 in dividend income, the next milestone reached on my long journey towards financial independence.

Markets were rallying strongly in March and posting one of their best performances ever since the financial crisis. With stocks having not only recovered from the lows set on Christmas Eve, but also many having set new all-time highs, this naturally reduces the number of attractive buying opportunities.

However, in a stock market consisting of thousands of equities, there are always some stocks that are appealing. Following some strong income in the first quarter from dividends and my writing, I was able to deploy more than expected fresh capital.

Portfolio Changes | 9 repurchases, 1 trim

I deployed net capital of around $1,300 in March, but did not buy any new holding. Instead I deployed capital into existing holdings and took some profits with Momo (NASDAQ:MOMO), however, too early as it turned out.

Given that transaction fees are no real issue, I made a couple of smaller purchases, broken down as follows:

  • Wirecard (OTCPK:WRCDF): Following a very positive interim fraud report, the stock initially rallied 30% only to be dragged down by another Financial Times article, which, I have to admit, looks to have more substance than the previous ones. However, in total, even if fraud will be found, which I highly doubt, the only thing which matters is the magnitude. So far I have not seen or heard any material figures and that's why I've added to Wirecard on renewed weakness.
  • Baozun (BZUN): One of my favorite stocks as it is growing very fast, but it is still very small in terms of market cap. With the US-China trade talks apparently developing favorably, Baozun is enjoying a stellar year so far, up almost 50% YTD, but still some large distance away from its all-time high.
  • Walgreens Boots Alliance (WBA): I bought only two shares before the company shocked the markets with flat guidance following structural problems in its core business. It is a company with rich history, but if the all-important foot traffic is continuing to decline and can't be compensated by corresponding e-commerce sales, the company has a tough nut to crack here. Right now, the stock is trading at a very high yield of 3.2% and below $55. It looks very appealing, but is also a risky bet I am not sure I want to take.

The other purchases I made are routine investments between $50 and $115 each into Wells Fargo (NYSE:WFC), Visa (NYSE:V), McDonald's (NYSE:MCD), Johnson & Johnson (NYSE:JNJ), Apple (NASDAQ:AAPL) and the lesser-known Commonwealth Bank of Australia (OTCPK:CBAUF).

All net purchases and sales in March can be seen below:

Dividend Income: What happened on the dividend side?

My income from 34 corporations hit $400.04 and thus for the very first time ever crossed the $400 mark by the tiniest margin. Dividend income is up 43% Y/Y and up 34% sequentially.

The figures look sensational, but the majority of that increase is certainly not organic. On a sequential basis, the semi-annual dividend payment from the Australian Commonwealth Bank amounting to $69 is the major driver. Excluding this, the sequential growth rate drops to 11%, which is a mixture of organic dividend growth and additional purchases of both new and existing positions.

All dividends break down as follows:

My stock portfolio covers around 100 individual holdings, and as such, there is a lot of varying organic dividend growth. On a Y/Y basis, Visa's 19% dividend growth clearly stands out and is following by double-digit dividend growth from other core holdings, such as McDonald's with 14.9% or Honeywell (NYSE:HON) with 10.1%.

In the case of Visa and McDonald's, the overall Y/Y change in dividend income is much bigger given that I have been investing into both stocks automatically every month. In March 2018, for instance, Visa only generated a meager $2.58 in net income, but a year later, this amount has risen to $6.15 already. It should not take long to hit the first double-digit dividend income figure.

Here is a look at my favorite chart: the net dividend income development by month over time between 2015 and 2019, where you can easily see the development of my dividend income as well as the average annual dividend in a given year:

Next, I have scattered all the individual dividend payments I have ever received and colored them by year, rearranging the years side by side rather than horizontally as in previous updates:

The readability of the numbers is rather poor, as there is so much data, but the bigger picture becomes apparent regardless of these numbers. I am just looking at the size and quantity of the bubbles as they keep on climbing higher and expanding in size.

It remains fascinating to watch how all these metrics develop over time. Right now, as I am still in the early stages, these metrics are not that impressive but the growth is truly striking, and all these instruments help me measure it and provide meaning to it. Now that I have entered the fourth year of my road to financial independence, it is really motivating and encouraging to see how these bubbles are increasing in size and quantity and (slowly) moving up the scale.

Speaking in terms of meaning, another way to express the monthly dividend income is in terms of Gifted Working Time (GWT). I am assuming an average hourly rate of $25 here. In 2018, I generated 121 hours in GWT, equaling slightly more than $3,000 in annual net dividends. For this year, I am targeting a 15% increase. This results in $3,450 in targeted annual net dividends, or 138 hours in GWT. Depending on actual performance, I may revise that target after the first 3-6 months.

What this shows is as follows:

  1. All time (blue area) - Around 268 hours, or 33.5 days, of active work have been replaced with passive income since the start of my dividend journey. Assuming a five-day work week, that equals more than six full weeks, or more than an entire month, of vacation funded via dividends.
  2. YTD (green bars) - Around 35 hours, or 4.4 days, of active work have been replaced with passive income in 2019 already.

Upcoming April Dividends

The snapshot below is taken from my newly released Dividend Calendar & Dashboard Tool (make sure to follow instructions) and shows expected gross dividend payments for April.

My portfolio composition

I have now switched showing portfolio composition from % cost basis to % market value. At end of March, my portfolio is composed as follows:

Company Name Ticker % Market Value
Apple Inc. (AAPL) 6.16%
Cisco Systems, Inc. (CSCO) 5.02%
AT&T Inc. (T) 4.76%
McDonald's Corp. (MCD) 3.81%
Royal Dutch Shell Plc Class B (RDS.B) 3.12%
Altria Group Inc. (MO) 2.79%
Micron Technology, Inc. (MU) 2.53%
AbbVie Inc. (ABBV) 2.47%
Johnson & Johnson (JNJ) 2.37%
Gilead Sciences, Inc. (GILD) 2.31%
Southern Co. (SO) 2.29%
Main Street Capital Corporation (MAIN) 2.11%
Siemens Healthineers (SHE) 1.92%
Microsoft Corporation (MSFT) 1.91%
3M Co. (MMM) 1.79%
Wells Fargo & Co. (WFC) 1.77%
Baozun Inc. (BZUN) 1.75%
Commonwealth Bank of Australia (OTCPK:CBAUF) 1.68%
BP (BP) 1.68%
Texas Instruments Incorporated (TXN) 1.47%
Daimler (OTCPK:OTCPK:DDAIF) 1.45%
Philip Morris International Inc. (PM) 1.38%
PepsiCo, Inc. (PEP) 1.31%
Toronto-Dominion Bank (TD) 1.24%
Procter & Gamble Co. (PG) 1.24%
Bank of America Corp. (BAC) 1.21%
Honeywell International Inc. (HON) 1.20%
Verizon Communications Inc. (VZ) 1.18%
Dominion Energy Inc. (D) 1.15%
Bank of Nova Scotia (BNS) 1.13%
B&G Foods, Inc. (BGS) 1.11%
Unilever NV ADR (UN) 1.07%
Canadian Imperial Bank of Commerce (CM) 1.06%
Alibaba Group Holding Ltd (BABA) 1.03%
Intel Corporation (INTC) 1.03%
Wirecard AG (OTCPK:WRCDF) 1.01%
Bayerische Motoren Werke AG Preference Shares (OTCPK:OTCPK:BMWYY) 0.99%
Morgan Stanley (MS) 0.96%
Target Corporation (TGT) 0.90%
Advanced Micro Devices, Inc. (AMD) 0.86%
QTS Realty Trust Inc Class A (QTS) 0.85%
The Coca-Cola Co. (KO) 0.85%
Ares Capital Corporation (ARCC) 0.81%
Allianz SE (OTCQX:OTCPK:AZSEY) 0.76%
BASF (OTCQX:OTCQX:BASFY) 0.72%
General Motors Company (GM) 0.72%
Royal Bank of Canada (RY) 0.72%
NVIDIA Corporation (NVDA) 0.71%
Tableau Software Inc Class A (DATA) 0.69%
JPMorgan Chase & Co. (JPM) 0.68%
Blackstone Group LP (BX) 0.64%
NextEra Energy Partners LP (NEP) 0.62%
Sixt (OTC:SXTSY) 0.60%
Pfizer Inc. (PFE) 0.56%
Momo Inc. (MOMO) 0.56%
Stag Industrial Inc. (STAG) 0.55%
Walt Disney Co. (DIS) 0.53%
General Mills, Inc. (GIS) 0.47%
Exxon Mobil Corporation (XOM) 0.45%
Pebblebrook Hotel Trust (PEB) 0.44%
Drillisch (OTC:OTC:DRHKF) 0.43%
Enterprise Products Partners L.P. (EPD) 0.41%
CoreSite Realty Corp. (COR) 0.41%
Bayer AG (OTCPK:OTCPK:BAYZF) 0.38%
Senior Housing Properties Trust (SNH) 0.38%
Citigroup Inc. (C) 0.36%
HUYA Inc - ADR (HUYA) 0.36%
Visa Inc Class A (V) 0.34%
Kinder Morgan Inc. (KMI) 0.33%
Starwood Property Trust, Inc. (STWD) 0.33%
Colgate-Palmolive Company (CL) 0.31%
Fresenius SE (OTCQX:OTCQX:FSNUF) 0.31%
Shell Midstream Partners LP (SHLX) 0.31%
Apollo Investment Group (OTC:AINV) 0.31%
Atlassian Corporation PLC (TEAM) 0.31%
Broadcom Inc. (AVGO) 0.28%
Omega Healthcare Investors Inc. (OHI) 0.28%
Activision Blizzard, Inc. (ATVI) 0.26%
IQIYI Inc. (IQ) 0.26%
JD.Com Inc. (JD) 0.26%
Walgreens Boots Alliance Inc. (WBA) 0.25%
Lanxess AG (OTCPK:LNXSF) 0.24%
Consolidated Edison, Inc. (ED) 0.24%
Uniti Group Inc. (UNIT) 0.23%
CVS Health Corp (CVS) 0.21%
BP plc (BP) 0.21%
Osram (OTCPK:OSAGF) 0.20%
Macquarie Infrastructure Corp. (MIC) 0.19%
Home Depot (HD) 0.19%
FedEx Corporation (FDX) 0.18%
CenturyLink Inc. (CTL) 0.17%
Facebook, Inc. Common Stock (FB) 0.16%
Fresenius Medical Care (FMS) 0.15%
Weibo Corp (WB) 0.13%
MediGene AG (OTCPK:MDGEF) 0.13%
Teekay Tankers Ltd. (TNK) 0.12%
EQT Corporation (EQT) 0.12%
Vonovia (OTCPK:VONOY) 0.12%
Apollo Commercial Real Est. Finance Inc. (ARI) 0.12%
Brookfield Renewable Partners (BEP) 0.12%
Brookfield Infrastructure Partners L.P. (BIP) 0.12%
Qualcomm (QCOM) 0.10%
DHT Holdings Inc. (DHT) 0.09%
TAKE-TWO INTERACTIVE SOFTWARE, INC Common Stock (TTWO) 0.09%
Incyte Corporation (INCY) 0.08%
Alteryx (AYX) 0.08%
General Electric Company (GE) 0.07%
Applied Optoelectronics Inc. (AAOI) 0.06%
Hi-Crush Partners LP (HCLP) 0.04%

Disclosure: I am/we are long ALL STOCKS MENTIONED. 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.