Updating the international dividend investor's portfolio
As a value-oriented dividend investor, I believe that investing in a diversified portfolio of dividend stocks and related shares/securities is a better option in the long term than investing in index funds or ETFs. In addition to receiving growth in stock/portfolio value, I also receive annual, quarterly and monthly dividend payments.
In adopting a Dividend Investor's mindset, I've stopped caring about short-term stock movements, and in so doing, I avoid the principle of loss aversion. I recognize that my own and all human emotion is the biggest danger to long-time market success and achieving my investment goals.
I consider my investment portfolio a functioning business, and the business's goal is simple - to ensure my financial independence. I'll do this through any means at my disposal.
This month, there are some more "macro" news in my investment strategy going forward. Nothing that will influence my overall investment mentality - just how I execute the strategy as a whole and split up my capital.
I'm a young (33/34-year-old) Swedish dividend investor who holds a large variety of international shares and various types of stocks. I reached financial independence in 2018, when my average monthly dividends for the first time exceeded my average monthly costs + savings goal.
I work independently and run my own limited company. These days, I work as a consultant and take contracts at leisure and as I like. Living in Sweden means that my economic requirements may be (very likely are) different from what someone in the US would require to comfortably retire. Due to a government-financed healthcare system and extensive state minimum pensions, many of the concerns and considerations investors in other nations may have don't apply to me.
I believe if I were an American dividend investor, I would still be working for a few more years and saving up more money (although I would also have access to a number of appealing options that are currently closed off to me, such as investment in T-Bills).
April 2019 News update
Contributing to Seeking Alpha is better than I could have imagined. The experiences, interaction and opportunity to write about companies and talk to/write with readers is extremely rewarding. I'm learning a lot, and I'm also given the opportunity to teach others. It is, quite simply, even more rewarding than my day job.
So rewarding, in fact, that I've considered taking the site up on an offer to start a premium service catering to investors interested in EU stock investments and trading - a more in-depth look at some of the companies that I review here, and offering more opportunity to real-time interaction and chat with interested readers.
This idea is still in its formative stage, however, and we'll see how things develop. What I do know is that there are a lot of interesting European companies available for American investors. Whether it's trading, long-term holding or other things that you may be interested in, I do believe that Europe offers something for you - and I do believe my expertise here allows me some possibility to offer an edge to some of you. Whether you're looking to swing-trade European stocks, long-term B&H, I believe my insights here could prove valuable to a certain demographic.
So, if you're at all interested in this sort of thing, keep your eyes open and look at my profile now and again to see how far I've come in the idea. I plan to write a blog post in the future to lay out my strategy and take comments/suggestions from you as to how to do this in the most interesting way.
Corporate investments - not private
In other news, I'm more or less going to stop investing privately in stocks. Instead, I'll invest using my limited company account using the proceeds from my consulting work, while using the monthly income from my dividends to simply pay the bills. The practical effects for readers/observers of this are non-existent.
My reasoning for this is the potential upcoming tax levied on Swedish citizens with a certain degree of wealth (a sort of Robin Hood tax). I believe this tax will be coming in the next few years. Because my portfolio is already above a certain value and will continue to grow on its own due to the simple fact of compound interest, it's better, from a tax perspective, for me to instead expand my company stock portfolio, which will not be subject to the same tax and will not be listed as belonging to "me" as a private individual, but to my company, which of course constitutes its own legal individual/organization. And given that I'm the single shareholder at 100% ownership...
I can use company stock dividends to pay a limited company dividend (from my company to me), at a reduced tax rate each year compared to taking a salary, should I desire to do so. Moreover, I can invest in things I need for my investment/writing work (electronics, traveling, etc.), as well as other things through the company. Given that I'm also self-sufficient simply through dividends now, I also no longer need to lift a salary from my business, freeing up even more capital.
The companies I invest in will not change - in fact, nothing will change. I'll just buy my stocks using my company instead! It's a bit absurd to have to go to such lengths, but when in Rome... (or in this case, when in social democratic welfare Scandinavia), it certainly pays to be well-prepared.
I've been purchasing a mixture of companies which I will review in the next section. I've also received a huge portion of my annual dividends - almost 40% - in a singular month, and I've put much of that money to work already (while also keeping a sizeable cash position around for emergencies still, though I'm looking to lower this). My REIT/mREIT/preferreds/income fund positions have increased to encompass about 4-5% of total portfolio value at this point, which I see as decent progress given the short time frame.
May still holds a sizeable chunk of my dividends - about 15% of annual - so more money will be coming in from the private account. During the summer months, it'll be a bit of a dividend lull, which hopefully will allow me to focus on building up the company portfolio somewhat more.
Reviewing April 2019 dividends and income
Dividends during the month of April 2019 came in from the following companies in my private portfolio:
- TransAlta Renewables Inc. (OTC:TRSWF)
- Boston Pizza Royalties Income Fund (OTC:BPZZF)
- Inter Pipeline Ltd. (OTCPK:IPPLF)
- Exchange Income Corporation (OTCPK:EIFZF)
- Pizza Pizza Royalty Corp. (OTC:PZRIF)
- American Hotel Income Properties REIT (OTC:AHOTF)
- NorthWest Healthcare Properties Real Estate Investment Trust (OTC:NWHUF)
- Freehold Royalties Ltd (OTCPK:FRHLF)
- FedEx (FDX)
- Fortum (OTCPK:FOJCF)
- Philip Morris International (PM)
- Leggett & Platt (LEG)
- Packaging Corporation of America (PKG)
- Thor Corporation (THO)
- Bank OZK (OZK)
- Scotiabank (BNS)
- Henkel (OTCPK:HENKY)
- Sampo (OTCPK:SAXPF)
- Svenska Handelsbanken (OTCPK:SVNLF)
- Beijer Alma (No symbol)
- Skanska (OTCPK:SKSBF)
- Swedbank (OTCPK:SWDBF)
- Tieto (OTC:TCYBF)
- NCC (OTC:NCCGF)
- Telia Company (OTCPK:TLSNF)
- ICA-Gruppen (OTC:ICCGF)
The total amount of dividends paid out from my private portfolio this month was $10052.35. As with other months, this cash is moved to my savings account.
The current average monthly dividend income from my private portfolio, based on the calculation of annual dividends/12, is $2076.32. The increase from the past month is thanks in no small part to some investments made during this month. At this point, however, and due to the aforementioned plan of allocating capital to my company account instead of my private account, the private account dividends will likely grow much slower going forward.
Dividends during the month of April 2019 came in from the following companies in my corporate portfolio:
- NorthWest Healthcare Properties Real Estate Investment Trust
- Pizza Pizza Royalty Corp. (OTC:PZRIF)
- Scotiabank (BNS)
The total amount of dividends paid out from my corporate portfolio this month is $153. This cash will be reinvested.
The current average monthly dividend income from my private portfolio, based on the calculation of annual dividends/12, is $ 45.20. The current dividend from my corporate account is rather paltry (in comparison), of course. However, given my future goal of dumping excess/incoming capital into this account and hopefully using some undervaluation to purchase stock, it's my goal that the average monthly dividend of my corporate account for the year 2019 rises to about $250/month.
The positive of a corporate investment account in Sweden is that this cash can then be used to pay down running expenses in my company (which are minuscule, below $120/month) and start collecting more money for a juicy company dividend. Or perhaps simply to invest in other things through the company, as I mentioned before!
Transactions during April 2019
I only purchase stocks I consider fairly valued or undervalued. I don't mind sitting with some cash on hand, as my goal of financial independence from dividend stocks is reached, and I am in no position where I feel I "have" to invest in anything or keep any certain amount of money in or outside of the market.
This month, the following transactions were made in my private investment account (ISK/KF):
- Purchased stock/increased exposure to Cummins Inc. (CMI). This purchase was in response to the opportunity I wrote about in my article, "Cummins: Dividends From Diesel."
- Purchased stock/increased exposure to Archer-Daniels-Midland (ADM). This purchase was in response to the opportunity I wrote about in my article, "Archer-Daniels-Midland: People Gotta Eat."
- Purchased stock/increased exposure to American Hotel Income Properties REIT. This purchase was in response to several articles as well as research into the stock.
- Purchased stock/increased exposure to Freehold Royalties Ltd. This purchase was in response to several articles, mostly this excellent article by Trapping Value.
This month, the following transactions were made in my corporate investment account (NYSE:KF).
- Purchased stock/increased exposure to LyondellBasell Industries (LYB). This purchase was in response to the opportunity I wrote about in my article, "Time To Buy LyondellBasell."
- Purchased stock/increased exposure to FedEx. This purchase was in response to the opportunity I wrote about in my article, "FedEx: Accept Dividend Delivery."
- Purchased stock/increased exposure to Cardinal Health (CAH). This purchase was in response to the opportunity I wrote about in my article, "FedEx: Accept Dividend Delivery."
- Purchased stock/increased exposure to American Hotel Income Properties REIT. This purchase was in response to several articles, as well as research into the stock.
My portfolio composition will, of course, change going forward, especially now that I will invest much less privately and instead focus upon my corporate account. I need to find a good way to present the information and portfolio composition I hold. I also need to consider how to implement this in an interesting way in relation to a potential future premium service.
I haven't fully decided on how to do all of these things yet. What I do want to do, due to responses from readers and other investors, is continue to report my purchases, my income and my strategy considerations. Going forward, my full portfolio composition may be part of the premium service, or I may publish a portion here as well.
Macro-wise/market-wise, I'm in a bit of a holding pattern as of right now. Everything seems either a bit overvalued, or my exposure to the undervalued holding/company is at a level where I feel I don't want any further allocation. This sort of period is, of course, pleasant in its own way. It gives time to plan things, as opposed to "having to" react to undervaluation opportunities and other stimulating happenstances. I can't wait for things to become more volatile and for a market downturn to occur, however.
Whether this happens this week, this month or this year is, of course, still subject to speculation. The Q1 earnings are in, and several of these warrant articles written for them, including many Swedish companies. As of now, it doesn't seem that any sector in Sweden is taking enough punishment for me to look into investing in it (except banks - but again, my exposure to banks is at its limit), which makes it more fun to look at companies in countries like Germany, France and central Europe.
Focus for the month of May 2019 will be on further developing the idea of an EU-oriented service, as well as continue to write interesting articles to keep you, my readers, up to date both on company development as well as potential undervaluation opportunities.
I hope this article provided a bit of insight into how I invest and how I think. I'm hoping that this monthly review can give you some ideas, some advice and perhaps spark some interest or questions for me. Please message me with any inquiries you may have.
Hope to see you around!
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.