Road To Financial Independence: 107 Stocks April Update

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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, HCLP, 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 $202 in April, down 11% Y/Y and down 1% sequentially.

The weak Y/Y performance is caused by a shift in dividend payments and a dividend cut.

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.

It's been a rather mediocre month for my income generation in April. Dividend income just barely topped the $200-mark as the overall portfolio rallied to new highs despite some heavy earnings-related blows on my top holdings. Going forward, I will try to better balance my dividend income and see if I can find some stocks at attractive valuations paying in January, April, July and October.

The earnings season was in full swing with most of my holdings reporting. The American banks spearheaded by JPMorgan Chase (JPM) and Bank of America (NYSE:BAC) posted very healthy earnings and semi-conductors and chips like Advanced Micro Devices (AMD) and Texas Instruments (TXN) also rallied strongly. Honeywell (HON) was doing oh so well and stormed to new highs. On the downside, portfolio heavyweights Altria (MO) and AT&T (T) disappointed the markets and gave up a significant share of their YTD returns.

Cartoon of the Day: Earnings Season - beating expectations cartoon 11.01.2016

Source: Hedgeye - all image courtesy remains

However, all of that does not really matter as my goal is not to sell these stocks but to generate income. In order to save cash for a possible correction as well as for some real estate endeavors here in Germany, net invested capital during the month was very low. Given that I have found affordable and promising real estate I will have to sell out some holdings in May and potentially have to trim others in order to raise equity for the loan.

Portfolio Changes | 12 repurchases, 1 trim, 2 sales

I deployed net capital of $536 in April which I entirely channeled into existing holdings. Faced with the task to raise some capital I sold my small positions in FedEx (FDX) and Citigroup (C) as both are no core positions and also did not generate a lot of income. I still like both stocks and would like to buy them back in the future but right now capital is very limited and reserved for the savings plan and "firesale" deals.

Cisco Systems (CSCO) is one of my largest positions and following the impressive rally in 2019 which has catapulted the stock from $43 to $57, I took some profits at $56 and hope to be able to buy back these and more shares later at a better price. Given that the P/E ratio has expanded to 17 and the dividend yield dropped to 2.5%, I will closely await the upcoming earnings report which could lead to some profit-taking.

On the purchase side I added to Kinder Morgan (KMI) following the company's impressive 25% dividend hike which resulted in a YoC of over 5%. Continued weakness in the stock prices of Canadian banks triggered a purchase of Bank of Nova Scotia (BNS). On top of that I added to my Wirecard (OTCPK:WRCDF) position and my already large position in Royal Dutch Shell (RDS.B).

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 April can be seen below:

Dividend Income: What happened on the dividend side?

Dividend income for the month did not set any records as it was down 11% Y/Y and down 1% sequentially. My income from 22 corporations amounted to $202.

The major reason for the Y/Y decline is a shift in the annual dividend payment from Daimler (OTCPK:DDAIF). In 2018, I received a net dividend of around $66 from Daimler in April whereas this year the dividend will be paid in May and has been reduced by 11% following a difficult past year and road ahead for the German car maker. Excluding this special effect, dividend income increased 20% Y/Y.

Sequentially, the 90% dividend cut from Uniti Group (UNIT) is affecting the result but mostly offset by a special distribution from Momo (MOMO). Shift in dividend payment schedule from Coca-Cola (KO) and Pepsi (PEP) explains the remaining delta.

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, JPM's 43% dividend growth clearly stands out and is followed by double-digit dividend growth from other core holdings, such as Altria and Toronto-Dominion Bank (TD). The unexpected 92% dividend cut looks alarming but given the relatively small position it only reduced income by less than $10. The company has a difficult path forward but I will stick with it.

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 277 hours, or 34.6 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 almost seven full weeks, or more than an entire month, of vacation funded via dividends.
  2. YTD (green bars) - Around 43.5 hours, or 5.4 days, of active work have been replaced with passive income in 2019 already.

Upcoming May 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 May.

My portfolio composition

At end of April, my portfolio is composed as follows:

Company Name Ticker Portfolio Weight
Apple Inc. AAPL 6.29%
Cisco Systems, Inc. CSCO 4.48%
AT&T Inc. T 4.34%
Visa V 4.24%
McDonald's Corp. MCD 3.89%
Siemens Healthineers (OTC:SEMHF) 3.13%
Royal Dutch Shell RDS.B 2.98%
Altria Group Inc. MO 2.53%
Johnson & Johnson JNJ 2.43%
Commonwealth Bank of Australia CBAUF 2.42%
Micron Technology, Inc. (MU) 2.34%
Southern Co. (SO) 2.19%
AbbVie Inc. (ABBV) 2.16%
Gilead Sciences, Inc. (GILD) 2.13%
Main Street Capital Corporation (MAIN) 2.05%
Microsoft Corporation (MSFT) 1.90%
Baozun Inc. (BZUN) 1.84%
Wells Fargo & Co. WFC 1.82%
3M Co. (MMM) 1.43%
Texas Instruments Incorporated TXN 1.41%
Daimler DDAIF 1.41%
Philip Morris International Inc. (PM) 1.28%
PepsiCo, Inc. PEP 1.28%
Toronto-Dominion Bank (TD) 1.27%
Wirecard AG WRCDF 1.22%
Bank of Nova Scotia BNS 1.22%
Honeywell International Inc. HON 1.19%
Bank of America Corp. BAC 1.18%
Procter & Gamble Co. (PG) 1.17%
Verizon Communications Inc. (VZ) 1.06%
Dominion Energy Inc. (D) 1.05%
Unilever NV ADR (UN) 1.03%
Canadian Imperial Bank of Commerce (CM) 1.01%
Alibaba Group Holding Ltd (BABA) 1.00%
BP (BP) 0.98%
B&G Foods, Inc. (BGS) 0.97%
Morgan Stanley (MS) 0.95%
Bayerische Motoren Werke AG Preference Shares (OTCPK:BMWYY) 0.94%
Intel Corporation (INTC) 0.89%
The Coca-Cola Co. KO 0.83%
Target Corporation (TGT) 0.78%
Advanced Micro Devices, Inc. AMD 0.77%
QTS Realty Trust Inc Class A (QTS) 0.77%
Ares Capital Corporation (ARCC) 0.76%
Allianz SE (OTCPK:AZSEY) 0.74%
BASF (OTCQX:BASFY) 0.70%
JPMorgan Chase & Co. JPM 0.70%
Blackstone Group LP (BX) 0.69%
Royal Bank of Canada (RY) 0.68%
General Motors Company (GM) 0.66%
Tableau Software Inc. Class A (DATA) 0.65%
NVIDIA Corporation (NVDA) 0.63%
Sixt (OTC:SXTSY) 0.59%
Walt Disney Co. (DIS) 0.57%
NextEera Energy Partners LP (NEP) 0.55%
Stag Industrial Inc. (STAG) 0.51%
Pfizer Inc. (PFE) 0.50%
Momo Inc. MOMO 0.47%
General Mills, Inc. (GIS) 0.44%
Pebblebrook Hotel Trust (PEB) 0.43%
Kinder Morgan Inc. KMI 0.42%
Exxon Mobil Corporation (XOM) 0.39%
CoreSite Realty Corp. (COR) 0.39%
Drillisch (OTC:DRHKF) 0.38%
Enterprise Products Partners L.P. (EPD) 0.37%
Bayer AG (OTCPK:BAYZF) 0.36%
Starwood Property Trust, Inc. (STWD) 0.32%
Senior Housing Properties Trust (SNH) 0.31%
Colgate-Palmolive Company (CL) 0.31%
HUYA Inc. - ADR (HUYA) 0.31%
Apollo Investment Group (OTC:AINV) 0.30%
Fresenius SE (OTCQX:FSNUF) 0.29%
Atlassian Corporation PLC (TEAM) 0.28%
Shell Midstream Partners LP (SHLX) 0.28%
Broadcom Inc. (AVGO) 0.27%
Omega Healthcare Investors Inc. (OHI) 0.24%
Activision Blizzard, Inc. (ATVI) 0.24%
iQIYI Inc. (IQ) 0.24%
JD.Com Inc. (JD) 0.23%
Walgreens Boots Alliance Inc. (WBA) 0.23%
Consolidated Edison, Inc. (ED) 0.22%
Lanxess AG (OTCPK:LNXSF) 0.22%
CVS Health Corp. (CVS) 0.19%
Uniti Group Inc. UNIT 0.19%
Macquarie Infrastructure Corp. (MIC) 0.18%
Osram (OTCPK:OSAGF) 0.17%
Home Depot (HD) 0.17%
Facebook, Inc. Common Stock (FB) 0.17%
Qualcomm (QCOM) 0.15%
CenturyLink Inc. (CTL) 0.15%
Fresenius Medial Care (FMS) 0.15%
Teekay Tankers Ltd. (TNK) 0.14%
MediGene AG (OTCPK:MDGEF) 0.12%
Weibo Corp. (WB) 0.12%
Apollo Commercial Real Est. Finance Inc. (ARI) 0.11%
DHT Holdings Inc. (DHT) 0.11%
Brookfield Infrastructure Partners L.P. (BIP) 0.11%
Brookfield Renewable Partners (BEP) 0.11%
Vonovia (OTCPK:VONOY) 0.11%
EQT Corporation (EQT) 0.10%
TAKE-TWO INTERACTIVE SOFTWARE, INC Common Stock (TTWO) 0.09%
Alteryx (AYX) 0.08%
General Electric Company (GE) 0.07%
Incyte Corporation (INCY) 0.07%
Applied Optoelectronics Inc. (AAOI) 0.05%
Hi-Crush Partners LP (HCLP) 0.03%

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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.

Additional disclosure: I am not offering financial advice but only my personal opinion. Investors may take further aspects and their own due diligence into consideration before making a decision. I am long all stocks mentioned in the portfolio composition table.