Sand In My Shoes - May Update

Includes: HRL, MMM, XOM
by: Brian Soule

Total portfolio value for the month of May dropped about 4.5% as the markets struggled with trade war concerns.

On the flip side, May was also a record month for dividends for my portfolio, over $350 total for the month.

I added shares to one of my positions and had two dividend increases reported during the month, adding to my future retirement income.

The month of May, to put it mildly, was not kind to the markets. As the trade war dragged on the S&P 500 dropped 6.58%. On the bright side, YTD the same index is up almost 10% and none of my stocks have stopped paying dividends. In fact I got every penny I expected except I miscalculated when I purchased my most recent shares of Hormel Foods Corp (HRL) and just missed the June dividend on the additional 30 shares I picked up in April. C'est la vie.

Well, the month of May was still a record month for the Sand in Shoes portfolio, gathering $363.97 in dividends.

May Dividends

All graphs and charts created by author unless otherwise specified

The record month is easy to see in the chart below. I'm getting very close to having a $400 month.

Image Credit

May Performance

And there it is, a bit of a rough month. I am only down 4.6% thanks to me being overweight in utilities and REITs as well as having about 35-36% of my portfolio in fixed income investments. But while the fixed income portion of my portfolio has somewhat shielded my retirement savings from a difficult month it is also up only 7.7% vs. the S&P 500 which is up 9.8% year to date.

Of course, that is what the fixed income portion of my retirement savings is for. It "smooths the ride out" a little bit. Keeps the month to month chart a little bit flatter. Not to mention getting in excess of $400 per month from my fixed income investments (and growing as we will later see) is not a terrible thing. That will be spending money in 15-20 years, not just ballast for my stock portfolio.

Speaking of my stock portfolio, here is where it stands as of May 31, 2019:

Individual Stocks

The portfolio yield currently stands at 3.74%. Literally every stock except for my two REITs and two of my three utilities was down. Nearly a third of my stocks were down double digit percentages. PepsiCo Inc (PEP) was down merely a nickel, but it was still down.

Projected Dividends

As I mentioned, all of the stocks that I expected to pay me a dividend did. None of them suspended the dividend simply because China is not playing nice and the market was down. I don't expect they will stop in the future either so I am going to continue to project the dividends for the remainder of the year.

Total projected dividends for the year now stands at $3,293.46. While my best month is approaching $400, my lowest month going forward looks like it will still be over $150.

Sector Diversification

Consumer Discretionary 7.3%
Consumer Staples 9.4%
Energy 7.2%
Financials 9.7%
Health Care 10.1%
Industrials 9.4%
Materials 13.2%
REIT 10.4%
Technology 8.1%
Telecom 6.8%
Utilities 8.4%

After the discussion following last month's article I am starting to rethink the percentages I am trying to maintain per sector but I have not come to any kind of conclusions yet. For now, I am content with the diversification as it is right now. I will try to come to some kind of resolution by next month but no promises. I'd be curious what others in a similar situation to mine do as far as sector weightings.

Asset Allocation of the Portfolio

Well one "upside" of the equity markets being down is that it makes my asset allocation closer to target. Just last month my domestic fixed income investment as a percentage of my overall portfolio was 26.1%. This month it is 27.1%.

Sales and Purchases in May

On May 6th I purchased $465 of a fixed income ETF. Slightly more than what I received in fixed income distributions. This is part of my continuing effort to slowly bring my fixed income percentages back up to my target over time.

3M Co (MMM), which as you may know is one of my favorite stocks, was in a free fall for much of the month of May. I purchased 11 more shares of the stock on May 23 when my limit order for $165 was filled.

I was able to set up a limit order because several days before that I sold off $1,440 of my S&P 500 index fund in the hopes of buying either MMM or another stock that had been pummeled due to the trade wars. Exxon Mobil Corp (XOM) was on my short list as was Apple Inc (AAPL). But 3M was what I ended up purchasing.

Forward Looking Dividends

Unfortunately, purchasing $450 or so of fixed income investments per month has put a bit of a damper on the amount of money I'm adding each month to my dividends going forward. I had a streak of five months in a row where I added $100+ annually to my future retirement stream. This past month marks the third in a row where I did not.

Nevertheless, I did manage to add over $56 to my future annual retirement income, mostly with the purchase of the 3M stock.

There were two dividend increases to report and the most important thing is the line on the chart below is on an ever-upward trend. As you can see in the bit I added this month, my dividends projected for the next twelve months is now over $3,400. I might remind you if you are not a regular reader that my goal is $10,000 in a single 12 month period.

Final Thoughts

So while May was a rough month for the markets and my portfolio to a slightly lesser extent, the overall plan of collecting high quality dividend stocks does still seem to be a good one. I fully believe that dividend growth investing is the single best path to long term financial independence there is.

The month of June is shaping up to be a pretty good one, and if anything happens positively in our trade disputes I expect the markets will shoot up instantly. However, while there are several stocks trading at attractive prices I will be looking for an entry point in one of them for my June position.

I will also be looking to add over $450 to one of my fixed income funds this month in an effort to slowly increase my fixed income exposure.

I hope you all have enjoyed this update as much as I enjoy tracking all of these things and writing these. Best of luck to you and yours as you continue to track towards your goals.

Disclosure: I am/we are long AAPL, HRL, MMM, PEP, XOM. 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.