The Retiree's Dividend Portfolio - John's September Update: Dividend Recovery
Summary
- John's retirement accounts generated a total of $2,158.34 of dividend income for September 2021 vs. $2,040.30 of dividend income for September 2020.
- John's Traditional IRA had a balance of $327,126.55 as of September 30, 2021, vs. $239,214.15 on September 30, 2020. The estimated annualized yield is 4.42%.
- John's Roth IRA had a balance of $203,676.87 as of September 30, 2021, vs. $143,603.46 on September 30, 2020. The estimated annualized yield is 3.71%.
- Three companies paid an increased dividend or issued a special dividend during the month of September.
- I have included tables for tracking month-end cash balance and unrealized gain/loss for both the Traditional and Roth IRAs.
Olivier Le Moal/iStock via Getty Images
Background
For those who are interested in John and Jane's full background please click the following link here for the last time I published their full story. Here are the key details about John and Jane that readers should understand.
- This is a real portfolio with actual shares being traded.
- I am not a financial advisor and merely provide guidance based on a relationship that goes back several years.
- John retired in January 2018 and is only collecting Social Security income at this point in time.
- Jane has officially decided to retire on December 31, 2020. She is now collecting social security as her primary source of income.
- John and Jane have other investments outside of what I manage. These investments primarily consist of minimal risk and minimal yield certificates.
- John and Jane have no debt and no monthly payments other than basic recurring bills such as water, power, property taxes, etc.
John and Jane requested my help after we discovered that their financial advisor was charging excessive fees and engaging in trades that appeared to be more favorable to the advisor than it was to John and Jane. I do not charge John and Jane for anything that I do and all I have asked of them is that they allow me to write about their portfolio anonymously in order to help spread knowledge and to make me a better investor in the process.
Generating a stable and growing dividend income is the primary focus of this portfolio and capital appreciation is a secondary characteristic.
Dividend Decreases
No stocks cut their dividend/distribution that was payable during the month of September.
Dividend and Distribution Increases
Three companies increased its dividend/distribution or paid a special dividend during the month of September in the Traditional and Roth IRAs.
We covered BP in the Taxable Account article (linked at the end of this article). I will include the summary of their dividend increases.
British Petroleum - The dividend was increased from $0.3150/share per quarter to $0.3276/share per quarter. This represents an increase of 4% and a new full-year payout of $1.31/share compared with the previous $1.26/share. This results in a current yield of 4.55% based on a share price of $28.79.
Duke Energy - DUK is one of the most steady holdings in John's portfolio and remains a favorite utility among dividend investors. The most recent increase is very much in-line with prior dividend increases and even though it might be small, investors can rely on DUK for its consistency. DUK is currently valued at the high-end of what I typically look for and would not add shares unless the share price was to drop substantially. Looking at the 10-year dividend yield we can see that the yield is at the low-end of the spectrum and I would want to see a 4.5%+ yield before adding more shares which suggests a price around $87.50/share.
Source: SeekingAlpha - Duke Energy
The dividend was increased from $0.965/share per quarter to $0.985/share per quarter. This represents an increase of 2.1% and a new full-year payout of $3.94/share compared with the previous $3.86/share. This results in a current yield of 3.86% based on a share price of $102.01.
Truist Financial - Q3-2021 was a great quarter for TFC which is the result of a massive merger between BB&T and SunTrust. The merger has generated results better than initially expected because there is almost always issues that come from these events, especially when it includes two large banks that now represents the 6th largest bank in the United States. Many banks that acted conservatively during the COVID crisis are now seeing large benefits from reduced credit losses which is resulting in one-time gains. TFC is starting to look a little richly valued for my taste and I would recommend only purchasing shares when it yields more than 3.50% which would suggest a share price of $55/share.
The dividend was increased from $0.45/share per quarter to $0.48/share per quarter. This represents an increase of 6.7% and a new full-year payout of $1.92/share compared with the previous $1.80/share. This results in a current yield of 3.02% based on a share price of $63.47.
Retirement Account Positions
There are currently 34 different positions in John's Traditional IRA and 22 different positions in his Roth IRA. While this may seem like a lot, it is important to remember that many of these stocks cross over in both accounts and are also held in the Taxable Portfolio.
Below is a list of the trades that took place in the Traditional IRA during the month of September.
Source: Charles Schwab
We sold the high-cost portion of John's PacWest Bancorp (PACW) position which lowered the cost basis of the remaining position to under $40/share. The image below represents the realized gain-loss of this transaction.
Source: Charles Schwab
Below is a list of the trades that took place in the Roth IRA during the month of September.
Source: Charles Schwab
September Income Tracker - 2020 Vs. 2021
Income for the month of September was flat for John's Traditional and up significantly in the Roth IRA. The key driver for the increase in Roth IRA income was the reinstatement of the dividend for EPR Properties (EPR) and the addition of Pinnacle West (PNW) and Southwest Gas Holdings (SWX) which all delivered dividends during the month of September. The average monthly income for the Traditional IRA is expected to be $1,068.93/month (2.0% higher than the 2020 average) and the Roth IRA coming in at $569.60/month (-1.6% lower than the 2020 average) based on current projections. The Roth IRA has made a strong comeback because it was at one point running behind over 10% year-over-year.
SNLH = Stocks No Longer Held - Dividends in this row represent the dividends collected on stocks that are no longer held in that portfolio. We still count the dividend income that comes from stocks no longer held in the portfolio even though it is non-recurring. All images below come from Consistent Dividend Investor, LLC.
Source: Consistent Dividend Investor
Here is a graphical illustration of the dividends received on a monthly basis for the Traditional and Roth IRAs.
Based on the current knowledge I have regarding dividend payments and share count, the following tables are a basic prediction of the income we expect the Traditional IRA and Roth IRA to generate in FY-2021 compared with the actual results from 2020.
Below is an expanded table that shows the full dividend history since inception for both the Traditional IRA and Roth IRA.
I have included line graphs that better represent the trends associated with John's monthly dividend income generated by his retirement accounts. The images below represent the Traditional IRA and Roth IRA, respectively.
Here is a table to show how the account balances stack up year over year (I previously used a graph but believe the table is more informative).
The next images are the new tables that indicate how much cash John had in his Traditional and Roth IRA Account at the end of the month as indicated on his Charles Schwab statements.
The next two tables provide a history of the unrealized gain/loss at the end of each month in the Traditional and Roth IRAs going back to the beginning in January of 2018.
I like to show readers the actual unrealized gain/loss associated with each position in the portfolio because it is important to consider that in order to become a proper dividend investor, it is necessary to learn how to live with volatility. The market value and cost basis below are accurate as of the market close on October 29th. If you compare the images below with the Unrealized Gain/Loss images, you can see that John's unrealized losses have been minimized going into the end of February and is now sitting on decent capital gains in both the Traditional and Roth IRAs.
Here is the unrealized gain/loss associated with John's Traditional and Roth IRAs.
Source: Consistent Dividend Investor
The last two graphs show how dividend income has increased, stayed the same, or decreased in each respective month on an annualized basis. I believe that the graph will continue to become more valuable as more years of data become available.
Conclusion
As you can see from the gain-loss tables that were updated on October 29th we have seen complete recovery in the value of John's accounts from the lows that occurred at the end of September. The Traditional IRA is up considerably and was moved by improved energy prices and talks of interest rate increases that moved financial stocks higher. The balance of $346K in the Traditional IRA is an all-time high for his account.
While we are happy about this price improvement the sentiment remains the same as the last article that we are happy to see the dividend payouts continue to normalize more than a year and a half after COVID tanked the market and impacted a number of industries.
September Articles
I have included the links for John and Jane's Taxable Account and Jane's Retirement Account articles for the month of September below.
The Retirees' Dividend Portfolio: John And Jane's September Taxable Account Update
Article Format: Let me know what you think about the format (what you like or dislike) by commenting, liking, following, etc. I appreciate all forms of criticism and would love to hear what I can do to make the articles more useful for you!
In John's Traditional and Roth IRAs, he is currently long the following mentioned in this article: Aflac (AFL), Apple Hospitality REIT (APLE), Avista (AVA), BP plc (BP), Brixmor Property Group (BRX), Canadian Utilities (OTCPK:CDUAF), Chatham Lodging Trust (CLDT), CVS Health Corporation (CVS), Chevron (CVX), CyrusOne (CONE), Dominion Energy (D), Digital Realty Preferred Series J (DLR.PJ), Duke Energy (DUK), Eaton Vance Floating-Rate Advantage Fund (EAFAX), EPR Properties (EPR), EPR Properties Preferred Series G (EPR.PG), General Dynamics (GD), Healthcare Trust of America (HTA), Iron Mountain (IRM), Kinder Morgan (KMI), Kite Realty Group (KRG), Lowe's (LOW), Main Street Capital (MAIN), Masco (MAS), Altria (MO), New Residential Investment Corp. Preferred Series B (NRZ.PB), Realty Income (O), Occidental Petroleum Corp. (OXY), Bank OZK (OZK), PacWest Bancorp (PACW), PepsiCo (PEP), iShares Preferred and Income Securities ETF (PFF), VanEck Vectors Preferred Securities ex Financials ETF (PFXF), Pinnacle West (PNW), PIMCO Income Fund Class A (PONAX), Regions Financial (RF), RPT Realty Preferred Series D (RPT.PD), STAG Industrial (STAG), Southwest Gas (SWX), AT&T (T), Toronto-Dominion Bank (TD), Truist Financial (TFC), T. Rowe Price (TROW), Cohen & Steers Infrastructure Fund (UTF), VICI Properties (VICI), Valero (VLO), Umpqua Holdings (UMPQ), Ventas (VTR), Walgreens (WBA), WestRock (WRK), and W. P. Carey (WPC).
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of APLE, CONE, EPR, GD, KMI, MAIN, O, OZK, T, UMPQ, VLO, WRK either through stock ownership, options, or other derivatives. 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.
This article reflects my own personal views and I am not giving any specific or general advice. All advice that is given is done so without prejudice and it is highly recommended that you do your own research. This article was written on my own and does not reflect the views or opinions of my employer.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
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Comments (4)
Any stock you would want to sell?
