The Retiree's Dividend Portfolio - John's March Update: Several Double-Digit Dividend Increases Steal The Spotlight

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Matthew Utesch
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Summary

  • John's retirement accounts generated a total of $2,457.27 of dividend income for March 2022 vs. $2,012.73 of dividend income for March 2021.
  • John's Traditional IRA had a balance of $372.5K as of March 31, 2022, vs. $302.2K on March 31, 2021. The estimated annualized yield is 4.87%.
  • John's Roth IRA had a balance of $227.2K as of March 31, 2022, vs. $196.5K on March 31, 2021. The estimated annualized yield is 4.24%.
  • John (like his wife Jane) had eight companies announce increases or pay a special dividend. Seven companies are unique to John's portfolio exclusively.
  • Apple Hospitality, Aflac, and Masco deliver huge dividend increases that are worthy of your attention.

Portrait of a man with an exploding mind

photoschmidt/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 his only consistent source of income is Social Security.
  • John has begun drawing $1,000/month from his Traditional IRA to supplement his retirement income.
  • Jane 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 March.

Dividend And Distribution Increases

Eight companies increased their dividend/distribution or paid a special dividend during the month of March in the Traditional and Roth IRAs.

We have already covered MAIN in Jane's Retirement Account article (see link at the end of the article) so I will not write another summary but will still include a brief summary of the dividend change.

Aflac - 39 years of growing dividends along with a 5-year growth rate of 10.6% is a pretty amazing track record to maintain. Now factor in a payout ratio of 22% and it's no wonder that AFL has been an incredible dividend investment. The stock is currently in a buy range with the dividend yield coming in at 2.52% (2.50% is a strong entry point and a "must-buy" if the yield reaches 3%). Since the start of 2021, the stock price has increased by 42.5% but still manages to carry a strong dividend yield based on historical metrics which should tell investors that AFL is an excellent dividend and capital appreciation investment. It's not very often that I include two charts but I think AFL's performance deserves it!

Chart
Data by YCharts
Chart
Data by YCharts

The dividend was increased from $.33/share per quarter to $.40/share per quarter. This represents an increase of 21.2% and a new full-year payout of $1.60/share compared with the previous $1.32/share. This results in a current yield of 2.52% based on the current share price of $63.37.

Apple Hospitality - APLE was hit extremely hard during the lockdown phase to the point where the dividend was temporarily eliminated and management took pay cuts to demonstrate they were willing to suffer along with shareholders. Since then they have re-started dividend payments quarterly but have moved back to a monthly dividend distribution which was a massive increase of $.01/quarter. Oppenheimer recently stated that they are bullish on the trends of travel and business. APLE's stock price is back to pre-pandemic highs so I don't see a ton of upside at the current price but would be willing to look at purchasing shares if the stock price were to sink below $15/share.

Apple Hospitality FastGraphs

Apple Hospitality FAST Graphs (FAST Graphs)

The dividend was increased from $.01/share per quarter to $.05/share per month. This represents an increase of 500% and a new full-year payout of $.60/share compared with the previous $.04/share. This results in a current yield of 3.28% based on the current share price of $18.28.

Canadian Utilities - The most recent dividend increase marks 50 years of dividend growth which makes CDUAF one of the most stable utilities available today. FY-2021 was a great success with strong revenue and income gains when compared with FY-2020. Interestingly enough, CDUAF has exposure to Puerto Rico (the major utility in Puerto Rico is going through bankruptcy but CDUAF's stability and business seem to be minimally impacted). On the earnings call, the CEO, Brian Shkrobot, emphasized that there are a number of green/clean initiatives that will be going live at the end of 2022 which means that CDUAF should see a higher return on investment in the latter part of 2022.

CDUAF - FastGraphs

Canadian Utilities - CDUAF - FastGraphs (FastGraphs)

The dividend was increased from $.4398C/share per quarter to $.4442/share per quarter. This represents an increase of 500% and a new full-year payout of $1.78/share compared with the previous $1.76share. This results in a current yield of 3.28% based on the current share price of $30.42 USD.

CSX - This is one of the more recent additions to John's portfolio as we wanted to develop more exposure to stocks involved in the transportation of bulk goods. Rail is still one of the most cost-effective ways to transport bulk goods across the United States. CSX carries a lower dividend yield but the company has a strong track record of double-digit dividend increases and maintaining a low-payout ratio (currently comes in at 23%). I would not recommend purchasing shares when they are trading at or over $35/share and would suggest the yield be no less than 1.15%. CSX has recently moved back into the buy range based on these metrics and FAST Graphs shows that shares are reasonably valued.

CSX - FastGraphs

CSX - FastGraphs (FastGraphs)

The dividend was increased from $.093/share per quarter to $.10/share per quarter. This represents an increase of 7.50% and a new full-year payout of $.40/share compared with the previous $.372/share. This results in a current yield of 1.16% based on the current share price of $34.48.

Chevron - CVX is one of the best-performing stocks in the portfolio over the last two months and comes as a direct result of the major increase in energy prices. We are now beginning to see share prices drop from 52-week-highs as concerns about the resurgence of lock-downs in China and a slowing world economy act as a counterbalance to the high oil and natural gas costs. Over the last five years, I would've recommended that CVX is a buy when the dividend yield runs 4.5% or higher. With a dividend yield of 3.48%, CVX is more than fully valued based on historical metrics, and investors may even find this to be a great time to take some of the chips off the table, especially if it means selling any high-cost shares.

Chart
Data by YCharts

The dividend was increased from $1.34/share per quarter to $1.42/share per quarter. This represents an increase of 6% and a new full-year payout of $5.68/share compared with the previous $5.36/share. This results in a current yield of 3.64% based on the current share price of $156.24.

Dominion Energy - D recently pushed to 52-week-highs along with the rest of the utility sector which has driven its dividend yield to 3.20% (FAST Graphs below is lagging when it comes to the dividend yield). Even if we go back 10 years there have been virtually zero instances where the dividend yield was less than 3%. D has had its fair share of struggles over the last few years (including the acquisition of SCANA Energy and the sale of units that resulted in dividend decreases). With these events in the past, D appears to be in the best position it has been in quite some time which is why the stock is fully-valued in the current market.

Chart
Data by YCharts

The dividend was increased from $.63/share per quarter to $.6675/share per quarter. This represents an increase of 6% and a new full-year payout of $2.67/share compared with the previous $2.52/share. This results in a current yield of 3.20% based on the current share price of $83.38.

Main Street Capital - MAIN paid a special dividend of .075/share in March 2022.

Masco - MAS reached 52-week-highs at the beginning of the year only to see its stock price plummet to 52-week-lows over the course of the next three months. MAS carries iconic brands like Behr, Kilz, and Delta which have benefitted from the home remodeling trends in a market where many people have decided to make improvements to their current property instead of selling and purchasing something else. On 4/27 MAS announced a strong earnings beat that was the result of higher sales volume and pricing but was also negatively impacted by higher commodity and freight costs. MAS repurchased $364 million of stock during the quarter and an additional $50 million in April. Management expects the total share repurchases will come close to $900 million FY-2022 (up from original estimates of $600 million) and represents roughly 7.3% of outstanding shares based on a share price of $54.90/share. MAS currently has a payout ratio under 27% and a five-year growth rate that comes in at a whopping 20.36%. Trends from the most recent call report suggest MAS is a buy and the FAST Graphs chart supports that as well.

Masco - FastGraphs

Masco - FAST Graphs (FAST Graphs)

The dividend was increased from $.23/share per quarter to $.28/share per quarter. This represents an increase of 19.1% and a new full-year payout of $1.12/share compared with the previous $.92/share. This results in a current yield of 2.04% based on the current share price of $54.90.

Retirement Account Positions

There are currently 39 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 March.

Traditional IRA - March Trades

Traditional IRA - March Trades (CDI)

Below is a list of the trades that took place in the Roth IRA during the month of March.

Roth IRA - March Trades

Roth IRA - March Trades (CDI)

During the month of March we sold a small portion of existing positions in CVX and General Dynamics (GD). These shares represented the high-cost shares in those positions so doing this was strictly intended to lower the overall cost basis and return funds to cash reserves.

Of the shares we bought were Global X Nasdaq 100 Covered Call ETF (QYLD) and Nuveen Nasdaq 100 Dynamic Overwrite Fund (QQQX) which are intended to give the portfolio exposure to the Nasdaq 100 while still generating significant dividend income by utilizing options. These funds are essentially counterparts and you can find out more about these funds in my recent article QQQX Or QYLD: Which Fund Makes More Sense (One Year Later).

March Income Tracker - 2021 Vs. 2022

Income for the month of March was up considerably year-over-year for John's Traditional IRA and up considerably in his Roth IRA. The average monthly income for the Traditional IRA is in 2022 is expected to be up about 9.3% based on current estimates and the Roth IRA is looking to grow by an astounding 13.1%. This means the Traditional IRA would generate an average monthly income of $1,200.80/month and the Roth IRA would generate an average income of $637.95/month. This compares with 2021 figures that were $1,098.38 and $564.25 per month, respectively.

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. (Abbreviated to CDI).

Traditional IRA - March - 2021 V 2022 Dividend Breakdown

Traditional IRA - March - 2021 Vs. 2022 Dividend Breakdown (CDI)

Roth IRA - March - 2021 V 2022 Dividend Breakdown

Roth IRA - March - 2021 Vs. 2022 Dividend Breakdown (CDI)

Here is a graphical illustration of the dividends received on a monthly basis for the Traditional and Roth IRAs.

Retirement Account - Monthly Dividends Received - March 2022

Retirement Account - Monthly Dividends Received - March 2022 (CDI)

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-2022 compared with the actual results from 2021.

Retirement Projections - March 2022

Retirement Projections - March 2022 (CDI)

Below is an expanded table that shows the full dividend history since inception for both the Traditional IRA and Roth IRA.

Retirement Projections - March 2022 - Full Dividend History

Retirement Projections - March 2022 - Full Dividend History (CDI)

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.

Retirement Account - Monthly Dividends - March 2022

Retirement Account - Monthly Dividends - March 2022 (CDI)

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).

Retirement Account - Month End Balances - March 2022

Retirement Account - Month End Balances - March 2022 (CDI)

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.

Retirement Accounts - March 2022 - Cash Balances

Retirement Accounts - March 2022 - Cash Balances (CDI)

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 of January 2018.

Retirement Accounts - March 2022 - Unrealized Gain-Loss

Retirement Accounts - March 2022 - Unrealized Gain-Loss (CDI)

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 April 27, 2022.

Here is the unrealized gain/loss associated with John's Traditional and Roth IRAs.

Traditional IRA - March 2022 - Gain-Loss

Traditional IRA - March 2022 - Gain-Loss (CDI)

Roth IRA - March 2022 - Gain-Loss

Roth IRA - March 2022 - Gain-Loss (CDI)

The last two graphs show how dividend income has increased, stayed the same, or decreased in each respective month on an annualized basis. Now that we are in our fifth year of tracking, the trend for each respective month of the year has begun to show interesting trends for when income increases year-over-year.

Traditional IRA - March 2022 - Annual Month Comparison

Traditional IRA - March 2022 - Annual Month Comparison (CDI)

Roth IRA - March 2022 - Annual Month Comparison

Roth IRA - March 2022 - Annual Month Comparison (CDI)

Conclusion

Looking at the final charts above it is interesting to see the months where dividend increases are the most dramatic. In the Traditional IRA we can observe a steep increase in income during the month of March, June, August, and December. Meanwhile, the months of February, May, August, and November are all fairly stagnant. This is reasonable considering the first group of months generates a disproportionate amount of the income and with so many increases in March we are seeing that grow faster than months where dividend payments aren't as common.

The Roth IRA is a little bit more difficult to identify a trend. The reason for this is that the Roth IRA has seen major setbacks since the beginning of COVID lockdowns. Dividend cuts or temporary elimination of the dividend for some companies dealt a major blow to the trends associated with chart. Be prepared for a major turnaround with companies like APLE and EPR Properties (EPR) reinstating and increasing their dividends. Right now the Roth IRA is currently trending towards a year over-year dividend increase of 13.1%.

March Articles

I have included the links for John and Jane's Taxable Account and Jane's Retirement Account articles for the month of March below.

The Retirees' Dividend Portfolio: John And Jane's March Taxable Account Update

The Retiree's Dividend Portfolio - Jane's March Update: 8 Dividend Increases

Article Format: Let me know what you think about the format (what you like or dislike) by commenting. 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: AFC Gamma (AFCG), Aflac (AFL), Apple Hospitality REIT (APLE), Avista (AVA), BP plc (BP), Brixmor Property Group (BRX), Crown Castle (CCI), Canadian Utilities (OTCPK:CDUAF), Chatham Lodging Trust (CLDT), CVS Health Corporation (CVS), Chevron (CVX), CSX (CSX), 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), Nuveen Nasdaq 100 Dynamic Overwrite Fund (QQQX), Global X Funds Nasdaq 100 Covered Call ETF (QYLD), 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), WestRock (WRK), Warner Bros Discovery (WBD), and W. P. Carey (WPC).

This article was written by

Matthew Utesch profile picture
10.85K Followers
Graduated in 2011 with degrees in Pre-Law and Business Administration from Eastern Washington University. Completed my MBA at Whitworth University in May of 2017. Over the last decade, I have worked exclusively in the finance industry. I have acquired specialized knowledge in multiple areas, most notably, Secondary Marketing, Underwriting (specializing in subprime credit), and am currently building an Indirect Lending Program for Canopy Federal Credit Union.Started my first Roth IRA at the age of 16, but began seriously investing closer to 2011 at the age of 22. My investment strategy is largely focused on generating retirement income from dividend-paying stocks. I do not hold any professional investment licenses, but I spend a significant amount of time educating children, teenagers, and young adults on basic finance. I also specialize in cash-flow analysis for those nearing retirement or who are in retirement.
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Disclosure: I/we have a beneficial long position in the shares of AFL, APLE, 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.

Additional disclosure: 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.

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