Dividend Income – September 2019

Recently the German Central Bank (Bundesbank) has calculated the total return of private households in Germany. The results were devastating! According to their report, the private households were averaging a total return of -2.5% in 2018. That figure mirrors the returns from cash deposits, stock investments, insurance claims and includes the inflation. In other words, Germans are losing wealth.

Knowing about the aversion for stocks in my country, this insight wasn’t surprising for me at all. On average, just about 10% of German people own stocks in some capacity. One of the lowest proportions in the developed world. Folks, stop and think for a moment. The stock market has historically returned an average of 10% annually. Let’s apply a more conservative assumption for future returns of about 6-8%. It’s still well above what cash deposits have to offer. And yet people love holding cash and condemn investing in equity markets. Are you kidding me?

Moreover, dividends play a major role in stocks’ long-term total returns. John Bogle, the founder of The Vanguard Group, has the following to say: “An investment of $10,000 in the S&P 500 Index at its 1926 inception with all dividends reinvested would by the end of September 2007 have grown to approximately $33,100,000 (10.4% compounded). If dividends had not been reinvested, the value of that investment would have been just over $1,200,000 (6.1% compounded) – a gap of $32 million”.

In addition to it, the impact of dividends is getting bigger the longer the time horizon becomes. In fact, over the past 81 years, reinvested dividend income accounted for approximately 95% of the compound long-term return earned by the companies in the S&P 500. Personanny, I try to have those benefits of dividends always in front of my eyes.

Firstly, it’s an important component of the total return. Even though the impact is rather weak yet, I know that its power will grow the longer I stay invested. Secondly, dividends represent real cash that hits my account on a regular basis. It’s a form of passive income. That being said, let’s have a quick look at the passive income for the month of September.

Dividend Income: September 2019

In September, 16 different companies have sent me a dividend cheque:

  • Enbridge (ENB): €16.97
  • Visa (V): €1.93
  • Amgen (AMGN): €8.91
  • Johnson & Johnson (JNJ): €24.08
  • Unilever (UL): €16.48
  • 3M (MMM): €7.75
  • Home Depot (HD): €13.55
  • Dominion Energy (D): €16.19
  • Royal Dutch Shell (RDS.B): €17.15
  • UnitedHealth Group (UNH): €5.00
  • BlackRock (BLK): €10.18
  • Bank of America (BAC): €6.97
  • Becton Dickinson (BDX): €3.14
  • Pepsi (PEP): €13.28
  • Union Pacific (UNP): €9.03
  • Broadcom (AVGO): €14.45

September’s dividend income total came in at €185.06 ($203.55). Compared to September 2018, this is an increase of 47%.

Month2019
2018
+/-
Total€ 1,308.34€ 1,163.80
January€ 97.98€ 25.26+ 288%
February€ 89.69€ 55.35+ 62%
March€ 166.57€ 107.33+ 55%
April€ 84.59€ 84.92+/- 0%
May€ 326.18€ 177.26+ 84%
June€ 160.66€ 103.13+ 56%
July€ 78.05€ 50.96+ 53%
August€ 119.56€ 190.84- 37%
September€ 185.06€ 125.87+ 47%
October€ 54.34
November€ 71.56
December€ 116.98

I’m always pleased to see a green bar surpassing the brown one. Due to some reallocation activities, it wasn’t the case in August. However, in September 2019, this portfolio has generated a decent cash flow growth compared to last year. With UnitedHealth Group (UNH), I also welcome a new income contributor in my portfolio. I have purchased 6 shares of UNH shortly before the ex-dividend date, so I was able to collect the first dividend payment in September.

Furthermore, I’m also glad to note that the number of different companies, that provide me with dividends, is consistently growing over time. Some quick facts. While it was just 6 companies in September 2018, the number of dividend-paying stocks has grown to 16 in September 2019. I expect that number to increase going forward as I haven’t reached my desired number of holdings yet. Finally, the target is to own 40-50 individual stocks and then build them up in size.

As I keep collecting more businesses, the cash flow is increasing along the way. Today, the cumulative annual income is sitting at €1,308. That is 42% more than in the same period last year. In September 2019, this portfolio has also exceeded the income total of 2018 (€1,163). Looking forward, dividends that I’m going to collect in Q4 will represent additional income for the year. Amazing!

Speaking about Q4, I expect this portfolio to generate about €330 in dividends in the remaining three months. That means the projected annual dividend income for 2019 is at €1,638 ($1,802) as of today. Pretty close to my personal goal of €1,650 ($1,815).

Dividend Increases

In September 2019, three of my holdings have announced a dividend increase:

  • Philip Morris (PM) is raising its annual dividend by 2.6% from $1.14/share to $1.17/share. PM’s 5-yr DGR is sitting at 4.6%. Taking into account the challenges in the tobacco industry as well as PM’s stressed payout ratio, that increase was more or less in line with my expectations.
  • Verizon Communications (VZ) is raising its annual dividend by 2.1% from $0.6025/share to $0.6150/share. This increase is pretty much in line with VZ’s 5-yr DGR of 2.7%. If you decide to own VZ (or T) in your portfolio, you know what you will get. That is a decent yield and a steady but rather slow growing dividend. Thus VZ is an income play for me and I’m happy to be a shareholder of this solid company.
  • Texas Instruments (TXN) is raising its annual dividend by 17% from $0.77/share to $0.90/share. This one was unexpected, to be honest. Although TXN has a rock-solid 5-yr DGR of 19.7%, I was rather expecting a high single-digit boost. However, one more time that was another positive surprise by TXN. I haven’t even lift one finger and TXN is rewarding me with a 17% increase. How great is that? As you can imagine, I consider myself a very happy owner here.

Summary

Dividends keep on rolling in. They are growing and reliable. No matter what the market is doing, it is almost guaranteed that quality businesses will continue to reward their shareholders. That’s the beauty of dividend growth investing. All we need to do is own wonderful companies, collect the dividends and use those dividends to buy more shares of wonderful companies. Easy peasy. Doing so, we not only build a passive income empire we also dramatically improve the expected total return. Remember, the longer the investment horizon the more powerful dividends become. That’s compounding at work. If not started yet, invest in a basket of high-quality stocks. Build them up in size, don’t trade in and out. Simply let them compound the wealth for you. It works. Good luck.

17 Comments

  1. dividendcompounder October 5, 2019 at 6:09 pm

    Congratulations with a rock solid month. I like your detailed report, tables and graphs. The high dividend increase of TXN was indeed unexpected. But you won’t hear me complaining either.

    Happy investing!

    Reply
    1. Snugfortune October 6, 2019 at 10:49 am

      Thanks, DC!
      I’m with you on TXN – really not much to complain about here. Dividend growth has been strong in the past and it seems to ramain strong in the future. Good for us shareholders.
      Total return looks good as well. I’ve checked FastGraphs for 20-yr. time frame:
      -TXN Total Annualized ROR (dividends incl.): 9.7%
      -S&P500 Total Annualized ROR (dividends incl.): 6.4%

      Reply
  2. BrokeInvestor October 7, 2019 at 7:20 am

    Great month SnugFortune! You have some great names on your payers list this month and I only share a few of them (MMM, D & BLK).
    Did you decide to buy RDS.B shares (as opposed to RDS.A) due to smaller taxes on dividends? I have RDS in my list but haven’t decided if I would buy A or B class shares, as it seems a little bit complicated to fully understand 🙂
    Keep it up!
    BI

    Reply
    1. Snugfortune October 7, 2019 at 11:06 am

      Hi BI,
      yes, I went with RDS.B because of tax reasons. Both, A and B shares, are ordinary shares and are equal in regards to voting rights and dividend claims.
      The only difference refers to tax treatment. Class A-shares are liable to Dutch tax law. For someone who lives in Germany, it means 15% withholding tax. Class B-shares are liable to British tax law, 0% withholding tax. Again, this is from a German perspective. Just check how the tax treatment applies in your country and go with a more tax friendly class:)
      Thanks for stopping by.

      Reply
  3. The long term investor October 8, 2019 at 8:56 am

    Hi SF,

    Seems like you hade a very solid month there. 16 companies that pay dividends is nothing to sneeze at!

    It seems we have some companies in common that payed us dividends.

    Cheers,
    TLTI

    Reply
    1. Snugfortune October 8, 2019 at 10:01 am

      Hi & welcome TLTI,
      I’m quite happy with the result in September.
      Not sure, but I believe it was a new record with 16 different companies sending me a dividend payment this month.
      It’s good since it provides income diversification.
      Thanks for the visit & all the best.

      Reply
  4. divrider October 8, 2019 at 11:31 pm

    Nice summary! I totally agree with your opinion of German people and the stock market. It’s crazy that there is literally no one who is interested in anything related to stock investing. If I talk about investing, everyone is staring at me like I’m talking about some things of another dimension. The absolute maximum of “common ground” is investing in a high fee mutual fund. When asking what kind of stocks are included, you get the question mark again. It’s really sad for me and in the end, sad for them.

    Regarding your dividend payment this month, I love your stock composition. Very balanced. I’d like to own quite a few of the companies. And hopefully I will, sometime in the future.

    Keep up your great work!

    Reply
    1. Snugfortune October 9, 2019 at 12:40 am

      We share the same dilemma in that regard, Divrider:) That’s a serious issue actually. Given the typical asset structure of private households in Germany (mostly cash), people literally destroy wealth instead of building it. And that by a rate of -2.5%, as calculated by the central bank. Knowing that, it’s reckless not to own stocks actually. However, similar to your experience, I still hear many people refering to stock investing as gambling. That is really unfortunately. However, I don’t give up to spread the message that investing into stocks is one of the best ways to build wealth and secure retirement planning.
      In terms of the PF composition: my goal for the year is increasing the stake in defensive companies. That’s what I’ve been focusing on lately.
      I’m sure you’ll end up owning what you want to own. Go for it.

      Reply
  5. Mr. Robot October 9, 2019 at 4:51 pm

    Awesome Snug, solid numbers all around and an impressive growth number. I’m not far behind on you this month but thats only due to a special dividend I got (first time ever!).

    Reply
    1. Snugfortune October 10, 2019 at 10:36 am

      Hey Mr. Robot!
      Good to hear that. I’m going to check your numbers for the month. Congrats on your special dividend.
      I never had the pleasure to receive one yet. Hopefully it will happen someday.
      All the best.

      Reply
  6. DivHut October 11, 2019 at 10:05 am

    Nice job bringing in a double digit year over year gain. Nice to see we share quite a few names too paying us both last month. Keep up the good work.

    Reply
    1. Snugfortune October 12, 2019 at 1:21 am

      I’m quite happy to see that the PF value goes up but I’m even more happy that the dividend cash flow is increasing.
      In the end that’s my primary goal. With September in the books, this portfolio has generated 42% more income compared to the same period last year.
      I will try to push Q4 to boost the annual income as much as possible.
      Thanks for stopping by.

      Reply
  7. Engineering Dividends October 13, 2019 at 1:07 am

    Outstanding results once again, SF. You’ve generated a lot of dividend income momentum over the past year, and I know you’ll keep that momentum going. I’m amazed that you’ve grown your number of September dividend payers from 6 to 16 in only 12 months.
    Good to hear you were able capture that UNH dividend this month with your initial purchase. I collected my first UNH dividend as well.
    Congrats on beating last year’s cumulative dividend total through Sept. by 42%. Impressive. I’ll be rooting for you to hit your $1,815 annual dividend income goal. One small purchase or a few dividend raises in October should get you there. Maybe just a couple raises like that TXN one will be enough!

    Reply
    1. Snugfortune October 13, 2019 at 9:26 pm

      Thank you, ED!
      From time to time I add to existing positions but mostly I try to target new stocks. The reason is that I want to build out my holdings first (own about 50 individual stocks) and then start building them up. Nevertheless, I was also suprised when I realized that my number of dividend payers in September went from 6 to 16 within just one year. UNH was one of those new payers – for both of us.
      Indeed, I will try to keep that momentum going and push the dividend income for that year as much as I can. Of course, dividend increases such as in the case of TXN are always welcome. A couple more of those and the annual income goal becomes more easily achievable. I definitely expect a double-digit raise by V and SBUX soon. We’ll see. Good luck & thanks for stopping by.

      Reply
  8. PassiveCash October 14, 2019 at 4:31 am

    SF-
    I had no idea that Germany as a country invested so little of their cash. I wonder if many households just park their money in savings accounts? Interesting fact, thanks for sharing…I get your frustration!
    Congrats on a great month and YoY improvement. $1800 is a nice number…$150/month

    Reply

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