Monthly Income Update – Mar 2022

My dear readers,

Hope you are all doing well, staying healthy and staying invested in your own future. Unfortunately, the situation in Eastern Europe continues to remain volatile and this has had its impact on the markets world-wide. My own personal life is also going through some interesting changes as I discussed in my previous post.

At the risk of sounding like a broken record, I will restate again that dividend growth investing as a strategy has been incredibly helpful during these turbulent times. Its truly passive nature is a huge blessing. I have not been checking on my portfolio and it is mostly in “auto-pilot” this whole time. What is amazing is that while my portfolio has been in this hands-off mode, it has generated a record amount as far as dividend income since its inception!

Let us get into the numbers to emphasize this point.

Dividend Income Received

Sl. No.Company / ETF (ticker)Amount
1.AFLAC Inc. (AFL)$14.48
2.Church and Dwight Co. (CHD)$2.11
3.Duke Energy (DUK)$4.97
4.The Home Depot (HD)$9.58
5. Intel Corp. (INTC)$3.65
6. Johnson and Johnson (JNJ)$36.25
7.Lockheed Martin (LMT)$46.80
8. 3M (MMM)$48.46
9.Microsoft (MSFT)$6.83
10.NextEra Energy (NEE)$1.71
11.Pepsi Co. (PEP)$8.70
12.Snap-On Inc. (SNA)$4.26
13.The Southern Co. (SO)$10.67
14.Target (TGT)$2.18
15. T. Rowe Price Group (TROW)$57.66
16.UnitedHealth (UNH)$2.92
17.Visa (V)$9.61
18. Whirlpool Corp. (WHR)$22.75
19.Waste Management (WM)$0.66
20. Exxon Mobil (XOM)$2.68
21.Schwab’s US Dividend Equity ETF (SCHD)$23.34
22.iShares Core Dividend Growth ETF (DGRO)$5.85
23.Realty Income Corp. (O)$11.66
24.Digital Realty Trust (DLR)$34.59
25.STAG Industrial (STAG)$3.48
Total$375.85

So, a total of 25 companies/ETFs contributed a grand total of $375.85 in terms of total monthly income. This is the first time my portfolio breached the $300 mark since its inception, making it a a new record. At the same time last year, I had earned $68.37 in total monthly income. The YoY growth is nearly over 5x and it is mostly due to the diligent and rather aggressive investment of capital into this portfolio. My largest payment came through TROW, which is something that I have been investing into pretty aggressively since the start of the year. The stock itself has plummeted from it highs back in December and I was seeing so discernable change in fundamentals.

So far, in this quarter, I have earned a total of $669.73 in terms of dividend income. At the same time last year, my total quarterly dividend income was $94.48. So even the quarter-over-quarter performance is truly impressive.

As far as my projections for the rest of the year, I am expecting to be averaging around the $250 mark in terms of monthly dividend income. Fingers crossed, I am looking in good shape to hit the $3000+ mark of earned dividend income for the year, which is one of my goals for this year.

This was expected to be a “heavy-paying” month in terms of dividend income. I am expecting April to be a LOT more quieter in terms of that metric. I am planning on writing some options to boost my income. This is, of course, time-permitting and if the market conditions are conducive.

Buys and Sells during this month

Like I said before, this was a busy month on the personal front. So trades were limited.

I continued adding small tranches to my existing position for TROW. The other stock that was in my radar was WHR. While there have been no telling changes in fundamentals, I think Mr. Market is probably thinking that inflationary pressures are going to have a bigger impact on WHR’s performance especially in Asia and other world markets. While there is some grain of truth in this sentiment, the reaction is a little over-the-top IMHO. Good buying opportunity for me as the starting yield looks very attractive, dividend is relatively safe and the stock is relatively cheap.

AT&T (T) was in the news during the month with the CEO elaborating about the previously announced plans for spin-off involving Discovery and WarnerMedia and also about the dividend cut. T has been one of my worst investments and a stock I wished I had never owned. This was something that I had purchased during my initial days as a dividend growth investor and I made the rookie mistake of chasing the yield and also believing the hype around “oh this is conglomerate and look at how many businesses they own etc.”. This was my stupidity, because one quick look at their balance sheet and the quality of the management would have told me that this is a bad investment decision. Thankfully, because of a categorized dividend growth portfolio strategy, I have safeguards in place against my own stupidity. I have placed T in the “speculative” category of my portfolio and, therefore, only invested a limited amount of capital in them. I will continue to hold this stock for now. However, I have actually no interest in the newly formed spin-off and also holding T as a pure telecom play, as I already hold Verizon (VZ) and I think they are a much better player in the telecom space as compared to T. More on this in a future post.

I continued adding to my position in DLR as this was still attractively priced. I am using every opportunity to dollar-cost average into two ETFs, SCHD and DGRO. Both these ETFs have performed pretty well and give me a good mix of attractive dividend-paying companies. I hold these ETFs and REITs in my tax-advantaged accounts (HSA and ROTH IRA). Investing in ETFs in this account helps me not have to track these accounts as far as individual stock positions (except REITs).

Watchlist

I am taking a serious look at JP Morgan Chase (JPM) and The Home Depot (HD). JPM stock has been on a steady decline since the start of the year, dropping nearly 22% in this period. A quick look at the Price-to-Tangible Book Value seemed bring this into my radar where the price starts looking attractive. I did not see any significant change in fundamentals, but then this is only a cursory look. Will need to dive deeper.

HD still seems to be hovering closer to my estimated fair value and I continue to dollar-cost-average, adding small tranches whenever an opportunity presents itself.

Summary

So another record-breaking month is in the books. I do hope to get a bit more active on the blog and Twitter in the coming few months (fingers crossed).

Take care and see you in the next post..

The Savings Rate – Revisited

My dear loyal readers,

I sincerely value your readership and appreciate your patience over the last few weeks in sticking with my blog updates. I am hoping that I have not lost you. Life has been crazy busy over the last several weeks. As I stated in my previous post, I am going through an fairly significant change in my professional life which has been consuming a lot of my free time. I would finally like to talk about this in this post.

Before getting started, I wanted to take you back to the topic of “Savings Rate” which I have also talked about previously on this blog.

A simple equation to look at your savings is as follows:

Savings = Income Generated – Expenses

Our objective is to improve the savings rate to the best extent possible, because higher the savings, the more capital we have to invest into our own future. For dividend growth investing to work as a strategy, it is important to ensure that we are investing as much capital as we possibly can atleast during the accumulation phase of our investing journey.

None of this should be overly controversial as the subject of improving the savings rate is pretty critical to the success of ANY investing strategy, let alone dividend growth investing.

The part of the equation that does not get as much attention as it should is the “Increasing Income” part. Since we are so hyper-focused on the “reducing expenses” part of the equation, we generally ignore the aspect of getting better at our day jobs and “coast” through it. Some of this is due to the relative comfort of our job, we understand it pretty well, why push ourselves in the quest for something better? Is it really worth it?

In my case, I saw a couple of interesting dynamics that prompted me to seriously ponder over this question. The rising inflation was one of these factors. At the time of writing this, we are seeing record-high levels of inflation and it is unclear how long this situation will last. The other dynamic was a question about my employer’s profitability in the years to come. As an investor, I am now used to reading through financial statements and questioning aspects of the businesses that I am invested in. I used some of these learnings to study the financial statements of my own employer. The exercise revealed some interesting insights. I was able to make reasonable approximations about the company’s long-term profitability and make reasonable guesses about how long it would take me to reach my financial goals if I would stick with this employer. It also dawned on me that while things are great with my employer at present, there is only so much I could do to boost my pay beyond a certain level. Ultimately, this exercise prompted me to start considering other options.

Interviewing in my area of expertise (i.e. tech sector) is incredibly hard and requires months of arduous preparation. This is because the interview process itself is fundamentally broken thanks to the FAANG (Facebook/Meta, Apple, Amazon, Netflix, Google) style of companies. These companies have tailored the software engineering interviews to include questions surrounding topics that an engineer would have typically studied back in graduate school. These questions, while academically interesting, have arguably little practical relevance. Unfortunately, the rest of the tech industry has been so enamored by these FAANG companies that they have replicated the interview process as well. It can be mind-numbingly stupid at times, but there is nothing much anybody can do about this.

Anyhow, the mere thought of preparing for interviews can be demotivating by itself. In my case though, I had to look past this and focus on my larger goals. So I prepared….juggling my responsibilities between a full-time job, my family responsibilities and using every little free time available to prepare.

After interviewing with several potential employers, I landed up with offers from a handful of them. Apart from evaluating the offers themselves, I studied each employer’s history by looking through their annual SEC filings, reading up about the management itself and factoring those into my decision making. This is something that I never did previously in my career. I would mostly look at the role itself, look at the offer in isolation, rely on the recent media news about the company and just take a blind leap of faith about the health of the company. My education as investor has forced me to research these other aspects of a potential future employer and use that to make a decision.

In the end, I am happy that I went through this process. Change is incredibly hard to accept especially as one progresses through life. But sometimes it is important to take a step back, analyze and make a difficult decision. At this point, I have no idea if my decision is right or not. But the decision is based on a logical premise, and that is all that is in my control.