Dear Readers,
February has come and gone. I have been quiet on the blogging front as most of my family has been under the weather for a major part of this month. If you have lived in Texas, you would have heard a lot of the locals complain about allergies all the time. I didn’t think much of it for the first few years of my stay here. But since the last three years, I have observed the sudden onset of asthma-like symptoms typically around the February and March time frame. Some reading up and voila! Turns out my symptoms are due to pollen from oaks and certain types of grass. I think I and my family are past the worst phase of these allergies and are looking forward to some beautiful spring weather.
Of course, I have been keeping a close eye on the markets and the earnings reports that have been rolling in. 2023 has been a rather busy month as far as dividend hikes. Per a statistic that I read somewhere (sorry, forgot to bookmark the source), there have been almost 200 dividend hike announcements in 2023 in the US, with an average hike of 11.7%. Among these dividend hikes, 76 of these have been double-digit hikes! Wow! Not a bad time to be a dividend growth investor, eh?
I had my share of dividend hikes as well. I received 10% hikes from PEP, HD and NEE. I received a lousy 1.7% dividend hike from TROW. While disappointing, I completely understand the reasoning behind the low hike. Another not-so-surprising lousy hike came from MMM, another 1c dividend hike. O hiked their monthly dividend by 2.4%.
I also received a massive 65% dividend cut from INTC. There is so much to say on this subject, explaining what I intend to do with my position in INTC. I’ll reserve my thoughts for a near-term future post.
Lets get into the numbers for the portfolio did during this last month.
Dividend Income Received
| Sl. No. | Company / ETF (ticker) | Amount |
| 1 | Apple (AAPL) | $5.08 |
| 2 | AbbVie (ABBV) | $21.77 |
| 3 | Albertsons Companies (ACI) | $2.54 |
| 4 | A.O.Smith (AOS) | $1.20 |
| 5 | Caterpillar (CAT) | $3.64 |
| 6 | Clorox (CLX) | $53.32 |
| 7 | Costco (COST) | $3.62 |
| 8 | Procter and Gamble (PG) | $23.20 |
| 9 | Texas Instruments (TXN) | $88.66 |
| 10 | Verizon (VZ) | $47.96 |
| 11 | Realty Income (O) | $25.41 |
| 12 | JP Morgan Equity Premium Income ETF (JEPI) | $5.32 |
| 13 | STAG Industrial (STAG) | $4.02 |
| Total | $285.74 |
So a total of $285.74 in terms of monthly dividend income from 13 companies and/or ETFs. At the same time last year, I earned a total of $148.28 in monthly income. In Feb 2021, I earned a total of $12.86 in monthly income. So the YoY growth is appreciable, albeit expected at this stage of the dividend portfolio.
My largest dividend payer for this month has been TXN. TXN has also been in the news, with an announcement earlier this year than the existing CEO, Rich Templeton, will step down on April 1 after a 19-year tenure, and be replaced by Haviv Ilan, the current COO. I looked into the background for Haviv Ilan and was happy to see that he also comes from an engineering background and is also a straight talker, similar to Rich Templeton. It remains to be seen how Haviv will be able to steer this ship in the coming few months.
I also received from my first dividend payment from AOS, a relatively recent addition to my portfolio.
Buys and Sells during this month
No sells during this month.
As far as buys, I continued adding to my position in VZ. While I do not see huge revenue growth in the near future for VZ, the position is serving as a bond-proxy in my portfolio and I could use the output cash flows from this position to fund other positions.
I also added small tranches of JNJ and UNH to my portfolio. JNJ was trading around the $155 mark when I bought my tranche. I am cognizant of the impending litigation risk with JNJ, but there are a few things with JNJ that I need to look into beyond this. JNJ is now slated to be a pure pharma and medical devices company, and I am concerned with the relative softness in their pharma development pipeline. In addition, JNJ has also gone through a recent CEO change and the new CEO is a bit of unknown quantity to me. So I am in wait-and-watch mode on this one as I study their latest annual report and re-evaluate my thesis around this position.
Portfolio Thoughts
After selling out of CHD and DGRO last month, I have been looking at other positions in my portfolio and re-evaluating my investment thesis for these positions.
One such position is Digital Realty Trust (DLR). My bull-case around this position was centered around the growth in the data-center and cloud-computing business (expected CAGR growth of around 15.8% between 2022-2028). However, I was particularly concerned after reading the news item where legendary short seller Jim Chanos was shorting the data center REITs. Jim Chanos is famous for predicting the downfall of Enron. He is a no nonsense guy and generally makes a lot of sense with his arguments.
“This is our big short right now,” Chanos said in an interview with the Financial Times. “The story is that although the cloud is growing, the cloud is their enemy, not their business. Value is accruing to the cloud companies, not the bricks-and-mortar legacy data centers.”
This comment caused me to revisit my thesis and I have to admit that Chanos does have a very valid point. DLR’s FFO has not grown at all over the last few years. A similar trend is seen with Free Cash Flow as well. While the legacy data centers will not go obsolete immediately, this opened my eyes towards the reality that these data center REITs should be viewed as slow-growing mature businesses rather than fast-growers, as one might be led to believe looking at the cloud growth. I will continue doing my research into this business and determine what I need to do next with this holding.
Summary
Feb is in the books and I am looking forward to March which is expected to be a big dividend paying month for my portfolio. While I keep counting the dividend checks, I am also planning to read through a bunch of annual reports.
I recently read through PEP’s annual report and posted my findings in this twitter thread.
Before ending this post, I wanted to share an interesting passage I read from Berkshire Hathaway’s 2022 Annual Report. Quoting Warren Buffet on his investment in Coke:
“The cash dividend we received from Coke in 1994 was $75 million. By 2022, the dividend had increased to $704 million. Growth occurred every year, just as certain as birthdays.”
As a dividend growth investor, if you ever need reaffirmation regarding if dividends matter, I recommend you read this statement every once in a while 🙂
Cheers!
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