Dividend Income Update – May 2013

Another month has passed by, and it’s time for me to post an article on my favorite subject: dividend income. The reason why I love to post articles on dividend income is because it’s pure numbers. It’s hard to argue the success of long-term dividend growth investing when you can slowly and surely see dividend income rise over time and get closer to covering one’s expenses.

May was another solid month for dividend income. I get pretty giddy every time I log in to my brokerage account and see fresh capital via dividend deposits. I don’t know. I’m easily entertained. It was only a few years ago that every single dollar that hit my checking account came by way of me getting out of bed, showering and going in to work. Now, the idea of me living off my dividend income by 40 years old is becoming more and more realistic. How amazing!

I hope these monthly dividend income reports provide inspiration for any investors out there that are just starting out. It’s easy to see these payments rising month after month and it shows that it’s possible to one day pay for monthly expenses with dividends, which would provide an investor opportunities and freedom to pursue other interests than full-time work. Without further ado:

May 2013 Dividends Received

  • Toronto-Dominion Bank (TD) – $12.28
  • AT&T Inc. (T) – $22.50
  • Raytheon Company (RTN) – $13.75
  • General Dynamics Corporation (GD) – $11.20
  • Southside Bancshares Dividend (SBSI) - $3.23*
  • The Procter & Gamble Company (PG) – $30.68
  • Kinder Morgan Inc. (KMI) – $57.00

Total dividends received during the month of May: $150.64

*This was not a usual dividend payout, but cash in lieu due to a 21:20 stock split by SBSI. This was to represent the .15 shares that I lost in the stock dividend.

Again, another great month! This was a significant improvement upon the $97.07 I received in May, 2012. That’s an increase on the order of 55.2%, which is superb. If I could increase my dividends by percentages like this every year I’d be a very happy investor.

I was only able to cover about 7.4% of my expenses this past month via passive dividend income. This is a rather low number for me, mostly due to the fact that my expenses were much, much higher than normal. I’ll be discussing this in my upcoming income/expense report. I hope to start getting this number up to around 20% or so on a regular basis over the next few months.

My goal is to receive $3,500 in dividends during the year of 2013. We have now seen five months pass us by and I’ve been able to generate $1,170.02 in dividend income so far this year. That averages out to about $235 per month. Extrapolating that out over 12 months puts me a little short of my goal, but I anticipate exceeding my goal as some of the equity purchases over the last few months start to pay out dividends over the latter half of the year.

I’ll update my dividend income page to reflect May’s dividends.

Full Disclosure: Long all aforementioned securities

Thanks for reading.

Photo Credit: sscreation’s/FreeDigitalPhotos.net        

Comments

    • Anonymous says

      KMI is a C corp and pays out dividends. KMP is a mlp and pays distributions (as well as issues a K-1 for tax time). KMR is a “clone” of KMP but it pays out in stock shares, as opposed to cash distributions (on the up side, it usually has traded at a discount to KMP, but with the same distribution, and it doesn’t have a K-1).

      KMI owns the general partner interest of KMP and EPB, the incentive distribution rights of KMP and EPB (which is why the paid out will continue to increase much faster than that of KMP or EPB), and some limited units of each. It also has some other oddball assets here and there.

    • says

      Neo,

      Anonymous answered the question perfectly.

      I looked at both KMP and KMI and purposely chose KMI as I feel it’s the better long-term investment. Less current income to be sure, but stronger growth going forward. It suits me, but only you will know what suits you.

      Best regards!

    • says

      The return profiles for KMP and KMI are different. Due to incentive distributions rights, KMI as the general partner gets most of the future dividend increases. KMI should have a higher return over the long term but there is no shame in buying KMP/KMR:

      KMI: 4% yield, 12%/year 5 year growth.
      KMP/KMR: 6% yield, 6%/year 5 year growth.

      For most investors, if you want to buy the LP instead of the GP, I would go with KMR over KMP. The distributions from KMR are automatically reinvested by issuing new shares. There is no tax consequence on your holdings until you sell. Think of it as a mini IRA in your taxable account.

  1. says

    I’m like you — I look forward to seeing every dividend deposited in my brokerage account, even if it’s just 5 or 10 bucks. I find it very motivational. It’s analogous to coming home from work, checking the mail, and finding a $5 or $10 bill among your letters once or twice per week. Who wouldn’t like that?

    • says

      DGM,

      Absolutely. Love the analogy there!

      How awesome would it be to check your mail and instead of getting a bill here and there, instead you’re getting a check here and there. That quickly swings the wealth in your favor.

      I guess I’m just easily entertained. I have a huge smile on my face every time I log in and see my brokerage account cash balance higher than it was yesterday, even though I didn’t make any deposits.

      Best wishes.

  2. Paige says

    Another great month! I used to get really annoyed with small dividend checks that were only five or ten bucks, but when you put them with other five or ten dollar checks, they are impressive! Especially when those ten dollar checks grow and compound from year to year. Keep up the good work!

    • says

      Paige,

      I think dividend investing gives one a fresh perspective and appreciation for pennies. You don’t think a penny or two can add up to much wealth. But when I first started investing and saw how major blue-chip companies were paying out $0.20 quarterly dividends or $0.34 quarterly dividends, I quickly realized how fast pennies truly add up.

      Take care!

  3. Spoonman says

    This is my favorite series because we’re talking about money in your pocket. I wouldn’t get too hung up on only convering 7.5% of your expenses with dividends. I think a more fair number to look at will be at the end of the year when you can take the ratio of all of your expenses and your total dividend income. I think that metric will smooth out some of the unevenness in month-to-month dividend payouts.

    I agree with DGM, seeing those dividends pile up in the brokerage account is kind of like getting a nice present. I very much look forward to the day when I can use those dividends to pay for needs (and some wants) instead of reinvesting them (which is itself an awesome activity, but I’m sure using dividends to pay for expenses will have a magical feel to it).

    • Spoonman says

      I’m suddenly getting a feeling of deja vu…I probably gave you the same exact advice before. I apologize if I sound like a broken record!

    • says

      Spoonman,

      Broken record? Not at all!

      I think that dividend growth investing can be repetitive because we’re basically doing the same thing month in and month out – saving large portions of our net income and using that excess capital to invest in high quality companies that pay rising dividends. But that repetition and consistency is exactly what builds the kind of long-term wealth we’re all seeking!

      Keep on preaching! :)

      Take care.

  4. says

    Awesome as usual Jason! Certainly two of the most rewarding aspects of dividend investing is receiving the actual payments and then seeing the year over year growth in dividends as your investment grows.

    • says

      w2r,

      That’s exactly what I find so wonderful about dividend growth investing – the tangibility of the dividend payments themselves. Investing in stocks can seem removed when you’re investing only for capital gains. The stocks go up and down every day and you get lost in it all. Dividends keep you grounded. Dividends are real, tangible cash and they’re real results that the plan is working. I love it! :)

      Best wishes!

    • says

      Luke,

      I am!

      What a wonderful journey this has been, and it’s been amazing to share it with so many readers. I’m blessed that there is such a wonderful community out there to share with, and learn from!

      I’m excited to pass that mark. Quite an achievement!

      Thanks for the support.

      Best regards!

    • says

      MFIJ,

      Thanks!

      It was definitely a wonderful month. I’m still early on in my journey, but getting over $150 that I didn’t have to work for is quite a victory. :)

      Every dollar counts!

      Take care.

  5. says

    Sounds like another great month, DM. Even though the 7% may seem low, it’s still better than 0% and you know that this was a lower month than usual. Keep up the good work and enjoy those dividends flowing in!

    • says

      Jake,

      7% is most certainly better than 0%. I had a very expensive month, but it’s still reassuring to know that I had to cover only 93% of it myself. It won’t be long before I’m covering 25% or more of my expenses via dividends on a regular basis. :)

      Keep up the great work on your end too!

      Best wishes.

  6. Onassis says

    Great income – without working! :-)
    Keep going!

    In may I have received 3,97 EUR from Procter & Gamble. That are 2,64% from your dividend income. ;-)
    But in june… the German Telekom will give me a huge payment :-)

    Onassis

    • says

      Onassis,

      Well, it’s more than 2.64%, because the EUR is higher than the USD. :)

      Every dollar counts. Don’t ever forget that. I started out with very little and my first couple of months involved $7-10 dividend payouts. A journey of a million miles starts out with a single step!

      Sounds like June will be much higher for you! :)

      Best regards.

  7. Anonymous says

    Dear Dividend Mantra,

    first of all thank you for all the work you put into the blog and the insight you provide by telling about your strategy and your stock Investment. I really appreciate the strategy of dividend growth and your take on it. It’s really helping further my knowledge on the anglo-american stock market.

    Being a young investor from Germany, I’d like to ask you and the community on your opinions about european stocks. Even though the history of ever growing dividens is not as long in Europe as it is in the US, there’s quite a lot companies some investors from across the Atlantic might enjoy looking into. So is there any advice you would give on those? Onassis above is invested in the German Telekom, as he told. I also like that stock as they were quite my first stocks to buy way back in the 90s on advice by my father (I was about twelve years old back then), but they were sold way before the collapse of the new economy took its toll on them. I bought back into Telekom for the dividend a few years ago and have been trying to add stocks with good dividend return to my Portfolio ever since.

    Kind regards

    Sebastian from Germany

    • says

      Sebastian,

      First, thanks for stopping by! I’m glad you enjoy the blog and I’m more than happy to share my journey if it inspires and educates others.

      As far as high quality companies from your side of the world, these are a few I follow and am interested in:

      Vodafone
      Nestle
      BP
      Royal Dutch Shell
      Novartis

      Hope that helps! Stay in touch.

      Best wishes.

  8. says

    I noticed in Feb. you had $215 with T, VOD, RTN, ABBV, ABT, PG, and KMI. This month was a bit less at $150 is this due to some dividend payments slipping in to June or were trades made to account for the difference ?

    Cheers,
    CD

    • says

      Captain,

      Thanks for pointing that out.

      The difference is on the account of a couple things.

      First, Vodafone pays out semi-annual dividends. The next dividend will be in August.

      Second, I have since sold ABT and ABBV. I laid out my case in an article a few months back where I described both my agony in before the decision was finally made, and then the sale of the securities. ABT was a very old holding for me, but ultimately I didn’t like ABBV’s over-reliance on the profit from Humira and ABT’s very low yield. I may end up regretting the sale, but for right now neither company really fits my portfolio.

      Best wishes!

  9. Anonymous says

    Dear DM,

    thank you for the fast reply. I think your pick of stocks from Great Britain and Switzerland is pretty solid. Vodafone is on my watchlist as well, BP was my first investment in the UK and has been paying its dividend ever since.

    I noticed you didn’t pick any stocks from the German Stocks Index DAX, however. I can imagine a couple of reasons for that and would like to know which one is the most important to you:
    Worried about the Euro crisis?
    Fiscal reasons?
    Lower market capitalization?
    Annual paying of dividends?
    The main reason for my interest in your opinion is of course a rather selfish one: Several dividend champions of the DAX can be bought at a rather low price these days, with E.on and RWE having fallen from past glory and Munich RE suffering a temporal setback in stock price because of the recent flood in the south and east of Germany. If there is any favourite you have among these, please let me know.

    I’d also be glad if you could share your opinion on the automobile industry one day, as it constitutes an important part of german economy.

    Thank you and all the best!

    Sebastian

    • says

      Sebastian,

      Well, to be honest I mainly follow a small universe of dividend growth stocks that meet certain criteria, and there just aren’t many (any?) from over in Germany that meet my criteria. Also, you have to remember that many of the stocks you list don’t trade on our exchanges over here. So it’s difficult for me to buy those stocks. For instance, I don’t believe I can purchase shares in Munich RE on any of my exchanges.

      I’m sure there are many high quality companies that trade on your exchange and offer solid risk-adjusted returns. I’m just not familiar with your market.

      I wish I could be of more help! Hopefully someone from Germany will chime in and help you out. :) Onassis?

      Best wishes.

    • Anonymous says

      Hi DM,

      thanks for the fast reply. I didn’t know about any Problems concerning the ability of european stocks for american investors. That’s really interesting information for me. Over here in Europe, you are able to purchase most stocks from the western world as long as they have an ISIN-ID. That’s especially useful when looking into tech stocks from the US.

      With that availability of great stocks from the US, however, I’m really looking for inspiration from your blog and will of course Keep following. :)

      My mention of Munich RE was made because it was one of WB’s more recent Investments and has already paid out for him and the shareholders rather nicely.

      Kind regards

      Sebastian

    • says

      Hello Sebastian,

      I am DG investor from germany. I actually have trouble finding decent investments in the DAX as well. Currently I am holding Munich RE (may add more on further weakness) and VW (not adding above 140€). I have currently no plans to add other DAX companies.

      Kind regards,

      Christoph

  10. Anonymous says

    Hi Mr. Mantra,

    I really enjoy the blog. It certainly is a great approach to life – Set a goal and work hard towards making it happen.

    When you say “I was only able to cover about 7.4% of my expenses this past month via passive dividend income” – Is the additional tax liability that you incur as a result of having these assets in a taxable account counted for as a monthly expense?

    Thanks,
    - DONT_COOK_THE_BOOK

    • says

      Cook,

      Glad you enjoy the blog and the theme of hard work behind it!

      I don’t count taxes as an expense in my budgets. Taxes reduce my net income. I reconcile my taxes every spring and you’ll see a reduction in net income usually around February/March to account for the taxes I owe on my dividends. My taxes are paid annually, so you only see the income reduction annually.

      So, no the 7.4% doesn’t count taxes…but the annual numbers include taxes.

      Hope that helps!

      Best regards.

  11. Anonymous says

    Took2summit here,

    I’m only about 1 year in to investing and my brokerage has a feature that shows forward 12 month expected dividends and I just passed 100+ for every month so that was pretty exciting. Unfortunately my battle is still far from over as I am looking for about 100-120k when I retire. I’m only 26 and make decent money and have a good savings rate, I figure I can save $50,000 per year so hopefully I’ll be able to reach my goal still before 65. I figure I’ll need about $3million to achieve this, and based on saving 50k a year I’m about 20 years away, which would put me right at 46. The sooner then better!

    It is quite satisfying to go into my projected investment income tab and see those numbers grow, next month it suggest I’ll bring in $187! quite satisfying indeed..

    • says

      Took2Summit,

      Wow! That’s fantastic that you’re able to save that kind of income every year! I can only wish I could save $50k/year. I’ve never looked at my savings on a yearly basis like that, but I’m probably somewhere around $30k/year which is much, much higher than I ever thought I would be. That’s a gross annual salary for many people.

      It’s definitely satisfying to see that projected dividend income continue to grow. It’s very motivating to keep seeing money that you didn’t have to work for roll into your account.

      You’re very young and doing fantastic. You’ll be a very wealthy young man. Enjoy it!

      Take care.

  12. Anonymous says

    you need a kick in the butt you are doing fine 7% is great I know you are going to make it.i know you are not complaining look at all that positive stuff coming your way. accolades to you

    • says

      Anonymous,

      Oh, I’m definitely not complaining! I’m in a wonderful position right now. The fact that I even have money left over at the end of every month to invest puts me in very small group of people worldwide. There’s billions of people around the world out there that are starving, and I’m lucky enough to be in the position to invest in high quality companies and buy my way to financial freedom. Life is wonderful, indeed!

      Thanks for stopping by. :)

      Best wishes.

  13. Anonymous says

    T2S here,

    Not sure why it’s not letting me respond. Keep in mind that 50,000 includes 401k and roth contributions, company matches (I have a decent 5% company match) as well as taxable savings, otherwise I’d probably be right around 30,000 myself.

    I plan to take advantage of the 401k/roth loophole that lets you take “retirement like” distributions at any age, using a mortality table, penalty free, and tax free in the instance. So at 46 I will be able to withdraw from my 401k and my roth using these tables, without paying penalty. The only thing I have been trying to figure out is dividends from 401ks are taxed as ordinary income and not the dividend tax rate of 15%. I will probably end up converting my 401k into roth once I retire around 46, and dividends from roth are tax free! music to my ears. even though 15% isn’t so bad. but if i can get around the 15% i absolutely will.

    • says

      Anonymous,

      Sounds like a great plan there. I don’t invest in a 401(k) because my employer does not match or offer any other type of financial reward for taking part. I only invest in a taxable account because I plan on accessing my dividend income very early in life. There are ways to access IRA money through SEPP, but I’d rather avoid the headache of the paperwork. That’s just me.

      Keep up the great work!

      Best regards.

  14. gibor says

    DM, what wondering what do you think about stocks like ABBV, LMT, RTN? They doesn’t look too expensive with p/e 10-13 , reasonable payout and yield

    • says

      gibor,

      I actually sold ABBV not long ago, after the spin-off. I didn’t like how much it relied on one product (Humira) for its revenue and I didn’t see anything in the pipeline to make up for projected lost revenue once it goes off patent. I discussed that just a few months ago after going back and forth as to whether to hold on to or sell ABT/ABBV. It was an extremely tough call.

      I own RTN. I like the company but it has had a pretty big run over the last month or so. I’d like to see it pull back to $60 or so before I’d consider increasing my position.

      LMT is the same. Shares could have been purchased for about $90 just a couple months ago. Certainly great to be invested with the world’s largest defense firm as I don’t ever see them going out of business and the high yield is nice. They had some unfunded pension issues last I knew, but I haven’t really taken a look at the company in a while now. It seems that many of the defense contractors have really ran up in the last month or two.

      Tough to find value right now, no doubt about it.

      Take care!

  15. says

    Hi jason,

    I’ve been following your blog and dividend growth investors (also seeking alpha dividends section) blog for almost 2 years. Every monday wednesday and friday eagerly awaiting for an update. I also love to read the comment section because you can find some valuable information there. I never took the time to leave a comment because i am a small time investor and new in dividend growth investing. I have been building my dividend growth portfolio for 2, 5 years now learning from some mistakes but in general following the rules of dividend growth investing. I am from, the netherlands. It seems that your international public is expanding. Dividend seems like an universal language. I admire your discipline and the lifestyle. I am 28 years old and married. A lifestyle like yours in the younger years of life demands a lot of sacrafice that me and my wife are not disciplined enough to make. I try to save what i can and my wife is typically american consumer. Thats weird because she is also dutch. So im the only one saving enough money to invest. I typically save around € 340. 140 goes to 5 different mutual funds that pay dividends every quarter. And the € 200 goes to dividend growth stocks. I wait till i have at least € 750 to invest. My last purchase was last week when i bought 25 shares of unilever. I recommend you to at least take a look at that company. Their also very social responsible. Besides my dividend growth investing account i also have a trading account. I try to earn a minimum 25% per year. Looking for undervalued companies or companies that were severly punished for no reason. I started with € 2.000 a year and a half ago and doubled my money now. This is more like a research account for me as i invest all the returns right back and try to see if i can trade it all the way to a million euros. Each year i set end-year targets for my dividend account and my traders account and try to reach them. Sorry for my lenghty first post. I will try to shorten them with my future posts. Thank you for your blog it is a major guideline for me!

    • says

      Trader666,

      Thanks for the kind words! I’m glad you find some value in the blog and enjoy the content. The comment section actually includes a lot of fantastic information, usually better than the article.

      It sounds like you’re off to a fantastic start, especially for being so young. The key is to start young, that’s for sure! Keep at it and you’ll see your investments, and net worth, grow month after month. Good luck on getting to that million euro mark! I’ll be rooting for you.

      Please stay in touch. I appreciate your readership!

      Best regards.

  16. gibor says

    Regarding European market, I have the only exposure to it through ETF : VEA -Vanguard FTSE Developed Markets, MER just 0.1% , not bad yield at 3.2%, 63% holdings are from Europe

    • says

      gibor,

      Great info there! I hope to increase my exposure to foreign holdings when the valuations allow. There are some great companies from the other side of the Atlantic.

      Take care!

  17. gibor says

    Jason, wanted to here your opinion on CAT and DE. Seems like they 2 stocks from just a few dividend contenders/chamions with reasonable validation. All Trailing P/E, forward P/E, Forward PEG are significantly below their 5-year average. Also most likely they will increase dividend next quorter. What do your think about those stocks?

    • says

      gibor,

      I like both companies. The only issues are the yield is lower with both stocks than I usually like and the businesses are very capital intensive. That being said, I think they are both attractively valued. CAT seems to test $80 often enough to make that a target entry price.

      Best wishes!

    • says

      troubled investor,

      Great thoughts there! Thanks for sharing. That certainly could impact earnings, although if the outlook were negative I’m wondering why CAT would raise the dividend by a full 15%? Strange. I suppose we’ll see what happens!

      Best regards.

  18. Retired2thdoc says

    Hi DM
    Enjoy getting your reports.
    Might I make a suggestion?
    Would you consider adding an “M” for monthly and “Q” for quarterly where this applies.
    Your monthly reports might explain the variances in them a bit better this way.
    Good luck.
    Best wishes

    • says

      Retired,

      Thanks for stopping by! Glad you enjoy the reports.

      I’m always open to suggestions, however I’m not sure where you’re looking for me to add and “M” and a “Q”. Would you mind elaborating or give an example?

      Best regards!

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