February 2017 dividend income report, getting close to 60k

This update follows hot on the heels of my previous dividend income report, the month is barely halfway gone but there are no more dividends in the pipeline for me this month.

February 2017 dividend income

  • Kinder Morgan: 4.36EUR
  • Colgate-Palmolive: 3.50EUR
  • Omega Healthcare Investors: 8.71EUR
  • YUM! Brands: 2.47EUR

That’s just 19.04EUR in after-taxes dividend income for February 2017, a total well below my monthly average. I just updated my spreadsheet and based on current currency exchange rates my average monthly dividend income is now close to 120EUR. It’s still far from anything resembling financial independence but it would be high enough to pay the monthly power bills.

There just aren’t a lot of companies in my portfolio that pay a dividend in February and the ones that do are rather small positions or have a low yield. Next year should a little bit higher as I recently initiated a position in Bristol-Myers Squibb (NYSE:BMY) — and they happen to pay a dividend in February.

Dividend increases

  • WDP:+6%
  • Diageo: +5%
  • Gilead: +10%
  • Sanofi: +1%
  • Novo Nordisk: +19%

I expected YUM! China to announce its first dividend this month but that didn’t happen. The company’s CFO said a review of all available options for capital allocation indicated buybacks were not the best fit. Instead, the company will be doing buybacks. So this is the first no-dividend company that snuck into my dividend growth portfolio.

A dividend increase from Coca Cola is imminent, probably as early as tomorrow.

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One new buy

  • 23 Bristol-Myers Squibb (NYSE:BMY)

I added 23 shares of BMY about two weeks ago, a biopharma company that’s a leader in immunotherapy cancer treatment. My shares were bought just a couple of percentage points above the 52-week low. At the moment, this position is up 14.5% so I’m unlikely to add more shares to this position as it’s now less attractive than at the end of January. At the time I bought it, the stock traded at a 3.2% dividend yield with a sub-60% payout ratio.

Portfolio close to hitting 60,000EUR

With the Trump rally continuing, my portfolio is regularly hitting new all-time highs. The total value of my dividend portfolio is getting very close to the €60,000 mark, with the addition of some fresh capital I will probably blast through this level by the end of the month.

To keep up to date about my dividend investing journey you can follow me on Twitter. I try to post relevant tweets on a regular basis.

How was your month? Lots of dividends or new purchases?

January 2017 dividend income

Earlier today I received my dividend from General Electric, this closes out the month in terms of dividend income. Here’s a look at all the dividends I received this month.

January 2017 dividend income

  • Nike: 2.57EUR
  • Philip Morris: 53.66EUR
  • GlaxoSmithKline: 23.20EUR
  • General Electric: 6.62EUR

In total, that’s 86.05EUR in after-taxes dividends for January.

January’s dividend increases

  • PZ Cussons: +2.3%
  • Omega Healthcare Investors: +1.6%

New buys

  • 17 Nike shares
  • 5 AB InBev shares

I still have a couple of free trades that expire soon so I’m looking at another mini-buy in the coming days.

Books I’m reading
Last month I mentioned I was reading Shoe Dog, the autobiography from Nike founder Phil Knight. I finished the book a couple of weeks ago and I definitely recommend it to anyone who likes reading about startups and success stories.

In the first chapters, Knight details his trip around the world in his early 20s and explains how he worked up the courage to pursue his “crazy little idea”. He closed a deal with a Japanese shoe company and a couple of months later Knight’s company started selling Onitsuka runner shoes in the US.

I was surprised to read how many growing pains Knight experienced and how he juggled between a day job and managing his rapidly growing company on the side. He always took out as much debt as he could and lived on the edge to make his company grow as fast as possible. Despite high demand for the shoes, the company almost went bankrupt a couple of times due to debt and liquidity issues. Knight and his team of self-described “chronically unemployable” partners also had to deal with two major legal issues, including a lawsuit from Onitsuka as well as issues with the US government that nearly crippled the company.

The book ends with Nike’s IPO, which seems to be the moment things got better. Great read, well written and an interesting journey.

At the moment I’m reading Peter Lynch’s One Up On Wall Street, I started reading it a couple of months ago and picked it up again after finishing Shoe Dog. I’ve read about a third of this book, it offers some nice insights but could use a revision as it’s starting to get pretty old. For example, the book talks about SmithKline Beecham and this is a company that merged with Glaxo Wellcome to become GlaxoSmithKline in 2000. Little details I know but it makes the book feel a bit dated at times.

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20,000
As a closing note, congrats to the Dow Jones for finally hitting the 20k mark earlier today. It took over a month to take out this major milestone but finally the question of whether we’d see the US debt level top the $20 trillion mark first or see the DJ hit the 20,000 level first has been answered.

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How was your month?

December 2016 dividend income

Hard to believe but 2016 has almost passed. Dividend income is growing at a steady pace and since the US elections my portfolio has soared to new heights. It’s been a very busy month, there are so many things on my to-do list but unfortunately there are only 24 hours in a day.

December 2016 dividend income

  • Unilever: 17.96EUR
  • Hershey: 6.21EUR
  • Coca Cola: 10.35EUR
  • Royal Dutch Shell: 75.36EUR
  • McDonalds: 5.57EUR
  • NVIDIA: 1.58EUR
  • Gilead: 4.45EUR

Because I live in Belgium, all figures are converted to euro and I list the net income after all applicable taxes. In total, my December dividend income hit a level of 121.48EUR, bringing the total 2016 dividend income to a sum of 1347.08EUR.

Dividend increases

  • General Electric increased its dividend by 4.3% to $0.24 per quarter.

New buys

I used a combination of dividend income and some leftover cash in my account to add three shares of Nike (NKE).

Earlier this week I started reading Shoe Dog, a new memoir written by Nike founder Phil Knight. It cover his trip around the world as a young adult in the 1960s, how he got into the shoe business, the start-up days of Nike and the company’s rise to fame. I’ve only read about 1/8th of the book so far but if you enjoy this sort of books I think this one is definitely worth the read! It’s well-written and Knight’s backstory is more captivating than I imagined, it’s hard to put this book down.

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Happy holidays to all my readers and best wishes for 2017!

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November 2016 dividend income report and a small buy

Earlier today I received my interim dividend from Van de Velde, so this month’s dividend income is now finalized.

November 2016 dividend income:

  • YUM! Brands: 4.27EUR
  • Omega Healthcare Investors: 8.78EUR
  • Colgate-Palmolive: 3.58EUR
  • Kinder Morgan: 4.45EUR
  • AB InBev: 19.86EUR
  • Van de Velde: 37.45EUR

In total that’s 78.39EUR in dividend income for the month of November. I’m not sure if next year will be at the same level, I’m still a bit uncertain if AB InBev will keep its dividend at the current level. It would be smarter for the company to focus on reducing its debt at a more rapid rate by temporarily cutting the dividend to a lower level.

Additionally, I still regard the interim dividend from Van de Velde as a one-time item. The company is paying out all cash it doesn’t need to its shareholders. The base dividend is very safe but I’m not confident if they can keep the total dividend at the same level for much longer. As such, I do not include the interim dividend from Van de Velde in my 2017 dividend income projection to keep it a bit more conservative.

My 2017 dividend income projection

Earlier this month I adjusted my dividend income projection for the higher Belgian tax on dividend income (from 27% to 30%). Based on my current investments, the present dividend payouts, the current currency exchange rates and without taking any growth or reinvestment into account I reach a figure of 1364.56EUR. The mental goal I have in mind for 2017 is dividend income 1500EUR.

So far dividend income is increasing faster than what I modeled a year or two ago, primarily due to a higher level of savings. Increased taxation has been a major headwind, since I started with dividend investing the Belgian dividend tax increased from a level of 25 percent to 30 percent. Therefore I’m increasingly shifting my focus to stocks with lower yields, which will result in less future dividend income in favor of higher capital appreciation (which is still untaxed).

Another headwind is that in the short-term, the dividend growth potential of a lot of the stocks I’m invested in doesn’t look that good. Too many names in my portfolio with a frozen dividend or dividend growth that has decelerated to a low single-digit rate.

Recent dividend increases:

  • Nike: +12.5%

Another nice dividend increase from Nike this month.

One small buy: WDP

Since my last blog update I’ve allocated a bit more money to Warehouses De Pauw (EBR:WDP), a Belgian REIT specialized in industrial real estate like distribution centers and warehouses. Last week the company announced a capital increase, they created 190 million EUR worth of new shares to fund expansion plans. This includes 120 million EUR of pre-let investments in the Netherlands.

WDP also confirmed its 2016 outlook, the REIT is on track to deliver EPS of 5.30EUR and a dividend of 4.25EUR per share, which represents a 6 percent increase versus last year. The 2016-2020 growth plan calls for a portfolio growth of 1 billion EUR — of which they already secured 330 million EUR. For book year 2020, this should result in 25 percent earnings per share and dividend growth versus book year 2015.

I participated in the capital increase, five more shares of WDP will find their way to my account on November 28. These shares were issued at a price of 75EUR, a 6.7 percent discount versus the closing price before the capital raise announcement was made.

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How was your month?

November additions: YUM China, Novo Nordisk and NVIDIA

My portfolio has seen a couple of changes this month, here’s an update about some of my new additions with some random thoughts mixed in.

Back into YUM + YUM China after the spin-off
As I discussed in my September dividend income post, spin-offs of foreign companies are almost always taxed at the same rate as dividends here in Belgium thanks to our inane (discovered the word “inane” some time ago and I love it!) tax laws. This is why I temporarily exited my YUM! Brands position. After the distribution date, I bought back my YUM shares and added YUMC shares. In fact, I used some fresh capital to slightly increase my position in the new YUM China as a way of giving China some extra weight (but still very small) in my portfolio.

YUM announced a hefty dividend increase right before the YUMC spin-off but at the moment it’s unknown whether the combined payout  of the two entities will be the same or lower than before.

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Novo Nordisk becomes a value play
Shares of diabetes leader Novo Nordisk have seemingly fallen off a cliff this year, despite the company being on track to deliver its best year ever. While the company’s financials are still going strong, investors are put off by the firm’s drastically reduced long-term outlook. In February, Novo Nordisk reduced its long-term target for operating profit growth from 15 percent to 10 percent, and last month the target got reduced to 5 percent.

While demand for the company’s products is still growing rapidly, the drug-pricing war has dimmed future prospects. Payers are no longer willing to pay up for convenience, which probably also resulted in Novo Nordisk’s decision to cancel further development of its innovative oral insuline treatment. We may never know if this insulin tablet effort would have been a viable alternative for insulin injections, but it’s sad for the millions and millions of diabetics who now no longer have a prospect of being able to abandon needles sometime in the future.

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As a result of the big share price drop, Novo Nordisk is no longer trading at a premium versus the market but at a nice discount. While it’s a bummer for investors who recently bought shares, it does make Novo Nordisk’s buyback program more effective. The dividend yield is currently a hefty 2.8 percent but unfortunately Danish withholding tax is 27 percent.

One thing is for sure: the diabetes and obesity epidemic isn’t going anywhere. Versus a lot of the no-growth or low-growth blue chips I see potential for more than satisfactory long-term returns at Novo Nordisk’s current valuation so I bought 45 more shares this week.

NVIDIA: A stock for the future?
The sector breakdown of my portfolio looks very different from what you see with a broad index like the S&P500. I own no financials, have no exposure to the traditional utilities nor do I have any telecoms sending me regular dividend checks. Since the financial crisis I never felt the need to get into banks, they’re boring, hard to analyze and I see no need to diversify just for the sake of diversification. With high dividend taxes in Belgium I also no longer feel the need to own telecoms with high dividend yields and in case of power utilities I have some doubts about how some trends like renewables and energy storage will impact their long-term performance.

Another segment I didn’t have exposure to was IT/technology, but that changed this week with the purchase of NVIDIA shares! There are several interesting names in this space that I would like to own, even non-dividend paying stocks like Google, but so far nothing really popped up on my radar.

I  know Apple is one of the most-owned technology stocks by dividend growth investors, the valuation looks attractive but I must admit I never really liked the company. Against my expectations, they’ve had a very good run the past decade but I have doubts about what they’re going to achieve in the future. Apple does have lots of cash but they lost their visionary leader and I do not think they have a sufficient moat in the smartphone market, which is the company’s biggest profit driver. Of course, even companies with declining sales can wildly outperform the S&P500, but at the moment I feel no need to own Apple.

My ten-bagger that wasn’t…
This post is getting longer than I intended it to be so let’s cut straight to the chase. One stock that’s been on my radar for some time is NVIDIA. I think I once read a quote about how it’s not the stocks you buy but the stocks you sell that you’ll regret. In case of NVIDIA this is totally true. It’s hard to believe right now but last decade I was sitting on top of over 600 shares of NVIDIA.

I was still quite young at the time and because I wanted to save money for a house I sold these shares less than a year later. At the time I predicted strong growth for PC gaming,  a continued market dominance for NVIDIA and the potential for strong growth in non-gaming segments. The road was bumpy but over the years it played out exactly as I expected. Had I held these shares it would have been a ten-bagger (partly helped by the stronger dollar) and the shares of this one company alone would be worth more than the entirety of the stock portfolio I own today.

It’s a good illustration of how the outperformance of a couple of stocks has the potential to transform a portfolio. A lot of the sentiments I had about NVIDIA last decade still ring true and I still follow the company closely — even though I’m no longer a gamer. They’re as strong as ever in PC gaming, I have a lot of confidence in the CEO and the company is seeing massive growth in non-gaming segments.

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When I look at the future, I can see several trends playing out right now that I think are going to be very disruptive for the economy and the world in general. One one hand I see a very bright future for solar and wind energy, both are getting closer every year to the point it will be a no-brainer in a lot of parts of the world to deploy them en masse. Next there’s electric cars, they’re still quite expensive but in a not-too-far-away future new car buyers will look at the total cost of ownership and most people will decide to go electric because it won’t make sense to pay more for an old-fashioned  gasoline or diesel car.

Another disruptive field that’s a bit harder to grasp is artificial intelligence. It’s a term that’s been around for ages but the last couple of years a lot of the pieces of the puzzle are starting to fall together. It’s easy to see how self-driving cars will revolutionize the world, and have a huge impact on the job market — and that’s just one of the many applications of this new wave of innovation. NVIDIA’s GPU-based platforms are well-positioned to ride this wave and the company is seeing massive growth in not only its datacenter and automotive segments, but also in its traditional gaming segment.

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A total of 19 NVDA shares landed in my portfolio. While NVIDIA does look expensive when you simply check the current P/E, this week’s earnings report suggests that on a forward basis, it doesn’t look expensive at all. This quarter NVIDIA beat it out of the park by growing its earnings per share by a huge 104 percent versus 2015.

It’s also nice to see the company has no net debt on its balance sheet, and a rather strong cash position. The company doesn’t have a long tradition of paying a dividend, they introduced one in 2012 and over the last four years it has nearly doubled, to a level of 14 cents per share.

The dividend yield is really low but the firm has a low payout ratio. This doesn’t really bother me anymore, after the Belgian government decided to hike dividend taxes for the second time in two years I decided to put less emphasis on current yield and a higher priority on growing capital to be able to buy the income I need in the future.

Dividend income projection for 2017
My last calculation says I’m on track to receive 1323.29EUR of dividend income in 2017. I just updated my spreadsheet to account for the increase in Belgian dividend tax (from 27% to 30%) and it’s pretty sour to see this tax increase is going to cost me an estimated 53.14EUR. At this rate, all my dividend growth is going to the tax man.

The US election
As someone from Belgium looking at the US elections, what surprised me most about this run was how confident the media and pollsters were about Clinton ending up in the White House. Not just in the US but especially here in my own country, where a very large percentage of the population couldn’t imagine Trump winning.

I think a lot of people look at the world as they want it to be rather than how it really is. This isn’t always easy but I try my best. Ever since Trump started working his magic during the primaries I thought he had a pretty good chance of winning. There were some times when things took a turn for the worse for his campaign but somehow Teflon Donald always managed to prevail.

While I don’t agree with all of Trump’s views, specifically several economic issues and some views on scientific matters, I think that on aggregate he’s not going to be as bad as a lot of people expect. My guess is there will be a big difference between the street-fighting candidate and president Trump.

Another surprise is how the market responded to Trump winning the election. All markets went deep into the red when it became clear that this was the Brexit scenario all over again, but then things started recovering and Trump’s victory speech calmed everyone’s nerves. The European stock market opening wasn’t that bad and by the end of the day the US stock market was on its way to a new all-time record.

While the US stock indexes are trading at or near all-time highs, there is quite a bit of difference between various segments of the market. For example,  a lot of dividend stocks got punished quite severely this week, presumably due to the increase in bond yields.

We’ll see how it goes.

Which stocks did you buy recently?

October 2016 dividend income report and a new buy

Another month has almost passed, there are no further dividends on this month’s radar so it’s time for my dividend income report!

October 2016 dividend income:

  • Philip Morris: 53.24EUR
  • Diageo: 67.15EUR
  • GSK: 23.32EUR
  • PZ Cussons: 7.69EUR
  • South32: 0.41EUR
  • Coca Cola: 9.68EUR
  • General Electric: 6.52EUR

Adding it all together results in after-taxes dividend income of 168.01EUR, which is an above-average month thanks to payments from companies that have a bi-annual payout, the most prominent one being my large Diageo position.

The South32 dividend was a bit of a surprise.This is a spin-off from BHP Billiton, they didn’t pay out a dividend last year and because the position is so small I didn’t really keep track of what this company is up to. The 0.41EUR is not a lot but it’s nice to wake up one day, log into your account and discover a company decided to send you a bit of money.

Recent dividend increases:

  • Omega Healthcare Investors: +1.67%

Like clockwork, OHI delivers another quarterly dividend increase.

New buy: Nike

Earlier this month I added 25 shares of Nike to my portfolio. This doesn’t bring in a lot of dividend income because Nike has a low payout ratio but it does offer higher growth prospects. A more detailed post about Nike may or may not follow in the coming weeks, depending on how much time I have available to write it. Often it feels like 24 hours in a day just isn’t enough. It’s been some time since my last dividend growth stock article on SA but I hope to be able to finish a post about Brown-Forman before the end of the month. Deadlines certainly help to get work out.

I don’t think there’s still a lot of Nike clothing in my closet but they do make some nice stuff.

Image courtesy of Nike For Girls

Belgian dividend tax going up… again
Unfortunately, the latest round of budget planning from the Belgian government was bad news for dividend investors as the coalition in charge decided to increase dividend taxation to a whopping 30 percent, three percentage points more than the current rate. What’s particularly sour here is that they already raised the rate from 25 percent to 27 percent last year, and that government couldn’t even agree to lower corporate taxes.

A slight glimmer of good news is that the Belgian government will abolish the infamous speculation tax in 2017. Last year the Christian democrats pushed hard for some sort of a capital gains tax and the speculation tax was their consolidation prize. In a nutshell, gains made on certain financial transactions like stocks were taxed at a 33% rate if you sold within the first 6 months. Losses on other transactions were not deductible.

The speculation tax was little more than yet another round of bullying the small investor, people changed their behavior and there were a lot of loopholes and workarounds (CFDs for example). The net result was a big loss of liquidity for small and mid-cap shares and, as a lot of people expected, the speculation tax did not bring in any money, it actually resulted in a loss because government collected a lot less transaction tax than the year before.

Last year, government claimed the speculation tax would bring in 34 million EUR but recent estimates from the financial press estimate this folly resulted in a tax loss of 100 million EUR due to a combination of lower transaction tax and less corporate tax due to the impact on the profitability of brokers and banks. The latter had to make a lot of extra costs to adjust their IT systems to implement the speculation tax, which also had to be done on a tight schedule because there wasn’t a lot of time between the implementation date and the publication of the finalized version of this tax.

Of course, it also soured investor sentiment and disrupted whatever was left of the sense of a stable investing climate. Furthermore, there was also a lot of lingering uncertainty as there was no final decision about whether options would be taxed or not. For example, just a few months ago there was still talk about a possible retroactive application of the tax on options. But today,  ten months after the introduction of the speculation tax and two months before it will be axed, the finance minister finally confirmed options will not be taxed. You just can’t make this stuff up!

Unfortunately, we’re not entirely out of the woods yet.  The Christian democrats are still pushing strong to outleft the left by calling for the introduction of a capital gains tax. Before our current government, which has been in power just two years now, socialist parties were in government coalitions for roughly a quarter of a century. Now they’re back in the opposition and suddenly the left is screaming bloody murder for more taxes on “the rich” and “fairer fiscal policy” (read: more taxes on small investors).

While they pat themselves on the back, all I’ve seen over the last couple of years is that my overall tax level has gone up and that government still can’t balance its budget (which doesn’t even include the massive cost related to the inflow of asylum seekers and the extra security measures following the Brussels bombings because this is kept off budget).

/rant

How was your passive income in October?

September 2016 dividend income report

It’s been some time since I lasted updated the blog. I was meaning to post an update after I published another article at Seeking Alpha but due to time constraints I’ve still not been able to finish this article. Although I did increase the frequency of my Twitter posts!

I use my DaC Twitter handle to share news about stocks I follow, interesting economic developments, some politics here and there, and other stuff I find interesting. That includes the recent Elon Musk speech about making humans a multi-planetary species, absolutely fascinating stuff from one of the most inspiring entrepreneurs of our generation.

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September 2016 dividend income
The end of the month has arrived so it’s time to add up all the dividends I received this month for the monthly dividend income report. All figures are in euros and after all applicable taxes.

  • Unilever: 16.60EUR
  • Hershey: 5.80EUR
  • McDonalds: 4.91EUR
  • Royal Dutch Shell: 71.32EUR
  • BHP Billiton: 4.56EUR
  • Gilead: 4.14EUR

In total, I received a dividend income of 107.33EUR in September 2016. Overall September was a pretty solid month in terms of dividend income.

Recent dividend increases:

  • Philip Morris: +1.96%
  • McDonalds: +5.62%

Not really big surprises here. Philip Morris continues to suffer from the strong US dollar, which doesn’t give them a lot of room to increase the dividend. The McDonalds dividend hike wasn’t very big either, but still decent enough and roughly in-line with expectations.

Upcoming events for my portfolio
Two upcoming events required a bit of attention.

First up is AB InBev’s takeover of SABMiller. As I mentioned some time ago, I purchased SABMiller shares last year to speculate on the takeover but unfortunately the Brexit vote eliminated most of my gains due to a big drop of the British pound versus the euro. The offer has an all-cash and a partial-share alternative. Due to the currency fluctuations and a big increase in the share price of AB InBev, the latter option is valued quite a bit higher now than what it was a year ago. The downside is the share-based offer comes with a five-year lock-up. I instructed my broker to pick the share-based offer for my shares because I want to build a long-term position in AB InBev.

Another event in October is the YUM! Brands spin-off of YUM! China. For Belgian investors foreign spin-off operations are a disaster because by default, the Belgian tax man considers spin-offs as a taxable event. It’s taxed at the same rate as a dividend, so if I keep these shares I need to pay 27 percent on the value of YUM! China shares.

Of course, this tax is totally pointless because it can easily be avoided by selling your shares before the date the spin-off become effective. If I recall correctly, YUM! China accounts for about 35 percent of the YUM! profits so a quick calculations learns that if I keep these shares, I probably need to pay a tax equal to almost 10 percent of the value of my current YUM! holdings. Absolutely insane so this means I’ll be selling my YUM! shares sometime next month.

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