Welcome to a new report of my Dividend Diary on the TEV Blog. Here, I report the development of a cash flow-oriented investment approach that focuses on generating a passive income through dividends. Against this background, the goal is not to outperform the market but to put food on the table through a regular income via dividends.
With the Dividend Diary, I document how a cash-flow investment approach can be part of well-balanced wealth management. To keep things simple, I have built three pillars:
- Active income.
- Passive income.
- Conversion.
Dividends fall into the last two categories. They are passive because they provide a cash flow without me having to go to work. Additionally, they are an essential pillar for the conversion since they can be reinvested to generate even more income in the future. That is the Theory. Now let’s get down to practice.
My monthly dividend income in October:
This month, my cash-flow approach generated the following income through dividends:
- Kimberly-Clark (20.40 EUR)
- Automatic Data Processing (5.32 EUR)
- GlaxoSmithKline (14.07 EUR)
- Merck & Co. (8.31 EUR)
- Diageo (23.79 EUR)
- Iron Mountain (13.03 EUR)
- Altria (18.49 EUR)
- Leggett & Platt (17.25 EUR)
- Realty Income (3.19 EUR)
- Ping An Insurance (17.26 EUR)
- Cisco (9.64).
The total income through dividends in October (after taxes) was: EUR 150.75/appr. 174 USD
Dividend income report check
October was a good month. I was in Dubai for a week with friends. And while I made sure I always had enough sunscreen on my skin in the heat of the Arab Emirates, my stocks did their usual thing during that time, going down or up (TeamViewer), sometimes more (TeamViewer :)) and sometimes less volatile, and paying nice dividends.
While I am less shocked by the price movements, I am all the more pleased about the dividends. I mean, how nice is it to sit with a coffee at the end of the month and count the dividends? And if dividend payments are even more than 60 percent higher than in the previous year, then the financial world is fortunately in order after all. So I am very much on track to double my monthly cash flow every two years. The overall development looks like this:
In 2021’s last remaining months, I expect to see much higher cash flows than the previous year’s figures. Some of my more significant investments are going to distribute some nice cash flows. Especially two of my ETF holdings pay their dividends in November (Emerging Markets) and December (Energy), so I am looking very much forward to the end of this successful year.
Stocks I sold in October
I sold no shares this month.
Stock purchases in October
In October, I bought more shares of great companies so that the dividends will continue to rise in the future.
- MSCI World Energy ETF (238 shares)
- Bristol-Myers Squibb (20 shares)
- Munich Re (5 shares)
- HP Inc. (75 shares)
- AbbVie (4 shares)
In the following, I will briefly explain why I bought these companies. Please do not expect a fundamental analysis. I will only mention some aspects per company that might be of interest to the readers. Maybe you will find inspiration for your investment. In case you disagree, feel free to write your opinion about my purchases in the comments.
Please keep in mind that this is only a non-representative sample of my overall asset management.
In October, I continued to work diligently on my December cash flow, using this month to increase my shares of my MSCI World Energy ETF holding (which distributes dividends in December). Here, I had bought the first 520 shares in September ’21.
The energy sector as a whole is still valued relatively low. And although the oil price continues to rise, the shares of many energy companies are still far from their pre-COVID-19 levels.
If the oil price stays as it is now or rises even further, there will be significant profits for companies like Royal Dutch Shell, Exxon, and Co.
And before I add to individual stocks like my Royal Dutch Shell or Kinder Morgan holdings, I’d rather buy a whole basket of energy companies.
Furthermore, I still have to consider if and when I sell my Royal Dutch Shell and Kinder Morgan shares and shift the capital into the ETF. I haven’t found a clear strategy for me here yet.
I also continued to expand my Bristol-Myers Squibb holding by buying another bunch of 20 shares. My last purchase of the company was in August ’21 (I started to build up a position in April 2021). Since my previous purchase, the share price has come back by 10 percent.
I used this drag down for an additional purchase. Fundamentally, the share is still very cheap and offers plenty of upside potential based on its historical fair values. However, my position is now substantial enough, and I do not plan to buy again in the next few months.
The purchase of the 5 Munich Re shares followed quite respectable preliminary quarterly figures. Due to great gains on investments, the company’s third-quarter earnings were significantly better than expected. Despite the heavy burdens from natural catastrophes, Munich Re expects to achieve its anticipated net result of EUR 2.8 billion for this year.
This means that Munich Re could achieve record earnings per share this year – given the uncertain times, a sign of strength and success and, for me, reason enough to add more shares of this anchor investment to my portfolio.
I also bought shares in the laptop and printer giant HP. The company has a monstrous focus on share buybacks and dividend increases.
The spin-off of the consulting business has streamlined the company, and I am curious to see where the journey will take it.
Sure, many investors believe smartphones are replacing laptops. But even though every iPhone Pro now has more power than typical laptops ten years ago, the laptop market is still doing quite well. Besides that, HP’s printing division is quite interesting (3D printing, metal printing), and I’m curious to see what the company will do with it. Funnily enough, the company is also still valued at a P/E ratio below 10, with a dividend yield of 3.5 percent (including the recent 29 percent hike).
Yep, and there was also AbbVie. Here I have only bought four additional shares to increase my position slightly. The company increased its dividend by 8.5 percent a few days ago and presented quite good figures for the third quarter.
Overall, the investment thesis is still intact. The company is working to reduce its dependence on its blockbuster drug Humira with expiring patents. This plan is working well so far with good sales figures for AbbVie’s next blockbuster generation around the drugs Skyrizi (3Q revenues net revenues were EUR 796 million) and Rinvoq (net revenues were EUR 453 million).
Investors who are a little less risk-averse here and, like me, want to have some shares of this company in their portfolio can still benefit from the low fundamental valuation and the high dividend yield.
Watchlist for November
There will be some additional share purchases next month. As you may know, I am relatively flexible when it comes to new investments. Either I buy new positions, or I increase my shares in existing investments.
The following companies are on my watchlist in particular:
- Microsoft (MSFT)
- Digital Turbine (APPS)
- Merck & Co. (MRK)
- Emerging Markets/Energy stocks
- Unilever (UL)
- General Mills (GIS)
If you look at my report from last month, you will likely see that none of the companies I bought were on my watchlist. Why is that? Is the watchlist nonsense, and in the end, I only do what I want anyway? Yeah, a little bit. I don’t have a fixed system for my stock purchases, and that’s one thing I have to consider changing.
However, I have an extensive overview of many companies that I look at from time to time. The watchlist contains primarily companies that I have examined particularly carefully, where substantial changes are imminent, or companies that are in my focus for other reasons.
These companies are present to me in some form, which is why I put them on the list and perhaps monitor them a little more closely than other companies. But it often happens that I invest in different companies when it seems convenient at that moment.
