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 December:
This month, my cash-flow approach generated the following income through dividends:
- Unilever (14.36 EUR)
- Pfizer (24.78 EUR)
- Johnson & Johnson (13.91 EUR)
- Archer Daniels Midland (8.51 EUR)
- Snap-on (11.20 EUR)
- 3M (19.36 EUR)
- Realty Income (3.38 EUR)
- Qualcomm (9.84 EUR)
- Royal Dutch Shell (9.95 EUR)
- Kontoor Brands (6.03 EUR)
- V.F. Corp (14.42 EUR)
- Broadcom (13.44 EUR)
- Simon Property Group (6.49 EUR)
- Imperial Brands (10.57 EUR).
The total income through dividends in December (after taxes) was: EUR 166.24 /appr. 188 USD
Dividend income report check
December was a good finish to a financially successful year. The dividend income of EUR 166 / 188 USD was almost 70 percent higher in EUR than the amount received in December 2020. I have not even taken into account an outstanding payment. While my Energy ETF also paid a dividend in December, my broker has not yet booked it. I will therefore not be able to book the amount until January. Overall, the cash income per month in 2021 was as follows:
Dividends were higher each month than in the previous year. Most of these increases were due to my monthly new stock purchases rather than dividend increases. However, these also contributed in part to the total annual income being 57 percent above that from 2020. My medium-term goal remains to double monthly revenues every two years.
Stocks I sold in December
I sold no shares this month.
Stock purchases in December
In December, I bought more shares of great companies so that the dividends will continue to rise in the future. All purchases were expansions of existing holdings. So no new companies entered my portfolio.
- Realty Income (17 shares)
- Leggett & Platt (32 shares)
- Omega Healthcare (25 shares)
- Xtrackers MSCI USA Financials UE 1D (50 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.
I took advantage of the mini-dip in early December to increase my very small position in Realty Income. 17 new shares entered my portfolio, almost doubling my total holding.
Realty Income is not a bargain, but from my point of view, it is not overpriced. The dividend yield is currently still 4 percent. The P/FFO ratio is quite high at 20, but still within the historical range.
Of course, I would have been pleased with a lower price, but an increase in my overall position was long overdue here.
I also used the sharp setback at Leggett & Platt to increase my holding. The price of the share fell by almost 8 percent in one day. The reason was that Leggett & Platt was kicked out of some indices and many institutional investors had to adjust their ETF structure.
As a cash flow-oriented investor who doesn’t care about stock price fluctuations, these are of course great discount opportunities. As a result of the drop, the dividend yield rose to 4.3 percent.
The adjusted P/E ratio is still below 15, as the company is struggling a bit with inflation and supply chain difficulties. In the long run, however, these problems should be solved. With a payout ratio of 60 percent, management should be able to navigate the dividend through the tough market environment. For a closer at the company, feel free to check out my article on Seeking Alpha.
My oh my, OHI was a risky buy. With a dividend yield of over 9 percent and several illiquid tenants, Omega Healthcare Investors is a rather risky REIT.
Omicron and the REIT’s indirect dependence on government social care programs (Medicare and Medicaid) make it impossible to predict how the business will perform.
I am aware that a dividend cut is not unlikely. At least the market seems to be pricing in such a cut and I am humble enough not to bet against such a scenario. But even with a temporary cut of 40 percent, I would still be happy with the dividend yield.
In addition, Omega Healthcare Investors could benefit in the long run from an aging society. In addition, management has shown several times in recent years that it can navigate through rough waters.
At the end of December, I found it difficult to really convince myself to buy certain stocks. Many stocks were on my list but somehow everything seemed a bit unattractive. In such situations, I simply use my ETFs. This allows me to diversify my capital and invest in several companies. In December, I, therefore, increased my Financials ETF.
Watchlist for January
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)
- BASF
- Johnson Outdoors (JOUT)
- Emerging Markets/Energy sector/Financials sector
- 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.
