Dividend Growth Investment Income – August 2022 Update

Klaus Vedfelt

Brick by brick I have continued to pile on to my forward dividend income on my dividend growth investing journey. August was a great month, with $54.40 in forward income added fueled by regularly scheduled purchases, dividend reinvestments, and an announced dividend increase. My forward dividend income now stands at $3,784 and another step closer to my long-term goal.

Background

The initiation of tracking my DGI income on Seeking Alpha can be found here. My dividend income is tracked across all of my portfolios (taxable accounts and IRAs, not 401ks). A large portion of the target $100,000 will be produced within retirement accounts and thus not easily accessible during early retirement; however, I will aim to maintain a 33% proportion of dividend income in my taxable account. With this level of dividend income and adhering to the 4% rule on the overall taxable account size, I will be able to reasonably consider a change in career into a more part-time role or pursue other methods of income until I am able to access retirement funds. Meanwhile, my retirement accounts will continue to build and grow until I’m ready to begin taking distributions to fund my retirement.

Added Forward Income

During the month of August, I added $54.40 in forward income, mostly driven by new purchases but also increased through dividend reinvestments and one dividend hike announcement. August is a slower month in my portfolio, receiving only $80.53 in dividends for the month, but I am excited to see my reinvestments propel growth in next year’s August update. I believe it will be interesting to see what the growth in dividend income is driven by during the long term, so I will be categorizing my added forward income by method in which it grew (new purchases, dividend reinvestment, and dividend raises).

First up, let’s look at the major driver for this month, new purchases. Throughout the month I stuck to my plan of $150 weekly injections spread across several positions, 401k contributions every two weeks, and additional injections. One note, I recently started a new role with a new employer halfway through the month, therefore only one contribution to the 401k was made this month. I only have limited options in funds that I am able to contribute to through my employer, but the new positions represent a standard S&P 500 fund, an international market fund, and a large-cap growth fund. The overwhelming majority will be weighted to the S&P500 fund. However, there is limited visibility on distributions and dividends from these funds, so I will not include my 401k income in my current analysis or in the future. In total, I invested $1,775 during the month.

For my weekly $150 purchases I accumulated shares of Ally Financial (ALLY), STORE Capital (STOR), Corning Inc. (GLW), Medical Properties Trust (MPW), and Comcast Corp. (CMCSA). I also invested an additional $375 throughout August by purchasing shares of Analog Devices, Inc. (ADI), MPW, and ALLY. In total, here are the number of shares that have been added to my portfolio:

  • 8.099 shares of ALLY adding $9.71 in forward income
  • 3.00 shares of STOR adding $4.62 in forward income
  • 16.712 shares of MPW adding $19.38 in forward income
  • 7.023 shares of CMCSA adding $7.58 in forward income
  • 4.694 shares of GLW adding $5.08 in forward income
  • 0.876 shares of ADI adding $2.67 in forward income

Forward income was slightly boosted by dividend reinvestments during the month as well:

  • 0.246 shares of CVS Health (CVS) reinvested adding $0.54 in forward income
  • 0.241 shares of Realty Income (O) reinvested adding $0.72 in forward income
  • 0.127 shares of Carrier (CARR) reinvested adding $0.08 in forward income
  • 0.686 shares of Ally Financial Inc. reinvested adding $0.82 in forward income
  • 0.106 shares of Starbucks (SBUX) reinvested adding $0.21 in forward income

Lastly, forward income was boosted by one dividend hike announcement, the 12.5% dividend hike resulted in:

  • $3.37 increase in forward income from American Financial Group (AFG)

In summary, here are the sources of my dividend income growth looking forward:

Source Forward Income Added
New Purchases $48.66
Dividend Reinvestments

$2.37

Dividend Rate Increases $3.37
Total $54.40

Portfolio

Here is a look at my full portfolio, displaying the weight and forward income of each position. I only maintain 2 tickers that do not pay dividends but believe that the long-term growth runways for both companies are extremely enticing.

Symbol Portfolio Weight Est. Annual Income
VOO 26.01% $580.86
ADI 4.29% $125.08
VICI 4.04% $253.59
AMT 3.96% $128.80
STOR 3.67% $302.33
MSFT 3.57% $49.31
UNP 3.53% $116.69
O 3.44% $214.96
HD 3.25% $120.46
CVS 3.0% $94.50
V 2.99% $32.35
DLR 2.68% $157.48
UNH 2.63% $47.92
LMT 2.57% $97.97
AMZN 2.51% NA
WSO 2.29% $105.60
CMCSA 2.28% $98.13
MPW 2.16% $249.91
ALLY 2.07% $108.44
BOC 2.04% NA
GLW 1.99% $92.29
GPK 1.99% $38.02
BBY 1.81% $127.83
FNF 1.77% $111.72
FRG 1.7% $180.23
GPN 1.68% $19.31
TROW 1.47% $85.21
AVGO 1.45% $67.96
SBUX 1.09% $36.77
AFG 1.08% $123.37
CARR 1.0% $21.54

Looking Forward

I am excited for the month of September in my portfolio for several reasons. First, I will be making my full 401k contribution from this point forward. Secondly, my dividend income during the month is historically one of my best due to my portfolio structure. Thirdly, several of my large positions have expected dividend increase announcements during the month. Lastly, I will have a one-time significant increase in income during September and will look to allocate a large chunk of capital to my portfolio.

I will continue to accumulate shares in the same names as this month and may look to add shares to my largest positions as well. I am also considering some changes and new additions to my positions. I am contemplating selling my position in Graphic Packaging (GPK), as I have achieved large returns that I was aiming for as a value play a few months ago and parlay that cash into Caterpillar Inc. (CAT). This is due to the solid runway ahead for Caterpillar as infrastructure rebuilding and acceleration in mining of precious minerals for batteries materializes. I will begin contributing $25 per week to a position in General Motors (GM) as I believe there is a once-in-a-generation shift happening in the auto industry with the potential to substantially increase profit margins in the long term. Along with this, GM has also recently reinstated its dividend.

A large change I am continuing to look at as well involves re-allocating a sizeable chunk of VOO into a higher yield dividend fund (SCHD). This is due to the fact that my 401k options are limited and will be heavily weighted towards the S&P 500 moving forward. While I want to have a large portion of my capital to be invested in the S&P 500, I don’t want it to become an overwhelming majority and would like to invest in some higher-yielding stocks or funds.

Summary

In conclusion, I am happy with my month/month increase in forward income of 1.45%, but I am even more excited about next month. I believe there are still several enticing stocks in the market and I believe that I own several of them, I will continue to build on these positions and propel my dividend checks higher. Even though my progress was small this month, it is still a step towards my long-term goal, and I can sleep well at night knowing that.

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