FRGAP - My Dividend Growth Income - May 2023 Update

2023-06-03 06:09:46 ET

Summary

• I reached a major personal milestone in May by surpassing $6,000 in estimated forward annual dividends.
• Forward income added throughout the month totaled $96.15, equating to month-over-month growth of 1.62% in estimated annual dividends.
• Total estimated forward dividends now stand at $6,033.

My goal for the month was to hit a personal milestone of $6,000 in annual forward dividend income, a goal I am happy to report as achieved. I witnessed strong growth in forward annual dividends throughout the month, adding $96.15 in total. This brings me to an estimated forward dividend income of $6,033. Let's see what my cumulative received dividends and dividend income growth figures look like now that the month of May has concluded.

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.

Forward Income Added

During the month of May, I added $96.15 in forward income, now making my total forward income $6,033. I received a relatively low amount of dividends this month, $252.64. This was expected in May since this historically has not been a strong month of dividends for my portfolio.

My breakdown of income added via new purchases, dividend reinvestments, and dividend rate increases does not include forward income added via re-allocation of funds that already existed within my portfolio (i.e., the money from the sale of one security invested into another). I will only be breaking down the effect of "new" capital entering the accounts in this section. Also, I would like to reiterate that increased income and tracking of funds from my recurring 401(k) contributions are not included in these articles as the fund options available to me do not paint a clear picture on income and distributions.

For my weekly $165 purchases I accumulated shares of Enterprise Products Partners ( EPD ), Medical Properties Trust ( MPW ), and Essential Properties Realty Trust ( EPRT ). Let's first look at the forward dividends added via all new purchases:

• 7.330 shares of EPRT adding $8.06 in forward income.
• 19.47 shares of EPD adding $38.16 in forward income.
• 24.919 shares of MPW adding $28.91 in forward income.

May is typically slow month in dividends received for my portfolio, but even on a slow month I received and reinvested dividends in 7 different positions:

• 0.379 shares of CVS Health ( CVS ) reinvested adding $0.92 in forward income.
• 1.929 shares of EPD reinvested adding $3.78 in forward income.
• 2.611 shares of MPLX LP ( MPLX ) reinvested adding $8.09 in forward income.
• 1.770 shares of Ally Financial ( ALLY ) reinvested adding $2.12 in forward income.
• 0.315 shares of Realty Income Corp. ( O ) reinvested adding $0.96 in forward income.
• 0.157 shares of Carrier Corp. ( CARR ) reinvested adding $0.12 in forward income.
• 0.156 shares of Starbucks ( SBUX ) reinvested adding $0.33 in forward income.

Lastly, a small amount of forward income was added via dividend increases announced by 2 companies in my portfolio:

• Cogent Communications ( CCOI ) announced a 1.1% increase to the dividend, adding $3.26 in forward income. The company historically has announced increases to the dividend each quarter, so the small increases add up.
• American Tower Corp. ( AMT ) announced a 0.6% increase to the dividend, adding $1.42 in forward income. Just like CCOI, American Tower historically announces dividend increases every quarter. It is important to note this was the smallest quarterly growth in the dividend since they implemented this dividend growth schedule back in 2012.

Through the first five months of 2023, here is how my forward dividend income has grown via new purchases, dividend reinvestments, and dividend increases. Due to a heavier focus on purchasing higher yielding stocks this past month to reach a personal milestone, total income added via new purchases is responsible for more than half of my current total dividend growth for the year. A summary of all transactions throughout May can be seen below as well.

Lastly, I completed another month of capturing the effects of dollar cost averaging. In total, for 2023, my portfolio has witnessed 144 transactions on 60 different market trading days.

Milestone Reached

In May, I reached a major personal milestone for estimated annual dividend income, surpassing the $6,000 mark. This was marked as a milestone personally because it represents $500+ per month in dividends. Just 10 months ago, this goal wasn't even on my radar due to the substantial growth required to get here. I couldn't be happier with my dividend growth journey up to this point, and I hope I am able to achieve even half this level of success in reaching my future goals.

Portfolio

No large shake-ups in my portfolio this month. I am continuing to see the strong representation I was hoping for in my Visa, Microsoft, and Analog Devices positions. Like clockwork, my ETF position, SCHD , continues to slowly drop in portfolio weighting as I focus more on accumulating individual stocks.

Looking Forward

Getting back to my roots and core investing philosophies, I will allocate my weekly recurring $165 purchases into positions with better balances between both growth and yield. For the month of June, I will be purchasing shares of AMT, CVS, and EPRT. I find American Tower and CVS Health to be sitting at attractive valuations and I continue to hold a bullish stance for both companies due to their strong cash flows and the necessity of their operations. A more detailed analysis of my stance on AMT can be found in my previously written article .

June is typically one of my strongest months in terms of dividends received, and I am looking forward to potentially setting a new personal record in total dividends received in a single month.

Lastly, I have a big decision to make for a relatively large dividend income provider in my portfolio. Franchise Group ( FRG ) made a major announcement this past month as they agreed to a management buyout to go private at $30 per share. I must say I was slightly disappointed at the agreed buyout valuation and the loss of a company in my portfolio that I found to be very intriguing. An overview of my investment thesis can be found in one of my previous articles, here . This has a significant effect on my portfolio as FRG is producing over $350 in annual dividends in my portfolio at a substantially high yield of roughly 8.5%. I will spend time this month deciding the best way to re-allocate this position. Currently, I am interested in converting the full position into Altria ( MO ) due to its nearly identical dividend yield and a track record of steady dividend growth.

Summary

Hitting a major milestone has fueled me with even more motivation to continue my dividend growth journey and achieve my goal of early retirement. With an addition of $96.15 to forward income in May, my total estimated forward dividend income grew month over month by 1.62% to $6,033. This equates to $16.53 per day in dividends!

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