OZKAP - The Retiree's Dividend Portfolio - John's July Update: HTA And HR Merger Produces Major Dividend Income

Summary

• John's retirement accounts generated a total of $4,487.75 of dividend income for July 2022 vs. $1,812.60 of dividend income for July 2021.
• John's Traditional IRA had a balance of $366K as of July 31, 2022, vs. $325K on July 31, 2021. The estimated annualized yield is 5.43%.
• John's Roth IRA had a balance of $219.7K as of July 31, 2022, vs. $204.5K on July 31, 2021. The estimated annualized yield is 4.38%.
• There were a total of six companies that increased their dividend during the month of July.
• HTA has been acquired by HR, and John received a hefty special dividend payout of $4.82/share.

Background

For those interested in John and Jane's full background, please click the following link for the last time I published their full story. Here are the key details about John and Jane that readers should understand.

• This is a real portfolio with actual shares being traded.
• I am not a financial advisor and merely provide guidance based on a relationship that goes back several years.
• John retired in January 2018 and his only consistent source of income is Social Security.
• John has begun drawing $1,000/month from his Traditional IRA to supplement his retirement income.
• Jane officially decided to retire on December 31, 2020. She is now collecting social security as her primary source of income.
• John and Jane have other investments outside of what I manage. These investments primarily consist of minimal risk and minimal yield certificates.
• John and Jane have no debt and no monthly payments other than basic recurring bills such as water, power, property taxes, etc.

John and Jane requested my help after we discovered that their financial advisor was charging excessive fees and engaging in trades that appeared to be more favorable to the advisor than it was to John and Jane. I do not charge John and Jane for anything that I do and all I have asked of them is that they allow me to write about their portfolio anonymously to help spread knowledge and to make me a better investor in the process.

Generating a stable and growing dividend income is the primary focus of this portfolio, and capital appreciation is a secondary characteristic.

Dividend Decreases

No stocks in John's Traditional or Roth IRA put/decreased dividend during the month of July.

Dividend And Distribution Increases

Six companies paid increased dividends/distributions or a special dividend during the month of July in the Traditional and Roth IRAs.

• AFC Gamma ( AFCG )
• Healthcare Realty ( HR ) - Special dividend from Healthcare Trust of America
• Kite Realty ( KRG )
• Realty Income ( O )
• Bank OZK ( OZK )
• W. P. Carey ( WPC )

I covered Realty Income and W. P. Carey in the Taxable Account update so I will only include information about the dividend increase. For those interested in reading the summary of these two companies the link is included at the end of the article.

AFC Gamma

Q2-2022 was a solid quarter with EPS exceeding estimates by 20%. Interest income jumped considerably to $21.6 million for the quarter compared to $8.7 million in the same quarter last year. The sizeable increase in interest income comes from the increased size of the loan portfolio and explains how the company has been able to fund the rapid increase of its dividend. There are still potential risks that make us limit the size of this position including interest rate risk and legal risk (the legalization of the pot industry could pose a significant risk by introducing additional market competition).

The dividend was increased from $.55/share per quarter to $.56/share per quarter. This represents an increase of 1.8% and a new full-year payout of $2.24/share compared with the previous $2.20/ share. This results in a current yield of 11.79% based on the current share price of $17.39.

Healthcare Trust of America/Healthcare Realty

HR became part of the portfolio when it acquired the Healthcare Trust of America (HTA). This resulted in a large cash payment into John's retirement account and the stock price has continued to sink even though Q2 results were strong with a 9.4% increase in rental income compared with Q2-2021. The portfolio now sits at over 700 properties and exposure to the most important high-growth markets in the US.

The stock has dipped further into the buy range again and is an excellent price at today's closing price of $24.14/share. We recently executed a limit trade and another trade increasing the size of the current position by another 100 shares. The graph below demonstrates that the stock is available at a price that hasn't been seen since the peak of COVID fear in 2020.

Investors received $4.82/share for each share of HTA stock sold while the remaining conversion was 1:1 share when converted to HR stock.

Kite Realty Group

KRG continues with the consistent dividend increases as quarterly results continue to impress. KRG primary focus in the sunbelt region and properties are typically in affluent areas with strong household income. Over the last few years the company has narrowed its focus by redeveloping existing properties and shedding those that don't meet this focus on affluent areas.

KRG is looking attractive under $20/share and offers the potential of both dividend growth and capital appreciation. I expect that the dividend yield won't get much higher than 5% because of the potential for capital appreciation and strong downside resistance at $18/share.

The dividend was increased from $.20/share per quarter to $.21/share per quarter. This represents an increase of 5% and a new full-year payout of $.84/share compared with the previous $.80/ share. This results in a current yield of 4.55% based on the current share price of $19.31.

Realty Income

The dividend was increased from $.2470/share per month to $.2475/share per quarter. This represents an increase of .2% and a new full-year payout of $2.97/share compared with the previous $2.964/ share. This results in a current yield of 4.35% based on the current share price of $68.45.

Bank OZK

Years ago OZK had fallen from its pedestal as an amazing high-growth bank that was experiencing success after success until word began to spread about the risk to the Real Estate Specialties Group (RESG). After a few large charge-offs investors panicked and the stock dropped from the mid-$50/share range to less than $20/share. After all the panic settled, OZK's RESG portfolio went on to be its most talked about success. The most recent quarter had a record of $3.53 billion of loans originated and a backlog of $17.37 billion of unfunded commitments. The dividend is very well covered and OZK has resumed quarterly increases of $.01/share which amounts to an annualized 12-14% dividend growth per share. OZK has a 23 year history of dividend growth and they have always raised the dividend every quarter.

Investors looking for a little higher yield and who are willing to ride out the tumultuous market we are in should pay attention to the OZKAP - OZK Preferred Series A shares. We purchased shares at $18.19 so the current price of $18.00/share is very tempting.

The dividend was increased from $.31/share per quarter to $.32/share per quarter. This represents an increase of 3.2% and a new full-year payout of $1.28/share compared with the previous $1.24/ share. This results in a current yield of 3.16% based on the current share price of $40.50 .

W. P. Carey

The dividend was increased from $1.057/share per quarter to $1.059/share per quarter. This represents an increase of .2% and a new full-year payout of $.4.236/share compared with the previous $4.228/ share. This results in a current yield of 5.04% based on the current share price of $84.42.

Retirement Account Positions

There are currently 41 different positions in John's Traditional IRA and 22 different positions in his Roth IRA. While this may seem like a lot, it is important to remember that many of these stocks cross over in both accounts and are also held in the Taxable Portfolio.

Below is a list of the trades that took place in the Traditional IRA during the month of July.

Below is a list of the trades that took place in the Roth IRA during the month of July.

Please see my articles that discuss trades more in depth. The most recent article regarding trades and potentially actionable information. This article can be found at the attached link - The Retirees Dividend Portfolio: Recent Purchases And Limit Trades Through August 19th.

July Income Tracker - 2021 Vs. 2022

July's income for the Traditional IRA came in at a record at $3.7K (the majority of this was related to the one-time special dividend) for the month while the Roth was up slightly year-over-year. The average monthly income for the Traditional IRA in 2022 is expected to be up about 28.2% based on current estimates, and the Roth IRA is looking to grow by an astounding 16.2%. This means the Traditional IRA would generate an average monthly income of $1,408.61/month and the Roth IRA would generate an average income of $655.37/month. This compares with 2021 figures that were $1,098.38 and $564.25 per month, respectively. We are on track to generate approximately $4,800 of additional dividend income in 2022 from the combined dividends in the Traditional and Roth IRAs.

SNLH = Stocks No Longer Held - Dividends in this row represent the dividends collected on stocks that are no longer held in that portfolio. We still count the dividend income that comes from stocks no longer held in the portfolio even though it is non-recurring.

All images below come from Consistent Dividend Investor, LLC. (Abbreviated to CDI).

Due to the size of the special dividend from HTA I have opted to exclude this amount from all charts since it greatly distorts the low and high range of the data. All tables will still include the full amount of dividends received.

Here is a graphical illustration of the dividends received on a monthly basis for the Traditional and Roth IRAs.

Based on the current knowledge I have regarding dividend payments and share count, the following tables are a basic prediction of the income we expect the Traditional IRA and Roth IRA to generate in FY-2022 compared with the actual results from 2021.

Below is an expanded table that shows the full dividend history since inception for both the Traditional IRA and Roth IRA.

I have included line graphs that better represent the trends associated with John's monthly dividend income generated by his retirement accounts. The images below represent the Traditional IRA and Roth IRA, respectively.

Here is a table to show how the account balances stack up year over year (I previously used a graph but believe the table is more informative).

The next images are the new tables that indicate how much cash John had in his Traditional and Roth IRA Account at the end of the month, as indicated on his Charles Schwab statements.

The following two tables provide a history of the unrealized gain/loss at the end of each month in the Traditional and Roth IRAs, going back to the beginning of January 2018.

John has finally begun taking disbursements from his Traditional IRA, and he currently receives $1,000/month.

I like to show readers the actual unrealized gain/loss associated with each position in the portfolio because it is important to consider that, in order to become a proper dividend investor, it is necessary to learn how to live with volatility. The market value and cost basis below are accurate as of the market close on September 1, 2022.

Here is the unrealized gain/loss associated with John's Traditional and Roth IRAs.

The last two graphs show how dividend income has increased, stayed the same, or decreased in each respective month on an annualized basis. Now that we are in our fifth year of tracking, the trend for each respective month of the year has begun to show interesting trends for when income increases year-over-year.

Conclusion

The special dividend from the acquisition HTA really boosted the YTD total of dividends produced. John's portfolio is on track to produce $4,800 more of dividend income compared to FY-2021.

A number of stocks have moved into the buy range but we are being a little more cautious with purchases. Typically our purchases are in tranches of 25 shares but you will likely notice that the size of purchases moving forward will be in quantities of 5-10 shares.

July Articles

I have included the links for John and Jane's Taxable Account and Jane's Retirement Account articles for the month of July below.

The Retirees' Dividend Portfolio: John And Jane's July Taxable Account Update

The Retiree's Dividend Portfolio - Jane's July Update: Record High Roth IRA Dividends

Article Format: Let me know what you think about the format (what you like or dislike) by commenting. I appreciate all forms of criticism and would love to hear what I can do to make the articles more useful for you!

In John's Traditional and Roth IRAs, he is currently long the following mentioned in this article: AFC Gamma ( AFCG ), Aflac ( AFL ), Apple Hospitality REIT ( APLE ), Avista ( AVA ), BP plc ( BP ), Brixmor Property Group ( BRX ), Crown Castle ( CCI ), Canadian Utilities ( OTCPK:CDUAF ), Chatham Lodging Trust ( CLDT ), CVS Health Corporation ( CVS ), Chevron ( CVX ), CSX ( CSX ), Dominion Energy ( D ), Deere ( DE ), Digital Realty Preferred Series J ( DLR.PJ ), Duke Energy ( DUK ), Eaton Vance Floating-Rate Advantage Fund ( EAFAX ), EPR Properties ( EPR ), EPR Properties Preferred Series G ( EPR.PG ), General Dynamics ( GD ), Healthcare Trust of America ( HTA ), Iron Mountain ( IRM ), Kinder Morgan ( KMI ), Kite Realty Group ( KRG ), Lowe's ( LOW ), Main Street Capital ( MAIN ), Masco ( MAS ), Altria ( MO ), New Residential Investment Corp. Preferred Series B ( NRZ.PB ), Realty Income ( O ), Oshkosh ( OSK ), Occidental Petroleum Corp. ( OXY ), Bank OZK ( OZK ), Bank OZK Preferred Series A ( OZKAP ), PacWest Bancorp ( PACW ), PepsiCo ( PEP ), iShares Preferred and Income Securities ETF ( PFF ), VanEck Vectors Preferred Securities ex Financials ETF ( PFXF ), Pinnacle West ( PNW ), PIMCO Income Fund Class A ( PONAX ), Nuveen Nasdaq 100 Dynamic Overwrite Fund ( QQQX ), Global X Funds Nasdaq 100 Covered Call ETF ( QYLD ), RPT Realty Preferred Series D ( RPT.PD ), STAG Industrial ( STAG ), Sun Communities ( SUI ), Southwest Gas ( SWX ), AT&T ( T ), Toronto-Dominion Bank ( TD ), Truist Financial ( TFC ), T. Rowe Price ( TROW ), Cohen&Steers Infrastructure Fund ( UTF ), VICI Properties ( VICI ), Valero ( VLO ), Umpqua Holdings ( UMPQ ), Ventas ( VTR ), WestRock ( WRK ), Warner Bros. Discovery ( WBD ), and W. P. Carey ( WPC ).

For further details see: