August Dividend Report

This past month set several records for my portfolio.  It's great to see that investment discipline is paying off. I keep investing dividend income and fresh capital each month. I carefully screen for companies with a track record of dividend growth.

• I received $ 644.14 in dividend income this month. This is not only the best August ever, but also the best month ever.
• The trailing 12 months paid $ 4,043.42. Crossing into $ 4k territory is great. I work on my expected income, looking forward. But it's good to look back and see what money actually came in.
• Year to date income is $ 2,902.90, which is already higher than any previous year total!

I had one oversight when I added RY to my portfolio. Being a Canadian business, I had $10.84 foreign tax withheld. I will have to see about getting this back at some point. If you have any tips on how to handle this, please drop me a comment or email.

Plan for September: keep investing. If markets stay down for a bit, I will pick up some great companies at rock bottom prices. I expect September dividends to be around $413.27.

Buy when stocks are discounted

When the whole market drops, long term dividend growth investors rejoice. Many high quality companies will be on sale at 5-10% discounts, often selling at prices we haven't seen in a year, or beyond. If you've done your research and have money ready to go, this is your chance to beef up your portfolio.
Unfortunately, I've just put my monthly allowance into JNJ recently, so I don't have fresh cash available right now. If things stay low I will invest early September.

It is refreshing to talk about a market drop in terms of buy opportunities. Before I was heavy into dividend stocks, I focused on capital gains, and a day like today would be terrible. I suspect it will take some time to recover. For dividend stocks this is great. In fact, I think that those companies that committed to share buy backs are having a ball today. I'm not clear about regulations, but today'd be a great day to buy back shares in large amounts. This in turn is good for earnings per share and hence dividends per share. It allows companies to meet their dividend obligations. For dividend investors it means the dividend and dividend growth is just that much more save.

Of course there are underlying reasons for the market drop. The China situation should not be under-estimated. But it 'feels' like there is no real data to support why some companies dropped in valuation this much in one day. They certainly didn't lose customers or announce bad sales today. So I think the best approach is to keep investing. Average down where possible. Start new positions for those gems that are never on sale. And then watch things recover.

10 Dividend Stock Purchase Criteria

Every investor has their own goals, personality and investment style. Many dividend investors agree on selecting solid companies that will grow dividends for years to come. Still there are unique risk strategies among dividend growth investors as well. I've highlighted some ways that I feel I'm different. For one, I'm not opposed to selecting a few higher yield stocks as a booster to get a portfolio going. Further, my main goal is not to retire early, but instead to augment my income to support my life style and allow me to enjoy certain things in life before retirement.

As such everyone has their own entry and exit criteria for stocks. I enjoy reading how others go about their decisions. Here are the things I look at right now. This collective screener will evolve -- I'm actively tuning it, adding more criteria to look at, and adjusting the values. These are not buy recommendations, merely a starting point for further research. 

I look at the following:

New Position: JNJ

Friday I bought 9 shares of JNJ. This is a new position, and also a new sector, which is good for further diversity in my portfolio.  JNJ is well-known amongst dividend investors. I was torn between JNJ and CAT, with CAT having a much higher current yield, at 4% vs 3% for JNJ. Looking at the longer term growth I believe JNJ has a more sustainable dividend growth story. CAT also faces some short term macro economic head winds in several locations. I will continue to watch CAT, and will consider it for a new position next month.  Next month I will go through the analysis again and see if I should build up my JNJ position, or jump into CAT.

JNJ adds 27 dollars to my expected annual dividend income. Total expected annual income now stands at 4,915.64.

Frugal vs Quality of Life

Several of the dividend bloggers write about their frugal lifestyle. I think they sometimes take it too far. It makes sense to live within your means. What's the point of investing if you keep spending money on stuff you don't need. You'd be better of putting the extra money into your portfolio. Being frugal means that your portfolio returns can covers your expenses sooner, since your expenses are lower than they would be for a non-frugal person. And for many investors that's the goal -- cover expenses with dividends, and retire. For me this is not the case. I love my job, and I love the income it generates. My dividend income is used to build up my portfolio. When it reaches a decent size, then yes, I will use it to cover non-discretionary expenses like mortgage, insurance and utilities. But only if I no longer want to grow the portfolio, which I think I will want for a long time to come.

Two New Div Stocks to Research

Two new stocks popped up on the dividend Inbox this month. Typically the top div stocks stays pretty constant. That makes sense because there's only a few times a year that companies provide a public report card in the form of dividend payments. What a company does with their div payments has a big impact on their score for the screener. Occasionally, when stocks increase or decrease the payout, it affects their score. Also, if a stock has consistently been paying and raising dividends they could pop into the 5 year or 10 year club, increasing their score.

The only other thing that impact the score is the stock price. Lower price and same dividend per share means higher yield.  We also look at the percentage from their 52-week high, which is a sliding window. 52-week high and p/e ratio are quick indicators if a stock is oversold, or overpriced.

This week, two stock popped up on the top scorers list.

How to Stay Disciplined About Investing

It is not always easy to keep up with investing. It's all to easy to let the weeks slide by without new activity. Life tends to throw distractions in your way. And forget about distractions. It's the financial setbacks that are perfect excuses to pass on an investment this month. Or getting emotional about the market.
I had a few set backs recently. First, my car didn't pass inspection, and I had to put several hundred dollars into it. This was unplanned, but always a risk when driving a 14-year old car. I'm active starting to look for a replacement. I have money for that set aside in a car fund. But the repair was unplanned.
Then my computer's hard drive stopped working. Not a huge deal, but here also I spend some money to fix it. I was worried I had to buy a new hard drive, and spend time installing everything. Or even look at a new computer as mine is over six years old. Luckily I was able to fix it myself with some tools I bought on Amazon. Geeky details -- search for Seagate 7200.11 BSY fix. Next in line is my wife's laptop. It's probably about 5 years old. While it generally works, the battery is toast, so it has to stay connected to power, and it keeps getting slower. I've been playing with defrag and other optimizations, but perhaps it's time for a new one.
These things all cost money and are mostly unplanned. So it is tempting to skip my investment this month and put it towards these expenses.

Here's how I shake off these distractions: