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Dividend Life by Dividendlife - 1w ago

Here’s my April 2018 Income Fund update, following on from last month’s March update. I closed one of my brokerage accounts this month, otherwise it was a quiet month for dividends. Click on for the details…

Dividend Income

Total income from my Income Fund this month was $46, an 87% decrease compared to the $349 I received in April 2017!

The following chart shows the cumulative dividend income this year compared to previous years.

The month on month decline for April 2018 results in lower cumulative income than this time last year. I switched from high-yield bonds which paid monthly distributions to stock funds which pay quarterly so this decline is expected.

Overall I’m relying more on added capital than dividend yield this year to try to reach my 2018 Target of $13,760. Hopefully there will be enough dividend growth in the funds to reach my target. I know hope isn’t a strategy…but the best I can do is to keep investing as much as I can. Bruce Lee’s quote at the end of this post makes much more sense now.

Income breakdown

The chart below shows a breakdown of my income this month.

The largest contribution came from individual stocks paying $42.

Interest from the Income Fund cash reserves made up the remaining $4. I keep a little cash aside to smooth out ‘withdrawals’ and the interest rate on this money market account has increased a little.

Dividend income from stocks

Five stocks that I hold paid dividends this month for a total of $42 as detailed below.

Last April my individual stocks paid $39.80 from six stocks. Since then I sold a small position that I had in CB.

Dividends increased by a simple average of nearly 7% over last year all on their own. JPM and ADP had the biggest increase with 12% and 9% respectively. WMT was the lowest at 2%.

The basis numbers are a little reduced for the italicized values because I sold some fractional shares. More on that further below.

Income from funds

None of the stock funds that I hold paid out dividends this month.

Asset Allocation

My Income Fund asset allocation is shown below.

I hold 100% stocks in my Income Fund which is held entirely in Taxable accounts.

Cash is virtually zero as I just keep a small amount to manage cash-flow.

Detailed Allocation

The following table shows the details.

Individual stocks are a little over my target and US Total Stock and International stocks are a little under. Not enough to worry about however.

Fund Purchases & Sales

I added $2,867 of new money to my Income Fund in April.

Fund purchases

Total purchases this month were $500 in VHDYX and $2,820 in VTSAX.

Funds sold

None.

Stock purchases

I bought another 30 shares of DAL in April. Total cost including the $4 commission for two transactions was $1,592.10. Delta Airlines is one of my more speculative holdings as they’re not a defensive dividend growth stock. However I think they are a well-managed company at a good valuation.

This purchase increases the number of DAL shares I hold to 90.

I also bought 50 shares of LB for $1,751.75 including $2 commission to replace the shares I sold earlier in the year. This is another more speculative purchase but I think they have a strong brand name as well as potential for international and online sales growth. The 6% dividend yield doesn’t hurt either but time will tell if the dividend is sustainable.

Stock Sales

I sold all of my T shares this month pretty much at cost for $2,976.95 resulting in about $3 of capital gains. I will buy them back next month. See this post for details.

In other news, I also closed my Capital One investing account and transferred all the assets in-kind to Vanguard so that all my stocks are in one place. The transfer cost $75 although Capital One refunded the fee back. However, the transfer meant liquidating the partial shares left over from my Sharebuilder days. The liquidation raised $1,070 in cash that went towards the purchases above so there will be a little bit of long-term capital gains to pay.

On the plus side though, I now have all shares in one place to simplify book-keeping and they can be more easily transferred in-kind to another brokerage should I chose to do that down the road.

Distributions

I transferred $875 from Fund Cash into my Living Expense account. This is an automatic payment and represents about 21% of my Living Expenses that my Fund pays every month.

Money is fungible, so a dollar in one account is no different than a dollar in another account (although an argument can be made that tax-deferred money is different). The distribution from the income fund allows me to invest more of my salary than I otherwise would be able to. Withdrawing money gives me experience in managing cash-flow from the Income Fund because one day I won’t have a salary.

Fund Cash

Fund Cash is now at $2,146 and held in the VMFXX money market account which is where all dividend distributions are paid into. $1,903 of this amount is reserved for future distributions of $875 a month. $243 is spare and not yet invested.

Cash has decreased by $662.58 since last month as I spend down my three month withdrawal buffer.

Portfolio Performance

My Income Fund increased in value from $431,917 to $434,911 this month. This increase of $2,884 includes $2,867 from new capital so overall the investments broke even.

Retirement Accounts

Although most of the financial information I describe is about my Income Fund, I should point out that I consider this one piece of the bigger picture. Ideally I’d like to reach Financial Independence based solely on my taxable accounts which is 100% stocks, but I still have Retirement accounts in case I can’t.

When I combine both accounts, I’m at a 60:20:20 asset allocation to US stocks : International stocks : US bond allocation. My retirement accounts are about the same size as my Income Fund with a higher bond allocation.

I max out my 401(k) contributions to reach the full $18,500 amount this year.

Outlook Simplified accounts

As a result of my stock transfer shenanigans this month, all my investments are at a single brokerage. This reduces the amount of cash transfers that I had going on since all dividends from all stocks can now be paid into my cash account. Previously I was doing monthly cash transfers from Capital One.

Future Stock Purchases

Next month I’ll be buying more shares in AT&T to replace the ones I sold this month.

Summary

Not a bad month by any means, but the dividend amount I set as a target this year seems very far away at the moment.

How was your latest month? Are you one step closer to Financial Independence?

Quote of the Day

A goal is not always meant to be reached, it often serves simply as something to aim at.

Bruce Lee

The post April 2018 Income Fund Update appeared first on Dividend Life.

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The UK Dividend Champions July 2018 edition is now available at DividendChampions.UK.

There’s not a whole lot of movement in the list this month.
These notes concentrate on changes in Financial Year dividend growth history which I think is fairer than a Calendar Year basis for quantifying growth. Change history for the Calendar Year based list can be found in the Excel File.

None of the companies listed below or included in the List are trading recommendations. They’re simply companies that I researched or otherwise increased their dividend growth history this month. Please do your own due diligence before making any trades.

Financial Year Rankings

I researched five companies this month. Three of these have 5-9 years of growth and two have 1-4 years of growth. No companies were removed from the list.

FY Dividend History July 2018 June 2018 Changes
Dividend Growth 25+ years 18 18 0
Dividend Growth 10-24 Years 66 66 0
Dividend Growth 5-9 Years 59 56 +3
Dividend Growth 1 to 4 Years 45 43 +2
Dividend Growth 0 Years 57 57 0
Total 245 240 +5
New Companies Added

I researched five companies this month. Of those, all five were added to the FY Growth List since June.

Johnson Service group plc (JSG)

I couldn’t determine when Johnson Service Group (JSG) was founded. It’s been around at least since 1984 and was admitted to the London Stock Exchange in June 2008. The company provides high quality textile rental and related services across a range of sectors throughout the UK.

It’s historically been a good dividend payer but it cut dividends entirely during the 2007-2008 period. Since then it’s been resuming dividends and currently has a nine-year growth period as of the end of FY17.

Rightmove plc (RMV)

Founded 2000, Rightmove (RMV) provides services in the UK residential property industry where it connects people to properties. The Company’s principal business is the portal www.rightmove.co.uk where estate agents, rental agents and new home builders pay to have their properties displayed on the website. Potential home buyers can their search the site for properties.

The company has an eight-year dividend growth history as of the end of FY17 due to a maintained dividend in 2009.

Rentokil Initial plc (RTO)

Founded 1925, Rentokil Initial (RTO) is a global leader in the provision of route-based services which protect people and enhance lives. In addition to the core services of Pest Control and Hygiene, the company offers a range of other smaller specialist services including Plants, Property Care and Workwear.

The company has a long dividend growth history that was interrupted by the market turmoil in 2008. Since then dividends have resumed with a seven-year growth streak.

Phoenix Spree Deutschland plc (PSDL)

Phoenix Spree (PSDL) is a long term investor in the mid-market segment of the German residential property market. Founded in 2007, and listed on the London Stock Exchange in 2015, the company’s portfolio is concentrated in Berlin, where over 99% of properties by value are located. PMM Partners acts as the Property Advisor. It has an experienced team of property professionals with long-standing experience of the German residential property market.

The company joined the London Stock Exchange in June 2015 and has since paid dividends with a three-year growth history.

London Stock Exchange Group plc (LSE)

This company shouldn’t need an introduction but here’s one anyway. London Stock Exchange Group (LSE) is a diversified international market infrastructure and capital markets business sitting at the heart of the world’s financial community. The Group can trace its history back to 1698.

The company started paying dividends in 2001. The growth history is distorted by a change to the company’s financial year end in 2014 which led to two “2014” results, as the second FY14 represented a nine-month year. The FY14 results have been combined in the chart below resulting in a two-year dividend growth history.

Deleted FY Entries

No companies were removed from the FY Growth List this month.

Other FY Changes

There were no promotions or demotions in the FY List this month.

Investment Trusts

The excel list contains Investment Trusts; you can easily identify them by filtering the Sector column “F” for Equity Investment Instruments, where you can either include or exclude them when viewing the list.

Fundamental Data

Entries in the list that have a “Founded” column have been manually researched and checked. The Dividend per Share and yield for these entries were calculated as of 3rd July.

Dividend yield is calculated based on the most recent dividend declarations divided by the current share price. Special dividends are also not included in yield or DPS calculations as a general rule (there are one or two exceptions) therefore actual yields may be higher.

Please keep in mind that the fundamental data will get increasingly out of date as the month progresses. The accuracy of the data is a best effort on my part. You should always perform your own research and due diligence on any potential stock trade and nothing in this post or the List is a recommendation to buy or sell.

Micro-Caps

The List includes AIM-listed companies which may be more volatile and unstable compared to larger FTSE-listed companies. To filter these out, you can use the Index (Column C) and the Market Cap (Column O) to be more selective.

Excel vs Website

All dividend history data that I have is posted on DividendChampions.UK. The Excel file limits the length to the last 15 years.

DividendChampions.UK is populated from a database built from the companies I’ve manually researched. This is a subset of the complete list in the Excel file. It contains placeholder pages for any other company in the Excel file but you’ll have to search for it using the search bar and there’s not a lot of data for those companies. Dividend history and graphs on the site are only available for companies that I’ve manually verified.

List Corrections

Current file version is dated 03-July-18.

03-July-18: Initial release.

Status update

The good: My new calendar approach to updates is working well and saving a lot of time. It helped catch some companies that I hadn’t updated for a while too.

The bad: More companies are completing their 2018 financial year. I’m working on a new method to accommodate jagged growth periods but for now only 2017 results are used in calculating dividend growth.

Look for the next update of the List on DividendChampions.UK in the first week of August. Follow @DividendChampions on twitter for the latest status or else wait for the release notes to be posted here.

Let me know if you see any comment on the List. Please keep in mind the list is entirely free and I make no money from it, thank you!

Quote of the day

Don’t judge each day by the harvest you reap but by the seeds that you plant.

Robert Louis Stevenson

The post UK Dividend Champions – July 2018 appeared first on Dividend Life.

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Lots of dividend income this month plus mortgage payment equals good results. Here’s my March 2018 review following on from my March income fund update. It’s almost like a balance sheet statement, but different!

My Score for March
Living Expenses Budget $4,040
Freedom Ratio 21.0%
Expenses 41.3%
Savings 13.4%
Investments 45.3%
Wet Worth $341,164
Work Freedom Day 02-Oct-18
Cash Reserves 3.5 months

Three records () this month! March’s results benefit from significantly higher dividend income. The month resulted in an increase to my Wet Worth although a lot of that was due to the mortgage paydown. My Work Freedom Day moved a couple of days earlier in October.

Living Expenses Budget

This is my monthly budget for living expenses and it includes both essential (e.g. groceries, mortgage, insurance), and non-essential (e.g. music, travel) purchases. $4,040 is the amount from my Budget 18.0.

The amount is more of a spending goal than a strict budget as I over/underspend each month. The budget is calculated from an estimated yearly spend divided by 12, so it’s normal for some months to be over or under the target amount.

Freedom Ratio

My Freedom Ratio is the percentage of my monthly living expenses budget that my Income Fund ‘withdrawals’ pay for. The current payment is $850 a month which is 21.0% of my current $4,040 monthly budget. So I’m 21% of the way to Financial Independence!

Living Expenses %

The percentage of net income that’s spent on living expenses. Lower numbers are better here.

This month’s 41% easily beats last month‘s 57% due to end of quarter dividend income from the funds in my portfolio. This result is a new record so far this year.

I save or invest any income that I don’t spend on Living Expenses so my effective “Savings Rate” this month was 58.7%.

Like the Freedom Ratio, any change in this number is caused by a change in either income or budget. However this metric takes total monthly income into account including actual investment income. This means it jumps around more, especially in the third month of each quarter.

The average percentage value should gradually decrease over time. This is because salary and investment income will hopefully increase faster than living expenses as I try to limit lifestyle creep and personal inflation.

The Living Expenses % metric and the Work Freedom Day metric (see below) are both good incentives to avoid increasing the budget since both numbers are impacted by a higher budget.

Living Expense History

Last March I spent 42.5% of my income on expenses, so I’m 1.2% points better than this time last year. This year’s budget is $70 more at $4,040 but I had much higher investment income this month compared to last year.

The chart above shows the trend in my Living Expenses % since the start of 2014. For the first part of 2014 I was paying two mortgages. In June 2014, I introduced Budget 1.0 after selling my first house and I made some minor tweaks in Budget 2.0 from October onwards. In January 2015 I started Budget 3.0 which I updated to Budget 3.5 in July.

Budget 4.0 started in 2016 with an increase to the monthly amount which I held constant in the mid-year review of Budget 4.5. In 2017 I moved to Budget 17.0 which increased monthly spending to $3,970.

This year I’m following Budget 18.0 which allows for $4,040 a month in living expenses.

Savings %

The percentage of net income spent on Savings (excluding Investments). Savings represents cash plus some stocks (VTMSX) and bonds (VWSTX). In making the mortgage payment I exchanged my previous holdings in Vanguard’s Wellington fund (VWELX) for more tax-efficient funds.

I’m now putting aside about $1,300 every month for unexpected and mid / long term goals (any large expense or purchase due a year or more in the future). This month the savings percentage was 13.4% of my month’s income compared to 17.7% last year.

This metric tracks only the money paid into my savings accounts. I have been spending some of my savings in the last couple of months. The resulting change in the savings balance is shown further below.

Investment %

The percentage of net income that I invest.

All spare money left over after savings and living expenses are paid goes into my Income Fund. This month it was 41.3% of my income.

I’ve written about my March portfolio income and gains in a separate post, so I won’t repeat all of that here again.

Wet Worth $

My liquid assets minus all debt (excluding retirement and non-liquid assets).

My Wet Worth increased $20,521 in March from $320,643 to $341,164. There’s a more detailed breakdown of this amount further below. This number is a new record high since I’ve tracked my finances.

Work Freedom Day

The day in the year that my dividend income could pay for the rest of the year’s expenses.

The current Work Freedom Day estimate moves forward to 02 October 2018 based on projected income. The exact date won’t be known until later in the year as I’m using conservative estimates to predict the date.

Note that based on a $4,040 budget, one Work Freedom Day requires about $134 of dividend income. Financial Independence then, requires about $1,800,000 at a 3% withdrawal rate.

Cash Reserves

Here I’m tracking the number of months of monthly expenses currently in my Living Expense account. Cash stored in other accounts such as Savings and Investment is not included here.

I spent a total of $4,017.15 in March which means I underspent my budget by $23. I had some car repairs expenses to pay for on account of hitting my wing mirror on a pole (doh!), but otherwise things were pretty normal.

But I did receive a tax refund, and I used some of that money to boost my cash reserves as they’ve been running a bit low lately. As a result, my account balance at the end of March increased to 3.5 months of living expenses, compared to 2.8 months the month before.

Wet Worth detail

I’m showing my Wet Worth in this post – this is the cost of my liquid assets minus debt. Assets and retirement accounts are excluded from this number. I prefer this over Net Worth since the equity in large assets (house, car) and retirement funds is hard to get at and not always predictable. I find this is a more honest view of where I’m at on my journey.

The change in Wet Worth is caused by

Cash +$2,596 Cash increased due to money from tax refund plus some transfer from savings.
Debt -$60,645 Large decrease this month due to $60,000 mortgage payment.
Savings -$39,499 I spent $40,000 of savings towards the mortgage payment above.
Income Fund -$3,220 My Income Fund market value decreased this month. See my earlier post for details.
Total +$20,521 Total change in Wet Worth

This month would have been a net loss had it not been for $20,000 of the mortgage payment courtesy of Ms. DL. Her income and savings are not part of the metrics shown here.

March 2018 Summary Cash Flow Forecast

No major expenses are planned for the next couple of months so spending should be fairly normal until larger bills (insurance) are due in the summer.

In other news

Last month I mentioned about changing my Savings – that’s the change from Wellington to more efficient tax holdings described above. My Savings account is certainly an area where I continue to evolve / change my mind as I don’t like seeing large amounts of cash just sitting there.

Anyway, it all adds up to one more step in the right direction towards Financial Independence!

Quote of the Day

Life is either a great adventure or nothing.

Helen Keller

The post March 2018: A look at my finances appeared first on Dividend Life.

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Dividend Life by Dividendlife - 2w ago

Here’s my March 2018 Income Fund update, following on from last month’s February update. March is usually a good dividend month but how good was it? Click on for the details…

Dividend Income

Total income from my Income Fund this month was $2,545, a 32% increase compared to the $1,923 I received in March 2017.

The following chart shows the cumulative dividend income this year compared to previous years.

March’s 2018 result shows a small increase on year to date compared to last year. I’ll be relying more on added capital than dividend growth this year to reach my 2018 Target of $13,760. That’s because I bought more total market funds which pay lower dividends. On the plus side, they’re more tax efficient and should have higher total return.

Income breakdown

The chart below shows a breakdown of my income this month.

The largest contribution came from US stock funds with $1,722. International came next at $578 with individual stocks paying $244.

Finally, interest from the Income Fund cash reserves made up the remaining $2. I keep a little cash aside to smooth out ‘withdrawals’ and the interest rate on this money market account has increased a little.

Dividend income from stocks

Eighteen stocks that I hold paid dividends this month for a total of $244 as detailed below.

Last March my individual stocks paid $212 from eighteen stocks. Since then, I’ve switched TROW for DAL. I’ve also added to INTC.

Dividends increased by a simple average of over 12% over last year all on their own. DAL and HD had the biggest increase with 50% and 25% respectively. EMR and CVX had the lowest increases under 2%.

Note that I sold my position in LB after the ex-dividend date. So I received dividends even though my position is showing zero. I discussed this stock sale here.

Income from funds

All stock funds that I hold paid out dividends this month. There were no capital gain distributions.

Fund 03/18 03/17 Organic inc
US Total Market (VTSAX) $365
US High Dividend Yield (VHDYX) $1,356 $1,007 14%
Total International Stock (VGTSX) $7
High Dividend Yield International (VIHAX) $571 $383 14%
Total $2,299 $1,390

US stock funds paid a total of $1,722 with $568 coming from International funds. I didn’t hold the total stock market funds this time last year.

Organic dividend growth of both high-yield funds was about 14%. Additional increases in the year-on-year comparison are due to new capital added.

Asset Allocation

My Income Fund asset allocation is shown below.

I hold 100% stocks in my Income Fund which is held entirely in Taxable accounts.

Cash is virtually zero as I just keep a small amount to manage cash-flow.

Detailed Allocation

The following table shows the details.

Individual stocks are a little over my target and US Total Stock and International stocks are a little under.

Changing the allocation ratio via new capital takes a lot of time because of the size of my contributions vs the total value. Eventually it may not even be feasible. However I don’t plan on selling any assets to re-balance faster.

Fund Purchases & Sales

I added $5,199 of new money to my Income Fund in March. The increase in investments this month is due to the tax refund that I received.

Fund purchases

Total purchases this month were $3,734 in VHDYX and $3,605 in VTSAX.

Funds sold

None.

Stock purchases

I bought another 7 shares of DAL on 2nd March for $26.78 per share. Total cost including the $2 commission was $371.46. Delta Airlines is one of my more speculative holdings as they’re not a defensive dividend growth stock. However I think they are a well-managed company at a good valuation and it doesn’t hurt that I spend a fair amount of money each year on their services.

This purchase increases the number of DAL shares I hold to 60.

Stock Sales

I sold all of my LB shares at a loss this month. I will buy them back next month. See this post for details.

Distributions

I transferred $850 from Fund Cash into my Living Expense account. This is an automatic payment and represents about 20% of my Living Expenses that my Fund pays every month.

Money is fungible, so a dollar in one account is no different than a dollar in another account. The distribution from the income fund allows me to invest more of my salary than I otherwise would be able to. Withdrawing money gives me experience in managing cash-flow from the Income Fund. One day I won’t have a salary after all.

Fund Cash

Fund Cash is now at $2,815 and held in the VMFXX money market account which is where all dividend distributions are paid into. $2,625 of this amount is reserved for future distributions of $875 a month. The remaining $190 is spare and not yet invested.

Cash has increased by $1,217 since last month as I rebuild my three month withdrawal buffer due from the higher dividend income this month.

Portfolio Performance

My Income Fund decreased in value from $435,136 to $431,917 this month. This decrease of $3,219 includes $5,199 of new capital so overall loses were higher.

Outlook 2018 pay raise!

I’m using the first quarter of the month to set my monthly withdrawal rate for the year. The first quarter is usually the lowest dividend payout. This is because June and December tend to include larger international payments. I’m also buying more shares throughout the year.

Overall the total dividends received in the first quarter were $2,680 which works out as $893 on average per month. I’m going to round this number to $875 and take that as a monthly withdrawal for the remainder of the year. This is a small increase compared to the $850 I withdrew each month previously.

This is a conservative withdrawal rate and any additional dividend income will be re-invested. Of course, this is all mental accounting as the $875 I withdraw for paying bills means that an extra $875 of my paycheck can be used for new purchases.

The cash withdrawal doesn’t come from any stock sales – it’s a three month drawdown of the $2,625 in cash that I will refill from dividend income each quarter.

Summary

March barely beat last year’s cumulative dividends. So although this month’s dividend was a lot higher than last year, it had to overcome much smaller payments in January and February.

How was your latest month? Are you one step closer to Financial Independence?

Quote of the Day

A goal is not always meant to be reached, it often serves simply as something to aim at.

Bruce Lee

The post March 2018 Income Fund Update appeared first on Dividend Life.

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Dividend Life by Dividendlife - 1M ago

Here’s the tale of two stock trades that I made recently. In March I sold 43 shares of Limited Brands (LB), and in April I sold 84 shares of AT&T (T). Click on to find out what happened…

Trade #1 – Limited Brands (LB)

LB has been struggling of late due to declining sales and lower operating margins so its share price has taken a hit. As of 3/19, my position in LB was $511 in the red as I’d spent $2,255 in buying 43.695 shares that were worth $1,743.87.

I sold all my shares on 3/20 for a total of $1,734.44 including a $2 commission.

Then on 4/23, I bought 50 shares of LB for a total of $1,799.50 including a $2 commission. LB’s price had decreased about 10% due to additional weak company sales in the period after I sold and before my purchase.

The net result is that I’m back pretty much where I started, except that I now own 50 shares instead of 43. I also have tax losses of ~$500 that I can use to lower my tax bill.

Clearly Limited Brands have their hurdles to overcome. This is a high-yield dividend stock with a yield that’s over 6%, so high capital growth shouldn’t be expected. The company does have strong brand names and economies of scale so we’ll see what happens in the future.

Trade #2 – AT&T (T)

AT&T is another high yield dividend stock where I held 84.153 shares which I had purchased for $2,973.66 over the last five years. These were worth $3,013.52 on 4/10; a small gain of $40.

I sold all shares on 4/11 for a total of $2976.95 including a $2 commission. The sale was $3 higher than the purchase price.

On 5/14, I purchased 85 shares for a total of $2,742.83 including a $2 commission. This means I’ve increased my AT&T holding by 1 share and saved $200.

AT&T has now been approved to buy TimeWarner along with acquiring a substantial amount of debt so I’m hopeful to see how that goes. It seems to me that cord cutting will continue as the population becomes increasingly mobile. AT&T has wireless, broadband and now media content and DirecTV Now to replace cable tv and landline subscriptions. Is it enough? Who knows. But their dividend pays a reasonable amount of my cellular bill so I’m happy enough as a customer and shareholder.

But…why?

My decision was really very simple and caused by a combination of two factors. I primarily wanted to get rid of the partial shares that I hold as a result from re-invested dividends.

Now there’s nothing wrong with partial shares. They’re normal if you are part of a DRIP (Dividend Re-Investment Program). And I’ve had these particular partial shares for ages now (just over five years) for both companies.

Their only disadvantage is that you can’t transfer them easily between brokerages. Only whole stocks can be transferred in kind.

My decision to eliminate them was really just because I didn’t like seeing the fractional number when compared to my other holdings in my Vanguard account. So much for detailed stock analysis! The longer I invest the more I see individual stocks as a gamble albeit one with a positive expected value.

At my brokerage, the only way to get rid of partial shares is to sell all of the shares at once. There’s no point in incurring additional taxes from capital gains so these trades only made sense if the stocks were at or below their cost basis. I figured I could tax loss harvest and buy the shares back later.

When selling at a loss, the US tax law penalizes you if you buy replacement shares within a 30 day period before or after the sale. When selling the whole position however, then only the 30 day period after counts. Please double check your own tax situation if you’re considering to sell a stock at a loss.

A lucky outcome

I don’t expect to do this kind of trading with individual stocks again, even if the outcome was generally positive both times. This just seemed like a good time to clean up my portfolio a little.

Nor would I recommend doing this every time a stock holding drops in value. The stock prices could have significantly increased during the period when I didn’t hold the stocks.

In my particular case, I invested the proceeds of the sales in VTSAX, the Vanguard US Total Market fund and bought the stocks back with new money from my paycheck the following month. So the trades became a bet that LB and T wouldn’t beat the US stock market over the 30 day period, rather than a bet that LB and T wouldn’t increase in value. Neither company beat the market performance over the 30 day period.

Quote of the day

How come anything you buy will go on sale next week?

Erma Bombeck

The post A tale of two stock trades appeared first on Dividend Life.

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Dividend Life by Dividendlife - 1M ago

One of my goals this year is reducing my mortgage payment. So earlier this year, I looked at some options. Here’s what I considered and my decision.

Meet my mortgage

My mortgage as of the end of February.

Mortgage Balance $213,104
Interest Rate 4.375%
Monthly Payment $1,197.03
Remaining Months 282 (23 years, 6 months)
Interest to be paid $131,423

The monthly payment is currently about $800 in interest and $400 in principal. It’s a fixed rate loan. The total monthly payment is constant and over time the interest will reduce with a corresponding increase in principal until the loan is paid.

If I continue paying per the schedule, I will pay an additional $131,423 of interest over the life of the loan.

However  my Income Fund is providing around $850 a month. I thought it would be nice to reduce my mortgage payment so that my Income Fund payment covers it. So my plan was to reduce the mortgage payment to about $850 a month.

Pay down mortgage or invest the money?

Paying down your mortgage vs saving / investing is an endless topic over at the Bogleheads forum, with new posts asking the question every week. Their wiki has some general points to consider.

Like most things in personal finance, there’s no magic answer. It’s a personal decision based on your unique situation.

In my case, I can afford to pay my mortgage entirely if I sold investments in my Income Fund. I have not been aggressively paying down the principal for two main reasons:

  1. I like the liquidity of having money available rather than having it locked in house equity. Yes, a HELOC could access the equity if needed but depending on the hypothetical situation occurring, the loan could be hard to acquire or at a bad interest rate.
  2. It’s an inflation hedge. My monthly mortgage payment is constant. My income is increasing. So over time, especially 30 years, the mortgage payment becomes less and less significant.
The options

To meet my goal, I’m willing to pay an additional $60,000 into the mortgage. Let’s see what can be done using some options below.

Pay additional principal

While paying additional principal reduces the amount of interest to be paid and reduces the life of the loan, it still requires the same monthly obligation. However, the effect of the payment would be:

Interest Rate 4.375%
Monthly Payment $1,197
Remaining Months 14 years, 1 month
Interest to be paid $53,853

This approach saves $77,570 in interest payments and reduces the loan term by 9 years, 1 month. However the monthly obligation is still above my $850 target.

Refinancing to a new 20 year loan

I did get some quotes for refinancing but the interest rate was the same as what I currently pay. Interest rates are on the increase so this isn’t a great time to refinance. Here’s the quote I received – a 20 year fixed rate refinance @ 4.375% with an assumed $2,000 in closing costs.

Interest Rate 4.375%
Monthly Payment $971
Remaining Months 20 years
Interest to be paid $77,895

This option saves a total of $53,528 in interest compared to doing nothing and reduces the loan by 3 years, 6 months. However the quotes I received didn’t meet the target monthly amount of ~ $850.

Recasting the loan

Recasting is a less common option where the loan is set back to its original duration. So the additional payment doesn’t reduce the length of the loan. Instead it reduces the monthly payment by amortizing the loan over the original completion date, so you pay more interest.

The advantage of this approach is that there are usually no closing costs and it’s simple to do. However there’s no change in the interest rate either.

Interest Rate 4.375%
Monthly Payment $831
Remaining Months 25 years, 6 months
Interest to be paid $101,215

Well we met the target monthly amount. However this option extends the loan by 2 years and only saves a total of $30,208 in interest. Financially it’s the worst option of the three but better than nothing.

Initial thoughts

So at first glance, it’s clear that the cheapest option financially is to pay down the mortgage.

But the one option meeting the monthly target amount is also the most expensive option in terms of interest paid.

Or is it?

A second look

The thing is, I’m currently paying $1,197 a month towards the mortgage. And I want to continue paying that amount. However I don’t want the obligation of having to pay that if I needed to save money.

The refinance and recast options above show a lower monthly payment of $971 and $831 respectively. What happens to the comparison if I continue to make a monthly payment of $1,197 where the extra money goes to principal?

Well, it looks something like

Option Monthly Payment Additional Payment Interest to be paid Loan Reduced by
Pay Down $1,197 $0 $53,853 9 years, 1 month
Refinance $971 $226 $55,221 8 years, 10 months
Recast $831 $356 $53,445 9 years, 1 month

Interestingly, on this basis the recast option comes out the cheapest in interest charges. Obviously this is contingent of making the additional payments but in making a fair comparison it’s important to consider what the extra money saved would be used for.

The total interest payments all come out fairly similar since all the options are using the same rate. The refinance option is penalized a bit more because of fees associated with closing that weren’t applicable to the other two options.

And so, recasting is what I did in March. The process required getting a simple form notarized and sending to my mortgage company who offer free and unlimited recasting on my mortgage. The only condition being a large enough down payment. Starting in May, my new monthly payment works out as $826.86 and I’m making an additional payment of $363.25 a month towards the mortgage.

Where the money came from

Although I’ve not been aggressive in paying down my mortgage, I have been putting some money aside as part of my monthly Savings with a long-term view to pay off the mortgage using that money. The majority of the savings have been in WWELX. This is an actively managed fund with approximately two-thirds in stocks and one-third in bonds. It has a low expense ratio of about 0.25% for the investor shares.

As of 22nd February, I had saved a total of $46,946.14 since my first purchase of $3,000 in October 2013. The total value of my holdings had grown by $3,132.80 to $50,078.94.

To fund the $60,000 I sold the entire holding, of which $2,722 were long term capital gains and $410 were short term gains. So I’ll owe a bit more at tax time next year. I put $40,000 towards the mortgage and Ms. DL put in $20,000.

The remaining $10,000 went back into new investments for long-term savings which will be the subject of another post.

Summary

So I have a shiny new mortgage payment of $827 a month that was achieved with a minimum of hassle and I’m happy about that! Recasting isn’t always offered as a choice in evaluating mortgage options so it was interesting to evaluate that. Refinancing can definitely be cheaper if the change in interest rate is high enough (say 1% or so).

Quote of the day

Behind every great man is a woman rolling her eyes.

Jim Carrey

The post Reducing my mortgage payment appeared first on Dividend Life.

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The UK Dividend Champions June 2018 edition is now available at DividendChampions.UK.

It’s a minor update this month unfortunately as I only found time to update a few new companies.

Going forward, the releases will be documenting the status of as the end of the prior month. This is June’s report since it’s released in June but reports dividend announcements during May.

On the plus side I’ve recently spent some time over the last couple of months creating a means to track upcoming announcements and that should help ensure companies get updated more frequently. Updating dividend data for existing companies I’m tracking is easy. It’s researching and checking new companies that takes more time.

These notes concentrate on changes in Financial Year dividend growth history which I think is fairer than a Calendar Year basis for quantifying growth.

None of the companies listed here are trading recommendations. They’re simply companies that I researched or otherwise increased their dividend growth history this month.

Financial Year Rankings

Dividend growers that I’m tracking increased by two this month. I researched four companies, one of which did not qualify. An existing company also dropped out of the list.

FY Category June 2018 May 2018 Changes
Dividend Growth 25+ years 18 18 0
Dividend Growth 10-24 Years 66 66 0
Dividend Growth 5-9 Years 56 57 -1
Dividend Growth 1 to 4 Years 43 40 +3
Dividend Growth 0 Years 57 56 +1
Total 240 237 +3
New Companies Added

I researched four new companies this month. Of those, three were added to the FY Growth List since May.

Sirius Real Estate Ltd (SRE)

Sirius is a property company listed on the London Stock Exchange and Johannesburg Stock Exchange. It operates business parks and flexible workplace environments.

Founded in 2007, the company’s initial dividend payment was interrupted by the financial events of 2008. It started paying dividends again in 2014 and currently has four years of dividend growth.

Tritax Big Box plc (BBOX)

Tritax is a specialty REIT company which focuses on large warehouse properties. These are typically leased to large companies via long-term lease arrangements.

The company has increased its dividends since it was founded in 2013 with four years of dividend growth.

Majedie Investments plc (MAJE)

After starting out in 1910 operating Rubber plantations, from which it acquired its name, Majedie evolved into an investment company. It became an investment trust in 1985.

A 20 year long streak of dividend increases was brought to a halt in 2009 when investment income from the groups holdings declined. In 2014 the company restructured and dissolved its subsidiary, Javelin Capital, which was previously responsible for managing investments of the company. The restructuring resulted in a reduced dividend which has subsequently been increased for the last three years.

Deleted FY Entries

One company was removed from the FY Growth List this month.

GKN plc

Originally known as Guest, Keen and Nettlefolds, GKN was an automotive and aerospace company which has been acquired by Melrose Industries plc (MRO) in April this year. Consequently the shares have been delisted from the LSE and the company is removed from the List.

Other FY Changes Provident Financial Group plc

PFG provides personal credit products in the UK. It wasn’t included in the list previously as it hadn’t enough CY growth to be included when I initially created the list a few years back. It was a consistent dividend payer however, so I researched it as a potential candidate to be included.

A demerger of their international business caused a holding in their dividend payments in 2007 until the company grew enough to resume increasing their payments.

However, last year the Financial Conduct Authority (the UK’s version of the SEC) started investigating the company for misconduct. This resulted in the cancellation of their dividend for FY2017 and the resignation of their chief executive officer (unfortunately named Peter Crook).

Investment Trusts

The excel list contains Investment Trusts; you can easily identify them by filtering the Sector column “F” for Equity Investment Instruments, where you can either include or exclude them when viewing the list.

Fundamental Data

Entries in the list that have a “Founded” column have been manually researched and checked. The Dividend per Share and yield for these entries were calculated as of 3rd June.

Dividend yield is calculated based on the most recent dividend declarations divided by the current share price. Special dividends are also not included in yield or DPS calculations as a general rule (there are one or two exceptions), so actual yields may be higher.

Please keep in mind that the fundamental data will get increasingly out of date as the month progresses. The accuracy of the data is a best effort on my part. You should always perform your own research and due diligence on any potential stock trade and nothing in this post or the List is a recommendation to buy or sell.

Micro-Caps

The List includes AIM-listed companies which may be more volatile and unstable compared to larger FTSE-listed companies. To filter these out, you can use the index (Column C) and the Market Cap (Column O) to be more selective.

Excel vs Website

All dividend history data that I have is posted on DividendChampions.UK. The Excel file limits the length to the last 15 years.

DividendChampions.UK is populated from a database built from the companies I’ve manually researched. This is a subset of the complete list in the Excel file. It contains placeholder pages for any other company in the Excel file but you’ll have to search for it using the search bar and there’s not a lot of data for those companies. Dividend history and graphs on the site are only available for companies that I’ve manually verified.

List Corrections

Current file version is dated 03-June-18.

03-June-18: Initial release.

Status update

The good: Things are ticking along although I didn’t get to research many companies this month.

The bad: There are many more companies left to research in more detail.

Look for the next update of the List on DividendChampions.UK towards the end of 1st July (US Time). Follow @DividendChampions on twitter for the latest status or else wait for the release notes to be posted here.

Let me know if you see any comment on the List. Please keep in mind the list is entirely free and I make no money from it, thank you!

Quote of the day

Don’t judge each day by the harvest you reap but by the seeds that you plant.

Robert Louis Stevenson

The post UK Dividend Champions – June 2018 appeared first on Dividend Life.

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I learned today that David Fish, the creator of the US Dividend Champions CCC list has passed away. He will be sorely missed.

David’s simple list, faithfully published monthly over the last ten years, was one of the tools I used when starting out investing. It provided an elegant entry point into DGI investing.

The list derived its name from its grouping of companies into three tiers of dividend growth: Contenders, Challengers and Champions, with lengths of 5-9, 10-24 and 25+ years respectively.

Although I never met David, he inspired many investors and the DGI investing style he favored encouraged a long-term buy and hold strategy.

If you’ve been helped by David’s list, please take a moment to visit his guestbook.

Thank you David. My deepest condolences to your family.

Rest in peace.

Quote of the Day

In the end, it’s not the years in your life that count. It’s the life in your years.

Abraham Lincoln

The post In memory of David Fish, a dividend champion appeared first on Dividend Life.

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Here’s my February 2018 Income Fund update, following on from last month’s January update. January showed a big increase in my Income Fund, but February was not so kind. Click on for the details…

Dividend Income

Total income from my Income Fund this month was $99, a 71% decrease compared to the $351 I received in February 2017.

The decline is because I no longer hold high-yield bonds that pay a monthly distribution compared to this time last year. In moving that money to stock funds, most of the dividends I receive now are paid in the third month of each quarter.

The following chart shows the cumulative dividend income this year compared to previous years.

February’s 2018 result still barely registers on the chart and my new 2018 Target of $13,760 looks far away. But this is the new normal of my portfolio now. It’s more tax efficient and it should have higher total return over a long time since it’s all stocks. The improved tax efficiency means that the bulk of the dividend income is taxed at the qualified 15% rate. Previously the monthly bond income was taxed at my ordinary 28% rate.

Income breakdown

The chart below shows a breakdown of my income this month.

The largest contribution came from individual stock holdings – together they paid 99% or $97.

There was no income from any of the stock funds I hold since they pay out in the third month of the quarter.

Finally, interest from the Income Fund cash reserves made up the remaining $1. I keep a little cash aside to smooth out ‘withdrawals’ and the interest rate on this money market account has increased a little.

Dividend income from stocks

Six stocks that I hold paid dividends this month for a total of $35 as detailed below.

Last February my individual stocks paid $95 from eight stocks. Since then, I’ve sold out of the small positions I held in CLX and VZ. I’ve also added to T and GIS.

Dividends increased by a simple average of over 7% over last year all on their own. AXP and RTN had the biggest increase with 10% and 9% respectively. T and GIS had the lowest increases under 3%.

Income from funds

None of the funds I hold paid out dividends or capital gains this month.

Asset Allocation

My Income Fund asset allocation is shown below.

I’m now holding 100% stocks in my Income Fund which is held entirely in Taxable accounts.

Cash is virtually zero as I just keep a small amount to manage cash-flow.

Detailed Allocation

The following table shows the details plus the new asset allocation for my Income Fund.

Individual stocks are a little over my target and US Total Stock and International stocks (VIHAX) are a little under.

Changing the allocation ratio via new capital takes a lot of time because of the size of my contributions vs the total value. Eventually it may not even be feasible. However I don’t plan on selling any assets to re-balance faster.

Fund Purchases & Sales

I added $15,197.50 of new money to my Income Fund in February. $2,300 is the usual monthly amount I aim to invest. The rest is from a bonus I received at work.

Fund purchases

Total purchases this month were $5,297.50 in VHDYX, $6,250 in VTSAX. and $3,000 in VGTSX.

Funds sold

None.

Stock purchases

I bought 7 shares of DAL on the 1st February for $56.50 per share. Total cost including the $2 commission was $387.50. Delta Airlines is one of my more speculative holdings as they’re not a defensive dividend growth stock. However I think they are a well-managed company at a good valuation and it doesn’t hurt that I spend a fair amount of money each year on their services. This purchase increases the number of DAL shares I hold to 53.

Stock Sales

None.

Distributions

I transferred $850 from Fund Cash into my Living Expense account. This is an automatic payment and represents about 20% of my Living Expenses that my Fund pays every month.

Money is fungible, so a dollar in one account is no different than a dollar in another account. The distribution from the income fund allows me to invest more of my salary than I otherwise would be able to. Withdrawing money gives me experience in managing cash-flow from the Income Fund. One day I won’t have a salary after all.

Fund Cash

Fund Cash is now at $1,473 and held in the VMFXX money market account which is where all dividend distributions are paid into. $1,220 of this amount is reserved for future distributions of $850 a month. The remaining $252 is spare and not yet invested.

Cash has decreased by $786 since last month since I withdrew $850 but received some dividend income this month. This figure includes some additional dividends which were reported last month but took several days to reach my main brokerage account.

Portfolio Performance

My Income Fund decreased in value from $441,077 to $435,136 this month. This decrease of $5,940 includes $15,197 of new capital so overall loses were much higher.

Outlook

For this quarter I’m continuing to withdraw $850 a month. This money pays some living expenses and allows me to invest more of my paycheck.

Going forward, I will set my monthly withdrawal rate for the next three quarters of the year to the average monthly income from the first quarter. The first quarter is usually the lowest income of the year since I invest throughout the rest of the year and because the stock funds I own tend to pay more dividends in Q2 and Q4.

Shifting focus

I started a position in Vanguard’s Total international Fund and will stop funding VIHAX. My tables above include references to the investor class of that fund (VGTSX) which has a $3,000 minimum purchase limit compared to the $10,000 limit of the cheaper admiral class fund.

I am moving towards a total market portfolio with a small tilt to high-yield (value) plus some individual stocks.

Summary

February has been a small step forward in terms of the dividends received this month. Hopefully March will finally show an increase in the cumulative dividends compared to last year.

How was your latest month? Are you one step closer to Financial Independence?

Quote of the Day

Always be yourself, express yourself, have faith in yourself, do not go out and look for a successful personality and duplicate it.

Bruce Lee

The post February 2018 Income Fund Update appeared first on Dividend Life.

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