Passive Income – Quarter 1, 2018

I was becoming a bit blasé about these passive income reports, with the generous dividend portfolio capital increases, quarter by quarter. Mainly due to the long bull run most of us have enjoyed. My intention is to portray why stocks (especially dividend growth stocks) are my preferred method of investing and a brief update on the passive income progress.

passive income

However, for the first time in 2 years, a small chunk was wiped off my total portfolio. It was the first time the dividend growth fund was in the red.

‘Twas a little scary. However, it’s a great learning opportunity and not much need for concern as you’ll find out below…

Q1 2018 Dividend Growth Stock Sales

I sold BP this month, as it’s dividend decreased by 1.9% in 2017 (according to Dividend Max and BP’s dividend history). I never sell dividend stocks unless I have to, but with this and the fact I have too many oil/ energy players – it’s all a bit too risky. I always think back to why I’m doing this in the first place.

I want to secure shareholder friendly management companies that continue to grow their dividends, year upon year. As simple as that.

I collected +600gbp from the BP sale, but I only think of this as a bonus. As the emphasis is not on the capital growth.

Q1 2018 Dividend Growth Stock Purchases

With the BP sale proceeds and some consultancy money, I bought 5 dividend growth stocks (including 2 REITS) going cheap at the sales.

I remember physically lining up for the January Sales back in the day, for trendy clothes. But these days, I shop for ‘boring’ old stocks. The funny thing is, when everyone is ‘running out the store’ I’m walking in and scooping up bargains galore.

Don’t get me wrong, I still shop for nice clothes. But at a decent price tag and much less frequently.

Realty Income (O) and Store Capital (STOR)

I picked these up at the new year. Realty Income is better known as the monthly dividend company and Store Capital is a Warren Buffet pick.

There’s not much dividend history to support Store Capital but I’m willing to take a punt when the great Warren Buffet has it in his portfolio.

The unique point of Store Capital is that it often requires tenants to provide store level profitability figures and requires tenants to pay variable costs, such as property taxes, insurance and some maintenance expenses; these all help increase the bottom line and ensure that the company only leases its properties to the most secure, creditworthy clients.

Of course, there’s a bunch of other metrics I required to check and it looks to have great potential…

REITs are required by law to pay out 90% of their taxable income to unitholders. This makes REITs one of the preferred investments for investors looking for current income.

You would have to be living in a cave to miss the sharp correction in February 2018. But as a quick recap, strong wage growth in recent payroll data frightened investors, raising the possibility of higher interest rates than expected.

As REITS are sensitive to interest rates, I purchased these REITS whilst they were on the operating table.

Rio Tinto

I picked up Rio Tinto in the sales, my first miner. It’s a cyclical stock which I’ve been patiently watching for months. Good old Donald Trumps’s announcement on the 10% steel tariff hit the share price (as RIO is focused on iron ore), hence it was a good buying opportunity and the chance to own a blue chip mining stock.

I love the fact it has a clean bill of health and its dividend is well covered (1.7 x coverage at the time of writing). Rio is in a very solid financial position after they have decreased Net debt from $27B to $7.5B in the last 3 years.

Not much in the way of dividend history, but the rest of the metrics look favourable.

Aflac

I also picked up the infamous Aflac. A high growth, dividend aristocrat that’s enjoyed 34 years of dividend increases. Aflac experienced its first stock split (two-for-one) in 17 years.

“The move follows a year of “strong share price performance” and the split “enhances the liquidity of our shares, which is in addition to our efforts to increase shareholder value,” Aflac Chief Executive Daniel P. Amos said in a statement.

It’s made the stock more affordable for the common investor, hence a good time to pile in. It actually came up as third best dividend growth stock (from the undervalued angle) in my ranking system.

Walgreens Boots Alliance (WBA)

Last but not least, I deployed my remaining hard earned cash into another dividend aristocrat, Walgreens Boots Alliance. This one was purchased at an attractive valuation.

However, there is still a great deal of fear in the market with regards to retail. Hence the double digit stock decline in 2017 and the general sentiment about Amazon entering the pharmaceutical scene.

Walgreens Boots Alliance Intrinsic Value - Passive Income Q1 2018

Anyway, after recent strong financial reporting, the future is potentially on the up. It has a super safe dividend with its low payout ratio (well covered by adjusted free cash flow) and has enjoyed 42 years of continuous annual dividend increases.

My dividend portfolio is in dire need of a consumer staple and defensive stock to maintain the balance. Hopefully, Walgreens is the medicine it needs.

Without further ado, let’s get down to the good stuff…

Dividend Income for Q1 2018

37 dividend payments were distributed in Q1, 2018 (compared to 30 dividend payments in Q4, 2017)

1046.35gbp (dividends from Q1) has accumulated in my broker account.
There’s an increase of 168.95gbp for dividend income in Q1 (compared to Q4, 2107).

Also, this is a great litmus test with regards to the sharp corrections we’ve just experienced. And why it doesn’t necessarily mean your dividend income is going to slump during a downturn. Sure, this is just a snapshot in time and not a deep analysis over a long timeframe. However, it instills a little confidence during times of uncertainty.

And that’s why I like dividend investing in sharp corrections, bear markets or recessions. Stock prices can lie, dividends tell the truth

DateCompanyDividend (£)   
TOTAL1046.35
26/03/2018Royal Dutch Shell Plc36.96
23/03/2018Qualcomm Inc18.57
22/03/2018Stanley Black & Decker Inc12.26
20/03/2018Flowers Foods22.13
19/03/2018Realty Income Corp7.62
16/03/2018SSE Plc92.02
16/03/2018S&U Plc64.00
15/03/2018Johnson & Johnson Com12.06
14/03/2018United Technologies Corp14.23
14/03/2018Chevron Corporation17.41
14/03/2018Target Corp25.94
14/03/2018International Business Machines Corp26.89
06/03/2018Boeing Co24.77
05/03/2018Pfizer Inc23.53
05/03/2018Enbridge Inc23.42
02/03/2018Corus Entertainment Inc26.60
22/02/2018Amerigas Partners 29.24
20/02/2018Apple Inc12.19
19/02/2018Realty Income Corp7.58
19/02/2018Omega Healthcare Investors Inc76.00
08/02/2018British American Tobacco Plc23.54
07/02/2018Universal Corp14.86
05/02/2018BT Group Plc55.53
05/02/2018AT&T Inc37.82
02/02/2018Vodafone Group Plc54.38
02/02/2018Toronto-Dominion Bank17.48
02/02/2018Corus Entertainment Inc26.72
26/01/2018RPC Group Plc25.12
25/01/2018Next Plc47.25
23/01/2018Medtronic Plc10.38
19/01/2018Greene King39.95
18/01/2018Cardinal Health Inc12.30
03/01/2018Brookfield Renewable Partners 7.03
03/01/2018Brookfield Renewable Partners2.55
03/01/2018Brookfield Renewable Partners22.39
02/01/2018Next Plc55.65
02/01/2018Corus Entertainment Inc19.98

Dividend Reinvestment

AT&T (T) has been identified as the highest ranking stock, using my dividend ranking system.

No cash contributions this quarter, as I’ve just purchased 5 new dividend growth stocks.

Hence, the accrued 1046.35gbp in dividends is deployed into the top ranking stock (T) in my dividend growth fund.

For more information on how I reinvest my dividends for maximum return, click here

Dividend Funds Overview (Capital)

The download from my Hargreaves and Lansdowne (broker) account below shows the state of play after Q1,2018 (and after the dividend reinvestment).

dividend growth stocks account summary - passive income q1 2018

There’s been a capital loss of 601.44gbp for the dividend funds this quarter.

Investment ISA (FAANG Fund)

There’s been a loss of 987.84gbp/ 6.33% for the  ISA/ FAANG fund this quarter.

investment isa faang fund - passive income q1 2018

Just like Mark, it experienced a dunt during the sharp correction in February AND a further nosedive in late March. Mainly due to the Cambridge Analytica scandal. The loss cut into Facebook’s market capitalization by around $43 billion, or $15 per share and of course made quite an impact on my Investment ISA.

Trumps Twitter rant with Amazon didn’t quite help matters either, where Amazon lost 50 Billion USD in market value after the Tweet. Again, denting the ISA.

Strictly, Scottish Mortgage don’t like to call it a FAANG fund, but it’s my little FAANG fund. A is for Alibaba, rather than Apple.

cambridge analytica conspiracy

P2P Lending

Mintos

No additional cash contributions were deployed into the Mintos fund this quarter.

p2p lending mintos - passive income q1 2018

The Mintos account has increased 476.77 Euros this quarter.
The Net Annual Return has increased 0.18%.

For more information on Mintos and Peer to Peer Lending, click here.

Rental Income

Total rental income this quarter is running a loss at -479.58gbp after management, insurances, internet and repair fees.

A repair on the lounge and kitchen floor really set me back. As in hiring a guy to lay brand new floor tiles over the entire lounge and kitchen. Most of these apartments had an underlying flaw in the workmanship in the floors and unfortunately, the warranty has expired. Shit sometimes happens.

SIPP (Pension)

There’s been a decrease of 2.41% re the SIPP this quarter. Again, this trade war with the USA and China is having an impact on the Vanguard SIPP.

SIPP pension - passive income q1 2018

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