Passive Income – Quarter 2, 2018

It feels like an eternity since the sharp correction back in February, and the Cambridge Analytica scandal that rocked the world. It was the first big shake up for a while, and it wobbled portfolios around the globe. Since then, we’ve had a trade war with more volatility in the portfolio. Not forgetting Kim Jong-un making peace with Moon Jae-in at a historic summit and enduring the bromance between Trump and Mr Jong-un. Times are changing!

passive income

Q2 2018 Dividend Growth Stock Sales

Nada. If I can help it, I won’t sell off anything in my dividend growth stock portfolio (maybe if something gets cut).
There’s that great debate about trimming/ subtracting to maintain equal weightings of each stock. I agree with this to a certain extent.

However, I’m not here to make mathematical symmetry…I’m here to make bank.

It just seems counter-intuitive to trim back on a dividend growth stock like Bovis (BVS) (my heaviest weighting at 4.25%) that’s just spat out 170.95gbp this quarter.

However…my rule of thumb is, if BVS or any other one of my 40 dividend stocks exceeds 10% of the total portfolio, THEN I’ll start to think about trimming.

Where does this rule come from? For example, Bailey Gifford (of Scottish Mortgage Investment Trust) ensure one of their most profitable holdings (AMZ) is maintained around the 10% mark.

Hence, 10% weight is a nice benchmark.

Q2 2018 Dividend Growth Stock Purchases

1. 34 shares of Kimberley Clark (KMB) on 23 April 2018 for 99.75 USD per share.

2. 33 shares of PepsiCo (PEP) on 07 May 2018 for 98.46 USD per share

3. 888 shares of Legal & General (LGEN) on 14 May 2018 for 278.67 pence per share

4. 62 shares of Delta Airlines (DAL) on 17 May 2018 for 53.36 USD per share

We have 2 dividend aristocrats amongst these buys (KMB and PEP) and all of them were undervalued (at least 20% discount), except for Pepsi which I purchased at fair value.

delta airlines undervalued - passive income q2 2018

Dividend Bonus

Some shareholder-friendly companies like to reward their shareholders for their loyalty, one of which is Next Plc (NXT). They decided to send all their shareholders (ones with at least 100 shares) a 25% discount voucher this quarter, which you can use as many times as you like…until the end of October 2018.

So, I purchased a couple of pairs of trousers with the voucher and left it for family members to use. Need or want? Both really. Unfortunately, I’ve gone through the middle-aged spread. I really thought I was invincible. I used to be a 30″ waist for years, but I’ve put on the beef somewhere along the lines. Cycling every day has also thickened my thigh muscles, which doesn’t help.

So, the jury is out with retail (apparel) at the moment, as you have seen on the news recently. House of Fraser, Henri Llyod, Marks and Spencer, New Look, Abercrombie and Fitch have all hit the doldrums with store closures etc. Maybe there’s an opportunity there for some of these stocks…or perhaps a value trap?

next plc reward for shareholders - passive income q2 2018

Next Plc has weathered the storm so far (although they had a rocky 2017) and have a lovely set of metrics to show for it. However, they may be a little overvalued at this moment of time.

This is Where Intrinsic Value Comes into Play

Fortunately, I managed to secure them at the 38GBP mark back in January 2017…so they really have rewarded me in more ways you can imagine.

From an initial downpayment of 2,500gbp in January 2017 and a further 2 dividend reinvestments), this stock has now gained 1,991gbp/ 45.57%. Paid 273gbp in dividend payouts (including special dividends) and now I’m dressed smartly for less.

That’s the beauty of shareholder-friendly companies.

Future Cash Flow Value and Share Price in January 2017

Analysts predicted a future cash flow value of 58.12gbp back in January 2017 (see screenshot above). They weren’t wrong, they were conservative (now 60.50gbp as of July 2018).

And that’s why I patiently scour my stockpicker for undervalued, shareholder-friendly companies with a long track record.

Dividend Income for Q2 2018

37 dividend payments were distributed in Q2, 2018 (same as Q1, 2018)

1308.32gbp (dividends from Q2) has accumulated in my broker account (post withholding tax and broker fees).

There’s an increase of 261.97gbp for dividend income in Q2 (compared to Q1, 2018).

Average yield is 5.09% (taken from the ranking system), an increase of 0.23% from last quarter

Total return from the dividend portfolio is estimated to be 10.03% (capital gain/4.94% + average yield/5.09%)

dividend funds - passive income q2 2018

I’ve taken a screenshot straight from my H&L account, to show some transparency. And I’ve actually got a bar chart to show my progress now (bit behind the times).

dividend income bar chart - passive income q2 2018

As you can see, my biggest month (and of the year) was May 2018…625.99gbp.

Dividend Reinvestment

AT&T (T) has been identified as the highest ranking stock, using my dividend ranking system.
However, as a new rule, I never reinvest dividends into a previous high ranking stock. Otherwise, I become too overweight.

So, the second highest ranking stock for Q2, 2018 is British American Tobacco (BATS). As I’ve never reinvested dividends into this dividend growth stock, I will deploy 1000gbp (I have 1141.54gbp sitting on account).

Purchased 25 shares at 3900.5 pence.

In case you’re wondering why I never reinvested the full 1308.32gbp (dividends accumulated from Q2, 2018), I had used most of them to purchase Legal & General (LGEN).

No cash contributions this quarter, as I already purchased 4 new dividend growth stocks.

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 Q2,2018 (and after the dividend reinvestment).

There’s been a capital gain of 15,815.13gbp for the dividend funds this quarter.

dividend fund capital overview - passive income q2 2018

Investment ISA (FAANG Fund)

There’s been a gain of 6,384.27gbp/ 40.21% for the ISA/ FAANG fund this quarter.

isa faang fund - passive income q2 2018

P2P Lending

mintos p2p lending - passive income q2 2018
No additional cash contributions were deployed into the Mintos fund this quarter.

The Mintos account has increased 493.01 Euros this quarter.
The Net Annual Return has increased by 0.08%.

mintos p2p lending overview - passive income q2 2018

It’s reassuring to hear, that after three years since their launch, Mintos has turned an annual profit for the first time. In 2017, their revenue increased more than four-fold to over EUR 2.1 million and net profit was EUR 196 000.

Already in 2018, they have added nine new loan originators and seven new countries – Armenia, Kazakhstan, Kenya, Mexico, Moldova, United Kingdom and Zambia.

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

Crowdinvesting

1000 Euros was deployed into the Envestio crowdinvesting fund, with 400 Euros deployed into 4 active investments.

crowdinvesting envestio overview - passive income q2 2018

crowdinvesting envestio charts - passive income q2 2018

The Envestio account has increased by 4.96 Euros.

Current Investments:

1. High-yielding investment into technology sector in Estonia, financing of working capital of urban mining plant – 19% planned annual return

2. High-yielding investment in energy sector in Latvia, financing of the further development of cogeneration power plant complex – 18% planned annual return

3. High-yielding investment in the crypto-mining sector in the Czech Republic, financing of a crypto-mining hardware production process – 22% planned annual return

4. Short-term bridge-financing: development of real-estate object (modern street market) in Riga – 17% guaranteed annual return (for the first EUR 100,000 of investment, then 15%)

For more information on Envestio and Crowdinvesting, click here.

Rental Income

Total rental income this quarter is 2542.87gbp after management, advertising and repair fees.

SIPP (Pension)

There have been some changes this quarter with regards to the SIPP. I switched out the Vanguard LifeStrategy 60/40 to a Vanguard LifeStrategy 80/20.

Why the change? The 60/40 was solid as a rock. That’s the thing, too steady. My father has this one in his SIPP, and it’s perfect for the withdrawal phase. Because no one wants surprises at his stage of life. However, I’ve got 15-20 years to play with.

Don’t get me wrong, the 60/40 is a brilliant performer and it’s risen a healthy 7.86% since I first started reporting my income back in Q3, 2016.

However, I can suffer a bit more volatility, ups, and downs, for a potentially higher return on investment. I’m in the accumulation phase and have more time on my side.

I also deployed 3600gbp into the SIPP (whilst it was down during the trade war).

So, how’s it performing so far?

sipp pension - passive income q2 2018

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