Passive Income – Quarter 4, 2016

Welcome to another passive income report, for Q4 2016 and Happy 2017!

The general consensus was, the market would rally after a Clinton Win and tank with a Trump triumph. It didn’t quite work out that way, a bit of an anti-climax really. However, the market is gaining momentum again and the portfolio is growing slowly.

passive income

Dividend Income for Q4 2016

DateTickerCompanyDividend (£)   
16/12/2016BPBP Plc46.56
14/12/2016UTXUnited Technologies Corp14.78
06/12/2016BABoeing17.20
05/12/2016PFEPfizer Inc22.53
18/11/2016BVSBovis Homes Group Plc50.70
15/11/2016AAPLApple Inc12.38
11/11/2016SUSS&U Plc24.72
03/11/2016TAT&T Inc29.00
19/10/2016CAHCardinal Health Inc13.40
TOTAL231.27

Dividend funds have risen by 29.54gbp this quarter. Not a huge increase, but this is only the start of something wonderful. And I’m now ready to perform my first dividend reinvestment. I will perform this during the start of Q1, 2017, Reinvesting 577.94gbp into Savilles. I’m literally putting the finishing touches to a ranking system . And Savilles came out tops with this little system.

The table below shows the state of play after Q4,2016 (before dividend reinvestment, with 577.94gbp sitting on account).

Dividend Growth Stocks (Snapshot), End of Q4 2016

Company SharesCost Basis (£)Mkt. Value (£)Gain Weight
TOTAL37,129.3543,971.47+16.61%
Amerigas Partners692489.482678.18+7.58%/ £188.70
Apple Inc.322439.873002.50+23.06% / £562.636.8%
AT&T Inc.892485.623066.63+23.37% / £581.017.0%
Boeing Co242412.633027.90+25.50% / £615.276.9%
Bovis Homes Group plc3382493.392766.53+10.95% / £273.146.3%
BP plc5872497.502990.77+19.75% / £493.276.8%
Cardinal Health Inc.442471.372564.94+3.79% / £93.575.8%
Deutsche Post AG1282485.673398.80+36.74% / £913.137.7%
Flowers Food Inc.2192493.983542.39+42.04% / £1048.418.1%
Pfizer Inc.1142480.703005.05+20.94% / £519.356.8%
S&U plc1032489.062219.65-10.82% / £-269.415.1%
Savills plc3432498.042401.00-3.88% / -£97.045.5%
SSE plc1642495.422546.92+2.06% / £51.505.8%
Stanley Black & Decker Inc.332457.723065.85+24.74% / £608.137.0%
United Technologies Corp342438.903023.54+23.97% / £584.646.9%

My key strategy now, is to stick to S&P 500 Dividend Aristocrats and Dividend Achievers. But everything seems so overvalued at the moment. Anyway, a little research unearths a Utility stock on a down turn…a Dividend Achiever with a 32% discount.

This stock is Amerigas Partners (APU) and the newest dividend growth stock in my dividend portfolio. It distributes propane, related equipment and supplies in the United States.

Their turnover was down roughly 10% the last couple of years. Partly due to warm weather and propane values dropping. However, it continues to grow through mergers and acquisitions. Also, through customer account renewals and additions. It’s economic moat is it’s sheer size. It’s the largest propane distributor in America, covering all 50 States through approximately 2000 distribution centers.

Did I mention it distributes a 8.5% yield?

Flowers Foods (FLO) is well worthy of a mention this quarter. It’s risen like a phoenix from the ashes. I bought it at 31% discount a few months back, after selling my gold biscuit. So, it was money well reinvested.

The discount is mainly due to a pending court case that was dragging it down (case centred on some of the company’s workers, whether they should be classified as employees or contractors). Anyway, they settled the class action lawsuit for 9 Million Dollars…which has helped in resulting a 14.4% spike – Source: Seeking Alpha.

On the flip side, S&U is in the red. It happens to be another Brexit buy, hence a lot of uncertainty at the moment. Although, flicking through their company reports, everything looks positive. I’m sure it’ll pull through once this article 50 is triggered etc.

If I was officially at retirement age and drawing an income, I would sell S&U. However, my dividend portfolio is on accumulation, so I have time on my hands. It happens to have a generous dividend (3.48%) and healthy payout ratio (50%) with a projected payout ratio of 46% in coming years. Based on that, I will ride out the Brexit storm.

As a side note, if any of the dividend growth stocks have an unusually high payout ratio, then I’ll keep my eye on them (as I don’t want my dividend funds to reduce, or even worse…get cut. I’ve highlighted such candidates below.

Pfizer
It’s current payout to shareholders is still unusually high (dividends paid are not well covered by net profit). The future payout to shareholders after 3 years are expected to be covered by net profit.

Pfizer is going through the motions currently, it’s Q3 share price dropped after Q3 results were announced. It’s still pulling itself together after it’s patent expired for Lipitor, way back in 2011. With generics now flooding the market and of course replicating Lipitor, this stalwart is feeling the pinch.

Pfizer is amending this situation by acquiring a number of key pharma/ biotech companies. Hence, shoring up it’s pipeline with biosimilars and sterile injectables. If you can’t beat them, join them (better still, acquire them).

BP
Again, this payout ratio is still unusually high. Dividends forecasted to be covered by profits after 3 years.

BP announced it’s Q3 results, start of November. The CEO announced the dividend will be a priority for the company and doesn’t see any issues, if oil prices can stabilise between $50 to $55 a barrel.

Oil is predicted to rise over the short and medium term. After spending and investment was cut, supply is expected to be constrained. Thus favouring demand and possibly a rise in oil price. OPEC (organisation of the petroleum exporting countries) who have a market share of around 40%, are also expected to play a positive role. They expressed confidence that they would finalise an agreement to curb output.

Sources:
Telegraph, Simply Wall St, Sure Dividend and Seeking Alpha.

Investment ISA (Snapshot), End of Q4 2016

TickerFundCost Basis (£)Mkt. Value (£)Gain
TOTAL15,423.1120,669.01
SMTScottish Mortgage Investment Trust15,423.1120,668.96+34.01% / £5,245.85

The investment ISA is ticking along. It’s down 2.87% from last quarter, but this is no biggy.

P2P Lending (Snapshot), End of Q4 2016

PlatformDepositedInterest EarnedRateDefaults
RateSetter£1000£14.232.2%NA
Mintos€1000€13.17 + €0.04 (late payment) = €13.2112.09%Yes
Twinos£2500£7.7810.04%NA

I’ve added two new P2P lending platforms this quarter, they are Mintos and Twino.
I’ve deliberately chosen the Sterling option for Twino. Here’s why…as a contractor, I invoice in Sterling or Euros. Depending on my agency and location etc.

This gives me more freedom re contributing funds/ taking a payment with my P2P platforms. I can analyze the exchange rates and work with the more favorable currency, at that moment of time.
So, I have 2 Sterling platforms and 1 Euro platform to work with.

I eventually plan to sock around 30K into P2P lending. It diversifies my portfolio and can act as a buffer if the markets tank.

Rental Income

It’s end of season for the holiday rental, hence no rental income this month.

SIPP (Snapshot), End of Q4 2016

FundShares Gain
Vanguard LifeStrategy 60/40 832.96+24.59%

The SIPP (pension) has gone up 2.89 % this quarter. It continues to go from strength to strength.

Takeaway

Things are moving in a positive direction, but there is a long way to go before I have all these passive income streams trickling into my accounts. Until then, it’s head down and 100% focus.

Now I would like to hear from you.

What were your biggest takeaways? How is your income and investing progressing?

Let us know in the comments…

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