Passive Income Report – Quarter 3, 2018

passive income

Q3 2018 Dividend Growth Stock Sales

Nothing this month, although I’m aware I should have dumped the notorious Corus Entertainment (CJR.B) after it slashed its dividend.  Yes, I was chasing yield.

Q3 2018 Dividend Growth Stock Purchases

1. 478 shares of Redrow (RDW) on 13 August 2018 for 517.63 pence per share.

2. 191 shares of China Construction Bank (CICHY) on 13 September 2018 for 1276.93 pence per share

It’s getting more difficult to find value amongst the S&P 500, so no chance of any bargain dividend aristocrats. However, the UK market is providing some gems. There’s a fire sale with the house building sector (e.g. Redrow) at the moment.

I thought I would also take a punt with this Chinese Bank, in the midst of the trade war with China/ US. China Construction Bank Corporation is one of the “big four” banks in the People’s Republic of China. In 2015 CCB was the 2nd largest bank in the world by market capitalization and 6th largest company in the world.

The metrics look promising, although it’s probably as far as I’ll venture with the Shanghai Exchange.

passive income q3 2018 - china construction bank valuation

Dividend Bonus

Some shareholder-friendly companies like to reward their shareholders for their loyalty, one of which (this quarter) is Green King (GNK). They decided to send all their shareholders a year’s worth of 25% discount vouchers, for using at their selected outlets. Again, I handed over to friends and family to use.

passive income q3 2018 - greene king rewards

Green King also paid out 159.58gbp this quarter, so no complaints there. Although they are a little down in the dumps with regards to their share price.

Dividend Income for Q3 2018

41 dividend payments were distributed in Q3, 2018 (an increase of 4 compared to Q2, 2018)

1800.97gbp (dividends from Q3) has accumulated in my broker account (post withholding tax and broker fees).

There’s an increase of 492.65gbp for dividend income in Q3 (compared to Q2, 2018).

Average yield is 4.59% (taken from the ranking system), a decrease of 0.50% from last quarter

Total return from the dividend portfolio is estimated to be 12.59%, since inception  (capital gain/8.00% + average yield/4.59%)

passive income q3 2018 - dividend funds

I’ve taken a screenshot straight from my H&L account, to show some transparency. Please see the bar chart below to show my progress.

passive income q3 2018 - dividend funds chart

It’s also the first time I’ve broken the 4 figure dividend monthly payment barrier (1004.51gbp…refer to September 2018 on chart).

Dividend Reinvestment

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

1. AT&T
2. British American Tobacco
3. Greene King
4. Redrow

However, as a rule, I never reinvest dividends into a previous high ranking stock. Otherwise, I become too overweight. I’ve already reinvested in the above 3. And apart from AT&T, they are all good FTSE Index stocks.

So, the fourth highest-ranking stock for Q3, 2018 is Redrow (RDW). As I’ve never reinvested dividends into this dividend growth stock, I will deploy 1000gbp (I have 1097gbp sitting on account).

I purchased 176 shares at 567.9 pence.

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 Q3,2018 (and after the dividend reinvestment).

There’s been a capital gain of 14,039.181gbp for the dividend funds this quarter (dividend buys, dividend re-investment and good old-fashioned compounding).

passive income q3 2018 - dividend capital overview

Investment ISA (FAANG Fund)

There’s been a gain of 480.77gbp/ 2.28% for the ISA/ FAANG fund this quarter.

It’s the first time I’ve started to get nervous about ‘big tech’. Apart from a spike in Q2, 2018, my Scottish Mortgage quarter by quarter gains have been dropping since Q1 2017.

Now…it’s up 124.14%, but there’s definitely a slow down for this investment trust – judging by the data I gathered on my quarterly reports:

Growth of Scottish Mortgage Investment Trust (SMT)

PeriodOverall GrowthQuarter by Quarter Growth
Q3 201636.88%
Q4 201634.01%-2.87%
Q1 201753.76%19.75%
Q2 201767.28%13.52%
Q3 201776.19%13.52%
Q4 201787.98%11.79%
Q1 201881.65%-6.33%
Q2 2018121.86%40.21%
Q3 2018124.14%2.28%

The psychological element is starting to creep in now. As much as, “Will I dump all my Scottish Mortgage stock?”  However, I think I’ve learnt my lesson there.

And as far as my fund and share account (div stocks) and SIPP (vanguard tracker) go, I welcome a bear market with open arms. I’m just a bit apprehensive about the investment trust though, as there have been a lot of rumours recently:

“Interestingly, the indexes that performed best during the run-up also tended to fare worst during the following drawdown,” a team of strategists including Vijay Chandar said in a recent client note.

However, having another look ‘under the bonnet’, Baillie Gifford has done a good job in diversifying the portfolio by sector (and geographically). Where more non-tech now appears in the top 10.

  1. Amazon – 10.8% (tech)
  2. Illumina – 8.2% (life science research)
  3. Alibaba – 6.0% (tech)
  4. Tencent – 5.9% (tech)
  5. Tesla – 5.1% (automotive and energy)
  6. Baidu – 3.4% (tech)
  7. Kering – 3.3% (luxury goods brands)
  8. Netflix – 3.1% (media services provider)
  9. ASML – 3.0% (photolithography systems for the semiconductor industry)
  10. Inditex – 2.9% (world’s largest fashion retailers)

passive income q3 2018 - scottish mortgage investment trust asset allocation

So, maybe I should stop referring to it as just a tech or FAANG fund.

The Investment Trust is also a smaller holding in my portfolio, so I’m comfortable from that perspective. So, maybe I just top slice it and hold some cash on account?  Top-slicing is one such strategy. However, even though it has doubled in value, it may not necessarily be twice as expensive…as can be seen below.

Did I say it was on a discount?

The Excess Return Method was used to calculate the Intrinsic Value of SMT. This is still part of the Discounted Cash Flow model:

Evaluation of Scottish Mortgage Trust Using Excess Returns Model

 

passive income q3 2018 - scottish mortage investment trust valuation

 

 

passive income q3 2018 - faang fund

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 428.13 Euros this quarter.
The Net Annual Return has decreased by 0.08%.

In my opinion, the reason for the decrease in net annual return is my tweaking with the loan term. I reduced the loan term from 36 months to 12 months, to enable me to have more ‘cash on account’. Hence, there is less exposure to high-interest notes.
However, I’ve now reversed this. I’ll keep the compounding machine plugging away.

passive income q3 2018 - p2p lending mintos

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

Crowdinvesting

The full 1000 Euros that was deployed into the Envestio crowdinvesting fund, is now fully invested in 10 investments (an extra 6 projects from last quarter).

Spread evenly at 100 euros per investment (9 are currently active).

passive income q3 2018 - crowdinvesting envestio fund overview

passive income q3 2018 - crowdinvesting envestio chart

The Envestio account has increased by 48.12 Euros.

Current Investments:

passive income q3 2018 - crowdinvesting envestio active investments

For more information on Envestio and Crowdinvesting, click here.

Rental Income

Total rental income this quarter is 3072.76gbp after management, internet and repair fees.

SIPP (Pension)

The SIPP is up 3.37% this quarter.

passive income q3 2018 - sipp

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