Blue Chip DRiP: September Dividend Update – Getting Back Into Gear

Flip A Coin: Heads – Full Recovery, Tails – Markets Crash

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The stock market feels like a coin toss these days. The presidential election is just over one month away. Donald Trump is recovering from COVID-19. The U.S. is politically and ideologically polarized, and the economy is a stretched balloon that can give way at any moment. Even if you buy in to the recovery hype, now might not be the ideal time to be going “all-in” to the stock market. But as long-term, buy and hold, dividend growth investors, we must remember that time in the market reigns supreme. September and October are historically the two worst-performing months for the stock market, but there are always opportunities for prudent investors. As always, we’re focused on religiously saving and disciplined investing every single month.

Here’s how our September panned out:

Dividend Income: 2020 (Blue) vs. 2019 (Red)

In September 2020, we pocketed $1,273.93 of dividend income. Compared YoY to September 2019, which saw $1,188.98 in dividends, that’s still a 7.15% increase YoY, even after liquidating $120k of assets from this account. June 2020 saw $1,952.04 of income. This is where the effects of my large July selloff and dividend cuts from some of my larger holdings become very noticeable. Our dividend income decreased a whopping -34.74% QoQ. We are laser-focused on rebuilding our holdings to get back into plus territory here.

Dividend Income Received: September 2020

Ticker/Stock Name Income
Aflac (AFL) $1.40
Ares Capital (ARCC) $123.98
Broadcom (AVGO) $13.58
BP plc (BP) $50.65
Brookfield Property REIT (BPYU) $130.92
Dominion Energy (D) $9.87
Easterly Government Properties (DEA) $26.76
Enbridge (ENB) $108.52
Corning (GLW) $1.10
International Paper (IP) $5.13
Johnson & Johnson (JNJ) $8.05
Keycorp (KEY) $55.50
Gladstone Land (LAND) $1.12
LyondellBasell (LYB) $87.15
McDonald’s (MCD) $6.25
3M (MMM) $49.19
Newell Brands (NWL) $1.31
Pfizer (PFE) $41.80
iShares Preferred and Income Securities ETF (PFF) $10.25
*Pinnacle West Capital Corp. (PNW) $7.83
Prudential Financial (PRU) $96.80
Qualcomm (QCOM) $5.02
Royal Dutch Shell (RDS.B) $55.12
Southern Company (SO) $16.10
United Parcel Service (UPS) $17.08
Valero (VLO) $100.94
Walgreens Boots (WBA) $46.75
Wells Fargo (WFC) $12.50
Exxon Mobil (XOM) $183.26
* = New position

Total: $1,273.93

Noteworthy Tidbits

Our highest payers for the month: Exxon Mobil with $183.26 and Brookfield Property REIT with $130.92. So far, both have managed to sustain their astronomical dividend/distribution yields, but the dam could bust at any time. Luckily, we’ve got lots of diversification and some safer names paying out good money as well. But you never know what lies ahead. Especially with President Trump contracting COVID-19!

September 2020: Dividend Increases Announced

September 2020: Dividend Cuts/Suspensions Announced

For the first time in a few months, none of our holdings announced any negative dividend news. Hallelujah!

Stock Transactions: September 2020

It’s going to be a long, arduous battle, but we’re intent on replenishing and rebalancing this portfolio. We’re still stacking cash on the sidelines, but time in the market reigns supreme. So, we’re actively reinvesting all dividends and extra savings we can spare. Sure, our purchases are smaller than in the recent past, but we’re content saving and investing whatever we can afford.

We made 11 cash purchases in September:

Ticker/Name # of Shares Share Price Amt. Invested Est. Annual Income
AbbVie (ABBV) 11 $88.42 $972.62 $51.92
Brookfield Renewable Energy (BEP) 20 $45.55 $911.00 $43.40
BP plc 30 $19.07 $572.10 $37.80
Cardinal Health (CAH) 10 $47.07 $470.70 $19.50
Cisco (CSCO) 15 $40.17 $602.55 $21.60
Energy Transfer (ET) 100 $5.44 $544.00 $122.00
General Dynamics (GD) 5 $138.07 $690.35 $22.00
Pinnacle West Capital Corp. 10 $70.50 $705.00 $31.30
AT&T (T) 46 $28.50 $1311.00 $95.68
Valero 10 $49.45 $494.50 $39.20
Verizon (VZ) 20 $59.98 $1,199.6 $50.20
Total: $8473.42 Total: $534.60
* = New Position 6.31% avg. yield

We cancelled all our DRiPs (dividends automatically reinvested) two months ago. While we rebuild this portfolio, I prefer to have control over all dividends for manual reinvestment. In the next couple of months, I’ll start opening up some of our holdings to DRiPs again.

We made one sale in September, due to an option getting called in. We were completely content with selling Wells Fargo, since the bank drastically slashed its dividend. We used the proceeds to increase our positions in Pinnacle West Capital Corp., General Dynamics, and AbbVie.

Ticker / Name # of Shares Share Price

Total Amount

Wells Fargo 100 $24.50 $2,450
Total: $2,450

September Transactions: Takeaway

  • Cash invested in September = $8,473.42
  • These investments add approximately $534.60 of annual passive dividend income.
  • With these additions, our estimated forward annual dividend income is up to $13,021.66 from $12,540.18 at the end of August. Overall, that’s a 3.84% increase on our projected annual income from last month. We’d love to keep this up!
  • We’re making an effort to grow the Utilities portion of this portfolio. Hence the BEP and PNW purchases. Before you ask, I hold BEP in a Roth IRA. Otherwise, I’d be purchasing BEPC, the incorporated version.
  • Otherwise, we’re slowly chipping away at increasing positions in some of our safer holdings across the board.
  • We still feel that Energy will eventually rebound once a COVID-19 vaccine is created and implemented. This could take a good long while, but we’ll continue to nibble here and there.
  • Moving forward, we can expect to pocket an average of $35.68 of passive income each and every day without lifting a finger. That’s up from $34.36 in August. That’s more than enough necessary to pay insurance, property taxes, and all monthly recurring bills. No longer having a mortgage or rent to pay sure is a breath of fresh air. We’ve got our work cut out for us to cover our monthly discretionary/fun budget and achieve 100% financial emancipation. But day by day, we’re getting closer and closer!

Diversification Checkup: Sector Allocations

Stock Sector Current % of Portfolio Goal % of Portfolio
Basic Materials 3.53% (was 3.30%) 5%
Communications 8.46% (was 7.11%) 6%
Consumer Cyclical 1.16% (was 1.44%) 5%
Consumer Defensive 2.43% (was 2.45%) 8%
Energy 24.19% (was 27.27%) 12%
Financial 12.44% (was 13.98%) 10%
Healthcare 10.35% (was 9.89%) 10%
Industrials 9.01% (was 8.74%) 10%
Real Estate/REIT 13.80% (was 13.36%) 10%
Technology 1.98% (was 1.58%) 10%
Utilities 11.21% (was 9.35%) 12%
Misc. (ETFs, Funds) 1.34% (was 1.32%) 2%
100% 100%

As you can see in the chart, our asset allocations are still out of whack due to our massive sell-off. But it’s getting better every month. Rehabbing the portfolio is a top priority, but it won’t happen overnight. The only notable changes from last month:

  • Our Utilities allocation jumped another 2% as we continued to add to that sector to get it around 12% of the portfolio. This month, we added to our positions in PNW and BEP. Both are sound, defensive businesses.
  • Communications went up quite a bit due to purchases of T and VZ. We’re fine with that.
  • Energy is still way out of balance, but we were able to reduce its allocation by 3% since last month.

Top 10 Holdings: Ranked by Position Size

Below are our Top 10 holdings ranked by position size within the portfolio. I include last month’s rankings for comparison, as well as their contribution to our passive income stream.

Ticker/Name Ranking Percentage of Portfolio Ann. Div. Income
AT&T 1 (was 1) 7.67% (was 7.01%) $970.36
Exxon Mobil 2 (was 2) 4.80% (was 5.66%) $881.79
Energy Transfer 3 (was 3) 4.12% (was 4.35%) $1615.09
PPL Co. (PPL) 4 (was 5) 4.11% (was 3.95%) $422.34
AbbVie 5 (was 6) 3.95% (was 3.60%) $377.60
LyondellBasell 6 (was 9) 3.44% (was 3.21%) $354.60
Antero Midstream (AM) 7 (was 4) 3.39% (was 4.04%) $1463.70
Prudential Financial 8 (was 8) 3.22% (was 3.38%) $387.20
Iron Mountain (IRM) 9 (was 7) 3.19% (was 3.44%) $502.25
Simon Property Group (SPG) 10 (NA) 3.17% (was NA) $421.25

As a rule of thumb, we try not to let any single position grow over 5% of the overall portfolio value. This rule is not hard and fast, but keeps me from getting carried away with any individual holdings, no matter how glorious they may seem.

Notable changes in September

Not much has changed since last month, but SPG snuck on the list, as it’s appreciated a bit lately. Otherwise, AT&T is up to almost 8%, but I feel it’s a solid buy at current prices, so I continue adding to the position with conviction. Hopefully, in the near future, we can buy more of our higher-quality “core” positions at reasonable valuations so they can start inching their way back on the chart. But for now, I feel valuations on many of my favorite stocks are way above fundamentals, so I’m waiting on the sidelines ready to pounce. But we’re relegated to this new normal for a while. I’m still scared that so much of the portfolio is weighted in Energy, but we’re working on it. Just more motivation to save as much as we can and smooth out our positions ASAP.

Top 10 Holdings: Ranked by Income Generated

This is another fun chart. I thought it might be beneficial to track our biggest payers:

Ticker/Name Ranking Estimated Annual Income % of Portfolio Income
Energy Transfer 1 (was 1) $1,615.09 12.40% (was 11.91%)
Antero Midstream 2 (was 2) $1,463.70 11.24% (was 11.67%)
AT&T 3 (was 4) $970.36 7.45% (was 6.98%)
Exxon Mobil 4 (was 3) $881.79 6.77% (was 7.03%)
Brookfield Property REIT 5 (was 5) $523.69 4.03% (was 4.18%)
Enbridge 6 (was 6) $516.25 3.97% (was 4.12%)
Iron Mountain 7 (was 8) $502.25 3.85% (was 4.01%)
Ares Capital 8 (was 7) $495.94 3.80% (was 3.96%)
Valero 9 (NA) $442.96 3.40% (was NA)
PPL Corp. 10 (was 9) $422.34 3.24% (was 3.37%)

Many of our top payers are sailing on extremely choppy seas unless oil demand starts to increase. Therefore, the dividend safety of ET, AM, XOM, and VLO are highly questionable. The upcoming months are going to be nail-biters!

As with position size, we try not to let any single position generate over 5% of the portfolio’s total dividend income. So, you know we’ll be doing our best to shore up the account and not be so reliant on the Energy sector.

Covered Call Premiums Received in September and YTD

To help counteract the depletion of passive dividend income, we’ve been strategically employing covered call options.

In the month of September, we initiated 6 new covered call options and collected $247.00 in premiums:

Name / Ticker Premium Received
Pfizer $52
Wells Fargo $52
Pfizer $16
Tanger Factory Outlet Centers (SKT) $28
Exxon Mobil $39
Total Received: $247

Year to date, I’ve initiated 50 covered call options. 35 have expired, 10 have been called in, and 5 are still active. Of the stocks called in, I’ve repurchased some of them at lower prices, reinvested some money in other businesses, and continue to hold plenty of cash.

YTD, I’ve received $2035.00 in premiums. When you factor this into my passive income, it’s definitely helped offset the dividend cuts and freezes announced so far in this recession.

The Whole Enchilada: The Blue Chip DRiP Portfolio As Of 9/30/20

Last but not least is a spreadsheet of the entire Blue Chip DRiP Portfolio as it currently stands. Unrealized gains/losses don’t faze us. An extra-large percentage of our holdings is still deep in the red, since these happen to be the ones we wanted to hang on to and not realize the losses when liquidating to pay for our home.

The current balance of this account stands at $175K. With approximately $226k invested, that’s an unrealized capital loss of around $51,000, or -22.56%, not including dividend income received. If you factor in the $20,327.69 of dividend income this portfolio has accrued, then we’re down about -13.5% over the 18 months since its inception. Further, if you factor in $2,035 of covered call premiums we’ve earned, then the account is down about -12.6% overall.

Then, if you factor in the $5,900 of realized gains I recently received when I sold a bunch of stuff to buy my house with cash, the account is actually down -9.95% overall. I’m ok with that. Time in the market will get us back to even and into the green sooner or later.

  • Est. forward annual dividend income 12/31/19: $15,570.66
  • Est. forward annual dividend income 1/31/20: $16,047.24
  • Est. forward annual dividend income 2/29/20: $17,657.65
  • Est. forward annual dividend income 3/31/20: $17,973.09
  • Est. forward annual dividend income 4/30/20: $17,439.54
  • Est. forward annual dividend income 6/30/20: $16,958.17
  • Est. forward annual dividend income 7/31/20: $12,050.56
  • Est. forward annual dividend income 8/31/20: $12,540.18
  • Est. forward annual dividend income 9/30/20: $13,021.66 = up 3.84% since 8/31/20 and down -16.37% YTD

Again, there’s a great chance these income projections will be adversely affected by even more dividend freezes and/or cuts in the upcoming months. But we’re focusing on what we can control. Real money is being deposited to this account almost daily. Now that we own our home outright, our concentration is 100% on increasing our savings rate and replenishing this account as fast as possible. We’re committed and will continue growing our passive income stream on the way to financial emancipation. A bear market, recession, or depression will not veer us off course.

Another September in the Books

Trucking along. Following the horizon, on a course charted for financial emancipation. These are exciting times ahead, and I get more joy out of investing and growing passive income than eating out at posh restaurants or wearing designer clothes. Laser-focused on returning our dividend income to previous levels and, eventually, surpassing them.

Whatever your investing goals or strategy, I wish you the best in these strangest of days. Stay determined. Stay engaged. Stick to your guns. Remember:

“Do not save what is left after spending, but spend what is left after saving.”

– Warren Buffett

PS: Thanks for clicking the “Follow” button, and feel free to read my other articles. Best of luck as we journey towards financial emancipation!

Disclosure: I am/we are long ALL STOCKS IN THIS ARTICLE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This is not stock advice. These are purely my opinions. I’m not a professional. Do your own research. Best of luck in your investing journey!

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