Another month has passed and it’s time again to update the monthly dividend income reports. I am making a habit of doing the dividend reports pretty late. I should probably have that as my new year’s resolution.
August was a worse month than July. A total of $54.83 in dividends from 11 different companies.
No Dividend increases or decreases this month. Just the usual fluctuations in the SPHD dividend
Another month has passed and it’s time again to update the monthly dividend income reports. July was a better month than June with almost double the amount in Dividends. A total of $64.97 in dividends from 12 different companies.
Dividend increases from 3 companies.
Cardinal health raised its dividend by 1% from $0.486 to $0.491 per share.
Medtronic by 5.8% from $0.58 to $0.63 per share.
Simon property by 7.7% from $1.30 to $1.40 per share. Added bonus with Simon Property is it looks like there will be another dividend increase to $1.50 for the next payout which is scheduled on 09/30/2021.
General electric is not part of the portfolio anymore after the 1 for 8 reverse split that went into effect on August 2nd. I think my brokerage (Robinhood) automatically sold it since I only had 5 shares and it wasn’t enough to form one share after the reverse split.
It’s almost August and I didn’t do my June dividend income report. Pretty late to the party. June looks like a slower month with $34.80 in dividends from 16 different companies, the lowest haul after I started tracking dividends here.
Most of these shares were bought more than a year ago. Some of them are closer to 5 years. That was when I was too scared to commit a lot of money to buy shares in one company. So I would usually do onesie-twosie shares and that is pretty clear here with dividends less than a buck from half of the companies in the list below.
All of us are used to dividend stocks being paid out on a quarterly basis. You need to get creative to have a portfolio with income every month. This led me to look into dividend stocks that pay dividends every month.
The question here is what if monthly dividends are not enough. What are the choices available if you are looking for something that pays a dividend every month?
SoFi has done exactly that by creating two ETFs that pay a dividend every week.
What is SoFi?
SoFi is a relatively new fintech company that specializes in all things money. Their number one priority is to help you get your money right. So you can secure your financial future and live life on your terms. It doesn’t matter what kind of money trouble you have or what kind of money tool you are looking for. They have a solution for you.
Are you looking to consolidate credit card debt? They offer personal loans.
Are you in the market for a new home? They offer mortgages.
Are you looking to get your finances in order? They have SoFi Relay for budgeting.
They have a product for all of your money needs. If they don’t have a tool directly, then they have a partnership that will get the job done.
I first heard about SoFi a few years ago when a friend mentioned about refinancing and consolidating all of their student loan debt. Student loan refinancing was their first product and from there they introduced more products as time went by. They launched Mortgages in 2014 and SoFi invest in 2019.
While sofi has made products like an investing app, they have also dabbled in making some ETFs. They offer 6 ETFs as of now but I am going to look into 2 of them that have dividends paid out every week.
I can’t think of a better ticker name than TGIF that would suit this ETFs purpose. I couldn’t find any information whether it is named for Thank God it’s Friday but I think it’s safe to assume that’s the case. As the name suggests Dividends are paid out every week on Friday.
This fund invests in investment grade and high yield fixed income securities. That’s a difficult way of saying it invests in corporate debt and junk bonds. It is an actively managed fund with exposure to over 100 different bonds for diversification. Biggest holding as of March 31st 2021 is a Ford corporate debt that expires in April 2023.
Annual Dividend: $2.60
Dividend Yield: 2.46%
Paid out: Weekly
This is a relatively new offering so there isn’t a long history for dividends. The first date of dividend payment is 10/07/2020.
Every Mutual fund and ETF charges a fee to its shareholders to cover operating expenses. TGIF is no different. Since it is an actively managed fund, the fees are a bit higher than usual. TGIF’s expense ratio is 0.59%. That’s $5.90 for every $1000 invested in the fund over a span of the year.
This is the second one on the list. I like how they have named these ETFs in the most straightforward way possible. This one is even newer than the TGIF ETF. First day of trading was 5/11/2021.
The goal with this is the same in terms of paying out dividends every week but the investments are different. This fund is made up of the most consistent dividend paying companies throughout the world. I couldn’t find a list of the companies they have in their holdings. However they have some stringent criteria for the companies that’s in the fund. Market capitalization of $1 Billion, dividend payout ratio not exceeding 100%, Company has paid dividend the last year and is projected to pay dividend the coming 12 months.
Annual Dividend Payout: $1.04
Dividend Yield: 2.07%
Paid out: Weekly
Expense ratio for WKLY is 0.49%. It is a bit cheaper than TGIF but this is still expensive. The 0.49% expense ratio amounts to $4.90 for every $1000 invested in the fund for a year.
Effective Dividend Yield
The dividend yield you will find by a quick search of TGIF and WKLY shouldn’t be considered as the dividend yield you can expect. You will not see any difference in the payout into your brokerage account but the expense ratio has to be accounted for somewhere since that is a cost to you.
The way I would look at the effective dividend yield for funds like these is the Dividend yield – Expense ratio.
Should you buy it?
On a high level, there is a quick and easy method you can use to decide this. If you don’t have a lot of money to be well diversified and want to have weekly income, then TGIF and WKLY make a lot of sense for you.
This is a scenario where you are not looking at the dividend yield or the stock movement. A set it and forget mentality that will bring in income.
Now to the nitty gritty- this is the I care less about getting dividends every week.
WKLY is a diversified fund invested in dividend stocks. The 2% dividend yield is more than the S&P 500 dividend yield which is currently at 1.37%. so it’s definitely not slacking in that area. However, since this fund is invested in dividend stocks. You could look at the fund holdings and pick out individual stocks you want to own. Some of them will have a dividend yield higher than 2%. You can have the ones you want and ignore the ones you think are not good. You will be sacrificing some diversification in the process.
TGIF is a fund invested in corporate debt and high yield junk bonds. The 2.5% dividend yield is good and similar to WKLY is higher than the S&P 500 dividend yield. Again if you are not desperately looking for weekly income, you can pass on this and go for a dividend stock that pays better. Only reason I can think of adding TGIF is for the added diversification. I have no exposure to bonds and TGIF can help with that.
It’s the beginning of June so it’s time to take a look at May Dividends. This is my second go around with a monthly dividend income report. Since I just started tracking this my only comparison is the April 2021 dividend income. May is about $20 lower than last month.
A Total of $54.56 in dividends in May from 9 different companies and 1 ETF.
This is my first dividend income report. I have written about stocks for monthly income and what other stocks to buy to boost passive income. It’s about time I show what this looks like. This is my first pass at it and I am already late.
Overall I received $76.18 in dividend income from 12 different companies for an average of $6.35 from each company. Not too shabby.
Having a dividend portfolio that pays you every month or every quarter is great. Who doesn’t like to get paid for doing nothing right? But before you can have a portfolio that pays you, there is some groundwork that needs to be done in selecting the companies so you can get that passive income.
So at the beginning of every month I look through a list of companies that pay dividends to check whether there is any new stock that I can buy at a reasonable price. The reasonable price part is purely my opinion that I have come up with over time.
These are my usual concerns I have before I put any money into a dividend stock.
1. Dividend yield
I look for a dividend yield of 2% or above. Anything below makes me feel like I am not getting the most out of my money.
2. Dividend growth
A high dividend yield is great to start with but if the company doesn’t continue to increase it then inflation is going to eat into it. A baseline line of 5% dividend growth looks good to me and that’s my starting point.
3. Dividend streak
This shows some stability. Have they been giving dividends for more than 10 years? That gives me some faith that they will continue to give dividends. The company could go through bad business cycles and still have a big enough safety net that could continue giving dividends.
4. Payout ratio
Payout ratio of less than 60%. A low payout ratio means that they have earnings to cover the dividend and to invest for the future.
5. P/E Ratio
I use the P/E ratio to determine whether I can buy the stock today at a reasonable price. In the past I used a P/E Ratio of 20 to decide what was expensive. I have come to realize that some stocks usually trade at p/e multiple higher than 20 all the time. So I don’t have a specific number for that anymore.
The stock that I am looking to add to my portfolio this month is Lockheed Martin (LMT). It’s not a household name. Lockheed Martin is a global security and aerospace company. It’s one of the largest defense contractors with over 70% of their revenue coming from military sales. We are talking about fighter jets, missiles and space equipment for NASA.
From a business standpoint, there are one of the biggest players in that industry with a few competitors. They are the primary manufacturer for most of the contracts they have won with the US government. This is an industry with a high barrier to entry which keeps them pretty insulated from being disrupted. This makes it very difficult for the company to just disappear or be overtaken out of nowhere. They also won a few contracts that’s going to last for the next 10 years.
As with most good things in life, there are some downsides to their business. These risks will play a factor in how successful they will be in the future. 74% of their revenue came from the US government in 2020. These agencies and the government in essence have control on Lockheed’s fortunes as they can delay delivery acceptance or cancel a contract. The F-35 program accounts for 28% of the revenue. Any negative outcome for that project in specific will have adverse effects on the overall company performance.
Now that we have a basic understanding of what Lockheed Martin does and how it makes money. How does it hold up against the checklist I mentioned earlier?
1. Lockheed Martin Dividend Yield
Dividend yield is at 2.53% as of Friday close. So this passes the 2% dividend yield test. Here is a 10 year chart of dividend yield for Lockheed Martin from Macrotrends. The dividend yield was almost 5% in 2013. It’s been below 3% since 2014 and looks to have settled between 2% and 3%.
2. Lockheed Martin Dividend growth
Lockheed Martin has grown its dividend by 9.8% compounded annually for the last 5 years and grown it by 14% compounded annually for the last 10 years. This is like getting a 10% raise everywhere. The dividend payout right now is $10.40 and in 2016 was $6.77 and it was $3.25 in 2011. This is a 53.7% overall increase over the last 5 years and a 325% increase over the last 10 years. For dividend investors who plan on holding for the long haul, the dividend growth rate should be of more importance than the dividend yield itself. Dividend yield is what matters when you invest initially but without a good dividend growth rate, you won’t be able to continue that momentum to grow your passive income.
3. Lockheed Martin Dividend Streak
This is for stability and Lockheed Martin is a dividend contender and has grown their dividends for the past 18 years. They went through the great recessions and still increased their dividends during that time. This past dividend streak doesn’t mean they will continue to do that in the future if they run into some major business issues.
4. Lockheed Martin Payout Ratio
Payout ratio is the portion of the earnings begin given away as dividends. Lockheed Martin has a dividend payout ratio of a bit above 40%. This leaves a lot of room for the dividend to keep increasing and possibly maintain that 10% dividend growth rate mentioned earlier. With 60^% of the earnings retained by them, they still have quite a bit of money to keep investing into business for new projects.
5. Lockheed Martin P/E Ratio
I don’t have one P/E Ratio to narrow down the companies I look at. I look at the current P/E ratio against its historical P/E ratio. This is where I determine whether I can buy the shares at a reasonable price. There is not any magic to it. If the current P/E is close to the average or below compared to the past 5 years, then I would consider it as a good entry point. Here is a 5 year trend of Lockheed P/E Ratio. P/E ratio is at 15.75 right now and that has not changed much in the last 2 years. I look at this and think I am not getting a great deal but I am not overpaying either.
Lockheed Martin is a good addition to any portfolio based on my checklist. As long as the US government continues to pour money into military equipment, Lockheed stands to benefit from it. Lockheed stock prices have gone up recently but it is not very far away from its 52 week low so I think this is a good time to seriously look into buying some shares.
It’s pretty common for people to look into dividend stocks if they’re looking for monthly income. This is especially true for people who are retired, who are nearing retirement and the early retirement FIRE movement folks.
Dividends are the portion of the profits that’s paid out to its shareholders on a regular basis. Buying stock in the company makes you a shareholder and investor. Shareholders and investors used interchangeably a lot. The dividend amount and how often they pay are usually determined by the company and the majority of the companies pay every three months.
This is great but what if you use dividends as your primary source of income to live everyday. Or you’re looking for some passive income every month. This is where monthly income from dividend stocks comes into play.
Here’s a list of 4 companies that pay dividends every month.
There are more companies that give a monthly income but some lack consistency, some don’t have a long history of paying dividends. The criteria I used to filter them down are –
Companies paid dividends for around 10 years or more.
No missed dividend payment during the 10 year or more time frame.
Increased dividend payments over time.
Companies fitting these criteria gives a certain level of confidence as it shows longevity, consistency and commitment to their track record. This is particularly important because we have no control over the dividend policy of the company. You have to use the information that’s available online to determine whether these companies deserve your investment.
Most of the companies in this list are REITs (Real Estate Investment Trust). REITs are companies that own real estate properties and produce income by renting or leasing out their property.
The business model of these REITs on a very basic level is very much like you buying a house and renting out to make a small profit after paying your mortgage, property tax and maintenance. On a larger scale these are big corporations that have access to a lot of money and can buy big commercial properties and rent them out to other large corporations for lease agreements that are in excess of 5 years.
Slight difference would be that they specialize in long term leases under a net lease agreement.
Here is a little bit more information about each of these companies.
1. Realty Income (O)
Realty Income is a REIT that focuses on commercial properties under a long term net lease agreement. A net lease agreement means that the renter is responsible for paying a portion or all the property taxes, maintenance costs etc. This is like having a rental property without any of the tenants problems.
Realty Income is so proud of paying dividends on a monthly basis that their company tagline is “ The Monthly Dividend Company”. Realty Income definitely has their investors in mind and know that people are mostly buying their stock for the monthly dividend. Their home page provides details on how the stock has performed since being listed in NYSE and how long they have paid dividends. I found this on Realty Income home page.
Current Dividend Yield: 4.8%
Dividend per share monthly: $0.235
Dividend per share yearly: $2.81
10 year Dividend Growth rate: 4.9%
Years paying dividend with increases: 28
Looking back to the last 10 years they have raised their dividend by an average of 4.9% on a yearly basis. Easy way to look at it is if you got $100 in dividends the first year, the second year you received close to $105 in dividends. The third year would be 5% on top of the $105 and so on.This is pretty good in my opinion since it’s above the regular inflation rate of about 2%.
Seeing an average of 4.9% annual dividend growth rate might seem very small and unimpressive because well it’s just 4.9%. Monthly dividend per share for Realty Income in 2010 was $0.144, 2015 was $0.191 and 2020 was $0.234.
From 2010 to 2015 – an increase of 32.6% in dividend payout over a span of 5 years. From 2010 to 2020 – a massive increase of 62.5%.
What’s really important to understand from this is that you can only enjoy these massive dividend increases if you have been invested in the stocks for 5 or 10 years. The 5 year and 10 year difference also demonstrates the need for being invested in dividend stock for a long period of time. The longer you are invested in a stock that raises their dividends regularly, the better you will do over time.
Not being able to see the impact of what a 5% annual growth rate is probably the reason why it’s difficult for people to grasp onto the concept of the power of compounding, but that’s a topic for another day.
2. Main Street Capital (MAIN)
This is the only company on the list that is not a REIT. Main Street Capital is an investment firm that provides long term debt and financing to lower middle market and middle market companies. That’s just a fancy way of saying providing loans to companies with annual sales up to $1 billion.
Main Street Capital has found a nice sweet with the companies they are helping out with loans. The companies they are helping out are usually too big to get any loans from the SBA (Small Business Administration) and at the same time too small to get any consideration by Wall Street. Main Street Capital as their company name is pretty smart branding if you think about it.
Current Dividend Yield: 7.6%
Dividend amount monthly: $0.205
Dividend amount yearly: $2.46
10 year Dividend Growth rate: 5.1%
Years paying dividend with increases: 10
After reading through Realty Income’s 10 year dividend growth rate of 4.9% and further breakdown of the dividend amounts in 2010 vs 2015 vs 2020, I don’t think there is a need to have the same breakdown for each company. You get the general idea behind it.
I found something very interesting about their dividend policy. They have a very conservative dividend payout on a monthly basis and have a special dividend like a bonus paid out 2 times a year. This was cut for 2020 for obvious reasons. I like that they try to be safe with this so when they have a difficult year like 2020, they are not looking to cut or pause their regular monthly dividends. The $2.46 dividend is without the special dividends so once business picks up again, the total dividends will be closer to $3.00 per share a year.
3. SL Green Realty (SLG)
SL Green Realty is another REIT. It is the largest office space landlord in Manhattan and its primary focus is to acquire more properties in Manhattan and maximize value.
I am not very sure of investing in a office space focused landlord in Manhattan with all the work from home.
SL Green Realty is a very new player in the monthly dividend game. They have had dividends since 1997 but they always paid on a quarterly basis until recently. The switch to monthly dividends occurred in March 2020. Dividends since 1997 shows a good track record but that is very deceiving. SGL fell on some hard times during the financial crash and cut their dividends to $0.1 every quarter until 2010. From 2010 onwards they have steadily raised their dividends to $0.295 every month in 2020. To make this a fair comparison, calculating the dividends on a monthly basis they have raised it from $0.03 to $0.295 over 10 years. That’s a huge 785% increase in dividends over 10 years.
Current Dividend Yield: 5.8%
Dividend amount monthly: $0.303
Dividend amount yearly: $3.64
10 year Dividend Growth rate: 24.4%
Years paying dividend with increases: 10
4. STAG Industrial (STAG)
STAG Industrial is another REIT. They focus on industrial and logistics properties – think of warehouses and distribution centers for all the online shopping you do. This is one of the companies I can think of that has done extremely well during the pandemic, especially considering that Amazon is their biggest tenant and rents about 40% of their properties.
Similar to SL Green Realty, they also paid dividends on a quarterly basis and slowly transitioned to monthly dividends in October 2013.
Dividend increase for STAG industrial is quite small and you can’t expect a big dividend hike if their history is any indication. Dividend increases have been $0.01 on a monthly basis every year since 2015. The tiny dividend hike is the disappointing part of owning STAG stock but I think the future is very bright for them since their main properties are distribution centers and warehouses. eCommerce sales are only going to go up from here so they are well positioned to take advantage of that.
Current Dividend Yield: 4.7%
Dividend amount monthly: $0.12
Dividend amount yearly: $1.45
5 year Dividend Growth rate: 1.1%
Years paying dividend with increases: 9
You might get the impression that I am suggesting to invest in all 4 of them. My suggestion would be to pick one or two from this list based on how you think their future is going to look like. The performance of these stocks for the last 10 years only goes so far and nobody can predict the future.
Each of these have their own pros and cons. If I had to pick two from this list I would put Realty Income first because they have paid dividends for a really long time and then I would take STAG industrial because I believe they are in an industry that has a lot of potential growth.