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.
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.
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.
Starting amount for the portfolio is $5,000 – that should be the minimum for a beginner in my opinion.
I wanted this portfolio to be from the first of the year. since we are 2 weeks passed that, I have to take some shortcuts. I am going to cheat and use my trade from 12/30/2020 as my first trade for this portfolio.
Beginner portfolio has been added to menu bar on top. There is going to be some changes on it as I am still trying to figure out the best way to show it. Right now I am thinking 1 table for each position and 1 chart to track portfolio total.
Make 10% ($500) for the year overall
Create “Monthly Income”
Introduce new concepts when things go wrong
Take profit at 50%
If a put option is sold for $100. Plan is to buy it back for $50 instead of waiting till the expiration date.
Options are financial contracts that give the buyer the right and not the obligation to buy or sell a stock at a specific price by a certain date.
The seller has the obligation to buy or sell the stock at that specific price if the buyer wants to at that specific price.
This all sounds very formal and I am sure that definition is a modified version of something I read in the past.
This is a pretty straightforward concept or at least it’s supposed to be straight forward but anytime I’ve read about it, it’s just complicated. Options are flexible and people use it for different purposes and I think trying to explain all of that makes it complex for anyone let alone a beginner. The flexibility that comes with options makes it a very vast topic and jumping into them with a lot of money in the beginning can quickly spiral out of control leading you to lose all of your money. Here, I will try to explain the very basics (just scratching the surface) of options but before we get into them, there are a few terms that you have to know.
It’s a contract so two people have to agree on what price the shares are going to be bought or sold. That’s the strike price.
This contract is only valid for a certain amount of time. That’s the expiration date. Another way to think about it is like your car insurance where you pay your premium for 6 months and you get coverage for those six months. Once those six months are over and if you don’t pay again then you don’t have insurance. Your coverage is over. your contract has expired.
Popular stocks that trade very often and are household names have contracts that expire every Friday for the most part and the rest of them have one expiration each month which is on the third Friday of every month.
Using the car insurance example, you pay a premium to have the insurance. Similar to that, a buyer has to pay a premium to have the opportunity to buy or sell the stock at the strike price. This applies to anyone buying an option.
if you get into a car accident your insurance company covers the cost because of the insurance contract you have. The money that is set aside by insurance companies to pay for those damages is the collateral. Depending on the kind of option, the collateral can be money or stock. This applies to anyone selling an option. It is also called buying power reduction if you are using a margin account.
This is not a definition per se. This is more of a need to know. Each option contact is for 100 shares.
There are two types of options
There are two parties involved
Combining all of these different variables seems very daunting but those give you the flexibility of making a directional bet easily.
As a beginner to options this is how I look at it. The risk is different depending on what combination you go with.
If you think a stock will go up then you can either buy a call or sell a put. The amount of money you can make will be vastly different and the way you would set up the options contract would be different. Buying a call would cost you very little upfront and the amount you can make from is astronomical if the stock skyrockets. Selling a put would require you to keep a significant chunk of money as collateral and the maximum profit would be whatever you collected initially as premium when you sold the put option.
So how does this work and what would it look like
Buying call options
XYZ company is trading at $50 a share right now and you think the stock is going to move up to $70 a share in two weeks.
You might consider buying the $60 strike call option that expires a month away for $1.00. This will cost you $100 because each option contract is for 100 shares. This is the premium.
If your assumption comes true then you stand to make $9 per share ($900 because a contract is 100 shares)
The calculation works out to be $70 per share which is the stock price at expiration minus $60 per share which is your strike price and then minus the $1 per share you paid in premium.
This would be a 900% return because you made $900 using $100. The same move in the stock will get you a return of 40% where you would make $2,000 in profits on the initial $5,000 spent to buy the stock.
This is great when everything works out the way you want but what if the stock price stays at 50 and does not move at all then the call would expire worthless and you would lose the $100 you paid initially as premium.
When and why would you do this?
You are convinced the stock will move up dramatically in a certain time frame. Especially handy for small biotech companies that sees a big stock price jump after getting FDA approval.
You are willing to lose the premium if the stock move you are hoping for doesn’t pan out.
More Misses than hits.
YOLO move – you only live once or you really lose once depending on how you look at it.
Selling put options
All the assumptions for XYZ company stays the same, XYZ company is trading at $50 a share and you think it will go up to $70 in two weeks
You might consider selling the $30 Strike put option for a month out for $1.00 ($100 since the contract represents 100 shares). This will cost you $3000 in collateral.
If they stock moves up to $70 a share in a month then the contract expires worthless and you will keep the $100 in premium you collected. Well as long as the stock price stays above the $30 strike price at expiration, you will keep the $100 collected initially.
If the stock is below the $30 then you will have to buy the stock at $30 a share since that is the contract you agreed to. This is where the $3000 collateral comes into play. You have already set this money aside when you started this trade.
The calculation works out differently from buying a call, you already know the maximum you can make is $100 as long as the stock price is above $30 a share at expiration.
Your return would be $100 on $3,000 you put down as collateral. This would be 3.33% in one month
When and why would you do this?
It’s a stock you like but you want to buy it at a lower price.
You think the stock will move but you are not fully convinced of it.
You want to get paid while waiting for the stock to come to a lower price.
More hits than misses.
Generate an income-based investing or trading.
Now moving to the other side, the scenarios are going to sound very repetitive since it’s just the other side of the same coin.
If you think a stock will go down then you can either buy a put or sell a call. Everything in this portion works in reverse of the items mentioned above. Buying a put will cost you very little upfront and the amount you can make from it is significant if the stock tanks. A key difference here compared to buying a call is that there is a limit to how much you can make because the worst that can happen to a stock is for it to go to $0. Similarly to selling a put, selling a call would require you to keep a significant chunk of money as collateral or 100 shares of the stock and the maximum profit would be whatever you collected initially as premium when you sold the call option.
Buying put options
Buying a put resembles the car insurance analogy I gave earlier except you are hoping for an accident to happen. Pay the premium and get a big payout if things go horribly wrong with the stock. But a less cynical way to look at it is buying a put option to protect stock you already own and in this way the put will behave exactly as having car insurance where you pay your premium just in case something bad happens.
Using the same XYZ company as the example, XYZ company is trading at $50 a share right now and you think it’s going to come down to $30 in two weeks. You can buy a put at a strike price of $40 spending $1 in premium which would be $100 because each contract is one under chairs.
Similar to buying a call, if everything works out you would net $900 profit after spending $100 in premium.
The calculation works out to be $40 per share which is the strike price minus $30 per share which is your stock price at expiration and then minus the $1 per share you paid in premium.
This would be a 900% return because you made $900 using $100.
You are convinced the stock will move down dramatically in a certain time frame.
A cheap way to protect stock you already own.
You are willing to lose the premium if the stock move you are hoping for doesn’t pan out.
More Misses than hits.
Selling call options
We are back to XYZ company and it’s trading at $50 a share and you think it will go down to $30 in two weeks.
You might consider selling the $70 Strike call option for a month out for $1.00 ($100 since the contract represents 100 shares). This collateral is a bit iffy, you can put 100 shares as collateral or it would be an amount that is calculated by your broker if you have a margin account.
If the stock moves down to $30 a share or stays below the $70 strike price in a month then the contract expires worthless and you will keep the $100 in premium you collected.
If it doesn’t work out then you sell the shares at the agreed strike price.
When and why would you do this?
Make money on the stocks you already own.
Options are risky but the first step is to understand what options are so you can understand the risks associated with them. Buying options is the easy part where you could potentially make a lot of money but the trade off is you will have more losers than winners. Selling options gives you a cap on maximum returns and statistically have more winners than losers.