Second Quarter Dividend Income 5

The months of April, May and June have been great to me. I saw dividend after dividend hit my account. In total I received £423.80 in pure passive income from 29 different companies. That’s £423.80 for doing absolutely nothing but owning stakes in wonderful companies. The dividends I received in this quarter have essentially paid for my recent purchases in GSK and Shire and these will in turn churn out their own dividends. My dividends are producing their own dividends. This is a real life snowball in action.

When averaged out, I received £141 a month during the past quarters. If you would have told me a couple of years ago that I would be getting an extra £141 in income a month for no effort at all I would have said that you are crazy. But quarters like these do emphasise the power of dividend growth companies and the torrents of cash they provide. Quarters like this do prove that I am well on my way to living purely off dividends before I turn 35.

In the past quarter, I received dividends from the folioing companies:

CocaCola – £6.32
Pennon – £1.91
Pz Cussons – £3.14
GSK – £4.81
Cisco – £1.93
Next – £4.50
Essentra – £5.12
Smith & Nephew – £2.25
Devro – £5.25
Pearson – £12.75
Procter & Gamble – £2.42
Tritax Big Box – £14.40
Hikma – £11.45
Dunedin Trust – £13.15
Intel – £0.90
National Grid – £111.89
Informa – £3.32
Sage – £2.60
Visa – £0.29
Unilever – £2.98
AG Barr – £35.02
G4S – £33.60
Exxon Mobil – £1.53
Estee Lauder – £3.14
Telefonica – £2.55
BP – £41.80
Royal Dutch Shell – £94.78

Looking at the numbers above, I’m pretty happy with how things are shaping up. The diversification is really solid, although I’ve got an overexposure to the big oil conglomerates. The reason for this is BP and Shell were so lowly valued when I bought them that they had a dividend yield of 10%! If the share price of these two companies does dive again, I will not hesitate in topping up my exiting positions as oil consumption is not going away anytime soon. In the meantime, I will keep re-investing the dividends these oil giants and the rest of the portfolio send me so that my dividend income will grow even bigger over the coming months and years.

The Importance of Dividends

As well as the obvious reasons as to why I like dividends – such as the cash I receive can be used to cover my expenses and make me financially free – dividends signal that a company cares about delivering shareholder returns. The decision to pay a dividend imposes discipline on company management. No ‘creative accounting’ can manipulate the dividend as the cash paid can’t be faked. Steady and growing dividend provide a good indication of management ability to be an effective capital allocator of the company’s free cash flow.

Furthermore, there is evidence to suggest dividend paying shares hold up better in difficult markets. Companies with a history of growing their per share dividend payments try not to cut their dividends – they instead seek to set and raise it to levels that are sustainable. This can provide investors with a cushion during recessionary periods.


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