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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  • Kim Walden

    Congratulations on the above news, your plans are coming together! Hope you don’t mind if I ask a question? Is coca cola bought as a UK stock or US? Do you make many international investments? I have a similar investment strategy to yourself but worry about over exposure to UK markets. I don’t have time to learn about Global/Emerging/US etc so I’ve diversified my portfolio by buying into a few funds that vary geographically. Thanks. Kim

    • http://moneygrower.co.uk moneygroweruk

      Hi Kim,
      Thanks for the kind words.

      The CocaCola stock that I own is for the Coca-cola Company (NYSE: KO) which is a US listed stock. This is the company the actually owns the secret coca cola recipe and owns all the brands – and this is the company you hear most about. The stock which is listed in UK is for Coca Cola HBC AG (LON:CCH) which is simply a bottler. So what happens is that the coco-coal company (KO) produces the concentrate which it then ships to the various bottlers around the world who then mix it with water, package it and sell it. I own shares in the coca-cola company (KO) as opposed to he bottlers due to it having a better business model with high returns on equity. Nothing wrong with owning the bottlers but you need to understand the business model and who owns all the intellectual property/brands.

      Yes, geographical exposure is important. You can get geographical exposure by simply investing in the large multinationals listed in the UK stock markets. Taking the FTSE 100 as a whole, close to 75% of revenues come from overseas thus showing you that you do get a significant geographic exposure. Looking at specific stocks, Vedanta resources has 0% sterling revenues, Hikma has 0.2% sterling revenues, BHP BIlliton has 0.3% sterling revenues and British American Tobacco has 1% sterling revenues. I am not saying these stocks are good or bad – rather I am trying to illustrate that you can invest in UK listed stocks without getting UK exposure. Investing index trackers or funds as you are doing is also a great way to get overseas exposures. I personally like investing in US listed stocks as they have great technology and consumer companies . If you ever invest in US stocks, read this first ‘http://moneygrower.co.uk/2016/10/if-you-want-to-buy-us-listed-shares-fill-out-a-w-8ben-form-american-stocks-for-foreign-investors/’

      Hope the above helps
      MG

  • flm

    Thanks for sharing all this, it’s great stuff and really help as a newbie investor myself. How much have you invested total in the companies and does the individual amount you invest vary or is it a fixed sum?

    • http://moneygrower.co.uk moneygroweruk

      Thanks for reading the site . At present I have invested about £45,000 into the market and I have a dividend income of just over £1,700 a year. This may seem low but remember that I have been investing in a lot of low dividend yield companies such as Shire, as I want to capture the growth from these companies. As I ams still young, I am not bothered about investing in low yielders such as Shire as its dividend growth is rapid – 15% per annum – and this will provide me a decent income stream down the years.
       
      If I was much older than I am, I would have concentrated more on high yielders. Take for example 5 stocks in my portfolio, Royal Dutch Shell, BP, Imperial Brands, SSE and Next. I have invested a total of £10,968 and get a total annual dividend from these companies of just over £800 for a dividend yield of 7.3%.
       
      As I am in the asset accumulation phase of my life – http://moneygrower.co.uk/2016/02/who-benefits-from-falling-stock-market-prices/ – I continue to make purchases at least every month -http://moneygrower.co.uk/2017/01/why-i-buy-stocks-every-month-and-do-not-care-what-the-market-is-doing/ – so that my dividend income grows over time and eventually reaches a point where I can cover all my expenses from it.

      • flm

        Thank you all really helpful!