Dividend Growth Investment Income – September 2022 Update

Another month has gone by and I have added a substantial amount of forward income. Throughout September, I added $248.94 to my forward income from dividends, courtesy of numerous dividend increase announcements, dividend reinvestments, re-allocation of a major position, and an abnormally high level of capital allocation due to a surplus of available cash.

Background

The initiation of tracking my DGI income on Seeking Alpha can be found here. My dividend income is tracked across all of my portfolios (taxable accounts and IRAs, not 401ks). A large portion of the target $100,000 will be produced within retirement accounts and thus not easily accessible during early retirement; however, I will aim to maintain a 33% proportion of dividend income in my taxable account. With this level of dividend income and adhering to the 4% rule on the overall taxable account size, I will be able to reasonably consider a change in career into a more part-time role or pursue other methods of income until I am able to access retirement funds. Meanwhile, my retirement accounts will continue to build and grow until I’m ready to begin taking distributions to fund my retirement.

Forward Income Added

During the month of September, I added $248.94 in forward income, largely attributable to new purchases, however substantial income was added via dividend rate increases as well. Additionally, re-allocation of a position added a small amount of forward income. Dividend reinvestment added income was small as expected, but larger than last month. Total dividends received in September came out to $306.68, much larger than August as September is typically a solid dividend month for my positions.

STORE Capital (STOR) made a major, surprise announcement that knocked many dividend growth investors off their feet during the month. With the announcement that they will be acquired and no longer be its own public entity (assuming the acquisition does not hit any snags), my portfolio was drastically effected as STOR accounted for the largest amount of income received from any individual equity in my portfolio. I promptly sold out of my position and re-allocated all of the proceeds across several positions I already owned along with the establishment of a new position. The cash from the sale was invested into Franchise Group (FRG), Broadcom (AVGO), Microsoft (MSFT), Analog Devices (ADI), along with a new equity, Cogent Communications (CCOI). Miraculously the projected income after the re-allocation was nearly identical to the projected income from STOR before selling. I’m actually pretty happy with how it worked out, I feel as if I strengthened my portfolio with a larger concentration in my higher conviction positions and achieved a nice balance of growth and dividend income with the change.

One major note I want to establish for this monthly update and all future updates is that my breakdown of income added via new purchases, dividend reinvestments, and dividend rate increases does not include forward income added via re-allocation of funds that already existed within my portfolio (i.e. the money from the sale of one security invested into another). I will only be breaking down the effect of “new” capital entering the accounts in this section. Also, I would like to reiterate that increased income and tracking of funds from my recurring 401k contributions are not included in these articles as the fund options available to me do not paint a clear picture on income and distributions.

For my weekly $150 purchases I accumulated shares of Ally Financial (ALLY), Corning Inc. (GLW), Medical Properties Trust (MPW), and Comcast Corp. (CMCSA). Additionally, I initiated my weekly $25 purchase of General Motors (GM) halfway through the month. Lastly, I had the lucky opportunity to invest a significant amount of additional cash into the market this month, totaling $3,135 extra capital invested throughout the months. All of these purchases combined with the $1,100 in monthly 401k contributions, I invested a total of $4,885 during the month. First let’s look at income added via new purchases:

• 18.042 shares of ALLY adding $21.65 in forward income
• 1.646 shares of MSFT adding $4.48 in forward income
• 45.337 shares of MPW adding $52.59 in forward income
• 12.709 shares of CMCSA adding $13.72 in forward income
• 3.27 shares of GLW adding $3.53 in forward income
• 2.879 shares of ADI adding $8.75 in forward income
• 16.336 shares of FRG adding $40.84 in forward income
• 1.87 shares of AMT adding $10.70 in forward income
• 1.2484 shares of GM adding $0.44 in forward income

Forward income was slightly boosted by dividend reinvestments during the month as well:

• 0.04 shares of Visa (V) reinvested adding $0.06 in forward income
• 0.269 shares of Realty Income (O) reinvested adding $0.80 in forward income
• 0.208 shares of Analog Devices reinvested adding $0.63 in forward income
• 0.048 shares of Microsoft reinvested adding $0.12 in forward income
• 0.106 shares of Home Depot (HD) reinvested adding $0.81 in forward income
• 0.023 shares of UnitedHealth (UNH) reinvested adding $0.15 in forward income
• 0.198 shares of T. Rowe Price (TROW) reinvested adding $0.95 in forward income
• 0.055 shares of Broadcom reinvested adding $0.90 in forward income
• 0.057 shares of Lockheed Martin (LMT) reinvested adding $0.64 in forward income
• 0.771 shares of Corning reinvested adding $0.83 in forward income
• 0.145 shares of Union Pacific (UNP) reinvested adding $0.75 in forward income
• 0.044 shares of Global Payments Inc. (GPN) reinvested adding $0.04 in forward income
• 0.778 shares of Fidelity National Financial (FNF) reinvested adding $1.37 in forward income
• 0.399 shares of Digital Realty Trust (DLR) reinvested adding $1.95 in forward income

Forward income additionally received a big boost via dividend rate increases. These boosts came from eight different positions:

• VICI Properties (VICI) announced an 8.3% increase to the dividend, adding $21.14 in forward income
• Realty Income Inc. announced a 0.2% increase to their monthly dividend, adding $0.44 in forward income
• Microsoft announced a 9.7% increase to the dividend, adding $4.78 in forward income
• Lockheed Martin announced a 7.1% increase to the dividend, adding $7.04 in forward income
• American Tower announced a 2.8% increase to the dividend now making it 39 consecutive quarters of dividend increases for AMT, adding $3.90 in forward income
• Starbucks (SBUX) announced an 8.2% increase to the dividend, adding $3.00 in forward income
• Graphic Packaging (GPK) announced a massive surprise 33.33% increase to the dividend, adding $12.68 in forward income
• Vanguard S&P 500 ETF (VOO) announced the new quarterly distribution payable next month, this increased my estimated annual income by $16.54

In summary, dividend increases made a big difference in forward income. The income added by simply owning these divided growth stocks and benefitting from the dividend increases this month would have otherwise needed to be purchased with roughly $2,500 in fresh capital (based on my portfolio average yield)! Here are the sources of my dividend income growth looking forward:

Source	Fwd. Income Added – Sept 2022	Fwd. Income Added – Since Article Tracking
New Purchases	$162.96	$211.62
Dividend Reinvestments	$10.01	$12.38
Dividend Rate Increases	$69.53	$72.90
Total	$242.50	$296.90

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Portfolio

Here we will look at the new weighting of my portfolio after the re-allocation of STOR. I’m happy to see a healthy increase in many of my highest conviction positions, FRG has now catapulted to the top as my largest individual equity contributor to forward income. I hold a very strong bull thesis for the stock price and future dividend increases for FRG, I have captured the full scope of my rationale in this article I recently wrote.

I struggled with what to do in wake of the STORE capital news, but ultimately I seized the opportunity to add on to strong growth positions and to introduce a new equity to my portfolio, Cogent Communications. I chose this company over a couple of other options I have mentioned in previous updates as I was looking for a position with a higher yield. Due to the market sell-off, Cogent was available at a price I found to be attractive on top of its impressive dividend growth. Boasting a historically high 6.75% yield while exhibiting a 5-year dividend growth rate of 15.07%, I couldn’t pass up the opportunity to add this company to my portfolio. An additional bonus is that CCOI has increased their dividend not just on an annual basis, but they have actually increased the dividend for 40 consecutive quarters. Below is a summary of all positions, with the accompanied portfolio weight and forward income.

Symbol	Portfolio Weight	Est. Annual Income
VOO	25.48%	$597.37
ADI	5.02%	$145.92
MSFT	4.64%	$72.17
VICI	3.95%	$274.72
AMT	3.93%	$143.40
HD	3.31%	$121.26
UNP	3.31%	$117.45
O	3.18%	$216.19
(CVS)	3.08%	$94.50
V	3.02%	$33.91
UNH	2.76%	$48.08
LMT	2.56%	$105.66
DLR	2.43%	$159.43
(AMZN)	2.39%	—
MPW	2.32%	$302.49
(WSO)	2.32%	$105.60
CMCSA	2.32%	$113.60
ALLY	2.30%	$132.14
FRG	2.21%	$302.77
AVGO	2.08%	$102.10
GLW	1.95%	$96.65
(BOC)	1.93%	—
GPK	1.88%	$50.70
CCOI	1.85%	$170.71
FNF	1.75%	$113.09
(BBY)	1.73%	$127.83
GPN	1.57%	$19.36
TROW	1.42%	$86.16
(SBUX)	1.19%	$39.77
(AFG)	1.11%	$123.37
(CARR)	0.96%	$21.54
GM	0.07%	$1.00

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Looking Forward

I am expecting to inject a large amount of additional capital next month aside from my planned recurring purchases. Although it may not be the same magnitude as September, I am looking forward to adding a substantial amount to my forward income.

I will be sticking to the plan in October with weekly cash injections and contributions to my 401k. However, I will be making some slight changes to the positions I will be adding to for the month. As I have achieved my targeted accumulation of Ally and Comcast, I will now be focusing on a couple of other positions. For the month, I am looking to add on to MPW, GLW, AMT, and FRG. I find these companies to be a great mix of yield, value, and growth.

Summary

I hit the double jackpot of having a large sum of available capital this month and benefitting from reduced purchase prices on high quality stocks, allowing me to grow my future income by $249 in September to $4,039 in annual income. I am very pleased to have added a significant amount of forward income that will continue to bear fruit for years to come. With this month’s 6.57% sequential growth in forward income, the total growth in income since beginning this article series two months ago is now 8.28%. My forward income has increased from $3,730 to $4,039, totaling a $309 increase in income since tracking through this article series.