The Retiree’s Dividend Portfolio – Jane’s October Update

Background

For those interested in John and Jane’s full background, please click the following link here for the last time I published their full story. The details below are updated for 2022.

• This is a real portfolio with actual shares being traded.
• I am not a financial advisor and merely provide guidance based on a relationship that goes back several years.
• John retired in January 2018 and now only collects Social Security income as his regular source of income.
• Jane officially retired at the beginning of 2021, and she is collecting Social Security as her only regular source of income.
• John and Jane have decided to start taking draws from the Taxable Account and John’s Traditional IRA to the tune of $1,000/month each. These draws are currently covered in full by the dividends generated in each account.
• John and Jane have other investments outside of what I manage. These investments primarily consist of minimal-risk bonds and low-yield certificates.
• John and Jane have no debt and no monthly payments other than basic recurring bills such as water, power, property taxes, etc.

I started helping John and Jane with their retirement accounts because I was infuriated by the fees their previous financial advisor was charging them. I do not charge John and Jane for anything that I do, and all I have asked of them is that they allow me to write about their portfolio anonymously in order to help spread knowledge and to make me a better investor in the process.

Generating a stable and growing dividend income is the primary focus of this portfolio, and capital appreciation is the least important characteristic. Providing John and Jane with as much certainty in their retirement remains the primary objective.

Dividend Decreases

No stocks in Jane’s Traditional or Roth IRA paid a decreased dividend during the month of October.

Dividend And Distribution Increases

• American Tower (AMT)
• Avient (AVNT)
• Altria (MO)
• Realty Income (O)
• OGE Energy (OGE)
• Philip Morris (PM)
• W.P. Carey (WPC)

MO, O, and WPC were covered in the Taxable Account update so I will only include information about the dividend increases. Those interested in reading the summary of these three companies can check the link included at the end of the article.

American Tower

AMT is a compelling investment, especially when the share price recently touched off of its 52-week-low. Trading to AMT has been quite a bit more active as we set limit trades to sell some of the higher-cost shares and use the excess cash on hand to accumulate stock when the share price is under $200/share. We are looking to set a limit trade for another five shares at $225/share because this will drop the total cost basis significantly. AMT has stronger growth prospects and its dividend has better long-term payout coverage due to a low payout ratio.

At its current price, the stock is fairly valued so investors might want to hold for another pullback before adding to or building a position.

The dividend was increased from $1.43/share per quarter to $1.47/share per quarter. This represents an increase of 2.8% and a new full-year payout of $5.88/share compared with the previous $5.72/share. This results in a current yield of 2.64% based on the current share price of $215.93.

Avient

AVNT announced a major setback in Q3-2022 figures and slashed FY-2022 guidance from $3.50/share down to $2.70/share. These figures were primarily setback by “economic weakness in Europe and COVID-19 lockdowns in Asia” along with future concerns about rising interest rates in the United States and reduced consumer demand.

Borrowers looking at a long-term horizon will want to consider adding at the current price because these setbacks are likely to be temporary. We recently added this position to Jane’s Traditional IRA and also to my wife’s retirement account. For those looking for more on AVNT you can read my previous article Avient: 4 Reasons Why It Belongs In Your Portfolio.

The dividend was increased from $.2375share per quarter to $.2475/share per quarter. This represents an increase of 4.2% and a new full-year payout of $.99/share compared with the previous $.95/share. This results in a current yield of 3.04% based on the current share price of $32.54.

Altria

The dividend was increased from $.90/share per quarter to $.94/share per quarter. This represents an increase of 4.4% and a new full-year payout of $3.76/share compared with the previous $3.60/share. This results in a current yield of 8.63% based on the current share price of $44.20.

Realty Income

The dividend was increased from $.2475/share per month to $.2480/share per quarter. This represents an increase of .2% and a new full-year payout of $2.976/share compared with the previous $2.97/share. This results in a current yield of 4.60% based on the current share price of $64.70.

OGE Energy

OGE is an interesting utility that has made a significant transition to being a pure-play electrical utility by selling off its ownership in natural gas assets that had significant volatility depending on market conditions. Enable Midstream, which was acquired by Energy Transfer (ET) was responsible for significant swings in the company’s earnings report depending on the price of oil and natural gas.

At its current price, OGE appears to be fully valued and this is largely because there are no identifiable growth drivers in the short term. OGE has minimal exposure to floating-rate debt ($200 million) and there are no fixed-rate maturities until 2027. Now that OGE is a pure-play utility we are likely to see a dividend yield slightly lower than its historical yield but also more stable and range bound.

The dividend was increased from $.41/share per quarter to $.4141/share per quarter. This represents an increase of 1% and a new full-year payout of $1.66/share compared with the previous $1.64/share. This results in a current yield of 4.19% based on the current share price of $39.24.

Philip Morris

PM’s stock price has touched on its 52-week-lows as concerns about the Swedish Match (OTCPK:SWMAY) merger came into question with PM needing to raise its bid to complete the transaction. On October 24th it was noted that EU regulators planned to give the transaction a green light and its stock price moved up swiftly. We like accumulating shares in the low $90/share range and cutting back on our higher cost shares when they reach triple digits. We have a limit trade to sell 25 shares at $100.

The dividend was increased from $1.25/share per quarter to $1.27/share per quarter. This represents an increase of 1.6% and a new full-year payout of $5.08/share compared with the previous $5.00/share. This results in a current yield of 5.18% based on the current share price of $98.11.

W.P. Carey

The dividend was increased from $1.059/share per quarter to $1.061/share per quarter. This represents an increase of .2% and a new full-year payout of $.4.244/share compared with the previous $4.236/share. This results in a current yield of 5.33% based on the current share price of $79.66.

Retirement Account Positions

There are currently 38 different positions in Jane’s Traditional IRA and 21 different positions in Jane’s Roth IRA. While this may seem like a lot, it is important to remember that many of these stocks cross over in both accounts and are also held in the Taxable Portfolio.

Below is a list of the trades that took place in the Traditional IRA during the month of October.

Below is a list of the trades that took place in the Roth IRA during the month of October.

For a more detailed discussion about these trades and the rationale behind them please see my most recent articles on Recent Purchases and Limit Trades.

The Retirees Dividend Portfolio – Account Transactions Through October 31st

The month of October was a heavy month for deployment of funds which makes sense because many of these stocks saw their share price drop anywhere from 25-40%.

October Income Tracker – 2021 Vs. 2022

Income for the month of October was up slightly year-over-year for Jane’s Traditional IRA and basically flat for her Roth IRA. The average monthly income for the Traditional IRA in 2022 (compared to 2021) is expected to be up about 14.0% based on current estimates (roughly half of this increase is due to LYB‘s special dividend) and the Roth IRA is looking to grow by 10.1% for the same timeframe. This means the Traditional IRA would generate an average monthly income of $1,580.04/month and the Roth IRA would generate an average income of $652.63/month. This compares with 2021 figures that were $1,386.13/month and $592.61/month, respectively.

SNLH = Stocks No Longer Held – Dividends in this row represent the dividends collected on stocks that are no longer held in that portfolio. We still count the dividend income that comes from stocks no longer held in the portfolio even though it is non-recurring.

All images below come from Consistent Dividend Investor, LLC. (Abbreviated to CDI).

Here is a graphical illustration of the dividends received on a monthly basis for the Traditional and Roth IRAs.

The table below represents the actual full-year results for 2022 and the prior year.

Below is an expanded table that shows the full dividend history since inception for both the Traditional IRA and Roth IRA.

I have included line graphs that better represent the trends associated with Jane’s monthly dividend income generated by her retirement accounts. The images below represent the Traditional IRA and Roth IRA, respectively.

Here is a table to show how the account balances stack up year over year (I previously used a graph but believe the table is more informative).

It is worth noting that with John and Jane Retired, there will be no additional contributions to these accounts. In fact, they have already begun to take regular distributions from the Taxable Account and John’s Traditional IRA.

The next images are the tables that indicate how much cash Jane had in her Traditional and Roth IRA Accounts at the end of the month as indicated on their Charles Schwab statements.

The next image provides a history of the unrealized gain/loss at the end of each month in the Traditional and Roth IRAs going back to the beginning in January of 2018.

I like to show readers the actual unrealized gain/loss associated with each position in the portfolio because it is important to consider that in order to become a proper dividend investor, it is necessary to learn how to live with volatility. The market value and cost basis below are accurate at the market close on October 20th.

Here is the unrealized gain/loss associated with Jane’s Traditional and Roth IRAs.

The last two graphs show how dividend income has increased, stayed the same, or decreased in each respective month on an annualized basis. I believe that the graph will continue to become more valuable as more years of data become available (with the fifth year of data being added, we can really see the trajectory of the income change for each month).

Conclusion

With October in the books we can say confidently that the amount of trading activity will be significantly less in the month of November since prices have rebounded significantly. October trades show a significant capital deployment in both retirement accounts.

We have set a number of limit trades to pare back the high-cost portion of positions in American Tower (AMT), Main Street Capital (MAIN), and Philip Morris (PM).

October Articles

I have provided the link to the October 2022 Taxable Account below.

The Retirees’ Dividend Portfolio: John And Jane’s October Taxable Account Update

In Jane’s Traditional and Roth IRAs, she is currently long the following mentioned in this article: AbbVie (ABBV), Agree Realty (ADC), Agree Realty Preferred Series A (ADC.PA), Archer-Daniels-Midland (ADM), Broadcom (AVGO), Avient (AVNT), Broadcom Preferred Series A (AVGOP), Bank of America (BAC), BlackRock Health Sciences Trust (BME), Bank of Montreal (BMO), Bank of Nova Scotia (BNS), BP (BP), British American Tobacco (BTI), Canadian Imperial Bank of Commerce (CM), Cummins (CMI), Concentrix (CNXC), Digital Realty (DLR), Eaton Vance Floating-Rate Advantage Fund A (EAFAX), Enbridge (ENB), EPR Properties Preferred Series E (EPR.PE), Eaton Corporation (ETN), Emera Inc. (OTCPK:EMRAF), East West Bancorp (EWBC), General Mills (GIS), GasLog Partners Preferred C (GLOP.PC), Honeywell (HON), International Business Machines (IBM), Iron Mountain (IRM), Lexington Realty Preferred Series C (LXP.PC), Lumen Technologies (LUMN), LyondellBasell (LYB), Main Street Capital (MAIN), 3M (MMM), Altria (MO), Annaly Capital Preferred Series G (NLY.PG), NextEra Energy (NEE), NetApp (NTAP), New York Community Bank (NYCB), Realty Income (O), OGE Energy Corp. (OGE), Oxford Lane Capital Corp. 6.75% Cum Red Pdf Shares Series 2024 (OXLCM), Philip Morris (PM), PPG Industries (PPG), PIMCO Corporate & Income Opportunity Fund (PTY), Cohen & Steers REIT & Preferred Income Fund (RNP), Royal Bank of Canada (RY), TD SYNNEX Corp. (SNX), STORE Capital (STOR), Toronto-Dominion Bank (TD), Unilever (UL), UMH Properties (UMH), Verizon (VZ), Williams Companies (WMB), W. P. Carey (WPC).