May is over. Boy did the stock market end with a bang! States are easing their lockdown restrictions and the economy is starting to open again. Already, the stock market is trading at their pre-pandemic levels. The impact of the reopening will be fascinating to follow over the next couple of months. When each month closes, we each type up our respective dividend income summaries to share our results, progress, and most importantly, hold ourselves accountable. My dividend income summary this month had some positive news. However, my dividend income was also plagued by some nasty dividend cuts. Let’s take a look at the detailed results.
Dividend Investing is amazing for so many reasons. Slowly, we invest every dollar we can to build a growing, tax-efficient passive income stream by investing in undervalued dividend growth stocks. We use our Dividend Stock Screener and a suite of other metrics to identify investments.
This Pandemic has taught me a lot about investing. More than ever, I have focused on purchasing high-quality dividend growth stocks that will perform well in the pandemic. Lanny has taken a similar approach as well with his purchases. This pandemic arrived suddenly and the impact was felt immediately. Unlike any other recession I have witnessed or read about.
Thus, by investing in Dividend Aristocrats and high quality dividend stocks, I am purchasing companies that have increased their dividend through multiple recessions. You cannot predict when and where the next recession will strike; however, you can choose to invest in companies that have a history of paying and increasing their dividend when the recession does arise.
Dividend investing is always a work in progress and your strategy evolves with time. You are always constantly learning something new and becoming better each day. The fun part of writing these summary reviews is that you see the results of previous investments and see the impact that each investment over time has on your passive income stream!
Dividend Income Summary – May 2020
In May, my wife and I received $523.49 in dividend income. This was only a 3.63% increase compared to last year. The chart below provides a detailed listing of the companies that paid us a dividend this month:
Here are some of the highlights from the month:
- Let me start with the obvious, albeit, most frustrating item from the month: Westrock’s dividend. At the beginning of May, the company announced a surprise 57% dividend cut. It was frustrating for a few reasons. First, personally, I think the dividend cut was excessive (covered in this article). The company stated the dividend cut was to pay down debt; however, their debt to service is minimal through 2021. Second, the cut was effective immediately. Thus, I received $16 less from Westrock this quarter. That was the largest reason for my small increase.
- The only other negative change was Dow Dupont changing their dividend payment structure post spin-off.
Otherwise, May was a relatively boring month. I did not receive dividends from any new companies. Increases were mainly attributed to the Power of Dividend Investing. What do I mean by that? My AT&T dividend increased $4.12 year-over-year due to the impact of dividend reinvestment and their annual dividend increase. That, my friends, is why we love dividend investing.
Portfolio News & HIghlights – May 2020
In this section, I discuss the impact of stock purchases, 401(k) contributions, and dividend increases had on my forward dividend income. Typically, I include a chart to show each purchase. However, I made a lot of micro purchases in May and the chart would be difficult to read. Thus, I will break down my May stock purchases in a separate, detailed post.
Despite excluding the detailed results, I will state that I purchase $2,431 of stock. The purchases added $117 to our forward dividend income. It was exciting because I continued to purchase Dividend Aristocrats and other high-quality dividend stocks. The purchases were less than expected and slowed down significantly in the second half of the month when the market began to soar.
Now, here comes the bad part. The dividend cuts. In April, I received several dividend cuts that were partially offset by PG and JNJ’s dividend increases. So the impact wasn’t too bad. This month, the dividend cuts were significantly larger than the sole increase I received. The following table shows the impact dividend changes had on my portfolio:
Yikes! My income decreased $94 this month due to the cuts. Earlier I discussed the Westrock dividend cut. Now, I’d like to discuss the Occidental Petroleum dividend cut. Occidental Petroleum announced their SECOND dividend cut of 2020. You read that right unfortunately. Their dividend’s collapse has demonstrated the importance of having a strong balance sheet and diversified revenue sources. The collapse in the price of oil decimated their revenues and cash flow. When coupled with a debt-laden balance sheet, it was a recipe for a dividend disaster. However, it is still shocking that the company had to cut their dividend twice. I wish the first one would have been sufficient.
Despite the Dividend Cuts, my forward dividend income still had a net positive increase. 401(k) contributions also added another $28 to our forward income. Therefore, in May, our dividend income increased $50.61. Man, I cannot wait for the dividend cuts to stop rolling in.
Overall, the month was mixed. Despite the dividend cut from Westrock, our dividend income still increased compared to last year; however, the increase was minimal and barely outapace inflation. The market continues to frustrate me and there have already been way too many green days in June for my liking. However, as always, buying opportunities will present themselves. I have learned some great lessons from this pandemic and cannot wait to apply them to my investing strategy going forward, post recession. Let’s continue to make Every Dollar Count and building on our successes in 2020. Onward and upward everyone!
How did you perform in May? What was your dividend growth rate? Did you receive any big dividend increases or dividend cuts? What stocks did you buy in May?