July 2016 Dividend Income And Expenses
Summer is in full swing, and temperatures have finally risen above 70F here in the Pacific Northwest.
I’ve heard rumours that the rest of the nation is encountering record heat levels, but we’re having a cooler than usual summer. Record temperatures? Hardly! We’ve only had a handful of days above 80F this year. Who needs AC when you get mild weather like this? We certainly don’t!
Last week, I decided to take a break from blogging, and just enjoy the summer. Blogging takes a lot of time, and I wanted to enjoy the summer a little before fall starts to set in. Thanks for letting me take a break!
This week I’m back in the saddle again, ready to give you the regular Dividend Income and Expenses update.
Let’s see how the month of July turned out…
Expenses for July
July ended up being a rather expensive month for us. There were no major purchases, but all the little things just added up to a more expensive month than usual.
July expenses were $4432 That number includes our mortgage ($2138) and daycare for our oldest son ($1120). Besides those major (and fixed) expenses, we spent $1173.66. Yikes!
This is significantly higher than what we’re used to. So what happened?
Groceries were a big part of the oversized expenses in July. We didn’t go crazy buying anything expensive, but we spent $634 on groceries and regular household supplies in July. Usually we spend around $500 per month, but blew way past that number in July. I guess a lot of little things just added up.
Grocery spending isn’t something we usually track closely. Normally we buy what’s in-season, and the numbers have taken care of themselves in the past. But this month was a warning….we need to keep it under control.
After I added up the numbers, Mrs. Tako and I had a serious discussion about our grocery spending. We both agreed $634 was getting a little out of control. We’re going to try get things back to normal in August. With any luck it will be closer to $500, like usual.
Usually we go out to eat once or twice a month, but that didn’t happen — We didn’t go out to eat in July at all. Every meal was made at home. So no excessive spending there!
July also included our annual car licensing fee ($75) and our bi-monthly water bill ($230). Summer always seems to have a bigger water bill, and we paid for it this month!
All together, July was one of the most expensive months we’ve had this year.
Dividends for July
Thankfully, we have a decent dividend income to cover those expenses. Our stated goal in 2016 is to have dividends cover our regular monthly expenses.
In July, the portfolio was no slouch, we received significant dividends:
July dividends were $5298.43, which exceeded our expenses by $866.23. That’s a pretty significant excess, and I feel pretty good about it.
Whenever dividends exceed expenses I always feel a little bit relieved, because those dry dividend months like February or May are always going to happen.
So, how’s the dividend income looking for the year?
Dividend income is still tracking a little bit behind where I wanted to be this year, but we’ve still got a few months to go. We’ve also made some pretty significant investment changes…
Remember the Well Known Energy Company? We’ve haven’t received a dividend from it yet, despite the company being 17% of our portfolio. Our first dividend from the WKEC is scheduled to arrive in September (not August like I originally though). That first dividend should exceed $2000.
July Investment And Portfolio Changes
In July we continued the portfolio reorganization that began in May. We continued to purchase shares of the Well Known Energy Company (WKEC), and added shares worth $32,448 in July. As I mentioned, the WKEC is now 17% of our taxable portfolio and growing.
Yes, I do realize that’s a pretty significant percentage, but I’m confident in the company’s future prospects.
We’ve still got a ton of cash to invest, mostly from the Montpelier purchase by Endurance at the end of last year. To hit our targets for the remainder of 2016, we’ll need to invest that cash at a rate of $45,000 per month for the rest of the year.
Can we do it? I’m not sure I can keep up that pace!
I’m not normally the kind of investor that throws money at just any random investment. Finding great investment opportunities in this market environment isn’t easy. The market is at all-time high’s. Earnings growth by most major corporations was either tiny or negative last quarter. With the S&P 500 Earnings Yield now under 4%, finding business-like returns to support my financial independence is hard.
So how am I going to invest $45k per month to meet my goals?
It’s going to be a major challenge! If we don’t manage to invest that cash, we might not meet our stated dividend income goal for 2016. Frankly, I’m OK with that — I prefer invest in quality companies at good prices, rather than just investing to meet dividend income goals.
There are plenty of quality companies out there, but not many at what I would call “good prices”. Even with interest rates this low, paying over 25 times a year’s earnings seems like a pretty foolish idea.
Stock prices continue to rise, even though earnings haven’t. This situation is really starting to make me nervous. Nervous that there will be a major market correction, or something worse.
Ultimately I can’t predict the market’s future, I can only stick to the investing principles that got me here today. The correction could happen a week from now or 5 years from now. Anyone who thinks they know when it will happen is just guessing.
I don’t want to be holding onto all this cash for the next 5 years, but I might have to. If I can’t find opportunities that meet my criteria, I’m prepared to wait it out.
There are worse things in life than having too much cash.
Should I hold the cash, or continue to invest at these high prices?
Those are pretty good expense numbers despite being higher than usual. Taking out mortgage and child care expenses, your raw spending is pretty low. Pretty awesome if you can cut even further in August.
Dividend income is looking solid. Wishing we get to your level in the near future.
You’ll get here soon!
Solid month, its nice you do not even have to touch your gains. I am with you on the market. Correction could happen soon, or there could be more gains to miss out on. Trying to time it never worked well for me. I take comfort in looking at the last peak in 2007 and remind myself that even investing at the wrong time can work out if you are in for the long haul.
I think holding onto cash until you see the deal on a good company/investment you desire is sensible. A correction just makes sense right now. These numbers are out of control. The goal of investing in X manner should not outweigh the goal of only buying good investments.
Solid month for you Mr. Tako. Even if you don’t make your dividend target for the year, your current run of dividend income is so close to your expenses, we can imagine you sleep very well at night.
Yep, I sleep pretty good at night.
Your July dividend income looks really good. For me, July is normally slow in dividend income as most companies I own don’t pay dividend in the first month of the quarter. But then the second and third month of the quarter makes up for the income with a nice bump in dividends.
Will have to check out your portfolio and maybe add a position or two that pays dividends in July.
Disclaimer: I’ve literally lost hundreds of thousands of dollars by being too timid to stay consistently index-invested since 2009. I’ve fallen for many false alarms. However, I’ve also lived through two-three real bubbles and I think I know them when I see them. The current bubble is in bonds.
Imagine inflation rising to 4% six months from now. It’s not implausible with record-low unemployment, near record low interest rates, rising commodities, and inevitable recoveries in China and parts of Europe. What happens next?
Well, 10-year treasury bonds start selling for about 4% yields, that’s what (these generally track inflation). Plug that into a bond calculator and depending on the details you enter, that represents about a 20-30% paper loss on the value of trillions – trillions – of dollars worth of bonds held by pensions, governments, companies, and investors. Longer term bonds lose even more.
Such a loss would be bigger than the 2007-2008 housing crisis, and would trigger pension bailouts, bank failures, panic selling of all liquid assets, infrastructure project delays, and a rapid increase in the U.S. budget deficit.
I’m going to stay invested this time, but I’m looking hard at buying way-OTM puts on TLT just in case. I’ll also reduce beta for a few weeks during the elections, it might cost me a few points or it might save me a quarter of my net worth.
Great dividends. Seriously impressive gains.
No dividend cuts. We’re just shuffling assets around, and of course timing. Dividend payment dates can vary by a couple days quarter to quarter and year to year.
Generally we try to hold at least a year’s worth of cash to smooth out the bumps. My experience with dividend cuts is pretty limited, but from what I’ve seen they eventually get reinstated.
Interestingly enough, when dividend cuts occur it’s actually a pretty good time to buy. The market reacts very negatively…even though div-cuts are a positive thing for the survival of the company.
I would wait for a good investment at a good value. Ok to hold some cash as a buying opportunity will come up. Holding some cash at the 7 year mark of a bull market is somewhat prudent. Good luck on reinvesting your funds.
Thanks Jerry!
Looking good. We have a few of those higher than usual grocery bills months too. It’s okay as long as we come back down next month.
Your dividend income looks great. Good luck with investing $45k too. I’m hesitant to buy anything right now. Hopefully, we’ll see some better deals soon.
WKEC I am guessing is PSX or VLO, or possibly CVX. All good quality companies, but not sure I would feel comfortable with 17% of my portfolio in one position. I have apprx. 3% in CVX and apprx. 4% in PSX. Another company with somewhat similar characteristics is LYB which I like a lot. It is more diversified with it’s plastics segments and has a higher ROIC. Only negative seams to be their debt ratios.
All good guesses Bob! I like LYB too — not a growth company, but they seem to do intelligent things with excess capital. ROIC is quite good because of that. The near future won’t be quite as rosy because of lots of new industry capacity coming online in the next few years. I still think it’s still undervalued (priced at maybe 10x future earnings?), and ROIC should still be ‘good’ in the future too. Solid, very diversified company, and priced like leftovers.
We do own shares in LYB, but it isn’t WKEC. 😉
I am surprised that my comment was deleted. Is there a specific reason why?
Sorry, I see that is came back now, must have been a computer glitch.
Sorry, we went to the park early this morning and I didn’t see it in the approval queue until just now.
I’m with you, I’m having a hard time finding any good value dividend stocks in this market. All indicators I see point to a bear market. I’d rather hold onto cash for a while and see what happens.
Our food budget was out of control in July as well! It’s summer time though and it’s nice to get out and try some new restaurants.