May 2016 Dividend Income And Expenses
Hello humans and cephalopods! You guessed it — It’s time for another monthly dividend income and expenses report. We also like to discuss investment portfolio changes in this regular post, and we actually have some this month! So, without further adieu….
What The Hell Happened In May?
May was actually a pretty uneventful month compared to April. We didn’t go on any vacations, and we didn’t make any big purchases. We lived pretty simply — We did a lot of gardening and yard work. We visited our local asian grocery store, and made good food. We grilled, and we had fun.
There was also some investing in the month of May! (More on this later)
It was a quiet month, but that’s not a bad thing! I relish the quiet life, and May provided.
Expenses For May
Expenses in May came back down from the high “vacation levels” we saw in February (plane tickets) and April. We got our expenses back under control, and I’m thankful for that.
The monthly expense total ended up being pretty average — $4096. This was very close to our monthly budget goal of $4k per month, and $48k for the year 2016.
Despite our modest expenses, we live very well. We ate out twice in May! One of those instances was a lunch with friends at a local food court ($8.75), and the other instance was a takeout dinner from a local teriyaki joint ($18.80). That’s $27.55 for “eating out” in the month of May.
Dang, we really lived it up!
Our annual cellphone bills came due this last month too. We pay annually instead of monthly for our two phones. It amounted to $122.45 (after taxes). That’s two cell phones for 12 months. Some people pay that much every month! Seems pretty outrageous if you ask me.
In case you’re wondering, this is a legacy plan. It isn’t offered to new customers. Sorry folks!
Expense Questions
Recently, I’ve had a few questions about our expenses. Readers wanted to know if our mortgage was included in the $4k budget — Yes, we do include our mortgage expenses and property taxes within the $4k budget. The mortgage and property taxes amount to $2138/month. Daycare for our oldest child amounts to $1120.00. Those two expenses add-up to $3258, or 81% of our budget.
Trust me, I dream of the day I don’t have a daycare expense! That said, we couldn’t imagine a better daycare for our son. We’re extremely happy with this childcare situation, and don’t plan on making any changes.
The remaining $741.46 in our budget doesn’t sound like much to live off, but we don’t even think about it. Frugality is etched into our tentacles at this point. I feel like we eat whatever we want, and spend when we need to. We just try to eliminate waste and resist unnecessary spending.
This month I even made a fancy sushi dinner! It was delicious! I hope everyone enjoyed all the pictures!
Dividends For May
When it came to dividends, May was one of those dry months. Very similar to this past February. For some reason, all the companies we own either pay out earlier in the quarter, or later in the quarter. This results in some months with dry spells.
Oh well, that’s just how the dividend game plays out.
Our intention is to live entirely off our taxable dividend income for the year. I’ve estimated this will work out to around $4k per month if I manage to invest all of our excess cash (and we receive some expected dividend increases).
We’re not going to touch our tax deferred accounts right now. Our plan is to just let them grow!
So how was Mr. Tako’s dividend income in May?
Yikes! A pathetic dividend income of $463.19. I told you it was a dry dividend month! There were no foreign taxes paid this month, so I guess that helped….kinda…sort of.
This poor showing from our May dividends will lower our average monthly income. That’s not good! The income number needs to be headed in the other direction!
As usual, I provide the monthly income numbers and averages:
As you can see, our average is now closer to $3k instead of the $4k I was projecting. Am I worried?
Nope! One bad month isn’t going to ruin the year. In fact, I’m pretty optimistic. I finally got my ‘butt in-gear’ and put some of that excess cash to work. Future months will have higher dividends.
May Investments And Portfolio Changes
We sent the relatives packing, and I finally had time in May to do some investing.
As I alluded to in my April update, I decided to sell a big chunk of our ENH position. While the company has been performing well, the economics of the reinsurance business don’t satisfy my idea of an acceptable business-like return. Eventually, the poor compounding would have taken its toll.
We ended up selling slightly over $91k of that position (roughly half of our ENH). What did we do with that cash? We invested it in a new company!
This new addition to the Tako portfolio is a well known energy company. It’s very diversified, but the main business is (currently) refining, and chemicals.
We invested $156k into it. The investment soaked up $65k of our excess cash, plus the $91k from the sale of ENH shares. The net result is a larger dividend yield, better growth prospects, and better long term returns on capital.
The higher dividend yield will help bump back up our average monthly dividend income for the remainder of the year. The improved growth prospects, if realized, will help improve our portfolio’s long term trajectory.
I like this company a lot, but it’s a complicated entity. I had to spend days reading through SEC filings and annual reports before I had a decent understanding of how it worked.
In a word, I like our chances! We invested a lot in this company, but I actually want to grow the position even further…maybe event double it!
My expectations for these excellent growth rates will not be realized in the short term. The current low price oil & gas environment could depress earnings in certain segments for many years. Refining has been bad lately too.
I’m not worried about that because I’m NOT buying it for today’s returns. I’m buying it because I like what tomorrow’s returns will look like.
I’m prepared to wait! How about you?
That’s it for today! Have a great weekend!
[Image Credit: Flickr1, Flickr2, Flickr3]
I too dream of the day with no more daycare! Such a huge expense, but obviously worth it.
The month we became day care free, we splurged with a good eating out, including wine with every course! I would do it again!
Living on 741 is really frugal. That is less than our monthly grocery budget. Wonder How you do that.
Practice? Well, we don’t always manage to stay on budget every month. April was pretty over-budget for example. 😉
Lot’s of my saving tips are posted throughout the blog. Check the saving category.
Thanks for sharing Mr.Tako. Guys are living the dream. Keep it up! I’m happy for you guys as You’re where I’d like to be in about 7-10 years.
Heres to our Health and Wealth. Cheers my friends.
Thanks! It certainly feels awesome!
Thanks for the update. $4k seems like an ample budget until you see the amount leftover for covering all of your food, utilities, etc. Very impressive spending discipline. No wonder you thought our eating out in Portugal looked expensive!
That’s a very sizable investment in one company. I hope you get excellent returns with that refiner. Are you opposed to sharing the company on here?
I’m still deciding my policy around sharing the contents of the portfolio. I want to avoid being sued!
Goodness, just finishing with day-care will keep your FI on dividends alone! You’ll have absurd buffer once the mortgage goes away too.
I thought I had my cellphone plan was at a good rate at $30, but woah, you are the champion. I used Freedompop which was priced around your rate for a while but I did not like the service quality. Keep up the frugality.
We use Tmobile. We’re pretty happy with the service.
I am curious on which “well known energy company.” Is it CVX, XOM, or RDS.B? Thanks.
None of the above!
Nice one. It is so nice when Daycare fees are no longer required, makes a big difference. Like your perspective that you are buying tomorrow’s returns, not today’s.
Well done! You’ve helped us see the value in investing in dividend paying equities. For the first time, I’m starting to see the results hitting my account and it feels like found money. Of course, it’s a little easier on the mind as the underlying securities are moving up (at the moment). We decided to start with SJR and LTC. My biggest challenge now, is deciding whether to sell some stocks that have had recent gains and move all proceeds into dividend payers (and get hit with capital gains), or have a mix of dividend/non-dividend. Need to figure that out…
My suggestion (if you want it) — find the companies with the most consistently returns on capital. Keep those!
Think of dividends as a side benefit!
Daycare costs us a pretty penny each month as well, but really feels worth it every time the little guy comes home with new skills and ways of doing things that he’s learned from socializing with all the other kids. Still can’t wait until he starts school though 🙂
We second that! 😉
Great job with your expense in May.
Our daycare expense is almost done! Jr starts kindergarten soon and I’m really looking forward to it. Summer should be a lot of fun too. He is going to preschool “camp” every other week to keep him busy and give me time to work a bit.
I’m planning to sell some stocks too, but I’ll probably hold on to the cash for a little while. I still think the market is a little hot.
Bravo for only eating out twice! We’re still eating out maybe once a week on average. We’ve really parsed down a lot of our spending over the last year, but I know we have a ways to go!
Nice work. It is very nice to see your updates as a dividend and passive income investor as well as a future retiree. I also have many non-dividend investment positions in both of my taxable and retirement accounts and want to get rid of them before the market corrects itself next time or a bear market arrives. Many big-time investors and fund managers like George Soros and Bill Gross have been accumulating cash lately. When do you think that a next market correction will come? S&P 500 hit above 2100 this month. Don’t think that the market is extremely expensive? There are also many foreign factors (Brexit, China, Puerto Rico Debts, Negative Interest Rates, etc.). I really want to get rid of all of the non-dividend investment positions prior to next corrections and plan to do so by the end of July.
I believe the main factors involved are interest rates and perceived market risk. If interest rates remain low like this, it might be reasonable to say that stocks are not over-valued. There haven’t been any huge scandals or major bankruptcies lately, so perceived market risk is low. Until those things change, I doubt there will be any major correction. Maybe some small ones – plus or minus 20%.