September 2016 Dividend Income And Expenses
Wow, where did September go? It absolutely flew by! Last time I checked September was just starting, and I was lamenting the end of summer….
Now, fall is definitely here. The forecast is rain, rain, rain, and even more rain….for the next 6 months.
Time to make some delicious Pho soup, and read a few good books instead of thinking about dreary weather. That’s how we roll here in the Pacific Northwest. The rotten weather is why we end up traveling to places like Hawaii for a break.
Are we going to travel anywhere this year? We haven’t made any travel plans for the wet season yet, but I’m starting to seriously think about it! Somewhere warm and mostly dry — like Texas, Okinawa, or Thailand.
Enough day-dreaming about travel!! How did our September finances turn out?
Expenses For September
Expenses for September clocked in at a slightly-higher than usual $4,431.23. Yikes!
September was one of our most expensive months this year! So where did all the money go? The main categories of our spending broke out like this:
Our food costs are back under control after an expensive July, but fuel costs were higher than usual due to a family road trip. Utilities also took up a big chunk of our budget this month too. Our water bill alone was nearly $200.
Argh! It’s like whack-a-mole. I stomp down on one expense and another pops right back up!
September did have some good luck though — we managed to secure a very nice bunk bed for the boys for the low-low price of free. That’s my kind of price!
Dividends For September
Dividends in September were quite healthy and in excess of our spending. (Yay!) After a rather dry August, a flush September is welcome news.
Yes, you read that correctly, $7,786 dollars in September!
The vast majority of the dividends are from our investment in the Well Known Energy Company (WKEC). You know…that secret company we’ve been buying shares in for the last few months. Yeah, that one!
September marked the very first dividend from the WKEC. Overall, our big investment in the WKEC will give us a significant boost in the dividend department by the end of the year.
But how are things in the dividend department shaping up for the entire year, you ask?
Hey, $35k isn’t too shabby! By the end of 2016, I expect we’ll have dividends around $43,000 for 2016.
Unfortunately, that’s less than our expenses, and we probably won’t meet our goal of living completely off dividends in 2016. Darn.
I just wasn’t able to invest the cash fast enough.
Finding decent investments at fair valuations has been a significant challenge this year. Despite our huge purchase in the Well Known Energy Company, we still have significant amounts of cash to invest…I just can’t find enough smart places to put it.
Having too much cash might be one of those “good problems to have”, with the market near all-time highs and a Federal Reserve hinting about raising rates.
Could 2017 be a negative year? Will the bull market finally end? I have no idea, but I’ve got the cash ready if it happens.
September Portfolio Changes
As rumored last month, on the 1st of September I ended up selling our position in Telus.
Usually I don’t condone jumping in and out of investments to make quick gains; that isn’t my style. That’s just trading. But in this case, we held the shares long enough and I felt the move was warranted — The business was deteriorating to the point where little compounding would happen in Telus’s future.
Frankly, I started thinking of the future value more like a bond than a business. The shares looked fully valued over $33, and I didn’t see Telus as being a long term portfolio holding.
So, I sold our Telus shares and moved the additional cash (roughly $32k) into ….wait for it… the Well Known Energy Company (WKEC).
By my math, the WKEC is a better long term value, with some pretty significant growth opportunities. We’ll see how that one turns out.
And NO, I’m still not prepared to say what company it happens to be.
And Then A Funny Thing Happened
This afternoon I signed-on to my laptop to check out my portfolio watch list…and, to quote Sesame Street, “one of the kids was not like the other“.
Endurance Specialty Holdings was up over 35%!!!
(Note: In case you don’t remember, it used to be our largest holding. We still own over 1500 shares of ENH by way of the Montpelier transaction from 2015)
“Wait a second…” I thought, “This has to be some kind of mistake. Stocks don’t just jump 35% in a single day.”
Nope. It wasn’t a mistake. The shares are in-fact trading up over 35% on rumors of a buyout by Sompo Holdings Inc. Apparently it’s a pretty solid rumor, because even the Wall Street Journal is reporting it.
The report suggests ENH will be purchased at a price of $6.5 billion…roughly three times our adjusted cost basis and AFTER the giant dividend paid-out last year. While the rumor is a long ways away from a ‘done deal’, at prices this high it’ll probably get done.
It certainly took me by surprise!
The insurance business is no stranger to mergers, but after the acquisition of Montpelier last year I figured nothing would happen for years. I even started trimming back our ENH holdings earlier this year, as the business has been in a decline.
Yeah, great call there Mr. Tako! Now I just look dumb.
It just goes to show:
- You can still make good money from mistakes.
- Time is the friend of a long term investor. We’ve held our shares for over 10 years. Maybe this will finally be the end of the train ride.
- My excess cash problem is going to get even worse.
- Not having a job might be a Very Good Thing™ when tax time comes.
So, that’s it for today. As the ENH deal develops, I’ll definitely be updating the blog with the outcome.
Update 10/5/16: The ENH purchase is no longer a rumor. The price settled on $93/share. That’s 40% higher than the pre-deal trading price.
[Image Credit: NOAA]
w00t! Buyouts are awesome for your returns. Unless you own the acquirer. I guess it cuts both ways. I really like the insurance space right now. Valuations are less insane than other sectors and there are plenty of names that still have profitable underwriting even in a soft part of the cycle.
There’s definitely a few good names still out there in the insurance space!
$7700+ in dividends is amazing. I’m going to have to look into the energy sector and see if I can crack the top secret energy company you’re buying into and see if it makes sense for my asset allocation. I have a bunch of cash sitting on the sideline. I was able to jump in February and would love to be able to jump back in if the values are right for me.
Amazing dividend Mr. Tako. Pretty awesome with the buyouts. 2017 will be the year that dividend income covering all your expenses!
Thanks Tawcan! I was really hoping it would happen in 2016…
It appears we have something in common. Our boys are also using parts of bunk beds for sleeping. Ours came from hoarding grand parents. We bought a cheap 70 dollar mattress off Amazon and off we go. The question my wife keeps bringing up though is do we eventually use them as actual bunk beds. So far we use each half as standalone as I’m worried the 4 yr old is too young to be safe in the top bunk. What are your plans?
Our 3 yr. old is already asking to sleep on the top bunk. I think eventually we’ll put him up on top and his little brother on the bottom.
Looks like another great month, and with some welcome surprises!
The weather is starting to cool down here in the east, but fall is still an awesome season before it gets really cold. We also like to get away to warmer places when the weather gets too cold.
Okinawa, and Thailand sound like some sweet destinations!
Awesome month 7,000 in dividends really helps out.
Interesting guesses, but not the WKEC.
My not so well known energy company (NSWKEC) has been really good to me lately! Cheers
Great!
$39 for internet in PNW?!! We live close to you in Issaquah and have not been able to get it that low. We pay $124. Who is your provider?
Comcast
Wow, an expected $43k in dividends for the year – that’s fantastic!! I’m still a little new to the dividend arena – are those investments in a Roth or taxable account? And I would guess you still have to ante up to the tax man at the end of the year for that payout, correct?
— Jim
Normally this would fall into the 0% tax bracket, as these are all qualified dividends. However, Mrs. Tako is still working so we’ll fall into the 15% tax bracket this year. Oh well! In future years, we won’t have this tax burden.
We also live in Washington state — we’re taxed on spending, NOT on income here. So there’s no state taxes to worry about in my case.
Hi Mr. Tako, found your blog recently, and have been going back to read your old posts, have to say really impressive portfolio, and good saving tips especially when it comes to food, I actually bought a slow cooker after I read that post !
Anyway, I think my situation will be similar to yours in a sense that my taxable account will be much more than my tax deferred account (no 401k, or other plans from work, but otherwise good benefits with annual raise and 2 days of work from home each wk with full time pay, so not switching job anytime soon). I am only at the beginning stage of building my portfolio, and was wondering when you had your full time income, did you invest in individual stocks with less or no dividend (and just focused on the long term growth) ? or you kept the same portfolio and pay dividend tax yearly ? did you try to make your investment more tax efficient since the brokerage account takes a large percentage in your portfolio? thanks !
I’ve always had a mix of dividends and growth. So yes, some years I paid taxes. There are a few tricks, such as making certain dividends are qualified, and investing in REITs with tax advantages. For the most part I’ve gotten more conservative over the years and actually don’t mind investments with smaller yields if the overall ROIC is good.
But there’s a limit. After working at fortune 500 companies for years, I KNOW how wasteful companies can be. Companies that owe nothing to shareholders waste money like you wouldn’t believe. That said, there’s always good apples and bad apples in the same basket.
Hi there Mr. Tako!
What a great month of dividends. I’m impressed with your ability to live as you do – and to earn such dividends. I’ve only just found your blog (through your article about frugal fatigue!) but it seems great!
PS. how many cephalopods read your blog?!
Well done on your dividends for September! I actually appreciate that WKEC is kept a secret. Encourages all of us to go out and learn more on our own and really understand stocks.