Saturday, November 8, 2008

* Progress Update - October 2008

Once again it is time for a goals/progress update. With several dividend cuts in October, I am pleased to say that my annualized dividend income still managed to eek out an increase for the month. This kept alive the string of consecutive months of increases dating back to November 2007 when I began tracking it. November 2008 will be a challenge to keep the string going as, I have already experienced one dividend cut. I am well ahead of my 2008 goal; thus, it is unlikely I will fall below it.

My goals were defined in this December 1, 2007 Investing Goals post. Below is an updated version of the table found in the original post.
Description Dividend
on Cost
2027 Goal 110,000 20.00%
2017 Goal 30,000 10.00%
2008 Goal 4,000 4.90%
Dec/2007 3,054 5.00%
Purchases YTD 3,236 0.55%
Div. Changes YTD 46 0.08%
Sales YTD (844) -0.25%
October/2008 5,492 5.38%
Purchases 850 0.37%
Div. Changes 25 0.03%
Sales (724) -0.31%
September/2008 5,341 5.29%
The above information covers the current month and year-to-date through the current month.

Click here for a Detailed Historical Progress Update Table.

For the month, annualized dividend income increased $151, and Yield on Cost (YOC) increased 0.09%. These changes were driven by new purchases, dividend changes and sales. Let's examine each of the these categories:

Purchases: The $850 increase in annual dividend income and 0.37% increase in YOC related to the following purchases (yield at the time of purchase):
  • $23 PEP (2.38%)
  • $45 LLY (4.46%)
  • $30 ITW (2.91%)
  • $36 NUE (3.42%)
  • $33 INTC (3.31%)
  • $35 MFC (3.42%)
  • $34 UTX (3.28%)
  • $43 RY (4.05%)
  • $571 AOD (37.05%)
I had higher than normal funds to invest in October due to the sale of the three stocks described below and the third month of a quarter provides the highest dividends in my portfolio. All the above purchases, except BP and AOD lowered my YOC. As noted in earlier updates, I generally expect YOC to drop each month since most new investments will yield less than my current YOC, and dividend increases will not be sufficient to offset it.

Since some of the securities sold were in my risky category, I was comfortable taking a calculated risk on one of the securities. The AOD purchase was opportunistic. I fully expect a future dividend cut, but on the day I bought it, I believed the closed-end fund was trading at a significant discount to the underlying securities. Since I purchased it about a month ago, it is up around 35% in this tough market. Combine that with its previously declared forth quarter dividend (37.05% yield), AOD has the potential to be quite profitable.

Dividend Changes: The $25 increase in annual dividend income and 0.03% increase in YOC related to the following dividend changes (a=dividend stated in annual terms, q=quarterly, m=monthly):
  • $18 SDY : $2.76a>$2.99a : 0.02%
  • $6 ACAS : $1.03q>$1.05q : 0.01%
  • $1 O : $1.405m>$1.411m : 0.00%
I continue to be unhappy with the performance of the income ETFs. The dividends tend to be volatile and unpredictable, which is not what a dividend investor is looking for.

Sales: The ($724) decrease in annual dividend income and (0.31%) decrease in YOC related to the following three stocks that cut their dividend and were immediately sold.
  • ($452) : SFI : (0.29%)
  • ($235) : BAC : (0.01%)
  • ($37) : STI : (0.01%)
That's it for this time. The next monthly progress update will be on Saturday, December 6th.