The Most Wonderful Time

Alright, with apologies to Andy Williams maybe the second, but as we turn the corner and head into the final quarter it’s a good feeling to have exceeded the 2015 full year dividend payments with a bunch of 2016 left.  Last year, Wonderful Day was September 9th.  This year it was October 4th with Kimberly-Clark’s dividend.  The three week difference is a reflection of the growing portfolio.  A compression would be indicative of a fund withdrawal -a not too unusual event in the distribution phase.

BAMF money is putting 2016 into his back pocket and while I’m still celebrating this year’s game, I decided to follow his post’s lead as there are certain similarities in our results.

  • His portfolio boasted a 73% rate of dividend increases – but two cuts
  • He expects Organic dividend growth of 5.51%
  • Dividend Reinvestment will increase this to 7%

Although I incurred no cuts this year, my 63.4% includes a slice of non-payers and a larger piece of non-raisers – usually in the realm of smaller community banks.  I have similar organic and reinvestment results.  But my numbers are lower for an additional reason – M&A activity.  Mergers artificially reduced dividend increases which were offset (and more) by a merger premium.  My dividend payers tended to have larger increases as well (12% on average).  The thing I found striking was two different portfolios following different strategies but using the DGI methodology yielded similar results.

On a different note, I’ve been working on different strategies to redeploy the funds received from the Duke Energy / Piedmont merger.  The first check arrived Thursday and I expect the final (and larger) today or Tuesday.  The issue I’m facing is Yield On Cost.  Some say this metric is meaningless or a ‘feel good’ measure.  I get this argument.  Articles have been written on strategies pertaining to current dividend yield (sell the low ones and buy AT&T instead).  All else being equal, the problem with these approaches is the time required for breakeven with broker fees and tax liabilities.

Piedmont has been in my portfolio since February 2009.  Over 7+ years compounding and dividend increases have raised my YoC to 7.11%.  Meaning the constant dollar value of each dividend payment had risen.  Throw in the merger premium and I have no issues, right?  Wrong.  Unless I’m willing to look in the high-yield arena, I can’t readily close this looming gap in my January dividends.  So I will take my time, wait for pullbacks and if I fail to meet my Q/Q or Y/Y benchmarks – like many companies are willing to do – I can blame it on the strong dollar or the election or …

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