My Own Portfolio : Dividend Income Report Out April 2017

Goodmorning, afternoon or evening…whatever time zone you are in.

This time we are in Poland while writing this blog post. A country I have seen develop at fast pace with new high ways, new logistic centers and fast growing IT companies. A lot of the infrastructure projects was paid with European money. If you want to grow as a country, you need perfect highways and infrastructure. So what do you do in a small Polish town where there is only one hotel and nothing to see? Beside my tasks for work of course…writing a blog post about our dividend income.

April was the month where the French elections dominated the news in Europe. There was the horror scenario where Le Pen and Melenchon (both extreme candidates against Europe) could have been elected in the second round. That would have been a nightmare scenario for the European stock markets. Macron and Le Pen were elected in the second round and now we know that  Macron has won the elections last weekend. A very good result for Europe and France ! I am glad the France people think this way compared to the British government who wants a hard BREXIT.

In Belgium the tax pressure on work remains incredible high. The OESO institution confirmed again that this is also the case after the taxshift. The tax pressure varies dependent on the family type and the salary income, but for almost all tax categories Belgium is leading amongst industrial EU countries. If you want to read more about this, read our past blogpost Who is stealing our money? Watch out !

The tax pressure has been lowered a bit but this has largely been compensated by an increasing inflation of 2,93%. Life became more expensive.

Number two in Europe. Germany has a tax rate of 49,4% on work. In the other neighbour countries the tax rate is on average 45%. In the graph you can clearly see the leading positon of Belgium with the tax rate on a very small group of working people. In Belgium only 45% of the people above 54 are working and contributing to the society.

Belgium is trying to sustain a social welfare society model but does that with very little group of working people. The government wants the same model as Sweden but in Sweden the employment rate amongst all ages is around 75%. Because the working class is so small, the tax pressure is extremely HIGH and is required to remain high to finance the social welfare system.

But the high taxes on work and capital are also a constraint to get more people at work. This is a vicious circle that will get worse as the baby boomers go into retirement. A real taxshift is required towards consumption and environment pollution.

The past months the government has been discussing a new company tax rate and capital gain tax on shares. But for Belgian economy the unsustainable heavy tax rate on work is a much bigger problem that needs an urgent solution. Government expenses need to be lowered and taxes for capital and work need to be reviewed.

Why do politicians always need to discuss NEW TAXES ? This strikes me…So with all those taxes in our country, it is important to build our financial freedom and create this passive income stream of dividends.

So let’s go towards our April 2017 Dividend Income Report.

Market Analysis

The stock market logged a solid first quarter of 2017 but as the second quarter kicks off, a bit of a chill seems to have fallen over the market as investors worry that the Federal Reserve is going to start shrinking its balance sheet in addition to raising rates. So, what do I expect for the second quarter?

It is often said that the stock market climbs a “wall of worry,” but the sheer volume of my current “worries” does seem elevated by historical standards. This is especially true given today’s lofty valuations, which, by some metrics approach levels only seen on the eves of some very nasty market volatility. The vulnerabilities to pay attention to in this US market fall into four key buckets: policy, the economy, geopolitics and valuations.

I won’t go in detail for those four categories but we think it remains wise to maintain a somewhat defensive posture. European markets always follow the US markets as both economies are closely tied. When president Trump asked Chancelor Merkel if he could do a trade agreement with Germany, she had to repeat 11 times that he can only negotiate a trade agreement with Europe. He finally understood that Europe is ONE BLOCK. Chancelor Merkel stated that a trade agreement with Europe is much more important than one with the UK as trade with Europe is so much bigger than with the UK. European markets will focus on the Brexit going forward and how this impacts the European economy. A hard Brexit is unevitable.

When we analyse the performance of the SPY (screenshot 1 May) we can conclude that our thinking was correct about a consolidation phase in April.

The SPY ETF did search for some consolidation between the 232 and 235 level. But after the first round of the French elections, we did see a strong rally back towards 239 level. If we break this 239 level we will purchase new positions or add to current positions that we have in our portfolio. We will focus on stocks or ETF’s that have been lagging behind and still have a fair value below or around Net Asset Value (NAV).

We also read that the retail investor is coming back in the stock market. For some retail banks that is a red alert as last time when this happened stocks made a strong correction. Will history repeat itself? Can we see another strong upward trend? Personally I believe there is still some upwards potential if economy strenghens and government debt remains under control. But we also worked a plan B in case volatility returns in the market or a geopolitical conflict with North Korea starts to impact spending. Now there’s an agreement about the debt ceiling in the US until September. So we will keep on monitoring that situation going forward…

Let’s dive in the numbers of my April 2017 Dividend Income Report.

Dividends received in April 2017

Do you know John Bogle ? John Bogle is an investing legend. He is the founder of Vanguard Group, a $3 trillion dollar mutual fund powerhouse. Vanguard is credited for single handedly rolling out the first index mutual fund in 1976. It gave millions of investors around the world the opportunity to invest at a low cost. I really liked Bogle’s message on keeping costs low, keeping turnover low, staying the course and keeping it simple.

I recently saw an interview with him on the merits of living off dividends in retirement. Bogle is an advocate of focusing on the dividend payments, and ignoring stock price fluctuations. He points out that the stock market is a giant distraction, and that the investors should keep an eye on the dividends, while ignoring stock prices.

I especially liked Bogle’s advice on dividends. In his books, he discusses how share returns are dependent in three factors:

1. Initial dividend yield
2. Dividend growth
3. Initial valuation at purchase

Dividends are more stable than stock prices, follow a general smooth uptrend, and provide a source of income that historically has grown faster than inflation. This is why Bogle tells investors to ignore stock prices, and focus on dividends.

January was a RECORD month of passive income for me. Well….April was a NEW RECORD MONTH for my dividend income with a total dividend income of 1668,27 $. My decision making of March with the new purchases has clearly paid off in a new RECORD dividend month. This amount is higher than the pension of my mom and this amount can cover my current rent + some utilities bills. But we do not want to spend this money. 

Similar like Usain Bolt, I want to keep on raising the bar for a new record. I love Usain Bolt’s dedication to his sport and with the same determination and eagerness I want to grow my dividend income. Another month where we beat the 300$ monthly goal. 4 out of 4 so far.

Now let’s analyze the breakout.

No European dividend payouts this time. Only US stocks and ETFs paying dividend. Our monthly payers paid me 251,32$ and my quarterly dividend payers paid me 1416,95$ on my bank account.

See our detail overview of all our dividend payouts.

Portfolio Analysis and Growth

During the month of April I sold my position in Euronav. The market outlook for this company is getting troublesome and the competition gets more fierce. One week later the stock took a 7% dive. I am glad to be back in a cash position. The dividend did not justify keeping this stock in my portfolio. The sale of this stock together with my pay myself first payout results in a 6k EURO cash position.

Our dividend income in US dollars I re-invested immediately in another high yield stock that pays 11%. I already had a position in this monthly paying stock and added another 100 shares to my portfolio. This reduced my US cash position to 240$. As the SPY broke the 235 level, I bought more shares of this monthly paying stock.

We have also been evaluating the EURO/USD valuation as we are now sitting on a 6k Euro position.  The EURO became stronger after Macron’s election and may get to 1,10 level. At 1,10 we may convert a piece of our EURO cash position in Dollars. Maybe we wait until 1,15. We will follow this closely. We will also review if we can find a strong European dividend paying stock or ETF. We will perform a screening. As most European stocks pay only yearly, we are not a big fan of having our cash do nothing for one year.

How are we doing on our journey towards our 2017 Objective?

We did a SMART objective of 6600$ for 2017 and we have now achieved 64% of this yearly objective. This is a total of 4213,67 dollar. 

We have a solid 9% growth compared to January 2017. Compared to last year April 2016 we have a strong 73% growth.

You can read our 2017 financial objectives here.

Going forward

In May 2017 we will keep a close eye on the EUR/USD currency valuation in case we want to convert Euro into Dollars.

Our second focus is to grow our monthly income. With the sale of FSC and WHLR stocks we lost almost 60$ monthly payment in our dividend income. As our 2017 objective is 300$ we will be 48,68$ dollar short for May and June months. When I review my dividend income of 2016 for the months of May and June, both months have been weak. June 2016 was 144,49$. We need to beat the 300$ for those months going forward.

We don’t need to worry about the months July and October. If we assume that these months will bring us the same dividend income as April 2017, we will beat out yearly objective. But many things can happen in the meantime so we don’t reason that way.

We now only need to focus on our monthly dividend income. 300$ per month is the new RECORD that we need to focus on as Usain Bolt would say. We end with a quote of Usain Bolt which clearly describes what we need to do.

It was encouraging to see that also an analyst of a Belgian bank Tom Simonts tweeted that their preference goes out to shares with a HIGH YIELD. Besides high yield shares, the recommendation is also to invest in Emerging Markets and companies in the EURO zone with a preference for German companies.

They do no longer invest in Real Estate shares due to the expected interest rates. They also hold cash for new possible opportunities.

We are doing the same going forward. We don’t follow analyst recommendations but it is always nice to see a bank analyst communicate and recommend an investment strategy what I have been executing for three years now.

Keep on following us as we also had a record month in my mom’s portfolio and also in my kids portfolio…

Don’t hesitate to leave your comments and feedback. Let us know what you think. How was your passive income for April 2017? What decisions did you take to make it grow?

Good luck with your personal finance strategy!