August marked a huge month on our journey towards financial freedom. We crossed a major dividend milestone. I wrote about how we crossed $12,000 in annual dividend income and now earn an average of over $1,000 per month in dividend income. Even without the milestone, August was very exciting. As usual, I”m going to show you exactly why. Each month, we summarize the dividend income we received to help monitor our progress and continue to push ourselves. Please continue reading my August dividend income summary!
Why I Invest in Dividend Stocks
Dividend income is the name of the game. In my mind, dividend investing is simple and the EASIEST form of passive income. Our goal is to achieve financial freedom by investing in high quality dividend growth stocks. That is why we invest in dividend stocks.
We find dividend stocks to purchase using our dividend stock screener. The stock screener uses 3 simple metrics to identify undervalued investment opportunities. Our stock screener has helped us find some awesome dividend stocks over the years. In an effort to help us, and our readers, we have built some stock lists using our stock screener. The lists include our legendary Top 5 Foundation Stocks and my 5 Stocks to Buy Now, Always and Forever.
Dividend investing in 2020 is as important as ever. The interest rates on our savings accounts continue to fall. In fact, I opened a “high yield” savings account with Capital One (NYSE:COF) several months ago. At the time of opening, I was earning 1.50%. Now, I am only earning .65%.
With low interest rates in our foreseeable future, we are looking for new ways to earn additional passive income. It is time to put our cash, that is earning nothing, to work! Dividend stocks are one of our suggested avenues for doing so. There are many great dividend growth stocks yielding well over the pathetic .65% interest rate I am receiving at Capital One.
Building a significant stream of dividend income takes hard work, consistency, saving, investing, and time. I have been investing in dividend growth stocks since 2012. Slowly, but steadily, my income has increased. Now, in 2020, I am enjoying some of my strong income months yet. The best part is… I’m just getting started. We continue to save, invest, rinse, and repeat here in our household. The best is yet to come.
Each month, we share our dividend income summaries to highlight our growth and progress. This is a fun and helpful exercise that holds us accountable. Further, it helps you, our followers, see the stocks we are purchasing. The comments I receive each month are great, helpful, and motivating. That’s what it is all about.
Bert’s August Dividend Income Summary
In August, we received $642.39 in dividend income. That is a 9.4% increase compared to last year. Our growth rate slowed compared to previous months. For example, July’s annual growth rate was 47%. Despite the slowdown, I am very excited with the results. The following chart lists EVERY dividend we received during the month:
In every monthly dividend income summary article, I provide a few observations and highlights from the previous month. My notes for the month of August are as follows.
Observation #1: AT&T Dividend Growth Compared to Last Year
Our AT&T (NYSE:T) dividends continue to grow! It sure is fun building up our position in this high yield, Top 5 Foundation Dividend Stock. Compared to last year, our AT&T dividend income grew by 16%. That shouldn’t exactly be surprising given our purchase spree over the last few months. AT&T is yielding over 7% and consistently trading below $30 per share lately. Quite frankly, the company crushes our Dividend Stock Screener. Therefore, I have been aggressively adding small dollar amounts to AT&T on our regular brokerage accounts.
This is the real fun part. AT&T’s ex-dividend date for their August dividend was July 9, 2020. The 16% growth rate reflects the purchases made before the ex-dividend date. We have also been purchasing AT&T in handfuls after the ex-dividend date. Now, this has me really excited for November. All my purchases this quarter will be reflected in the November dividend. That growth rate should be insane.
Observation #2: New Dividends Received from 2 Dividend Aristocrats
At the beginning of the pandemic, I re-focused my dividend investing strategy. After receiving too many dividend cuts, I decided to get back to the basics of dividend investing. That’s right, it was time to focus on high quality dividend growth stocks. In particular, I really wanted to purchase companies that were Dividend Aristocrats.
Dividend Aristocrats are companies that have increased their dividend for 25+ consecutive years. Aristocrats have increased their dividend through the Global Financial Crisis, dot-com bubble, and even the pandemic (for some). In uncertain times, you can’t beat investing in Aristocrats!
That is why I decided to invest in companies such as General Dynamics (NYSE:GD) and People’s United (NASDAQ:PBCT). In August 2020, I received my first dividend from the Aristocrats. That $4.40 dividend from General Dynamics won’t get me too far. However, just remember, every dollar counts. No dividend received is ever too small for me. Nothing would make me happier than seeing GD’s stock price fall. If it does, I will take advantage of the opportunity to build my position.
Observation #3: WestRock Dividend Cut
Not every observation is positive. I wish it was; however, in this economic environment, it would be very difficult. WestRock (NYSE:WRK) cut their dividend in May. The company cut their dividend to save cash and use the proceeds to reduce their debt. Personally, I am skeptical the dividend cut was needed. Especially after taking a deep dive into their financial statements.
In the long run, de-leveraging and improving your future financial position is not the worst reason to cut a dividend. But that doesn’t mean that it didn’t hurt when it happened. Nobody likes seeing their income decrease. I went from receiving nearly $31 in August 2019 from WestRock to just $14 in August 2020. Man, these dividend cuts are brutal and I cannot wait until they are behind us.
Dividend Portfolio News & Updates: August 2020
In this section of my article, I discuss the impact of dividend increases/cuts on my dividend income. Further, I typically discuss the impact of dividend stock purchases as well. However, over the last few months, I have been publishing a separate article discussing dividend stock purchases. Rather than cram the results of the purchases here, it is more beneficial to discuss the buys at length.
August was a relatively slow month for dividend increases. In fact, this was a point I have already discussed in our monthly “Expected Dividend Increases” series. I would consider it the calm before the storm. Why? We have some heavy-weight dividend stocks expected to announce a dividend increase in September.
For my portfolio, the only dividend increase I received was from Illinois Tool Works (NYSE:ITW). The company announced a 6.5% dividend increase. This increase added $8.33 in dividend income to my forward dividend income. In this economic environment, I’ll happily take a 6.5% dividend increase, my friends!
Unfortunately, I couldn’t celebrate for too long. After receiving the great news from ITW, BP delivered my dividend income a haymaker. BP cut their dividend by 50% in August after reporting a nearly $18 billion loss.
In hindsight, I really shouldn’t have been surprised. Oil companies have been impacted by the pandemic and low oil prices in 2020. A brutal one-two punch. Shell (NYSE:RDS.A) (NYSE:RDS.B) was the first major oil company to cut their dividend several months ago. Exxon (NYSE:XOM), Chevron (NYSE:CVX), Total (NYSE:TOT), and BP did not cut their dividend, hoping the economics would improve. Unfortunately, it appears that BP couldn’t wait any longer. I’m very curious how long Exxon and Chevron can maintain their dividend. The impact of BP’s dividend cut was significantly larger than the impact of ITW’s dividend increase. The chart below shows the net impact each had on my dividend portfolio. I guess I should be happy my dividend income didn’t decrease by three digits.
In conclusion, this was another strong dividend month. The dividend growth was lower than the past; however, it was great to receive almost $650 in dividend income in an “off month.” We are nowhere close to Lanny’s $1,000+ August dividend income total. There is still some work to be done to match that impressive feat! However, as always, we will continue to march forward one step at a time. Let’s keep making every dollar count. With each extra dollar saved or earned, it is time to put the cash to work and buy more dividend growth stocks. Financial freedom awaits. Let’s get after it!
Did you have a strong month of August? What was your dividend income total? Did you receive any dividend increases or cuts?
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.