To close out June I am keeping you up to date with my investment journey. I briefly address the flawed statements of why dividend investing might be bad. Furthermore, I offer my analysis for my top three picks this month.
- Portfolio update and highlighting negative outlook on dividend investing.
- Stock analyses for my picks this month.
- Market overview for next month.
I also deposited $2,900 into my Roth IRA, effectively investing $3,900 for the month of June.
My primary brokerage is M1 Finance, there are plenty of other online brokerages available with their own benefits and perks.
M1 Finance benefits:
- Offering retirement accounts, trust and joint accounts.
- Offering fractional shares.
- Borrow against your portfolio for low rates.
- Automated portfolios (Similar to acorns investing pies).
- Automated share buy and sell based on your pie
- $10 referral program, “Give $10, get $10”
June Dividend Portfolio Value:
Purchases of the Month:
Stigma Against Dividend Investing
If you happen to spend a lot of time researching about investing, quite rarely do you see a lot of articles highlighting dividend investing’s successes. Instead, you notice a lot of people raving about day trading and how easy it is to get a quick buck.
You would also hear them dismissing dividend investing due to dividend cuts during recessions. Since we are in a recession, I believe it is important for me to display my dividend payouts to counter that argument and reaffirm dividend investors.
Despite being paid a penny for some of these stocks, due to not owning an entirety of their share prior to the dividend payout. I was paid $13.17 just for being an owner of these companies this month!
If we take a look at this graph that tracks all of my dividend payouts since October 2019.
Monthly Dividend Graph:
In the short span of eight months, I was able to increase my monthly dividends from $0.92 to $13.17. This might be pocket change to many but it is worth noting that $13.17 is enough for a lunch in many areas. This is what drives me to continue reinvesting and growing my portfolio each month.
Dividend investing reassures me that I am making the right decisions through a slow and steady process. I would like to restate that I am not discrediting day trading, as I know there are plenty of successful day traders. However, to dismiss dividend investing due to misguided statements and misinformed friends/peers I believe that is just outright uneducated.
The main thing that deters people from dividend investing is the idea of long term wealth building. We are in a time, where everyone is so fixated on finding the next Microsoft or the next Amazon, that they often forget building wealth can be simple.
There are many methods to obtaining wealth and retiring luxuriously. However, investing should not be a rushed method. It requires a lot of patience and learning before you can see results take effect. Therefore, I encourage many new investors to consider dividend investing as a means of amassing your wealth for long run.
Analyses For Picks
This month I prioritized diversification due to all of the dividend payouts. I wanted to raise my stakes in these companies to either own at least one share or I thought they were at a great discount.
I will be covering my three main picks of the month, Microsoft, JNJ, and STOR.
Microsoft (NASDAQ: MSFT)
Microsoft is a renowned tech company most notable for it’s windows program. However, in recent decades they have diversified their operations to become a software and hardware leader in the following services.
MSFT’s main sources of revenue:
- Productivity and Business Processes (33% of sales, growing 20% a year)
- Intelligent Cloud Services (29% of sales, growing 15-20% a year)
- More Personal Computing (38% of sales, growing under 10% a year).
MSFT is currently breaking all-time highs every day due to their resilient business structure. Similar to many tech companies they are not completely hindered by the ongoing effects of the pandemic. Therefore this is what has been attracting many investors towards MSFT.
Their recent acquisitions of LinkedIn and GitHub has encouraged many investors to reconsider MSFT as a leading tech company again.
The current dividend yield is 0.98% which is below the 5-year average of 1.95%. Despite being viewed as overvalued I am purchasing this company with the mindset of having it for a long time 20-30 years to say.
SimplySafeDividends rates MSFT a 99 which is the highest possible dividend safety score. As always I refer to this rating as a reassuring factor to my investment decision making.
MSFT has developed an environment that allows them to stand out from the crowd. Their current CEO Satya Nadella is focused on cloud computing and subscription services which will help propel MSFT in the right direction. As states begin to juggle reopening and restrictions, many companies will be dependent on MSFT programs like Office 365 to maintain operations.
Store Capital Corporation (NYSE: STOR)
Store Capital Corporation is a REIT that focuses on middle market businesses, with over 9,600 properties. Although relatively new to the REIT sector, they have already made considerable advancements towards gaining popularity for long term investors.
STOR’s main sources of revenue:
- Service Industry: 65% of rent
- Retail Industry: 18% of rent
- Manufacturing Industry: 17% of rent
The current dividend yield is 5.96%, which is above the 5-year average of 4.61%. This indicates to me that it is a great time to purchase STOR as they are well diversified and have maintained an uninterrupted dividend for the past 5 years.
STOR’s second quarter report reassured investors by stating that they are going to maintain the same dividend of $0.35 and the payout will be on July 15th.
REITs have been the hardest hit industry which would lower their overall dividend safety score. This does not concern me as STOR’s diversification is focused on retail and consumer stores. As states continue to reopen, rent collection will continue to rise.
It is worth noting, that STOR has stated that they will not borrow to meet dividend payouts. This also does not concern me as I am able to see that their true value in the long run outweighs the current dividend losses.
Johnson and Johnson (NYSE: JNJ)
Johnson and Johnson is the world’s largest medical conglomerate. They are accessible in 60 countries and have 250 subsidiaries under their brand. JNJ’s diversification is what sets them apart from other healthcare businesses as it allows them the leisure of generating revenue even during pandemics.
JNJ’s main sources of revenue:
- Pharmaceuticals (50% of sales, 61% of pretax profits)
- Medical Devices (33% of sales, 29% of pretax profits)
- Consumer Products (17% of sales, 10% of pretax profits)
Remicade is the largest drug that JNJ distributes that accounts for 6.5% of the company’s revenue.
JNJ’s balance sheet and diversified healthcare businesses offer it the stability to ride out the pandemic while continuing to reward investors.
JNJ’s current dividend yield of 2.86% is higher than the 5-year average of 2.72%. This indicates to me that it is a reasonable time to purchase the company as it is reasonably priced.
JNJ’s first quarter result report reassured investors that the dividend will remain safe and increase to 6.3%. This reassuring news maintains their high dividend safety score and marks its 58th consecutive year of increases.
Furthermore, JNJ’s research towards COVID-19 vaccines has been showing progress since January. As more healthcare businesses continue to have successful covid-19 treatments, I see it as a no-brainer that many of them will see an increase in value.
Although STOR is arguably my most risky pick for this month, I would like to reaffirm onlookers that REITs have been the hardest hit industry. My idea behind investing in REITs similar to STOR, is that they offer a lot of consumer value that I see have no problem generating revenue as states ease on restrictions.
STOR’s management, balance sheet, diversification, conservative payout ratio, and solid dividend growth potential is a company that I want to hold for the long run.
Meanwhile, JNJ and MSFT are both leading competitors within their respective industries. JNJ and MSFT have businesses that are diversified in a manner where they are resilient against pandemics. Their face-to-face sales might be lowered, but the overall production of the company is fairly similar to pre-covid operations.
MSFT like many tech companies is able to shift their production to remote work. This flexibility allows them the attractiveness that many investors look for during uncertain times. As they continue to develop cloud computing and subscription services, I am certain that MSFT will continue to have a competitive edge against it’s competitors.
JNJ is a healthcare business that offers diversification and R&D success with it’s preliminary covid-19 treatment. Since JNJ is the world’s largest healthcare conglomerate, it is capable of continuing operations without significant capital losses. Furthermore, their research towards covid-19 treatment and promise to non-profit distribution by 2021 is a great PR move.
Overall, I believe these three companies are in comfortable positions within their respective industries. Despite STOR being at risk due to some states reinstating restrictions, I am certain that these companies will continue to generate revenue throughout each phase of reopening.
Their commitment towards transparency is what I truly enjoy about researching these companies.
June has been an interesting month for investors as reopening plans begin to slow down. The uncertainty and ever-growing number of cases is certainly concerning to many.
I think July will be a testament to our government’s efficiency when it comes to handling crises. I am doubtful that states will close again due to the growing fear of economic failure.
I can only predict that as the number of cases continue to rise, we can expect the service industry to be the hardest hit. Perhaps even reducing the current 50% capacity to 25% capacity or none at all.
Disclaimer: This is intended for entertainment purposes, not financial advice.
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As always, I hope you found my article informative or entertaining. Feel free to reach out to express concerns, questions or feedback, as I am reading through them to improve my writing. Thank you for your time and here’s to July!