Welcome back to another month of Dividend Stock Purchases! The last 3 months have been heavy on our investment front.  Now the question that the community is wondering – was I able to keep the dividend stock purchase pace up?  The journey to financial freedom does not take breaks and one must continue to persevere through uncertainty, put cash to work and push that forward dividend income forward.  September was no different, time to dive in!

dividend stock purchase and dividend income: Path to financial freedom

Investing consistently in Dividend Income Stocks allows you to create & build another income source.  Dividend Income is our primary vehicle on the road to Financial Freedom, which you can see through my Dividend Portfolio, which continues to build and build.  Further, I have written about every stock purchase and month of dividend income since we started this site, plenty of dividend history for you, the reader!

How do I make dividend stock purchases and screen for dividend stocks?  I usually put the stocks through our Dividend Diplomat Stock Screener and trade on Ally Bank’s investment platform (one of our Financial Freedom Products).

Related: Dividend Diplomat Stock Screener

Watch – Dividend Diplomat Stock Screener – Video Example

Related: Financial Freedom Products

Purchasing dividend stocks takes capital or money.  How do I build the capital to make these stock purchases?  I save anywhere from 60-85% of my take-home pay and strongly believe Financial Freedom does not happen by hitting a home run on an investment.  Nothing matters more than your savings rate on your journey to Financial Freedom, plain and simple.  Therefore, I work my butt off to make sure expenses remain in-check and that my savings rate is meeting our investment and financial independence goals!  Then, you rinse and repeat.

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My dividend stock portfolio was burnt by dividend cuts and lost over $800+ in forward dividend income.  Therefore, I was ready to get back to basics and acquire more shares in the best quality dividend stocks out there.

Related: Dividend Cuts: Pandemic Impact on Lanny’s Portfolio

I was able to make consistent investments for the FIFTH month in a row.  If you re-call, I was very quiet on the stock purchases front in the months of April and May.  I made the decision to pick up the pace for purchasing dividend stocks on my journey to financial freedom in June!  June through September were very consistent months, as my wife and I averaged an investment amount of $4,480.66.  Was October 2020 dividend stock investments at the same level?  Time to see the dividend stock purchases below.

Vanguard HIgh Dividend Yield (VYM)

As discussed in the video above, and you’ll see in my stock purchase activity below, I invested quite a bit into a Vanguard Exchange Traded Fund (ETF).  In fact, I performed exactly what I stated in our video.  I made a weekly purchase of 3 shares into Vanguard’s High Dividend Yield (VYM) ETF.  I had a bonus of 5 shares of VYM on 10/21, in addition to the 3 shares.  This was due to proceeds from a recent clean-up of a position and loved being able to add to my forward dividend income with Vanguard! vanguard etf purchases

What is Vanguard?  They are a registered investment advisor with $6 trillion plus assets under their management.  Many companies use Vanguard for their company-sponsored 401(k) plans and many use them for their retirement and/or investment accounts.

Why do so many individuals and businesses love Vanguard?  First, they usually have the lowest or near the lowest expense ratios for individuals to choose from.  In addition, John Bogle, the legendary founder of Vanguard Group, created the first index fund.  The index fund is a tool that millions of people use and love every day.

Related: Vanguard: Who and What are They?

Vanguard Group

Vanguard High Dividend Yield (VYM) has 413 different stocks and 3 of their top 10 holdings are dividend aristocrats, such as Johnson & Johnson (JNJ), Procter Gamble (PG) and AT&T (T).  Yes, that’s 3 of our Top 5 Foundation Dividend Stocks!

This will be different than other dividend stock purchase summary posts and how I breakdown each investment.  I usually like to use the Dividend Diplomat Stock Screener and I will do my best to use on the VYM ETF.

  1. Price to Earnings: Based on the metrics below, the ETF shows signs of undervaluation at < 20x earnings.  The stock market is well over 35x+ earnings, which is insanely overvalued.  Therefore, VYM shows positive signs here.Vanguard ETF
  2. Payout Ratio: The Dividend Payout Ratio is between 60% and 65%.  This is right at the ceiling of where we like the dividend payout ratio to be and sure is higher than that perfect dividend payout ratio.
  3. Dividend Growth Rate: Dividend growth rates of over 7%+ over the last 9 of 10 years, with consistent dividend increases, is excellent.  There is no wonder why this is considered a high dividend yield fund.
  4. *Bonus* Dividend Yield: Given the trailing 12 month dividend is $2.74 and the average share price that I acquired them of $83.04, the dividend yield averaged 3.30%.  This is significantly higher than the S&P 500 index and is a dividend yield higher than my overall dividend stock portfolio.

In total, my dividend stock purchases of VYM totaled $1,411.81, acquiring 17 total shares.  This added $46.58 in forward dividend income.  I will continue this going forward, 3 shares per week.  This will allow me to stay invested and have time in the stock market, versus timing the stock market.

General DYnamics (GD)

General Dynamics

General Dynamics (GD) has been on my Dividend Stock Watch List many times before.  GD is a dividend aristocrat and is one of the biggest companies in the aerospace and defense industries.  One of the other competitors, which I also own, is Lockheed Martin (LMT).

Of course, I run General Dynamics through the Dividend Diplomat Stock Screener each and every time I buy them.  This is how GD stacked up within the stock screener:

  1. Price to Earnings: 21 analysts are projecting $11.54 for FY 2021 earnings.  Therefore, based on a weighted average purchase price of $134.77, the price to earnings on 2021 projection is 11.68.  This is significantly below the S&P 500, currently, as well as other competitors.  See the analyst projections below.
  2. Dividend Payout Ratio: At a dividend per year of $4.40 and earning projections stated above for 2021 at $11.54, the dividend payout ratio is close to being perfect.  We love the dividend payout ratio in the 40%-60%, which we consider the perfect payout ratio sweet spot.  General Dynamic’s (GD) dividend payout ratio is 38%.  This shows that GD likes to payout almost 2/3 of their earnings back in the business, but also returns back into their shareholders.
  3. Dividend Growth: This dividend aristocrat continues to increase their dividend, year after year, after.  How does General Dynamics do it?  Winning massive contracts consistently, of course.  In fact, GD earned a $9.2 billion contract to build on the Naval procurement system, see this snip below.  This is in addition to the $1.2 billion contract I mentioned last month, wow!:Their dividend increase strong this year at almost 8%, just a tad below their 5 year dividend growth rate of 10.11%.  A dividend stock, increasing the dividend during a global pandemic is music to an investor’s ears.  Many companies cut their dividend or suspended for a few quarters, but it shows signs of confidence when GD increased their dividend.

Overall, I purchased 3 shares of General Dynamics at an average price of $134.77 for a total capital deployment of $404.30.  This added $13.20 to my forward dividend income projection.

In total, I now own ~35+ shares of this dividend aristocrat.  My dividend stock position with General Dynamics now pays me $152 in dividends per year.  From a dividend reinvestment standpoint, I stand to add 1 share of GD during the year!  I may have room for 5 more share if price levels fall below $140.

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Now that most of us here in the U.S. have the access to buy stocks at zero cost, my stock purchases can be smaller than usual.  The brokerages really have paved the way to make it “easier” or at least, less costly, for investors.  Thank you Robinhood, Charles Schwab, E-Trade, you name it!  I easily have saved hundreds of dollars this year alone in trading fees.

Given that, I don’t want to dive into so much detail on smaller purchases.  Therefore, the remaining dividend stock purchases will be reflected in a screen shot below.  The screen is directly from the brokerage that I use – Ally Investing.

Here are the screenshots from my September Dividend Stock purchases!

Taxable Account:

October dividend stock purchases

Roth IRA: No dividend stock purchase for the Roth IRA in October.

Sales for the month: No sales for the month.

No new dividend stock positions during the month of October 2020.  Simply adding to my current stock positions and adding forward income.  From looking above, there are 4 dividend aristocrats you should see.  First, AT&T (T) a top 5 foundation dividend stock.  Secondly, General Dynamics (GD), Aflac (AFL) and International Business Machines (IBM).  IBM has been making headlines, as they set themselves up for a spin-off, which we have talked about in our recent IBM stock analysis video!

In addition, due to the global pandemic, it’s definitely easier to buy dividend aristocrats, especially those stocks that are set to do very well during this time period.  In the video, showcased below, we talk about insurance and technology industries to persevere through COVID-19. Given the dividend stock purchases of Aflac (AFL) and Cisco (CSCO), that you see above, I picked up stocks to buy in the post-pandemic world!

Related: Stocks to Buy in a Post-Pandemic World

In total, I deployed a total amount of $2,541.13 and added $94.02 to our forward dividend income, equating to an average dividend yield of 3.70%.  The average dividend yield of 3.70% is greater than my portfolio, in total, and definitely adds to my forward passive income.  Financial freedom, getting closer baby!

My Wife’s Dividend Stock Purchase summary

My wife has accounts where we also make dividend stock purchases.  Though we are married, we are still running two separate, individual, taxable accounts.  All is good, especially because we use the same platform, but just haven’t wanted to deal with the administrative tasks of combining.  In actuality, I don’t think it’s even possible to combine on the retirement-based accounts.

Over the last few months, we definitely started to add more capital to my wife’s dividend investing account.  The dividend income added from Dividend Aristocrats, including one of our TOP 5 Foundation Dividend Stocks for YOUR Portfolio, are in the mix.  As stated earlier, we are also acquiring 3 shares of VYM per week, to stay invested in the market.

Related: Top 5 Foundation Dividend Stocks for any Portfolio

Taxable Account:

Roth IRA: No dividend stock purchase for the Roth IRA in October.

We purchased 5 share of Johnson & Johnson (JNJ), good old reliable!  Yes, they are one of our Top 5 Foundation Dividend Stocks, no doubt about it.

Outside of picking up shares in what could arguably be the best dividend stock to buy and own for life, we really kept this consistent in her portfolio with Vanguard’s VYM ETF and a share of Walgreens (WBA), but not to forget about the 3 shares of Tyson Foods (TSN).

My wife’s portfolio is typically full of safe and sound dividend investments and since we’ve been together, her portfolio has been blossoming into an extremely significant part of our family’s finances.

Related: Dividend Aristocrats – Who & What are They

In total, $2,167.89 was put into investments, producing $68.21 in Dividend Income going forward.  This is an average dividend yield of 3.15%.

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September maintained the momentum from the last 3 months and we finished the quarter strong.  We plan on keeping the strategy of investing into Vanguard, each week, 3 shares at a minimum.  The stock market at all-time highs will make things a little more difficult/interesting here.  Combined, my wife and I invested $4,709.02 for October and added $162.23 to our forward dividend income total (3.44% yield overall)!

I will maintain my main message.  Stick to the strategy that works for you, but review if there is anything that may impact your strategy going forward.  You are in control and the emotion button is hard to turn off.  Persevere and stay consistent, if you are able to.  Time to lock in and stay ready for further opportunities.  This was one step closer to financial freedom and I hope to continue making strides.  Lastly, my dividend portfolio has been updated to reflect all dividend stock purchases above (outside of my wife’s).

I am continually looking at my October Dividend Stock Watch List and always keeping an eye on the stocks on Bert’s expected dividend increases that he will release later this month.  It is all about the road to financial freedom and I cannot wait to have that crossover point.  That crossover point where the passive income, from dividends, overcomes the total expenses in a given month.

I know I’ve said it many times, but each and every month, we do make inches towards the financial freedom goal.  We will get there and we are very excited you have joined us on the journey.

Thank you for stopping by, good luck and happy investing out there!

-Lanny

The post Dividend Stock Purchase: Lanny’s October 2020 Summary – Over $160+ Dividends Added! appeared first on Dividend Diplomats.