October Dividend Income

After 34 years of clocking in and out of work and religiously saving at least 10% annually in my 401K every year, my countdown to financial independence is in sight. Each month is a step closer and lets take a look at how this past month is getting me there.

For the month of October I made $3,310.23; a decrease of -5.96% versus this time last year. Not every month is going to be positive and this is one of those times. I had two payments that opted to pay me in November instead of October. On the bright side, November’s payout will get a nice bump.

In October I received two dividend raise announcements from Phillips 66 (PSX) at 2% and AbbVie Inc. (ABBV) at 9%. I was expecting a third raise from Pinnacle West Capital (PNW) but they moved their quarterly meeting to early November and anticipate the announcement then.

On the home front my expenses have remained the same which means my savings rate has stayed steady at 24.9% but there may be a change coming.  My oldest daughter’s car died and she had to buy a replacement. Since her old car was in my name I was paying the taxes and insurance but the new car is in her name and she got her own insurance. This is going to free up some money and the bulk of it I will redirect to my investing accounts. Hopefully next month my savings rate will go up.

Enough of me droning on, let’s see the things we all love to see…charts and dividend payouts:

10/19/21BCEBCE INC$170.08
10/7/21MRKMERCK &CO. INC$137.08
10/29/21OGEOGE ENERGY CORP$139.42
10/1/21PPLPPL CORP$489.49
10/15/21WPCWP CAREY INC$572.04
10/29/21M1 FinanceM1 DIVIDEND GROWTH ACCOUNT$32.06

Should Relocation Be Part of Your FI Plan?

I had no buys or sells for the week as I am always low on funds in the last week of a month so I decided instead on posting my opinion on a topic that occasionally crosses my mind. Should relocating to an area with a lower cost of living be part of my financial independence (FI) plan?

Quick backstory, I live in Connecticut which as many know is one of the highest taxed states in the U.S. and they tax nearly everything including most forms of retirement income (social security, 401K & IRA distributions, pensions, and dividend income). Moving to another state would save me anywhere from $2,000 to $8,000 annually in taxes depending on which state I choose to relocate to making relocation a tempting option.    Before anyone turns this political (i.e., blue state versus red state) I’ll just say CT’s high taxes are primarily attributable to pension obligations from years of pension fund mismanagement & neglect at the local city & state level.  State pension obligations are something that can plaque any state regardless of political affinity and is more attributable to past politicians who spent money to win votes than doing the right thing 20 or 30 years ago.  The lesson here is to make sure the state you plan on moving to has a well-funded pension fund or else you may see your taxes grow down the road.

With potential tax savings of up to $8,000 it really begs the question if I should make this part of my financial plan.  To generate $8,000 of annual income I would need $200,000 of investment savings.  $200,000 is not a small amount and not having to save that additional money would allow me to retire much earlier than I originally planned.  I have read quite a few stories of people who accelerated their FI via relocation and some, such as Jason Fiber, have even achieved this even faster by using geo-arbitrage where you relocate to a foreign country with living expenses extremely below that of the U.S.  I enjoy reading their stories about how their quality of life has improved because of it and inspired by their stories.

If you are single and with no children, the decision to relocate is simpler and more a matter of personal choice but if you are married and have family it suddenly becomes a bit more complicated as you must take in several different views and get buy-in from at a minimum your spouse.  In my life, my wife and I both agree relocating is a desirable option however we choose not to make it part of our FI plan and instead are planning FI based on our current expenses.

The reason we do not factor it in is because we do not know what the future holds.  My wife’s father is in his 90s and needs care, what if he lives another 10 years or more?  My children are now young adults and if they have children, I am sure without a doubt my wife would want to be as close to the grandchildren as possible.  And then of course you have the extended family (sisters, brothers, etc…) as well as friends.   All of these are factors that can change mine or my wife’s opinion about relocating. 

My wife & I have had a long and happy marriage and much of that is contributable to each of us compromising with the other but something like this I believe both need to be on the same page with only minor compromises. Of course, by doing this it raises the bar I have to achieve but at least we will have peace of mind that if we decided to retire-in-place it is achievable. If we do relocate then it is just an extra cushion that can be used for other unplanned events that life throws at us.  Thankfully we both have jobs we enjoy so working a little longer won’t be that much of chore.

Buys and Sells for the Week 10/22

Another week of strong earnings being reported across the board keeping markets near their high. Here are my trades for the week:

  1. Unilever PLC (UL) – increased position – Bought early in the week before earnings were announced. Buying at this price point point might be history as earnings were decent pushing share prices up. Grabbed 3 shares @ $52.32 and a 3.82% yield.
  2. Investors Bancorp (ISBC) – sold position – Buyout offer from Citizens Financial was great for their shareholders but not so much for ISBC shareholders as the offer was equivalent to $14.62/share. Sold 269 shares @ $16.15.
  3. Independent Bank Corp (IBCP)new position – My replacement for the ISBC sale. 7 years of dividend growth and a very nice ROE of 18.9%, interesting little bank out of Michigan. Grabbed 196 shares @ $22.11 and a 3.8% yield.

Buys an Sells for the Week 10/15

Big Banks reported strong earnings mid-week and the markets rallied. Phillips 66 (PSX) was my only dividend raise this week coming with a 2% raise, not big but I was not expecting a raise from them this year. Here are my trades for the week:

  1. Amgen Inc (AMGN) – new position – AMGN dropped pretty far on Tuesday and it was a good entry price to start a position. Grabbed 4 shares @ $201.27 and a 3.5% yield.
  2. Viatris Inc (VTRS) – sold position – Sold VTRS and used the proceeds for my AMGN buy, I’m not as enamored as some over the growth prospects and exited the position entirely. Sold 71 shares @ $13.37.

Did I Achieve My Goal?

This October comes with an additional anticipation for me as this is the month I turn 53 and I had set a personal goal for my portfolio to generate dividend income equal to 57% of my expenses.  This past Thursday was the official day I turned 53 and of course, the big question is did I achieve this?  But before we get to that answer here is a quick summary of how the goal was created.

Back in 2018 I performed an analysis that led me to setting two dividend income goals:

  • At Age 53 Dividend income is equal to 57% of expenses
  • At Age 60 Dividend income is equal to 115% of expenses

The analysis was based on using one of the worst bear markets in history that ran from 1964 to 1984.  During that time, we also had high long-term inflation making this period one of the worst economic times in U.S. History.  I decided to analyze a portfolio where someone would retire in 1973 with a dividend growth portfolio where at the start of retirement in 1973 dividend income was equal to 100% of expenses.  

The results were rather shocking as it showed the purchasing power of the dividend income eroded at a faster rate than its ability for growth and by 1984 the dividend income was able to cover only 63% of expenses and would not meet 100% expenses until 1991.   

Using this as my basis, I ran 5 additional models using varying dividend incomes at the start of retirement and I concluded that a portfolio that generates dividend income 25% greater than expenses would have been able to weather the onslaught of inflation and that anything less you would need varying amounts reserve cash to close any gaps.

At the time in 2018 I did not believe I had the capital to achieve 125% of expenses and instead settled at 115% of expenses and reserve cash equivalent to 9 months of expenses to cover shortfalls until the portfolio income recovered to 100% of expenses.  From this I created my age 53 and age 60 goals and even at this rate I knew it would be challenging.

Fast forward three years later and I am now 53 years old and can report I successfully met my goal but by the skin of my teeth.

Getting here was not easy and 2020 was a big step back.  At the start of 2021 it looked like I was going to fall short and would need an additional $16K of capital to invest which I did not have.  But something magical happened in early part of 2021, dividend raises came in double what I was expecting and suddenly the gap was closed, my goal was in sight.

As quickly as I was excited of meeting my goal, I had the wind taken out of my sails.  First was PPL Corp (PPL) who sold their UK utilities and announced that future dividends would eventually be cut to reflect the lost cash flow from the UK sale.  Then AT&T (T) announced they were spinning off their Time Warner assets and they too would be cutting their dividend after the deal was announced.   If that wasn’t bad enough Newtek Business Services (NEWT) announced that they were going to change from being a business development company to a bank in 2022 and they too would reduce their dividend to be commensurate to other banks in the finance sector.  Even though these dividend cuts are going to occur after my goal I knew I had to discount them so I adjusted my goal with the assumption that all three will cut their dividend by 45%.   Suddenly I was back to square one.

When summer hit things changed once again.  Dividend raises continued to come in significantly above my forecast and 2 different companies restored their dividend policy with Armanino Foods of Distinction (AMNF) restoring their dividend to pre-pandemic levels and that was followed up by an even bigger restoration by EPR Properties (EPR) who restarted paying out their monthly dividend of which I had a significant position in and the two compensated for 90% of the PPL, T & NEWT loss.   I was back in the game baby!

After all that drama the final number came in and as of Thursday morning I just squeaked past the goal by hitting 100.12%.

I knew this would be down the wire and it sure was as my end of September and early October purchases were just enough to get me over the goal line.

Now that I achieved a goal I did not think would happen it made me rethink my age 60 goal and discovered if I can continue to grow my annual income by 12.5% annually I can now retire an entire year earlier at age 59.  This revised goal means I am now only 6 years away from declaring FI for me and my wife!  If current inflation continues the way it has it will be a challenge but hey what is a goal for if you cannot challenge yourself.

Buys and Sells for the Week 10/8

The week started off continuing its decline but reversed course on Thursday after a short term lifting of the debt limit was agreed to by Congress. No dividend increases were announced this week so my only method to increase my passive income was to buy stocks. Here are my trades for the week:

  1. Unilever (UL) – increased position – Continuing to dollar cost average downwards. On Tuesday grabbed 3 shares @ $53.43 and a 3.74% yield and on Wednesday grabbed 3 shares @ $52.63 and a 3.8% yield.
  2. Leggett and Platt (LEG) – increased position – Still trying to slowly build up my industrial sector holdings. Grabbed 4 shares @ $44.28 for a 3.79% yield.

Changing My Buy Price for Merck

Merck (MRK) is a biopharmaceutical that brings forward medicines and vaccines to prevent and treat diseases that threaten people and animals – including cancer, infectious diseases, such as HIV and Ebola, and emerging animal diseases. They have increased their dividend for 11 straight years and have a 10-year average dividend growth rate of 5.36% with its most recent raise of 6.56%. Their next dividend increase is set to be announced this November.


For a biopharmaceutical stock to make it into my portfolio they need a minimum dividend yield of 3.5% as they have larger risk factors from patent expiration, regulation, and litigation. With the current annual dividend of $2.60 per share that sets my current buy price at $74.28/share.

MRK has the number 2 selling drug in the world via Keytruda and that patent is not set to expire until 2028. Additionally they are applying for Keytruda patents for other applications which will more than likely stretch the patent expiration out to the early 2030’s eliminating any fear of long term patent expiration.

I do have some concerns over their debt levels as the debt to equity ratio is currently 80%. However, they just applied for emergency use of their antiviral Covid-19 medication which may generate additional cash flow in 2022 to offset my concerns and hopefully begin to retire some debt beginning around mid 2022.

Currently I am projecting MRK to increase their their annual dividend in the range of $2.76 to $2.80/share (6.15% to 7.69%). With the recent announcement of the antiviral medication I’ll go out on a limb and use the upper end of my estimate of $2.80/share and if you divide that by my expected dividend yield of 3.5% then my new buy price is $80/share. Based on Monday’s close of $83.15/share it is 4% above my buy price.