Everything comes to an end eventually. Probably 2020 will not be missed by many. Pandemic is still ongoing concern even though vaccinations are in progress. Even in developed countries the progress seems to be a bit asymmetric and EU in general seems to be lagging behind a bit. US elections were held and results can be considered final even though some aftershocks are still coming. Brexit was also “finalised” but it seems to be a gift that keeps on giving for years to come. In general pandemic together with brexit revealed something fundamental about EU community. As a result of those events I’m slightly more convinced that EU and Euro as currency will start to break down sooner than later. I don’t anticipate it to happen very quickly but quicker than I thought before. This kind of uncontrolled step towards federalization without a real mandate – and for fundamentally incompatible national economies – will eventually bite us in the ass. I’m guesstimating a timeframe of 8-15 years until this really starts to hit us.
Fourth quarter was somewhat expected kind of quarter. Dividend income compared to previous year was impacted negatively by the pandemic and reduced, eliminated or postponed dividends. Fourth quarter dividend income was 1078,82 EUR before taxes compared to 1 343,74 EUR in 2019. ECB also continued the dividend ban for banks and other financial companies so previously postponed dividends were not paid during this quarter. It is possible that some of those will be paid during 2021 but it’s likely that those and additional since then cumulated profits – buffered dividends if you will – will be heavily capped by ECB. I fear that this ECB decision will be as effective as pissing in your pants in freezing temperatures. FY2020 dividends before taxes were 5040,06 EUR compared to 6769 EUR in FY2019. Primary portfolio market value was hit very hard during the pandemic due to heavy REIT allocation for which recovery is still in progress: 12 month change in dividend portfolio value was −16,43%, fourth quarter change was +6,08% but this paper loss was partially compensated by the secondary growth portfolio.
FY2020 was still a success in personal finances. I tracked my overall savings rate for the whole year and managed to save 73,7% off all my income. That’s a figure which would be hard to beat consistently. I also end the year with portfolio debt to equity ratio of 0,004 which significantly below the 0,1 target average. Plenty of liquidity available for 2021 but in current environment it’s difficult to make any moves. Plan is to keep adding consistently with focus at least on healthcare sector and Swedish dividend stocks. It’s likely that I’ll let cash to to build up a bit but let’s see how the first quarter unfolds.
Not that much has changed compared to previous quarter. Global economy is mainly dominated by still ongoing COVID-19 pandemic and BLM protests in US as they prepare for presidential elections. There were ups and there were down during the quarter. Index level recovery has been surprisingly quick one. Personally my portfolio is still down mainly due to the heavy REIT allocation. Lately I’ve been holding back a little bit as the elections are likely to provide some turbulence together with second – and third – corona wave.
Dividend income before taxes during Q3 was 871,88 EUR (Q3/2019 1 206,75 EUR). Corona is clearly showing but not too badly. Impact was way clearer during last quarter as the Euro dividends have been cut or postponed especially in financial sector.
Second quarter was a wild one with all the COVID-19 and BLM related issues around the globe. Both are still very much ongoing but perhaps winding down a bit. That of course can be just calm before the perfect storm but that remains to be seen.
Euro zone is not looking very good. COVID-19 recovery package is being negotiated and seems to be headed to slow spiralling death. I’m sure this can will be kicked patiently quite a bit further it probably should. Eventually however inevitable will most likely happen and euro zone will crumble at least partially. It’s probably impossible to estimate time frame for such event or even the nature of it. Due to to political reasons it might take way longer than it should. Alternatively of course it’s possible that all the issues will be resolved resulting a stronger Europe and currency. Personally I even hope so but don’t see it as a likely outcome.
Dividend income before taxes during Q2 was 1553.07 EUR (Q2/2019 3047.48 EUR). This was statistically a slight disappointment as some of the scheduled dividends were either cut or at least postponed (regulators prevented dividend payments for banking and investment companies).
First quarter of the year is over and what a ride it was. First the markets were hitting all time hight valuations and then corona virus hit the global stock markets like a black swan on steroids. In retrospect quick adaptation by selling everything would have been the sensible choice but that doesn’t really fit into the DGI influenced strategy. Real impact on dividends will remain to be seen. Short term there will be a significant hit but there are also long term possibilities. Some of the strong companies should probably eliminate the whole dividend and invest the money wisely. Prime candidate for this would be Sampo Plc which could increase the stake on TopDanmark. For the main portfolio this quarter was quite bad with -37% drop in value. Impact on dividends is not visible on metrics until next quarter. Dividend income during Q1 was 1 302,58 USD and 101,40 EUR before taxes.
Overall this drop was not totally unexpected though it should be noted that exact timing and reason was unexpected to me. In retrospect it should have been quite obvious if one would have paid enough attention on the news coming in from China during January and February. Long term strategy has not been changed. I was always planning on buying at least for one turn of the economic cycle. Therefore I’ve naturally now moved back to normal buying mode. I’m quite well positioned for it unless of course if this economic turn hits my personal finances. Even that should be quite easily digestible event as I’ve prepared for the turn for quite some time now. This was mainly done by reducing the debt load to minimum. It’s quite easy to take this kind of hits without mortgage. This drop also opens the possibility to make some tax efficient moves by e.g. moving certain assets between providers.
Another eventful year has passed. Global economy had some major setbacks such as the trade war, approaching US presidential elections with the internal issues that comes with it, the ever ongoing BREXIT saga and loads of smaller issues which I’m sure the middle east region will provide us for many years to come. Then there’s the situation with central banks and interest rates. Considering all this it’s really mind blowing to think how well stocks have performed. Portfolio value is really a secondary metric for me but primary portfolio value increased about 28% this year. This is somewhat in-line with index performance but this being an income oriented portfolio, unrealised capital gains are secondary but nice to have of course.
During FY2019 I re-arranged my personal finances and paid of my mortgage. For me this constitutes as the first step of three in the path to financial independence as it reduces significantly the required income for mandatory monthly expenses. In retrospect I probably should’n have sold some of the stocks for this (looking at Apple Inc. especially which has rallied since then) but these investments are done for a purpose and those realised profits filled their purpose in bigger picture. No hard feelings there especially since I very well realised that this could be exactly the outcome even for the Apple share.
Dividend income for FY2019 increased quite nicely compared to previous year. This happened even though I was not buying as aggressively as in year before due to decreased leverage on the portfolio. There were some one time extra dividends (BHP Billiton) and some negative news for next year as some of key positions will decrease the dividends next year (Nordea, Sampo). For FY2020 I expect consistent cash injections and full dividend re-investments which should offset those negatives and keep dividend growth trend in same trajectory. For FY2019 the total dividend income before taxes and converted to euros was 6769 EUR.
In the spirit of traditional new year’s resolutions I’ve set following goals for 2020:
Personal savings rate of 70%
Second step on the path to financial independence: passive income covers base consumption
12 months without alcoholic beverages
Protecting effective tax rate (offset increased taxes with tax planning)
Third quarter is over and this time around it was a bit special one. I decided to restructure my overall finances and paid off my mortgage. This operation involved some stock sales as well since the main motivation was to trim things into a more defensive position (keeping the investment debt carried in portfolio in low end of the allowed range). In global economy main risks are still in place as I expected. Recession risk is real but then again political decisions can easily cause big shifts in a way or another. I might increase cash position in fourth quarter but that remains to be seen. I’m also considering splitting the main portfolio between Nordnet and Nordea. This could be achieved by making additional purchases in portfolio hosted in Nordea.
Third quarter was quite solid considering all the global challenges. Dividend income was 1 337,50 USD and main portfolio value increased 5,45% during the quarter.
Q2 is over and not much has changed. The very same problems in world economy are still in place. Markets are close to all time high valuations but there’s increasing discussion about recession or worse. I’ve successfully eliminated effectively all debt within the portfolio and the question remains: should I keep building cash reservers or look for investment opportunities? There are some interesting possibilities such as Wärtsilä corporation (dropped today on earnings but long term energy mega trend story is still there) or EPR properties (new REIT position with monthly and relatively high dividend). On the speculative growth side there’s the Second Sight Medical Products which I’ve been looking at as a speculative brain-machine-interfacing position.
Q2 results didn’t contain any major surprises. Dividend income was 3047 EUR before taxes which can be compared to 1824 EUR year before. Solid growth mostly fuelled by additional investments.
First quarter is now over and it can perhaps be best described as unexpectedly quick rebound from previous quarter. Main dividend portfolio value increased over 15% in value during the quarter. Received dividends totalled 1442,40 USD including one time extra dividend from BHP Billiton. Main problems are still in place as the trade war tensions between US and China have not been resolved and the brexit resolution was once again pushed forward. Main portfolio is currently in maintenance mode in order to deleverage while waiting for better opportunities and some kind of resolutions for the main problems in global economy. One extra ingredient in this are the local elections which might end up changing the local tax environment from quite bad to extremely bad. This remains to be seen.
Busy day today. Apple Inc. posted a revenue cut yesterday and dropped post market and today. I was tempted to add on it but decided to execute a swap with remaining Diageo shares. I sold all the remaining 30 shares for 138,53 USD per share. In retrospect I should have sold all of the shares back when I sold the first 20 shares but that’s not a big deal. I still consider the the valuation to be a bit stretched and yield is on the low side though growing. I deployed some of the money back to Sampo Plc and Apple Hospitality REIT – both equipped with seemingly much better valuations and yields. I bought additional 100 shares of Apple Hospitality REIT for 14,19 USD per share and 30 shares of Sampo Plc for 38,36 EUR per share.
Now that I’ve exited the whole Diageo position it’s time to check to results. I bought to original 50 shares for 5497,98 USD and sold the shares for the total of 7048,17 USD. Realized capital gains were therefore 1550,19 USD before taxes and commissions. Total dividends received came in at 435,01 USD before taxes. This is a result I’m very pleased with. I still like the company and it’s very likely that I’ll buy back these shares if the price comes down to 110 USD per share range.
Another year has passed and it’s time to take a look at the results. Sentiment really changed towards the end of the year and we saw quite dramatic volatility. The problems however are the same old ones: Trump presidency & trade war tensions, weak EU & brexit and possibly slowing global economy. There’s no doubt that we have been closer to the end of the cycle than to the start of it. Who knows when the real turn will happen – it could be happening already or it might still be years away. Looking back at the results, it’s clear that I got what I wanted and managed to follow the strategy I’ve set to myself.
Fourth quarter dividend income was 1 514,51 EUR (992,23 EUR during Q4/2017)
Dividend income for whole year was 5 373,07 EUR (4 450,93 EUR during FY2017)
Primary portfolio performance was -0,36% during the whole year
Debt ratio was maintained at or close to the planned 10% of the portfolio market value
What will happen in 2019 then? I don’t personally expect big changes going forward. We are likely to see even extreme volatility on index level but I don’t see strong reasons for changing the existing strategy. I will continue to buy and will aim to make at least one purchase per month for the main portfolio. For the secondary portfolio I’ll probably make one small purchase per month or one per quarter at the minimum. ETF portfolio will get a small buy each month and will be funded from the primary portfolio dividends.
I’ll keep an eye on few things: high yield companies with reasonable debt loads (as we might see mainly sideways movement for the next couple of years), quality companies with significant cash positions (which might be thrown overboard when the overall market tanks and which are in great position to deploy cash during a downturn) and advanced technologies such as brain-machine-interfacing, fuel cells & hydrogen economy. High yielding candidate could be e.g. Apple Hospitality REIT or Nordea Bank. Quality companies with significant cash positions would be the likes of Apple Inc. or Berkshire Hathaway. Advanced technologies will be much more difficult to cover. NEL is obvious candidate and it might be accompanied by PowerCell Sweden. Brain-machine-interfacing will require extensive analysis if I intend to find a suitable for addition for the secondary portfolio.