I have already mentioned selling off the majority of my stake in INTC. You can find that post here. That left me with around $9k in capital to deploy. Since INTC is paying out .225 in quarterly dividends, the 300 shares I sold dropped my dividend income by $270.
I have put $7k of that money to work and the remaining went to replace my A/C coil that was leaking freon. The A/C system in my house is 20 years old so I was expecting something to go wrong soon anyways.
$7k went into these two purchases:
1.) I purchased 120 more shares of VOD for $33.48/share. VOD has a dividend payment in February with a larger special dividend payment in August. Assuming no increase in the Feb. payment, shares are carrying a forward yield of 5.5%.
2.) I also purchased 80 shares of AT&T (T) in my Motif account. With commissions of only $4.95 I decided to add the shares to this account. You can find my Motif review here.
These combined purchases will add $368.32/year to my dividend income. So I’ve increased my income by over $100 net after the INTC sell and I didn’t use all the proceeds.
I’ve been wanting to add a little more exposure to the Telecom sector. I also wanted to bring up my weight in VOD to what I have invested in VZ. Due to the reverse split, my VOD cost basis is still much higher. I mentioned how my cost basis was calculated here.
Here’s a look at VOD’s revenue distribution from their annual report. I like the diversity and international exposure I get even after the sell of their Verizon Wireless stake.
T was a brand new position. I don’t mind a few “utility” like companies in my portfolio. These companies provide a large dividend to start but offer much slower growth. What better company is there to compliment my VZ holding than T?
Here’s a fun exercise. Look how much time it would take a growth company, Visa (V) , to produce the same cumulative dividends as T. This is just a simple exercise and there is no adjustment for inflation. I’m assuming $1,000 is invested into each stock. T has a starting yield of 5.2% with 2.5% growth (their 5-year CAGR is 2.4%) and V has a starting yield of 0.8% with 40% growth (their 5-year CAGR is 45%). I don’t believe Visa can sustain a growth rate this high for the long-term but it’s fun to look at the results.
It takes Visa 12 years to surpass the cumulative dividends produced by T assuming Visa can sustain a 40% dividend growth rate. It would also take longer than that with inflation taken into account.
Now let’s change Visa’s dividend growth rate to 25% which is still high and include inflation of 3%. Here are the new results:
It takes 19 years for V to produce more total inflation-adjusted dividends than AT&T.
I believe a good mix of higher yielders with slower growth and lower yielders with higher growth can make for a great balanced portfolio.