December 2013 Dividend Earnings

My December 2013 dividend earnings are in. It has been a busy month!

HoldingDividend/Shr# SharesDividend TotalReinvestedNew SharesAccount
$159.8
RDSA$0.9038$34.20NO0Brokerage
KO$0.2864.6496$18.10YES0.4624Brokerage
XOM$0.6330.215$19.04YES0.202ROTH IRA
INTC$0.225106.058$23.86YES1.010ROTH IRA
ADM$0.1975.395$14.33YES0.352ROTH IRA
MCD$0.8127$21.87YES0.2295Trad IRA
IBM$0.9514$13.31YES0.0752Trad IRA
CSX$0.15100.5681$15.09YES0.5413Trad IRA

I got my first full dividend for MCD, after the piecemeal purchases I made earlier this year. My Shell investment returned one last ‘funny’ dividend – I received $34.20 in cash, but immediately has $5.13 clawed back as a foreign dividend tax.  Hopefully this should be resolved next quarter now that my RDSA has been liquidated from my brokerage account and I have purchased RDSB in my Traditional IRA.

$159 of dividend income is not too bad.  Unfortunately January and February will not be as lucrative, my dividend paying investments in those months are rather sparse at this time.

 

Shell Games – RDSA Swapped for RDSB in IRA

RDS Logo

Shell Logo

I have spent some time thinking about how best to handle the Shell dividend issue I recently experienced.  As discussed earlier my RDSA dividends are subject to Foreign Dividend Tax, which is potentially a bit of a hassle for me to deal with.  Rather than cope with this I have learned that due to their setup RDSB are not subject to dividend withholding.

The RDS.A shares are not a good choice for an IRA account, as the foreign taxes cannot be reclaimed from the IRS.  The RDS.B shares, however, without this tax to deal with are a great choice for an IRA investment. See this article for a great discussion on the background of the two types of Shell shares and the benefits of investing in each using different vehicles.

Apart from the foreign tax issues, another item of import is that Shell pays a very generous dividend, currently yielding over 5 percent.  Given the choice of a Taxable or an IRA account for my various holdings, it seems logical – all other things being equal – to locate the higher yielding holdings in a sheltered account.  I’d rather pay tax on the dividend from a stock yielding 3% than one yielding 5%.

Based on both the foreign tax and dividend income tax considerations, I have decided to do a straight swap of my RDSA in my taxable brokerage account for RDSB in my Traditional IRA.  Today I sold my 38 shares of RDSA at $67.51 (2,565.34) and purchased 38 shares of RDSB at $70.81 ($2,689.07) – the two issues do not sell at identical prices.

The sale means I have a gain of roughly $1.50 from my initial purchase back in May.  This is probably going to prove taxable as short term capital gains, but I think any tax hit will be tolerable:)

Now this sale is completed I have a nice chunk of cash sitting uncommitted in my regular taxable brokerage account.  I have an urge to purchase some more Nestle, so I have placed a GTC limit order for another 36 shares of NSRGY at $70. It is hovering around $72 per share right now, but hopefully I’ll get lucky and have the opportunity to purchase on a future dip.

 

September 2013 Dividend Earnings

It is time to document my earnings from my dividend stock portfolio for September 2013.  The way my portfolio has been chosen a lot of payouts dates happen to fall in September, so I have quite a few items to report.

HoldingDividend/Shr# SharesDividend TotalReinvestedNew SharesAccount
$108.55
ADM$0.1975$14.25YES0.395ROTH IRA
XOM$0.6330$18.90YES0.215ROTH IRA
INTC$0.225105$23.63YES1.058ROTH IRA
RDSA$0.9038$34.20NO0Brokerage
CSX$0.15100$15YES0.5681Trad IRA
MCD$0.7710$7.70NO0Trad IRA

For several of my newer positions I received my first dividend payout ever. Intel, Shell, Clorox and McDonalds I purchased too late to received their earlier June 2013 payouts.  The ADM and Exxon payouts were a repeat of last quarter, but this time I had dividend reinvestment enabled as opposed to getting a cash deposit – so the money was invested in  fractions of additional shares.

McDonalds was an aberration this month.  I had several buys and sell of MCD while finalizing its position in my portfolio, the end result being I only received dividends on 10 shares and it was not reinvested.  This issue should be resolved now and I expect a full payment in December 3013.

I had a signficant issue with my investment with Royal Dutch Shell.  I was under the impression I would receive my dividends thru Shells’ Scrip program, where you are paid in shares – rather than in cash which needs to be reinvested into shares.  This is supposed to exempt you from paying a Foreign Dividend Tax.  Unfortunately this did not work out for me, I received $34.20 in dividends but then has $5.13 deducted for ‘Fgn Div Tax’.

I am going to monitor this issue if there is an easy way to get this back at tax time.  I may end up changing the location and type of Shell investment in the future to optimize the situation, but for now I I’m not too concerned – it is only $20 a year after all.

$108 of dividend income if my first triple digit month so far.  Here is  hoping it is the first of many!

Purchase of RDSA – Shelling Out for Big Oil

RDS Logo

Shell Logo

Shell – or more correctly Royal Dutch Shell – is a high dividend income machine.  Partly in an effort to move the average yield of my portfolio up slightly I have decided to establish a position in this security.

While I had been considering a purchase of Coca Cola, rather than buying Oil major, the high yield was too tempting.  Oil companies are just so darned cheap in comparison to companies producing consumer goods! KO will have to wait, as all my current investable assets are going into RDSA. RDSA is my second fossil fuel investment, having purchased Exxon Mobil (XOM) some time back.  At this time I have enough funds for a full position of $2500, so this should be a one-time event – no future purchases of Shell are planned.

Item to note, Shell trades with two different ADRs – RDSA and RDSB.  This is a legacy of the original merger between Royal Dutch Petroleum and Shell.  Shell offers a program called the “Scrip Dividend Programme” which allows investors to receive shares as dividends, rather than cash.

For tax reasons it is said to be better to purchase RDSA in my situation, due to the handling of dividends.  I am hoping this proves to be correct, as my brokerage firm is clueless on the subject, but will not know for sure until I see some dividends come in and file a tax return!

Royal Dutch Shell is not a company I expect to demonstrate rapid dividend growth, as for the last few years it has demonstrated lackluster dividend increases.  However, with a starting yield of over 5% I can overlook that.

This particular position gives me respectable dividend income now, and I think it’s good to seek a balance between high current yield and high future growth. I cross my fingers that I haven’t made a foolish decision in the ‘chase for yield’, but time will tell.

Purchase of 38 shares of RDSA at $67.91, for a cost basis of 2,580.58. Dividend yield at time of purchase is 5.30%. Dividend Reinvestment enabled. Initial dividend income $136.80 annually.