Last month I didn’t make any stock buys (gasp!), so I just let my investing capital reserve build up by letting the cash from my dividend payouts add up, cashed out my employer’s final stock grant, and transferred $300 as part of my matching program in early July and again in early August. After letting July pass with no additions to my dividend income portfolio, I started August being flush with capital and was ready and able to buy more stocks.
I like to have a portion of my dividends come from municipal bond funds. Being tax-free, they help mitigate the pain from taxes that one inevitably pays. Two years ago, I bought 200 shares of Dreyfus Municipal Income, Inc. (DMF) which had a yield of 7.5% at the time, which was an unusually good yield for a leveraged muni bond fund. I recently noticed that DMF had slipped in price enough for the dividend yield to be a hair over 7%, so last week I bought 100 shares of DMF at $8.96 per share and a yield of 7.03%. Not quite as good as my first 200 shares, but still a respectable yield (especially for being tax-free).
My next buy is a new addition to my portfolio: Western Asset Global High Income Fund Inc (EHI). I recently discovered this closed-end fund when using CEF Connect’s stock screener for researching new stocks to acquire. Here are the pros and cons of EHI:
- Monthly payout. I like dividend stocks that pay out monthly instead of quarterly. Not only is it just plain cool to get a payout every month, it also smooths out my porfolio’s payout spikes caused by other portfolio stocks that pay quarterly.
- Yield. EHI’s dividend yield of over 11% is high, but isn’t crazy high. EHI has managed to maintain a consistent monthly dividend 9.625 cents per share since January 2011. Through the worst of the Great Recession, EHI maintained its dividend of 8.5 cents per share, so it has a very good record of keeping shareholders happy with its consistent dividend payouts.
- International Assets. Unlike most of my ETF and CEF stocks I have, this one is entirely non-US focused. EHI’s assets are largely foreign corporate and government bonds that span a diverse range of sectors and countries.
- Leverage. EHI’s effective leverage is 26.14%, which is rather high, but not as high as some of my other acquisitions (DMF has an effective leverage of 33.46%). The high leverage is certainly reason for concern, but hopefully it won’t prove to be a severe problem when the inevitable market correction arrives.
- Age. With an inception date of 7/29/2003, EHI is a bit young, having only experienced the tail end of the Dot-Com bust and the Great Recession that followed several years later. I prefer a stock that’s been through at least three economic downturns, as this proves that a company or fund is a survivor and has competent management at the helm. While not as old as I would prefer, it has weathered the greatest economic crisis in nearly a century, so that says something.
So I bought 200 shares at $10.00 per share. With a dividend of 9.625 cents per share, I got EHI with a yield of 11.55%. A yield that high is nice, but I do realize that it does come with more risk. But on the other hand, it has a strong record of maintaining its dividend through difficult times, so that does give me some assurance that EHI is a good pick.
With these two stock buys, my projected average monthly dividend income goes up by $24.50 to $629.60. This meets and exceeds my 2015 goal of $625.00/month! And with five months remaining, I may just reach $650 by the end of the year. Nice!