Hello there! Here I am, at 6:15 PM on my day off having a nice cup of tea and listening to what sounds like some of Oasis’s songs on the radio. Can’t complain though, the view from the new place (recently moved :)) is pretty nice, summer, on the other hand, seems to have slowly faded away in the Emerald Island and we are now back to sub 15 C temperatures. By the way as suggested by One Million Journey on my previous post Update #002 - May 2021 I’m using google docs for writing the post so let's see how it goes this time.
A few weeks ago, while I was doing my regular dividends check in my Google sheets I noticed something that caught my attention. Several of the dividends that I had recorded seemed to have been shrinking since I started receiving them. This was shocking to say the least, so I decided to write down my findings here for posterity :). Enjoy!
Are my dividends shrinking?
I have the rather odd habit of regularly (at least once a week) looking into my dividends. The process is more or less like: take the dividends registered by DeGiro and add them to my own Google spreadsheet for a better/easier tracking. This is by no means a healthy habit, but it’s under control xD. While doing that a few weeks ago, I noticed some of my dividends seemed to be shrinking, which I was not expecting at all.
I initially noticed this looking at JNJ dividends collected since June 2020, here the numbers:
However I was sure JNJ had not reduced their dividend and definitely not several times in 1 calendar year! Looking at the rest of my dividends closely it was evident this wasn’t isolated to JNJ at all, several of my dividends had been shrinking in a very similar way (GPC, AFL, etc).
So I started digging… and digging… and…
- From June 2020 to September 2020 JNJ dividend dropped 3.31%, then by December 2020 had dropped another 2.74%. By March had gone up 1.40% and then up again 2.77% (part of this growth was driven by the dividend increase of 4.95% the announced back in April I blogged about it here).
- Even after the dividend increase it’s still down 1.98% between June 2020 and 2021!!!
- Looking at GPC dividends I see very similar numbers: €1.79 in July, €1.71 in October (down 4.47%), then €1.63 in January (down 4.67%, despite dividend increase of 3.16%), then €1.76 in April (Up 7.97%).
- After 12 months and despite the dividend increase, the dividend is still down 1.67%.
So… wtf? How come dividends that have gone through increases in the past 12 months are still returning less money than before?
Currency exchange …
Since my day to day expenses are mainly done in € I decided to track all my investments (including dividends) in that currency. However since a big part of the companies I own are from the US, many of them pay their dividends in USD and then DeGiro exchanges those USD into EUR.
Looks like the USD has depreciated considerably in the last 12 months compared to the euro (see European Central Bank website). Went from about €0.9261 per USD (in May 15th 2020) to as low as €0.8105 per USD (in January 6th 2021), that’s a ~12.48% drop!!! Nowadays it sits at around €0.84 per USD so it’s still down by ~9.3% (~7.86% if we take June to June).
In the FRED website we can corroborate how the currency in circulation increased drastically starting in March/April 2021:
Wrap up & Lessons learned
I understand this may be like 1+1 to seasoned investors, however it was very enlightening to me. It’s also something very hard to avoid when you are investing in assets denominated in different currencies, however you can fight back by diversifying your portfolio. Also worth noting, that a cheaper USD, may be a good opportunity for buying :).
Here I was happy that my companies weren’t cutting their dividends and even increasing them… yet, overall my income was shrinking!!!! Wrapping up, at 08:45 PM, finishing my beer (tea cup is long gone by now).
Cheers!
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