December was a solid month and a great way to close out 2012. This month I set a new personal best for dividends, but I expect to do even better in 2013. I'm looking forward to 2013, it's going to be a great year! Regular dividends, accelerated dividends, plus special dividends totaled over $500 for the first time. Obviously this is not yet sustainable, but I'll get there eventually
DOW: 13,104 /// S&P 500: 1,426 /// 10-YR BOND: 1.76%
New Purchases:
1) 40 units LINE at $36.04 - $116.00 annual income
2) 35 shares KO at $36.07 - $35.70 annual income
3) 1.654 shares SBSI - $1.32 annual income (this was a dividend reinvestment)
Sales:
1) 50 units BWP at $25.05 - ($106.50) annual income
Dividends Received: $458.81
ConocoPhillips (COP) - $39.60
Intel (INTC) - $41.40
Southside Bancshares (SBSI) - $13.02
Chevron (CVX) - $26.10
Emerson Electric (EMR) - $22.55
Lorillard (LO) - $26.35
Norfolk Southern (NSC) - $28.50
Johnson & Johnson (JNJ) - $36.60
Avista (AVA) - $45.53
Exchange Income Corp (EIFZF) - $18.17
Realty Income preferred F (O-PF) - $6.76
Coca-Cola (KO) - $19.89
McDonald's (MCD) - $43.12
UNS Energy (UNS) - $45.58
LTC Properties (LTC) - $26.06
Owens & Minor (OMI) - $19.58
Accelerated Dividends Received: $23.38
H.J. Heinz (HNZ) - $12.36
Illinois Tool Works (ITW) - $11.02
Dividend Increases:
none
New Deposits: $1,030
$300 to ROTH IRA, $730 to taxable account
Lending Club:
Added $50. Still no defaults
Option/Bonus:
Southside Bancshares paid me two special dividends which came out to $21.49 based on the number of shares I own. Since this is a special dividend, it will not count towards my monthly or quarterly totals.
Monday, December 31, 2012
Friday, December 28, 2012
New Purchase - KO, LINE / Sale - BWP
New Purchase - KO
I added 35 shares of The Coca-Cola Company at $36.07 which will increase my annual income by $35.70. This purchase came with a yield of 2.83% before commissions. As many of you know, I've been looking to add to my KO position for quite a while now. The last time I bought KO shares was June 2011 so it's been a good year and a half. To be honest, I'm not excited about the price I paid but you'll rarely see this company on sale. I decided to go ahead and pickup some shares now and just get it over with. This is a company I never plan to sell meaning 20 years from now I doubt I'll really care if I paid $36 or $35 or $33. The point is to increase my stake in this fine company and collect rising dividends the rest of my life. Coke has a dividend growth streak of 50 years. Impressive!
Sale - BWP / New Purchase - LINE
Boardwalk Pipelines (BWP) was one of my earliest purchases and frankly has been a disappointment. I have some concerns with the safety of the distributions of this MLP so I decided to take a loss and trim back the position. I sold 50 units at $25.05 which will reduce my annual income by $106.50 per year. The concern here is that distributable cash flow coverage is thin and distribution increases have stalled. BWP has a history of increasing the distribution every quarter, and was doing exactly that until about 6 months ago. I've spent a lot of time listening to conference calls and reading articles on Boardwalk trying to figure out what went wrong. I do not think the distribution will be cut, but I want to play it safe here. I foresee flat payments until some of the projects they are building come online. Pipeline systems and storage facilities are not built overnight. It could be a year or two until BWP gets back on track. At this point I'm not ready to give up on this company, but as a precaution I think it's prudent to hold a smaller position. I have a fair value of $31 on this company and do feel it is undervalued right now. They've also taken steps to diversify their business away from 100% natural gas. I like that.
With the proceeds from the BWP sale plus some extra money, I purchased 40 units of Linn Energy at $36.04. These units will increase my annual income by $116.00. This swap was actually completed Thursday US time. I wish I would have waited one more day to do this transaction, but I'm only human and cannot predict the future. Basically what I did here is trim BWP and add LINE. I'm more comfortable with this weighting.
I have to be honest with myself, I suck at picking MLPs. I really like the concept of side stepping corporate taxes allowing for huge distributions that are tax deferred until sold. It's a fantastic idea. Unfortunately I haven't quite figured out how to make sound decisions in this industry. Valuing MLPs is a difficult task. I'm not going to throw new money at MLPs until further notice. That includes KMI. Even with KMI I've never really known if I'm under paying or overpaying. I've learned that yield alone is not a good enough reason to buy a company. Even though I have spent numerous hours researching Master Limited Partnerships, I just can't seem to get it right.
__________________________________________________________________________________
I also had a limit order to purchase LO which didn't execute. The stock market opens at 11:30 PM here so I'm forced to set limit orders before I go to bed and hope they fill while I'm sleeping. LO came within a few cents of triggering. I've also reconsidered my stance on Hasbro. New information has been brought to light. Kids are increasingly interested in tablets and smart phones. It makes sense that toy sales would be hurt with all the new technology these days. I've seen this trend first hand with my coworkers kids. At Thanksgiving, my buddy's son just sat there and played with an Ipad all night. Back when I was his age it would have been HE-MAN or GI JOE. Times are changing... Not sure why I didn't pick up on this before.
I added 35 shares of The Coca-Cola Company at $36.07 which will increase my annual income by $35.70. This purchase came with a yield of 2.83% before commissions. As many of you know, I've been looking to add to my KO position for quite a while now. The last time I bought KO shares was June 2011 so it's been a good year and a half. To be honest, I'm not excited about the price I paid but you'll rarely see this company on sale. I decided to go ahead and pickup some shares now and just get it over with. This is a company I never plan to sell meaning 20 years from now I doubt I'll really care if I paid $36 or $35 or $33. The point is to increase my stake in this fine company and collect rising dividends the rest of my life. Coke has a dividend growth streak of 50 years. Impressive!
Sale - BWP / New Purchase - LINE
Boardwalk Pipelines (BWP) was one of my earliest purchases and frankly has been a disappointment. I have some concerns with the safety of the distributions of this MLP so I decided to take a loss and trim back the position. I sold 50 units at $25.05 which will reduce my annual income by $106.50 per year. The concern here is that distributable cash flow coverage is thin and distribution increases have stalled. BWP has a history of increasing the distribution every quarter, and was doing exactly that until about 6 months ago. I've spent a lot of time listening to conference calls and reading articles on Boardwalk trying to figure out what went wrong. I do not think the distribution will be cut, but I want to play it safe here. I foresee flat payments until some of the projects they are building come online. Pipeline systems and storage facilities are not built overnight. It could be a year or two until BWP gets back on track. At this point I'm not ready to give up on this company, but as a precaution I think it's prudent to hold a smaller position. I have a fair value of $31 on this company and do feel it is undervalued right now. They've also taken steps to diversify their business away from 100% natural gas. I like that.
With the proceeds from the BWP sale plus some extra money, I purchased 40 units of Linn Energy at $36.04. These units will increase my annual income by $116.00. This swap was actually completed Thursday US time. I wish I would have waited one more day to do this transaction, but I'm only human and cannot predict the future. Basically what I did here is trim BWP and add LINE. I'm more comfortable with this weighting.
I have to be honest with myself, I suck at picking MLPs. I really like the concept of side stepping corporate taxes allowing for huge distributions that are tax deferred until sold. It's a fantastic idea. Unfortunately I haven't quite figured out how to make sound decisions in this industry. Valuing MLPs is a difficult task. I'm not going to throw new money at MLPs until further notice. That includes KMI. Even with KMI I've never really known if I'm under paying or overpaying. I've learned that yield alone is not a good enough reason to buy a company. Even though I have spent numerous hours researching Master Limited Partnerships, I just can't seem to get it right.
__________________________________________________________________________________
I also had a limit order to purchase LO which didn't execute. The stock market opens at 11:30 PM here so I'm forced to set limit orders before I go to bed and hope they fill while I'm sleeping. LO came within a few cents of triggering. I've also reconsidered my stance on Hasbro. New information has been brought to light. Kids are increasingly interested in tablets and smart phones. It makes sense that toy sales would be hurt with all the new technology these days. I've seen this trend first hand with my coworkers kids. At Thanksgiving, my buddy's son just sat there and played with an Ipad all night. Back when I was his age it would have been HE-MAN or GI JOE. Times are changing... Not sure why I didn't pick up on this before.
Thursday, December 20, 2012
Finding Value in This Market
The Dow Jones Industrial Average is back to 13,250 again but for some reason it doesn't strike me as unreasonable this time around. I've been scanning my watch list the past few days trying to find companies trading at attractive prices. I just don't see it. The market as a whole might seem reasonable, but the individual companies I want to buy are looking a little pricey. Hmm
At this point I'm honestly not sure if I'll make a purchase in December. It wouldn't really bother me since I went on a shopping spree the past two months. At the same time I do intend to make monthly purchases and have done so every single month starting November 2010. That's over two years straight which started well before I was blogging.
I was planning on picking up some INTC the other week, but just as I was getting comfortable with the price sub $20 it shot back up. That ship has sailed. Oh well.
I'll likely hold out for better prices, but here is what I'm considering:
Lorillard (LO)
13.9 P/E / 13.5 P/E (5Yr Avg) / 8.7% LT Growth (projected)
5.3% Yield / N/A Yield (5Yr Avg) / 71.1% Payout Ratio
Tobacco stocks in general dipped the past week. The current news in the tobacco industry is two fold. The first is that the EU has proposed stricter warnings on cigarette packs. The new legislation would force 75% of the packaging to be warning pictures and text. Lorillard doesn't sell products in the EU or anywhere else outside the US however. It's a moot point for LO, but the nanny state mentality could spread. Wow you mean to tell me cigarettes are unhealthy? I would have never guessed without the new packaging. Haha!
The second news story is cigarette manufacturers (including Lorillard) will have to release settlement money they have been withholding. However, they will be able to claim credits since smoking use has decline over time. LO will be able to claim about $200 mil over the next 5 years.
What I like about Lorillard is that it has a blockbuster brand in Newport, it has branched out into electronic cigarettes, the yield is fantastic, and it comes with nice growth prospects all at a reasonable valuation. The debt load is a bit concerning, but you'll see a lot of that in the tobacco industry.
Hasbro (HAS)
14.1 P/E / 14.3 P/E (5Yr Avg) / 7.4% LT Growth (projected)
3.9% Yield / 2.6% Yield (5Yr Avg) / 49.6% Payout Ratio
I'm looking at Hasbro for a couple of reasons. First off I need more holdings from the consumer discretionary sector. HAS fits the bill. Secondly I like the value this stock offers. I have a fair value of $42 on HAS, it's currently trading at $36.57. That's a discount of about 15% which is quite attractive. A huge negative with buying shares of Hasbro right now is the accelerated dividend which already went ex. If I bought shares today I would have to wait all the way till May to get paid. Bummer.
I think Hasbro has done a good job managing its brands. My Little Pony made a resurgence the past few years, GI Joe and Transformers have surely benefited from Hollywood movies, and now that Star Wars is set to make additional movies I think toys from that brand could be a source of growth in the future. A subset of the population goes absolutely nuts for Star Wars. Perhaps I should load up before the mania returns.
At this point I'm honestly not sure if I'll make a purchase in December. It wouldn't really bother me since I went on a shopping spree the past two months. At the same time I do intend to make monthly purchases and have done so every single month starting November 2010. That's over two years straight which started well before I was blogging.
I was planning on picking up some INTC the other week, but just as I was getting comfortable with the price sub $20 it shot back up. That ship has sailed. Oh well.
I'll likely hold out for better prices, but here is what I'm considering:
Lorillard (LO)
13.9 P/E / 13.5 P/E (5Yr Avg) / 8.7% LT Growth (projected)
5.3% Yield / N/A Yield (5Yr Avg) / 71.1% Payout Ratio
Tobacco stocks in general dipped the past week. The current news in the tobacco industry is two fold. The first is that the EU has proposed stricter warnings on cigarette packs. The new legislation would force 75% of the packaging to be warning pictures and text. Lorillard doesn't sell products in the EU or anywhere else outside the US however. It's a moot point for LO, but the nanny state mentality could spread. Wow you mean to tell me cigarettes are unhealthy? I would have never guessed without the new packaging. Haha!
The second news story is cigarette manufacturers (including Lorillard) will have to release settlement money they have been withholding. However, they will be able to claim credits since smoking use has decline over time. LO will be able to claim about $200 mil over the next 5 years.
What I like about Lorillard is that it has a blockbuster brand in Newport, it has branched out into electronic cigarettes, the yield is fantastic, and it comes with nice growth prospects all at a reasonable valuation. The debt load is a bit concerning, but you'll see a lot of that in the tobacco industry.
Hasbro (HAS)
14.1 P/E / 14.3 P/E (5Yr Avg) / 7.4% LT Growth (projected)
3.9% Yield / 2.6% Yield (5Yr Avg) / 49.6% Payout Ratio
I'm looking at Hasbro for a couple of reasons. First off I need more holdings from the consumer discretionary sector. HAS fits the bill. Secondly I like the value this stock offers. I have a fair value of $42 on HAS, it's currently trading at $36.57. That's a discount of about 15% which is quite attractive. A huge negative with buying shares of Hasbro right now is the accelerated dividend which already went ex. If I bought shares today I would have to wait all the way till May to get paid. Bummer.
I think Hasbro has done a good job managing its brands. My Little Pony made a resurgence the past few years, GI Joe and Transformers have surely benefited from Hollywood movies, and now that Star Wars is set to make additional movies I think toys from that brand could be a source of growth in the future. A subset of the population goes absolutely nuts for Star Wars. Perhaps I should load up before the mania returns.
Saturday, December 8, 2012
January = Lean Dividend Month
These companies in my portfolio have moved payments up:
●H.J. Heinz normally pays in January but moved the payment up to Dec. 26. Payment dates for the preferred will still be in January 2013 however. Does this mean they are paying the common dividend before the preferred?
●Illinois Tool Works already declared a January dividend, but decided to move it up to Dec. 31.
●Coke is paying Dec. 17. Two Q4 dividends is normal for Coke however.
I know these companies are trying to do shareholders a favor, but for me it's annoying. I don't want the payments changing. First of all I like consistency for tracking and planning purposes. Second of all I'd rather delay paying the taxes. I will have to pay taxes on these dividends very soon. Tax season is right around the corner. I'm lower middle class and am not worried about the potential tax hikes anyways. It will barely affect me. Obama has my back on that one!
I really hope Pepsi and Philip Morris leave the dividend schedule alone but hey in reality it's just a slight annoyance and not the end of the world.
●H.J. Heinz normally pays in January but moved the payment up to Dec. 26. Payment dates for the preferred will still be in January 2013 however. Does this mean they are paying the common dividend before the preferred?
●Illinois Tool Works already declared a January dividend, but decided to move it up to Dec. 31.
●Coke is paying Dec. 17. Two Q4 dividends is normal for Coke however.
I know these companies are trying to do shareholders a favor, but for me it's annoying. I don't want the payments changing. First of all I like consistency for tracking and planning purposes. Second of all I'd rather delay paying the taxes. I will have to pay taxes on these dividends very soon. Tax season is right around the corner. I'm lower middle class and am not worried about the potential tax hikes anyways. It will barely affect me. Obama has my back on that one!
I really hope Pepsi and Philip Morris leave the dividend schedule alone but hey in reality it's just a slight annoyance and not the end of the world.
Friday, December 7, 2012
Updated Pages
Goals Page:
I deleted the goals tab because I don't pay attention to it. I rarely follow goals. I just try to do the right thing and without worrying about it. Here's how I did anyways:
-Dividends: I blew all my estimates out of the water. I had some unexpected windfalls in 2012 and saved more than I originally thought. That translates into higher dividend income.
-Smoking: I haven't bought a pack in 2-3 months so I guess you could say I quit. I still bum a smoke here and there. I really only fail at this when I drink. Oh well I enjoy it so it doesn't bother me. My body is in tip top shape other than my lungs perhaps. haha.
-Visit 1 new country: Success. I'm in S. Korea for a year.
-Exercises: I had good intentions, but was unable to follow through on my goals. I'm in fantastic shape, but did not meet the specific numbers I set for myself. Fail.
No more Goals page. I haven't even looked at in 6 months o.O
Watch List Page:
Added: CM, PPL, and some ETFs
Deleted: SO since I bought shares of this company
Sunday, December 2, 2012
Exchange Traded Funds
In general I'm opposed to ETFs (and mutual funds) since you are essentially paying someone else to do work for you. Maybe I'm just too proud or too cheap, but I'd rather do it myself. That extends beyond investing into other areas of my life such as car maintenance and repairs. But there is a real advantage of being a nimble self directed investor: fees! Those pesky fees add up over time and is precisely why index funds never match the actual index. Over decades those little expense ratios add up to thousands and thousands of dollars. I was a fund investor in the past and was not happy with the results.
Explaining why ETFs suck isn't why I'm writing this post. Rather, the real reason is that I'm actually considering buying a couple. Yeah really!
Foreign stocks: a glaring hole in my portfolio. In a perfect world foreign stocks would pay dividends quarterly and not have dividends withheld just like my favorite dividend champions. Unfortunately such conditions are very rare. American stocks spoil us with a level of predictability and stability not seen anywhere else (with the exception of Canada). But there are tons of quality foreign companies such as Nestle, Novartis, and National Grid. The problem is I simply do not want to be paid only once or twice a year! I will not accept that. So I'm left looking at stocks from Canada and a few from the UK. I currently own TD and EIFZF plus monitor CM, EMRAF, UL, and BP. So I follow a grand total of six stocks outside the US.... There are a lot more quality companies around the globe than that!
For the price of an ongoing fee I can turn annual and semiannual dividends into a quarterly paying ETF. Now I spent a few hours looking at various foreign dividend funds and couldn't find a single one where the distribution stream was smooth and predictable. No matter what I do it's going to be bumpy. But I can gain exposure to a bunch of great companies I would otherwise not be interested in, avoid the withholding tax (the fund should deal with it), and get that quarterly dividend I require.
I have access to 30 no transaction fee iShare ETFs with my Fidelity brokerage account. I can buy small lots of $50 or $100 without worrying about commissions. Anyways one particular fund caught my attention:
iShares Dow Jones International Select Dividend Index Fund (IDV):
Explaining why ETFs suck isn't why I'm writing this post. Rather, the real reason is that I'm actually considering buying a couple. Yeah really!
Foreign stocks: a glaring hole in my portfolio. In a perfect world foreign stocks would pay dividends quarterly and not have dividends withheld just like my favorite dividend champions. Unfortunately such conditions are very rare. American stocks spoil us with a level of predictability and stability not seen anywhere else (with the exception of Canada). But there are tons of quality foreign companies such as Nestle, Novartis, and National Grid. The problem is I simply do not want to be paid only once or twice a year! I will not accept that. So I'm left looking at stocks from Canada and a few from the UK. I currently own TD and EIFZF plus monitor CM, EMRAF, UL, and BP. So I follow a grand total of six stocks outside the US.... There are a lot more quality companies around the globe than that!
For the price of an ongoing fee I can turn annual and semiannual dividends into a quarterly paying ETF. Now I spent a few hours looking at various foreign dividend funds and couldn't find a single one where the distribution stream was smooth and predictable. No matter what I do it's going to be bumpy. But I can gain exposure to a bunch of great companies I would otherwise not be interested in, avoid the withholding tax (the fund should deal with it), and get that quarterly dividend I require.
I have access to 30 no transaction fee iShare ETFs with my Fidelity brokerage account. I can buy small lots of $50 or $100 without worrying about commissions. Anyways one particular fund caught my attention:
iShares Dow Jones International Select Dividend Index Fund (IDV):
- Holdings: 101
- Dividend Yield (ttm): 5.19% (paid quarterly,YAY!)
- Expense Ratio: 0.50%
- P/E: 15.1 / P/B: 2.63 / Beta: 1.49
- Major Holdings: British American Tobacco, Eni, Commonwealth Bank of Australia, Royal Dutch Shell
- Other Holdings: National Grid, Seadrill, Bank of Montreal, Emera, Vodafone
- Countries: 21% Australia, 17% UK, 7% Hong Kong, 6% France, 6% Italy
Friday, November 30, 2012
November Recap
Another fantastic month for dividend growth investing. Total dividends received since I started income investing surpassed $5,000 this month. Not bad at all. Perhaps I can hit $10,000 by this time next year...
DOW: 13,022 /// S&P 500: 1,416 /// 10-YR BOND: 1.62%
New Purchases:
1) 37 shares KMI at $33.91 - $53.28 annual income
2) 15 shares MCD at $85.91 - $46.20 annual income
3) 53 shares AVA at $23.27 - $61.48 annual income
4) 29 shares SO at $42.18 - $56.84 annual income
Sales:
none
Dividends Received: $423.07
AT&T (T) - $80.52
General Mills (GIS) - $23.28
Raytheon (RTN) - $28.50
Linn Energy (LINE) - $43.50
Abbott Laboratories (ABT) - $27.54
Boardwalk Pipelines (BWP) - $91.06
Exchange Income Corp (EIFZF) - $17.21
Kinder Morgan, Inc (KMI) - $12.96
Procter & Gamble (PG) - $43.84
Realty Income Peferred F (O-PF) - $6.76
Senior Housing Properties (SNH) - $21.84
LTC Properties (LTC) - $26.06
Dividend Increases:
1) EMR: $.40 to $.41 per quarter. $2.20 per year
2) T: $.44 to $.45 per quarter. $7.32 per year
3) EIFZF: $.135 to $.14 per month (Canadian). $7.51 per year
New Deposits: $6,390
$300 to ROTH IRA, $6,090 to taxable account. (I received a bonus payment 6 months early)
Lending Club:
Added $50.
Option/Bonus:
none
DOW: 13,022 /// S&P 500: 1,416 /// 10-YR BOND: 1.62%
New Purchases:
1) 37 shares KMI at $33.91 - $53.28 annual income
2) 15 shares MCD at $85.91 - $46.20 annual income
3) 53 shares AVA at $23.27 - $61.48 annual income
4) 29 shares SO at $42.18 - $56.84 annual income
Sales:
none
Dividends Received: $423.07
AT&T (T) - $80.52
General Mills (GIS) - $23.28
Raytheon (RTN) - $28.50
Linn Energy (LINE) - $43.50
Abbott Laboratories (ABT) - $27.54
Boardwalk Pipelines (BWP) - $91.06
Exchange Income Corp (EIFZF) - $17.21
Kinder Morgan, Inc (KMI) - $12.96
Procter & Gamble (PG) - $43.84
Realty Income Peferred F (O-PF) - $6.76
Senior Housing Properties (SNH) - $21.84
LTC Properties (LTC) - $26.06
Dividend Increases:
1) EMR: $.40 to $.41 per quarter. $2.20 per year
2) T: $.44 to $.45 per quarter. $7.32 per year
3) EIFZF: $.135 to $.14 per month (Canadian). $7.51 per year
New Deposits: $6,390
$300 to ROTH IRA, $6,090 to taxable account. (I received a bonus payment 6 months early)
Lending Club:
Added $50.
Option/Bonus:
none
Thursday, November 22, 2012
2013 ROTH IRA Contribution Limits Increased
Contribution limits for IRAs and ROTH IRAs will be $5500 next year! As long as you earn less than $112,000 (single & head of household) or $178,000 (couples) this is the new limit for the ROTH. My earned income is nowhere close to these lofty numbers meaning I easily qualify. Qualification criteria is slightly different for traditional IRAs.
I'm going with the ROTH option because capital gains & dividends compound tax free plus it's easier to access money before 59.5. You can withdraw contributions any time, penalty free, which will work out perfectly for my situation. In retirement I plan to only spend dividends and interest, while leaving principle intact.
I'm going with the ROTH option because capital gains & dividends compound tax free plus it's easier to access money before 59.5. You can withdraw contributions any time, penalty free, which will work out perfectly for my situation. In retirement I plan to only spend dividends and interest, while leaving principle intact.
Tuesday, November 20, 2012
New Purchase - SO
The latest addition to my dividend and income portfolio is 29 shares of the Southern Company. This purchase will increase my yearly income by $56.84 on a 4.62% yield. I'm actively trying to increase my utility holdings right now while prices are reasonable. I don't think I need to introduce SO or what they do, this one is one of the largest electric utilities in the United States. I like SO for a variety of reasons. The population in their service area is growing faster than the national average, it's diversified into a wireless telecom business, it's large and stable, it has a history of growing EPS better than peers, and it is currently building the first new nuclear reactor on US soil in 30 years. Obviously the yield is quite attractive. The payout ratio is fairly high, but I'd be thrilled to see dividend growth of 3-4%.
I did catch this one at the 52 week low, but the valuation I paid is about average historically speaking. Utilities have been pretty pricey most of 2012 as income investors have bid them up for the income. With bonds paying next to nothing investors need to find yield somewhere. So basically I'm okay paying an average valuation in a low interest rate environment. I certainly don't think this one is a bargain, but it's not terrible either. I like SO a lot and will be happy to collect the slowly growing dividends. This company is going to need to replace or upgrade many old coal power plants, it's something I will keep an eye on. Hopefully the new nuclear facility will help SO move further away from coal.
I might make one purchase in November. Right now I'm considering INTC, PPL, VZ, and NSC.
I did catch this one at the 52 week low, but the valuation I paid is about average historically speaking. Utilities have been pretty pricey most of 2012 as income investors have bid them up for the income. With bonds paying next to nothing investors need to find yield somewhere. So basically I'm okay paying an average valuation in a low interest rate environment. I certainly don't think this one is a bargain, but it's not terrible either. I like SO a lot and will be happy to collect the slowly growing dividends. This company is going to need to replace or upgrade many old coal power plants, it's something I will keep an eye on. Hopefully the new nuclear facility will help SO move further away from coal.
I might make one purchase in November. Right now I'm considering INTC, PPL, VZ, and NSC.
Saturday, November 17, 2012
Dividend Increase - T, EIFZF
I'm very pleased to see every single one of my dividend stocks increased payouts in 2012. AT&T and Exchange Income Corp. were the remaining companies I was waiting on.
AT&T:
This is the third increase since I became an owner of the telecom giant. No surprises here, the quarterly dividend of $.44 was raised to $.45. This increase of 2.27% roughly matches inflation, no complaints from me. T is in my portfolio for its huge yield with inflation protection. It is performing as intended. The new and improved payment won't hit my account till 2013 but will be the 29th straight year of increases.
Exchange Income Corporation:
Believe it or not I had to pay a $57.95 commission to buy shares of this company! That is the fee fidelity used to charge to invest in pink sheet foreign stocks. Pretty crazy! If I wanted to buy or sell EIFZF now the fees have been reduced to a reasonable $7.95. Even with the ridiculous commission I paid, the YOC on this one is over 8% now.
I cannot and do not recommend this company to anybody. This one is the oddball stock in my portfolio. It's a Canadian company that operates regional airlines & helicopter services, plus they manufacture cell phone towers, pressure washers, custom tanks/trailers, and other specialized products. Yeah sometimes I wonder why I even own this! Then the dividend rolls in every month and my memory is refreshed.
EIFZF increased its monthly dividend from $.135 to $.14 (Canadian) which is a 3.70% boost. Exchange Income acquires companies in the transportation & manufacturing industries, integrates them under the EIF umbrella, then handsomely rewards loyal shareholders with massive monthly dividends. It's growing pretty fast and has benefited from a contract to manufacture cell towers for AT&T. I think I got lucky with this company, it's been one of my best performers.
AT&T:
This is the third increase since I became an owner of the telecom giant. No surprises here, the quarterly dividend of $.44 was raised to $.45. This increase of 2.27% roughly matches inflation, no complaints from me. T is in my portfolio for its huge yield with inflation protection. It is performing as intended. The new and improved payment won't hit my account till 2013 but will be the 29th straight year of increases.
Exchange Income Corporation:
Believe it or not I had to pay a $57.95 commission to buy shares of this company! That is the fee fidelity used to charge to invest in pink sheet foreign stocks. Pretty crazy! If I wanted to buy or sell EIFZF now the fees have been reduced to a reasonable $7.95. Even with the ridiculous commission I paid, the YOC on this one is over 8% now.
I cannot and do not recommend this company to anybody. This one is the oddball stock in my portfolio. It's a Canadian company that operates regional airlines & helicopter services, plus they manufacture cell phone towers, pressure washers, custom tanks/trailers, and other specialized products. Yeah sometimes I wonder why I even own this! Then the dividend rolls in every month and my memory is refreshed.
EIFZF increased its monthly dividend from $.135 to $.14 (Canadian) which is a 3.70% boost. Exchange Income acquires companies in the transportation & manufacturing industries, integrates them under the EIF umbrella, then handsomely rewards loyal shareholders with massive monthly dividends. It's growing pretty fast and has benefited from a contract to manufacture cell towers for AT&T. I think I got lucky with this company, it's been one of my best performers.
Friday, November 16, 2012
New Purchase - AVA
I added 53 additional shares to my Avista holding. This particular purchase will increase my annual income by $61.48 and comes with a solid yield of 4.95%. I haven't purchased any utility stocks since 11/17/2011 so it's been a whole year! As an income investor, I'm a huge fan of utility stocks. I like the safety and stability this particular sector offers. However I felt the sector was overvalued most of 2012 which is why I haven't bought any utility shares in a long time. Post election, utility stocks are looking attractive once again!
Avista is a electric & gas utility that operates in Washington, Idaho, and Oregon. Power sources: 51% hydro, 36% natural gas, 10% coal, 2% biomass, 1% wind. Shares of its stock are currently trading at the 52 week low due to a poor earnings report. AVA is a dividend contender with a 10 year streak of rising dividends. I anticipate future dividend boosts to be modest but higher than inflation.
It seems utility companies are going through a transition right now. The trend is moving away from coal power generation and moving towards natural gas. There are a couple factors impacting this change. First of all, the Obama administration is keen on clean energy. EPA regulations are tightening down on pollution controls which makes natural gas a good solution. It's a lot cleaner than coal. Many coal power plants are old and need to be upgraded. Even though carbon-capture technology is available to reduce coal emissions, the technology is expensive to install. Secondly the US has access to a massive reserve of natural gas due to new drilling methods. With such a huge supply, the price of the commodity is now very cheap. The way I see it, cheaper raw materials, lower emissions, and government regulation is the driving force for the future of natural gas power generation. I expect coal powered generation to diminish over time.
Right now I own only two utilities. AVA from the northwest and UNS from the southwest. I'll be looking to add 2-3 additional utilities to my portfolio in the coming months. I currently have a limit order in for SO and like what I see from PPL. This would complete the geographic diversification I'm looking for. Besides utilities, I'm currently interested in O, RSG, TD, INTC, and perhaps NSC. I've made quite a few purchases this month and might have to pace myself a bit. Its hard to keep money on the sidelines right now as investor fear mounts and prices fall.
Avista is a electric & gas utility that operates in Washington, Idaho, and Oregon. Power sources: 51% hydro, 36% natural gas, 10% coal, 2% biomass, 1% wind. Shares of its stock are currently trading at the 52 week low due to a poor earnings report. AVA is a dividend contender with a 10 year streak of rising dividends. I anticipate future dividend boosts to be modest but higher than inflation.
It seems utility companies are going through a transition right now. The trend is moving away from coal power generation and moving towards natural gas. There are a couple factors impacting this change. First of all, the Obama administration is keen on clean energy. EPA regulations are tightening down on pollution controls which makes natural gas a good solution. It's a lot cleaner than coal. Many coal power plants are old and need to be upgraded. Even though carbon-capture technology is available to reduce coal emissions, the technology is expensive to install. Secondly the US has access to a massive reserve of natural gas due to new drilling methods. With such a huge supply, the price of the commodity is now very cheap. The way I see it, cheaper raw materials, lower emissions, and government regulation is the driving force for the future of natural gas power generation. I expect coal powered generation to diminish over time.
Right now I own only two utilities. AVA from the northwest and UNS from the southwest. I'll be looking to add 2-3 additional utilities to my portfolio in the coming months. I currently have a limit order in for SO and like what I see from PPL. This would complete the geographic diversification I'm looking for. Besides utilities, I'm currently interested in O, RSG, TD, INTC, and perhaps NSC. I've made quite a few purchases this month and might have to pace myself a bit. Its hard to keep money on the sidelines right now as investor fear mounts and prices fall.
Tuesday, November 13, 2012
Lending Club Update
I've been investing at lendingclub.com for about a month and a half now. So far no major complaints and no red flags. I'm starting to think this is a valid investment option. To date I haven't had any defaults or anything negative.
What I Like:
●Returns are very high (so far)
●Simplicity. This is very easy and takes little to no time. I spend hours and hours researching stocks before I invest, it's not necessary with lending club. A first grader could do this. The site itself is also user friendly.
●If a loan defaults I can sell on the secondary market and recoup part of my losses. I have yet to implement this tactic however.
●Fixed income alternative. I plan to use LC as a portion of my fixed income allocation inplace of bonds and preferred stock.
Concerns:
●There aren't enough attractive (using my criteria) loans to put a lot of money into this. I want to own as many loans as possible to diversify. It's the same tactic I use in my stock portfolio to reduce risk. Unfortunately I would have to modify my screens to be less selective to accommodate a large investment. No thanks!
●I do not know how this will affect my taxes. We will see during tax season!
●The interest these loans pay are front end loaded. It shows a massive annualized return right now. It will become lower over time. I'm pretty sure I'll experience a few defaults at some point as well.
●Time delays. It takes a little bit for a loan to fully fund. Usually less than 5 days. Then the loan has to be approved which can tack on even more days. Then the payment rolls in and that has a time delay as well. Patience is needed!
●Some loans are rejected further delaying investments
My Screen:
●36 Month - Term
●20 Max - Total Credit Lines
●0 - Delinquencies
●$15,000 - Max Loan Amount
●0-1 - Inquiries
●Consolidate Debt/Medical Expenses - Loan Purpose
●Exclude Loans Already Invested In
●10% - Max Debt To Income
●Mortgage/Own - Home Ownership
●4 Years - Min Length Employment
●B-G - Interest Rate
●Verify all information is filled out
●Verify all grammar and spelling is correct
●Verify requested loan payment is less than 10% listed income
This screen is quite selective. I wouldn't even qualify! I get excited to see a C or D make it through. Most of the time there will be a couple B loans, sometimes nothing at all is available.
For now I will continue investing with lendingclub. Thus far the returns are great and it has surpassed my expectations. I'll be adding another deposit soon.
Friday, November 9, 2012
Why Can't All Stocks Be Like This!!!!
I really shouldn't have checked this stock before I went to bed. It's midnight and I can't sleep. Even though I need to wake up early tomorrow so I can play Army in the woods the next few days, I can't stop thinking about this.
The Board of Directors of Southside Bancshares, Inc., (Nasdaq:SBSI), parent company of Southside Bank declared a special cash dividend for 2012 of $0.13 per common share in addition to declaring a regular quarterly cash dividend of $0.20 per common share. In addition, due to the potential changes in the tax code the Board approved a one time only additional cash dividend of $0.20 per share. The Board believes that it might be more beneficial for the shareholder to receive this one time cash dividend this year than in future years. This $0.20 one time only additional cash dividend will not be repeated in the foreseeable future. The combined cash dividend of $0.53 is payable to common stock shareholders of record November 21, 2012. The cash dividend is scheduled for payment on December 6, 2012.
Apparently paying a special dividend isn't enough for SBSI. They decided to pay TWO special dividends this year! HAHA this is awesome! Not only that, but they also declared share repurchases on top of it all.
Let's recap 2012 for SBSI:
Dividend Growth >15%: check
Stock Split: check
Special Dividend: check
2nd Special Dividend: check
Stock Buybacks: check
I literally cannot think of any other company this shareholder friendly. Why does SBSI have to be a bank? I really want to transplant the management into a different sector!
Ok maybe I'll be able to sleep now.
The Board of Directors of Southside Bancshares, Inc., (Nasdaq:SBSI), parent company of Southside Bank declared a special cash dividend for 2012 of $0.13 per common share in addition to declaring a regular quarterly cash dividend of $0.20 per common share. In addition, due to the potential changes in the tax code the Board approved a one time only additional cash dividend of $0.20 per share. The Board believes that it might be more beneficial for the shareholder to receive this one time cash dividend this year than in future years. This $0.20 one time only additional cash dividend will not be repeated in the foreseeable future. The combined cash dividend of $0.53 is payable to common stock shareholders of record November 21, 2012. The cash dividend is scheduled for payment on December 6, 2012.
Apparently paying a special dividend isn't enough for SBSI. They decided to pay TWO special dividends this year! HAHA this is awesome! Not only that, but they also declared share repurchases on top of it all.
Let's recap 2012 for SBSI:
Dividend Growth >15%: check
Stock Split: check
Special Dividend: check
2nd Special Dividend: check
Stock Buybacks: check
I literally cannot think of any other company this shareholder friendly. Why does SBSI have to be a bank? I really want to transplant the management into a different sector!
Ok maybe I'll be able to sleep now.
New Purchase - MCD
The stock market took quite the tumble the past few days. On top of the carnage, McDonald's reported horrible October numbers. According to the report I read, sales were down 1.8% this October compared to last year. US was down 2.2%, Europe down 2.2% and Asia/Africa down 2.4%. Yikes! Exchange rates made matters worse meaning it wasn't as bad in constant currencies. Unfortunately currencies don't stay constant in the real world. The numbers are what they are and is a negative aspect of having global operations.
It's no wonder MCD stock set new 52 week lows. MCD is now trading at a 16.0 p/e which is lowest I've seen in quite a while. I'm a long term investor buying shares of companies I plan to hold for many years. I fully expect negative news and a bumpy ride along the way. Even with short term struggles I think McDonald's will continue expanding operations and profits over time. When I was a kid they used to report how many hamburgers they served on their signs. It used to be "X billion served". Then it was "billions and billions served" starting in 1994 because the number simply became too big. Executives must have figured counting hamburgers past 100 billion was pointless. McDonald's plan to take over the world is working nicely!
I added 15 shares to my portfolio at a 3.57% yield including commissions. This is my fourth MCD purchase in 2012 and the best price to date. I don't know if the price will go down from here, but I do know I picked up the shares in time to collect the dividend next month.
The way this market is headed I'll probably make one more purchase in November.
It's no wonder MCD stock set new 52 week lows. MCD is now trading at a 16.0 p/e which is lowest I've seen in quite a while. I'm a long term investor buying shares of companies I plan to hold for many years. I fully expect negative news and a bumpy ride along the way. Even with short term struggles I think McDonald's will continue expanding operations and profits over time. When I was a kid they used to report how many hamburgers they served on their signs. It used to be "X billion served". Then it was "billions and billions served" starting in 1994 because the number simply became too big. Executives must have figured counting hamburgers past 100 billion was pointless. McDonald's plan to take over the world is working nicely!
I added 15 shares to my portfolio at a 3.57% yield including commissions. This is my fourth MCD purchase in 2012 and the best price to date. I don't know if the price will go down from here, but I do know I picked up the shares in time to collect the dividend next month.
The way this market is headed I'll probably make one more purchase in November.
Tuesday, November 6, 2012
Emerson Electric Increases Dividend
Emerson Electric (EMR) will be increasing its dividend from $.40 to $.41 per quarter which marks 56 consecutive years of rising payouts. Unfortunately this dividend boost is only 2.5% and pales in comparison to what they did last year. I like to see rising dividends, but I must admit I'm disappointed by this announcement. For a stock yielding around 3.5% I expect better dividend growth. I can get the same increase from high yielding stocks such as T or SNH.
Historically EMR has periods with low dividend growth so I'm not alarmed or even surprised. Before I become a shareholder I always check a company's dividend history. Over time I anticipate Emerson to average around 7% div increases. Pre-announcement, the 5 yr average was 9.1% and the 10 year average 6.4%. It seems Emerson is just being conservative this time.
Historically EMR has periods with low dividend growth so I'm not alarmed or even surprised. Before I become a shareholder I always check a company's dividend history. Over time I anticipate Emerson to average around 7% div increases. Pre-announcement, the 5 yr average was 9.1% and the 10 year average 6.4%. It seems Emerson is just being conservative this time.
New Purchase - KMI
I added 37 additional shares of Kinder Morgan, Inc to my portfolio. This purchase will increase my annual income by $53.28 and comes with a respectable 4.22% yield after brokerage fees. KMI already has a hefty dividend, it's exciting to think where the YOC might end up 2-3 years from now. I already discussed my thoughts on Kinder Morgan last month, but will note I got in at a slightly better price in round 2. There may be a 3rd or 4th round of KMI purchases if the stock continues to decline in price. I think KMI will perform well over the next 10 years and possibly beyond if the US becomes more dependant on natural gas. There are plenty of natural gas reserves and plenty of potential projects/expansions with this one. Kinder Morgan is pretty ambitious!
I plan to make at least one more purchase in November. I'm currently looking at the following companies: APD, MCD, NSC, RSG. Perhaps KO or O if they fall a little bit. Quite a few tempting selections on this menu.
I plan to make at least one more purchase in November. I'm currently looking at the following companies: APD, MCD, NSC, RSG. Perhaps KO or O if they fall a little bit. Quite a few tempting selections on this menu.
Wednesday, October 31, 2012
October Recap
It seems like the months are just flying by. The stock market retreated a bit recently which has been more than welcome! I've been toying with the idea of dripping stocks next year, but utimately couldn't justify it. I'm going to continue to selectively reinvest dividends into what I deem to be the best companies and/or best value.
DOW: 13,107 /// S&P 500: 1,412 /// 10-YR BOND: 1.75%
New Purchases:
1) KMI: 36 shares at $35.10. $50.40 income per year (the dividend has since increased)
2) LO: 17 shares at $115.54. $105.40 income per year
3) APD: 16 shares at $77.54. $40.96 income per year
Sales:
none
Dividends Received: $194.89
Coca-Cola (KO) - $19.89
H.J. Heinz (HNZ) - $12.36
Illinois Toolworks (ITW) - $11.02
Philip Morris (PM) - $66.30
Corporate Office Prop. Pref L (OFC-PL) - $22.59
Exchange Income Corp (EIFZF) - $17.60
Realty Income Pref F (O-PF) - $6.76
LTC Properties (LTC) - $26.06
Toronto-Dominion Bank (TD) - $12.31
Dividend Increases:
1) SNH: $.38 to $.39 per quarter. $2.24 per year
2) KMI: $.35 to $.36 per quarter. $1.44 per year
New Deposits: $1,210
$300 to ROTH IRA; $910 to taxable account
Lending Club:
Added $50. So far no problems, everything is current. I'm still learning the system and not comfortable putting a lot of money in this yet.
Options/Bonus:
$4.51 from OFC-PL. This was the first payment for series L, which included some days from the previous quarter since it is a new issue. I only included the normal amount in my monthly totals. The extra couple bucks will not be accounted for in my quarterly updates either because it will not happen again (isn't sustainable).
DOW: 13,107 /// S&P 500: 1,412 /// 10-YR BOND: 1.75%
New Purchases:
1) KMI: 36 shares at $35.10. $50.40 income per year (the dividend has since increased)
2) LO: 17 shares at $115.54. $105.40 income per year
3) APD: 16 shares at $77.54. $40.96 income per year
Sales:
none
Dividends Received: $194.89
Coca-Cola (KO) - $19.89
H.J. Heinz (HNZ) - $12.36
Illinois Toolworks (ITW) - $11.02
Philip Morris (PM) - $66.30
Corporate Office Prop. Pref L (OFC-PL) - $22.59
Exchange Income Corp (EIFZF) - $17.60
Realty Income Pref F (O-PF) - $6.76
LTC Properties (LTC) - $26.06
Toronto-Dominion Bank (TD) - $12.31
Dividend Increases:
1) SNH: $.38 to $.39 per quarter. $2.24 per year
2) KMI: $.35 to $.36 per quarter. $1.44 per year
New Deposits: $1,210
$300 to ROTH IRA; $910 to taxable account
Lending Club:
Added $50. So far no problems, everything is current. I'm still learning the system and not comfortable putting a lot of money in this yet.
Options/Bonus:
$4.51 from OFC-PL. This was the first payment for series L, which included some days from the previous quarter since it is a new issue. I only included the normal amount in my monthly totals. The extra couple bucks will not be accounted for in my quarterly updates either because it will not happen again (isn't sustainable).
Monday, October 29, 2012
Stock Market Closed On Monday
US stock markets will be closed Monday and possibly Tuesday in the face of Hurricane Sandy. Hurricane Sandy is currently a category 1 "megastorm" putting 50 million people at risk along the East Coast. NYC is in the path which is why the markets will be closed.
Natural disasters are sometimes golden buying opportunities. Average investors are prone to panic at any hint of bad news, I wouldn't be surprised to see stock markets opening lower when trading resumes. Natural disasters happen from time to time, it's normal. Barring cataclysmic events, hurricanes don't concern me (although I hope nobody gets hurt). I've made it through two typhoons here in Korea this year.
I'll be monitoring news the next couple days and will put in a couple limit orders in case Mr. Market overreacts.
Edit 10/31/2012: I deleted a statement I made the other day because this hurricane turned out to be worse than I originally thought. I've been through category 1 typhoons (same thing as hurricane, just depends on the ocean) this year and while it's not exactly fun I never felt truly threatened. They had me stay at work through one of them to supervise soldiers, and monitor the equipment as well as wind speeds. There are procedures I have to follow depending on wind. I witnessed trees snapping and debris all over the road the next day. Roads were closed and we were stuck up there on top of a mountain. Not fun. I didn't have to deal with flooding or my posessions being ruined.
I don't want more natural disasters to occur, but I hope that I'll be sent to help clean up if it happens in the future. I really hope to get a humanitarian mission like that sometime. I know soldiers who were ordered to go help Haiti, I want to do something equally as awesome!
Natural disasters are sometimes golden buying opportunities. Average investors are prone to panic at any hint of bad news, I wouldn't be surprised to see stock markets opening lower when trading resumes. Natural disasters happen from time to time, it's normal. Barring cataclysmic events, hurricanes don't concern me (although I hope nobody gets hurt). I've made it through two typhoons here in Korea this year.
I'll be monitoring news the next couple days and will put in a couple limit orders in case Mr. Market overreacts.
Edit 10/31/2012: I deleted a statement I made the other day because this hurricane turned out to be worse than I originally thought. I've been through category 1 typhoons (same thing as hurricane, just depends on the ocean) this year and while it's not exactly fun I never felt truly threatened. They had me stay at work through one of them to supervise soldiers, and monitor the equipment as well as wind speeds. There are procedures I have to follow depending on wind. I witnessed trees snapping and debris all over the road the next day. Roads were closed and we were stuck up there on top of a mountain. Not fun. I didn't have to deal with flooding or my posessions being ruined.
I don't want more natural disasters to occur, but I hope that I'll be sent to help clean up if it happens in the future. I really hope to get a humanitarian mission like that sometime. I know soldiers who were ordered to go help Haiti, I want to do something equally as awesome!
Saturday, October 27, 2012
Quality or Value?
As a long term investor, is it better to simply invest in the highest quality and best companies knowing the stocks are usually priced at a premium? Or does it make more sense to invest in companies that are undervalued but not as high quality? I've been contemplating this a lot lately.
I want to own companies for 20, 30, maybe even 50 years. That's the holding period I have in mind. Does it really matter if I overpay a little bit for shares of Procter & Gamble knowing they will still be around and still paying dividends decades from now? Shouldn't I place my trust and money in a company like Johnson & Johnson that will continually pay me rising dividends and will likely never fail even if the P/E is high? Why do I even invest in lower quality companies that might not be around far into the future? Should I even hold companies like Southside Bancshares (SBSI) or Intel (INTC)? This is my retirement (hopefully early) we are talking about!
In the perfect scenario the best companies would also be undervalued. While these scenarios are no brainers they are also very rare. If you want to be an owner of Coca-Cola, arguably one of the greatest companies in the world, be ready to pay a little extra for the privilege. KO is rarely on sale. My calculations put a fair value price at $30. It hasn't been at that price since October 2010. Two years ago! Good luck finding Coke at 30 bucks...
What I've done in the past is keep a list of all the stocks I want to own and buy them when they are under or fairly valued. The problem I have is that even within this list of great companies, I believe some great companies are greater than others. These are my core stocks which include ABT, JNJ, KMI, KO, MCD, PEP, PG, and PM. Coincidentally these are the same stocks that hardly ever go on sale, but the ones I strongly feel should anchor my retirement plan.
I've been thinking about beefing up these core stocks regardless of price. Why do I consider KO to be a core stock if I won't even allocate a decent amount to it? Sounds hypocritical. These 8 stocks should be my 8 largest holdings.
I'm looking for ideas and input. What do you think?
I want to own companies for 20, 30, maybe even 50 years. That's the holding period I have in mind. Does it really matter if I overpay a little bit for shares of Procter & Gamble knowing they will still be around and still paying dividends decades from now? Shouldn't I place my trust and money in a company like Johnson & Johnson that will continually pay me rising dividends and will likely never fail even if the P/E is high? Why do I even invest in lower quality companies that might not be around far into the future? Should I even hold companies like Southside Bancshares (SBSI) or Intel (INTC)? This is my retirement (hopefully early) we are talking about!
In the perfect scenario the best companies would also be undervalued. While these scenarios are no brainers they are also very rare. If you want to be an owner of Coca-Cola, arguably one of the greatest companies in the world, be ready to pay a little extra for the privilege. KO is rarely on sale. My calculations put a fair value price at $30. It hasn't been at that price since October 2010. Two years ago! Good luck finding Coke at 30 bucks...
What I've done in the past is keep a list of all the stocks I want to own and buy them when they are under or fairly valued. The problem I have is that even within this list of great companies, I believe some great companies are greater than others. These are my core stocks which include ABT, JNJ, KMI, KO, MCD, PEP, PG, and PM. Coincidentally these are the same stocks that hardly ever go on sale, but the ones I strongly feel should anchor my retirement plan.
I've been thinking about beefing up these core stocks regardless of price. Why do I consider KO to be a core stock if I won't even allocate a decent amount to it? Sounds hypocritical. These 8 stocks should be my 8 largest holdings.
I'm looking for ideas and input. What do you think?
Tuesday, October 23, 2012
New Purchase - APD
Air Products & Chemicals is the 30th stock in my portfolio and the first from the basic materials sector. I've researched many materials stocks and concluded APD would best fit my objectives. I've been looking to add this one for quite a while and have had a number of different limit orders which never filled for one reason or another. Over the weekend I placed a new order which triggered at $77.54. I bought 16 shares that come with a 3.28% yield after commissions.
To be fair, all is not rosy at Air Products right now. The company had a subpar year which is why it's trading at the 52 week low. Earnings are mostly flat; sales were lower in a number of segments; management admits mistakes (which I actually appreciate, I like honesty). 2013 is forecasted to be another slow year, although better than 2012, with mild earnings growth. The success of this company is impacted by the U.S. and world economy more than the typical dividend growth stocks I buy. APD is currently planning a number of new projects throughout the world but seems to focus mainly in China. There are projects in other countries such as South Korea, Belgium, UK and US. Overall it appears earnings should be up next year in the 5-8% range. Obviously this is just a forecast.
I like Air Products for a number of reasons. First of all I think it offers a lot of value at today's prices. It has a reasonable P/E of 14.3 and an attractive yield with a 30 history of dividend growth. I have a target price of $83 on this stock and was able to pick up shares less than that. The fact that I can get a quality dividend champion trading at 52 week lows validates my thoughts. In my opinion, APD is the best dividend growth stock from the materials sector. This is for my strategy; I require a yield of at least 2.75%.
It is interesting to note that when I wrote about Air Products back in March it had a high beta of 1.29. Since that time the beta has actually decreased to about 1.16. I typically prefer low beta stocks, but it's not a rule set in stone. If the world economy does pick up APD should do very very well. I also like the fact that APD operates a number of different businesses serving a wide variety of industries. This company is not a one trick pony.
Some of Air Products biggest competitors include Praxair (PX) and Airgas (ARG). Both of these stocks are dividend contenders but have low yields around 2%. Not my cup of tea but could fit different investment strategies.
To be fair, all is not rosy at Air Products right now. The company had a subpar year which is why it's trading at the 52 week low. Earnings are mostly flat; sales were lower in a number of segments; management admits mistakes (which I actually appreciate, I like honesty). 2013 is forecasted to be another slow year, although better than 2012, with mild earnings growth. The success of this company is impacted by the U.S. and world economy more than the typical dividend growth stocks I buy. APD is currently planning a number of new projects throughout the world but seems to focus mainly in China. There are projects in other countries such as South Korea, Belgium, UK and US. Overall it appears earnings should be up next year in the 5-8% range. Obviously this is just a forecast.
I like Air Products for a number of reasons. First of all I think it offers a lot of value at today's prices. It has a reasonable P/E of 14.3 and an attractive yield with a 30 history of dividend growth. I have a target price of $83 on this stock and was able to pick up shares less than that. The fact that I can get a quality dividend champion trading at 52 week lows validates my thoughts. In my opinion, APD is the best dividend growth stock from the materials sector. This is for my strategy; I require a yield of at least 2.75%.
It is interesting to note that when I wrote about Air Products back in March it had a high beta of 1.29. Since that time the beta has actually decreased to about 1.16. I typically prefer low beta stocks, but it's not a rule set in stone. If the world economy does pick up APD should do very very well. I also like the fact that APD operates a number of different businesses serving a wide variety of industries. This company is not a one trick pony.
Some of Air Products biggest competitors include Praxair (PX) and Airgas (ARG). Both of these stocks are dividend contenders but have low yields around 2%. Not my cup of tea but could fit different investment strategies.
Monday, October 22, 2012
Kinder Morgan Increases Dividend
Well that didn't take long! I started a KMI position less than two weeks ago and it already boosted its dividend. This increase is only 1 cent, but I'll take it. A 1 cent increase does not impress me, however Kinder Morgan Inc managed to raise its dividend each quarter in 2012. In total the payouts per share are 20% higher than they were one year ago. That's impressive, especially when you consider it is currently paying around a 4% yield. Maintaining a dividend growth rate of 20% is probably not realistic but I do expect double digit future increases. I listened to the conference call and KMI appears to have many growth and expansion opportunities which could lead to higher cash payouts.
Thursday, October 11, 2012
New Purchase - LO
Last night I purchased 17 shares of Lorillard at $115.54 which will pay me $105.40 per year. It ends up being a yield of 5.34% including commissions, no complaints there :) This purchase pushes my total annualized dividend income over $4200 meaning from this point forward I'll average $350 in passive income per month. I'm pretty excited about that.
It's actually my second choice in the tobacco industry as I do prefer Philip Morris. That said I cannot control market prices and right now I find PM to be a bit pricey and LO to be priced right. I believe I'm getting some value with this one and would be willing to pay more than I did. Of course I don't know where this stock or the market is headed short term. Would I find a better price if I wait? Hell if I know... All I can do is buy a stock when it hits my target price!
As I stated in a previous post this month, I like Lorillard for a variety of reasons. Obviously the yield is pretty strong with this one. Beyond the yield and the decent price I think I'm getting there is a business behind the stock. This business is in a cash cow industry that sells top notch addictive products. LO is geared towards menthol cigarettes. However they have been making a push into non menthol which is a bigger market. They also sell electronic cigarettes which I find interesting. Believe it or not people use those things! In addition Lorillard is extremely shareholder friendly. I anticipate double digit dividend growth as well as share buy backs.
In my personal life I've battled nicotine addiction with mixed results. It's an extremely difficult habit to break. One month I'm doing good, the next thing I know I've had a little too much bourbon and I'm doing my chimney impression. The hard part is that I do enjoy smoking... I know there is legislation and talks about label changes, this and that. At the end of the day it's my right to smoke. When I'm listening to recorded bugle music; saluting the flag every morning; I often reflect on the great freedoms we have in this country. I think tobacco is here to stay.
It's actually my second choice in the tobacco industry as I do prefer Philip Morris. That said I cannot control market prices and right now I find PM to be a bit pricey and LO to be priced right. I believe I'm getting some value with this one and would be willing to pay more than I did. Of course I don't know where this stock or the market is headed short term. Would I find a better price if I wait? Hell if I know... All I can do is buy a stock when it hits my target price!
As I stated in a previous post this month, I like Lorillard for a variety of reasons. Obviously the yield is pretty strong with this one. Beyond the yield and the decent price I think I'm getting there is a business behind the stock. This business is in a cash cow industry that sells top notch addictive products. LO is geared towards menthol cigarettes. However they have been making a push into non menthol which is a bigger market. They also sell electronic cigarettes which I find interesting. Believe it or not people use those things! In addition Lorillard is extremely shareholder friendly. I anticipate double digit dividend growth as well as share buy backs.
In my personal life I've battled nicotine addiction with mixed results. It's an extremely difficult habit to break. One month I'm doing good, the next thing I know I've had a little too much bourbon and I'm doing my chimney impression. The hard part is that I do enjoy smoking... I know there is legislation and talks about label changes, this and that. At the end of the day it's my right to smoke. When I'm listening to recorded bugle music; saluting the flag every morning; I often reflect on the great freedoms we have in this country. I think tobacco is here to stay.
Tuesday, October 9, 2012
New Purchase - KMI
I bought 36 shares of Kinder Morgan, Inc. at $35.10. This is my first investment in Kinder Morgan which has been a long time coming. I decided to buy shares of the general partner instead of the limited partner for the higher dividend growth. KMI intends to boosts dividends by 12% per year through 2015 which is obviously a very high rate. This stock is currently paying about a 4% yield to boot.
To be honest it's very difficult to value KMI. I'm not exactly sure if I'm over paying or under paying. What I do know is that I want to own a slice of this company, and I like the yield it's currently paying. CEO and founder, Richard Kinder, owns about a quarter of all KMI shares. His annual salary is $1 with no stock options or bonus incentives. The reason he oversees the company is to make wise decisions that will increase his dividend stream and the value of his stake. The guy is a multi-billionaire and knows what he's doing. If it's good enough for Richard it's good enough for me!
In the past year Kinder Morgan acquired El Paso pipelines which I see as being beneficial to KMI. So now we're looking at KMP, KMR, and EPB all paying incentive distribution rights to KMI. Right now it looks like they need to finish asset drop downs, but I wouldn't be surprised if we see more acquisitions in the future. According to the website, it's currently the third largest energy company in North America with total enterprise value greater than 100 billion. I'm taking that to mean only XOM and CVX are bigger. They operate 75,000 miles of pipeline throughout the US and Canada.
I'll be on the lookout for opportunities to increase this position and I might add KMP as well.
To be honest it's very difficult to value KMI. I'm not exactly sure if I'm over paying or under paying. What I do know is that I want to own a slice of this company, and I like the yield it's currently paying. CEO and founder, Richard Kinder, owns about a quarter of all KMI shares. His annual salary is $1 with no stock options or bonus incentives. The reason he oversees the company is to make wise decisions that will increase his dividend stream and the value of his stake. The guy is a multi-billionaire and knows what he's doing. If it's good enough for Richard it's good enough for me!
In the past year Kinder Morgan acquired El Paso pipelines which I see as being beneficial to KMI. So now we're looking at KMP, KMR, and EPB all paying incentive distribution rights to KMI. Right now it looks like they need to finish asset drop downs, but I wouldn't be surprised if we see more acquisitions in the future. According to the website, it's currently the third largest energy company in North America with total enterprise value greater than 100 billion. I'm taking that to mean only XOM and CVX are bigger. They operate 75,000 miles of pipeline throughout the US and Canada.
I'll be on the lookout for opportunities to increase this position and I might add KMP as well.
Senior Housing Properties Increases Dividend
SNH increased its quarterly dividend to $.39 per share marking the 9th straight year of increases. This boost is only 2.63% which sounds low, but I'm actually pretty happy with it. Sources tell me inflation has been around 1.9% so far in 2012 meaning SNH is able to slightly increase my purchasing power. With a low yielding stock I would expect more, with a super high yielder I can't complain. High yield with inflation protection is what my hopes were with SNH, so far it has delivered. Of course there will likely be times in the future with higher inflation and SNH might not fare so well.
Monday, October 8, 2012
New Watch List Additions
It is becoming increasingly difficult to find value these days. Most of my favorite stocks are trading at levels higher than I am willing to pay. I've already increased my stake in companies I've identified as under valued which has lead me to search for new opportunities. I scoured the CCC lists and came up with 3 companies that fit my objectives. All three are either under or fairly valued right now.
Hasbro (HAS):
14.3 P/E / 7.4% Projected Growth / 116% Debt to Equity
3.81% Yield / 17.6% Div Growth / 47% Payout Ratio / 9 Yrs Increases
Most of us are probably already familiar with Hasbro, they sell toys and games. I grew up with popular Hasbro products such as Transformers, Monopoly, and Mr. Potato Head. It's funny how some of these products like My Little Pony go back in style. I was reading about a subset of American males who are infatuated with My Little Pony and call themselves "bronies." There was an article in the Army Times about bronies in the military, it was a hoot. We joke about this all the time at work, who would have thought? All jokes aside Hasbro is a serious company in the business of entertaining people. It is currently under valued and very shareholder friendly. It has a great dividend growth rate with room for additional increases. I would expect that long term the dividend growth would slow down some to be more in line with EPS growth. It does carry quite a bit of debt, which is something to watch out for. A toy company is not my first choice for a core holding, but I could see starting a small to medium sized position with HAS.
Lorillard (LO):
14.6 P/E / 9.2% Projected Growth / -166% Debt to Equity (negative equity)
5.24% Yield / 27.8% Div Growth / 70% Payout Ratio / 5 Yrs Increases
Lorillard is a fine company in the tobacco industry that would compliment my Philip Morris holding. LO is best known for its Newport brand of menthol cigarettes. I have seen Newport making a push into the non mentholated market with its red label. Before I left for Korea I noticed Newport red label was running specials and many smokers were indeed lured in by the low prices. LO sells products mostly in the United States and doesn't seem to focus on international sales. It has a huge stock buyback program which has lead to negative equity and quite a bit of debt. This is pretty common in the tobacco industry. It is something to keep an eye on, but not too concerning. For dividend investors LO could be be a goldmine. It offers a high yield, high dividend growth, and future EPS growth to keep the machine rolling. It's currently trading in the fair value range.
Republic Services (RSG):
15.3 P/E / 6.6% Projected Growth / 93% Debt to Equity
3.37% Yield / 6.7% Div Growth / 48% Payout Ratio / 10 Yrs Increases
RSG is a trash collection service whose biggest competitor is Waste Management. To be honest I'm more familiar with WM since it was our trash collector when I was growing up. RSG is a bit smaller than WM and has a noticeably lower yield. However it also has lower debt, a better payout ratio, and is projected to grow at a slightly higher rate. Republic grows its business through an acquisition strategy; it buys smaller companies and integrates them under the RSG umbrella. In fact if you look at its balance sheet you'll notice it has a huge amount of goodwill from all the past acquisitions. RSG and WM are commonly put in the industrials sector of stocks. To me its more like a utility. I like WM for its yield and RSG because it's more financially sound. RSG is slightly undervalued at this point in time.
What do you guys think? Are you familiar with these companies?
Hasbro (HAS):
14.3 P/E / 7.4% Projected Growth / 116% Debt to Equity
3.81% Yield / 17.6% Div Growth / 47% Payout Ratio / 9 Yrs Increases
Most of us are probably already familiar with Hasbro, they sell toys and games. I grew up with popular Hasbro products such as Transformers, Monopoly, and Mr. Potato Head. It's funny how some of these products like My Little Pony go back in style. I was reading about a subset of American males who are infatuated with My Little Pony and call themselves "bronies." There was an article in the Army Times about bronies in the military, it was a hoot. We joke about this all the time at work, who would have thought? All jokes aside Hasbro is a serious company in the business of entertaining people. It is currently under valued and very shareholder friendly. It has a great dividend growth rate with room for additional increases. I would expect that long term the dividend growth would slow down some to be more in line with EPS growth. It does carry quite a bit of debt, which is something to watch out for. A toy company is not my first choice for a core holding, but I could see starting a small to medium sized position with HAS.
Lorillard (LO):
14.6 P/E / 9.2% Projected Growth / -166% Debt to Equity (negative equity)
5.24% Yield / 27.8% Div Growth / 70% Payout Ratio / 5 Yrs Increases
Lorillard is a fine company in the tobacco industry that would compliment my Philip Morris holding. LO is best known for its Newport brand of menthol cigarettes. I have seen Newport making a push into the non mentholated market with its red label. Before I left for Korea I noticed Newport red label was running specials and many smokers were indeed lured in by the low prices. LO sells products mostly in the United States and doesn't seem to focus on international sales. It has a huge stock buyback program which has lead to negative equity and quite a bit of debt. This is pretty common in the tobacco industry. It is something to keep an eye on, but not too concerning. For dividend investors LO could be be a goldmine. It offers a high yield, high dividend growth, and future EPS growth to keep the machine rolling. It's currently trading in the fair value range.
Republic Services (RSG):
15.3 P/E / 6.6% Projected Growth / 93% Debt to Equity
3.37% Yield / 6.7% Div Growth / 48% Payout Ratio / 10 Yrs Increases
RSG is a trash collection service whose biggest competitor is Waste Management. To be honest I'm more familiar with WM since it was our trash collector when I was growing up. RSG is a bit smaller than WM and has a noticeably lower yield. However it also has lower debt, a better payout ratio, and is projected to grow at a slightly higher rate. Republic grows its business through an acquisition strategy; it buys smaller companies and integrates them under the RSG umbrella. In fact if you look at its balance sheet you'll notice it has a huge amount of goodwill from all the past acquisitions. RSG and WM are commonly put in the industrials sector of stocks. To me its more like a utility. I like WM for its yield and RSG because it's more financially sound. RSG is slightly undervalued at this point in time.
What do you guys think? Are you familiar with these companies?
Sunday, October 7, 2012
Trying out F.A.S.T. Graphs
I read a few articles at Seeking Alpha the other day and noticed a lot of people use F.A.S.T. graphs as a quick way to gauge stock valuations. I've seen these charts in the past, but never really looked at it closely. This afternoon I went to http://www.fastgraphs.com/ and signed up for a 2 week trial. I ran my whole portfolio their service. Here is what I've found:
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I really like FAST graphs as a tool to quickly determine valuations. The fact that they cover foreign stocks like TD and EIFZF is just fantastic. They also have a technique which is used to value MLPs and REITs. Awesome! In the past I've mostly looked at P/Es, yields, dividend discount calculators, market conditions, and my gut feeling (I've been watching these stocks for a few years) to determine entry prices. FAST Graphs takes it a little further into a format which is easy to use and a bit more scientific. Taking emotions and hunches out of investing is good.
The downside is that this service is not free :( I really hate to add $10 a month to my budget, but I think in this case it's worth it.
Check it out guys! You can sign up for a 2 week trial and cancel if you don't like it!
Over Valued:
EIFZF, PM, UNS
Fairly Valued:
AVA, EMR, GIS, HNZ, ITW, KO, LTC, OMI, PEP, PG, SBSI, SNH, T
Under Valued:
ABT, COP, JNJ, NSC
Significantly Under Valued:
BWP, CVX, INTC, LINE, RTN, TD
I really like FAST graphs as a tool to quickly determine valuations. The fact that they cover foreign stocks like TD and EIFZF is just fantastic. They also have a technique which is used to value MLPs and REITs. Awesome! In the past I've mostly looked at P/Es, yields, dividend discount calculators, market conditions, and my gut feeling (I've been watching these stocks for a few years) to determine entry prices. FAST Graphs takes it a little further into a format which is easy to use and a bit more scientific. Taking emotions and hunches out of investing is good.
The downside is that this service is not free :( I really hate to add $10 a month to my budget, but I think in this case it's worth it.
Check it out guys! You can sign up for a 2 week trial and cancel if you don't like it!
Saturday, October 6, 2012
Quarterly Progress Update
Third quarter 2012 is now in the history books I just updated my progress page with the latest figures. In total my dividend portfolio paid out $979.25 with was about $65 more than the previous quarter. In my view the market is not offering the same value it has in the past which has lead me to keep a pile of cash ready for corrections. Unfortunately this strategy has not worked very well, the market keeps on going up. I thought DOW 13,000 was too high. Now its 13,600 and climbing. Timing the market is easier said than done.
Seeing everything in the green feels good but it can also make us over confident. I have to remind myself that price gains are only on paper while dividends are real cash hitting my account every month. That's why I don't really care what the value of my portfolio is. The only thing that matters to me is the amount of dividends I receive, if those dividends are sustainable, and if those dividends are likely to increase in the future at a rate greater than inflation. Of course I want to obtain the best yield for my money which is why I follow markets and stock prices in the first place.
2012 has been a crappy year for putting new money to work. I'd much rather have another 2011 even with the crazy volatility. I do expect the stock market will rise over time, it's just annoying when it actually happens. o.O
Seeing everything in the green feels good but it can also make us over confident. I have to remind myself that price gains are only on paper while dividends are real cash hitting my account every month. That's why I don't really care what the value of my portfolio is. The only thing that matters to me is the amount of dividends I receive, if those dividends are sustainable, and if those dividends are likely to increase in the future at a rate greater than inflation. Of course I want to obtain the best yield for my money which is why I follow markets and stock prices in the first place.
2012 has been a crappy year for putting new money to work. I'd much rather have another 2011 even with the crazy volatility. I do expect the stock market will rise over time, it's just annoying when it actually happens. o.O
Wednesday, October 3, 2012
Linn Energy IPO to Create C-Corp Shares
Well this is interesting, I've never seen anything like this one before. Linn Energy (LINE) is going to introduce a new way to invest which will be called LinnCo (LNCO). From what I gather LNCO's only assets will be units of LINE, but will be set up as a corporation. So if you like LINE but don't want to fool around with K-1's this could make some sense. Seeing that LNCO will be a corporation it's going to have to pay corporate taxes (which can run up to 35%) but will pay regular dividends and issue a 1099. Intriguing!
This is not like KMI at all. LINE is technically not a MLP because there is no general partner or incentive distribution rights. It is set up as a LLC meaning it pays distributions, you file a K-1, it's a pass through entity, and you own units not shares. One of the main attractions to KMI is that you can invest in the general partner and reap the rewards of the MLP structure in a big way. This isn't possible with Linn. I'm not saying either is better, just different.
I haven't made up my mind if I'll buy LNCO shares or not, but if I do it's going in my ROTH. The main downside here is that the dividend will obviously be lower and you don't get the built in tax sheltering. For those who like Linn, LNCO will make tax time a little easier and will have a place in retirement accounts.
What do you all think? Am I understanding LinnCo correctly?
This is not like KMI at all. LINE is technically not a MLP because there is no general partner or incentive distribution rights. It is set up as a LLC meaning it pays distributions, you file a K-1, it's a pass through entity, and you own units not shares. One of the main attractions to KMI is that you can invest in the general partner and reap the rewards of the MLP structure in a big way. This isn't possible with Linn. I'm not saying either is better, just different.
I haven't made up my mind if I'll buy LNCO shares or not, but if I do it's going in my ROTH. The main downside here is that the dividend will obviously be lower and you don't get the built in tax sheltering. For those who like Linn, LNCO will make tax time a little easier and will have a place in retirement accounts.
What do you all think? Am I understanding LinnCo correctly?
Monday, October 1, 2012
October Shopping List
The stock market continues to fly high
making it difficult to find quality dividend stocks trading at
attractive valuations. The usual dividend stalwarts such as KO, ABT,
WMT, CL, and CVX are no longer on sale, yet I have money to invest
and will continue depositing more funds from my day job. I'm going
to buy something, this is a list of what I'm currently looking at.
●Genuine
Parts Company: I've had my eye on GPC for a while, but it never
quite reached the entry price I had in mind. I came very close to
pulling the trigger a few months ago when it went down to around $58.
I like Genuine Parts because it would help diversify my portfolio
into an industry that I'm currently lacking plus it has proven itself
to be a shareholder friendly company over the years. After
revisiting GPC, I determined a 3.3% entry yield would be a decent place
to start an investment. I'm interested in this stock below $60, it's
pretty close right now.
3.24%
yield / 52% payout ratio / 56 years of increases / 15.93 P/E
●Kinder
Morgan, Inc: KMI is an American success story that wasn't available
to the public until last year. It's one of those stocks I feel will
be worth more many from years now but is difficult to value due to
its business model. If you plug the numbers into a dividend discount
calculator you'll see that it's way undervalued because it has a nice
current yield and is expected to grow dividends at a rapid pace. It
kind of tells you it's almost too good to be true (I had the same
sort of feeling when I bought shares of PM last year). This one will
be a steal if they can continue raising dividends like they say. The
dividend growth is the wild card here; I like KMI's chances seeing
that they recently acquired El Paso Pipelines. With that in mind I'm
going to target a 4.0% yield which means a price of $35. I plan to
put this one in my ROTH and keep regular MLPs in my taxable account.
I'd like to make the purchase soon to make sure I get the Q4
dividend, it should go ex later this month.
3.94%
yield / 1,078% payout ratio (isn't meaningful) / 2 years of increases
/ 281.9 P/E
●Norfolk
Southern: NSC took a nose dive the past few weeks after it cut its
future guidance. This drop has been well documented by internet
bloggers and has been a consensus buy across the board. Anytime I
get can a 3% yield with NSC I'll consider adding to my position, but
at the same time I don't want one stock dominating my portfolio and odds
of retirement success (which is why I've leaving INTC off this list). Since I already have a sizable stake with
this railroad, I'm going to target a price that will lower my cost
basis. My next price point is at the 3.25% yield or $61.50/share
since we don't really know when the bleeding will stop.
3.14%
yield / 34% payout ratio / 11 years of increases / 10.90 P/E
My
plans are constantly changing, but chances are I'll pick up one or
two of these names this month. In fact I think I'll put in a limit
order for KMI right now just in case.
Saturday, September 29, 2012
September Recap
Another good month for dividend growth investing. I've noticed that YOC really starts to grow on the second and third increases, especially if it's a fast raiser like PM. I just hope these types of companies can continue growing EPS and dividends at a solid rate.
DOW: 13,437.13 /// S&P 500: 1,440.67 /// 10-YR Bond: 1.64%
New Purchases:
1) 52 shares Intel @ $23.86. Adds $46.80 to my annual income.
2) 19 shares Norfolk Southern @ $65.71. Adds $38.00 to my annual income.
Sales:
none
Dividends Received: $407.13
ConocoPhillips (COP) - $39.60
Intel (INTC) - $29.70
Phillips 66 (PSX) - $3.60
Southside Bancshares (SBSI) - $13.02
Chevron (CVX) - $26.10
Emerson Electric (EMR) - $22.00
Norfolk Southern (NSC) - $19.00
Johnson & Johnson (JNJ) - $36.60
Avista (AVA) - $30.16
Exchange Income Corp (EIFZF) - $17.67
Realty Income Pref. F (O-PF) - $6.76
McDonald's (MCD) - $28.70
UNS Energy (UNS) - $45.58
LTC Properties (LTC) - $26.06
Owens & Minor (OMI) - $19.58
Pepsi (PEP) - $43.00
Dividend Increases:
1) PM: $.77 to $.85 per quarter. $24.96 annually
2) MCD: $.70 to $.77 per quarter. $11.48 annually
New Deposits: $1035
$300 to ROTH IRA, $735 to taxable account
Lending Club:
Started an account with $250. Currently in the process of building a portfolio of 10 notes. Looking to add between $50-$100 a month to this experiment depending on how my budget and finances turn out.
Options/Bonus:
none
DOW: 13,437.13 /// S&P 500: 1,440.67 /// 10-YR Bond: 1.64%
New Purchases:
1) 52 shares Intel @ $23.86. Adds $46.80 to my annual income.
2) 19 shares Norfolk Southern @ $65.71. Adds $38.00 to my annual income.
Sales:
none
Dividends Received: $407.13
ConocoPhillips (COP) - $39.60
Intel (INTC) - $29.70
Phillips 66 (PSX) - $3.60
Southside Bancshares (SBSI) - $13.02
Chevron (CVX) - $26.10
Emerson Electric (EMR) - $22.00
Norfolk Southern (NSC) - $19.00
Johnson & Johnson (JNJ) - $36.60
Avista (AVA) - $30.16
Exchange Income Corp (EIFZF) - $17.67
Realty Income Pref. F (O-PF) - $6.76
McDonald's (MCD) - $28.70
UNS Energy (UNS) - $45.58
LTC Properties (LTC) - $26.06
Owens & Minor (OMI) - $19.58
Pepsi (PEP) - $43.00
Dividend Increases:
1) PM: $.77 to $.85 per quarter. $24.96 annually
2) MCD: $.70 to $.77 per quarter. $11.48 annually
New Deposits: $1035
$300 to ROTH IRA, $735 to taxable account
Lending Club:
Started an account with $250. Currently in the process of building a portfolio of 10 notes. Looking to add between $50-$100 a month to this experiment depending on how my budget and finances turn out.
Options/Bonus:
none
Tuesday, September 25, 2012
Signed up for Lending Club
I've had my eye on peer to peer lending site www.lendingclub.com for a while and decided to start an account after reading a recent post at the Mr. Money Mustache blog. I'm sure most of you guys have heard of this before so I'm not going to get into the details of what it is. If not check out the website, it's quite a novel idea. I'm starting with the bare minimum $250 to open the account and might deposit more if it turns out to be a good investment.
The biggest risks I see at Lending Club:
-Risk of individual notes defaulting.
-LC itself going into bankruptcy.
To try to minimize these risks I'm going to only have a small sum in the account which will be spread out between as many loans as possible. The smallest loan amount is $25 so I'll start with 10 notes and see how that goes. The risk of individual notes defaulting is probably not as bad as it seems. For starters you can screen for certain characteristics that should help to weed out potential deadbeats. It's like using a stock screener. Not only that, but when you receive payments you are getting interest plus part of the principal back. Assuming the borrower makes at least one payment, the loss won't be 100%. The average default rate for the types of loans I'm looking at is 3-4%. I'm hoping my screens will give me better results.
I like the way LC is setup and the yield potential is very high. I'm going to concentrate on the "B-D" rated loans where I should be able to collect at least a 10% yield if everything goes as planned. My screen is pretty strict and consequently I wasn't able to immediately find 10 notes that fit my criteria. That's okay, I don't mind checking back every few days to see if something new is available. So far I have the following notes: B5 (14.09% interest) / C1 (14.33%) / C2 (15.31%).
I'll cross my fingers and see how this plays out. If nothing else I'm helping real people and it's entertaining!
The biggest risks I see at Lending Club:
-Risk of individual notes defaulting.
-LC itself going into bankruptcy.
To try to minimize these risks I'm going to only have a small sum in the account which will be spread out between as many loans as possible. The smallest loan amount is $25 so I'll start with 10 notes and see how that goes. The risk of individual notes defaulting is probably not as bad as it seems. For starters you can screen for certain characteristics that should help to weed out potential deadbeats. It's like using a stock screener. Not only that, but when you receive payments you are getting interest plus part of the principal back. Assuming the borrower makes at least one payment, the loss won't be 100%. The average default rate for the types of loans I'm looking at is 3-4%. I'm hoping my screens will give me better results.
I like the way LC is setup and the yield potential is very high. I'm going to concentrate on the "B-D" rated loans where I should be able to collect at least a 10% yield if everything goes as planned. My screen is pretty strict and consequently I wasn't able to immediately find 10 notes that fit my criteria. That's okay, I don't mind checking back every few days to see if something new is available. So far I have the following notes: B5 (14.09% interest) / C1 (14.33%) / C2 (15.31%).
I'll cross my fingers and see how this plays out. If nothing else I'm helping real people and it's entertaining!
Friday, September 21, 2012
New Purchase - NSC
I bought 19 shares of Norfolk Southern at $65.71 which amounts to a 3.02% yield factoring in commissions. This purchase was completely unplanned, I honestly didn't think I'd buy anything else this month. NSC lowered its guidance citing weak coal shipments and fuel surcharges which sent the stock price in a downward spiral the past couple days. NSC was trading in the mid 70's at the beginning of the week and is now over 12% lower. Situations like this is why I like to keep some dry powder available. Even though the market as a whole is pricey it is still possible to find stocks trading at attractive valuations. Short term this purchase might appear suspect due to the lowered guidance and general concerns over coal consumption. I'm approaching this from the long term view that railroad companies with continue to be profitable especially if gasoline and fuel prices rise over time. I believe it will. If you think gas is expensive in the U.S. you better think twice. It's roughly $6/gallon in South Korea...
McDonald's Increases Dividend
McDonald's recently raised its quarterly dividend 10.0% to $.77 marking 36 consecutive years of dividend growth. 10% is a huge raise and exemplifies how the dividend growth strategy works. I really couldn't be happier. MCD is one of my favorite dividend stocks. I believe we will see continued dividend growth from the company as it expands into additional locations worldwide, buys back stock, and aims to increase same store sales.
Thursday, September 13, 2012
Philip Morris Increases Dividend
This years boost will be 10.39% which is really good news for those of us who hold shares of the tobacco giant. PM has raised its dividend annually since it was spun off from Altria 5 years ago, it's now an official dividend challenger. Given more time I strongly believe PM will become a contender and has qualities which could take it all the way to dividend champion status many years from now. It offers great products, great management, growth potential, and a fantastic dividend policy all in a cash cow industry. Of course there are risks, but I'll be looking to add shares during temporary setbacks and other times when valuations appear attractive.
Edit 9/15/2012: Here is one of the risks I was talking about:
This picture was taken in Thailand by yours truly. Plain packaging would be worse for Philip Morris because the distinctive Marlboro brand would be replaced with a boring font.
Edit 9/15/2012: Here is one of the risks I was talking about:
This picture was taken in Thailand by yours truly. Plain packaging would be worse for Philip Morris because the distinctive Marlboro brand would be replaced with a boring font.
Tuesday, September 11, 2012
New Purchase - INTC
I bought 52 shares of Intel at $23.86 which ends up yielding 3.75% including brokerage fees. It has been a long time since I've bought shares of INTC and oddly enough I started with a 3.75% yield last time around as well. A few dividend increases later those same shares are now sporting almost a 5 percent yield on cost. I think Intel is one of the best income stocks in the technology sector and will continue rewarding shareholders with dividend increases.
It's kind of scary buying stocks when the market is this high, but I do feel INTC offers a lot of value at the moment. They lowered their future guidance citing weak demand which sent the stock in a downward spiral the past couple days. If I was back home and awake during market hours I bet I would have bought at a lower price. Being half way around the world in a different time zone, I have to settle for limit orders. It feels like I'm one day behind the market because I can't react quickly without screwing up my sleep schedule. Anyways I'm happy to put some money to work and increase my dividend income with Intel!
It's kind of scary buying stocks when the market is this high, but I do feel INTC offers a lot of value at the moment. They lowered their future guidance citing weak demand which sent the stock in a downward spiral the past couple days. If I was back home and awake during market hours I bet I would have bought at a lower price. Being half way around the world in a different time zone, I have to settle for limit orders. It feels like I'm one day behind the market because I can't react quickly without screwing up my sleep schedule. Anyways I'm happy to put some money to work and increase my dividend income with Intel!
Sunday, September 2, 2012
Interest Rates are Ridiculous
I blog mostly about stocks and investing since that is what interests me, but today I bought a CD.
IT PAYS LESS 1%
That's right I bought a 18 month CD that pays me 0.95%. This is money I will use to buy a different car in the future so I don't want to risk it in the stock market. I need to have the principle left intact. Here is a list of savings products I use. The CDs mature at the same time (meaning I bought the 24 month CD six months ago).
36 Month CD 1.64%
30 Month CD 1.29%
24 Month CD 1.09%
18 Month CD 0.95% (just bought this one)
Savings Account 0.11% (Seriously? BAHAHA)
Checking Account 0.01%
Look at these atrocious rates, is it any wonder dividend stocks have performed well the past couple years? Retirees need to find yield somewhere...
Oh and my bank advertises that the savings account pays twice the national average o.O
IT PAYS LESS 1%
That's right I bought a 18 month CD that pays me 0.95%. This is money I will use to buy a different car in the future so I don't want to risk it in the stock market. I need to have the principle left intact. Here is a list of savings products I use. The CDs mature at the same time (meaning I bought the 24 month CD six months ago).
36 Month CD 1.64%
30 Month CD 1.29%
24 Month CD 1.09%
18 Month CD 0.95% (just bought this one)
Savings Account 0.11% (Seriously? BAHAHA)
Checking Account 0.01%
Look at these atrocious rates, is it any wonder dividend stocks have performed well the past couple years? Retirees need to find yield somewhere...
Oh and my bank advertises that the savings account pays twice the national average o.O
Friday, August 31, 2012
August Recap
August was a fantastic month, I'm very pleased with the results. I felt the market was kind of high and didn't buy much accordingly. I have quite a bit of dry powder now; I'm ready for a correction. Hopefully we'll see one soon.
DOW: 13,001 /// S&P 500: 1,399 /// 10-YR Bond: 1.62%
New Purchases:
1) 49 shares Corporate Office Properties Preferred Series L (OFC-PL) which will provide $90.36 in dividends every year. I bought the shares at $25.43
Sales:
1) 18 shares Phillips 66 (PSX) reducing my annual income by $14.40. I sold at $40.10 per share.
Dividends Received: $409.77
AT&T (T) - $80.52
General Mills (GIS) - $23.28
Raytheon (RTN) - $28.50
Linn Energy (LINE) - $43.50
Abbott Laboratories (ABT) - $27.54
Exchange Income Corp (EIFZF) - $17.43
Procter & Gamble (PG) - $43.84
Realty Income Preferred F (O-PF) - $6.76
Boardwalk Pipelines (BWP) - $91.06
Senior Housing Properties (SNH) - $21.28
LTC Properties (LTC) - $26.06
Dividend Increases:
1) NSC: $.47 to $.50 per quarter. $4.56 annually
2) ITW: $.36 to $.38 per quarter. $2.32 annually
3) LTC: $.145 to $.155 per month. $20.16 annually
4) TD: $.72 to $.77 per quarter. $3.20 annually
New Deposits:
$1035 this month. $300 to ROTH IRA. $735 to taxable account.
Options/Bonus:
-39 shares KO from the stock split
DOW: 13,001 /// S&P 500: 1,399 /// 10-YR Bond: 1.62%
New Purchases:
1) 49 shares Corporate Office Properties Preferred Series L (OFC-PL) which will provide $90.36 in dividends every year. I bought the shares at $25.43
Sales:
1) 18 shares Phillips 66 (PSX) reducing my annual income by $14.40. I sold at $40.10 per share.
Dividends Received: $409.77
AT&T (T) - $80.52
General Mills (GIS) - $23.28
Raytheon (RTN) - $28.50
Linn Energy (LINE) - $43.50
Abbott Laboratories (ABT) - $27.54
Exchange Income Corp (EIFZF) - $17.43
Procter & Gamble (PG) - $43.84
Realty Income Preferred F (O-PF) - $6.76
Boardwalk Pipelines (BWP) - $91.06
Senior Housing Properties (SNH) - $21.28
LTC Properties (LTC) - $26.06
Dividend Increases:
1) NSC: $.47 to $.50 per quarter. $4.56 annually
2) ITW: $.36 to $.38 per quarter. $2.32 annually
3) LTC: $.145 to $.155 per month. $20.16 annually
4) TD: $.72 to $.77 per quarter. $3.20 annually
New Deposits:
$1035 this month. $300 to ROTH IRA. $735 to taxable account.
Options/Bonus:
-39 shares KO from the stock split
Thursday, August 30, 2012
Toronto-Dominion Bank Increases Dividend
TD announced the next quarterly dividend will be Canadian $.77 per share which is a 6.94% increase over the previous payment. This is the second boost in 2012 and the second consecutive year of dividend growth since the freeze in 2010. Overall the company has been paying dividends since 1857 which is the third longest streak in Canada (only bested by BMO and BNS). In general I am not a fan of bank stocks, but do feel comfortable holding Canadians. I see major flaws in the American banking system and am more apt to trust the policies of our friends up north. The payout ratio now stands at about 47% leaving room for future dividend growth if the company chooses to do so. I anticipate TD being a solid dividend investment and plan to buy more shares.
Saturday, August 25, 2012
Am I Good at Picking Stocks?
I am not attempting to beat the stock market when I choose stocks. I am simply trying to build my passive income over time so that I can retire comfortably at an early age (late 40's). I've been dividend investing for about 2 years now and have never sat down to compare my results to the market indexes. It won't change my strategy, but I decided it was time to see how my choices have done.
This is a chart showing each purchase individually compared to the DOW. I chose the DOW since it's a good representation of the type of stocks I like to own. This is a price comparison only, it doesn't take dividends into account. Check the last column to see how each purchase has performed. 0% would mean it matched the DOW. Right now the DOW is 13,158
On average my picks have performed 4 percentage points better than the DOW. Again this is just price, it gets better when you include yield. I'm still not sure if it means I'm a good stock picker or it's just that investors have flocked to the dividend stocks I was buying in 2010-2011. I don't know the answer.
Looking at the chart you'll notice my BWP and MCD picks were terrible. I wanted MCD to be in my portfolio so badly that I overpaid for the priviledge. BWP is a case of chasing yield. Actually due to the massive yield, BWP is total return positive but I could have done better elsewhere.
Take away point: Valuation is important, don't overpay for stocks.
You'll make a lot more money buying when the market is low, but there is always something with a favorable valuation. Right now I'm looking at INTC.
This is a chart showing each purchase individually compared to the DOW. I chose the DOW since it's a good representation of the type of stocks I like to own. This is a price comparison only, it doesn't take dividends into account. Check the last column to see how each purchase has performed. 0% would mean it matched the DOW. Right now the DOW is 13,158
On average my picks have performed 4 percentage points better than the DOW. Again this is just price, it gets better when you include yield. I'm still not sure if it means I'm a good stock picker or it's just that investors have flocked to the dividend stocks I was buying in 2010-2011. I don't know the answer.
Looking at the chart you'll notice my BWP and MCD picks were terrible. I wanted MCD to be in my portfolio so badly that I overpaid for the priviledge. BWP is a case of chasing yield. Actually due to the massive yield, BWP is total return positive but I could have done better elsewhere.
Take away point: Valuation is important, don't overpay for stocks.
You'll make a lot more money buying when the market is low, but there is always something with a favorable valuation. Right now I'm looking at INTC.
Friday, August 17, 2012
Watch List Update
Added:
-ADM: A lot of savvy investors have been looking closely at ADM the past few months. The share price has eroded to the point where it is trading below book value. I'm really not very familiar with Archer Daniels Midland, but know they have a long streak of dividend increases. I'll start monitoring ADM and learn more as I go.
-BDX: I'm looking to add one more stock from the healthcare sector. BDX is a dividend champion in the business of manufacturing medical instruments. Quite a few dividend growth investors like BDX, I would consider a purchase at a higher yield. I require a minimum of 2.75% yield at purchase. All it would take is a dividend increase and a lower price. This stock will likely sit on my watch list for a long time. I want to start monitoring it and become more familiar with the company.
-HRS: I am employed as a satellite technician in the US Army. We use a lot of Harris products, more than any other DOD supplier/contractor I can think of. In the past I wasn't a fan of HRS because the Harris equipment we currently use is old technology. Newer and better technology is available right now. The bottom line is the Army will continue to use the old Harris equipment because it's extremely reliable and already paid for. Reliability is key in the communications field. You don't want to lose comms and piss off some General. Anyways about a month ago a couple Harris technicians visited our site to fix a few things and train us. Obviously I used this as an opportunity to learn more about a possible portfolio candidate. What I discovered is that HRS is currently working on replacing/upgrading most of the systems at fixed satellite terminals. This is going to be a huge project down the road and likely good for dividend growth.
-NNN: This is a REIT with a nice yield and a history of dividend increases. The ticker "NNN" refers to the triple net lease structure. Basically this means the tenants are required to maintain the property, pay the insurance, and pay the taxes. National Retail Properties (and most other REITs) just sit back and collect rent/lease fees. I'm starting to look at REITs from other industries besides healthcare.
-PSX: I sold my tiny PSX position a week or two ago. I still like Phillips 66 and will continue to monitor it.
Deleted:
-SNH: I became a shareholder.
-WR: Seriously doubt I'd ever buy this one.
-ADM: A lot of savvy investors have been looking closely at ADM the past few months. The share price has eroded to the point where it is trading below book value. I'm really not very familiar with Archer Daniels Midland, but know they have a long streak of dividend increases. I'll start monitoring ADM and learn more as I go.
-BDX: I'm looking to add one more stock from the healthcare sector. BDX is a dividend champion in the business of manufacturing medical instruments. Quite a few dividend growth investors like BDX, I would consider a purchase at a higher yield. I require a minimum of 2.75% yield at purchase. All it would take is a dividend increase and a lower price. This stock will likely sit on my watch list for a long time. I want to start monitoring it and become more familiar with the company.
-HRS: I am employed as a satellite technician in the US Army. We use a lot of Harris products, more than any other DOD supplier/contractor I can think of. In the past I wasn't a fan of HRS because the Harris equipment we currently use is old technology. Newer and better technology is available right now. The bottom line is the Army will continue to use the old Harris equipment because it's extremely reliable and already paid for. Reliability is key in the communications field. You don't want to lose comms and piss off some General. Anyways about a month ago a couple Harris technicians visited our site to fix a few things and train us. Obviously I used this as an opportunity to learn more about a possible portfolio candidate. What I discovered is that HRS is currently working on replacing/upgrading most of the systems at fixed satellite terminals. This is going to be a huge project down the road and likely good for dividend growth.
-NNN: This is a REIT with a nice yield and a history of dividend increases. The ticker "NNN" refers to the triple net lease structure. Basically this means the tenants are required to maintain the property, pay the insurance, and pay the taxes. National Retail Properties (and most other REITs) just sit back and collect rent/lease fees. I'm starting to look at REITs from other industries besides healthcare.
-PSX: I sold my tiny PSX position a week or two ago. I still like Phillips 66 and will continue to monitor it.
Deleted:
-SNH: I became a shareholder.
-WR: Seriously doubt I'd ever buy this one.
Friday, August 10, 2012
Budget
Here is my new budget I'll be following until I leave Korea in June 2013. All the items are allowances, it's the most I expect to spend in any given month. In reality I usually have money left over which I can use to purchase more stock or to have fun. Probably 99.99% of the military does not receive a TSP match (federal employee 401k). They put me in the TSP matching pilot program when I enlisted in 2008 as an incentive to pick my particular job. It's very rare and is set to expire in less than a year as far as I know. When the matching is gone, I'll stop contributing to the TSP. It's a horrible program with only 5 investment choices. 100% of mine is in the G fund.
Income:
$2,500 - Take Home Pay
$125 - TSP Contribution
$100 - TSP Match
$2,725 - Total Income
Fixed Expenses:
$0 - Rent
$0 - Utilities
$45 - Car Insurance
$60 - Cell Phone/Internet
$225 - Car Savings Acct
$250 - Travel Savings Acct
$580 - Total Fixed Expenses
Variable Expenses:
$200 - Groceries
$0 - Gas
$40 - Haircuts
$500 - Fun Money
$145 - Misc. (clothes, uniforms, etc.)
$885 - Total Variable Expenses
Investments:
$1,035 - Dividend Stock
$125 - TSP Contribution
$100 - TSP Match
$1,260 - Total Investments
Savings Rate - 46.2%
Since I lasted posted a budget in February I find myself in a different set of circumstances. Being stationed in South Korea means I have reduced expenses and increased pay. I also received a small raise a couple months ago of like $100/month. My car is in storage yet I still set aside money every month to buy a newer vehicle in the future. I still have insurance on my car, even though I don't drive it. I found out I have to keep some liability unless I turn in my registration and plates (which I can't do now that I'm here). I also increased my fun money by 2/3 and save money every month for a trip to Thailand. I'm going to live like a king while there :)
I ended up getting a Samsung Galaxy M-style smart phone, which is nice to have. It has unlimited data so I tether it to my computer. $58/month gets me unlimited data, I doubt it would be so cheap in the states. It's 3G though so my internet is not blazing fast like before. Overall I do not need a smart phone, but it's nice to have portable entertainment.
I'm very pleased with my savings rate, it doesn't feel like I'm sacrificing anything. I could easily achieve a 80%+ savings rate if I wanted to. I know I'll be working for another 15 years, I want to live in the present a bit. No reason for me to get excessive with retirement saving, think I found a good balance.
Income:
$2,500 - Take Home Pay
$125 - TSP Contribution
$100 - TSP Match
$2,725 - Total Income
Fixed Expenses:
$0 - Rent
$0 - Utilities
$45 - Car Insurance
$60 - Cell Phone/Internet
$225 - Car Savings Acct
$250 - Travel Savings Acct
$580 - Total Fixed Expenses
Variable Expenses:
$200 - Groceries
$0 - Gas
$40 - Haircuts
$500 - Fun Money
$145 - Misc. (clothes, uniforms, etc.)
$885 - Total Variable Expenses
Investments:
$1,035 - Dividend Stock
$125 - TSP Contribution
$100 - TSP Match
$1,260 - Total Investments
Savings Rate - 46.2%
Since I lasted posted a budget in February I find myself in a different set of circumstances. Being stationed in South Korea means I have reduced expenses and increased pay. I also received a small raise a couple months ago of like $100/month. My car is in storage yet I still set aside money every month to buy a newer vehicle in the future. I still have insurance on my car, even though I don't drive it. I found out I have to keep some liability unless I turn in my registration and plates (which I can't do now that I'm here). I also increased my fun money by 2/3 and save money every month for a trip to Thailand. I'm going to live like a king while there :)
I ended up getting a Samsung Galaxy M-style smart phone, which is nice to have. It has unlimited data so I tether it to my computer. $58/month gets me unlimited data, I doubt it would be so cheap in the states. It's 3G though so my internet is not blazing fast like before. Overall I do not need a smart phone, but it's nice to have portable entertainment.
I'm very pleased with my savings rate, it doesn't feel like I'm sacrificing anything. I could easily achieve a 80%+ savings rate if I wanted to. I know I'll be working for another 15 years, I want to live in the present a bit. No reason for me to get excessive with retirement saving, think I found a good balance.
Wednesday, August 8, 2012
LTC Properties Increases Dividend
LTC Properties (LTC) declared a 6.90% increase to its monthly dividend to $.155 per share. This is the second increase in 2012 which has surpassed all my expectations. It's difficult to imagine a REIT could maintain a double digit DGR, but who knows I never thought LTC would reach these heights in the first place. With a high yield on cost stock like LTC, I'm okay with low dividend growth or freezes going forward.
I sold part of my LTC position last month, which kind of stings a little bit with the latest increase. If I wanted to I could buy the shares back at a cheaper price right now. I still don't want it to be my largest holding, but I do like LTC's management and future prospects.
I sold part of my LTC position last month, which kind of stings a little bit with the latest increase. If I wanted to I could buy the shares back at a cheaper price right now. I still don't want it to be my largest holding, but I do like LTC's management and future prospects.
Tuesday, August 7, 2012
Sold PSX
My position in Phillips 66 was liquidated at $40.10. These were shares received from the ConocoPhillips spinoff a few months ago. I'd note that I will still receive the first ever PSX dividend since it went ex last month. Overall I managed about a 26% total return gain based on the adjusted cost basis from the spinoff. This includes the upcoming dividend payment (excludes past COP payments). This sale will reduce my annual income by $14.40 which isn't a big deal since Phillips 66 was by far my smallest holding and income producer.
Like I was saying in the previous post, PSX was cut loose because it's yield fell below 2% and management has stated they are targeting a low dividend growth rate of only 5%. When one of my stocks falls to a low current yield, I will always consider a sale. If I have reason to believe the future DGR will be high it could be a reason to continue holding. It will vary stock to stock and is subject to market conditions. In general I do not like yields less than 2% since it slows down the compounding process.
I do not have a replacement company in mind at the moment, but the proceeds will eventually be invested at a higher yield. I still think PSX has a bright future; it will be relegated to my watch list for now.
Like I was saying in the previous post, PSX was cut loose because it's yield fell below 2% and management has stated they are targeting a low dividend growth rate of only 5%. When one of my stocks falls to a low current yield, I will always consider a sale. If I have reason to believe the future DGR will be high it could be a reason to continue holding. It will vary stock to stock and is subject to market conditions. In general I do not like yields less than 2% since it slows down the compounding process.
I do not have a replacement company in mind at the moment, but the proceeds will eventually be invested at a higher yield. I still think PSX has a bright future; it will be relegated to my watch list for now.
Sunday, August 5, 2012
On The Chopping Block: PSX
I'll start by saying I believe Phillips 66 has a bright future. I listened to the recent conference call which helped me better understand what the company is doing. PSX is committed to growing the business and returning cash to shareholders. Management is targeting a 5% dividend growth rate and intends to make annual increases for many years to come. I'm going to take management's word on the dividend policy.
With the recent price run up, PSX is now yielding 2.02%. I will sell pretty much anything if the yield goes below 2%, especially something with a low expected dividend growth rate. It's nothing against PSX, but I should be able to make better use of the cash in something else with a higher yield.
Sell limit order placed @ $40.10
With the recent price run up, PSX is now yielding 2.02%. I will sell pretty much anything if the yield goes below 2%, especially something with a low expected dividend growth rate. It's nothing against PSX, but I should be able to make better use of the cash in something else with a higher yield.
Sell limit order placed @ $40.10
Saturday, August 4, 2012
Illinois Tool Works Increases Dividend
ITW's board of directors approved a 5.56% increase in the quarterly dividend to $.38. The latest increase extends ITW's streak to 49 straight years placing it in the prestigious dividend champions category of dividend growth stocks. Not many corporations can boast longer streaks. I'm a little bit disappointed that the increase was so small this year especially considering its yield is an anemic ~2.5%(pre-announcement). The good news is that 5.56% beats inflation.
At this point in time I'm not looking to add to my ITW position. I'll hold out for a more enticing entry yield.
At this point in time I'm not looking to add to my ITW position. I'll hold out for a more enticing entry yield.
Friday, August 3, 2012
New Purchase - OFC-PL
I scooped up 49 shares Corporate Office Properties preferred series L yesterday at $25.43/share + commissions. This is a bit of a speculative move that comes with a nice yield. These shares will pay me $90.36 per year on a 7.21% YOC. It was time for me to buy fixed income and after careful consideration I decided to buy another preferred stock. Corporate Office Properties is a REIT which specializes in (you guessed it) office properties. These are multi million dollar buildings leased to various companies with an emphasis on Department of Defense suppliers and contractors. Make no mistake, Corporate Office Properties is not a super stable corporation like Johnson & Johnson. They make heavy use of debt to expand and finance new endeavors.
Seeing that this investment is preferred stock, I'm not as concerned about whether the common stock sees dividend cuts, freezes, or increases. I only need enough cash to be generated to cover my shares' dividend which will be paid before the common. I like that series L is a new issue which allowed me to get in close to par. I paid less than 2% over. Series L is cumulative and not callable for 5 years. Interest rates are supposed to remain low for a few more years which should be good for preferred stocks. Rapidly rising interest rates might erode share price, but I don't see that happening for a while.
Some drawbacks to OFC-PL include liquidity, absolutely zero dividend growth (or any future chance), interest rate risk, and a less than stellar balance sheet. If you look at OFC you will notice it has negative EPS, this is because the company took impairment charges Q4 2011. Cash flows remained intact.
I believe the rewards outweigh the risks with this particular purchase. The income is outstanding.
Seeing that this investment is preferred stock, I'm not as concerned about whether the common stock sees dividend cuts, freezes, or increases. I only need enough cash to be generated to cover my shares' dividend which will be paid before the common. I like that series L is a new issue which allowed me to get in close to par. I paid less than 2% over. Series L is cumulative and not callable for 5 years. Interest rates are supposed to remain low for a few more years which should be good for preferred stocks. Rapidly rising interest rates might erode share price, but I don't see that happening for a while.
Some drawbacks to OFC-PL include liquidity, absolutely zero dividend growth (or any future chance), interest rate risk, and a less than stellar balance sheet. If you look at OFC you will notice it has negative EPS, this is because the company took impairment charges Q4 2011. Cash flows remained intact.
I believe the rewards outweigh the risks with this particular purchase. The income is outstanding.
Thursday, August 2, 2012
Norfolk Southern Increases Dividend
NSC reported it will hike its quarterly dividend 6.38% to $.50 per share. This a small increase for a stock yielding under 3%, but it is the second increase this year. The company also reported plans for additional share buybacks. Personally, I'm neutral on share buybacks. I'd rather just have the cash in the form of a dividend to use as I see fit. On the other hand reducing the sharecount should increase EPS to make room for future dividend increases. For those who don't know NSC operates railroads in the United States and has raised dividends for the past 11 years. It's a fairly popular stock among dividend growth investors.
Tuesday, July 31, 2012
July Recap
July was a pretty slow month for me investment wise. The stock market posted gains and was pretty even keeled, nothing crazy. I wish I bought more in June. Oh well, it's too late now! To keep my allocations in order, my next purchase will be fixed income. 10% of my retirement assets are earmarked for fixed income, most of it is held in my TSP (federal employee 401k). I'm currently investigating individual preferred stocks, individual exchange traded debts, and emerging market debt etfs. I'm looking at new issues since they seem to be closer to par value.
DOW: 13,073.01 /// S&P 500: 1,385.30 /// 10-Yr Bond: 1.5040%
New Purchases:
1) 56 shares Senior Housing Properties (SNH) providing $85.12 annual income. I bought SNH at $22.32/share + commissions.
2) 44 shares Owens & Minor (OMI) providing $38.72 annual income. OMI was purchased at $27.96/share + commissions.
Sales:
1) 33 shares LTC Properties (LTC) reducing my annual income by $57.42. I reduced my stake in LTC at $37.37 per share.
Dividends Received: $162.35
Coke (KO) - $19.89
H.J. Heinz (HNZ) - $12.36
Illinois Tool Works (ITW) - $10.44
Phillip Morris (PM) - $60.06
Exchange Income Corp (EIFZF) - $16.99
Realty Income Preferred F (O-PF) - $6.76
LTC Properties (LTC) - $24.38
Toronto-Dominion (TD) - $11.47
Dividend Increases:
None
New Deposits:
$1065 in July. $300 added to ROTH IRA, $765 to taxable account. I'm still working on a budget, waiting on a few items before I know what it will be.
Options/Bonus:
None
DOW: 13,073.01 /// S&P 500: 1,385.30 /// 10-Yr Bond: 1.5040%
New Purchases:
1) 56 shares Senior Housing Properties (SNH) providing $85.12 annual income. I bought SNH at $22.32/share + commissions.
2) 44 shares Owens & Minor (OMI) providing $38.72 annual income. OMI was purchased at $27.96/share + commissions.
Sales:
1) 33 shares LTC Properties (LTC) reducing my annual income by $57.42. I reduced my stake in LTC at $37.37 per share.
Dividends Received: $162.35
Coke (KO) - $19.89
H.J. Heinz (HNZ) - $12.36
Illinois Tool Works (ITW) - $10.44
Phillip Morris (PM) - $60.06
Exchange Income Corp (EIFZF) - $16.99
Realty Income Preferred F (O-PF) - $6.76
LTC Properties (LTC) - $24.38
Toronto-Dominion (TD) - $11.47
Dividend Increases:
None
New Deposits:
$1065 in July. $300 added to ROTH IRA, $765 to taxable account. I'm still working on a budget, waiting on a few items before I know what it will be.
Options/Bonus:
None
Thursday, July 26, 2012
New Purchase - OMI
I purchased 44 shares of Owens & Minor at $27.96. Including commissions this amounts to a yield of 3.13% and will pay me $38.72 per year. OMI is one of my favorite stocks from the healthcare sector. It runs a profitable business distributing medical supplies along with other hospital/medical related services. OMI recently reported a softer outlook for the rest of 2012 which seems to have triggered a sell off. Fine with me, I'm happy to add to my position although I paid a tiny bit more this time. They also announced plans of a sizable acquisition which will be their first venture in the European healthcare market.
I've had a number of limit orders the past week which weren't filled including MCD, APD, and INTC. Since I'm now 13 hours ahead of Eastern time, it's difficult to jump in quickly if something favorable happens. I set limit orders before going to bed and check in the morning to see if anything triggered. I'm still hoping the stock market drops a bit lower for better entry prices.
I've had a number of limit orders the past week which weren't filled including MCD, APD, and INTC. Since I'm now 13 hours ahead of Eastern time, it's difficult to jump in quickly if something favorable happens. I set limit orders before going to bed and check in the morning to see if anything triggered. I'm still hoping the stock market drops a bit lower for better entry prices.
Thursday, July 19, 2012
Dividend Growth Companies in Korea
If you follow dividend growth stocks you will notice a trend. US companies are expanding internationally to fuel growth. Since I am now stationed in South Korea I see this strategy in action firsthand. It's amazing to find to the same products as back home and cooler yet to see products customized to fit local tastes. The past few days I've been taking pictures of American products and brands sold in Korea. It's been a lot of fun.
Coke
Coke products seem to be very popular in this country. I have no idea what the market share is, but it's not uncommon to see coke advertisements and coke products. While in a small grocery store I noticed a strange juice made by Minute Maid. Some type of Aloe juice, never seen this one before (one side is in English, the other Hangul). I bought a bottle which was a good move, it's awesome. It has a sweet, pleasant taste and has bits of fruit mixed in with the juice. Diamond water is also a product I've never seen before, it has a coca cola label on it. Diamond is a popular brand of bottle water in the military because it tastes good, comes in a big bottle, and is cheap.
Pepsi
Pepsi appears to be less popular than coke, but is still all over the place. Pepsi, Mountain Dew, and Gatorade are sold in the vending machine shown above. A can costs about 65 cents American. Frito Lay can be found in grocery and convenience stores, there are a lot of flavors. I have no idea what the flavors are since I can't read Hangul, so I picked one that looked like nacho cheese. It has less flavor than what I'm used to.
Phillip Morris
I see a HUGE opportunity for Phillip Morris over here. A lot of Koreans smoke, about 24% according to some website. Sounds about right. The thing is not all stores carry Marlboros. They have not fully penetrated this market. It's almost impossible to find Camel or Newport, it's clear PM is making headway. Korean cigarettes have charcoal in the filters I'm told (not Marlboros), maybe they need to look at that. Or maybe PM already owns local brands that do? I noticed Marlboro "Ice Ball" are popular with soldiers stationed here. The ice ball is similar to the Camel Crush in that it has a small ball inside the filter that you can break to release menthol. It's only sold in Asia as far as I know. A pack of smokes costs around $2-$2.50.
Procter & Gamble
It's not a surprise to find P&G products at grocery stores. Familiar brands such as Fusion, Head & Shoulders, and Downy. I have yet to find Crest (or Colgate) toothpaste/toothbrushes. P&G has some work to do in South Korea. It's clear there is room left to grow.
Johnson & Johnson
I haven't seen much from J&J except the baby products shown in the picture. I imagine Tylenol and Acuvue are also sold in Korea. I've only been here a month, I'll discover more as I go.
McDonald's
McDonald's are rare. I've only seen one so far which was located in Itaewon. Itaewon is an Americanized part of Seoul where many soldiers and other Americans go to shop and drink. It seems to me that fast food wouldn't be popular with the typical Korean. I've been here a month and have yet to see an obese Korean. It's astonishing! Every other American is a fat-ass, it's so refreshing to see healthy people.
General Mills
I saw a Haagen Daaz ice cream truck on a bus ride home, but didn't have my phone handy at the time. It's about all I've seen from GIS so far. The grocery store I was shopping at carried Post cereals, no Cheerios or any other General Mills brand. A store carrying Post leads me to believe GIS brands are sold somewhere. I don't imagine Koreans eat cereals very often, different culture.
Military bases sell regular American products we are used to. I do not have to shop off base, but that won't stop me from seeing what my retirement plan is up to.
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