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

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!

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. 

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.

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!

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