January was a hot month for stocks, but unfortunately that makes it more difficult to find companies trading at discounts. I still plan to make a purchase every month, but I don't mind keeping a little cash on hand for dips or market corrections. I'm currently looking at defense stocks such as RTN and GD. RTN is creeping up on my buy price.
2013 is off to a good start. Lorillard did a 3 for 1 stock split. ABT spun off ABBV. I'm pleased with the spinoff, as I'd rather just own the diversified health care portion. With the spinoff I'm free to sell my Abbvie shares when the time is right. I like what I see with the new ABT, it's kind of like a mini JNJ. Unfortunately the yield is very low right now, but I may pick up some shares in the future.
DOW: 13,861 /// S&P 500: 1,498 /// 10-YR BOND 1.99%
New Purchases:
1) 11 shares LO at $113.74 ($37.91 after split) - $68.20 annual income
Sales:
none
Dividends Received: $195.17
Pepsi (PEP) - $43.00
Philip Morris (PM) - $66.30
Corporate Office Properties series L (OFC-PL) - $22.58
Realty Income series F (O-PF) - $6.76
Exchange Income Corporation (EIFZF) - $18.13
LTC Properties (LTC) - $26.06
Toronto-Dominion Bank (TD) - $12.34
Dividend Increases:
1) KMI: $.36 to $.37 per quarter. $2.92 annual income
New Deposits: $1,035
$1,000 to ROTH, $35 to taxable account
Lending Club:
Added $50
Option/Bonus:
1) 54 shares Abbvie (ABBV) from spinoff
2) 56 shares Lorillard (LO) from a 3:1 stock split
Thursday, January 31, 2013
Monday, January 28, 2013
Lending Club Update
Lending Club is still performing above my expectations. It's mind boggling to receive an expected double digit interest rate while 10 year treasuries are paying less than 2%. The best part is the simplicity, I can't imagine anything easier to use. I can log in, use a saved search, then make an investment in less than a minute. So easy a third grader could do it.
At this point, I'm considering stepping up contributions. I've been adding a modest $50/month which has worked well. With the stock market approaching all time highs coupled with unbelievably low interest rates, lending club is looking more and more attractive. I think this is where new money will go for my fixed income allocation.
Sorry preferred stocks, sorry bonds; you do not offer this kind of return.
Friday, January 18, 2013
Useful Links
I've been talking a lot about valuing stocks this month, let me share the resources I use. If you have other recommendations, please let me know!
Dividend Discount Calculator. This is a free tool that lets you input constant, 2 stage, 3 stage, or 4 stage dividend growth. Quite useful to a dividend investor such as myself!
http://www.bargainbininvesting.com/tools/dividend-valuation-tool.html
Discounted Cash Flow Calculator. Another free tool to value stocks. I like this particular one because it offers two stages.
http://moneychimp.com/articles/valuation/dcf.htm
Morningstar.com Fair Value Estimate. I'm not exactly sure how this is calculated, but I do trust morningstar. I like this as a comparison. You can also find historical data and tons of other free information at this site. 5 year average P/E and yield are just a few clicks away.
http://www.morningstar.com/
Enjoy my mad paint skills:
F.A.S.T. Graphs. This is the best valuation tool I've ever used. Bar none. It does cost $10/month which is unfortunate because most of the bloggers on here are tightwads, myself included. I recommend doing the 14 day trial and cancelling before payment. Instead of maintaining a monthly subscription, I might just do quarterly reviews. If I do go this route, it will be after earnings season to make sure the data is current.
http://www.fastgraphs.com/
Do you have better resources? If so, please share!
Dividend Discount Calculator. This is a free tool that lets you input constant, 2 stage, 3 stage, or 4 stage dividend growth. Quite useful to a dividend investor such as myself!
http://www.bargainbininvesting.com/tools/dividend-valuation-tool.html
Discounted Cash Flow Calculator. Another free tool to value stocks. I like this particular one because it offers two stages.
http://moneychimp.com/articles/valuation/dcf.htm
Morningstar.com Fair Value Estimate. I'm not exactly sure how this is calculated, but I do trust morningstar. I like this as a comparison. You can also find historical data and tons of other free information at this site. 5 year average P/E and yield are just a few clicks away.
http://www.morningstar.com/
Enjoy my mad paint skills:
F.A.S.T. Graphs. This is the best valuation tool I've ever used. Bar none. It does cost $10/month which is unfortunate because most of the bloggers on here are tightwads, myself included. I recommend doing the 14 day trial and cancelling before payment. Instead of maintaining a monthly subscription, I might just do quarterly reviews. If I do go this route, it will be after earnings season to make sure the data is current.
http://www.fastgraphs.com/
Do you have better resources? If so, please share!
Thursday, January 10, 2013
New Purchase - LO
I purchased 11 shares of Lorillard at $113.74 plus commissions. Lorillard is doing a 3 for 1 stock split within the next week; this purchase came with due bills (I will receive the extra shares). At this purchase price I can expect to receive $68.20 annual dividends on a 5.45% yield before transaction costs. I anticipate a dividend hike before the next payment, we'll have to see what happens there.
Tobacco stocks offer dividend growth investors the rare combination of high current yield coupled with high expected dividend growth. It's the best of both worlds and LO is no exception. Lorillard is best known for its Newport brand of menthol cigarettes, which has been gaining market share the past few years. They have also expanded into electronic cigarettes with Blue e.cigs and sell budget smokes with a couple off labels. Lorillard claims to be the oldest publicly traded company on the NYSE with its founding in 1760. That's over 250 years of continuous operation.
I just started working night shift which will be great for buying stocks. There isn't as much to do at night so I can just sit there and see what opportunities the US markets present... in real time. I'm pretty happy with the purchase price on this one as I have a buy price of $115 and have it fairly valued at $125. Morningstar has it listed at $122 which helps to validate my beliefs.
Smoke 'em if you got 'em!
Tobacco stocks offer dividend growth investors the rare combination of high current yield coupled with high expected dividend growth. It's the best of both worlds and LO is no exception. Lorillard is best known for its Newport brand of menthol cigarettes, which has been gaining market share the past few years. They have also expanded into electronic cigarettes with Blue e.cigs and sell budget smokes with a couple off labels. Lorillard claims to be the oldest publicly traded company on the NYSE with its founding in 1760. That's over 250 years of continuous operation.
I just started working night shift which will be great for buying stocks. There isn't as much to do at night so I can just sit there and see what opportunities the US markets present... in real time. I'm pretty happy with the purchase price on this one as I have a buy price of $115 and have it fairly valued at $125. Morningstar has it listed at $122 which helps to validate my beliefs.
Smoke 'em if you got 'em!
Friday, January 4, 2013
Quarterly Progress Update
Fourth quarter 2012 has come to a close, it's time for me to update my progress page. In Q4, I received a total of $1,100.15 worth of dividends. This includes a few accelerated dividends from December, but excludes all special dividends. I may add a separate line for special dividends to keep track of that too.
Q4 was the first quarter I have ever broken $1,000! All told it was about a $120 worth of progress which was mostly due to new purchases, although at this point some of the past purchases I made are entirely from reinvested dividends. My life time total for dividends has now surpassed $5,650. If this isn't proof that dividend growth and income investing works, then I don't know what is.
In 2012 I tried to focus less on high yield and instead concentrate on companies who are likely to increase distributions at a faster rate. Most of the high yielders I did buy was just shuffling money around to better position my portfolio. You can see that YOC of my portfolio actually went down last year, even with all the dividend increases I enjoyed. I expect the trend to continue in 2013. The sweet spot I'm looking for are companies that pay 3-3.5% and are expected to grow dividends in the 7-10% range. I am weary of companies with super high dividend growth, say 15+%, as maintaining the expected rate is next to impossible long term. Projecting high dividend growth more than a few years in the future is a slippery slope. Compounding can work against us too!
For 2013 I will again be looking to add companies growing distributions at a healthy pace. This is not to say I'll abandon utilities and telecoms as I believe these types of companies have a place in diversified income portfolios.
Fun 2012 Statistics:
Total Dividends Received: $3,805.23
Total Deposits: $21,865 (I will NOT be able to maintain this pace in 2013!)
New Companies Purchased: 11
Existing Companies Added To: 6
Total # of Purchases: 25
Total # Sales: 4
Sales I regret: 1 (PSX, the company either lied or misspoke about the 5% div increase, drat!)
% Companies that increased div: 100%
Best Dividend Increases: NSC 16.9% / SBSI 16.7% / RTN 16.3%
Worst Dividend Increases: BWP 1.0% / T 2.3% / UNS 2.4%
Tax Sheltered Dividends (ROTH + MLP in taxable): 48.8%
Best purchase of the year(?): EMR at $45.55
Worst purchase of the year(?): INTC at $23.86
Q4 was the first quarter I have ever broken $1,000! All told it was about a $120 worth of progress which was mostly due to new purchases, although at this point some of the past purchases I made are entirely from reinvested dividends. My life time total for dividends has now surpassed $5,650. If this isn't proof that dividend growth and income investing works, then I don't know what is.
In 2012 I tried to focus less on high yield and instead concentrate on companies who are likely to increase distributions at a faster rate. Most of the high yielders I did buy was just shuffling money around to better position my portfolio. You can see that YOC of my portfolio actually went down last year, even with all the dividend increases I enjoyed. I expect the trend to continue in 2013. The sweet spot I'm looking for are companies that pay 3-3.5% and are expected to grow dividends in the 7-10% range. I am weary of companies with super high dividend growth, say 15+%, as maintaining the expected rate is next to impossible long term. Projecting high dividend growth more than a few years in the future is a slippery slope. Compounding can work against us too!
For 2013 I will again be looking to add companies growing distributions at a healthy pace. This is not to say I'll abandon utilities and telecoms as I believe these types of companies have a place in diversified income portfolios.
Fun 2012 Statistics:
Total Dividends Received: $3,805.23
Total Deposits: $21,865 (I will NOT be able to maintain this pace in 2013!)
New Companies Purchased: 11
Existing Companies Added To: 6
Total # of Purchases: 25
Total # Sales: 4
Sales I regret: 1 (PSX, the company either lied or misspoke about the 5% div increase, drat!)
% Companies that increased div: 100%
Best Dividend Increases: NSC 16.9% / SBSI 16.7% / RTN 16.3%
Worst Dividend Increases: BWP 1.0% / T 2.3% / UNS 2.4%
Tax Sheltered Dividends (ROTH + MLP in taxable): 48.8%
Best purchase of the year(?): EMR at $45.55
Worst purchase of the year(?): INTC at $23.86
Wednesday, January 2, 2013
Valuing KMI
Those who have been following my blog the past few months know one of my favorite companies is Kinder Morgan, Inc (KMI). As much as I like the management, business model, future prospects, and dividend, trying to value this stock is giving me fits. I'm going to go through methods I normally use to put a number to a stock. Suggestions would be most appreciated.
Base Stats:
Ticker: KMI
Share Price: $36.53
Dividend: $1.44 (3.94%)
P/E (ttm): 212.4
P/E (fwd): 26.9
P/B: 2.59
LT EPS Growth: 25%
Discounted Cash Flow Model: $46.44
I used EPS of 1.36 (based off fwd p/e), growth of 25% for 5 years, growth of 4% after 5 years, discount rate of 11%.
Dividend Discount Model: $78.48
I used $1.44 dividend, 9% DGR, 11% discount rate
Graham Number: $20.43
(22.5*1.36*13.64)^.5
5 Year Average P/E: N/A
Wasn't publicly traded the past 5 years
5 Year Average Dividend Yield: N/A
Wasn't publicly traded the past 5 years
Fast Graphs: N/A
Fast Graph looks like nonsense. Wasn't publicly traded the past 5 years
Morningstar Ratings: ***
How are you guys valuing this stock? My numbers are all over the place. What is your target buy price and why?
Base Stats:
Ticker: KMI
Share Price: $36.53
Dividend: $1.44 (3.94%)
P/E (ttm): 212.4
P/E (fwd): 26.9
P/B: 2.59
LT EPS Growth: 25%
Discounted Cash Flow Model: $46.44
I used EPS of 1.36 (based off fwd p/e), growth of 25% for 5 years, growth of 4% after 5 years, discount rate of 11%.
Dividend Discount Model: $78.48
I used $1.44 dividend, 9% DGR, 11% discount rate
Graham Number: $20.43
(22.5*1.36*13.64)^.5
5 Year Average P/E: N/A
Wasn't publicly traded the past 5 years
5 Year Average Dividend Yield: N/A
Wasn't publicly traded the past 5 years
Fast Graphs: N/A
Fast Graph looks like nonsense. Wasn't publicly traded the past 5 years
Morningstar Ratings: ***
How are you guys valuing this stock? My numbers are all over the place. What is your target buy price and why?
Subscribe to:
Posts (Atom)