April Recap

The months seem to be flying by.  Soon enough I'll be headed back to the states.  I have been put on orders to an Air Force base.  Looking forward to that, finally have what looks to be an easy assignment.

Anyways deposits and dividend growth were both strong this month.  I am thinking about trimming LTC, we'll see.

DOW: 14,840 /// S&P 500: 1,598 /// 10-YR Bond: 1.67%

New Purchases:
1) 15 shares APD at $84.73: $42.60 annual income
2) 2 shares EMB at $117.32: $10
3) 33 shares BNS at $56.23: $79.20

Sales:
1) 36 shares UNS at $50.624: ($62.64 annual income)

Dividends Received: $243.79
Coca Cola (KO): $31.64
Illinois Tool Works (ITW): $11.02
Kraft Foods (KRFT): $13.50
Philip Morris (PM): $66.30
Corporate Office Properties series L (OFC-PL): $22.58
Exchange Income Corp. (EIFZF): $17.52
iShares Emer Mkt Bond (EMB): $1.65
Realty Income series F (O-PF): $6.76
Bank of Nova Scotia (BNS): $17.06
LTC Properties (LTC): $26.06
Toronto-Dominion Bank (TD): $29.70

Dividend Increases:
1) SO: $.49 to $.5075 per quarter.  $2.04 annual income
2) PG: $.562 to $.6015 per quarter.  $12.32
3) KMI: $.37 to $.38 per quarter.  $4.68
4) CVX: $.90 to $1.00 per quarter.  $11.60
5) JNJ: $.61 to $.66 per quarter.  $12.40
The LINE increase won't hit my account till October.  That's pretty far into the future so I'll add it to my monthly report at that time.  The SBSI split/dividend increase will be listed next month.

New Deposits:
$1,000 to ROTH IRA, $2,000 to taxable account

Lending Club:
Added $100 this month

Options/Bonus:
none

Lineup Change

 



I decided it was time to part ways with the rest of my UNS position.  At $50 UNS no longer looks attractive, plus there is very little incentive to stick around to see if the dividend increases will accelerate.  The current yield dropped to 3.4%.  No thanks, I will pass.  Even if Mr. Market thinks this stock is worth $50, I do not.  The fair value I have in mind is closer to 40.  An overvalued price coupled with atrocious dividend growth made this decision easier than normal.  I might be wrong about the valuation...  Right or wrong, low dividend growth on a stock yielding 3.4% does not fit my strategy.

 

I will still follow this company, although it will get less attention now that is has been demoted to watch list status.  If the dividend growth accelerates and the price drops I am not opposed to rebuilding the position.  It will be interesting to see what the future holds for this company. 

 

I held UNS in both my taxable and ROTH IRA accounts.  That is why I sold in two separate transactions.

 

 

 

With the capital raised with the UNS sale, I purchased 33 shares of BNS.  When I make portfolio changes like this, the goal is to bolster my dividend income and/or expected dividend growth with a stock that has a better valuation.  I'm happy to report that BNS accomplishes all of this.  #1 Immediately my passive income rises.  #2 I expect higher dividend growth #3 I currently see BNS as undervalued. 

 

It's impossible to know how changes like this will turn out or if it was the right move.  I do like my odds though.

 

Unfortunately my 2013 Q2 income will take a small hit since BNS already paid this quarter.  That's really just a small blip of less than 20 bucks.  It certainly won't be on my mind 10 or 20 years from now!

Another Dividend (well distribution) Boost

I don't want to write a post about every single dividend/distribution increase, however I find this one to be pretty intriguing.

Linn Energy (LINE) announced a new distribution policy.  The regular distribution will be maintained this quarter.  Nothing special this was already announced.  Here is where it gets interesting: starting in July, the distribution will be monthly and increased by 6.2%.  A 6.2% boost on something yielding 7% is truly massive!  It's like getting a 14.5% increase on a stock yielding 3% or a 21.7% increase on a stock yielding 2%.

Pretty impressive!

The catch is that this is not sustainable long term.  The distribution itself is covered by cash flow, but I don't think we'll see 6% increases annually for the next 20 years...  That's okay.  I don't need to see large boosts from my high yielders every year.  The monthly distribution showcases Linn's commitment to unit holders and shareholders.  It's pretty rare to see a policy change like this.

It's the investors they have in mind here.  Thanks!

Like Clockwork - Recent Dividend Increases

Johnson & Johnson - 8.2% increase.  51 years of increases

Chevron - 11.1%.  26 years

Kinder Morgan Inc. - 2.7%.  6 straight quarters, IPO in 2011

Procter & Gamble - 7.0%.  57 years

Southern - 3.6%.  12 years


No complaints, all increases meet expectations.

First Stock to Double

REITs have been on a tear the past couple years.  Holy cow!  With the recovering housing market coupled with investors' unquenchable thirst for yield, these types of companies have reached astronomical heights.  REITs are income machines and income machines are exactly what many investors want right now.

Enter LTC Properties.

My original thesis for selecting LTC as a holding in my portfolio was simple: baby boomers are aging.  An aging population should translate into higher demand for nursing homes and assisted living accommodations.  I was specifically looking to add a health care REIT.  LTC Properties (I believe it stands for Long Term Care Properties) does exactly that. 

This is a picture of one of the properties LTC owns in Fort Collins, CO.  Before I joined the US Army, I lived in Fort Collins and used to work out at the gym behind this facility.  Seeing properties in real life helped me understand that this isn't just a ticker symbol, this is a company with real assets!  And I have seen some of them!  I drove past this one more times than I can count. 

There are a number of choices in the health care REIT industry, I choose LTC for reasons stated above plus I liked their conservative debt load and monthly dividend.  I regularly listen to the conference calls and can appreciate the conservative yet focused management.  It probably wouldn't have mattered which REIT I picked in the health care space, they've all done well. 

OK I admit I don't look at my portfolio positions very often and didn't even realize this thing had doubled until today.  I purchased 109 shares 05AUG2011 which is sitting on a 97% unrealized cap gain + another 13% from dividends. 

Not trying to brag here, but this is the first time one of my purchases doubled.  This will be the last pat-me-on-the-back post for a while...

Holy Crap! I managed to save $100,000!

If someone would have told me this five years ago I wouldn't have believed it...

Lifetime deposits to my brokerage accounts recently exceeded $100,000 thanks to a nice 2012 tax refund.  In total I have saved $100,760.  Unbelievable!  To commemorate, I added a Deposits Page to track my progress.

My brokerage accounts are currently:

It is evident that investing has been very rewarding.  I'm up $34,000.  That's higher than my annual salary... Pretty crazy!  My portfolio page is scewed.  Reinvested dividends and capital gains (e.g. the HNZ and UNS sales) increase my cost basis on my spreadsheet, yet there was a handsome profit.  A better way to see how I'm doing is to compare how much I've actually deposited to what my account is actually worth.

To me, investing success is defined as a rising income stream.  I do not care about beating an arbitrary benchmark such as the S&P 500.  I've been blogging since December 2011 and can only remember talking about beating the market in one post.  My brokerage account has a feature that allows me to see my rate of return.  Here it is (just for shits and giggles):

Fidelity started the Rate of Return feature in October 2011, it would be interesting to see how I did before then.  These percentages are annualized. 

 

Without even trying, dividend growth & income investing can do pretty well.  I'm nothing special, just an average guy who invests as a hobby.  Lets not forget SPY would actually underperform the S&P 500 due to fees....

New Purchase - APD

I scooped up 15 additional shares of Air Products which will pay me $42.60 per year based off the current dividend.  APD has recently been a popular purchase among internet bloggers including Dividend Mantra and Passive Income Pursuit.  After recalculating APD's fair value, I decided to join the party.  My previous buy target of $83 has been increased to $86 which I believe is a nice discount to what this dividend champion is worth.  Using DDM, DCF, average p/e, and average yield; I calculated a fair value of $96.  I chose a $86 target buy price because I want a decent margin of safety since APD is quite volatile.  APD is not a bulletproof consumer staples stock that sells toilet paper and razors.  No, it relies on a favorable world economy to fuel growth.  I believe that is exactly what will happen long term.  We may fall into a recession again, I don't know, but I do think economies will advance over time. 

Capitalism is a powerful force.  Very powerful indeed.  Case in point: S. Korea vs. N. Korea.  They used to be one in the same, one embraced capitalism the other didn't.  The difference is literally night and day:

Stone age vs. modern technology: the Korean peninsula at night.  Progress.  I believe it will continue over time and companies like APD are necessary for it to happen.  This is where my conviction in companies like Air Products comes from.  Have fun with your communism N. Korea.  Fools!

I have confidence that the world economy will continue to grow long term, and confidence that APD will be around to supply me with rising dividends.  31 straight years of dividend increases impresses me.
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New Purchase - EMB

I also bought 2 additional shares of EMB to strengthen my bond holdings. 

Forward Income Projections

Conservative Assumptions:

● Dividends, existing deposits, and new deposits invested at a 3.5% yield

● Dividend growth 1.5% above inflation.  I want to project in today's dollars.  Raw dollars tell me very little.  I will buy fixed income assets too, I do not want to rely 100% on stocks.  Fixed income has no dividend growth.

●Deposits of $500 per month.  I can easily save $1,000 a month while in Korea, but I will be leaving soon.  I intend to have children and may be getting married in the next 1-2 years.  Deposits will be tough, but I should be able make more as my career progresses.



Assuming everything goes to plan, I'll be sitting on roughly $1,300/month (2013 dollars) in dividends!  This will be a great addition to a military pension and would make me financially independent!

With a little luck and a lot of planning, I may be able to retire before age 50.  A lot can go wrong here, but I believe this is very achievable.