Hey guys!
I'm going to be away for a while without time to update this blog.
Even though I sold it 6 months ago, the BWP meltdown has really affected me and how I want to approach building a passive income stream going forward. I'm done speculating on high risk/high yield stocks. No more playing with fire for extra yield... LNCO and EIFZF have to go. This will be quite a daunting task because I'll need to replace about $500 worth of annual income between the two. I'm gonna to have to use the proceeds from the sales plus a lot of additional capital to keep my income stream intact. In fact I'm lucky to have a healthy amount of reserve cash at the moment or else all this would be impossible. I have a plan for replacing the lost income which includes buying MO, OHI, TD/TU, BP/COP, PEP, TGT/MCD and DE/GE depending on market prices. Yep, 7 stocks. I'm still comfortable with big tobacco & REITs; new PEP shares have already been purchased.
See you in March!
CI,
ReplyDeleteVery nice timing wrt BWP. Glad you were not affected with the meltdown.
Factoring in PEP's latest dividend increase along with the drop in share price, it is attractive. Eventhough I'm overweight consumer staples, PEP is on my radar.
I nibbled a little bit on PEP during my absence. I'm now way over weight consumer staples, but that seems to be where the bulk of reliable, predictable, and steady dividend growth stocks happen to be. Those businesses have huge moats and perform to standard year in year out. So be it.
DeleteCI
PEP is on my radar as well, and you've identified some strong replacements for that lost income. Definitely hard to cut back on dividend income, but you've got to stick to your criteria and individual risk level.
ReplyDeleteCatch you in March!
I'm happy with the replacement stocks. I think they will perform to standard for a long time as the world's population grows. Talk to you later.
DeleteCI - I am not familiar with either EIFZF or LNCO. However, I don’t think it is ever a bad idea to buy quality, so it seems you are on the right track in replacing these.
ReplyDeleteI don’t have any stocks than I would consider “speculative”, but I do have some that are higher yielding and are not perennial dividend increasers. For the most part I’m okay with these, but at times I have thought about selling one or two, in particular DirectCash Payments. Although I know it may be necessary to replace it with a lower yielding, but steady dividend increasing stock, it is not an easy decision to pull the trigger and watch the immediate loss of dividend income. Nonetheless, if the time comes where I think that DirectCash no longer meets my investing criteria I will sell it, foregoing short term dividends for long term gain.
Enjoy your break.
Haha I wasn't on vacation, rather I had to work brutal hours in crappy living conditions with little sleep. But it's what my country needs me to do, so I'll do it and even try to keep a smile while I'm at it. I'm glad to be back to be back to my regular routine. Sometimes I wish I would have chosen an easier profession...
DeleteCI,
ReplyDeleteI've been thinking about that as well recently. Do I want to trim some positions and get my money only with the best of the best or go with some of the more speculative plays. I don't think there's too much that I would really say are speculative but there's definitely some that aren't quite as high quality. As of now I have the time to monitor them more closely but as I approach FI I think making a switch to the highest quality companies could be better because I don't want to spend as much time monitoring my portfolio. There's just too many other fun things to do when you have your whole day to do as you please.
That is something to think about. I plan to build a portfolio of 50 and there just aren't enough KO's, PEP's, and JNJ's to fill that many spots. So I must have some second tier dividend growth stocks like BAX, DE, and OMI. Those stocks are high quality, but they aren't the at the level of a PG imo.
DeleteHehe it's nice to have to worry about the best way to reach FI, most of the world doesn't have this luxury!
CI -
ReplyDeleteWe're on the same page. I'm struggling with what's going to replace LINE when I dump it. Like we talked about, we'll probably take some lumps but I think long-term we'll come out ahead even taking an immediate hit to income...
Take care!
Warrior
Linn Energy is now gone. I replaced it with MO and used some extra cash to fill the income gap with a few other companies. I'll be interested to see what you end up doing.
DeleteTalk to you later!
I hear you on the high yield high risk. I got burned with ERF and am done with that sort of thing.
ReplyDeleteI find myself trading down a couple % in yield for more safety these days.
Avoiding the BWP disaster really hit home for me. Sounds like you had a similar experience with ERF.
DeleteAre you not worried with your tobacco stocks about CVS deciding to no longer carry cigarettes and others possibly following suit? Also there are are separate lawsuits now resulting from the Florida court decision that the Engle class could not be tried as a class action. I ask because those are the concerns I have with the tobacco stock that I own and I have been debating this in my head lately.
ReplyDeleteTo be honest I'm not overly worried about tobacco stocks, but I WILL be monitoring. Americans have the right to smoke and it confounds me as to why lawmakers are more concerned about tobacco then alcohol or marijuana. States are legalizing weed left and right, and alcohol will always be legal. I cannot understand the point of banning tobacco or menthol, makes no sense.
DeleteThat said I do want a balanced portfolio and I'll be looking at other industries for future purchases. Since you wrote this comment RAI apparently put in a bid to acquire Lorillard. It could shake things up, we'll see what happens.
Have a nice weekend!
Chasing higher yields is a mistake many investors often make and at times it can catch up and bite you in the butt! I think the best approach is purchasing the best companies in the world (even though you have to sacrifice for a lower yield usually) and holding long term while those investments work to pay off.
ReplyDeleteGood luck with your new focus!
I agree with you Dan. EIFZF is a legacy holding back from when I didn't have a concrete plan in place. LNCO was purchased as a speculation and I just felt it was time to shift gears. Cya later!
DeleteThis comment has been removed by a blog administrator.
ReplyDeletePlease don't spam my blog
DeleteCI,
ReplyDeleteI am unfamiliar with BWP as it wasn't on the dividend champion or dividend contenders list, but I looked up the chart (UGLY). What occurred in Feb? I couldn't find a news story on google finance. Was it just the dividend decrease that caused the drop? If that is the case what was the yield before?
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