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. 

March Recap

I really, really, REALLY hope there is a correction soon.  I already have cash piling up plus I just did my tax return and will have a large deposit next month.  I'm basically down on my hands and knees begging at this point.  It's a tough market for value investors.

As always, I really don't care what my stocks are worth. I want income so I can retire!  Low entry prices juice yields and acts as jet fuel for long term investors.  I like paying low prices for my stocks and pretty much everything else I buy.  Other than market prices not cooperating with my plans, March was pretty darn good.  A very nice month for income coupled with solid dividend increases is always a welcome treat!

The trip to Thailand did not affect my finances.  It was part of my budget the past 9 months.  Planning ahead ftw!

DOW: 14,579 /// S&P 500: 1,569 /// 10-YR Bond: 1.85%

New Purchases:
1) 44 shares KMI at $36.63 - $65.12 annual income.
2) 29 shares BNS at $57.93 - $69.60
3) 2 shares EMB at $118.19 - $10
4) .628 shares SBSI - $.52 annual income (this was a dividend reinvestment)

Sales:
1) 70 shares UNS at $47.14 - ($121.80) annual income

Dividend Receiveds: $521.15
Conoco Phillips (COP) - $39.60
Intel (INTC) - $41.40
Southern Co (SO) - $14.21
iShares Emer Mkt Bnd (EMB) - $.86
Chevron (CVX) - $26.10
Emerson Electric (EMR) - $22.55
Lorillard (LO) - $46.20
Norfolk Southern (NSC) - $28.50
Johnson & Johnson (JNJ) - $36.60
Southside Bancshares (SBSI) - $13.36
Avista (AVA) - $47.87
Exchange Income Corp (EIFZF) - $17.49
McDonald's (MCD) - $43.12
Realty Income Series F (O-PF) - $6.76
UNS Energy (UNS) - $46.11
LTC Properties (LTC) - $26.06
Owens & Minor (OMI) - $21.36
Pepsi (PEP) - $43.00

Dividend Increases:
1) GIS: $.33 to $.38 per quarter.  $14.12 annual income
2) RTN: $.50 to $.55 per quarter. $11.40
3) APD: $.64 to $.71 per quarter. $4.48

New Deposits:
$1,000 to ROTH IRA

Lending Club:
No deposits this month.  I'm having trouble getting my money invested into new notes.  I don't know why, but my orders are expiring one after another.  I've been checking almost daily to get new money invested, nothing passes my screen anymore.  I'm starting to question the viability of LC.  It clearly cannot support a large investment based on my screen criteria.  Hmmm.....

Dividend Growth Stocks in Thailand

 

I recently took two weeks of leave in Thailand.  While on vacation I decided to spend a little time to see what my retirement plan is up to.  It's very interesting to observe the strategies my favorite dividend growth companies use internationally.  Even though the packaging is often in a different language, it is quite easy to spot familiar products.  Brands are powerful in the US and everywhere else around the world too. 

Coca-Cola

 



Is anyone really surprised that Coca-Cola penetrated the Thai market?  Coke is the dominant soda brand in Thailand, no doubt.  Go to any restaurant, bar, or convenience store and you'll find a cold Coke waiting to be consumed.  What I love is that they sell KO products in glass bottles.  Man I try not to drink too much soda, but I absolutely had to take advantage of this while I could.  Beyond soda, KO sells other products such as Minute Maid orange juice (made from different oranges, its sweeter) and bottled water under the NAMTHIP label.  An 8oz bottle of Coke was 10 Baht or about USD $.35.

Pepsi

 





 



 

  

  

  

  

  

 

Pepsi is a mixed bag in Thailand.  On one hand the snacks business is thriving, on the other they COMPLETELY dropped the ball in sodas.  It is very, very difficult to find Pepsi other than in a 7/11 or similar convenience store.  If you are interested in PEP, please click the link to read about management's failure in Thailand.  I tried EST, and yes it does taste like Pepsi.  Fail.

 

The snacks business is doing quite well.  Note the interesting flavors customized to suit the taste of Thai people.  I was not bold enough to try the "Lobster Hot Plate" or "Nori Seaweed" flavors (I don't like seafood or fish), but I did try the Sweet Basil and it was fantastic!  You can see Stax has different packaging.

 

 

Philip Morris

 

 

 

Philip Morris brands dominate the Thai cigarette market from what I saw.  Go to any convenience store and the two biggest brands are Marlboro and L&M, both PM products.  You can see that the warning labels are very graphic with the intent to deter smoking.  This strategy does not concern me as a PM shareholder, pictures won't stop me or anyone else from lighting up.  Sorry we all know smoking isn't healthy.  Captain Obvious.  What does concern me is plain packaging since brands are of utmost importance to cigarette companies.  A pack of smokes costs about $2.90 for Marlboro and about $2.25 for L&M.

 

 

McDonald's

 

 

I saw a number of McDonald's restaurants during my stay.  They are very similar to back home.  The food tastes the same, the stores are clean with updated decor, and the menu isn't much different either.  Everything you would expect from a McDonald's except the prices were very high.  Thai people eat Thai food, not hamburger and fries, these McDonald's stores are probably targeted towards tourists.  That could explain the high prices.  Thai people are generally very poor and do not have the means to pay $2.50 for a cheeseburger.  Unfortunately no dollar menu either.  I thought it was interesting that they call ketchup "tomato sauce."

 

YUM also has significant operations in Thailand.  I saw and ate at KFC & Pizza Hut.  I didn't see any Taco Bells.

 

 

Procter & Gamble

 

 

PG products are easy enough to find.  Familiar brands such as Head & Shoulders, Mach 3, and Pantene.  I didn't see any Crest products, it appears there is still room to grow.  Colgate and a brand I've never heard of seemed to be the leaders in oral care.  Perhaps P&G can utilize the distribution channel already in place to push other popular products?

 

Johnson & Johnson

 

I mostly saw J&J consumer products, I wasn't looking for pharmaceuticals or medical devices.  The same products are sold in Thailand as in the U.S.  I was going to buy some Acuvue contacts, but the store didn't have the right prescription.  An exam isn't necessary at all, you can just buy them.  Genius!

 

General Mills

I'm not sure exactly sure what General Mills is doing in Thailand.  It looks like they are simply exporting American products and placing them on store shelves.  The packaging is in English and Spanish (WTF!) and doesn't appear to have any Thai at all.  Strange.  I can tell you this: Thai people do not eat Betty Crocker cakes or Progresso soups.  I think these products are targeted towards ex-pats and tourists.  191 Baht for a can of soup is approximately $6.50.  Clearly very expensive.  At a military commissary, I can usually buy a can of Progresso for $.99.  No way in hell would I pay 6 bucks for soup! 

 

All the cereals are Kellog. 

 

I'm just not sure what GIS can do in Thailand, the diet is very different.  Maybe push ice cream?  Most Thais don't have a fridge/freezer/microwave.  I don't know.

 

Emerson Electric

 

 

This was taken in China not Thailand.  I was walking through the Beijing airport and noticed an EMR ad.  Who would have thought?  My China experience is limited to the airport, but I will report it was strange seeing a bunch a Chinese kids running around wearing Lakers and Yankees hats.  The world is becoming very Americanized.  Same story in S. Korea. 

 

Do they even know who the Atlanta Braves are?  Seriously...



New Purchase - BNS

I used the rest of the money raised from the UNS sale to fund a new position: Bank of Nova Scotia.  Those who have followed me the past year know I'm fond of Canadian banks as long term holdings.  I like conservative lending practices, sound government policies and no dividend cuts during the recent financial crisis.  The financial institutions that tend to grab my attention are mostly from Canada which isn't surprising since Canada is known as a banking safe haven. 

BNS has paid dividends since 1832.  I absolutely love storied dividend histories like this, BNS has it in spades.  The dividend is so ingrained in the culture at this point that I feel very confident the streak will continue.  I plan to still be shareholder in 2032 which will mark 200 years.

I like the international strategy Scotia Bank uses to grow the business.  This is truly an international company with operations in over 55 countries.  I believe focusing on emerging markets for growth while using the Canadian market as an anchor will reward shareholders handsomely over the long term.

My calculated fair value for BNS is $69 which leads me to believe I was able to purchase these shares at an undervalued price.  I used DDM, DCF, average p/e, and average yield in the calculations.  BNS is currently trading below its 5 year average p/e and above its 5 year average dividend yield.  Even though it's had a major run up since last summer's lows, I feel there is some value left.

Assuming a $1US to $1CAN exchange rate, I'm locking in a yield slightly over 4%.  As with the KMI purchase I will realize an immediate passive income boost which is expected to grow at a faster pace than what UNS provided.  In reality I don't know the exact dividend.  Exchange rates fluctuate which I've observed with my TD and EIFZF holdings.

I made a mistake and entered the wrong amount when I placed this limit order.  I actually meant to type $57.83.  Oh well it's only a $2.90 difference.  I quickly placed the order after a 17 hour work day, I usually pay close attention to details like that.  It won't happen again.

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New Purchase - SBSI

Southside Bancshares is the only stock I DRIP.  I do this because I want to increase my share count, but I don't want to throw new money at it.  I plan to keep the DRIP on for now.

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Recent Dividend Increases

 

General Mills: 15.2%  Wow I was not expecting an increase like this!  My yield on cost is already  4.1% after just two increases.  If I only I had bought more last year.... whoops!
 



Raytheon: 10.0%  Yet another stellar RTN dividend boost.  My RTN position has already ballooned to a 5.0% YOC after only 2 increases.  I think I had lucky timing with this one though.

Air Products: 10.9%  This is exactly why I snatched up APD shares last October.  Air Products & Chemicals is a dividend champion with a history of delivering above average dividend growth, 2013 adds to the evidence.  YOC is now 3.6%, will it go over 4% next year?

Here's some motivation courtesy of RTN: