Coke Increases Dividend for 50th Straight Year!

All I can say is wow.  50 consecutive years.  Coke recently announced it has increased its dividend by 8.5% a fantastic increase indeed.  Based on the new annual payout of $2.04 per share, KO is rocking a 55% payout ratio, and a current yield of around 2.97%. 

Note to self: buy more KO.

Nothing else needs to be said about this company or its history. 

New Purchase - NSC

Yesterday Norfolk Southern (NSC) dipped below $68 giving me an opportunity to invest in the company with a yield over 2.75%. The minimum yield I will accept in a stock is 2.75% so I decided to make the purchase. I've been watching NSC for a while, and finally I can add it to my portfolio. It reached my minimum yield threshold due to a recent dividend hike and decline in share price. NSC and KO are the only companies I've purchased with a yield less than 3%. I reason that these companies shouldn't take more than 1-2 years to reach a 3% YOC, which is what I'm after.

I picked the 2.75% threshold because I buy dividend stocks for the dividends, I think it can be dangerous to expect huge dividend growth rates to be sustained over long periods of time. Expecting sustainable div growth rates of greater than 10% can be just as risky as expecting sustainable high yields in my opinion. It would stink to buy a stock that only pays 2% and find out later that the dividend is not growing as fast as expected.

I purchased 19 shares NSC just under $68/share giving me a yield of exactly 2.75%. The yield would have been slightly higher, but I have to pay my broker those pesky fees to make trades. I include transaction costs in the basis.

Norfolk Southern is a railroad company, which is exactly the type of business I like. I like boring companies that produce oil, toilet paper, cigarettes, soda, band-aids, and the like. Railroads fit right in and are easy to understand. I like railroads because I suspect that they will benefit as the price of oil continues to rise. This concept is nothing new, having been popularized when Warren Buffet bought BNSF a few years ago.  The purchase also further diversifies my portfolio, which is important to me.

Selected stats on NSC: 2.75% yield, 34.5% payout ratio, 13% div growth rate (5yr), 12.4 P/E, 2.24 P/B, 17% estimated long-term EPS growth.  10 years of annual dividend increases.  Solid.

This was my last planned purchase for February. I will be monitoring the market, but won't swoop in for more unless something happens that I cannot say no to.

New Purchase - HNZ

I purchased 24 shares of HNZ the other day.  As I've stated in other posts I like HNZ because I use their products which will increase stocks I directly support at the grocery store.  I picked the shares up around $51.70, giving me a yield of about 3.7%.  Heinz is a food company best known for ketchup, but also manfactures frozen dinners/snacks, salad dressing, spaghetti sauce, and other products world wide.  HNZ is a dividend challenger having increased dividends for 8 consecutive years; has a nice yield of around 3.7% with a payout ratio of about 65%.  I might buy more shares on dips.

I am still planning to make one more purchase in February.  Kellog (K) has seen its price spike with news that it will be purchasing the Pringles brand from P&G.  At its current price around $53, I'm no longer interested.  I am closely watching NSC, GD, and SBSI.  Those three are on my radar at this time.

Small Watchlist

I am planning to make 2 purchases in February.  The market is at a high point right now, but did make a small retreat last Friday.  If we see another drop I might put in some limit orders.  I am currently paying close attention to SBSI, HNZ, K, and GIS.  Food stocks have seen weakness lately and I actually had a limit order in for HNZ last week (it didn't get filled).  I like HNZ because I use and understand the products they make.  Heinz is famous for ketchup, but also manufactures Classico spaghetti sauce, Bagel Bites, OreIda potato products, TGIF frozen snacks, and Smart Ones frozen dinners.  I am particularly fond of Smart Ones because I buy them almost every week.  Most varietys can be purchased for $1.25 where I shop, which is the best deal in terms of price and taste (in my opinion).  HNZ also owns other brands throughout the world and has made acquisitions in Brazil and China to fuel growth.  I pay attention to the brands I buy at the grocery store and adding Heinz to my portfolio would increase stocks I directly contribute to.

Kellog recently beat earnings estimates, but has still seen it's price decline near its 52 week low.  I love to eat Kellog's cereals, but currently do not buy them so I can suppoert other companies I own shares in.  I would love to buy Crispix, it might be my favorite cereal.  GIS has also recently dropped a bit.  I could see myself adding shares in the low 38 - high 37 range.  SBSI is another candidate.  I'd like to add to my position before it goes ex.  It's currently at an acceptable price in my view, but with a little luck I'm hoping to catch it under 21.  I'm a patient guy, there's no rush to make any purchases.  I like to pick a good time and go for the best yields I can in the stocks I want to own.

Boardwalk Pipeline Increases Distribution

Today Boardwalk Pipeline Partners (BWP) announced it has raised quarterly distributions from $.5275 to $.53, which is an increase of .47%.  This is a minor increase, but keep in mind they have made increases for 24 consecutive quarters in a row.  With 6 years of increases BWP is part of the "dividend challengers" group of dividend growth stocks. 

Boardwalk Pipeline Partners is a MLP based in Texas, which transports and stores natural gas throughout the south and midwest regions of the United States.  This year it has been negatively affected by a warmer than usual winter.  Due to a warm winter it has seen reduced demand of natural gas from its customers such as power plants and other utility companies.  On a positive note it has seen an increase in demand for storage services.  About half its customer base are power plants, with another 30% industrial and local distribution companies.

It is currently expanding into the Marcellus and Eagle Ford shales and has recently issued more units to pay for such projects.  The price of natural gas is rediculously low right now, luckily the price of the commodity doesn't cut into BWP's profits much because it charges fees for use of their infrastructure.  I like that BWP is expanding, but I am not thrilled they have issued more units.

This is the 5th quarterly increase BWP has provided me since I became an investor in the partnership.  Right now I am not buying anymore MLPs until I do my taxes this year.  BWP and TCP are suppose to have K-1's ready in late February.  After finishing my taxes I will determine if I will invest in additional partnerships.  2011 was an experiment to better understand MLPs, I do like the distributions and the tax sheltering for my taxable account.  Right now I plan to hold BWP and TCP.  If I do add another MLP I will stay away from a pure natural gas play and look at oil pipelines or possibly diversified pipelines. 

Avista Increases Dividend

Avista Corporation (AVA) recently announced it has raised its quarterly dividend 5.5% to $.29 per share from $.0275.  This marks 10 consecutive years of dividend increases and puts Avista into the prestigious "dividend contenders" category of dividend growth stocks.  Avista is an electric and gas utility based in Washington state.  It also has operations in parts of Idaho and Oregon.

I am very pleased with this announcement.  A 5.5% dividend increase for an utility is awesome.  I hope to see solid increases like this from Avista and Unisource, my other utility, in the future.  In general I like utilities because they have a localized monopoly in the area they serve.  They are unlikely to face competition, and have very stable earnings.  The downside is that they are heavily regulated and have limited growth opportunities.

The bottom line is that this holding provides an attactrive dividend yield coupled with dividend increases that outpace inflation.  So far I have been pleased with AVA.

Budget

In this post I will discuss my monthly budget.  It will be fun to look back at this in the future.

Income:
$1860 - Take Home Pay (after taxes)
$119 - TSP Contribution
$95 - Match on TSP Contribution
$2074 - Total Income

Fixed Expenses:
$0 - Rent
$0 - Utilities
$225 - Car Savings Account
$81 - Car Insurance
$10 - Cell Phone
$30 - Internet
$346  Total Fixed Expenses

Variable Expenses:
$190 - Groceries
$75 - Gas
$50 - Haircuts
$305 - Fun Money
$620 - Total Variable Expenses

Miscellaneous Expenses:
$284 - Car Maintenance, Clothes, Presents, etc.

Investments:
$610 - Dividend Stock
$119 - TSP Contributions
$95 - Match on TSP Contributions
$824 - Total Investments

Savings Rate - 39.7%


As a soldier in the US Army, one of the benefits is that I do not pay rent, utilities, or insurance copays.  We do pay state, federal, and FICA taxes.  The fixed expense "Car Savings Account" is to build cash for purchase of a different vehicle in the future, I do not actually have a car note.  I intend to drive a vehicle about 5 years and use built up cash to buy a new one when the time comes.  All variable expenses are paid in cash so in the end they kind of morph together.  I stay away from credit cards.  I give up rewards programs, but have found that when I only pay with cash it forces me to make better decisions.  It's too easy to lose track of finances with credit cards, at least for me.

In reality I usually have some money left over at the end of the month.  It depends though, car repairs and Christmas presents are killers.  Looking at my budget I could potentially trim down a few areas.  I do not live a life of luxury, but I do like to drive a nice car.  I have thought about reducing car savings contributions, but am undecided right now.  I have also been thinking of shopping around to find a better rate on car insurance.  I'm over 25 and have a pristine driving record; I think I might be over paying.  Spending $50 a month on haircuts is rediculous, I realize this.  I get my hair cut every single week (unless I'm on leave).  I am a professional soldier and must maintain a military appearance. 

Overall I think a 40% savings rate is really good.  It allows me to build assets and still enjoy life.  If only I made more...