Tuesday, March 21, 2017

Recent buy: $3599 HRL + $3000 PEP


Today $3599 was spent on buying shares of Hormel.

And another $3000 was spent on PepsiCo.  In my earlier post in the blog, I talked about GIS. I decided in the end on PepsiCo (PEP) over General Mills (GIS) because I liked the diversity and growth prospects of PEP more than GIS, despite PEP having a slightly lower yield.

Happy investing

Sunday, March 19, 2017

Upcoming purchase: GIS HRL

The stock market has had an incredible run. This has helped the paper value of my assets, however it makes buying stocks very difficult.  At this point I've resorted to finding stocks that have not experienced the recent run up. Or if I want to purchase companies that have run up, I will buy the ones that have the highest growth potential (slow growing companies with high P/Es just doesn't make too much sense).

I really like the food consumer staples sector. It is defensive and the products still sell during recessionary times. Right now I have $6600 ready to allocate to this sector. I will also have $2000 next week for another purchase and will continue thinking about that purchase.

If the buys go through, GIS will become a 5-figure position in my portfolio and HRL will be a starting position. I have right now 8 positions that are 5-figures. It's great seeing my portfolio grow and grow over the years through my contributions and individual company growth.

General Mills is the traditional old school boring food stock. It yields 3.2% and has a slow single digit dividend growth. Sometimes GIS holds its dividend flat for several years but they have been paying dividends for over a hundred years straight. It is a defensive company that will still hold its own during recessionary times. The company is facing headwinds now as consumers look to healthy organic alternatives to processed food. I am confident GIS can weather the storm, and if its enterprise value falls I am sure someone like Kraft Heinz will scoop in to buy out the company.

Hormel historically been a high growth company with a small dividend. It recently increased its dividend by 17% and it has been an impressive dividend paying company for many decades. HRL is a dividend aristocrat yielding almost 2% now. Hormel's stats are very impressive. Year after year their earnings and revenues increase even with a slight blip in revenues from 2008-2009. The company has a very stable payout at 36% and the credit rating is high at "A". HRL has been flat for many months since the growth has failed to keep up with its escalating P/E ratio. HRL is starting to look more fair value compared to the days it was hitting $45 a share!

I sold HRL in Dec'16 for tax loss harvesting and right now the share price is around the same as when I sold it. I would like to get HRL back so this would be a good time to re-enter.

Both GIS and HRL are relatively "small" companies. GIS is around 35 Billion and HRL is only 18 Billion. The supermarket aisles are packed full now with many different brands trying to compete for aisle real estate. It's hard to expand and grow as a food company. There also is not much to innovate in terms of food besides going organic.

What many companies do now in the packaged foods space is to acquire other companies through cheap debt. By issuing the debt, they can increase their revenues and earnings. Cost cutting through synergies can also be done as seen by 3G's extreme efficiency measures on Kraft and Heinz. If the price of GIS and HRL fall or continue to stagnate, it's almost guaranteed a large buyer will come in to gobble them up eventually.

However, I don't recommend buying a company based on take over potential. Instead I want to buy a company I would want to own for the very long term (30+ years) because of their business fundamentals. Both of these companies have proven their resileance by lasting many many decades. Both of these companies are older than my grandparents. I have faith they will continue producing spam and cereal after I am no longer here.


Wednesday, March 1, 2017

Recent buy: PM

I added 31 shares of Philip Morris (PM) today. That is around $3379 invested which adds $128 annually in dividend income. I am investing in PM based on my belief in the success of the new iQOS and HeatSticks Marlboro brand which is in line with the upcoming generation's focus towards healthier alternatives. People who smoke want to still smoke, but they don't want the tar and chemicals associated with burning tobacco. iQOS provides the satisfaction of nicotine delivery from traditional smoking without the harmful effects associated with burning. If people can have a healthier alternative, smokers will be more likely to continue smoking.

PM has also absorbed most of the shock from the increase in the dollar from 2014-2016. PM compared to MO is supposed to be the higher growth company with the lower yield. Right now PM still yields higher than MO and I believe in the future, as the dollar strength becomes overshadowed by the continuous growth in PM's earnings, that PM will have a lower yield than MO.

MO and PM are getting expensive so I will likely no longer be adding more after these two buys unless earnings and dividend increases are high. Any Trump policies enacted to improve corporate taxes and repatriation of foreign cash will help MO and PM (PM being the one that has international operations). I am feeling that some changes will happen in regards to corporate taxes or repatriation before the end of this year, which will help American businesses.

For additional invest-able cash coming in a week and a half, I am considering Realty Income (O) with a 4.18% yield in my 401k and General Mills (GIS) yielding 3.15% in my taxable account.


February 2017 Dividends Received

Another month. More cash, around $300 was deployed on more stock. There was less this month than other months because February is a light month since I don't hold many companies that pay in Feb. Below are my payouts for February 2017.

Ticker      Total    Taxable    Roth IRA         401k
GIS $61.54 $48.48 $13.06
SBUX $46.09 $37.84 $8.25
O $41.14 $33.77 $7.37
T $35.99 $35.99
VZ $25.39 $25.39
APD $24.24 $24.24
Interest $20.12 $20.12
PG $17.82 $17.82
ABT $15.85 $15.85
CL $13.82 $13.82
MA $12.53 $2.17 $10.36
CLX $11.46 $11.46
BCR $1.88 $1.88
$327.87 $229.67 $59.16 $39.04

For March I am expecting $630 in dividends, and April I am expecting a large $800 check in dividends.

Wednesday, February 22, 2017

Watchlist for March

Well, most of the companies I own that I was looking to add have rallied higher. In fact, a lot of them are quite excessively valued for my taste at this moment. This makes it very hard to add. Names that I wanted to add to include MO, PM, HD, PEP, CL, PG, MKC, and V.

You can take a look at what stocks I hold and their 12 month chart on this page: http://www.youngdividend.com/p/portfolio-chart.html 

I have been accumulating a lot of cash that is sitting in a savings account. I have decided to taper off the rate at which I accumulate that cash and start to invest some more in dividend paying stocks. I am slowing down the rate at which I am looking to purchase a house due to the uncertainty of my employment situation.

In the end, even if the market is rising I will continue to add to positions. This is my principle of dollar cast averaging. Since I cannot count on myself to outsmart the market and time exactly at the right time, I just purchase stocks periodically month after month after month. Over time I average out times when I buy at the highest of highs and when the market is at its gloomiest lows. By being persistent I guarantee that my income every month can increase.

For next month I am eyeing the following stocks:

General Mills: Consumer staples making  packaged goods like cereal. Yields 3.17%. Slower growth, Very defensive and stable.

Home Depot: Large home improvement store. Yields now 2.45% after the massive 29% dividend hike. Is a very strong grower with good comps and decent yield. Company is more cyclical during recessions. Despite being brick & mortar, it is likely very difficult to Amazon a lot of the types of services and items they sell.

Mastercard: A company supporting cashless transactions. It has a sub 1% yield but this company grows very quickly. Company is relatively defensive in nature. Recent dividend increase was around 16%.

3M: Diversified industrial conglomerate. More cyclical but likely one of the least cyclical industrials out there due to its diversity and strong balance sheet. The company has steady growth and yields a moderate 2.53%. The latest dividend hike was a modest 5.9%.

NextEra Energy is a fast growing diversified utility. It yields 3.06% after its recent large 13% dividend hike. NEE is very defensive and does well in all periods.

PepsiCo: Diversified drink and snack business. It yields 2.75% now and I am waiting for the dividend hike in June timeframe. I think I will get a 7 to 8% hike in the dividend. The company has very nice comps compared to Coca Cola. Pepsi is a stable slower growing blue chip company. They provide a safe dividend and is a dividend aristocrat known for increasing steadily year after year.

Procter & Gamble: Diversified personal care products company. People use their products everyday. This business is very defensive. They are undergoing restructuring and change. I think eventually it will work out. The business yields 2.93% now which is lower than it was in the past. Activist investor Nelson Peltz has taken an active stake in PG and I have always liked how investments turn out with Peltz's involvement. I expect PG to raise its dividend in May at a rate of 3%. PG is a slow growing blue chip company, and pays you to hold it over the years with its large dividend and steady dividend increases.

Philip Morris: An international tobacco company. I think their new iQOS concept will be a huge hit and will provide a diversified revenue stream for PM and reduce the decrease in tobacco comsumption. With iQOS, smokers can smoke without worrying as much about the harmful effects of smoking (at least that's the plan..) PM yields 4% and I expect the recent headwinds to decrease. I am looking for a dividend increase in 5% range this year around October. PM in the past with MO has growth incredibly well, severely outpacing the S&P500. Their dividend increases together were around 8% year after year.

Visa: Like Mastercard, Visa is a global giant in cashless transaction processing. They are a defensive business and grows very rapidly. It is a low sub 1% yielding company. The growth will more than make up for the low dividend.

Air Products & Chemicals: APD is a chemicals company for industries. The company is cyclical in nature but is a dividend aristocrat and has shown that it can survive recessions. APD yields 2.71% after their recent announcement of a 10.47% dividend hike.

Sunday, February 19, 2017

Getting wealthy is a boring process

I have only been investing for a short amount of time compared to others. I started investing in October 2013 in index funds. I was a graduate with little insight into financial planning. I spent a lot initially without giving much thought to what I should do with the extra cash sitting in my bank account. Over time my view of surplus money has changed.

Over the last 3-4 years I have learned a lot about the slow and gradual process of how wealthy people I know grew their wealth. There are a lot of stories out there about people becoming wealthy quickly. These stories usually try to sell an idea which may be enticing at first but over time one realizes that easy money is hard to come by. Statistically speaking, one would be better off leaving the get rich schemes from their financial strategies and focus on real wealth generation. From the wealthy people that I know and the strategies they employ, the real way for an average person to generate large amounts of wealth in one lifetime is to live below his or her means and continuously invest the surplus into assets that hold or grow in value. Additionally, most of the wealthy people I know receive their starting wealth from their career. And then over time that wealth creates more wealth on its own without requiring the career as a base. Finding the right vocation that pays the right value is very important in getting the right start.

Living below your means does not entail being cheap. You only live once and it's just not worth saving a nickel or two while compromising your health, living condition, or the people around you. Wealthy people I know do not skimp on what is important. They take care of their family and friends. Even if something is expensive, the purchase will be done given that the purchased item or service can provide good value. They do not save the nickel and dimes for what is important to them. Living below one's means does not mean one becomes a miser. Money needs to be spent in society for one to survive but frivolities such as a new sports car or the newest television or fancy clothes can be better spent elsewhere.

In all honestly wealth building is boring. It is unexciting. Balance sheets and financial reports and tax filing is just not most people's cup of tea. People I talk to do not want to hear about it. There may be a reason "smart" people in the technical or academic sense are not all rich. Making money or getting rich is just not as exciting as curing cancer or flying to the moon. Receiving high grades or knowing everything does not mean one will be successful. In the end, money is blind. It cares not if you are smart, gifted, talented, or where you came from.

Having a high income does not mean one is wealthy. Having a high net worth to income ratio is what makes one wealthy. Having assets that generate more income than one's main job or living expenses makes one wealthy. Real wealth building takes decades. Not months or years. Telling someone that they can be wealthy after several decades is just not sexy. They would rather appreciate the short term pleasures of buying material goods and enjoying the moment. Enjoying the results of one's investments will likely not be immediately "feel-able". The move towards wealth is so slow and gradual one's brain becomes accustomed to one's increasing net worth month after month without much thought. The numbers crawls up so slowly that there is no euphoria or appreciation for "the moment".

Compared to what we see on TV, my job is not very exciting. I wake up every morning, go to the office, sit on my desk, perform my tasks, then go home. There are no  luxurious such as free gourmet lunches, or luxury buses driving me home, or free massages or fun travels or big sales deals being made. It's just a regular cubicle desk job that simply generates a decent income. Every 2 weeks I receive a check and that gets deposited. When I deposit my check from my employer, I put a few Benjies into my checkings account for living costs. Then I put the majority of the rest in my investing accounts. Everything is on auto pilot and frankly speaking there isn't much "hoorah" going on. In fact it is much less glorious than I thought. However, every year I see my passive income increasing and increasing. My net worth may or may not increase depending on the economy, but my income continues to increase. Every month, I receive ever increasing dividend checks and my broker automatically deposits them into additional shares.

The only real way to notice I found is to look back at my old blog posts and put myself in my "old" shoes and see how much of a difference the years have been. Over time I hope I can look back and appreciate my younger self for planning ahead when most of America is too pre-occupied with the present moment.


Friday, February 17, 2017

Today I hit $300,000

My portfolio today just barely slipped above $300,000 after today's Friday session. I'm sure this will likely drop back down next week due to market turbulence, but nevertheless it's a step in the right direction.

Thinking back when I started at $0, I remember how I was always browsing through all the various dividend and investing blogs with high 6 digit values and hoping I would someday be there. It's a very satisfying feeling now looking back and seeing that all my effort was not in vain.

My first $100,000 was back in April 2015. My second $100,000 was in May 2016. And the third on February 2017. This is all possible by saving and investing most of my take home pay, and watching the portfolio carry itself forward with dividends reinvested and upward earnings guidance. $100,000 is just a small drop in the bucket, but it is still a step forward in the right direction.

Charlie Munger had said in the past “The first $100,000 is a bitch”. After each $100k, the next $100k becomes progressively easier to reach. This is because the earlier achieved $100ks can now provide their own individual growth to one's future growth. When starting out for the first time, one must rely solely on one's saving rate which is a much slower process than compounding returns.

It's always good to invest earlier. The growth of dollars invested early will have a more profound impact than dollars invested later.
“The best time to plant a tree was 20 years ago. The second best time is now.”

Name Ticker Sector       Value   Weight        Divies      Yield S&P Fin VL Fin VL Safety
Altria Group Inc MO Staples $47,872.98 15.95% $1,600.80 3.3438% A- B+ 2
Home Depot Inc HD Discret $13,541.89 4.51% $261.42 1.9305% A A++ 1
Philip Morris International Inc PM Staples $13,282.71 4.43% $533.21 4.0143% A B++ 2
Realty Income Corp O REIT $11,875.13 3.96% $494.39 4.1632% BBB+ A 2
Johnson & Johnson JNJ Health $11,675.12 3.89% $314.32 2.6922% AAA A++ 1
Ross Stores Inc ROST Discret $11,214.08 3.74% $88.38 0.7881% A- A 2
Visa Inc V Financial $11,048.51 3.68% $83.40 0.7549% A+ A++ 1
Starbucks Corporation SBUX Discret $10,570.10 3.52% $165.91 1.5696% A A++ 1
Kraft Heinz Co KHC Staples $8,947.21 2.98% $222.06 2.4819% BBB- A 2
PepsiCo PEP Staples $8,313.45 2.77% $231.48 2.7845% A A++ 1
Kimberly-Clark KMB Staples $8,280.92 2.76% $243.69 2.9427% A A++ 1
Becton Dickinson and Co BDX Health $7,912.94 2.64% $127.77 1.6147% BBB+ A++ 1
General Mills, Inc. GIS Staples $7,653.34 2.55% $248.05 3.2411% BBB+ A+ 1
McCormick & Company MKC Staples $7,210.71 2.40% $138.92 1.9266% A- A+ 1
Church & Dwight CHD Staples $6,996.10 2.33% $101.37 1.4490% BBB+ A+ 1
3M Co MMM Industrial $6,404.38 2.13% $155.44 2.4270% AA- A++ 1
Mastercard Inc MA Financial $6,241.19 2.08% $50.20 0.8043% A A++ 1
The Coca-Cola Co KO Staples $5,046.06 1.68% $171.47 3.3981% AA- A++ 1
Dominion Resources, Inc D Utilities $4,381.10 1.46% $179.35 4.0938% BBB+ B++ 2
Automatic Data Proc, Inc ADP Tech $4,276.91 1.42% $97.85 2.2878% AA A++ 1
TJX Companies Inc TJX Discret $4,166.93 1.39% $56.19 1.3484% A+ A++ 1
McDonald's Corporation MCD Discret $4,131.48 1.38% $121.58 2.9428% BBB+ A++ 1
Air Products & Chemicals, Inc APD Materials $3,988.48 1.33% $107.12 2.6857% A A+ 1
NextEra Energy Inc NEE Utilities $3,836.25 1.28% $105.29 2.7447% A- A 2
Xcel Energy Inc XEL Utilities $3,807.87 1.27% $123.33 3.2389% A- A+ 1
Procter & Gamble Co PG Staples $3,787.40 1.26% $111.52 2.9444% AA- A++ 1
Stryker Corporation SYK Health $3,340.38 1.11% $44.94 1.3455% A A++ 1
AT&T Inc T Telecom $3,082.47 1.03% $145.65 4.7252% BBB+ A++ 1
Southern Co SO Utilities $2,725.69 0.91% $127.76 4.6872% A- A 2
Abbott Laboratories ABT Health $2,673.09 0.89% $63.40 2.3719% BBB A++ 1
Colgate-Palmolive Co CL Staples $2,550.73 0.85% $55.30 2.1679% AA- A+ 1
Medtronic plc MDT Health $2,233.49 0.74% $48.69 2.1800% A A++ 1
Verizon Communications Inc VZ Telecom $2,188.61 0.73% $102.74 4.6942% BBB+ A++ 1
Clorox Co CLX Staples $1,916.18 0.64% $45.86 2.3931% A- B++ 2
The J. M. Smucker Company SJM Staples $1,874.25 0.62% $41.37 2.2073% BBB A++ 1
Bard (C.R.) Inc BCR Health $1,754.10 0.58% $7.53 0.4290% A A+ 1
WEC Energy Group, Inc. WEC Utilities $1,397.25 0.47% $50.53 3.6161% A- A+ 1
Aqua America Inc WTR Utilities $945.22 0.31% $24.08 2.5471% A+ A 2
Misc Type ……….. Partial Totals Weight Yrly Dividends  Avg Yield …..832 …..9 …..82
Equity Stocks $263,144.71 87.67% $6,892.33 2.6192%
Investable US Dollars $4,527.59 1.51%
House Fund Cash Savings US Dollars $27,992.63 9.33%
Miscellaneous Assets $4,505.25 1.50%
. .. Equity + Misc Weight …..2 ….. …..222 …..2222 …..223
Total $300,170.18 100.00%