Thursday, April 30, 2015

Early April Watchlist - Industrials

I am looking to add funds to my Industrials sector holdings. Even though the market index is approaching new highs, I do believe it is a market of stocks and there are good values out there if one looks hard enough. From my survey of dividend growth stocks, I have narrowed down my focus to these two picks.

Union pacific has promising growth. Their share price has pulled back recently, making them approach fair value according to its average PE over the last 10, 13, or 15 year period. I believe there might be a better entry point but the shares are already at fair value and I will be willing to start averaging into this company. UNP has 9 years of dividend increases. Value Line rates this company 1 for safety and A++ for financials. CAGR with dividends reinvested over the last 15 yrs averages 18.1% annually.

3M is the other company I am interested in. The recent pullback from revenue declines due to the strong dollar has started to send shares back down. 3M is still fully valued in my opinion and should come down more. I am willing to pay more for 3M than UNP since I feel more comfortable holding 3M over the long run. 3M has the impressive 57 year dividend increase streak to back itself up. Value Line rates 3M as a 1 in safety and A++ in financials. The 15 year CAGR of 3M is 10.0% with dividends reinvested which is less than UNP but impressive for a blue chip. The stock pullback isn't something to get excited over as it's quite small, and waiting may bear one more reward. I will be really interested in 3M at values below $150. My time horizon is over 30-40 years so I am not as picky at timing my entry points.

Monday, April 27, 2015

AAPL dividend raise: 10.6%

Apple's board has increased the dividend to $0.52 per share payable on May 14, 2015. The dividend increase is 10.6%. Yield is now around 1.57%. I'm not really impressed by the raise but I'll take it.

New buy: BDX, KMI, WMT, AMGN, etc

The following will be added to my Taxable account tomorrow morning.


$3500 was invested with an average yield of 2.43%. This will add $85.16 in annual income.

Recent buy: V

Today I added  $2358 in Visa on my retirement account. I believe Visa will have strong growth prospects in the coming decades even if the stock appears expensive today. The stock has low dividends, so I am looking at it more of a growth company. I expect their dividends to grow at double digit rates in the coming years.

Friday, April 24, 2015

JNJ dividend raise: 7.1%

Today J&J announced an amazingly healthy raise of 7.1% despite currency headwinds. The raise is a quarterly dividend increase of 0.70 to 0.75 dollars. The new yield is around 3.0% now. J&J is one of my favorite stocks. This picture of dividend increases shows why:

This will be the 53rd straight year of dividend increases! All of my JNJ dividends are reinvested.

Tuesday, April 21, 2015

Mini buy: PG & KO

Added the following:

$50 in P&G
$40 in KO

Large buys will be coming next week.

Monday, April 20, 2015

SO dividend raise: 3.3%

My utility holding in Southern Company announced a 3.3% dividend hike today. This will bring the yield to 4.84%. I expect utilities to yield around 4-5% and have dividend increases in 3% region. The Southern Company's dividend increase is in line with my expectations unlike P&G's. For P&G I need to see more dividend growth for its lower yield.

I am considering adding to my SO in the coming weeks since the ex-dividend date will be in May.
"Southern Company also announced today a regular quarterly dividend -- including an increase of 1.75 cents per share over the prior quarter -- of 54.25 cents per share, payable June 6, 2015, to shareholders of record as of May 18, 2015. This marks 270 consecutive quarters -- dating back to 1948 -- that Southern Company will have paid a dividend to its shareholders."

Saturday, April 18, 2015

Watchlist - End of April

April is almost over! I have a preference for picking stocks that will go ex-dividend soon to get in for the dividend payment. However, I will always buy a stock that is of a good deal that has a later paying dividend date. My requirements for picking stocks is relatively straight forward and are as follows:

  • BBB+ Credit rating or higher. A- or higher is preferred.
  • Dividend streak of 25 years+ preferred. 15 years+ is ok but a higher margin of safety in price is required.
  • Yield + 5yr Average Div Growth = 12%, this will be 8% for utilities
  • Earnings consistency, if the business is cyclical there needs to be a higher margin of safety in price
  • PE is at or below fair value (indicated by FastGraphs)
  • Price is below fair value as indicated by Morningstar and S&P, buying stocks of fair value or slightly above fair value are ok for core positions.
Below are stocks that I am eyeballing at the moment. I have taken price guidance figures from M* and S&P.

Ticker Price Morningstar S&P Jefferson Valuation
WMT $79 $83 $78 Low Risk
XOM $87 $98 $95 Low Risk
CVX $110 $114 $120 Low Risk
V $65 $69 $67 Med Risk
MA $89 $104 $107 Med Risk
PEP $96 $95 $84 Least Risk
UTX $117 $116 $128 Least Risk
GWW $242 $272 $235 Low Risk
ROST $103 $109 $111 Low Risk
TJX $66 $72 $68 Least Risk
MCD $95 $98 $84 Low Risk
BDX $142 $165 $155 Least Risk
KMI $44 $43 $45 Most Risk

The yellow indicate 12 month targets since S&P does not have a fair value estimate. In the coming weeks I will be planning to add to the following companies. I prefer sprinkling my contributions over several companies of fair value instead of dumping it all in one stock. Sharebuilder allows me 12 automatic investments every month.

Visa - a bit expensive but I believe in Visa's growth prospects.
Mastercard - Healthy discount according to sources above
UTX - add to existing position, moderate yield and it's of fair value I think.
TJX - add a small amount to my position
ROST - add a small amount to my position
BDX - initiate a position in this consistent dividend champion.
KMI - I will most likely add to this at the end of the month to get some more before the ex-dividend
WMT - add a small amount. Their dividend growth was very small this year but I still consider this a core position in my portfolio.

I do not feel like adding more to my oil major stocks at the moment.

I was going to add to PM last week but the stock shot up 9% after an earnings beat. I probably will sit out until next quarter to pick some more up if it falls. My existing holdings in PM and MO are quite a large percentage of my portfolio already.

Friday, April 17, 2015

KMI dividend raise: 14.3% y/y

KMI does not raise their dividend once a year. They have been raising it quarterly. This cash machine has been impressively churning out more dividends at a high rate despite its high yield.

The quarterly dividend has been raised from $0.42 a quarter to $0.48 this year's quarter. This is a very impressive 14.3% increase year over year. $0.48 a quarter is $1.92 annualized. With a price of $44 today that is around a 4.36% yield (very nice!). I will consider adding more to KMI as the ex-dividend is this month.

Thank you Mr Kinder. I will gladly take a 14% raise to my paycheck :)

A boring raise: PG 3%

I do track dividend raises on my portfolio holdings. However, I have not concentrated on posting them on my blog. I'll make an effort to do so from now on.

Today P&G announced a dividend raise of 3% from $0.6436 to $0.6629. It will be payable next month May 15, 2015. Ex-dividend is April 27, 2015.

PG is facing pressures from the strong dollar. Sales to foreign markets will be lower due to the exchange rate. I am not too happy with the raise but will take it nonetheless. More money is more money :) I was considering adding to PG this month but will rather put off that for now and allocate the capital somewhere else.

Thursday, April 9, 2015

Recent buy: ABBV

Added 1800 in AbbVie. I sold all of my BAX to fund this. I feel that AbbVie works better for my goals. ABBV yields around 3.4%.

ABBV is a spinoff of the old timer company ABT. ABT is a dividend aristocrat. The following graph shows the historical dividend growth. This is truly the classic slow and steady dividend growth stock that one should drip into when it hits fair value. ABBV has so far increased its dividend at a decent rate since the spinoff.

Monday, April 6, 2015

New domain name:

The blog has been moved from blogspot to

The old blog URL link will be redirected to the new address. New articles will be published on the new web domain.

I've updated the Goals and the About page. The Portfolio page has some nifty new graphs linked up with Google Docs.

Recent buy: ABBV, T, VZ

Tomorrow morning, the following trades will be executed:

ABBV $1350
T $700
VZ $300

All of these companies will be going ex-dividend in the next 7 days and appear to be trading at or a bit below fair value.

Their yields are highlighted below. All of these companies pay yields higher than my preferred 3%.

ABBV - 3.5%
T - 5.6%
VZ - 4.4%

This will add around $100 in annual dividends or $25 next month.

In the coming weeks, I will have an unexpected addition of income. I am contemplating using these extra funds to make Visa into a full position, which will be an addition of $4000-5000. I am impressed by Visa's moat, cash flow, debt, and growth. I believe that in the very long term they will grow very quickly in the US and overseas. In terms of its low yield, I believe their small dividends will eventually become sizable yield on cost from the dividend growth.

Saturday, April 4, 2015

My favorite dividend growth stocks

While most investors look at the price action of stocks, I like to look at the historical earnings and dividend payments of stocks. A company's health is usually reflected by the earnings growth (companies who utilize financial engineering may skew results). Higher earnings usually translate to higher dividend payouts. These two in combination usually translate to higher share prices. In the end, owning a business that can continuously increase earnings will make an investor very wealthy.

Although past results are not a good way to predict future results, it is interesting to see how management has performed in the past and how capable the company is in handling recessions. Those investing now have the traumatic records from 2008-2009 to look over.

Below is a list of charts of my favorite dividend growth companies. This is not a list to tell investors to buy these stocks now. Some of these stocks are not of good value at the moment. If these stocks can be bought for a good value, they will likely be good additions to anyone's portfolio. One might notice that the majority of these companies are of the Consumer Staples classification. This tells us investors something: that the companies that have growing earnings and dividends, even during recessions, are the ones that sell products that every person needs no matter the economic situation. Recession, what recession? Looking at these graphs, one would be crazy to think that there was a recession in 2008-2009 since many of these companies had in fact both growing earnings and dividends. These companies have survived through decades of harsh environmental climates. Financial institution collapse, housing bubble, tech bubble euphoria, SARS virus panic, harsh currency exchanges, terrorist attacks, Anthrax bioweapon scare, rising interest rates, etc... you name it. They've seen it.

Note that some companies have more linear dividend growth graphs whereas some have more exponential. The exponential charts are the most impressive. It indicates that the company continuously increases their dividends by the similar rate. This over time will follow an exponential function. A decreasing dividend growth every year will reduce the power of exponential growth, and it will eventually look more linear. The companies picked here all have consistent earnings and consistent dividend growth.

These companies are not sexy. They are not the next Tesla or Facebook. They are predictable. They are boring. They sell things people wouldn't get giddy over. Two graphs are shown below for each company. The orange line shows earnings. The blue graph shows dividend payments. FastGraphs are utilized here for earnings charts.
(Click the graphs for enlarged version)

#1 MO / KRFT / PM: The best stock of all time. MO has spun off KRFT and PM, both of which pay very high growing dividends. An investor will be very wealthy having invested in MO in the past.

#2 JNJ - Near linear earnings growth and extremely consistent dividend payout increases.

#3 CL - Near perfect linear earnings growth. Liftoff dividend payments.

#4 MKC - Near perfect linear earnings growth. What recession? Dividend growth :yawn: predictable. I'll continue sprinkling my McCormick seasoning on my chicken dinners.

#5 PEP - Snack and beverage company. Predictable growth and exponential dividend liftoff.

#6 PG - The earnings growth is choppier here but the dividend history is exceptional.

#7 UTX - UTX and MMM are my favorite industrial stocks. Predictable earnings growth and dividend growth. I included UTX here instead of MMM since I do not own MMM yet :)

#8 GIS - GIS has frozen their dividend in the past. This is one of those companies where a freeze in the dividend does not warrant a sell. Their earnings have been nothing short of consistent.

#9 KO - No need to introduce what KO is. Definately not the fastest growing company, but the dividend growth has been legendary.

#10 ABT / ABBV - ABT spun off ABBV several years ago. Their earnings are boring, slow, but steady. The dividends are similar to JNJ. Nearly perfect. I aim to hold both ABT and ABBV in my portfolio one day.

Thursday, April 2, 2015

March 2015 Portfolio Summary

The goal of this portfolio is share accumulation, income, and income growth. The market value of the portfolio is of not much importance to me. In fact I prefer a crashing market during my accumulation phase so that each of my dollars can be used more effectively when buying shares. The S&P500 is nearly at an all time high. This news makes many people happy. Unfortunately, I am not in a terribly good mood since I cannot find quality companies for good value in this overheated market. I monitor my portfolio for dividend security and dividend increases. If a company appears to have financial trouble in maintaining their dividend, I will remove them from my portfolio.

As of 4/2/2015 the Portfolio stands at $96,247. Inching ever closer to the $100k mark. I believe this month will be the special time when I am able to pass this mark for the first time. Yields are barely above 3.0%, ideally I want this number to be closer to 3.5% but it's just so hard to find higher yielding stocks in this bull market.

My stock picking criteria is simple and follows many other DGI philosophies. The company must have an investment grade credit rating (BBB+ or higher). Must have a solid history of increasing dividends. The price is of fair value or undervalued. And solid earnings history. Brownie points are awarded to stocks that have low debt, yield that is 50% higher than the S&P500, and solid earnings even during recessions. Yield can be sacrificed if speculative growth stock positions are wanted. Cyclical stocks such as industrials will need to be below fair value for me to consider, since I want some safety margin when the market turns sour.

Ticker Sector Value PE Yield Annual Divs Beta Weight Credit
AAPL Technology $2,767.42 16.89 1.50% $41.51 0.82 2.88% AA+
ABBV Healthcare $467.11 51.83 3.58% $16.72 1.27 0.49% A
BAX Healthcare $1,786.65 19.10 3.06% $54.67 0.71 1.86% A-
CAT Industrial $789.83 13.67 3.49% $27.56 1.64 0.82% A
CHD Staples $4,822.02 28.50 1.56% $75.22 0.47 5.01% A-
CVX Energy $2,222.77 10.39 4.07% $90.47 1.16 2.31% AA
DIS Discretionary $1,398.13 23.56 1.08% $15.10 1.16 1.45% A
EMR Industrial $690.57 17.63 3.38% $23.34 1.28 0.72% A
GIS Staples $3,635.99 24.48 3.11% $113.08 0.19 3.78% A
HCP REIT $757.59 22.68 5.14% $38.94 0.39 0.79% BBB+
JNJ Healthcare $6,235.59 17.48 2.81% $175.22 0.58 6.48% AAA
KMB Staples $1,920.43 27.51 3.29% $63.18 0.20 2.00% A
KMI Energy $3,356.60 43.46 4.31% $144.67 0.63 3.49% BBB-
KO Staples $2,478.51 25.58 3.24% $80.30 0.51 2.58% AA-
KRFT Staples $2,512.62 51.42 2.47% $62.06 0.76 2.61% BBB+
LMT Industrial $526.11 17.73 3.02% $15.89 0.62 0.55% A-
MCD Discretionary $1,463.74 19.88 3.55% $51.96 0.36 1.52% AA-
MKC Staples $3,074.40 22.94 2.08% $63.95 0.56 3.19% A+
MO Staples $8,473.64 20.00 4.06% $344.03 0.55 8.80% BBB+
O REIT $4,162.42 51.53 4.36% $181.48 0.41 4.32% BBB+
PEP Staples $4,632.45 22.46 2.74% $126.93 0.43 4.81% AA-
PG Staples $2,199.98 24.24 3.12% $68.64 0.44 2.29% AA
PH Industrial $1,100.13 16.28 2.14% $23.54 1.67 1.14% A
PM Staples $4,497.92 16.16 5.18% $232.99 0.92 4.67% A-
PX Materials $3,332.29 21.34 2.34% $77.98 0.81 3.46% A
ROST Discretionary $2,464.57 23.51 0.90% $22.18 0.77 2.56% A-
SBUX Discretionary $1,704.85 28.52 1.36% $23.19 0.77 1.77% A-
SO Utilities $1,129.02 20.48 4.70% $53.06 0.08 1.17% A-
T Telecom $3,192.12 27.84 5.67% $180.99 0.40 3.32% BBB+
TJX Discretionary $1,912.75 22.01 1.01% $19.32 0.66 1.99% A
TROW Financial $1,208.64 18.42 2.54% $30.70 1.41 1.26% N/A
UNP Industrial $1,835.41 18.63 2.05% $37.63 0.95 1.91% A
UTX Industrial $1,443.56 17.17 2.19% $31.61 1.13 1.50% A
V Financial $2,259.71 29.15 0.73% $16.72 0.81 2.35% A+
VZ Telecom $1,366.14 19.63 4.45% $60.79 0.37 1.42% BBB+
WMT Staples $892.99 16.18 2.43% $21.70 0.47 0.93% AA
XOM Energy $2,464.51 11.11 3.27% $80.59 0.90 2.56% AAA
….. …..2 …..3 …..4 …..5 …..6 …..7 …..8 Credit
Cash Cash $5,068.58 5.27%
. .. Total Yield Annual Divs Beta Avg ….. …2
$96,247.75 3.06% $2,787.93 0.65

My sector allocation is basically what I always wanted. The only problem is the lack of utilities. I do think a very good opportunity will arise when the Fed starts raising the interest rate. Utilities will surely fall. I think utilities are still overpriced. 

I believe in holding Staples. I like holding companies that will receive the people's dollar no matter what the economy is like. People always need to eat, drink, shower, brush their teeth, use toilet paper, etc. My other holdings are quite evenly distributed in the other sectors since I do believe that a portfolio should have different types of companies to tap into different opportunities. I hold no banks. My only financial stocks are TROW and V. My only tech stock is Apple and I hold it for purely speculative reasons. I am adverse tech and banks.

I currently have 37 companies. My top 5 holdings are MO, JNJ, CHD, PEP, and PM. These five together make up 30% of my portfolio. This is a bit heavy in my taste but my monthly contribution is high enough that this number will eventually drop. I am still in the accumulation phase and over allocations will eventually go away. 

MO and PM will be paying heavy dividends this month (April) so my large allocation will be appreciated. These two stocks (originally Altria) have in their history done very well in paying and increasing dividends.