Monday, August 24, 2015

Recent buy: ABT, CL, JNJ, KMB, PG

Today was a blood bath. Either way, I will be continuously buying shares every month. This week I will be adding $1150 to several well known dividend aristocrats. The buys will occur on Tuesday morning. ABT dropped 7.24% in one day! Many of the other names have also dropped as well and I will take the time to dollar cost average in.


To give a picture how the selloff is going so far here's a picture of the S&P. We're around the lows in October, except this drop has been much more sudden. My strategy for situations like this is to tune out the noise and invest in quality names that I will hold onto forever.

Saturday, August 22, 2015

MO: Dividend Increase!

I'm excited to say that today, Altria Group (MO), the seller of Marlboro cigarettes in the USA, has announced a dividend increase of 8.7% to $0.565 per share compared to the pervious $0.52 (paid quarterly).

Altria has historically increased the dividends very steadily in the 8-9% region for many many years. I find the fundamentals of the company very promising and will plan to add more if the correction in the market continues. At the moment I am overweight and will prefer the yield to be over 4.5%.

Monday, August 17, 2015

Recent buy: MA, JNJ, MMM, UTX ...

The following dollar amounts were added to my portfolio today (some will be executed early morning tomorrow).

MA - $2340
JNJ - $300
MMM - $300
UTX - $150
KMB - $200
XOM - $150

In total $3440 was invested this week. This is around $48 in annual income. The dividends are low since MA has a very low dividend. The MA's purchase is an emphasis on dividend and capital gains growth.

For MA: 
Morningstar assigns a fair value of $106
S&P assigns a fair value of $124. S&P gives this company an A- credit rating.

Jefferson Research has the following quality ratings for MA:
Operating Efficiency: STRONGEST
Balance Sheet: STRONGEST
Valuation: MEDIUM RISK

This is a decent enough discount for me to begin a starter position for a quality company.

Thursday, August 13, 2015

Purchase plans for next week

The energy sector:
The current environment for oil and gas is providing us with depressed share prices in many large companies such as XOM, CVX, COP and even pipelines such as EPD and KMI. I am however quite cautious about many of these companies in the current environment. If the price per barrel were to remain low for an extended amount of time, I can foresee companies such as COP or CVX having to pause or cut their dividends.

At the moment I am overloaded in KMI so I cannot add more. I am also hesitant to add more because of KMI's debt levels. If I were to add another pipeline it will either be MMP or EPD but both are not low enough for me. My desired buy range will be 50% drop from the top.

Out of all of the oil giants, the only one I am willing to dollar cost average is XOM. The other company I hold is CVX. Both are dividend aristocrats and have survived numerous oil busts. XOM is definitely the stronger company at this moment and CVX has many huge megaprojects that are very expensive. CVX is definitely betting on the rise of oil prices in the future and will benefit more from rising share prices than XOM if oil prices rise.

I am not a fan of chasing yield. I prefer looking at the overall market environment. At the moment XOM I believe is capable of covering the dividend with sufficient margin. XOM's latest earnings were much better than CVX's despicable $0.3 per share (a -73% surprise!). XOM was also able to increase their dividend at a very nice rate this year too. At the moment I would prefer CVX to hold their dividends flat for as long as they see fit to be financially secure. If the price of oil continues to be depressed below $50 I will start to become worried about CVX's dividend coverage. I am dripping dividends on both XOM and CVX, but will only reinvest new capital into XOM at the moment. I need to see an uptrend in oil prices before considering CVX.

Credit Cards:
I want to add another company into my portfolio that is in the credit card business. Currently I have a holding in Visa. I plan to buy some MasterCard next week with new funds. I believe MasterCard and Visa will both profit healthily from the move to cashless spending in developing countries. Growth internationally will increase profits for both companies and I want to be part of that. MasterCard is smaller than Visa in market cap so they have more room to grow. At the moment, S&P and Morningstar are placing MA undervalued 9% to 20% while Visa is fair valued. Since I hold too much Visa I might as well buy some more MA to diversify.

Both V and MA have very low dividends but high dividend growth. I am not buying either of these companies for their dividends. They are growth plays but I consider them less speculative than my other growth companies such as SBUX or AAPL. I see V and MA as essentials in modern society just like consumer staple stocks. We have to use them in our everyday lives to function. I myself never use cash anymore since carrying cash and going to the ATM for cash is just so inconvenient. I also use credit cards exclusively for their cash back and benefits. Consumers in developing nations will see the light and eventually convert to cashless spending..

Depressed oil prices and the drama over coal shipments have sent shares of my favorite railroad UNP lower. Other railroads such as CSX and NSC are lower as well. UNP in my opinion is the strongest railroad and the one I want to own most. I want to build up my position in UNP first before buying other railroads. However I need UNP to drop further into the 80s range before buying more since I bought some a couple weeks ago.

I will be adding more to my position in UTX. UTX has one of the most consistent earnings and cashflow out of the industrials I survey. My favorite industrials are MMM and UTX. I prefer MMM more for their history and diverse portfolio. The market has started hating UTX in the last couple of weeks for selling their Sikorsky Aircraft unit to LMT. It has dropped by over 17% so I plan to take advantage of the sale!

MMM has dropped in value by around 12%. It's not a noticeable drop to be excited about but I always am looking for a chance to drip more into MMM. MMM is a dividend king with many decades of dividend increases. MMM has a solid moat and steady earnings & cashflow even during cyclical times. MMM is my favorite industrial company to hold and I will be moderately dripping as it falls.

For pictures of UTX and MMM's historical earnings and dividends graphs, look at my favorite dividend stocks page:

Since I have 12 trades to use in a month I may add additional small buys to various core staple companies such as WMT, JNJ, CL, etc. I am always open to buy these core companies that are in the consumer staples business even if shares are not at a noticeable discount since my holding timeframe is forever.

For reference, I DRIP all of my investments. Dividends are immediately reinvested in the company that paid the shares.

Tuesday, August 11, 2015

Recent buy: DIS

I added $1000 in Disney today. Disney is not a high yielder as its yield is 1.22%. I hold it for the growth prospects. I took the recent pullback as an opportunity to weigh more into my existing shares. Below is a graph showing the recent drop.

Wednesday, August 5, 2015

Watchlist: MLPs, EPD and MMP

There is blood on the streets in the energy sector. Companies responsible for the drilling and discovery of oil are hardest hit. Large corporations that are involved in both the upstream and downstream are more sheltered. Out of all the companies I am most confident in XOM's ability to succeed through this mess. They have recently increased their dividend by 5.80% and with their strong balance sheet and AAA credit rating, they are the most likely to survive out of everyone.

I do not particularly enjoy having my assets tied to the price of oil but am willing to buy names of high quality. Midstream companies participating in the transportation of oil can be a way to reduce sensitivity to oil prices. My favorite companies in the pipeline business is KMI, EPD, and MMP. EPD and MMP are the highest quality MLPs on the market with a credit rating of BBB+, strong cash flows, and a good track record of dividend payments. I only own KMI at the moment and want to add more to EPD and MMP. Below I will describe my thoughts for the coming weeks as EPD and MMP are now hitting close to my price targets.

EPD has fallen by more than 36%. There is officially blood on the streets. Compared to 2008-2009 I would say that I will be happy with a 50-60% correction from the high. EPD has been increasing dividends for 18 years straight and here are the percentage increases for the last several years:
5.9 6.6 5.3 5.3 5.5 5.9 6.8 6.7 8.1 9.8 4.9 8.7 14.8 12.8 10.8
The average dividend increase is 7.9% with a deviation of 2.9% which is very consistent. With a 5.88% yield today growing at 8% this is a strong holding for the future.

Jefferson Research's ratings of EPD's earning power is strong. MMP is more attractive from a performance standpoint. However EPD is of better value. In the end both still have strong cash generating abilities in the current environment.
Earnings quality: Strong
Cash flow quality: Strongest
Operating Efficiency: Weakest
Balance Sheet: Weak

MMP is still overvalued in my opinion and I feel that it will have time to drop. I think a price around $60 will make me very interested. A correction of 50-60% like the last recession will make me very interested. MMP has a faster dividend growth rate than EPD which is why it has a higher P/CFL ratio. MMP has been increasing its dividend for 15 years. The recent increase % are:
19.4 17.6 14.6 7.1 2.4 4.3 9.2 9.1 16.3 14.3 12.2 18.9 79.9
The average is 15% and the deviation is 18.5%. The yield is not very high for an MLP but I believe it may go over 5% if the bear continues.

Jefferson Research's ratings of MMP is very strong. This is what I like to see in quality companies.
Earnings quality: Strongest
Cash flow quality: Strongest
Operating Efficiency: Strong
Balance Sheet: Strong

I am considering trading my position in CVX for MMP and EPD. And then drip additional capital acquired in the coming months into MMP and EPD. Selling a depressed oil sector stock to buy another depressed oil sector stock which have both comparably declined is something I'm considering since CVX has not raised its dividend after 4 quarters. However, my history usually tells me I do better off when I don't do anything at all! So I'm debating removing CVX. Officially though, the dividend growth per year of CVX is still considered "increasing" (if you look at a per year time window). Presently I have more confidence in XOM than CVX in the E&P sector. But both are the strongest names in the business.

I did not include KMI in this post because my position in KMI is heavy and I will only consider it if the company's price is at a 50-60% drop from its all time high. I will rather diversify to other companies.

Monday, August 3, 2015

Recent buy: MMM

Tomorrow morning, $300 will be automatically invested in MMM. 3M yields 2.73% today. I'm adding slowly into 3M since I love the company but think that there is a better price. I want to eventually hold a full position in 3M. 3M is one of those companies with a large moat, strong credit rating, huge dividend history, reasonable growth and earnings history. I consider it one of those companies that I will be happy to add on the fall without worries. -YD

Saturday, August 1, 2015

July 2015 Dividends Received

Time is flying by! Another month has passed and another month of dividends have been collected and put to work in my portfolio. The table below lists what dividends I have received this month. All funds have been reinvested except TROW (the position was removed from the portfolio).

Ticker Total Received Taxable Accnt Roth Accnt 401k Accnt
DIS $8.71 $8.71
KHC $28.28 $28.28
KMB $15.79 $15.79
KO $30.49 $23.23 $7.26
MKC $16.08 $16.08
MO $25.21 $25.21
MO $70.27 $70.27
O $19.46 $19.46
PM $28.00 $28.00
PM $58.97 $58.97
TROW $7.85 $7.85
$309.11 $213.10 $26.72 $69.29

This month I have met my original goal with some additional extra dollars. I am slowly creeping towards $300 for all months which will most likely be met by the year end. As it stands at the moment, I am expecting $321 in forward dividends for October (the next quarter). The chart below shows my dividend progress.

It is satisfying to see the amount of cash received every month increase. Although I am reinvesting all the proceeds back into the companies that paid the dividends, I can if desired pay for my food and utilities with the dividends so far. The next goal is to pay for my housing costs completely with dividends!