Monday, December 21, 2015

Recent buy: MMM, SO, GIS

The following purchases will be made in my taxable account on Tuesday morning. This should yield around an average of ~3% for $1270 invested.

MMM: $900
SO: $200
GIS: $170

Friday, December 18, 2015

Portfolio dividend increase news: 9 raises in 2016

I have been holding back on reporting dividend increase because they happen frequently so I decided to lump the news into one post. 2015 is already wrapping to a close so all of these dividend increase announcements are scheduled for 2016. I don't have the 2016 dividend calendar posted on the site yet, and I will be posting that on the first of next year. Without further ado, I am delighted to say that the following 8 companies I hold have announced dividend increases for 2016:

ABBV: 16.33% (they raise rather irregularly, if comparing 2/2016 to 2/2015 dividend, it is a 16.33% increase)

ABT: 8.33%

CVS: 21.43% !!!!!

D: 8.10% , what an awesome utility!

DIS: 19.13% (they used to pay once a year and now they pay biannually so it's not straightforward to calculate the raise; I used ($0.71+$0.66)/$1.15 which yields 19% raise which is a nice increase)

MA: 18.75% , MasterCard impresses again!

MKC: 7.50%, steady eddy solid company

O: 4.13% (This is comparing 1/2016 to 1/2015 dividend, to get year over year increase; O raises the dividend irregularly multiple times a year at small increments, for 1/2016 they will pay $0.191 instead of the $0.1905 paid in 12/2015)

T: 2.13%, steady as always.



This is all great news. For the year of 2015, I averaged around a 10-10.2% dividend increase across the entire portfolio. My portfolio yields around 3% so in total that's about an 13% growth in income considering I reinvest all dividends (not bad!). Since when do I get a 13% increase in income from my job!

For 2016 I expect perhaps a slightly lower dividend increase due to the federal reserve tightening interest rates. In the watch is Chevron, who did not raise their dividend on the month they usually increase the dividend. They are holding the dividend still but still maintain dividend aristocrat status since 2015 total dividends is still greater than 2014 total dividends. Hopefully Chevron announces a token increase in 2016. For 2015, I sold my entire position of KMI before they announced the dividend cut of 75%. It is very unfortunate and I am afraid I cannot trust the current management at Kinder Morgan anymore for over-promising. Best of luck to the retirees who held on.

Happy Holidays

Tuesday, December 15, 2015

How I categorize what is Core and Speculative in my Portfolio

It is important for investors to know what holdings in their portfolio are Core and what are Speculative. Core positions should be looked upon as the foundation of one's portfolio. One should not sell these positions but instead add to them whenever they are decently priced. Core positions offer safety and consistency in dividends and dividend increases. The Core positions are not expected to garner out-sized gains, however they can still provide decent gains over many years of compounding. The Speculative positions help in improving gains but introduce volatility. There is also a chance that the Speculative position may cancel or decrease their dividend. Below is a description of how I decide what is high quality and what is lesser quality in my portfolio. 

In the portfolio below, Green Tickers signify what I consider "Core", Yellow Tickers are supporting positions, and Red Tickers are speculative. I consider companies to be "Core" if they have predictable earnings, are non-cyclical and anti-recessionary in nature, have wide moats, demonstrate predictable dividend histories, and have strong credit ratings. I want to stress the point about having consistent earnings and being anti-recessionary. Many of the business I consider must haves are businesses that produce goods and services people need no matter the economic situation. When a recession occurs, we will still need to buy medicine when we are sick, use toilet paper, pay for electricity, consume food and drink, and wash ourselves. My portfolio aims at getting the dollar that people have to spend everyday, whether they like to or not.

The highest of high quality stocks have their Tickers bolded with green and can only qualify for such honor if they meet all 4 of these criteria:
   1) A or higher S&P financial rating
   2) A++ in Value Line financial strength rating
   3) in Value Line safety rating
   4) Be considered by me to be "Core" or have the Green Ticker name

Companies that are "Core" and satisfy the 4 criteria above have their entire row in Green and their Ticker bolded, and I call these my Elite collection of high quality stocks. I am always on the lookout to add to these at fair value or less. These positions make up the foundation of my dividend growth portfolio since I do not see them going out of business anytime soon.

Companies can meet the first 3 requirements (very high scores for credit rating and safety) but fall in an industry I am not too fond of. Some examples of stocks that I own are CVX, DIS, and TJX. Chevron is an oil major that is incredibly strong but I still see it as a risk due to the cyclical nature of oil prices. The only oil major I will count on is Exxon with its proven history and AAA credit rating. I consider Disney to be speculative because of its lower yield, discretionary nature (do we really need entertainment to live??), and my perception of the company as a growth stock. TJX is labeled as a Speculative position because I do not completely trust retail, and I own it purely for capital gains despite the meager dividend (which I must add grows rather quickly). One can never be too comfortable with retail when we continuously hear of the cancerous giant called Amazon. An investor needs to do their due diligence to decide if a company is really something he or she is comfortable owning despite the strong ratings.

Companies that turned sour (dividend cut, fraud, or destruction in fundamentals) which I have held in the past but eventually sold would all be classified under the Speculative or (more generously stated) Supporting category from the rules defined. These include KMI, ARCP, and SDRL. I have sold each of these at an average of a 20%-30% loss.

There are definitely other "Core" positions in my portfolio, but they do not qualify for the Elite status because they have lower safety or lower credit rating due to their debt, company size, type of business, cyclical nature, less predictable earnings, dividend history, or whatever other factors.

Currently in the portfolio below "Core" positions (which includes the Elite) occupy 72% of my portfolio. To be more specific, Elite positions occupy 27% of my portfolio. Hence the majority of my holdings are companies that I want to buy and hold forever. Speculative positions only occupy at the moment 9% of my holdings.

TickerSector               Value  Weight          Annual Div          YieldS&P FinVL FinVL Safety
ABTHealth$2,143.451.48%$45.232.11%A+A++1
CLStaples$2,314.401.60%$52.772.28%AA-A++1
JNJHealth$9,211.016.37%$265.282.88%AAAA++1
KMBStaples$2,718.831.88%$76.942.83%AA++1
KOStaples$4,167.412.88%$127.523.06%AAA++1
MMMIndustrial$1,330.840.92%$36.862.77%AA-A++1
PEPStaples$4,905.003.39%$138.812.83%AA++1
PGStaples$2,710.121.87%$90.253.33%AA-A++1
VFinancial$6,293.164.35%$44.680.71%A+A++1
XOMEnergy$4,341.673.00%$159.773.68%AAAA++1
APDMaterials$1,163.720.80%$28.632.46%AA+1
BDXHealth$2,823.001.95%$48.561.72%BBB+A++1
CHDStaples$4,807.983.32%$76.451.59%BBB+A+1
DUtilities$2,826.771.95%$110.813.92%A-B++2
GISStaples$4,262.342.95%$128.303.01%BBB+A+1
KHCStaples$3,757.062.60%$119.853.19%BBB-A2
MKCStaples$3,440.552.38%$69.842.03%A-A+1
MOStaples$10,742.367.42%$423.253.94%BBB+B+2
NEEUtilities$1,428.400.99%$44.573.12%A-A2
NVOHealth$7,063.634.88%$91.831.30%AA-A++2
OREIT$7,676.285.31%$352.344.59%BBB+A2
PMStaples$8,160.505.64%$378.654.64%AB++2
SOUtilities$2,156.991.49%$103.104.78%A-A2
TTelecom$4,134.552.86%$229.885.56%BBB+A++1
ABBVHealth$1,793.901.24%$72.474.04%AA2
CVSHealth$1,261.210.87%$19.041.51%BBB+A+1
CVXEnergy$2,136.331.48%$98.484.61%AAA++1
HCPREIT$2,343.601.62%$146.016.23%BBB+B++3
MAFinancial$4,629.953.20%$30.090.65%AA++2
MCDDiscret$1,831.501.27%$55.683.04%BBB+A++1
PXMaterials$1,844.571.27%$49.802.70%AA1
UTXIndustrial$1,696.121.17%$46.642.75%A-A++1
VFCDiscret$764.060.53%$18.032.36%AA2
VZTelecom$1,883.811.30%$93.444.96%BBB+A++1
XELUtilities$645.830.45%$23.253.60%A-A1
AAPLTech$2,472.071.71%$46.471.88%AA+A++2
DISDiscret$2,514.271.74%$31.931.27%AA++1
ROSTDiscret$3,451.802.39%$30.030.87%A-A2
SBUXDiscret$2,306.091.59%$30.671.33%A-A++1
TJXDiscret$2,167.681.50%$25.801.19%A+A++1
…..…..2    Equity Total…..4Total Annual Div Avg Yield…..8…..83…..9
$138,322.80$4,062.012.94%
CashCash$6,364.594.40%
...   Equity + Cash…..22…..2…..…..222…..2222
$144,687.39

Watchlist: MMM

Today, all the major indices saw increases but MMM had a large 6% decline on decreased guidance. 3M is my favorite industrial and I always wanted to add more but the price is always high. At the moment it is sporting a 2.77% yield. It's still over my price point, but it's worth considering. I like 3M above a 3% yield. The Fed announcement about their decision to hike rates will be coming very soon, and may spike volatility in the market which may open large opportunities in high quality stocks for investors. When stock market sentiment goes bad, many investors who own index funds will sell. And index funds hold everything from junk to high quality names like 3M. People will throw the baby out with the bath water during panic sells, and buying quality companies that have unchanged fundamentals are best done during these times.

3M has paid dividends for 98 years and have been increasing the dividend for 57 straight years. Their dividend was last raised by 20% and I am expecting any day now for them to announce the increase for the 2016 year.

I may choose to add some more later this week. 3M below $137 will be a buy for me.

FastGraphs indicates in the last 20 years, MMM averages around a P/E of 20, which is approximately what it stands today.


Monday, December 14, 2015

Recent buy: CL & XEL

Tomorrow morning, the following trades will be done on my taxable portfolio. Not much activity in my portfolio towards the end of the year. My money is spent on Christmas presents :)

Buy:
$200 CL - Colgate Palmolive Company - Yield 2.31%
$200 XEL - Xcel Energy Inc - Yield 3.63%

Monday, December 7, 2015

Recent transaction: D, NEE

Bought:
D: $2313
NEE: $1021

Sold:
KMI: $1018

This week I am working on increasing my utility weighting. Utilities will stand at a small 4.6% weighting in my total portfolio after this trade closes so there is still more work to be done. The four utilities I like are SO, D, NEE, and XEL.

The tax loss harvesting is completed for this year. I do not plan to sell anymore shares for the 2015 year. I will be able to subtract $3000 from my income when I file my taxes in February, and be able to receive a check of around $1000 back from the government.

Thursday, December 3, 2015

November 2015 Portfolio Summary

November has been a relatively inactive month. I have not been following the market as closely this month. My goals are to increase my cash position and to increase my size in utilities when interest rates are raised. It seems that the high yield market is already taking a hit, making many utility companies enter more favorable prices.


My portfolio is shown below. A new large addition is Novo Nordisk, a Danish pharma company specializing in diabetes medicine. I have also started a new position in CVS. My portfolio has increased quite decently since last month's summary primarily due to contributions.

My yield is a bit on the low side for my taste. I hope that in the coming weeks utility stocks and REITs continue to get hammered so that I can pickup them at attractive valuations. These stocks sport high yields and will help bring my dividends up more.

The goal of the portfolio is to own high quality companies, with strong histories of increasing dividends year after year. Quality is incredibly important, I prefer to hold heavily companies with a BBB+ or better S&P financial rating or an A or higher Value Line financial strength rating. The table below show the financial rating scores of my various holdings. Bolded names are companies that are incredibly high quality.

Ticker Sector                Value   Weight           Annual Div           Yield S&P Fin VL Fin VL Safety
MO Staples $10,695.52 7.44% $423.54 3.96% BBB+ B+ 2
JNJ Health $8,851.28 6.15% $263.77 2.98% AAA A++ 1
PM Staples $8,114.05 5.64% $378.93 4.67% A B++ 2
O REIT $7,469.10 5.19% $350.30 4.69% BBB+ A 2
NVO Health $7,038.45 4.89% $92.20 1.31% AA- A++ 2
V Financial $6,266.75 4.36% $45.12 0.72% A+ A++ 1
PEP Staples $4,890.20 3.40% $138.88 2.84% A A++ 1
CHD Staples $4,847.80 3.37% $76.11 1.57% BBB+ A+ 1
MA Financial $4,513.77 3.14% $30.24 0.67% A A++ 2
XOM Energy $4,245.02 2.95% $157.91 3.72% AAA A++ 1
GIS Staples $4,169.16 2.90% $127.99 3.07% BBB+ A+ 1
KO Staples $4,076.69 2.83% $126.79 3.11% AA A++ 1
T Telecom $4,047.73 2.81% $229.91 5.68% BBB+ A++ 1
KHC Staples $3,728.36 2.59% $114.83 3.08% BBB- A 2
MKC Staples $3,472.84 2.41% $65.64 1.89% A- A+ 1
ROST Discret $3,351.59 2.33% $30.16 0.90% A- A 2
BDX Health $2,761.13 1.92% $48.60 1.76% BBB+ A++ 1
KMB Staples $2,583.59 1.80% $76.99 2.98% A A++ 1
AAPL Tech $2,577.45 1.79% $46.65 1.81% AA+ A++ 2
PG Staples $2,576.11 1.79% $90.16 3.50% AA- A++ 1
DIS Discret $2,508.22 1.74% $29.60 1.18% A A++ 1
SBUX Discret $2,289.55 1.59% $30.68 1.34% A- A++ 1
HCP REIT $2,268.60 1.58% $146.10 6.44% BBB+ B++ 3
TJX Discret $2,142.54 1.49% $25.71 1.20% A+ A++ 1
CL Staples $2,077.33 1.44% $48.19 2.32% AA- A++ 1
ABT Health $2,075.74 1.44% $45.04 2.17% A+ A++ 1
SO Utilities $2,073.10 1.44% $101.79 4.91% A- A 2
CVX Energy $2,021.58 1.41% $97.44 4.82% AA A++ 1
PX Materials $1,888.43 1.31% $49.48 2.62% A A 1
VZ Telecom $1,842.86 1.28% $93.43 5.07% BBB+ A++ 1
ABBV Health $1,785.31 1.24% $72.48 4.06% A A 2
MCD Discret $1,762.56 1.23% $55.34 3.14% BBB+ A++ 1
UTX Industrial $1,710.68 1.19% $46.19 2.70% A- A++ 1
MMM Industrial $1,377.87 0.96% $36.65 2.66% AA- A++ 1
CVS Health $1,264.75 0.88% $19.10 1.51% BBB+ A+ 1
KMI Energy $1,256.95 0.87% $133.11 10.59% BBB- B++ 3
APD Materials $1,201.51 0.84% $28.72 2.39% A A+ 1
VFC Discret $777.46 0.54% $18.04 2.32% A A 2
D Utilities $503.95 0.35% $20.01 3.97% A- B++ 2
XEL Utilities $432.29 0.30% $16.08 3.72% A- A 1
NEE Utilities $399.18 0.28% $12.73 3.19% A- A 2
….. …..2     Equity Total …..4 Total Annual Div  Avg Yield …..8 …..83 …..9
$133,937.05 $4,040.65 3.02%
Cash Cash $9,874.69 6.87%
. ..    Equity + Cash …..22 …..2 ….. …..222 …..2222
$143,811.74

My healthcare sector weighting have been increased this last month. They now occupy 1/6 of my portfolio. MO, JNJ, PM, O, NVO, V, PEP, CHD, MA, XOM are my 10 largest holdings.



In terms of meeting my goals, I am still on track. The ride has been bumpy in 2015. I expect the ride to get bumpier as my networth increases and the fluctuations in the market become much more than the monthly contributions I put into my portfolio.


Stay tuned
-YD