Friday, November 4, 2016

October 2016 Portfolio Summary

Introduction:
The purpose of this blog is to document my journal to accumulate passive income. If an investor wants to become independent, he needs to make sure that he has several sources of income. Many people today rely purely on their primary vocation for financial support. Having worked in the tech industry for several years, I have seen many of my colleagues given the "pink slip" as companies reduce their expenses. One's employment is never guaranteed and this is very scary indeed. One's consistent paycheck from his employer should never be taken for granted. In order to take control of one's life, a person must become an employer (or business owner) and not remain as an employee forever. As an employer, you own assets and people that produce income for you. You keep a portion of the profits from a profitable enterprise. The employees are there to work for you to bring in profit and you will pay the employees a small portion of your profits to ensure they come in to work the next day. In the future, I want to be on the side of the employer or shareholder or business owner. I do not want to remain an employee forever since the accumulation of wealth is only linear as an employee (based on hours worked and wage) while the accumulation of wealth for a capitalist is exponential. My current goal as an employee is to accumulate as many businesses as I can to pay for my living expenses.

October:
The market was rather shaky in October. From what I've noticed, September and November have often been volatile months with the indexes often dropping several percentages. It seems this year that the volatility is continuing into November as well. Part of my reasoning is that the elections are coming up in a few days and there is large uncertainty. There is also the Federal Reserve decision in December which many believe will be a hike to the interest rate. For the month of November, the Federal Reserve decided not to hike the interest rate. I believe also that many of the companies that are not doing so well this year will continue to drop as the year ends. Many people are looking to perform tax loss harvesting including me. Those people will sell the losers to reduce their taxable income.

I pasted the charts below for the S&P500 index, the crude oil prices, and the dollar index. My portfolio follows similarly to the S&P500 index because my portfolio is very diversified. I would say my portfolio rises and falls less than the S&P500 (less volatility) because of my larger weighting in consumer staples and my low exposure to technology, banks, and industrials. The oil price is shown because today's market often times follows the price of oil. Oil is seen as a demand indicator and when oil prices fall, institutional investors often sell. This is rather contradictory since lower oil prices will help many companies since oil is a basic commodity that companies use to produce their goods and services. The dollar index is shown because a strong dollar will have a negative effect on many of my companies that are multinational. A strong dollar means less sales overseas since our goods are more expensive for foreigners to purchase. 


The S&P500 is correcting. Although this may be seen as bad news for most people I welcome this change. It allows me to purchase companies at a large discount. The yield will also now be higher for many of the dividend aristocrats I follow. The US dollar has risen in October but is largely stabilized around 95. Crude oil prices have taken a tumble lately. I am not invested in energy or oil stocks anymore so this is not something I am too bothered with.

Portfolio:
My portfolio at the end of October is trailing a bit below $1/4 million. I seem to be having some difficulty going off the 1/4 million mark and it's largely due to the market uncertainty and selling happening before the 2016 election and December Fed hike decision. My positions are sorted from highest to lowest. The right columns of the table show the S&P credit rating (AAA being the best), the Value Line Financial Strength rating (A++ being the strongest), and the Value Line Safety rating (1 being the safest).

My general guideline in investing is to buy high quality. It is better to pay more for a few extraordinary high quality company than to buy a lot of cheap good companies. The portfolio's goal is income accumulation. All of my companies pay dividends and all of them raise the dividend every year. The coverage of that dividend is paramount and I do everything in my power to ensure the companies are safe in covering their dividends.

Name Ticker Sector       Value   Weight        Divies      Yield S&P Fin VL Fin VL Safety
Altria Group Inc MO Staples $36,412.09 14.78% $1,365.38 3.7498% A- B+ 2
Home Depot Inc HD Discret $11,368.87 4.61% $261.09 2.2966% A A++ 1
Johnson & Johnson JNJ Health $11,218.71 4.55% $312.09 2.7819% AAA A++ 1
Philip Morris International Inc PM Staples $10,239.44 4.16% $442.65 4.3230% A B++ 2
Visa Inc V Financial $10,170.04 4.13% $83.23 0.8184% A+ A++ 1
Realty Income Corp O REIT $8,974.37 3.64% $384.05 4.2794% BBB+ A 2
PepsiCo PEP Staples $8,141.90 3.30% $229.83 2.8228% A A++ 1
Kraft Heinz Co KHC Staples $7,924.62 3.22% $220.51 2.7826% BBB- A 2
General Mills, Inc. GIS Staples $7,823.10 3.17% $245.75 3.1414% BBB+ A+ 1
Ross Stores Inc ROST Discret $7,372.47 2.99% $64.97 0.8812% A- A 2
Kimberly-Clark KMB Staples $7,081.03 2.87% $229.28 3.2380% A A++ 1
Nike Inc NKE Discret $6,344.89 2.57% $81.66 1.2869% AA- A++ 1
Mastercard Inc MA Financial $5,899.19 2.39% $43.20 0.7323% A A++ 1
3M Co MMM Industrial $5,804.30 2.36% $154.48 2.6614% AA- A++ 1
Reynolds American Inc RAI Staples $5,422.23 2.20% $181.93 3.3552% BBB A 2
Becton Dickinson and Co BDX Health $5,381.95 2.18% $82.04 1.5244% BBB+ A++ 1
The Coca-Cola Co KO Staples $5,104.36 2.07% $170.02 3.3310% AA- A++ 1
Church & Dwight CHD Staples $5,011.03 2.03% $80.64 1.6092% BBB+ A+ 1
Hormel Foods Corporation  HRL Staples $4,675.83 1.90% $74.44 1.5921% A A 1
Medtronic, Inc. MDT Health $4,634.33 1.88% $97.68 2.1078% A A++ 1
Starbucks Corporation SBUX Discret $4,603.99 1.87% $71.15 1.5453% A- A++ 1
Dominion Resources, Inc D Utilities $4,374.49 1.78% $164.74 3.7660% A- B++ 2
McCormick & Company MKC Staples $3,906.98 1.59% $70.84 1.8132% A- A+ 1
TJX Companies Inc TJX Discret $3,866.14 1.57% $56.00 1.4485% A A++ 1
Automatic Data Proc, Inc ADP Tech $3,812.45 1.55% $90.48 2.3732% AA A++ 1
NextEra Energy Inc NEE Utilities $3,719.10 1.51% $104.51 2.8101% A- A 2
Xcel Energy Inc XEL Utilities $3,653.25 1.48% $122.31 3.3481% A- A+ 1
McDonald's Corporation MCD Discret $3,585.07 1.45% $120.66 3.3656% BBB+ A++ 1
Air Products & Chemicals, Inc APD Materials $3,534.83 1.43% $91.37 2.5847% A A+ 1
Stryker Corporation SYK Health $3,043.86 1.24% $40.01 1.3143% A A++ 1
Southern Co SO Utilities $2,840.05 1.15% $126.25 4.4453% A- A 2
AT&T Inc T Telecom $2,690.79 1.09% $143.98 5.3508% BBB+ A++ 1
Colgate-Palmolive Co CL Staples $2,486.89 1.01% $54.97 2.2106% AA- A++ 1
Procter & Gamble Co PG Staples $2,286.04 0.93% $70.75 3.0947% AA- A++ 1
Abbott Laboratories ABT Health $2,280.54 0.93% $61.80 2.7097% A+ A++ 1
Verizon Communications Inc VZ Telecom $2,036.08 0.83% $100.35 4.9285% BBB+ A++ 1
Clorox Co CLX Staples $1,603.22 0.65% $44.72 2.7894% A- B++ 2
C R Bard Inc BCR Health $1,567.64 0.64% $7.51 0.4790% A A+ 1
WEC Energy Group, Inc. WEC Utilities $1,402.35 0.57% $47.68 3.3997% A- A+ 1
The J. M. Smucker Company SJM Staples $986.73 0.40% $22.73 2.3038% BBB A++ 1
Aqua America Inc WTR Utilities $918.36 0.37% $23.92 2.6049% A+ A+ 2
Misc Type ……….. Partial Totals Weight Yrly Dividends  Avg Yield …..832 …..9 …..82
Equity Stocks $234,203.62 95.04% $6,441.65 2.7504%
Liquid US Dollars $9,949.51 4.04%
Non-Liquid Assets $2,278.50 0.92%
. .. Equity + Misc Weight …..2 ….. …..222 …..2222 …..223
Total $246,431.63 100.00%



My largest weightings are in consumer staples. These companies are corporations that make products we use everyday, which is why they are called staples. These include stuff like water and drinks, food, shampoo, toilet paper, toothpaste, cigarettes, food spices, and laundry detergent. They are not high flying growth stocks but they do continuously grow their dividends and are readily capable of covering their dividends due to the anti-cyclical nature of their business. The majority of my portfolio are in positions I would classify as Core or Super Core. These business are ones I can trust for the long term. I don't see many of these going out of business any time soon since they offer products and services we all need no matter the economic situation. Supporting and Speculative positions are usually companies that I classify as less robust but may offer larger capital gain growth than my Core positions. I try to balance my portfolio between super growth and steady payers.

My Progress:

Here is the graph showing my progress so far to reach $1 million. With $1M I hope to have a 2.6% average yield on my portfolio which is around $26,000 a year in passive income from my assets.

My portfolio has been flat for several months because the market has been falling and I have been able to offset that with my periodic contributions. Although my portfolio has been going no where, my dividends have been growing as seen in the plot below.

One must remember as a dividend growth investor that the ultimate goal is income accumulation, not share price accumulation. Share price accumulation is only icing on the cake to income accumulation. Usually, when companies increase their dividends, their share price will rise along with it but this is often an after effect of the business being successful. As long as my portfolio's dividend income continues to rise, I am content. If my income is dropping because my companies have to cut their dividend, then I will become concerned.


Stay tuned for next month's update.

-YD

1 comment:

  1. hello congratulations on your blog, continues so are my hero, greetings from italy

    ReplyDelete