Monday, April 24, 2017

Recent buy: BDX

Today BDX announced they purchased BCR for a 20% premium. I hold shares in both but my position in BCR is small. It was however a very nice gain and I am sure BCR will serve BDX well in the long run. I expect a lot of synergies and cost savings along with EPS growth for BDX after the acquisition.

I have a large holding in BDX and I added 19 shares today. I spent around $3400 on BDX. If it falls more I plan to add more to BDX. BDX and JNJ are two of my favorite dividend aristocrat healthcare companies. They have consistently increasing earnings and dividend increases for many many decades, even during economic recessions. They provide products and equipment we need since health is very important for people and when you're sick you will eventually spend money on health equipment. Healthcare companies are also in a good spot for the next several decades as the baby boomer population hits old age, which usually results in higher healthcare costs.

Thursday, April 20, 2017

Recent buy: JNJ, PM, ITW

Today I purchased the following companies.

JNJ: 57 shares - $6947
PM: 24 shares - $2623
ITW: 14 shares - $1879

Wednesday, April 12, 2017

March 2017 Portfolio Summary

I will report March's summary using data I have today on April 12, 2017. The growth so far this Q1 has been high due to the growth in the market and bonuses or nonrecurring sources. I am currently ahead of schedule for 2017 so a market correction will be fine by me to scoop up better dividend yields.

The goal of this portfolio is income replacement. I will one day use the passive dividend checks I receive every month from my various holdings to pay for my daily living expenses, whether it be housing or food or travel or entertainment. Everything will eventually be covered without me having to work. My plan is also to have this income stream grow independently without me having to contribute. Each of these companies are expected to increase their dividend payouts year after year. And many of these companies have consistently done so no matter the economic environment. As of today, I contribute heavily into the portfolio month after month. Hence, most of the dividend growth is caused by my contributions. In the future however I expect the portfolio to grow the income by itself at a rate of 10% y/y with dividends reinvested (so a $100,000 income becomes $110,000 the next year and then $121,000 the next and $133,100 the next, and so on).

I hold mainly defensive companies that provide products and services we use everyday no matter what. Whether we are unemployed, sick, or in a recession, people will likely buy products or services from the companies that I own. These are things like credit card payment services (Visa), toilet paper, food, water, electric utilities, off the shelf medicine, toothpaste, shampoo, and household/industrial cleaning products. This ensures that the companies can successfully pay their dividends safely every year.

I am a technical professional working in the bay area. Before accounting for taxes, I strive to save and invest 70-80% of my income (before tax salary - living expenses) / (before tax salary). Since I am single and in my 20s (no mortgage or family finances yet), I am able to grind through and grow this portfolio very quickly. I think time is my most valuable asset, not so much the income I can generate. Compounding from investment income and returns is a much faster way to grow wealth I think than having a higher income once you factor in time. Compounding as a function of time is exponential while accruing income by spending one's hours is only a function of linear growth with time as the variable. So I tried to get started in investing right after I graduated from university.

My goal is to reach $1,000,000 by age 31-33, depending on market fluctuations. By then the portfolio should be spitting out $25,000 in passive income every year or $2083 a month. I expect this $1M portfolio to be able to passively grow the income at 10% a year with dividends reinvested, or ~$2500 for the first couple years after hitting $1M. The portfolio shown below has been the result of my work over a period of 3-4 years. I started from $0 and so far I am a third of the way towards my goal of $1M dollars.

Currently my portfolio receives $7500 annually in passive dividend income. This number can be even higher if I did not have nearly $65,000 in cash. I plan to deploy more cash to boost my dividend income in the future, but deals are hard to come by in today's expensive market.

Friday, April 7, 2017

The April Plan

My taxes are done, there will be a tax return I will get this month that I would like to use on stocks. Along with the cash I have been saving from my income, the amount I plan to spend will be in the 5 figures.

The problem now is that most of the stock market has run up a lot and everything is expensive. My goal is income accumulation and not necessarily buy and sell. So higher stock prices have to me a downside of acquiring less income per share than before, however since I do not have any desire to sell shares that I buy, a decrease in share price will not be a problem for me.

I have recently switched brokerages so I will be able to get several free trades per month due to the balance of my portfolio. Hence, this list is quite large.

Here are some names I am thinking of to add this month. I am trying to pick primarily higher yielding companies.


Altria (MO): This well run company paying copious dividends has pulled back nicely. I always buy on the dips on Altria. MO yields 3.4%

Philip Morris (PM): The highest yielding stock I'm considering from this list. Its yield is 3.7% and has strong growth prospects with IQOS and the international population usage of cigarettes has a much higher growth potential than the US. The company is also hampered by the strong dollar, and when that goes down PM's earnings will increase substantially.

Procter (PG): Still expensive but it's pulling back. I like PG at a 3% yield or above and that's where it sits now.

Kimberly (KMB): Also a bit expensive but it's rolling back down. I like this company at a 3% or above and it's sitting around 3% now.

Coca Cola (KO): The no growth loser. It yields around 3.5% now which is a nice yield in today's market. I will consider buying KO not for growth but as a "bond" that grows with inflation.

Clorox (CLX): Still at a high but pulling back a little bit. It yields 2.40% which is not very high but it's one of the few companies that can still grow organically.

General Mills (GIS): Downgrades and less than stellar earnings is causing this staple name to fall back even more. It now yields 3.3%

Hormel (HRL): Hormel is a small yielding company at 2%. The company shows impressive growth but I feel it is experiencing PE contraction right now (sits at around a P/E of 20 which is much lower than what it was in the past). The price has not moved since the beginning of 2016.

JM Smucker (SJM): Nice pull back on this consumer staple company that is very defensive. It's at 2.32% now and has strong growth as well. A bit expensive with a P/E of 22.

3M (MMM): I'm late to industrials but my weighting in industrials is too light. So I need a few high quality names to have small additional positions added to. 3M is the highest quality in my opinion and it yields now 2.5% which is not bad for the amount it has run up. 3M's recent dividend increase was only a modest 6% hike. My strategy for industrials (since I am buying at a high) is to buy a small position now and then buy more as the companies drop due to bad news or slow downs.

Illinois Tool Works (ITW): ITW is more cyclical than 3M but it is also a very well diversified industrial. It yields only 2% but increases its dividend at a high pace when the economy is good. It's recent increase from 0.55 to 0.65 was a 18% hike. Industrials pull back hard when the economy slows down. I don't want to overload on ITW right now but want to have a starter position. For example, add $3000 now, and when it drops 10% add another $3000. Since this position is long term, I have no plans to sell and buying at a lower price will just give me the benefit of getting more dividends per share.

Visa (V) / MasterCard (MA): Both of these are very high growth and offer non-existent dividends. However, these dividends grow quickly. V yields 0.74% and MA yields 0.78%. I'm expecting V and MA to grow their dividends by 15-20%. The future is cashless.

Becton (BDX): Very consistent grower health care equipment company yielding 1.6%. BDX is usually very conservative with increases, so I'm expecting a 10% hike.

Ross (ROST) / TJX Companies (TJX): These are more speculative since they are brick and mortar. However, their past performance has been impressive and I believe they offer a niche store style that customers will always flock to even during bad times (they are the discount store that sells brand name products). TJX recently hiked their dividend 20%. from 0.260 to 0.313. It has done this consistently in the past and I believe it will continue in the future. I expect similar growth with ROST.

Saturday, April 1, 2017

March 2017 Dividends Received

I cashed in $644 for March 2017. The goal of this portfolio is income growth and March was another month showing growth in my passive income. All dividends were reinvested back into the stocks that paid them. My estimates for now indicate that in April I will be able to get $820 and for May I'm planning on getting $350.

Ticker      Total    Taxable    Roth IRA         401k
HD $84.30 $21.11 $63.19
JNJ $78.58 $73.56 $5.02
PEP $57.87 $33.45 $24.42
KHC $55.52 $55.52
D $44.84 $6.12 $38.72
O $41.25 $33.88 $7.37
MMM $41.13 $41.13
SO $31.94 $31.94
BDX $31.94 $31.94
MCD $30.40 $30.40
NEE $29.73 $29.73
CHD $26.75 $14.88 $11.87
ROST $26.10 $26.10
Interest $20.95 $20.95
V $20.85 $15.05 $5.80
TJX $14.05 $14.05
WEC $12.63 $12.63
SJM $10.34 $10.34
WTR $5.98 $5.98
$665.15 $474.88 $33.88 $156.39