Tuesday, September 12, 2017

August 2017 Portfolio Summary

This is the August portfolio summary report. I will be using data up to the September 11, 2017 period. I will first summarize what happened in the market in the last month. The dollar continues to weaken. This is great for my portfolio as most of my portfolio has companies that deal internationally. A weaker dollar means more US dollars recovered when they convert their foreign earnings to US dollars. A weaker dollar allows our US products to compete more competitively in price on foreign lands. 

The S&P500 has retreated in August. August, September, and October are usually more volatile months and corrections are common in the last few years. I always took advantage of the declines but it seems our market now has largely recovered. The S&P500 is hitting all time highs again but my portfolio has not since many of the gainer industries are not in my portfolio (I tend to hold very low volatility stocks so my portfolio does not usually follow so extremely with the S&P500). In the news, there were a lot of concern over the North Korea nuclear testing situation, Trump's inability to get any movement on tax reform or repatriation, the destruction of Hurricane Harvey and Irma, and the US debt ceiling. 

I used to monitor oil very closely in the past. My portfolio does not contain any companies that directly deal with oil. But I still track the oil market since this commodity is so crucial to our economy. Oil has stayed relatively flat. It is still very cheap, sub $50. This new environment of very cheap oil is likely to stay for a very long time. It is going to be very hard for any oil company in this environment. I tend to stick out of the oil business in general as countries aim to phase out gas powered cars for alternatives, and the world becomes less reliant on oil. I cannot see oil being a dominant source of energy in 70+ years. I cannot see all of our oil pipelines being usable in the future as oil reserves get all mined out, eventually they'll all be retired. I invest for the decades and the future. If a company's core product is no longer going to be here then I will not invest in it. I can see toilet paper and toothpaste and laundry detergent being here in 100 years time, but oil not so much.

This portfolio's goal is income replacement. Every single company that I own pays dividends. Nearly all of them pay once a quarter, except Realty Income (O) which pays every month. The dividends of every company that I own has been raised every year. The large majority of companies that I own have been raising dividends for more than 2 decades. At the time of writing my income has grown to over $10,000 in dividends a year. I do not hold many high yielding companies as they are riskier. I am conservative in my selection of companies. I am averaging 2.6-2.8% in yield in my portfolio. Chasing yield has burned me in the past and I tend to prefer high credit rating low payout ratio companies to high yield.

Name Ticker Sector       Value   Weight        Divies      Yield S&P Fin VL Fin VL Safety
Altria Group Inc MO Staples $44,405.22 11.55% $1,875.98 4.2247% A- B+ 2
Philip Morris International Inc PM Staples $25,694.75 6.68% $906.39 3.5275% A B++ 2
Johnson & Johnson JNJ Health $22,152.33 5.76% $558.76 2.5223% AAA A++ 1
Home Depot Inc HD Discret $19,725.57 5.13% $443.41 2.2479% A A++ 1
Visa Inc V Financial $18,864.73 4.91% $117.29 0.6218% A+ A++ 1
Becton Dickinson and Co BDX Health $15,756.52 4.10% $225.68 1.4323% BBB+ A++ 1
PepsiCo PEP Staples $15,547.95 4.04% $432.75 2.7833% A A++ 1
Realty Income Corp O REIT $14,972.79 3.89% $639.71 4.2725% BBB+ A 2
McCormick & Company MKC Staples $11,587.20 3.01% $222.19 1.9176% A- A+ 1
Mastercard Inc MA Financial $11,274.12 2.93% $69.87 0.6198% A A++ 1
General Mills, Inc. GIS Staples $10,963.58 2.85% $385.24 3.5138% BBB+ A+ 1
Ross Stores Inc ROST Discret $10,754.69 2.80% $116.13 1.0798% A- A 2
Starbucks Corporation SBUX Discret $10,025.18 2.61% $185.58 1.8512% A A++ 1
Procter & Gamble Co PG Staples $9,563.96 2.49% $280.84 2.9365% AA- A++ 1
AT&T Inc T Telecom $8,788.93 2.29% $481.99 5.4841% BBB+ A++ 1
3M Co MMM Industrial $8,423.91 2.19% $188.93 2.2428% AA- A++ 1
Kimberly-Clark KMB Staples $8,129.28 2.11% $263.73 3.2441% A A++ 1
Kraft Heinz Co KHC Staples $7,728.64 2.01% $234.06 3.0285% BBB- A 2
Automatic Data Proc, Inc ADP Tech $7,566.72 1.97% $160.48 2.1209% AA A++ 1
Church & Dwight CHD Staples $7,034.18 1.83% $107.74 1.5316% BBB+ A+ 1
The Coca-Cola Co KO Staples $6,707.28 1.74% $213.39 3.1814% AA- A++ 1
TJX Companies Inc TJX Discret $5,941.96 1.55% $101.97 1.7161% A+ A++ 1
NextEra Energy Inc NEE Utilities $5,935.99 1.54% $154.08 2.5958% A- A 2
Clorox Co CLX Staples $5,842.56 1.52% $145.38 2.4883% A- B++ 2
Hormel Foods Corporation HRL Staples $5,823.08 1.51% $124.99 2.1465% A A 1
Xcel Energy Inc XEL Utilities $5,389.18 1.40% $153.64 2.8509% A- A+ 1
Air Products & Chemicals, Inc APD Materials $5,255.16 1.37% $133.86 2.5473% A A+ 1
McDonald's Corporation MCD Discret $5,200.38 1.35% $121.05 2.3277% BBB+ A++ 1
Illinois Tool Works Inc. ITW Industrial $4,826.79 1.26% $106.41 2.2046% A+ A++ 1
Dominion Resources, Inc D Utilities $4,823.63 1.25% $182.27 3.7788% BBB+ B++ 2
Colgate-Palmolive Co CL Staples $4,489.32 1.17% $99.73 2.2216% AA- A+ 1
Stryker Corporation SYK Health $4,179.05 1.09% $49.44 1.1831% A A++ 1
WEC Energy Group, Inc. WEC Utilities $4,067.75 1.06% $126.21 3.1026% A- A+ 1
Abbott Laboratories ABT Health $3,164.00 0.82% $63.94 2.0210% BBB A++ 1
Medtronic plc MDT Health $2,986.11 0.78% $67.37 2.2560% A A++ 1
Southern Co SO Utilities $2,917.62 0.76% $133.75 4.5841% A- A 2
Bard (C.R.) Inc BCR Health $2,267.96 0.59% $7.29 0.3213% A A+ 1
Federal Realty Investment Trust FRT REIT $2,084.00 0.54% $64.00 3.0710% A- B++ 2
The J. M. Smucker Company SJM Staples $1,950.22 0.51% $56.81 2.9132% BBB A++ 1
Aqua America Inc WTR Utilities $1,085.96 0.28% $25.72 2.3686% A+ A 2
Misc Type ……….. Partial Totals Weight Yrly Dividends  Avg Yield …..832 …..9 …..82
Equity Stocks $373,898.26 97.24% $10,028.07 2.6820%
Investable US Dollars $5,588.09 1.45%
Miscellaneous Assets $5,041.50 1.31%
. .. Equity + Misc Weight …..2 ….. …..222 …..2222 …..223
Total $384,527.85 100.00%

Below is a treemap of my portfolio holdings. I have most of my weightings in consumer staples. I p refer non-cyclical companies. I need to make sure the dividend is safe since I do not want to see a drop in my annual dividend income. Cyclical businesses like oil and materials and industrials have boom cycles and bust cycles. I do not want to partake in such roller coasters. Companies I prefer are those that offer products and services you and I use every day. We simply cannot live without these products. In consumer staples land, this includes products like cleaning products, addictive products (alcohol and tobacco), food and drinks, and personal care products. In the healthcare side these can include disposable equipment like needles and gloves used in hospitals to medical tools doctors use to treat patients to common drugs like Tylenol, Pepto Bismol, or sleeping pills. If one becomes sick or is on the verge of dying, one borrows money or pays a lot of money to see the doctor and tries to get their problems fixed, end of story. For financials, I have been a big advocate of MasterCard and Visa. I see them as the future of developed countries. There is no need to use cash anymore and the incentive to get cash back and the ability to "borrow" makes credit cards very attractive. I want to profit from this cashless trend and MA and V are my main picks. I prefer MA and V over others like Discover and American Express because MA and V do not lend to the end user (which is risky). MA and V offer toll road type of service which is a much less risky high margin business. Even if the economy has a recession, people still need to purchase basic survival goods and services. And people in developed countries will carry plastic not wads of cash.

My portfolio sits in the $384,000 range but can move up or down a few thousands of dollars depending on market sentiment. My portfolio has grown to a point where daily market fluctuations starts to be quite large compared to my periodic contributions. Since the last few weeks have not been kind to my portfolio, especially the food company stocks and other consumer staples companies, I have seen no growth in my overall portfolio value. The declines in  several of the companies that I own including my most heavily weighted position in Altria has been offset by my periodic contributions. I have no intention of selling Altria. In fact I am looking to add more to my large position if Altria falls below $60. I find the FDA announcement to investigate reduction of nicotine in cigarettes as something that has no material impact to Altria's top and bottom line right now nor in the coming years. This is something that will take a very long time to materialize (if ever). And Altria has always been part of large laws discussions with the government regarding tobacco. Altria has the best negotiators and businessmen to sort out an agreement with the government to establish a scenario that proves profitable to Altria, as seen in the Master Sourcing Agreement in 1998 which was a genius agreement between government and Big Tobacco. In effect, Big Tobacco and Government are both partners in the tobacco industry. Both want to see growing earnings in the business as Governments need the tax income to support their programs.

Below is a chart of my dividend income. The spike up is my recent additions to my portfolio that cause my annual income to reach 5 figures ($10,028). I plan to add more to my portfolio throughout the year and I think I can hit somewhere between $10,600-$11,000 by the year end. I am estimating that my portfolio's net worth can hit around $400,000 by the end of the year. But this largely depends on market fluctuations.

Stay tuned for next month's report. Happy investing.


1 comment:

  1. Fantastic, over 10k for forward dividends, that is a fantastic milestone, well done to you!