Monday, December 31, 2018

The year is over

What a volatile end of the year December was. Here's a screenshot of past yearly returns for the S&P500 and how this year compares.

After the market closed on the final day of 2018, my portfolio sits at $570,687 with the stock position I hold averaging a 3.01% yield. Right now the portfolio outputs $16,481 in future annual income. The cash position now sits at $15,895 or 2.79% of weighting.

I will post a full summary in a report soon after the holidays. Happy new years to everyone. Let's make 2019 a good year and increase the dividend income even further!


Tuesday, December 18, 2018

Thoughts on market correction

The S&P500 has pulled back around 13% from its highs. For those that only focus on price, 2018 has not been a good year. My portfolio has pulled back from the $600K levels and is now sitting in the high $500k's :(  I made a vow to myself that I will climb myself back up!

The lower prices a lot of companies are dropping by is creating a lot of good value. Each share I can purchase now contributes more dividend income compared to when the S&P500 was at its peak. Although this site says my goal is to reach $1MM by some time, the real goal of the portfolio is income appreciation. Since I am still in my accumulation stage in life, I want my dollars to be put to their best use. A market sale provides are more efficient way for me to deploy cash as yields will be higher. I am developing a list of stocks I am planning to purchase after the holiday season. I do not expect to purchase anything from now until the end of the year as I will be going on vacation.

After New Years I plan to have around $15,000 in capital around mid January. Hopefully values are still attractive by then. My feeling is that since the S&P500 is ending the year quite negative, tax loss harvesting is going to exacerbate a lot of the losses. I do not plan to tax loss harvest as I do not like selling any stock. February is traditionally a bad month as well. And since the trend now is downward without any recovery, I am feeling rather patient waiting for a floor of resistance before deploying anything quickly. This may mean waiting in January or waiting until February. After my recent large purchase a few weeks ago, my portfolio has had a large swing upward in dividend income so I do not feel a need to increase it as quickly in the interim.

My focus is on defensive type businesses with conservative yields and conservative payout ratios. There are discussion about recessions and slowdowns. A defensive portfolio with business types that still function very well under larger unemployment will preserve capital and pay dividends better than cyclical industries like oil & gas, industrials, transports, banks, and discretionary. Defensive industries include sectors like consumer staples, healthcare, and utilities.

Eventually stocks will fall hard enough during hard times and the dividend yield will be the only thing keeping a stock from falling any further. The yield acts as a floor. If JNJ or Clorox falls in price to a 4% yield, then that will be a huge bargain as those payout ratios are safe and the business is defensive in nature. When a stock like Netflix or Tesla falls 60% there is no dividend to pay you to hold along, there is no floor of protection. The only thing keeping you in is the prospect or hope that the price will rise back up again.

I don't believe I can invest in a business just based purely on price speculation, hope that the price will go up one day. I need to have some form of payment periodically to allow me to hold it comfortably during a recession. The dividend is reassurance to me that the business is still profitable and that I can still rely on it to provide income even during bad economic times. Dividend aristocrats are examples of companies that have survived countless recessions while still maintaining a increasing dividend year after year, these companies RAISED their dividends during recessions. This is why my portfolio is heavily concentrated towards dividend aristocrat types of businesses that are in defensive sectors. Dividends don't lie and at the end of the day if a company is cash flow negative, there will be no dividends.

Thursday, December 6, 2018

November 2018 Portfolio Summary

The market has been volatile recently. It has been range bound for several weeks primarily on fears of the escalating trade war with China and the slight slow down of the American economy. There rae discussions about the rise in interest rates slowing things down, and talk about how the boost from this year's tax cut will not be so evident next year.

The S&P500 looks like it's testing its lows again. Dollar is relatively strong. And oil is very cheap, appearing to bottom at around $50. Overall things look quite unpredictable right now in terms of where the index will head. There are too many outside variables that happen on the news day to day. For example, the American government arrested the CFO of Huawei today in Vancouver for violating Iranian sanctions. This increased uncertainty due to escalating tensions between China and the US. This type of event happened with Chinese ZTE in the past and it did not help the market calm down.

Since it is impossible for me to predict the market, my objective is very simple. Acquire high quality companies that pay dividends with very safe payout ratios. For every dollar that I earn from my vocation, I save a good percentage and allocate them to income producing stock. I don't time the market but instead deploy capital periodically (i.e. every 2 weeks to every month). The graph I focus most on is the growth of the forward annual dividends my portfolio will generate, not the net worth of my portfolio. I expect the net worth of my portfolio to climb steadily over time as the shares I own will continuously increase their dividend year after year. Net worth is secondary to income growth. If an asset generates more income, the more valuable it will become.

Additionally, any dividend income I get I reallocate back into the stocks that paid them. Since I am young and in the accumulation stage of my life, my goal is to collect as many shares as possible and then let the shares compound on their own. I expect each of the shares I purchase will be able to increase their dividend year after year, further amplifying the income compounding effect.

Monday, December 3, 2018

Recent buy: large purchase

I decided to deploy around $44,000 across my various positions today. I could of bought a nice car or down-payment for a house but I decided to plop it in income investments. This is a large purchase for me and will boost my dividend income quite noticeably.

It is hard for me to time the market. I do not foresee needing this cash in the next year and my vocational income comes in every 2 weeks. My emergency cash fund is sufficient for my low expense lifestyle and the dividend income now per month is large enough to pay for a lot of random things if needed. So I decided to deploy it sooner than later as I am focusing on increasing my passive income. I sprayed it across basically all my positions.

*edit: I did not pay for trades as I get several a month from my broker
Trade  Action  Security  Quantity  Last Price  Total Paid
Buy   GIS  84 $41.19 $3,459.96
Buy   GD  6 $181.21 $1,087.26
Buy   ABT  10 $73.99 $739.90
Buy   MDT  5 $98.66 $493.30
Buy   HON  3 $149.26 $447.78
Buy   MCD  3 $185.26 $555.78
Buy   CL  46 $63.49 $2,920.54
Buy   SYK  5 $174.25 $871.25
Buy   SBUX  14 $67.67 $947.38
Buy   MSFT  6 $111.80 $670.80
Buy   D  10 $74.80 $748.00
Buy   TJX  22 $48.37 $1,064.14
Buy   CHD  10 $65.82 $658.20
Buy   WEC  27 $72.65 $1,961.55
Buy   KMB  13 $112.88 $1,467.44
Buy   KO  20 $49.39 $987.80
Buy   PG  32 $92.68 $2,965.76
Buy   T  16 $31.60 $505.60
Buy   ITW  7 $139.37 $975.59
Buy   CLX  12 $164.10 $1,969.20
Buy   ADP  5 $146.77 $733.85
Buy   APD  14 $165.08 $2,311.12
Buy   XEL  34 $52.60 $1,788.40
Buy   MMM  5 $208.59 $1,042.95
Buy   MKC  3 $150.91 $452.73
Buy   MA  5 $207.33 $1,036.65
Buy   ROST  14 $85.07 $1,190.98
Buy   BDX  3 $252.15 $756.45
Buy   NEE  5 $181.94 $909.70
Buy   PEP  15 $118.13 $1,771.95
Buy   HD  3 $181.42 $544.26
Buy   V  10 $144.70 $1,447.00
Buy   PM  25 $86.69 $2,167.25
Buy   JNJ  10 $145.70 $1,457.00
Buy   MO  17 $55.56 $944.52
TOTAL:  $44,052.04

Sunday, December 2, 2018

November 2018 Dividends Received

Dividends received are shown below.
November is a light paying month due to my portfolio holding less positions that pay then.
Due to recent additions to the portfolio, for December I am aiming for around $1350 and January $1620 in monthly dividends.

Ticker      Total    Taxable         401k
T $208.73 $208.73
CLX $80.46 $80.46
APD $72.67 $72.67
PG $72.27 $72.27
O $58.69 $58.69
SBUX $46.24 $33.98 $12.26
GIS $36.35 $3.47 $32.88
CL $28.94 $28.94
ABT $24.45 $24.45
MA $21.95 $10.05 $11.90
GD $20.69 $20.69
PG $11.22 $11.22
INTEREST $3.52 $3.52

$686.18 $555.71 $130.47

Steady as she goes. The portfolio climbs bit by bit every quarter.

Friday, November 30, 2018

Passed $600,000

My portfolio passed the sixth hundred K mark today due to non-periodic income from my profession. Company restructuring and departure benefits from my previous employer have helped boost my contributions despite the recent market volatility. It's been a stressful few months but in the end it all worked out.

I will save all of this cash for further investment into the stock market. I do not expect anymore large one-time income additions in the next several months unless there are items that need to be accounted for during tax season around March of next year.

To reach my goal of $1MM I am relying on both my income, high savings rate, and the growth of my portfolio. Since I am approaching the latter period of my goal, I will be relying more on my portfolio than in the beginning years. If the portfolio cannot carry itself forward, then my goal will likely be pushed out a year or two.

Right now the portfolio sits at around $55K in cash. It is nearly 10% of my portfolio and to me this is getting a bit too much as I am always looking to find ways to get those dollars to generate income. I have been watching the market but recently it has run up again, although still lower than the peaks. I think there will be more volatility due to Trump's tax policies against China and the higher interest rates the Fed is currently pressuring with, and this weekend there is a G20 meeting between Trump and Xi. I will wait to see what materializes next week before making my next decision.


Sunday, November 25, 2018

My compound growth goals

This post is a summary of my analysis on how compound interest will affect me, read more below for graphs and pictures.

"Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it."
- Albert Einstein

I am a fond believer in the power of compound growth. In the beginning it is like watching paint dry. But once it gets going, each year's growth dwarfs the beginning contributions. I sometimes compare the nature of compound growth to a snowball rolling down a hill. The beginning quotes of this book illustrates it quite well:

"Warren is catching snowflakes. One at a time at first. Then he is scooping them up by handfuls. He starts to pack them into a ball. As the snowball grows bigger, he places it on the ground. Slowly it begins to roll. He gives it a push, and it picks up more snow. He pushes the snowball across the lawn, piling snow on snow. Soon he reaches the edge of the yard. After a moment of hesitation, he heads off, rolling the snowball through the neighborhood."
- The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

I am far from what is traditionally retirement age. I began investing when I was 19 but really started contributing heavily when I was 23. As of this post I am aging steadily and am now 28 with $580,000 invested. Although this blog highlights my goal to hit $1MM sometime when I am 30 years old, my real goal is to grow my portfolio into tens of millions of dollars using largely the best asset I have right now which is time. Ironically, if this blog is still alive, the name "Young Dividend" is probably a bad choice... In the beginning the only thing I can do is accumulate and invest as much cash as possible and then let the snowball go. Time and compounding is the most important element of my strategy after that.

Wednesday, November 21, 2018

Portfolio's 2018 dividend increase performance

All of the companies in my portfolio have finished announcing their dividends for 2018. The last one was BDX which announced a small 2.67% raise. They are busy working down the debt of their BCR acquisition. In the past BDX usually raised like clockwork at 10%. I think it's a good idea to focus on the acquisition since their credit rating and debt are in worse condition than before.

Below is the chart of the companies I hold and their increases. The cells show how much (in US dollars) each share pays on that given month. The gray boxes are regular payments and the light green show increases announced. The red text mean that the company decided to not announce an increase, on those months I was expecting an increase given their past history. GIS and KHC (food stocks) did not announce a hike this year. They have both kept constant given the challenging environment they are in. Both have safe payout ratios so I am not worried so far. GIS has held the dividend constant in the past but they have paid dividends constantly for a hundred or so years, so this is not the first time.

Tuesday, November 13, 2018

Recent buy: HD

I added 10 shares of Home Depot today ($1778) after they announced earnings. Was impressed with the beat and raise. Dividend yield is modest but I can see this dividend growing quite fast in the short term. They have a good track record of dividend payments as well.

Home Depot is cyclical on the housing business side, but for the super long term housing has done well in America and I believe it will be here to stay. It is very hard to "Amazon" this type of business and they have a duopoly across the states with Lowes (another dividend aristocrat). I do believe HD is the better managed company of the two.

Home Depot is one of my largest holdings in the whole portfolio. I hold close to $26,000 in this one company now. In the consumer discretionary space, my next big holding is Ross Stores at around $19,000. That company has been on fire recently with excellent execution. ROST has become so large in my portfolio largely by itself, I do not add too much to it because the yield is so low.

Monday, November 12, 2018

Recent buy: MO, ITW, HON, GD, CL, etc

I gave my portfolio a dividend booster today. Several purchases went in this morning. Close to $15K was bought which will prop up quite a bit on my income. I try to balance some of the low yield purchases with higher yield ones. On average my portfolio seems to be around 2.7% average yield.

Symbol/  CUSIP   
Buy BECTON DICKINSON CO  BDX  8 $241.36 $1,930.88
Buy REALTY INCOME CORP O 29 $63.15 $1,831.35
Buy COLGATE-PALMOLIVE CO CL 29 $63.06 $1,828.74
Buy AIR PRODUCTS&CHEM  APD  7 $160.37 $1,122.59
Buy GENL DYNAMICS CORP COM  GD  6 $184.08 $1,104.48
Buy PEPSICO INC  PEP  9 $118.22 $1,063.98
Buy HONEYWELL INTL INC DEL  HON  7 $149.69 $1,047.83
Buy AUTOMATIC DATA PROC  ADP  7 $146.55 $1,025.85
Buy ALTRIA GROUP INC  MO  16 $61.79 $988.64
Buy ILLINOIS TOOL WORKS INC  ITW  7 $131.38 $919.66
Buy KIMBERLY CLARK  KMB  8 $110.54 $884.32
Buy MICROSOFT CORP  MSFT  5 $108.60 $543.00
Buy PROCTER & GAMBLE CO  PG  5 $92.59 $462.95
TOTAL: $14,754.27

After this purchase my forward annual income hit $15,014 US dollars.

Saturday, November 10, 2018

October 2018 Portfolio Summary

Dear readers,

This post will summarize October's performance. Markets were rather volatile in the last several weeks. Recently the markets have been recovering from the October declines. The consumer staples and defensive type names have been performing well. I have noticed stock sectors that I hold large positions are doing better now and sectors that I hold less in (more cyclical ones) are getting cheaper. This is a change for the better for me as I am now able to diversify into other categories by buying stock at better prices. Previously, the consumer staples and defensive names have largely lagged the cyclical high growth companies like Technology and Industrials.

In October I received sizable one time distribution from my vocation. There will still be one last non-reoccurring payout happening around end of November. I still have not identified how I will invest all this cash, so these monies are sitting on the sidelines. I have zero debt so all this cash will be invested into asset classes that pay income. The portfolio value also saw a shoot up as markets recently have been recovering. These two factors caused October's sharp shoot upwards, almost hitting $600,000. If market circumstances remain flat I believe I can achieve the $600,000 target before New Years which will be a good boost towards my goal of $1MM.

At this point in time, my portfolio is getting large enough that market movements dominate day to day changes. The contribution from my re-occurring income does not help so much propel the portfolio forward. From $600,000 to $1MM I am expecting my portfolio will help perform much of the lifting while my periodic income contributions are there to help buffer against market declines. The $1MM timing target is quite ambitious, if the growth is purely relying on my periodic income contributions I think it will be impossible. That is why I have weighed a decent chunk of my portfolio in high growth companies that pay less dividends. As a result, my average portfolio dividend yield is less than other dividend investors who emphasize high yield. Given my age, I think having a large emphasis on higher growth lower yield companies will pay large dividends in the long term after these growth companies have grown much over their starting cost basis.