Sunday, April 29, 2018

March 2018 Portfolio Summary

Dear readers and my future self,

In this report I will summarize how my portfolio sits as of the end of 4/27/2018. Before we get to my portfolio, let's start with some market metrics.


The S&P500 has been a bumpy ride lately. There are a lot of uncertainties in the market in the last month. Discussions around trade with China and the rising 10 year do not bode well for stocks. A lot of my portfolio is in higher dividend paying stocks. A rising 10 year makes the yield of stocks less competitive compared to buying treasuries. As a result, dividend stock prices fall to raise their yields so that they are more competitive alongside risk free treasuries.





Oil prices are rising quite rapidly. This increases the input costs for a lot of the companies I invest in. Higher raw material prices increases costs of production for my companies. This has been an argument against the consumer staples sector which is experiencing higher raw input costs. Additionally, transport of goods and freight is at a scarcity. It is getting costlier to ship goods. The dollar index is still very low. This bodes well for many of the companies I invest in which do business overseas.

Note, the results below are actual numbers from the portfolio I manage and own. This is real money and not a virtual portfolio. I have roughly 95% of my net worth fully invested. I am putting my own hard earned cash on the line using an investing strategy that I have tailored over the years to meet my goals. The portfolio has been amassed over a period of 4 and a half years. The portfolio started from $0 and is built completely from the income I receive from my primary vocation. I have received no financial handouts or assistance in building this portfolio.

My portfolio is stuck in the $425,000-$435,000 range for a long time. It peaked at $450,000 a few months ago before the market corrected. Money is continuously pushed into the portfolio every 2 weeks. There was a lot of cash held in my portfolio since the beginning of the year. It was only recently, around 1-2 weeks ago, that a lot of money has been deployed. I have started new positions in Microsoft and Honeywell. I have also added to a lot of different companies that I already own, see previous posts to see what I purchased. There is still a sizable amount of cash left for purchasing stock so I hope to deploy more when the opportunities arise in the coming days.




It is important to note that the purpose of my portfolio is income generation and income growth, not so much the growth of the portfolio's total value. I believe the value of my portfolio will eventually be reflected by the increasing dividends. When companies increase their dividends per share, their share price will naturally rise as investors will find the business more attractive to invest in. 

The value of my portfolio has been up and down in the last few weeks as the volatility of the market increased quite significantly. I am experiencing daily swings of my portfolio that can sometimes reach $5000 of paper losses.

However, more importantly, my portfolio's annual dividend continues to grow and is highly predictable. Note the stark difference between the dividend graph and portfolio value graph. Dollar value of stock is highly unpredictable and up to the whims of the market or emotions of people. However, dividends is real money. A company can't pay dividends without cash. Dividends are related to the fundamentals of the business. If a business is profitable and cash rich at the end of the day (after paying bills and salaries and capex and other stuff), it can pay the excess money it has in the form of dividends to its owners. If a business is not profitable, there are no dividends.

I check every month the financial stability of the companies I own, this includes their debt levels, dividend coverage (free cash flow or earnings), and business fundamentals. Although the S&P500 index has dropped, I see no worsening fundamentals in the businesses I own. They all can cover the dividend just fine. In fact I see a major tailwind in a lot of companies I own with the changes in corporate tax rates, repatriation, weakening dollar, and less regulations from the government. 

Several companies have recently announced dividend increases which are reflected in my May and June payouts. General Dynamics has a 10.7% boost. Johnson & Johnson a 7.1% boost. APD 15.8%. TJX has a massive 24.60% boost. Clorox did a huge 14.3% boost. Colgate 5% and P&G 3.9%. These "raises" are all more than the salary raise I was able to get in the company I work for. I am quite happy with these ~10% average raises every year for doing nothing. All in all, I have not seen a dividend freeze or cut so far this year. Business is doing just great in America and that's reflected in the increasing benefits to these companies' shareholders.


My annual dividends topped $12,000 for the first time. This is a milestone as now my portfolio now generates a monthly average of $1,000 in dividends. Having 4 figures coming into my bank account every month automatically is starting to increase my own personal financial stability as this can pay for a lot of my bills. It took roughly 4 and a half years to get to this point from nothing.

In the beginning I was impatient and I felt the progress was quite slow and the monthly contributions appeared to be pointless (i.e. putting $1000 away just to increase my annual income by $30 sounded stupid, I could of used that $1000 to buy a new iPhone). However after so many months of constant contribution, the results are starting to really pay off and I no longer question whether my monthly contributions are pointless or not. Everything now is on autopilot. I have also found that now I am far more patient and forward looking compared to my younger self 5 years ago. In the beginning I used to watch stock tickers every day and feel terrible on days when the tickers turned red. However, after having seen the tickers float up and down for 5 years, I have given up tracking the daily movements and am now more concerned with the fundamentals and forward looking prospects of the businesses I own.

Several of my prior months' dividend payments (before this month) were able to generate 4 figures, that is because my 2/5/8/11 months are lighter paying months and my 1/4/7/10 and 3/6/9/12 months are heavier paying months. But now on average I am able to hit 4 figures on all months. Note I do pay 15% tax on taxable dividends but this amount is paid all at once in the following year's tax application (I do not have my brokerage withhold my dividend for taxes).

These dividends are extra cash that comes into my pocket which gives the freedom to decide what to do with that cash. In July and August, I will be using some of this cash for my vacation to Tokyo. Tickets have been purchased using the points and miles accrued on my credit cards. Most often, I just use this dividend cash to buy more shares of the companies that paid them to begin with. Reinvesting dividends I believe is a fast way to compound income. By reinvesting dividends, we double the compounding effects of dividend growth. The companies that pay the dividends allow the investor to buy more shares, and on top of that the company will increase that dividend every year by itself.


I have been trying to increase the portfolio weightings of my other sectors including Healthcare and Industrial. The staples sector has shrunk recently as these companies are not highly favored in today's market environment. I have decided to add to several of my existing staples companies since many of their yields are topping 3.0% which I find very attractive. My goal is to have a larger weighting in Technology and Industrials companies in the future compared to where I am now.


Name Ticker Sector       Value   Weight        Divies      Yield S&P Fin VL Fin VL Safety
Altria Group Inc MO Staples $31,037.35 7.19% $1,548.27 4.9884% A- B+ 2
Philip Morris International Inc PM Staples $28,236.90 6.54% $1,463.83 5.1841% A B++ 2
Johnson & Johnson JNJ Health $27,019.46 6.26% $758.32 2.8066% AAA A++ 1
Visa Inc V Financial $25,002.54 5.79% $166.67 0.6666% A+ A++ 1
Home Depot Inc HD Discret $23,791.87 5.51% $525.70 2.2096% A A++ 1
NextEra Energy Inc NEE Utilities $18,662.89 4.32% $505.39 2.7080% A- A 2
Becton Dickinson and Co BDX Health $18,234.54 4.22% $233.52 1.2806% BBB A++ 1
3M Co MMM Industrial $16,085.64 3.73% $446.19 2.7738% AA- A++ 1
Ross Stores Inc ROST Discret $14,931.48 3.46% $164.52 1.1019% A- A 2
PepsiCo PEP Staples $14,474.96 3.35% $458.26 3.1659% A A++ 1
Mastercard Inc MA Financial $14,178.71 3.28% $80.59 0.5684% A A++ 1
Realty Income Corp O REIT $13,375.80 3.10% $683.74 5.1118% BBB+ A 2
McCormick & Company MKC Staples $12,865.04 2.98% $250.81 1.9496% BBB A+ 1
AT&T Inc T Telecom $12,381.73 2.87% $749.50 6.0533% BBB+ A++ 1
Kimberly-Clark KMB Staples $8,732.50 2.02% $334.23 3.8274% A A++ 1
Automatic Data Proc, Inc ADP Tech $8,695.66 2.01% $200.20 2.3023% AA A++ 1
Xcel Energy Inc XEL Utilities $8,286.75 1.92% $267.43 3.2272% A- A+ 1
The Coca-Cola Co KO Staples $8,119.80 1.88% $292.47 3.6019% AA- A++ 1
Illinois Tool Works Inc. ITW Industrial $8,070.80 1.87% $176.62 2.1884% A+ A++ 1
Dominion Resources, Inc D Utilities $7,919.14 1.83% $398.64 5.0339% BBB B++ 2
Procter & Gamble Co PG Staples $7,892.54 1.83% $311.11 3.9418% AA- A++ 1
Medtronic plc MDT Health $7,872.49 1.82% $178.19 2.2635% A A++ 1
Air Products & Chemicals, Inc APD Materials $7,663.05 1.77% $204.32 2.6663% A A+ 1
Starbucks Corporation SBUX Discret $7,406.53 1.72% $152.29 2.0562% A A++ 1
TJX Companies Inc TJX Discret $7,372.42 1.71% $132.96 1.8035% A+ A++ 1
Church & Dwight CHD Staples $7,158.60 1.66% $133.13 1.8598% BBB+ A+ 1
Clorox Co CLX Staples $6,489.82 1.50% $210.64 3.2457% A- B++ 2
WEC Energy Group, Inc. WEC Utilities $6,366.55 1.47% $218.24 3.4280% A- A+ 1
McDonald's Corporation MCD Discret $5,188.63 1.20% $132.42 2.5521% BBB+ A++ 1
Stryker Corporation SYK Health $4,982.08 1.15% $54.88 1.1015% A A++ 1
Colgate-Palmolive Co CL Staples $4,329.68 1.00% $109.25 2.5233% AA- A+ 1
Abbott Laboratories ABT Health $4,145.87 0.96% $77.96 1.8805% BBB A++ 1
Kraft Heinz Co KHC Staples $3,777.51 0.87% $163.78 4.3358% BBB- A 2
General Dynamics Corporation GD Industrial $3,679.53 0.85% $67.19 1.8261% A+ A++ 1
General Mills, Inc. GIS Staples $3,056.67 0.71% $134.57 4.4025% BBB+ A+ 1
Honeywell International Inc. HON Industrial $1,175.44 0.27% $23.84 2.0282% A A++ 1
Microsoft Corporation MSFT Tech $1,054.02 0.24% $18.48 1.7533% AAA A++ 1
Misc Type ……….. Partial Totals Weight Yr Dividends  Avg Yield …..832 …..9 …..82
Equity Stocks $409,715.01 94.88% $12,028.17 2.9357%
Investable US Dollars $16,511.96 3.82%
Miscellaneous Assets $5,574.75 1.29%
. .. Equity + Misc Weight …..2 ….. …..222 …22 …..223
Total $431,801.72 100.00%



Best regards,
Young Dividend

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