Saturday, June 16, 2018

May 2018 Portfolio Summary

In this post I will go over my current portfolio status. The portfolio has been growing at a faster rate recently due to share price accumulation and some non-reoccurring income that I cashed in during May to June. I'll start the portfolio summary with a short summary of what the environment is like in the market. Let's start with some charts of various market KPIs.

The S&P500 is steadily climbing back up since the lows of May. This in turn has helped elevate my portfolio value. The price of stocks have been influenced by several factors. These include worries about Fed tightening due to the growing economy. Rising rates will make it more expensive for companies to borrow making the cost of doing business more expensive. Mortgages will also be more expensive and buying cars more pricey. Rising rates to borrow has the effect of slowing everything down in the economy. My high dividend paying stocks usually fall back when the 10 year hits close to 3% since this makes bonds more attractive compared to dividend stocks which have higher risk. For stocks to compete against high yielding bonds, stock prices have to fall to make their yields higher and more attractive.

The dollar is getting more expensive. This is a headwind for a large portion of my portfolio as I hold many multinationals. The trade war situation with China and Trump's recent import tax hike on Chinese goods will be a headwind for international business. As a result a lot of industrials have seen their share fall. Recent developments in North Korea's leader and President Trump have also caused some movements in the stocks however I think the impact of NK is rather minor as their economy is so insignificant. I have seen defense stocks fall back (like my GD position) after relations with NK are improving.

My portfolio is hitting all time highs. Visa has taken the #2 spot on my second largest investment and it's growing incredibly fast. I have paried Visa with Mastercard and MA has performed incredibly well as well.

It seems tobacco has largely fallen out of favor in the last year. Tobacco is a 13% part of my portfolio and I have held it for more than 4 years with no intention of selling. I like the dividend and plan to just collect and reinvest the 5-6% yield. At the moment I do not plan to add more despite the attractive price as my position is too large.

The retail part of my portfolio has also been on fire. My investments in ROST and TJX have grown considerably. Restaurants seem to be doing better as I have seen noticeable appreciation in MCD compared to 4 years ago. Consumer staples are still lagging behind but I have noticed they have begun to uptick higher in the last week. Perhaps this is a move from trade war vulnerable stocks like the industrials into more safer staples stocks that people tend to hold during volatile times. My healthcare stocks have all been doing very well;  BDX and SYK and ABT are all much higher. JNJ is a very big part of my portfolio and has been a laggard, and MDT never really seems to enjoy walking sideways. I keep these two since they are very stable dividend aristocrats with very dependable earnings and dividend history. JNJ has one of the most consistent dividend track record and one of the cleanest balance sheets I have seen.

I have started expanding my portfolio in to other sectors besides consumer staples. My technology position is growing as I have been adding a lot to Microsoft. I like Microsoft's cloud offerings, I think they will be giant competing against Amazon. Retailers do not like going to Amazon web services for cloud offerings (for obvious reasons), I think they would much rather do business with Microsoft who is less seen as a invasive competitor. 

I want to expand my technology positions but a lot of tech companies don't pay a dividend which is my #1 criteria. I am considering Apple, as I am liking how their services business is growing so quickly and is already so large. Their P/E is not expensive. I think over time Apple will be known as a software services providing a "user environment" experience instead of how we usually think of them today (i.e. as a hardware phone making company).  I have also been entertaining the idea of buying AVGO for its yield and dominance in the chipset space in the communications industry. The company has become a monopoly in tech like Intel or nVidia, the payout ratio looks conservative, and the P/E is reasonable.  My position in the dividend aristocrat ADP is also growing by itself quite fast. 

I have been increasing my positions in Industrials as well, with gradual additions in ITW, HON, and MMM. 3M has not done very well and they are in a period of change as they have a new CEO but I find the overall business very diversified and stable. In the short term there may be headwinds but in the long term (over many decades) I am comfortable with diversified industrials like 3M and Honeywell. 3M has a proven track record as a dividend aristocrat and has withstood the test of time and seen many recessionary cycles.

I want to add more into utilities and industrials but I think there will be better opportunities coming soon. Utilities have not fared well in the rising rate environment. I think there will be lots of opportunity to add. Rates are only going to go up as of now. Utilities are shielded from the trade war problems as these are all based in USA. The industrials I think will also have good opportunity to add going forward. The stocks move up and down on trade war escalation discussions with China as many of these companies do business in the growing Chinese economy. Right now the narrative is not so attractive for these stocks so I think opportunity will eventually come knocking. I prefer to buy when the mood is the most gloomy. I am eyeing 3M, HON, ITW, and GD (positions I already hold) as well as many other names like Boeing. I don't think Boeing will be very impacted by any trade escalations with China. Their backlog is simply too large and China needs Boeing's planes more than Boeing needs China (China cannot simply just copy Boeing's planes in any reasonably short amount of time)

The graph above shows the growth of my assets over time. From February until May my portfolio has been in a lull. I suffered great losses as stocks tanked after trade war escalations between China and USA. Consumer staples did not do very well compared to other sectors like tech, industrials, discretionary, and healthcare in this period. Recently the portfolio is coming back to shape as stocks have been rising steadily and I have been contributing more cash into my portfolio in Q2 than in Q1. I think at this rate I can hit the 1/2 million $ mark sometime this year as long as nothing disastrous happens to the general market. Hitting the $500K mark will be a big step for me. After that point my next goal will be $1MM.

Since share price is volatile as seen by the up and down movements of my portfolio, I also monitor the annual dividend trend of my assets. Notice how from Q1'18 to Q2'18 my portfolio suffered sharp drops of over $25-30K. However, the dividend trend actually increased steadily in this period. Share prices are ephemeral and spontaneous. Dividends don't lie and are based on the company's profitability. As long as the business model is intact, there will be cash in the owners' pockets and this is the metric I go by when investing.

The graph above shows how much income my portfolio will generate by itself in the next 12 months. Right now I have just crossed the $12.5K a year barrier, which is a bit over  $1000 per month. I don't see this trend stopping or slowing down anytime soon. The stocks I have invested all have quite conservative payout ratios albeit a few. Since my portfolio is largely diversified in dividend paying stocks, if one company were to go under or stop the dividend, the overall impact to my dividend trend will be minimal.

As my portfolio grows over time and my passive income grows, I have started noticing how it has affected my lifestyle bit by bit. My lifestyle is pretty much the same to how I started, building wealth this way is actually very boring. But over periods of years I have noticed subtle changes for the better.

Back in 2014 and 2015 my assets were around $100K or less. At that time I was more conscious about job security or paying for the bills or wondering how I should manage my cash flow. Currently, that money pressure has decreased. With $1000-1200 flowing in every month from dividends and almost $500K in assets, there is less stress to fix the car or to take someone out to a nice dinner. There is also less stress on my job. If one day I were let go, the fear of surviving on the streets is no longer really there compared to when I started out in 2014. Having these assets to back me up makes me feel much more flexible and independent. I now have options and can think what I want to do instead of worrying about making a living and paying the bills. There's less stress and I can take things slow instead of rushing decisions through.

Interestingly as well, I have noticed I have less of a desire or urge to buy something for material pleasure now that I have the money to do so. It's almost as if the interest has waned once something is easily attainable. I think the enjoyment I get is knowing that I can afford a new luxury car or to buy a condo in cash whenever I want, and that is what makes me appreciate the work and progress I have put in over the years. Ultimately the peace of mind and financial security is what I am most satisfied with at the present time, not the prospect of buying a nice expensive toy.

Stay tuned for next month's report. Hopefully we see even more progress next month!



  1. Nice job Youngdividend, i'm following you with lot of interest from Italy! ciao, Loris

  2. YD, You're the man with a plan! I like reading your thought process. You line it out and then execute. Great job!

  3. Inspirational portfolio made in such a short period. Have been silent reader for years. Good move adding additional capital during choppy waters!

  4. Thank you for the detailed post! Especially your closing thoughts on how your portfolio affects your lifestyle. Very inspirational!