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.

As of today 11/11/2018 my portfolio sits at $588,000. My largest position now is JNJ. There have been several spinoffs from Honeywell so I still hold those (REZI and GTX). I think in a few weeks my cash position will start to approach $60,000. If I cannot find good deals then I will likely just spray that money proportionally on all my positions like an index fund. Timing the market is not something I am very good at and I prefer to deploy money when it's ready to be deployed and harvest the additional income added. I am not too worried about timing at my age as I am still in the accumulating stage. My income from vocation will continue to come in so bad timing will be offset by future good timings (i.e. following a dollar cost averaging philosophy).

Name	Ticker	Sector	Value	Weight	Divies	Yield	S&P Fin	VL Fin	VL Safety
Johnson & Johnson	JNJ	Health	$36,452.09	6.19%	$902.90	2.4770%	AAA	A++	1
Altria Group Inc	MO	Staples	$35,936.77	6.11%	$1,813.27	5.0457%	A-	B+	2
Philip Morris International Inc	PM	Staples	$31,344.79	5.32%	$1,602.74	5.1133%	A	B++	2
Visa Inc	V	Financial	$31,238.03	5.31%	$217.04	0.6948%	A+	A++	1
Home Depot Inc	HD	Discret	$23,971.43	4.07%	$531.01	2.2152%	A	A++	1
NextEra Energy Inc	NEE	Utilities	$22,847.96	3.88%	$574.56	2.5147%	A-	A	2
PepsiCo	PEP	Staples	$22,564.20	3.83%	$712.57	3.1580%	A	A++	1
Becton Dickinson and Co	BDX	Health	$19,720.46	3.35%	$243.20	1.2332%	BBB	A++	1
Ross Stores Inc	ROST	Discret	$18,877.56	3.21%	$165.33	0.8758%	A-	A	2
Mastercard Inc	MA	Financial	$18,463.46	3.14%	$89.79	0.4863%	A	A++	1
McCormick & Company	MKC	Staples	$18,283.66	3.11%	$252.86	1.3830%	BBB	A+	1
3M Co	MMM	Industrial	$17,722.32	3.01%	$479.41	2.7051%	AA-	A++	1
Realty Income Corp	O	REIT	$16,705.45	2.84%	$705.91	4.2256%	BBB+	A	2
Xcel Energy Inc	XEL	Utilities	$13,618.42	2.31%	$411.20	3.0195%	A-	A+	1
Clorox Co	CLX	Staples	$13,306.42	2.26%	$321.83	2.4186%	A-	B++	2
AT&T Inc	T	Telecom	$13,021.33	2.21%	$848.57	6.5168%	BBB+	A++	1
Air Products & Chemicals, Inc	APD	Materials	$12,481.91	2.12%	$343.47	2.7517%	A	A+	1
Automatic Data Proc, Inc	ADP	Tech	$12,404.86	2.11%	$266.32	2.1469%	AA	A++	1
The Coca-Cola Co	KO	Staples	$12,217.72	2.08%	$383.65	3.1401%	AA-	A++	1
Illinois Tool Works Inc.	ITW	Industrial	$12,139.82	2.06%	$366.32	3.0175%	A+	A++	1
Procter & Gamble Co	PG	Staples	$11,774.47	2.00%	$365.43	3.1036%	AA-	A++	1
WEC Energy Group, Inc.	WEC	Utilities	$11,100.85	1.89%	$350.79	3.1600%	A-	A+	1
Kimberly-Clark	KMB	Staples	$11,075.50	1.88%	$404.77	3.6546%	A	A++	1
Church & Dwight	CHD	Staples	$10,115.68	1.72%	$134.57	1.3303%	BBB+	A+	1
TJX Companies Inc	TJX	Discret	$10,002.39	1.70%	$140.22	1.4019%	A+	A++	1
Dominion Resources, Inc	D	Utilities	$9,845.75	1.67%	$455.15	4.6228%	BBB	B++	2
Microsoft Corporation	MSFT	Tech	$8,924.04	1.52%	$149.86	1.6793%	AAA	A++	1
Starbucks Corporation	SBUX	Discret	$8,810.89	1.50%	$184.95	2.0991%	A	A++	1
Stryker Corporation	SYK	Health	$8,131.58	1.38%	$89.27	1.0978%	A	A++	1
McDonald's Corporation	MCD	Discret	$6,734.69	1.14%	$168.06	2.4954%	BBB+	A++	1
Medtronic plc	MDT	Health	$6,462.48	1.10%	$136.98	2.1195%	A	A++	1
Abbott Laboratories	ABT	Health	$6,355.43	1.08%	$97.79	1.5387%	BBB	A++	1
Honeywell International Inc.	HON	Industrial	$5,581.01	0.95%	$121.78	2.1820%	A	A++	1
Colgate-Palmolive Co	CL	Staples	$5,416.19	0.92%	$142.62	2.6332%	AA-	A+	1
General Dynamics Corporation	GD	Industrial	$5,210.78	0.89%	$105.06	2.0163%	A+	A++	1
Kraft Heinz Co	KHC	Staples	$3,776.79	0.64%	$174.88	4.6305%	BBB-	A	2
General Mills, Inc.	GIS	Staples	$3,398.29	0.58%	$147.00	4.3258%	BBB+	A+	1
Resideo Technologies Inc	REZI	Industrial	$110.32	0.02%	$0.00	0.0000%
Garrett Motion Inc	GTX	Industrial	$39.20	0.01%	$0.00	0.0000%
Misc	Type	………..	Partial Totals	Weight	Yr Dividends	Avg Yield	…..832	…..9	…..82
Equity	Stocks		$536,184.97	91.09%	$14,601.14	2.7232%
Investable	US Dollars		$45,636.40	7.75%
Miscellaneous	Assets		$6,820.00	1.16%
.	..	…	Equity + Misc	Weight	…..2	…..	…..222	…22	…..223
Total			$588,641.38	100.00%

The graph below shows how much annual income my portfolio will generate on its own in the next 1 year. The graph trend had a spike upward last month. This is because I deployed around $15,000 in cash. I still have $45,000 right now waiting to be deployed. I expect my forward annual dividends to get close to $16,000 annually before the year ends. 2018 has been a good year so far with record dividend increases from the companies I have held (the tax cut really helped) and larger income from my job.

Here is the current distribution of my portfolio categories. I tend to emphasize less cyclical businesses with higher dividend payouts. These type of businesses do not grow as quickly when the economy is good but they help protect the downside. My preference is on capital preservation and protection of the dividend so I am more conservative. I do not need to leverage hyper growth companies with larger risk because I believe my income from my vocation will help me achieve my yearly targets. If my income was not at a level that I can rely on, then I will be forced to take on more risk to achieve my goals.

As you can see in the picture above, there is a big rectangle for Investable Cash. I need to find a way to deploy that somewhere as it's generating nothing at the moment. It is good to have some cash on the sidelines for emergency and opportunity but too much can be a bad thing. Cash is similar to a company that is not growing and having no positive earnings; if looked at in those "equity" terms then cash can be seen more negatively.

Happy investing.

-YD