Follow the dividend investment decisions of a person who has no background in financial investment and wishes to take control of their financial future.

Merry Christmas Everyone - 23 Dec 2015 11:57

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Happy Holidays! I wish everyone the best and want to take the time to thank everyone for their patronage & help.

While investing is a favorite topic of ours, I would like to take the time to ask readers to remember those who are not in the same position as we and less fortunate. Please be charitable and bring a smile to someone that needs it.

Have a wonderful Christmas and hope you get all of your Stocking stuffers you asked Santa for:)

- Ken K. - Comments: 0

New Buy CMI - 16 Dec 2015 23:26

Tags: cmi cummins

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The big headline in news for 2015 was the dramatic drop in oil. Not a single oil producer has been spared and all have seen a significant drop in their share price. Another area that has been quietly getting whittled down and not getting as much attention (I argue it should) has been U.S. Industrials. U.S. Industrials have seen downward pressure on their share prices due to a slow down in China's economy and a strong U.S. dollar.

Cummins (CMI) however falls a bit into both camps and its share price has been hammered over the year dropping from a high of $145 down to the current price of $87. That is a 40% year to date drop!

An economic slowdown will without a doubt hurt CMI's 2016 sales and earnings. Analysts 2016 earning range from a 5% to 12% decrease in earnings. The forecasted decrease in earnings will change their dividend payout ratio from 33% to 47% which is still pretty respectable. Additionally, CMI is not sitting on their laurels. They already have a cost reduction plan in place to address the reduction and I'd expect no less from a company that has aggressively managed their financials over the last decade.

CMI's 40% price drop has driven its dividend yield to over 4%. I do not see this as a value trap but more of an oversold position. CMI is not a one trick pony, they have a diversified business and their diesel engines can be found in construction equipment, on highway vehicles (like Dodge trucks), military vehicles, trains, marine vehicles, and power generation equipment. CMI is also involved with emissions control and natural gas engines both of which have promising growth markets. Finally do not forget the aftermarket spares business to support all those engines!

With CMI's share price near its 52 week low I pulled the trigger and bought 11 shares at $86.86/share. This purchase will net me an additional $42.90 a year in income. I'm sacrificing short term dividend growth in exchange for a high yield and the promise of dividend growing at an accelerated rate down the road (2017 and beyond). It was hard to let CMI slip by at these prices for such a well run company, if the market continues to punish them I may just have to buy more. - Comments: 0

Cost of Family - 15 Dec 2015 01:54

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The best investment I ever made was the decision my wife and I made to start a family. With three loving children and 17 years of child raising under our belts I am a firm believer you can’t place a dollar on the unconditional love as well as all of joy and sorrow.

However, while I cannot place a dollar value on having a family I can determine the cost. I tallied up all the expenses over the years and discovered that each child on average costs $10,176 annually after taxes. With my oldest about to enter college I’m sure that number will increase but for now it is the basis I have to work with. Since I have three children my annual total costs is a whopping $30,528. From a pre-tax perspective it represents a little over $38,000 of my gross salary.

Another decision my wife and I made that we have no regrets was for her to leave the workforce and take care of our children fulltime after the birth of our third child. That was 14 years ago and she only recently returned to working part-time for minimum wage earlier in 2015. Her attention and caring of our children was without a doubt the biggest contributor as to why our children have been happy and successful to date. Similar to starting a family, it is impossible place a dollar value on her contribution but can determine a cost. To support an adult dependent it costs on average $9,600 annually after taxes or $12,000 before taxes.

Adding it all up; four dependents cost $40,128 annually after taxes and $50,000 before taxes! This sounds expensive (and it is) we still found ways to sock away a little cash to invest and save. It is not easy, there is lots of coupon cutting and the occasional vacation had to be sacrificed but we managed. With only one income there were definitely some tough and financially scary years. Through it all we somehow kept the kids fed, clothed, educated, healthy and happy.

No-one said raising a family was easy and to be successful self-sacrifice is a must. That is why I truly admire fellow bloggers who are raising a family but are working to save and invest for a better future. Its an incredible challenge to overcome.

There are also quite a few successful savers & bloggers with no children who have stories of climbing out of debt and amassing a small fortune or on the road towards financial independence through aggressive saving and investing. While I respect these folks for eliminating debt and turning around their lives I cannot admire them as I do not see it as that difficult. You simply dig deep, cut costs, and save regularly. Not a hard formula.

If I decided to forego a family I’d be looking at an additional $40,000 to invest annually and since my wife would have remained in the workforce that number would probably have been closer to $60,000. If we add up just the contributions over the last 14 years that comes to $840,000! If we assume a 5% annual return then that investment would be worth closer to $1.3 million!

If you are thinking about starting a family but are afraid of the costs don’t worry. An amazing thing happens when you become a parent, you learn self-sacrifice and how to manage real challenges. The education and experience from raising a family is so immense and will continually re-pay you in the future more than money ever will. If you are looking for inspiration here is a list of bloggers who are saving and investing while raising a family:

DRIP Portfolio Update - 13 Dec 2015 23:29

Tags: drip

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The last quarter of 2015 has been a wild ride with the market swinging up and down like a yo-yo making it difficult to figure which prices are really down or up but a couple have been steady to make some changes to my DRIP Portfolio.

Microsoft (MSFT) has long been a favorite of mine. The company announced strong earnings and another great dividend increase causing the stock price to shoot into the mid $50s from the mid to upper $40s. I still love MSFT as a dividend grower but the rise in share price has changed my opinions on the effectiveness of DRIP'g. I believe I can use the cash better towards other values and as such removed the DRIP designation.

Omega Healthcare Investors (OHI) has not been as lucky as MSFT. REIT stocks in general have been under price pressure with a looming Fed rate increase. OHI is down 26% for the year and it had little to do with performance. OHI still continues to execute and increase dividends but if the market wishes to punish OHI then I am obliged to take advantage by adding it to the DRIP Portfolio.

I had high hopes for General Motors (GM) to continue languishing around $30 per share as most investors still have not forgiven them for their bankruptcy. Their most recent earnings increase though is starting to make investors warm up to GM once again and share prices have since increased 10%. As such GM missed the cut for being added to the DRIP portfolio so I'll continue to receive their dividend and invest in other opportunities.

Holding DRIP Start
CMI - Cummins Jun 2015
HCP - HCP, Inc. Jun 2015
MHLD – Maiden Holdings Mar 2015
MSFT - Microsoft removed
PG - Procter & Gamble Aug 2015
QCOM - Qualcomm Mar 2015
THO – Thor Industries Mar 2015
New OHI - Omega Healthcare Investors Dec 2015

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