Follow the dividend investment decisions of a person who has no background in financial investment and wishes to take control of their financial future to retire from their full-time job at 60.

Portfolio Experiment - Month 1 - 31 Dec 2016 13:08



Our first month into the experiment is completed. As a reminder this experiment was based on creating an imaginary MOTIF portfolio using $10,000.

We initiated our positions on December 2 right in the middle of the end of year stock rally. With markets elevated near all time highs my expectations were pretty low on performance growth. However, there was a surprise as the portfolio actually grew and here is a summary of the performance:

Dividend Income

Projected dividend income $8.23
Actual dividend income $8.29
Apparent Growth of $0.06
Actual Growth 0

Looking at the dividend growth, initially it looks like we already received a raise but looks are deceiving. The variation is due to the ETFs within the portfolio which do not payout on a consistent basis. If we remove the ETF variance then dividend growth is actually zero and came in as planned.

Portfolio Value

Starting Value $10,000
Ending Value $10,217
Growth 2.17%

The Overall portfolio value was a pleasant surprise. Initiating the portfolio during market highs I actually expected a breakeven or slight loss but somehow we garnered 2.17% in growth. The biggest contributors to this growth was Technology & Telecommunications with 7% gain and Real Estate with a 3.73% gain. Overall here is how each sector and allocation grew for the month of December

Portfolio Sector & % Allocation Gain/Loss
FINANCIALS - 10% 2.80%
HEALTHCARE - 10% -0.10%
INDUSTRIALS - 10% 1.20%
REAL ESTATE - 15% 3.73%
UTILITIES - 6% 1.0%
BONDS & INCOME - 8% 0.25%

Once we have next months actuals there will be enough data points to start graphing. Looks like we are off to a decent start hopefully it will continue into the new year. :) - Comments: 0

End of Year Portfolio Tune-up - 23 Dec 2016 22:04



Investors everywhere will be evaluating their year-end portfolio performance and will be impressed. 2016 has been a pretty good year for investors and most will see gains in some form or another. A few will admire their dividend growth, others their capital gains and some may admire both.

Take a moment and feel proud of your accomplishment! Let it motivate you to continue investing into 2017 and beyond. Now that you are feeling good, let’s take a deep breath and remember the investing rules that got you to this point and take the time to re-evaluate and give your portfolio a tune-up. Here are 4 steps I run through at the end of the year to keep me on pace.

1. Update mid and long term goals

Has there been any major life changes throughout the year? Maybe you got married, had a child, bought a house or changed jobs. Do you need to adjust a mid or long term goal or maybe even add an additional goal?

Also, do not limit yourself to just investing goals. Use this time to also consider if you have adequate insurance coverage. Do you need to increase life, home or auto coverage? What about disability insurance?

2. Review Portfolio Holdings Financials

If you have a lot of holdings this could be a bit tedious but it is vital to know the financial health of your holdings. Check earnings, debt, cash flow, investments, and acquisitions. Also use this time to read a few annual reports and read the CEO’s letter to shareholders to evaluate if the CEO’s tone or strategy has changed.

3. Time to Sell?

Have some losers or under-performers? Are you holding on to these emotionally, hoping that you can get back to a break-even point before you sell? I get it, no one likes losing but the faster you admit the mistake and sell the quicker you can put it behind you and relieve any stress going forward.

Do not forget about over-performers. A rule I use for high dividend growth stocks that I have owned more than 1 year is if the stock price has appreciated 4x faster than the divided from the time of purchase then it is a potential to sell, I’ve nicknamed this rule “The Prune Ratio”. For example:

I bought Thor Industries (THO) two years ago at $53.25/share and a 2.05% dividend yield. Currently THO sits at $102/share and a 1.3% dividend. In just two years there is a 90% capital gain and 22% dividend growth. The stock price has appreciated 4x faster than the dividend growth so the logical step is to lock in the gains and re-invest into a higher yield with similar dividend growth. I just need to decide if I want to sell a portion (pruning) or sell the entire position.

4. To DRIP (or not)

Some investors always DRIP and some never DRIP. For myself I use a hybrid approach where I only DRIP select holdings.

A dividend re-investment program is a powerful tool available to investors to quickly re-invest dividends without any effort or much thought. However, there are arguments for and against DRIP’s and while both sides have valid points I favor neither.

Instead I evaluate a stock’s current dividend in relation to its dividend growth rate. If it is favorable I will DRIP the stock and if not I turn the DRIP off. At this time of year I will evaluate which stocks meet my criteria in the table below. For example:

I originally bought GATX Corp. (GATX) with a 4% dividend yield and a 10 year dividend growth rate of 6.77%, because this met the requirements in the table below I decided to DRIP new shares. As I re-evaluate my portfolio GATX now only yields 2.53% and does not meet the minimum growth rate of 9.7% so I will have to stop DRIP’g shares.

Yield Growth Rate
2.00% 11.50%
2.50% 9.70%
3.00% 8.00%
3.50% 6.70%
4.00% 5.50%
4.50% 4.30%
5.00% 3.20%
5.50% 2.00%
6.00% 1.00%

I have performed this process of re-evaluating twice a year for the last 6 years and it has kept my portfolio on track to meet my goals. Though I do recommend you perform the tune-up before the new year so if you have to sell any losers you can capitalize on tax loss harvesting before years end.

Happy Holidays Everyone! - Comments: 0

Experimental Portfolio Begins - 03 Dec 2016 01:10


As promised in an earlier post I started a fictional $10,000 Motif Portfolio based on 12/2/16 market closing prices. The projected annual income is $391.67 or a 3.916% yield.

Base Portfolio as of 12/2/2016
Portfolio Value Projected Dividend Income
$10,000 $391.67

Not too bad of a yield considering the market is at an all time high but personally if I had to buy all of these holdings individually I would never have bought everything at once and would have waited for better prices. However, the point of the experiment is to see how a diversified portfolio in Motif will act.

While putting together the final numbers I thought all of the holdings were past their ex-dividend date but there were two pleasant surprises that will generate a whopping $7.19 for this month and is a nice start to generating our fictional cash flow. One area that may slightly skew the numbers will be the ETFs as the monthly dividend varies from month to month.

Now onto the good part…based on the original percentage allocation here are how many shares of each holding we bought with our fictional $10K.

Position Symbol Shares
Compass Minerals CMP 5.1282
Wal-Mart WMT 5.6433
General Motors GM 11.2962
Cracker Barrel Restaurants CBRL 2.4096
P&G PG 4.8544
Archer Daniel Midland ADM 9.0909
Petmed Express PETS 17.8492
Travelers Insurance TRV 4.3234
Canadian Imperial Bank of Commerce CM 6.1207
Johnson & Johnson JNJ 4.4659
Merck MRK 8.1793
3M MMM 2.8997
Emerson Electric EMR 8.8731
Omega Healthcare Invest OHI 17.094
STAG Industrial STAG 21.3493
W.P. Carey WPC 8.6775
Apple AAPL 3.6397
AT & T T 12.95
Microsoft MSFT 6.7511
Artesian Resources Corporation ARTNA 9.4073
PPL Corp PPL 8.9982
iShares iBoxx $ High Yield Corporate Bd HYG 2.3425
iShares iBoxx $ Invst Grade Crp Bond LQD 1.7182
iShares 20+ Year Treasury Bond TLT 1.6722
iShares S&P US Pref Stock Idx PFF 5.4025

Blog is Public Again :) - 28 Nov 2016 20:29


5 months ago I turned my blog from being public to private. The decision to turn the blog private was because it met its original intent and the blog was no longer adding value to myself or the investing community.

I continued to use the blog platform as a personal notebook and it was not until I was out with a few friends having drinks that things would change. I mentioned an experiment that I will be conducting on a model portfolio. They were intrigued by the idea and asked why not share the findings and re-activate the blog.

So here we are for the world to see again. Ray, Mike, Jim, and Steve thanks for coaxing me back :) - Comments: 0

Book Review: The Art of Retirement - 22 Nov 2016 22:16

Tags: book_review


I have read quite a few financial books over the years but lately a lot of the books being published are mediocre or just plain trash. Some of this I blame on the easy route of self-publishing via Amazon and all of the self help books telling folks they can create additional income streams through publishing. But recently, I came across one book that I highly recommend for investors of any age.

When I saw "The Art of Retirement" written by Gary Williams who is a certified financial planner I had my doubts and assumed it would be nothing more than a sales pitch for his investment firm. However, I did read the inside cover which mentioned that all proceeds from the book would be donated to ALS research for finding a cure and it was this one charitable line that tugged at me to give a try.

For anyone with any investing knowledge this will not enlighten you to new investing styles, analysis, or theories. Its financial investing elements are simple and laid out for someone not familiar with investing but this is not what got me excited about the book. Instead it is the author's method of how to examine ones life and establishing goals to improving your life, creating a legacy, and inspiration for financial independence.

One of the most moving concepts he proposes is by asking yourself a simple question

"What if an artist was going to paint your life's story on the ceiling of your home? Now imagine a painter will paint a fresco of your life, what would it look like (besides the fact that when you go to sell it the new homeowners may find it creepy)? Did it capture all of your accomplishments? Your victories? Your agonies of defeat or loss? Imagine for a moment what your masterpiece of life would look like."

This one question quickly examines your life to help find what is missing and starts you down the road for developing a plan to get there which in turn will lead to a happy fulfilled life. While this book was targeted at retirement, this concept can be applied throughout ones lifetime that can help develop pre-retirement as well as retirement goals.

I wouldn't call this book life changing but it will help add clarity as to what you are saving for and to how leave a legacy to be proud of. - Comments: 0

Portfolio Experiment - 13 Nov 2016 13:17


There are so many new investment tools available to investors today that make it so much easier for the little guys like us. One of the tools I find useful is Motif Investing were you can create a basket of stocks with assigned percentage allocations and when you invest in the basket it will buy all of the shares in the basket for just a small transaction fee of $9.95.

Using Motif as a model, I have decided to start an experiment by creating a portfolio with a fictional $10,000 investment. We will track capital returns, pre-retirement income growth and post-retirement income growth. For pre-retirement growth, we will collect three months of dividend payments and then re-invest in an effort to keep our annual expenses under a cap of $40. For post retirement all dividends will be redistributed with no reinvestment.

To kick this off the initial purchase will be the prices at the business close of Friday 12/2/16 and progress will be updated weekly. Purchased securities and their allocation shall be per the table below

Experimental Portfolio

Compass Minerals CMP 4%
Wal-Mart WMT 4%
General Motors GM 4%
Cracker Barrel Restaurants CBRL 4%
P&G PG 4%
Archer Daniel Midland ADM 4%
Petmed Express PETS 4%
Travelers Insurance TRV 5%
Canadian Imperial Bank CM 5%
Johnson & Johnson JNJ 5%
Merck MRK 5%
3M MMM 5%
Emerson Electric EMR 5%
Omega Healthcare Invest OHI 5%
STAG Industrial STAG 5%
W.P. Carey WPC 5%
Apple AAPL 4%
AT & T T 5%
Microsoft MSFT 4%
Artesian Resources Corporation ARTNA 3%
PPL Corp PPL 3%
iShares iBoxx $ High Yield Corporate Bd HYG 2%
iShares iBoxx $ Invst Grade Crp Bond LQD 2%
iShares 20+ Year Treasury Bond TLT 2%
iShares S&P US Pref Stock Idx PFF 2%

2016 Election Effect - Speculation & Surprise - 12 Nov 2016 12:56


On Monday, before the elections, much of the media had Hillary Clinton beating Donald Trump and most financial and fund managers had the same view and as such positioned stock investments based on a Clinton Presidency.

On Tuesday the day of elections or more precisely early on Wednesday around 2am in the morning it became clear that Trump was the new President elect. International markets responded negatively and sent U.S. futures cratering down past 5%. But as the morning moved closer the sentiment was quickly changing and futures were improving. At the opening bell the market took off into positive territory and would remain that way through to Friday with the Dow up just over 5% for the week.

Financial pundits and spin doctors were labeling it as the "Trump Rally" and were touting how beneficial Trump will be to business and U.S. markets. This was extremely laughable as these were the same people who just a week earlier were stating a Trump Presidency would be the worst thing for Wall Street. These folks will do anything to sound like they are always right and why it pays to tune out the noise from Wall Street and the media.

Personally I have no clue if Trump's Presidency will be beneficial or not and only time will tell. Regardless what happens in the future I will continue to evaluate and pick stocks based on Liquidity, Profitability, Credit Risk, Shareholder Value and Growth. - Comments: 0

Financial Independence - 30 Oct 2016 16:58


The term "Financial Independence" can me different things to different people. For myself I interpret the definition as

When personal wealth or passive income alleviates the need for choosing to work out of necessity and allows the choice to do and pursue passions that drive fulfillment in ones life without fear from financial commitments necessary to live.

In other words, my definition means I am free to decide on how I want to live without fear of going bankrupt or homeless. This does not mean I will not work but I can choose to do work that I find fulfilling. I believe many people incorrectly associate massive financial wealth with independence however the two are distinctively different. One is about being filthy rich and the other is about freedom to choose. The confusion exists because you do need some wealth to achieve financial independence but just enough to alleviate you from day to day financial burdens.

An article I found recently on "The Simple Dollar" poses a great position on the concept and proposes we should eliminate the term Retirement and replace it with Financial Independence.

This is the second article from The Simple Dollar I have referenced. I am really starting to become a fan of the site and its authors. - Comments: 0

Dividend Investing vs. Total Return Investing - 23 Oct 2016 12:30


For years I have hated the polarizing views on various articles, papers, and blogs that state one investing style is better than another as they back up their position with mounds of data. I have always been of the belief that your investing strategy should align to your goals. And by the way anyone can pick and choose historical data to support their position in a positive light by simply manipulating timelines or making random relationships.

I actually employ both styles of investing because a.) I have more than 1 long term goal that is not income or cash flow related and b.) my 401K does not allow for income investing. The hard part I have had to deal with is explaining this to others who either have little investing knowledge or are savvy investors but believe their style of investing is the only way.

I have finally come across a wonderfully written article by Michael Gardon that explains the two investing styles in a simple to read fashion. But, is just detailed enough to caution new investors that you need some skills to evaluate investments regardless of which strategy you choose. - Comments: 0

Are Company Sponsored DRIP Plans Viable - 08 Oct 2016 12:38


There was a time when company sponsored DRIP and Direct Stock Purchase (DSP) plans were the best low cost solution for small investors. But, in today’s low cost trading world it begs the question if these company sponsored plans still have value to the small investor.

When I first started investing in the 1980’s a discount brokerage house would charge commissions that ranged from $35 to $50 a trade and they did not have their own internal DRIP program. But company sponsored DRIP & DSP programs offered a huge discount as they typically did not charge a fee to buy stock and dividends were reinvested for free or at a nominal fee. The only commission charged was when you sold and the commission was around $25 per trade.

By the late 1990’s the internet began to explode. New online discount brokers like E*Trade and Ameritrade began to appear and disrupt the brokerage world by offering commissions below $10 per trade. Some new companies, such as Scottrade, pushed the envelope even further by offering $7 trades. As the popularity of online trading soared, brokerages expanded their services by offering free DRIP programs. By the early to mid-2000’s all of the traditional discount brokerages were online and offering low commission trades and free DRIP programs. The low cost trades and free DRIP programs offered by brokerages today appear to make company sponsored DRIP & DSP plans irrelevant and more expensive but in certain circumstances they still make for a viable alternative to investing.

If you are a dividend income investor, whose income is dependent on dividends, a DRIP is a viable alternative thanks to its flexibility in dividend payments that online brokerages do not offer. With discount brokerage a dividend re-investment is all or nothing, if AT&T pays you a dividend of $50 it reinvests the entire $50 back into full and fractional shares. But, with a company sponsored plan you can direct how many shares you wish to receive in cash and how many to reinvest. This scenario provides income investors with not just an income stream but also the potential for income growth.

Say you own 200 shares of AT&T (T) who pays a quarterly dividend of $.050 which equates to 200 x 0.5 = $100 quarterly dividend payment. In a company sponsored DRIP I can designate 80 shares to be paid in cash and 20 shares to be reinvested so that splits our quarterly payout to $80 in cash and $20 in new stock. Assuming the reinvested shares after a year acquire 2 new shares then our quarterly payment will increase to $41 and continue to grow every year after that. In 15 years you will return to your original $100 cash payment and every year after that your cash payment will continue to grow. Amazing how a small sacrifice up front provides a better long term solution.

Overall I believe company sponsored plans to be a pain in the ass. They nickel and dime you with small fees and you have to manage all of those individual accounts. I get the same functionality from my brokerage and all the paper work is managed under one account. But, I do see the benefit of the partial reinvestment and may use this approach with a handful of companies when I retire, unless my brokerage offers partial reinvestment in the future. - Comments: 0

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