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

Weekly S&P Performance - 31 Jan 2016 17:04

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Last weeks gains were a nice change but still not enough to save the S&P from significant losses earlier in the month.

With the first month of 2016 behind us we can see money has been moving into utilities and consumer staples as they were the only two sectors seeing gains for 2016, investors are definitely in defensive mode.

S&P Weekly Sector Perf S&P YTD Sector Perf
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What I Did During the Market Slide - 28 Jan 2016 23:06

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After a two week slide the markets have leveled off trading in a sideways pattern and investors can catch their breath. Through this whole slide I remained perfectly calm and did not panic sell any of my holdings. And what happened to my portfolio during this time? Well here is a summary:

Annual Dividend Income Increase 0.5% - While the market was declining my annual income actually increased for doing nothing but sitting on my ass thanks to dividend increases from General Motors (GM) and Omega Healthcare Investors (OHI). How I love this aspect of dividend growth investing!

Annual Dividend Income Increase 0.07% - My forward annual dividend increased a smidge thanks to auto reinvesting some of my dividends and with declining share prices they reinvested at an extremely nice price.

Annual Dividend Income Increase 2.69% - I wouldn’t say the market was extremely undervalued so I did not dump every dollar to my name into the market. However, there were definitely some nice bargains to be had so I did invest in two securities that provided a dividend yield of 3.85% with lots of room for future growth.

The end result saw my overall annual dividend increase by 3.26%. My goal for 2016 is to grow my annual dividend by 15%, in less than 1 month I knocked a pretty good chunk off. I doubt every month will be like this but a few more times would be nice.

Beyond my dividend growth, I am proud of how cool and collect I was during the whole event and I can give credit primarily to the fact that I have a diversified and balanced portfolio of companies with strong balance sheets. If I was over-weight in materials or energy holdings this would be an entirely different post

I am not trying to brag of success while others are struggling. This post is more about reinforcing the benefits of dividend growth investing, keeping to a plan, and not getting greedy by chasing high yields which can lead to steady and consistent growth. Of course the down side is when the market surges my portfolio misses out on massive gains but I’ll take the trade-off knowing that it reduces the stress related to investing. - Comments: 0

Weekly S&P Performance - 24 Jan 2016 12:26

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Friday's gains pulled most sectors into a positive gain for the week and energy stocks being the biggest winner. But not all sectors saw gains, the financial and industry sectors continued their downward beat-down for the third week in a row.

In the financial sector I still see quite a few bargains for non-bank financial businesses (insurance and financial services). Companies like AFLAC, Cincinnati Financial, Eaton Vance, Maiden Holdings, Principal Financial Group, and TROW are offering decent yields and have plenty of room to grow their dividend.

The industrial sector has no pulse to start 2016. While I do not see as many opportunities as in financials there are some well run companies selling at a slight discount. Some opportunities include 3M whose share price has dropped below $140, United Technologies and Genuine Parts Co yielding just north of 3% to reward you while waiting for a recovery.

S&P Weekly Sector Perf S&P YTD Sector Perf
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Create Goals Throughout Your Lifetime - 23 Jan 2016 01:21

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At work I had young co-worker ask for some advice on what I thought would be the best approach to start saving and investing. Considering my co-worker is just starting out in his professional career it reminded me how confusing starting life can be especially in regards to saving and investing.

This is where I hate the media in over-hyping retirement savings and emergency savings. While the media’s intentions are good, the constant bombardment of the same stories makes a young saver lose sight that they need multiple goals to meet challenges during their lifetime.

Additionally, these media stories throw out some huge numbers like 2 million dollars or 6 months of salary. If you are 25 that is impossible to perceive! Those goals are so large or so far out in the future it could make you save too much for the wrong goal at the wrong time or cause investing paralysis where you are too confused to do anything. The better approach is to have multiple goals over time that are achievable.

Getting back my co-worker, I started the advice with: In order to save and invest you need a set goals so you can budget & plan how to save. Unfortunately I followed that up with questions like do you plan on getting married, buy a house or have kids. It wasn’t till later that I realized this was not fair to ask and expect an answer. I just asked him to decide on some big time life changing moments at the start of his career which was not cool (If you are reading this I apologize). Instead I will offer up a set of goals I would shoot for if I was 25 again.

Age 25

Goal #1 - Emergency savings equal to 1 month of expenses
I realize experts claim you should have 3 to 6 months of your salary in cash in case of emergencies but I believe this is the worst advice for young workers. Instead I recommend enough cash for 1 month of expenses. If an emergency pops up there are things that will help and not require you to burn through cash; there is short/long term disability, severance pay, and unemployment. If you still require cash do not forget your 401K but make this your last resort.

The only exception to this goal would be for people with huge income swings. Think of careers that are seasonal or highly dependent on commissions. This is the only time I endorse a 3 to 6 month stash of cash to help even out the uneven earnings.

Goal #2 – Contribute enough to your 401K to get the max company match (but not a penny more)
This is an easy one. If your company offers a contribution match be sure to contribute enough to get the maximum match. The match is free money so do not walk away from that! But there is no need to contribute more than this. You have other things to save for and additional 401K contributions at such a young age will take away from other goals.

Goal #3 – Open a taxable brokerage account and start a DGI portfolio
Take your first step towards financial independence

Age 30-35

Goal - Savings for future life changes
Simply put, life and priorities change with age. This savings can be used for those big life changes like buying a house or changing careers. This amount can vary but anywhere between $10,000-20,000 is a good start.

Age 45-48

Goal – Start an IRA or ROTH IRA
For the first 20 years of your career I recommended savings into taxable accounts. At this age you have to start being strategic for the second half of your career in regards to taxes for future savings and income.

Age 50

Goal #1 – 50 at 50, Annual Dividend Income equal to 50% of annual expenses
I love the 50@50 goal, this level of passive income provides so much freedom. It can act as a source of emergency funds, you could use it towards college tuition or simply reinvest for retirement. I really believe this is an important goal because losing your job in your 50s is the worst time as you have so many financial commitments and approaching retirement. Finding another job becomes extremely difficult and even if you do find a new job there is a good chance it pays much less than the one you lost. Having a passive income stream can make up for this loss.

Goal #2 – Max out 401Ks and/or IRAs every year until retirement
Up to this point you have been primarily saving in taxable accounts. This is the age to completely change your savings habits. You probably split savings up with 20% towards tax deferred and 80% taxable. Now you want to completely flip this around with 80% or more of savings going towards tax deferred accounts.

Retirement

Goal – Annual Dividend Income equal to 100% of annual expenses
Not too much to explain on this one as it is a typical retirement goal but I will add if you met the 50@50 goal this should be easily achievable when you factor in dividend growth and social security.

Conclusion

I am sure there are financial planners screaming after reading this or you may not agree. Trust me I would not be insulted. The life lesson I have learned is that if you set goals at specific ages it makes long term goals like retirement easier to achieve while still managing financial risks that will arise during your 40+ year career. You can use any saving/investing goals you choose, the take away is to plan it out in chunks so it is manageable. - Comments: 0

Weekly S&P Performance - 17 Jan 2016 11:58

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After including a weekly sector performance chart in a previous blog post I decided to make it a regular series.

in the second full week of trading the markets continued its downward trend. Looking at the sectors Utilities continues to be the preferred safe haven followed closely by Consumer Staples and Health Care.

The Materials and Energy continued to have the worst losses and probably comes as no surprise. The Financials however continued to get pounded and it is hard to believe that on a YTD basis they are the second worst performing sector. A pullback in large US banks or lending institutions with loan portfolios heavily weighted in energy or materials I understand but the rest of the sector collapsing is head scratching.

As a dividend investor it would be wise to keep an eye on other financials being pulled down from guilt by association. Financials areas where investments are looking attractive include insurance and investment service industries. Another area to keep an eye on are small local banks, they do not operate on the same grand stage as big banks and are more influenced by local economics than National.

The technology sector is another of interest and it is highly influenced by the FANG group (Facebook, Amazon, Netflix, Google) due to their high valuations. When FANG drags so does the whole sector. This is similar to the Financials where guilt by association may trigger some buying opportunities.

S&P Weekly Sector Perf S&P YTD Sector Perf
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DRIP Portfolio Update - 16 Jan 2016 13:22

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The start of 2016 has been a constant ride down in the markets leaving most (if not all) portfolio balances seeing red ink. Listening to all the talking heads in finance it has suddenly become cool (in a sick sadistic way) to be negative on the market. It is like they are begging the bear to come out of its cave! As bad as it may sound this has materialized opportunities for my DRIP Portfolio.

To start I added Domtar (UFS) to my growing list. Domtar has consistently been trading below $40 for all of December and early January’s drop to the low $30s just makes it all the more enticing. Like any capitalizing investor, I grabbed the chance to re-invest at a yield near 4.8%.

Domtar was not my only DRIP benefactor, insurer Maiden Holdings (MHLD) price drop came right during a DRIP payment. Maiden’s 2016 DRIP netted an additional 3.17 shares versus 2.633 last quarter or an increase of 20% more shares. If prices remain stable I will end acquiring an additional 2 shares per year, how sweet is that!

There are other opportunities in my portfolio but I want to wait and see if prices stabilize or we have a bounce back up in prices before I pull the trigger. One of these wait & see stocks is T Rowe Price (TROW), if their share price remains below $68 going into February then odds are they will be the next addition. General Motors (GM) is another candidate whose share price has dropped even after announcing a 5.5% increase to their annual dividend, if their share price remains below $32 this would be the second addition.

Microsoft (MSFT) is still in the dividend dog house. Yes their share price has dropped 10% to start January but unless it consistently trades below $50 a share I believe I can reinvest the dividend in better investments.

Holding DRIP Start
CMI - Cummins Jun 2015
HCP - HCP, Inc. Jun 2015
MHLD – Maiden Holdings Mar 2015
MSFT - Microsoft removed
OHI - Omega Healthcare Investors Dec 2015
PG - Procter & Gamble Aug 2015
QCOM - Qualcomm Mar 2015
THO – Thor Industries Mar 2015
New UFS - Domtar Jan 2016

2016 Goals - 13 Jan 2016 22:24

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I am late with setting my 2016 goals but I had to re-plan all my future goals due to the loss of an early retirement pension benefit and to a lesser extent the elimination of the Social Security file and suspend option.

Unfortunately, after weeks of number crunching and long talks with my wife, my retirement goal had to be moved out by two years from 60 to 62. To top it off this is only achievable if my wife goes back to work full-time so we can accelerate savings while still funding college for our three children over the next 8 years.

The silver lining is that my retirement is moving due to factors outside of my control and NOT because of bad investments. This reinforces the success of my investment discipline and approach.

This year I am keeping my goals on this blog linked to financials and keeping my personal goals private as they are more intimate between me and my family. Without further ado here are my 2016 goals.

2016 Goals

  1. Grow dividend income by 15%
  2. Transition my old 401K into an IRA with a dividend growth strategy
  3. Establish a ROTH account and maximize the 2016 contribution
  4. Buy daughter a car so she can commute to college
  5. Fund 100% of daughter's first year of college
  6. Reduce my debt by 20%

Of all the goals the hardest will be number 6. Reducing my debt by 20% while taking on more debt from buying my daughter a car and funding her first year of college will definitely be challenging but I think it is achievable. I need to keep the family on budget and hopefully in the fall my daughter receives a STEM scholarship for $7,500 a year. If these two things happen then I have a fighting chance :) - Comments: 2

Finds of the Week - 09 Jan 2016 23:04

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Interesting Articles from Last Week

Mistakes Were Made Great article by fellow blogger No More Waffles. You have to admire an investor that admits his mistakes and what is more impressive is he is still in his twenties so it shows maturity and level headedness at a young age.

I Retired at 30 Another fantastic article by Mr. Money Mustache. Nothing is more polarizing than combining the words retired and thirty, actually the article is not about retirement but about having no more constraints to say or do what you want (freedom)!

18 Steps to a New Financial Plan Helpful checks for all those developing 2016 goals.

Markets and Lotto

Last week’s major headlines were pretty much downers with ISIS, Hydrogen Bombs, Shootings, and of course the markets getting bashed to start 2016. But at least there was one distraction to give us a break and that is a record Power Ball lotto drawing of $900 million.

I have no idea what to even do with that much money! But if I won a small piece of that action I sure know how I would invest some of it. Thanks to the market beating there are definitely some big name well run companies on sale.

The financial sector was one of the worst hit last week. Many investors for some reason soured on big banks and the sector was the second worst performing.

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The problem I saw was the baby being thrown out with the bath water. The Financials sector is more than just banks and some good non-bank companies got trashed, take a look at these bargains:

Company Tkr Price Yield
AFLAC AFL $56.71 2.89%
Cincinnati Financial CINF $55.53 3.31%
Eaton Vance EV $28.78 3.68%
Maiden Holdings MHLD $13.52 4.14%
T Rowe Price TROW $65.36 3.18%

And financials weren’t the only place that looked attractive. Check out these big names

New Members to the Sub $100 Club
Company Tkr Price Yield
Apple AAPL $96.96 2.14%
Disney DIS $99.25 1.43%
Johnson & Johnson JNJ $98.16 3.05%

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4+% Yield Club
Company Tkr Price Yield
Cummins CMI $86.03 4.53%
Domtar UFS $33.44 4.78%
Emerson Electric EMR $44.09 4.31%
Ford F $12.54 4.78%
General Motors GM $29.52 4.88%

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Even More Big Names
Company Tkr Price Yield
3M MMM $140.49 2.91%
Donaldson DCI $27.12 2.51%
Genuine Parts Co. GPC $78.56 3.13%
IBM IBM $131.63 3.95%

I’ll keep on sharing internet finds when I can, Enjoy the Links :) - Comments: 1

New Buy WHG - 07 Jan 2016 17:54

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Markets are getting beat up (again) and I picked up another bargain in Westwood Holdings Group (WHG) at 49.91/share for 24 shares and a dividend yield of 4.57%. This will increase my annual forward dividend by $54.

Though WHG is a small cap I bought it for many of the same reasons I bought T Rowe Price (TROW):

◾High dividend 4.57%
◾34% Operating margin (not as good as TROW but still impressive)
◾22% Profit margin
◾No long term debt
◾Free cash flow

These last two buys have made my portfolio slightly overweight in financials so it will probably be my last buy for the year in this sector. Additionally, this is the last of my available funds until the second quarter of 2016.

Hopefully markets do not go much lower from here cause I'd hate to see I could have gotten both positions at much lower prices. - Comments: 0

New Buy TROW - 06 Jan 2016 18:40

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If this was a boxing match the new year 2016 has come out of its corner swinging and pummeling Mr. Market who is praying that someone will ring the bell to end the first round. Not sure if this is an indicator of how the rest of the year will but so far it is far from pretty.

As the market is currently suffering through early losses an opportunity to buy T. Rowe Price (TROW) finally came across so I bought 15 shares @ $68.96 a share with a dividend yield of 3.01% that will increases my future annual dividend income by $31. I have been following TROW for just over a year and have been patiently waiting to get in at a decent price. There was an opportunity back in October but at the time I did not have enough funds to start a position and thought I missed the boat.

Some of the reasons why I bought TROW include:

  • 3% dividend
  • 46% Operating margin
  • 29% Profit margin
  • No long term debt
  • Free cash flow
  • 29 Years of dividend growth - Comments: 0
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