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

New Buy Linear Technology (LLTC) - 27 Jun 2016 21:29

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Just a few days ago I thought it would be awhile before I made another buy but, thanks to a BREXIT scare, markets have retreated creating a few pockets of opportunity.

Today I grabbed 100 shares of Linear Technology (LLTC) at $44/share. LLTC has been a steady dividend grower for 21 consecutive years and (thanks to an expansion with a new manufacturing facility) their increased production capability will keep the growth continuing on. For more detail on LLTC here is a write-up from an earlier post http://dgi.wikidot.com/blog:135. - Comments: 0

New Buy Marine Products (MPX) - 22 Jun 2016 21:51

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Grabbed 300 shares of Marine Products (MPX) at $7.99/share. This price point will provide a 3% yield and if they pull the trigger on a special year end dividend like they have done in past years then the yield is closer to 3.5%. For more detail on MPX here is a write-up from an earlier post http://dgi.wikidot.com/blog:146.

Unless there is a sudden market crash this will probably be my last buy for awhile. From a portfolio perspective the MPX purchase gets me to my 50% of funds invested from my rollover IRA but my portfolio is void of defensive dividend growth companies like consumer staples and utilities. Unfortunately most stocks that fall in this category seem overpriced and hence my prediction of not picking up anything for awhile. For those that are curious here are some of the companies I am waiting for:

Con Ed (ED)
Ct. Water Services (CTWS)
General Mills (GIS)
Johnson & Johnson (JNJ)
Kimberly Clark (KMB)
Procter & Gamble (PG)
PPL Corp (PPL)
Unilever (UL)
Waste Management (WM) - Comments: 0

Father's Day Portfolio - 18 Jun 2016 02:46

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My Dad passed away 29 years ago and I still miss the big lug. If Dad was still around today I would have loved to have given him an awesome Father’s Day gift of a small portfolio consisting of one share of the following companies. Wherever you are Pops HAVE A GREAT FATHERS DAY!!!

Father’s Day Portfolio Gift

Even though your kids are grown we are still useless so we still need your help repairing our houses so here are couple power tools from Black & Decker (SWK) and Lowes (LOW). By the way, you are getting older and pushing that lawn mower just doesn’t cut it so here is a brand new John Deere (DE) lawn tractor to cut that ½ acre of grass.

Of course you have been more than just a Dad, you are also a big boy at heart and big boys get big toys. With all of the kids out of the house that garage is pretty empty and we can fill it up by starting with a Ford (F) Mustang. If you have a classic car then you will need a classic Indian Motorcycle from Polaris (PII) to balance it out. Still have a little room left out in the garage, how about a new boat courtesy of Marine Products (MPX).

Toys and tools are fun but you are my Dad and I still like to do things with you. We could start by stopping by Big 5 Sporting Goods (BGFV) and grab some fishing gear before hitting the lake. After fishing we could enjoy playing the front 9 at one of the many golf courses of EPR Properties (EPR) or if you are feeling up to it we can play a full 18 holes.

Finally, having six kids could not have been easy. While you were a great Dad I am sure we took away time from you being a husband so here is a new RV from Thor Industries (THO) so you and Mom can get away from us and be a couple again.

Father’s Day Portfolio
Issue Price Yield
SWK $112 1.95%
LOW $78 1.79%
DE $86 2.79%
F $13 4.52%
PII $82 2.7%
MPX $8.5 2.83%
BGFV $9 5.57%
EPR $74 5.16%
THO $64 1.88%

New Buy Polaris Industries (PII) - 10 Jun 2016 20:43

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Grabbed 50 shares of Polaris Industries (PII) at $81.33/share. Patiently waited for PII to drop below $82/share and now I have it. What I find attractive is the long term growth prospective as PII expands its motorcycle dealer network. For more detail on PII here is a write-up from an earlier post http://dgi.wikidot.com/blog:143. - Comments: 2

Marine Products (MPX) - 07 Jun 2016 23:17

Tags: mpx stock_review_2016

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Back in my younger days, every free chance we got we would travel to Maine to enjoy some vacation time on Big Sebago Lake. Back then we cruised the lake on a 19 foot Chaparral Bow Rider filling up our time with water-skiing, tubing, or just relaxing on the boat and taking a slow cruise. There were quite a few boats on the lake back then but Chaparral was the outright favorite for boaters.

That was 20+ years ago and I no longer have a boat nor do I travel enough to the lake I enjoyed for oh so many summers. But to my surprise I have discovered that Chaparral boats are still being manufactured today and remain the top seller. Even more surprising I discovered the manufacturer of Chaparral is a publicly traded company under the name Marine Products Corporation (MPX) and (this is the best part) on its way to becoming a dividend growth company.

MPX manufactures fiberglass boats under the product names of Chaparral and Robalo with a total of 50 different products. While Chaparral has long been known for power boats, the Robalo brand was acquired shortly after the company was spun-off in 2001 and provided instant access to the recreational salt water fishing market.

In regards to competition, MPX’s largest competitors are Bayliner, Cobalt, Regal and Sea Ray but the powerboat market is extremely crowded with many other smaller companies with traditional names like Chris-Craft, Four Winns, and Starcraft. Competition is not any lighter in the fishing boat market and MPX needs a consistent new product roll-out in both markets to remain current and competitive.

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As a dividend grower MPX has been paying a dividend since 2001 but drastically cut it in 2009 and suspended dividends in 2010 and 2011. Since 2009 the dividend has grown from $0.01/share to $0.24/share with a recent 50% increase. In addition to the generous dividend growth, MPX has issued a special dividend every year since 2012. If you had the courage to endure the 2009-2011 dividend cut, you would have been well compensated for lost dividends via the special dividends.

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Like any investment we shall perform the due diligence of analyzing MPXs annual financial statements to understand if the dividend is on solid ground and opportunities for dividend growth.

Note: The following financial analysis is based on MPX’s 2015 annual report.

Liquidity

2015 2014 2013
Current Ratio 3.79 3.31 3
Quick Ratio 1.21 .77 .87
Days to Collect Receivables 2.12 4.99 4.35
Days to Sell Inventory 73.9 76.7 76.7
Liquid Current Assets $17M $10M $13M
Long Term Debt $0 $0 $0

The current and quick ratios indicate a strong level of liquidity and when you combine it with no long term debt this company is well positioned to access cash for emergencies or to capitalize on opportunities.

The days to sell inventory seems high but considering they operate in a seasonal consumer discretionary market it is not out of line.

Profitability

2015 2014 2013
Revenue Growth Rate 55.55% 12.5% 14.2%
Operating Expense Ratio 11% 12% 12%
Net Income as a % of Sales 7% 5% 5%
Return on Assets 13% 9% 8%
Cash Used for Investing $3M $4M 1M
Free Cash Flow $6M $1M $4
Dividend $8M $6M $6M

MPX has been improving in many areas year over year. Operating expenses are decreasing, revenue is growing and they are getting better returns out of their investment into capital expenditures as shown by the growing Return on Assets.

Credit Risk

2015 2014 2013
Debt Ratio 0.18 0.19 .20
Interest Rate Coverage Ratio - - -

MPX has no long term debt so there is no interest rate coverage ratio. The debt ratio which is amazingly low gets better year over year, another indicator expenses are shrinking and margins are growing.

Future Growth

2015 2014 2013
Capex to Depreciation Ratio 4 .57 .71
R&D Investment $663K $743K $1.1M
Acquisitions $0 $0 $0
Share Buyback $16M $22M $15M

As stated earlier, MPX operates in a pretty crowded market so they need a continuous year after year launch of new or upgraded products. MPX is not making extreme investments, management knows their business and markets extremely well and strategically invest the right amount of money into capital equipment and R&D. For example, last year MPX rolled out the all new Robalo 160. The Robalo 160 a smaller boat that is reaching a new market thanks to its low cost for boating beginners.

In regards to acquisitions I am not surprised that no money has been has been spent. The boating market is fairly crowded and acquiring another boating product would cannibalize existing sales. While management continually states they are open to acquisitions, I believe that sentiment is limited to acquiring new manufacturing or material technologies to improve existing product lines.

Shareholder Value

2015 2014 2013
P/E Ratio 16 36 48
Book Value per Share $2.39 $2.2 $2.15
Dividend Yield 3.3% 1.9% 1.49%

MPX’s share price has not grown with its revenue growth, improving book value, or reduced operating expenses. I understand share prices were overinflated during 2013 & 2014 based on the high PE but when it dropped to a PE of 16 in 2015 you have to wonder if the market is late to catch up.

Conclusion

MPX has conservative financials and is very liquid but its future is extremely dependent on how strong the economy is. The existing dividend is well covered and still has room to grow with a low dividend payout ratio of 54%.

Investing in MPX is not for those with a weak stomach. You have to be prepared for significant price volatility based on:

  1. When the economy tanks so does MPX revenue.
  2. MPX is a small cap stock with a market cap of just $315M
  3. MPX is thinly traded, average daily volume currently sits at 11,644

Because there will be significant price volatility I would initiate a small position at $8/share or lower. - Comments: 0

Yield/Growth to Meet Goals - 05 Jun 2016 12:00

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Late last year there were some small changes in my life that will move my target retirement age from 60 to 62. To get their I had to re-plan all of my long term saving goals and I finally finished the last piece by analyzing my potential expenses and potential income to the age of 82 or 20 years into my retirement.

The final calculations showed that for every dollar I invest I need a certain combination of dividend yield and dividend growth rate. The table below is a summary of the various combinations I need going forward.

Yield Min 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%

The important lesson here is that I am not limiting myself to just yield or just growth. Occasionally you may hear or read a scenario where one investor states to another investor "I would never buy the stock at that price because it is too rich." The rub I have is that if the yield and growth rate meet your savings or income goals does it matter in the long run that you paid more or less than the next guy? In these scenarios you need to let the ego go and just ensure you are on the path to achieving your goals.

Getting back to achieving my goals, now that I have a set of yield/growth measures I will not just apply this to new buys but also what companies I will use a dividend reinvestment plan (DRIP) with. I already scanned my portfolio and surprisingly 5 new companies were changed to a DRIP. My personal take is I must not have been DRIP'g these companies because the stock price was high in relation to when I bought them. But, just because I bought a position 5-6 years ago at a much lower price does not mean it is a bad investment today.

A good example is Dr. Pepper/Snapple (DPS). I bought DPS at $42/share and today it is averaging $93/share. Since DPS has more than doubled I was not DRIP'g the dividend as I thought prices were lofty. But the current dividend yield is 2.3% and 3 year average dividend growth rate has been 10.86% so this meets my yield/growth needs and it signals that I should have been DRIP'g the dividend the entire time (doh!). I chalk this up as yet another mistake that has contributed to my education on investing. - Comments: 0

Recent Sell (HCP) - 04 Jun 2016 09:51

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I sold 200 shares of HCP at $33.67 with a capital gain loss of $149. Luckily losses were not that bad and I can use it as a deduction on my taxes.

Two weeks ago I bought two REITS, Pebblebrook (PEB) and Stag Industrial (STAG), which made my portfolio overweight in REITs. This sell brings my portfolio weighting back into alignment and allows me to avoid the upcoming HCP spinoff of their problem child HCR ManorCare of which I did not want to become a shareholder of.

Of course this places some cash back into the portfolio but as of right now I have no short term target to put the money to work. Instead I will use the cash as a reserve to capitalize on any future buying opportunity. - Comments: 2


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