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

Peace Out! This Blog is Over - 30 Jul 2016 13:21

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The title of the blog says it all, after three years of dividend growth blogging I have decided to end this blog. The site has fulfilled its original mission into making me a more disciplined investor while transitioning a part of my investments into dividend growth. The site could continue on but what value does it bring? There are countless other blogs on the topic of dividend growth and so much so that keeping another one around probably does more harm than good. I will keep the site up for a couple more months but after that it will become private and inaccessible. With all that said here some of my favorite benefits from blogging.

Goal Setting a Must

Setting long term goals was something I casually approached in the past but blogging forced me to actually plan multiple goals over different stages of my life and to revisit them twice a year.

Investing without aligning to your goals is just pointless. Goals should determine your investing strategy or style and be a part of a decision process. For example I am currently sitting on a pile of cash that has yet to be invested. Why? Because I can’t find enough investments at the dividend yield and growth I require to meet my 10yr, 15yr, or 20yr goals!

It is absolutely stupid to invest for the sake of investing. If the results do not meet your goals in the timeframe you desire then you are just undermining yourself and will have to add even more capital to compensate. The only exception to this is my 401K because it is just stupid to leave a company matching contribution on the table! Someone wants to give you free money then take it!

Best Resource are Financial Statements

My writing style is definitely inadequate to describe how important financial statements are but I will give it my best shot. Blogging helped me shed years of speculation trading measures or per share measures and return to the basics of valuing a company.

I actually found my original accounting books from college (15+ years ago) as well as my class projects I had written in early versions of excel. The beautiful thing about accounting is that they are based on standards and standards do not change! Accounting standards for analyzing financial statements are truly neutral, they do not lie or get swayed by opinion.

Beyond the numbers, financial statement also provide insights into company’s leadership beginning with the CEO. The CEO letter to shareholders can be an insight to whether the CEO is inspiring, boring, exciting, or just an oblivious dick head. I discovered this during my analysis of Thor Industries (THO) and summarized it the post A CEO That Gets It!.

Risk is another aspect within a financial statement report that you can glean important information, take Kodak as a prime example. In their 1996 annual report there was no risk for digital images. It wasn’t until 1997/8 that they recognized the risk but by then their revenue was already getting decimated by rapidly declining sales in film. In reality they should have started identifying the risk back in 1995 when digital photography was starting to take off.

One last thing to remember is not to get cocky. Just because you performed a financial analysis and a stock pick has performed well does not equate to you being a great or expert stock picker. Truth is we live in a macro environment and not a micro environment. I could have listed a few hundred companies back in 2012 with strong financials and have a 5 year old child randomly pick 10 companies and all would have done great over the last 4 years. As long as a company has sound financials it will always move positive in lock step with the macro markets while their strong financials will allow them to perceiver through down times.

Tried to be Different

One aspect I have pride in was trying to be different by bringing smaller less well known dividend growers into focus to the dividend growth community. Many bloggers routinely analyze and post big well-known names like McDonalds (MCD), Johnson & Johnson (JNJ), Coca Cola (KO), or General Mills (GIS). These are great companies and I have many in my portfolio and am not disregarding them by any means but they are not the only fish in the sea.

The reason why they are so popular is because many investing “professionals” including Warren Buffet continually review, comment or invest in these big names. Why? Because they own funds that are so large that they need to invest in large enough companies that will move their portfolio yields without having negative effects on share price swings. Small companies simply do not have enough equity to make it worth their while. I realize that size can equate to market survival and do not discount this, being the big dog has advantages in regards to longevity and stability.

But there are other opportunities investors should not ignore and here is a list of my more favorites I have brought to light over the last three years:

  • Bar Harbor Bank (BHB)
  • Domtar (UFS)
  • Donaldson (DCI)
  • GATX Corp (GATX)
  • Linear Technologies (LLTC)
  • Maiden Holdings (MHLD)
  • Marine Products (MPX)
  • PetMed Express (PETS)
  • SPAN America (SPAN)
  • Thor Industries (THO)

And of course I did have a stinker in the bunch. Ensco (ESV) really killed me as I lost 50% on that and good thing I got out when I did as the stock plummeted even further. Only consolation was that my investment in ESV was only $1500 so the loss did not hurt my overall portfolio.

Final Thought & Farewell

To say the blog was popular is really a laughable moment but it was more important to me than readers (more like a personal journal). There never was intent to use this as a platform to generate passive income. I have made a few friends over the years who helped provide guidance and feedback that I will always value and I can never thank all of the readers and commenters enough for their support.

While my blog may be ending my visitation and commenting on other blogger sites will continue. But there are some blogs that I no longer will support because they have become abhorrently obsessed with turning their blog into a passive income machine. Of which I despise any blog with:

  1. pop-up windows (really! I just want to read the damn post)
  2. java script adverts (pages take forever to load, are instable and not secure)
  3. article redirects to other websites (click here to continue reading crap!)

Well it has been fun and as I leave the blogging sphere are so many quality blogging sites out there that I feel confident the topic of dividend growth is in good hands. :)) - Comments: 8

LLTC Acquisition Dilemma - 26 Jul 2016 22:56

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Readers of my blog might remember my June purchase of Linear Technologies (LLTC) for 100 shares @ $44. Today Analog Devices (ADI) announced a $14.8B buyout of LLTC with a combination of cash and stock.

The combined deal will pay LLTC $46 cash and 0.2321 ADI share for each of LLTC. Luckily this holding is an IRA account so taxes are not a concern. The big decision I have to make is do I sell or hold on for the acquisition?

This is a tough decision because I really planned on holding LLTC for many years to come while enjoying a potential dividend growth rate near 7% annually. If I sell where do I invest the money that will provide the right combination of yield and growth?

In March I did an analysis of both LLTC and ADI and while both were strong I thought LLTC was the better value play. But I also commented I wouldn't shy away from ADI if it was available at the right price. If I hold on for the acquisition I will get back my original investment plus an additional $200 (about a year and a half of LLTC dividends) and I get 23 shares of ADI (that is for all intents and purposes free stock) for a company I was willing to buy back in March.

Since there are no tax consequences for me this is a pretty tempting deal. I will look around to see if I can do better but one additional item I will factor in the new dividend from the 23 ADI shares that will pay me $38 annually. - Comments: 1

Portfolio Planning - 24 Jul 2016 23:21

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Obviously the markets have had a significant run-up as of late and many individual investors are hesitant adding new funds to what may possibly be an overvalued market.

Normally I do not pay close attention to market gyrations because I focus on whether the combination of dividend yield and dividend growth will meet my long term investing goals. But even I am struggling to find companies with the right yield/growth combination while maintaining a diverse portfolio. In other words, my buying activity is rapidly declining.

Since I am not actively buying I decided to use this time to analyze my portfolio in regards to diversification and to develop an acquisition plan. The chart below is a depiction of my target allocations, where I am and the remaining gap. If you are wondering why the allocations do not add up to 100% that is because I keep 5% in cash and did not include it in the chart

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In the Consumer Defensive (staples) and Utilities sectors it is not shocking that I still have a rather large gap to fill as these sectors have been hot all year with YTD returns of 10% and 21% and are overpriced to what I need. I am waiting on a significant market pull back before I buy anything here but I do like the classics General Mills (GIS), Archer Daniels Midland (ADM), JM Smuckers (SJM) and Unilever (UL). Of all UL seems the most promising for a near term buy.

One area I was surprised at how underfunded I was in was Healthcare. Johnson & Johnson is my favorite in this group and I am just waiting for a pull back in prices before I buy more shares but considering how large the gap is I will add Pfizer (PFE) and Merck (MRK) to my watch list as potential buys. At the end of the day I am not sure how I missed funding the Healthcare sector but it just goes to show you even an actively managed portfolio needs to be analyzed regularly.

Energy is a sector I know I have ignored but now is possibly a time to visit. 3 stocks that look interesting are Valero (VLO), Marathon Petroleum (MPC), and Phillips 66 (PSX). Unfortunately I do not know enough about these companies and will need to investigate further.

Interestingly, one area I thought I was overbought in (financials) I was actually a little bit under and I can make one more purchase. This is good news as financials are the only S&P sector not participating in the rally and offers the only area where buying opportunities exist. My most likely near term buy will be the Royal Bank of Canada (RY) which put me at my target of 15% allocation.

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With my planning complete I now have a target amount of investment dollars for each sector. All I need now is a shopping list and a market decline :) - Comments: 2

New Buy (GATX) - 21 Jul 2016 21:56

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The market might be high but there are still some buys out there if you do your homework. Today I grabbed one of those opportunities buying 100 shares of GATX Corp (GATX) at $44 to add to my existing position I that initiated last February.

Before the market opened GATX reported quarterly earnings and knocked it out of the park. Estimates were at $1.24/share and they reported $1.49/share. As great as this sounds the excitement was tempered by the rail industry declaring the remainder of 2016 as “soft” and the railcar leasing company GATX Corp confirming the same future outlook which sent the stock down more than $3/share for the day to close at $44.06.

Yet, where the market saw disappointment I saw an opportunity. Much of the gains for the quarter were from efforts to reduce overhead costs such as SG&A that improve margins making them leaner and more competitive. Also leadership confirmed their full year earnings forecast of $5.55 to 5.75/share or an 18% to 22% increase over 2015 earnings of $4.69/share. Yes there is currently a glut of railcars but GATX has a proven knack for understanding which types of railcars will be in demand and aggressively managing lease agreements to help reduce the “softness” within the industry. The increase in earnings should support a dividend growth increase anywhere from 10% to 15% while decreasing their payout ratio.

Based on the lower end of the projected dividend growth (10%) that places forward dividends at $1.76/share and with a share price of $44 or less translates into a 4% yield for 2017. I love GATX as an alternative to rail operators like Union Pacific and CSX, hopefully I will be rewarded when January 2017 rolls around.

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- Comments: 2

3 Years Later, Mission Accomplished - 10 Jul 2016 15:12

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3 Years ago I started a blog with the simple mission of becoming a more disciplined investor by documenting my journey and learning process.

In that three year time frame I feel I have met the original purpose of why I started a blog. I now regularly write down and revisit my goals and strategies. I have trained myself to remove my emotions from investing decisions and to let data tell the story of when to buy or sell allowing me to take control of mine and my family's financial future.

A benefit from blogging was the deprograming of decades of media perception that the stock market is for getting rich or going broke which I now know was speculation trading and not investing. Last and most importantly the greatest benefit of blogging was the participation of fellow bloggers sharing their wisdom and experiences.

After 3 years I truly feel that the original mission of this blog has been met. Now I sit at a crossroad of whether or not to continue on and if so what direction it should take it. There are more than enough dividend growth blogs out there to continue inspiring others so in regards to continuing on I am undecided at this moment.

Regardless of my decision going forward I want to take the time to thank everyone who has encouraged and helped along this journey, on that note…Thank You and I Wish You the Best in Achieving All of Your Financial Goals & Dreams! - Comments: 1

New Buy Canadian Imperial Bank of Commerce (CM) - 05 Jul 2016 16:59

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I've been looking to add a bank stock to my IRA portfolio and was attracted to Canadian banks, in particular Royal Bank of Canada (RY) and Canadian Imperial Bank of Commerce (CM).

I have finally got off my backside and pulled the trigger buying 67 shares of CM at $74.60. CM is currently yielding 5% and will add $250 to my annual dividend income. RY is a good stock and there is a fair chance I will pick this up down the road but for now I am happy the CM purchase. - Comments: 2

2016 2nd Quarter Summary - 01 Jul 2016 21:57

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The first half of 2016 was definitely interesting with the markets dropping throughout all of January through mid-February only to see it rally through June and then a market drop from BREXIT but the markets rallied in the last week to where they were before BREXIT. Good thing I am not a trader because it would definitely have given me an ulcer. With all of the market ups and downs here is state of my portfolio in relation to my 2016 goals.

Taxable Portfolio

My 6 month dividend income in comparison to the same time in 2015 has increased 15.15%. This is right on target for meeting annual income growth of 15%. For the second quarter of 2016 I actually purchased no new stocks but instead relied on dividend raises and dividend re-investment.

This has been pretty awesome to achieve as I have not been adding any new funds and instead redirecting extra cash towards my daughters first year of college and reducing debt.

IRA Portfolio (401K Rollover)

My goal at the beginning of the year was to invest all of the cash from a 401K rollover by the end of the year. I was actually a bit cocky as I thought I would accomplish this by June. But alas I did not even come close as I have only invested 50% to date.

It is not that I do not think there are no good buys out there, on the contrary there are quite a few but they are all in sectors I already have a significant investment in and do not want to become overweight. The areas I need to diversify into are utilities and consumer staples, unfortunately I did not foresee a run-up in the sectors and am struggling with valuations.

Luckily a significant portion of what I did invest was during February when the market had a significant sell-off which will provide a forward annual dividend of $5,200. My forward annual dividend target for this account was $7,500 so with 50% remaining to invest it looks like I should exceed my expectation.

DRIP Portfolio

For the second quarter I changed my philosophy on when to automatically reinvest dividends via a DRIP program. I have developed a table (based on my retirement goals), that identifies what dividend growth rate I need in relation to dividend yield.
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%

(note: for yields above 6% only reinvestment is required to meet my goals, any dividend growth is pure gravy)

I evaluated every holding to see which stock holding fits into the table above and it tripled what stocks I should DRIP. Here is a list of all the companies I now DRIP:

COMPANY SYMBOL COMPANY SYMBOL
BAR HARBOR BANKSHARES BHB OMEGA HEALTHCARE INVS OHI
CUMMINS INC CMI PEBBLEBROOK HOTEL TRUST PEB
DOMTAR CORP COM UFS PETMED EXPRESS INC PETS
DR PEPPER SNAPPLE GROUP DPS PROSPECT CAP CORP PSEC
GATX CORP GATX QUALCOMM INC QCOM
GENERAL MOTORS GM SPAN AMER MED SYS INC SPAN
HASBRO INC HAS STAG INDUSTRIAL STAG
HOSPITALITY PROPERTIES TRUST HPT THOR INDS INC THO
LINEAR TECHNOLOGY CORP LLTC TRIANGLE CAP CORP TCAP
MAIDEN HOLDINGS LTD MHLD WESTWOOD HLDGS GROUP WHG
MARINE PRODUCTS CORP MPX WP CAREY INC WPC
MICROSOFT CORP MSFT Nordic American Tankers NAT

Personal Goal

In the first quarter I had completed my goal of funding my daughter’s first year of college and I am proud to say I completed another goal related to this as I just bought her a car so she can commute.

Debt Goal

During the first quarter I summarized all of my debt into how much interest I was paying daily which was $4.83/day. In lieu of adding more funds to my investing accounts I funneled all excess cash to paying down debt and our new daily interest per day is $3.43/day. This was a whopping 29% decrease in my debt!

Unfortunately this may flatten out for the next quarter. When we bought my daughter a car it was slightly more expensive than I had planned and used some emergency funds to cover the difference. For the next few months my extra money will be used to replenish the emergency fund. Hopefully we will be back on track in the 3rd quarter.

ROTH IRA

No new progress on the ROTH. It still has a small balance of a $100 and will probably remain that way as I am sacrificing this goal to eliminate debt. Who knows maybe a contribution in the 4th quarter but it will not be enough to max out the 2016 contribution.

Summary

So there you have it, income is up, debt is down, and my daughter’s future is off to a decent start. - Comments: 1

New Buy Nordic American Tankers (NAT) - 01 Jul 2016 21:49

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Grabbed 100 shares of Nordic American Tankers Limited (NAT) at $13.95/share. No sugar coating this one as I bought it for the high 12% yield.

I know the risk going in and hence why I only initiated a small position. Outside of the yield what I find attractive about NAT is that they have the largest fleet of suezmax tankers and the lowest debt of commercial shipping. In the long term, as long as the yield stays above 7% I will have no regrets with this risky buy. - Comments: 0

New Buy PetMed Express (PETS) - 01 Jul 2016 21:17

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Back in 2011 PetMed Express (PETS) was a stock that continually appeared when I was searching for dividend growth stocks. Back then I dismissed PETS because I did not believe that their business model would last. I was sure that pet owners were loyal to their local pet store and would pick up their pet's prescriptions there and big chains like PETCO would bury them.

Fast forward 5 years later and they have proven me wrong. Consumers have become extremely comfortable with online purchases and big chains like PETCO failed to capitalize. Between PETS established online presence and the incredible loyalty between owners and their pets (which many consider as family members) It is hard to ignore and so I acquired 150 shares at $18.50.

PETS has a current yield just above 4% and a 5 year average growth rate of 8.59% and no long term debt. The one weak spot is that their dividend payout ratio is slightly higher than what I normally find acceptable as it is currently at 74%.

Despite the high payout ratio I like the stock as a staple company (I know it is not in the consumer staple sector). As I stated earlier, pets are family members and like any family member you would go to any lengths to keep that family member healthy. - Comments: 0


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