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.

New Buy IRM - 27 Jul 2018 16:18

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Surprise, Surprise…Thought I was all done with purchases this month and it just goes to show how the market can change on a dime. Today I grabbed some shares of Iron Mountain at 33.71/share with a 7% yield. This buy will add $70 annually towards my dividend income.

I made this buy in my Roth IRA and besides another buy in July what was surprising was I bought a REIT. REITs have not been in my buy zone since April but now it looks like prices are softening. Who knows I may make another REIT for my Roth IRA in August. - Comments: 2

Largest Monthly Expense is Gone - 20 Jul 2018 14:23

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I just got back from the bank and signed the papers that will authorize the use of my escrow balance to pay off my mortgage. After 23 years my wife and I are finally waving goodbye to the largest debt load we have ever taken on and accomplished this by the age of 50!

How we got here

We did not do anything crazy to get where we are today and just followed a simple plan of keeping one house and we never refinanced to extend the loan. Back in 1995 when me and my newlywed were house hunting I had only one rule for the purchase; to buy a home we can afford on one income. That August we bought our home for $100K. For the first 5 years we had dual incomes (life was good then) and did make some extra payments to reduce the loan term (we paid an additional $100/month). But, in 2000 things changed dramatically with our income.

In 2000, my wife decided to leave the workforce to focus on raising our children and remained a stay at home mom for the next 17 years. At the time that was a 50% drop in income but things were manageable because we bought a house I could afford on my salary alone. Of course with the big drop in salary we could not afford to pay extra on the mortgage after that. It is amazing how paying just a few extra dollars in the first 5 years shaved off 7 full years on the mortgage.

Lower Expenses and Found Money

It is kind of surreal paying off the mortgage and the reduced expense hasn’t settled in yet. I am sure when we pay next month’s bills it will finally settle in that our monthly expenses have gone down $700 a month and we will have less financial stress throughout the year.

Of course the big question is now that we have an extra $700 what are we going to do with it? I can already imagine most readers screaming at their screens “save it you fool”, heck I'd do the same thing. However, life doesn’t always work out that way. As much as I would love to invest all of the money we do have other needs. Most important is my wife’s 10 year old minivan which probably has 2 more years left in it before it starts to become a money trap. So we agreed to split the difference and will set aside $350/month towards a new car in the next 2 years and to invest the other $350/month into the market.

Luckily this couldn’t come at a better time. Over the next 9 years the possible risk of me losing my job would devastate our plans to retire at age 60. Saving and investing an additional $350/month into dividend growth stocks will ease that risk and combined with my wife’s recent return to the workforce I can finally breathe again. It has been a long time having to watch every penny. Now that I don’t have to maybe it is time to start enjoying life just a bit more. - Comments: 0

Inflation Beaters Index Updated - 17 Jul 2018 23:46

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Last weekend in a blog post I unveiled the Inflation Beaters Index that is a compilation of companies who have grown their annual dividends for 25 or more consecutive years and their annual dividend increases exceed the inflation rate for each year. Today I am posting an update to the list that now includes inflation beating contenders who have exceeded the annual inflation rate for more than 10 consecutive years.

The data is not 100% complete as I still have to research stocks that exceeded 18 years (currently listed as 18+ in the file). For these companies I have to download the dividend history for each company and then manually adjust for all stock splits. It is a tedious process so they will be a bit longer to get updated but I felt the list complete enough for myself or others to use.

Hers is a quick metric summary of the components of contenders list:

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Recent Buys IBM & PRU - 15 Jul 2018 11:11

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I made two purchases Friday in PRU at $95/share and IBM at $146/share that combined will add $73.68 annually to my dividend income. I have been accumulating the two over the last four months and now have a full position in both. Just to note, a full position in my regular brokerage account is ~$3000 and I usually buy in $1000 increments.

Unless something big happens in the markets this should be my last big purchases for the month. I still have a little cash in my regular brokerage account, IRA & ROTH IRA to make purchases if I need to but most likely will carry this balance into August. - Comments: 2

My New List - 13 Jul 2018 17:25

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I did not post any blog updates last weekend and if I disappointed anyone I apologize but it was for a good reason as I was hard at work developing a new list that I’m pretty excited about. With that being said, I developed a new list called the U.S. Inflation Beaters Index. This list is a compilation of companies who have grown their annual dividends for 25 or more consecutive years and their annual dividend increases exceed the inflation rate for each year.

When I first imagined this list I thought it was going to be a quick exercise in spreadsheet number crunching but I couldn’t have been more wrong. I started by using the ever-so valuable U.S. Dividend Champions List from http://www.dripinvesting.org/ as a base model. The limitations of that file was that dividend payment history only went back to the year 2000 and would not fit the analysis needed to be done. From there I spent the next 5 days downloading the dividend history for each champion (there were 123 companies) and then had to manually adjust for all stock splits.

Once I had all of the relevant information it was an easy analysis after that. Using the inflation table from https://www.usinflationcalculator.com/inflation/current-inflation-rates/, the inflation rate from each year was overlaid to see how often a dividend increase exceed inflation. The data was then formatted and migrated to google sheets and now available to all. This will be a fairly easy thing to maintain going forward so I am pretty happy with the way it turned out.

Now that the data is available, the largest surprise was of the original 123 dividend champions only 32% met the criteria of beating the inflation rate for 25+ years. The really impressive companies are those with 30+ year streaks as they did this while navigating the significant downturns from:

  • Black Monday Crash of 1987
  • S&L Crisis in the early 1990’s
  • Dot-Com crash of 2000
  • 9/11 Terrorist Attacks in 2001
  • Financial Crisis of 2008-2009
Hers is a quick metric summary of the components of the list:
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Recent Buy PRU - 11 Jul 2018 22:42

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Picked up another small position in Prudential Financial (PRU) at a price of $95.89/share and a dividend yield of 3.75% while adding $36 annually to my income. This purchase was made in thanks to the recent massive dividend resulting from the Keurig & Dr. Pepper/Snapple (DPS) merger.

My original intention was to buy three stocks with the DPS distribution but all of my watched stocks with the exception of PRU decided to increase in price after I got the distribution. One that I was really interested in was Fastenal (FAST) who dipped into my target buy price a day before but quickly rose back above and then reported a positive quarter only to see its share price escalate even further placing FAST well outside of my buy zone. Pepsico (PEP) was another possible replacement but they also reported a positive quarter and their shares moved well above my buy price.

I still intend to buy two more positions and just need to be patient. Like any investor I prefer opportunistic buys and will just have to wait and see what the market offers up in the future.

PRU has 10 straight years of dividend growth with its most recent increase of 20% announced back in February 2018. The recent dividend increase places their payout ratio at a low 32% of earnings. While the payout ratio allows for dividend growth it is not the primary feature that I like about PRU (but it does help). There are two aspects of PRU I find more attractive for long term potential of continued dividend growth; increasing rates and global aging populations.

The Federal Reserve just increased rates again and announced their stance on future rate increases. For the insurance side of the business this is good news. Insurance companies keep a significant amount of cash and short term investments on hand for claims and risk reduction, with increased rates this will increase the interest earned on those funds. Subsequently, the European Central Bank just announced an end to their Quantitative Easing (QE) program and while they have no immediate plans to increase rates I am assuming they will begin gradually increasing rates 12-18 months after the end of the QE. So globally we will see rising rates and better interest returns for short term investments.

The largest attraction of PRU I saved for last. The United States is not the only country facing an aging population issue and it is becoming a global issue. The map below is forecasted population growth by 2030 where 20% of the population will be 65 or older. The good news for PRU is that they are positioned in all of the major markets with the exception of Oceania countries like Australia and New Zealand. PRU global foot print include the America’s, Europe and Asia. It is no coincidence that their three main services of life insurance, retirement solutions and investment management services are all targeted to an aging population positioning them to capitalize on the global aging phenomenon. Considering there are forecasts that the aging crisis will peak in 2050 to 2055 before declining PRU has the potential to grow dividends for another 30 years.

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source http://money.cnn.com/interactive/news/aging-countries/index.html - Comments: 0

Recent Buy ABBV - 03 Jul 2018 22:48

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Friday I started a small position in AbbVie (ABBV) by grabbing shares at a price of $92.93/share and a dividend yield of 4.13%. Pharmaceutical companies have been pressured for the last 6 weeks with some strong names like Johnson & Johnson (JNJ) and Pfizer (PFE) facing decreasing or stagnating share price.

All three companies (ABBV, JNJ, PFE) are currently decent buys and it is tough to choose. However, from a dividend growth perspective, you can’t go wrong with any of these three. I choose ABBV because I already have sizeable positions in JNJ, PFE, as well as Merck (MRK) which surprisingly has held up well over the last 6 weeks. - Comments: 2

July Watch List - 01 Jul 2018 15:18

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I’ll be getting the largest dividend check ever from Dr. Pepper Snapple (DPS) as the buyout offer from Keurig was overwhelmingly approved by DPS shareholders and the buyout will be distributed as a $103.75/share dividend on July 10. The remainder of my DPS shares will be exchanged for shares in the new company Keurig Dr Pepper (KDP).

I bought DPS 5 years ago and forgot I had as many shares as I did so this will be a nice bankroll for reinvestment. I’ll be keeping a close eye on my watch list in July to see who dips down into bargain territory. As an update I have updated some of my buy prices to adjust for my portfolio annual income growth targets and market risk.

Equities

AbbVie (ABBV) did not get treated well at the end of June and fell back to the $92/share level. The market keeps punishing good pharmaceutical stocks so why not take advantage especially when ABBV has an ex-dividend date of July 12.

Another pharmaceutical stock that has been languishing and still in my buy zone is Pfizer (PFE). With a 3.75% dividend yield it’s a hard one to ignore. One thing I love about stocks that languish is that they make for a great DRIP plan to keep my annual income growth goal on target.

Though not in my buy zone there are three stocks that have fallen and are close to my buy zone. Air Products (APD) and Fastenal (FAST) are both trending down due to the tariffs and potential trade war. United Parcel Service (UPS) had a recent Amazon scare pushing its price down and just a few dollars away from my buy price. I’ll be keeping a close eye on all three as they have potential.

International Business Machines (IBM) continues to get punished and now yields 4.5%. IBM’s last quarter was good (not great) but is a vast improvement from previous quarters. Unfortunately, IBM lives in the tech sector and in comparison to other tech stock the revenue & earnings growth is not up to par and the market is punishing them.

Prudential Financial (PRU) is still below the $100/share mark and remains attractive. I bought a small position in June at $97/share and with a current price of $93/share I may average down picking up a few more shares

Real Estate

REITS continue to be a haven as a hedge for the tariffs and potential trade war. I bought no REITs last month and I do not have high hopes for July. Looks like I will have another monthly contribution made to my ROTH IRA with no stock purchase and am satisfied letting my cash position build in that account.

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- Comments: 2


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