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

Portfolio Experiment - Month 2 - 04 Feb 2017 16:03



January we saw the Dow break the 20K level only to retreat a small bit and then trade sideways for the remainder of the month. A second month into the Motif portfolio experiment and one thing is becoming clear is that diversity by sector pays off.

Dividend Income

Projected dividend income $26.77
Actual dividend income $26.81
Growth of $0.04

Dividend income for January was much easier to predict as the ETFs (which have a variable dividend payment) do not have distributions during the month of January. Actual dividend income came in 4 cents more than planned thanks to a small dividend increase from W.P. Carey (WPC). This small increase represent an increase of 0.15% and while small is much better than no increase (or a decrease).

Portfolio Value

Pre-Retirement Retirement
Starting Value $10,000 $10,000
Current Value $10,279 $10,279
Cash Balance $35.10 -
Cash Distributed - $35.10
Total Portfolio Value $10,314 $10,279
Total Return 3.14% 2.79%

With the markets zig-zagging all month I was surprised to see our portfolio total return increase from 2.71% in December to 3.14% & 2.79% for the two different scenarios. I attribute the slight gain in thanks to a well-diversified portfolio. Consumer Discretionary & Staples performed less than December’s performance but this was compensated with gains in Basic Materials, Healthcare and Technology.

Portfolio Sector & % Allocation Gain/Loss
FINANCIALS - 10% 2.90%
HEALTHCARE - 10% 1.3%
INDUSTRIALS - 10% 2.9%
REAL ESTATE - 15% 4.4%
UTILITIES - 6% 0.66%
BONDS & INCOME - 8% 1.1%

- Comments: 0

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

Tags: potfolio-experiment

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

Tags: speculation

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

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