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 at 60.

Weekly Portfolio Summary - 09 Feb 2019 12:08

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Portfolio Activity

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Portfolio News - (In Case You Missed These Headlines)

Armanino Foods of Distinction (AMNF)

Brookfield Renewable Partners (BEP)

General Motors (GM)

Hasbro (HAS)

Leggett and Platt (LEG)

Medical Properties Trust (MPW)

Procter & Gamble (PG)

Prudential Financial (PRU)

Prospect Capital (PSEC)

Phillips 66 (PSX)

Westwood Holdings Group (WHG)

Weyerhaeuser (WY)

Interesting Blog Posts or Articles

Not a lot of articles this week as most folks were busy posting their monthly results. For a summary of monthly dividend income checkout the well maintained page at our fellow blogger’s site Dividend Driven - Comments: 0

6 Dividend Stocks With a 30-Year Streak of Increasing Their Payouts Higher Than Inflation - 07 Feb 2019 22:42

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1. AFLAC Inc (AFL)

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Inflation Beating Streak: 31 Years
Yield: 2.23%
Payout Ratio: 29%
Most Recent Dividend Increase: 3.85% / Jan 2019

2. Automatic Data Processing Inc. (ADP)

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Inflation Beating Streak: 35 Years
Yield: 2.17%
Payout Ratio: 77%
Most Recent Dividend Increase: 14.49% / Nov 2018

3. Coca-Cola Company (KO)

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Inflation Beating Streak: 34 Years
Yield: 3.16%
Payout Ratio: 142%
Most Recent Dividend Increase: 5.41% / Feb 2018

4. Johnson & Johnson (JNJ)

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Inflation Beating Streak: 38 Years
Yield: 2.73%
Payout Ratio: 64%
Most Recent Dividend Increase: 7.14% / Apr 2018

5. Medtronic (MDT)

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Inflation Beating Streak: 36 Years
Yield: 2.25%
Payout Ratio: 49%
Most Recent Dividend Increase: 8.7% / Jul 2018

6. Target (TGT)

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Inflation Beating Streak: 35 Years
Yield: 3.56%
Payout Ratio: 55%
Most Recent Dividend Increase: 3.23% / Jun 2018 - Comments: 2

January Dividend Income - 03 Feb 2019 21:19

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After 31 32 years of clocking in and out of work and religiously saving 10% annually every year, in good times and bad, I have decided to share my monthly dividend income to show what regular saving and investing can accomplish.

This month I made $2,915 a slight increase versus last quarters $2901. This was a marginal gain because of two factors. First is the lack of monthly income from my ETFs which make a double distribution payment in December and nothing in January. The second factor was the sale of Versum (VSM), Keurig Dr. Pepper (KDP), and Analog Devices (ADI). All three stocks were acquired from buyouts or spin-offs, however, their position in my portfolio was so small that it was becoming a labor to track all three so I decided to cut them loose. These sells reduced my January income by $17.

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Looking at my 3 year goal metric I improved my percent complete by 0.85% from last month and puts me back on target not just for my 3 year goal but also my annual goal of increasing my forward dividend by 12.5%.

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Back in November I posted about refining my goals and after analysis I discovered that I needed additional emergency cash and needed to save a minimum of $2,000 a year or $170/month until I retire. Well unfortunately I did not start this new goal well and saved a big fat $0 goose egg.

The only consolation is that the funds were used to avoid credit card debt of which I am proud to say that I have now achieved 5 full months of carrying no credit card debt. - Comments: 0

Inflation Beaters Index Updated! - 03 Feb 2019 00:56

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The Inflation Beaters Index has finally been completely updated to reflect all 2018 dividend growth and inflation data. Below is a summary of the update, and hopefully useful to fellow investors.

2018 Average Inflation Rate 2.45%

The final inflation came in at 2.45% and was the highest rate since 2011. This may seem pretty tame but it still takes a bite out of growth.

Take for example AT&T (T) which increased its dividend from $2/share to $2.04/share. This recent increase extended T’s impressive continuous dividend growth to 35 years and cementing it as a dividend aristocrat. However if we adjust the increased dividend for inflation, the annual dividend actually shrank to $1.991/share or -0.45%. This makes that aristocrat status look a bit tarnished.

Changes to the Inflation Beaters Index

Hers is a quick metric summary of the components of the champion (25 or more years) and contenders list (11 to 24 years):

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Weekly Portfolio Summary - 02 Feb 2019 12:32

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Portfolio Activity

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Portfolio News - (In Case You Missed These Headlines)

Camden Property Trust (CPT)

Chevron Corp (CVX)

Iron Mountain (IRM)

Medical Properties Trust (MPW)

Pfizer (PFE)

Prudential Financial (PRU)

Qualcomm (QCOM)

Ryder System (R)

Sabra Healthcare REIT (SBRA)

AT&T (T)

T. Rowe Price (TROW)

United Parcel Service (UPS)

Weyerhaeuser (WY)

Interesting Blog Posts or Articles

Being a FIRE Millionaire Doesn’t Mean You’re Rich by Route to Retire

Here's the Difference Delaying Retirement by 6 Months Can Make
Are you ready for early retirement or just kidding yourself?
What 401(k) Savers Don’t Know About Their 401(k)s - Comments: 0

Anti-FI/RE Movement Becoming Annoying or Is It Me? - 30 Jan 2019 20:28

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The FI/RE movement has garnered so much attention the last couple years that it has spawned a new Anti-FI/RE Movement among financial professionals. Over the last two months I see at least one article per week condemning those attempting to achieve financial independence.

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At first it was amusing how bi-polar the financial media has become. It was not that long ago when the financial media machine was telling the world (and still does to this day) that people are not saving enough and everyone’s retirement is in danger. Then along comes a group of people who do exactly what they were preaching by busting their backsides, saving/investing like mad and creating a big pile of money or passive income flow. Once they have a pile of money they decide hey I think I can try this financial independence thing and then financial professionals jump all over them that what they are doing is wrong. Which is it? Save money and retire or don’t?

Personally I neither support nor condemn folks that embrace the FI/RE movement. If you desire to sacrifice, work your tail off, save money and try financial independence then good for you. If it doesn’t work out they’ll just have to pull themselves back up, learn from their mistakes and work hard to get back on track. One trait I see among everyone in the FI/RE movement is that they are not lazy! These folks hustle like mad and I’m sure they would pour that same energy into fixing any planning mistakes they made. As for me, my plan since I was 18 was to retire at 60 (I’m 50 now). I have no clue if that makes me part of the FI/RE movement and it doesn’t matter. Regardless of my status there was one recent article I found mildly offensive on the topic:

9 REASONS WHY YOU’RE BETTER OFF RETIRING LATE by financial columnist Brett Arends

Being that the source is a financial expert I thought the article was incredibly irresponsible to readers and does more harm than good.

The gist of the article is a milder passive aggressive version of Suze Orman’s attack on the FI/RE topic. Granted this article was labeled as an “Opinion” piece but since the author has a significant financial background I hold him to a higher standard. I am sure he wrote the article with good intentions but his emotions seemed to get the better of him. The message in the article is that you should delay retirement as long as possible or better yet never stop working to avoid financial, mental and social catastrophes and this is where it gets dangerous. A reader might construe this as being if you try to retire you will fail so your best option is to not focus on saving or retirement but focus on working because its better for you! Yipes! I'm sure this is not what the author intended.

If this author was genuinely concerned for his readers then it should have been more like “Make a financial plan to retire early but plan on working as long as possible”. This could then be served up to address how people have to enter into an unexpected early retirement for a multitude of unplanned events such as; physical inability to work, forced retirement, or to take care of a family member and to be financially prepared if one of these unfortunate events happens. But no, he had a passion to dismiss FI/RE and couldn't focus the article into something useful.

I usually dismiss these types of articles and not sure why this article rubbed me the wrong way. Maybe I’m just having a bad hair day and should cut cut him some slack, on second thought…NAH! - Comments: 0

New Buy R - 17 Jan 2019 20:08

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On Tuesday I increased my position in Ryder System (R) at a price of $51.96/share and a dividend yield of 4.2%. This new purchase will increase my forward annual dividend income by $54.

For those not familiar, Ryder System provides transportation and supply chain management solutions worldwide. The company operates through three segments: Fleet Management Solutions (FMS), Dedicated Transportation Solutions (DTS), and Supply Chain Solutions (SCS). Ryder System also has a 15 year dividend growth history and a 13 year inflation beat record and a 10 year dividend growth rate of 8.76% with its most recent 3.85% increase announced back in July. - Comments: 0

Experience with New M1 Finance Account and It's Awesome! - 13 Jan 2019 21:30

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Background

Two years ago this month my wife went back to full-time work and after 15 years we became a dual income family once again. My wife did not go back because she was bored or looking for new challenges. On the contrary she loved being a stay at home Mom and kicked ass at it.

Unfortunately, she had to go back to work out of necessity as my paycheck was no longer paying the monthly bills and we were racking up considerable credit card debt to cover the monthly shortfall. Luckily, our expense gap was small enough that she could choose a job that she enjoyed and not worry about a large salary. In the end she was offered two jobs; one in a medical practice as a phlebotomist and medical assistant for $45K/year and the other was working with children as a paraprofessional for $28K/year. The medical job had the better pay but she dreaded going back to an office environment. In the end she chose working with children and the lower salary but much higher job satisfaction and has loved her job since.

With the additional income we focused on one thing, eliminating all of our credit card debt. It took two years but we were finally free and clear of credit card debt last September. Also, with our mortgage getting paid off last summer we no longer need my wife’s additional income but she does love her job and decided to continue working. With her decision to continue working she asked how she can start her own savings since her employer does not offer a 401K so we started her with an M1 Finance Roth IRA account.

The account was opened with a $500 deposit and scheduled a weekly deposit of $10 and will double the contribution rate every year until she hits the IRA maximum of $7000/year.

Experience Opening the Account

This was the easiest account to open and fund. If you have your bank routing number this is a pretty quick process which took us no more than 15 minutes and this included making an investment pie and scheduling the recurring deposits. By the next day her account was credited and her first transaction was executed. This process was extremely painless and we created a pie with 31 individual stocks with a 50% weighting towards dividend growth and 50% towards REITS. After four additional weekly deposits of $10 here is what the portfolio looks like:

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Anyone not familiar with M1 Finance it’s a pretty straight forward process of creating a pie (kind of like your own mutual fund). You then populate the pie with individual stocks or ETF’s (referred to as slices) and assign a percentage value to each one and M1 finance will then take your initial deposit and buy each stock to the percentage you allocated (including fractional shares) and charges no commission to buy. A single pie can hold a maximum of 100 individual stocks or ETFs and you can even nest pies within pies as long as all the pies do not exceed 500 individual stocks or ETFs. Not sure who could ever buy 500 stocks but the option is available.

The Brilliance of an Algorithm

As easy as it was setting up the account what was more impressive was how additional investments are made after the initial trade.

The algorithm that M1 uses is nothing short of brilliant. Most would assume when a subsequent investment is made it goes out and buys all the stocks defined in your pie based on the percentages you set but that is not how it works. The way the algorithm works is that it analyzes your portfolio to determine which slices are above or below their assigned allocation and then executes a buy order that prioritizes slices whose percentage allocation is below what you assigned and gives the least priority to stocks whose value has exceeded your allocation.

Below is an example of this with my wife’s account. The initial investment bought 31 stocks, but the subsequent investments bought 20, 26, and 23 stocks. The Dec 28 buy order of 20 stocks was primarily due to an overall price drop in REITs and focused the bulk of the investment dollars to REIT stocks. With, the trade of 26 stocks the largest amount of money went to Apple (APPL) which reflected the recent stock drop.

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This is such an amazing process and it puts every investment penny to work. We even had had a buy for $0.03 yes 3 cents. Not sure how effective this is but at least we are not paying a commission for it. This process is so different from what I have to go through with my regular account. In that account I wait until I have $600 to $1000 and then decide to buy 1 stock. Typically I have several potential buys but have to go through the process of down selecting to just 1 and even then the investment is not a full $1000 because I cannot buy fractional shares. M1 finance eliminates that decision process by investing in all of the best opportunities at once and invests every penny via fractional shares.

Conclusion

Overall my opinion of M1 Finance is that for the average person or buy & hold investor when used with regularly scheduled investments it is the best wealth building tool second only to a 401K! It accessible to anyone with a computer or cell phone and a checking account. While it takes a $100 to open a brokerage account ($500 for an IRA) you can set recurring deposits at ANY amount.

If you do not make a lot of money you can set the recurring deposit anywhere from $1 to $10 per week and as you make more money you can increase the amount. In theory, you could initially not deposit the $100 minimum and just setup a recurring deposit and when your cash balance hits $100 it will then make the initial investment. This is what makes M1 such a fantastic tool, it brings the ability to invest to everyone regardless of the size of your paycheck!

As great as M1 Finance is there are drawbacks especially for more experienced investors:

  1. Limited asset class – OTC or pink sheet stocks as well as mutual funds and bonds are not available to trade
  2. No covered calls – If you were looking to make some additional income with options you cannot do it with M1.
  3. No limit or stop loss orders – M1 trades only once a day at 9am Central Standard Time and you are subject to whatever prices are at that time

While M1 is a great platform it is far from perfect and there are some improvements that need be made:

  1. Lack of Educational Material – M1 is too flexible for people new to investing and having too many options could be confusing. While there are pre-made pies available there is little material available to help newbies navigate on what to choose.
  2. Research Tools are Too Basic – The research tools to search stocks & ETF’s is near useless in its current state, you would be better off using an external search tool.
  3. No Portfolio Downloads – This seems like it should have been a no brainer but M1 does not allow you to download your portfolio as a spreadsheet or CSV file.
  4. No Community or Blog – A community for members to share and comment would go a long way especially for those new to investing
  5. No Reports for Income – While it does state what yield a pie has it does little to tell you how much income you are generating.

Do you invest with M1? I’d love to hear your experiences. - Comments: 1


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