What does it mean when only the most conservative high dividend slow growing companies on the NYSE are anywhere near fair value? All the growth stocks and the lower dividend stuff is richly valued.
What's propping up those prices...too much money chasing too little investment opportunity? Is it truly time to be in cash? Should I spend all my money on banks, utilities and telecoms? Every bone in my body says "don't make wholesale changes, buy and hold, stop looking at the valuations, follow the earnings and dividends", but it's hard to look past the P/Es. My DRIPs are buying more and more richly valued shares at the moment. I may have to change to that selective reinvestment strategy for a while.
How much cash would be a reasonable amount to hold, waiting for bargains? My average dividend yield is about 3.5%. That means that 10k earns me about $350 in dividends per year. My average holding appreciates about 6.5 % per year. that means 10k appreciates by about $650 per year. In order to feel good about holding cash, I'd need to put it to work; could I get $85 per month in put premiums? maybe...would I be able to liquidate those positions in order to buy 10k worth of stock when an opportunity presents itself? My experience is that puts often lose value first, then create value as the strike date approaches, or you get the stock. trading puts is a bunch of work, and there's some anxiety in it as well. Not my favorite use of idle hours, as it has to be done in the early morning. Market hours are 0630 to 1330 around here, not hours I have to devote to investments.
Should I sell calls on overvalued shares? I wonder if you can get a decent short term premium on the richly valued stuff...I should check it out.
Saturday, December 6, 2014
Stuff in the Roth and the 401k
I started the Roth 401k a while back, then rolled it to an IRA when my corporation joined a bigger company.
The Roth IRA is a hodge-podge of small cap, large cap and in between, the new 401k is both traditional and Roth, mostly small cap with a dividend chaser
The Roth IRA has AFL, AXPWD, CNSL, CODI, COP, GE, HAS, HTA, KO, LNCO, NNN, PAYX, SO, SZYM, TGH, ZBB
the new 401k has AVA, BGS, KO, HCP, LEG, MAIN, TIS, DOC, QCOM, TCAP, TUP and UMPQ
These all ( except AXPWD, SZYM and ZBB) have the same theme; pay growing dividends.
It won't be too long before the dividends will amount to more than I can contribute yearly. I have 13 years to social security time; should the portfolio behave itself, it could double at least once and a half, possibly twice from here. I'll continue to contribute, so 2x is within reach. If we make it there, we will have achieved a secure retirement on dividends, without the need to spend down principal.
That's the big goal.
The wife has company 403b and a supplemental salary deferral plan. That'll contribute about 10% on top of my pension/profit sharing contribution.
There's little to do at this point with the portfolio. I see only a few adjustments I might make, and they don't amount to much. I can think about rebalancing, but very few of my holdings are over-valued as defined by my F.A.S.T Graphs tool. Those that are are amongst the best companies I own, so I'm not all that inclined to jump off a fast horse to ride a slower one. As long as earnings continue to rise, I don't worry so much about the valuations.
The Roth IRA is a hodge-podge of small cap, large cap and in between, the new 401k is both traditional and Roth, mostly small cap with a dividend chaser
The Roth IRA has AFL, AXPWD, CNSL, CODI, COP, GE, HAS, HTA, KO, LNCO, NNN, PAYX, SO, SZYM, TGH, ZBB
the new 401k has AVA, BGS, KO, HCP, LEG, MAIN, TIS, DOC, QCOM, TCAP, TUP and UMPQ
These all ( except AXPWD, SZYM and ZBB) have the same theme; pay growing dividends.
It won't be too long before the dividends will amount to more than I can contribute yearly. I have 13 years to social security time; should the portfolio behave itself, it could double at least once and a half, possibly twice from here. I'll continue to contribute, so 2x is within reach. If we make it there, we will have achieved a secure retirement on dividends, without the need to spend down principal.
That's the big goal.
The wife has company 403b and a supplemental salary deferral plan. That'll contribute about 10% on top of my pension/profit sharing contribution.
There's little to do at this point with the portfolio. I see only a few adjustments I might make, and they don't amount to much. I can think about rebalancing, but very few of my holdings are over-valued as defined by my F.A.S.T Graphs tool. Those that are are amongst the best companies I own, so I'm not all that inclined to jump off a fast horse to ride a slower one. As long as earnings continue to rise, I don't worry so much about the valuations.
A small epiphany
Today, I took a step towards a more sensible appoach to my investing future. I had allowed myself the license to purchase a few companies purely out of interest in their technology. They qualified as speculative investments. I was caught up into the excitement of others who had similar interests, expressed very eloquently in messages on an emerging technology blog. Ultimately I put about 4% of my entire portfolio into 3 companies. As of today, they are worth less than 20% of what I paid to own them.
Lesson learned...twice. A long time ago, I bought Ballard Power, also an emerging technology stock. I took a bath there too. Eventually, a competitor, Plug Power, developed a saleable product and has reached some scale, but even that stock is still speculative in nature, with valuation based much more on hopes of future earnings than present revenues. I should have learned my lesson then.
I got stuck in that " no loss until realized loss" thing. I hoped that things would turn around. I watched others throw in the towel. I told myself that it was speculative money that I wasn't afraid to lose. But the emotional impact of watching that value continually erode took it's toll on me and I finally realized that there was no emotional value in "getting back to even", only some value in putting the cash value of those shares into more prudent investments whose business fundamentals are more sound.
In short, I need to exercise discipline with ALL of my assets and stop allotting "mad money" to speculative investments within my retirement portfolio. So, I'm selling those depreciated shares. No more flights of fancy in my portfolio. I'm planning on taking some of that advice I've been reading; don't invest in companies whose business model you can't understand. That means ditching some pretty high flying, high yielding companies. I'll be looking really hard at those MLPs. I'll be getting more conservative and accepting lower yields. The portfolio will look more large-cap, blue-chip in nature. Rather building higher yield higher risk on top of the blue-chip foundation, I'll be be building lower yield higher growth on top of the blue chip foundation.
When you hold a stock that has lost a lot of value, you either have to bet on that stock rebounding, or you have to find another investment to carry the load of building back the value of that piece of your portfolio. If a stock tanks, you have to be convinced that it has nothing to do with the business model, the prospects for growth, earnings and profits, or you should bail and ride a different horse.
Investment prospects are about looking forward. The rear-view mirror does tell you about how the company has performed heretofore, and a meltdown based on internal issues should certainly tell you that management has some fundamental issues to explain and/or correct.
I'll be doing some clean-up come Monday...
Lesson learned...twice. A long time ago, I bought Ballard Power, also an emerging technology stock. I took a bath there too. Eventually, a competitor, Plug Power, developed a saleable product and has reached some scale, but even that stock is still speculative in nature, with valuation based much more on hopes of future earnings than present revenues. I should have learned my lesson then.
I got stuck in that " no loss until realized loss" thing. I hoped that things would turn around. I watched others throw in the towel. I told myself that it was speculative money that I wasn't afraid to lose. But the emotional impact of watching that value continually erode took it's toll on me and I finally realized that there was no emotional value in "getting back to even", only some value in putting the cash value of those shares into more prudent investments whose business fundamentals are more sound.
In short, I need to exercise discipline with ALL of my assets and stop allotting "mad money" to speculative investments within my retirement portfolio. So, I'm selling those depreciated shares. No more flights of fancy in my portfolio. I'm planning on taking some of that advice I've been reading; don't invest in companies whose business model you can't understand. That means ditching some pretty high flying, high yielding companies. I'll be looking really hard at those MLPs. I'll be getting more conservative and accepting lower yields. The portfolio will look more large-cap, blue-chip in nature. Rather building higher yield higher risk on top of the blue-chip foundation, I'll be be building lower yield higher growth on top of the blue chip foundation.
When you hold a stock that has lost a lot of value, you either have to bet on that stock rebounding, or you have to find another investment to carry the load of building back the value of that piece of your portfolio. If a stock tanks, you have to be convinced that it has nothing to do with the business model, the prospects for growth, earnings and profits, or you should bail and ride a different horse.
Investment prospects are about looking forward. The rear-view mirror does tell you about how the company has performed heretofore, and a meltdown based on internal issues should certainly tell you that management has some fundamental issues to explain and/or correct.
I'll be doing some clean-up come Monday...
Thursday, December 4, 2014
A manifesto of personal investing philosophy
I like to read SeekingAlpha articles in the dividend and income space. I am, broadly speaking, a dividend-growth investor. It's a loose-fitting jacket, since I throw in a few other concepts, partly to my detriment from a performance standpoint, but also because managing my own assets needs to keep my interest. I purchase some positions out of interest rather than out of strict investment performance criteria. I would like to be the cool-headed dispassionate investor I recognize in some of the most mature authors that I read, but I lack that strict discipline that some of them apply to their portfolio management. I try to avoid being too self-critical in this arena, or it will spoil the fun.
Still, I have come to a fairly coherent philosphy on investing in which I am quite comfortable for the time being. Having invested some thousands of hours in the pursuit, it's not too likely that I will make wholesale changes to this approach in the future.
Why do I like dividend growth investing?
First; this school of investing philosophy broadly follows some principles espoused by none other than the Oracle himself, the larger-than-life WB of BRK. One seeks to buy "high quality" companies at a discount to fair value, or at most fair value. That's more a value investing principle than dividend investing principle, but it's a great foundation for avoiding poor investment performance.
Second; this school of investing philosophy emphasizes buy, hold and monitor. Moving rapidly in and out of positions has several hazards. It is a trader's habit, not an investor's habit. It generates significant "leakage" due to trading fees. It fundamentally is about short-term movement in stock prices, rather than long term prospects. Holding respects the wisdom that "time in the market is more important than timing the market". The kind of companies that populate the DGI universe aren't generally momentum stocks. They build value methodically over time. Monitoring is about applying criteria for continuing to hold a stock and then being willing to sell a position if that company's business fundamentals or management performance break down.
Third; DGI focuses on companies with a particular characteristic; that of having paid dividends, and more specifically rising dividends, for a period of time. The DGI investor believes that the history of dividends speaks to the character of management and the board, reflecting a philosophy about the relationship between management and the owners of the company. When you add a few more metrics like pay-out ratio, CAGR of earnings and dividends over short and long term and dividend yield, you identify a company and management that is in a business with steady growth prospects, healthy cash flow and with a discipline about allocation of capital allowing some of the profits to flow to owners each year.
The DGI investor focuses on reliability of earnings, cash flow and the company's ability to fund growth through earnings, rather than through repeated stock offerings that dilute ownership. The DGI investor also has an independent streak, preferring to exercise personal discretion in a portion of the capital allocation decision by either reinvesting in the company, selectively reinvesting dividends in another holding, or harvesting a stream of income for other purposes such as living expenses.
The dividend growth investor recognizes that it's possible to achieve outsized performance investing in a mature company with modest growth, if that company is buying back shares at a favorable price to book ratio and delivering a generous dividend to the owner, who can then reinvest that dividend and watch his/her position grow in an accelerating fashion. That is known as compounding. Growth in earnings per share can be more important than overall earnings growth to the individual investor if the company under scrutiny operates in a mature, slow growing marketplace. The DGI investor recognizes that compounding within the investor's portfolio is just as important as compounding within the position, and even more important than growth in a given company.
The dividend growth investor seeks to protect capital investment with a "margin of safety" at the point of purchase, to avoid the need to sell shares to raise cash for new purchases or living expenses, to allow time and compounding to grow the position and produce a stream of income at or greater than the rate of inflation.
The dividend growth investor believes that the individual has the capacity to achieve adequate diversification, safety and performance through the purchase of a basket of individual stocks without paying a professional manager year-in and year-out and exposing oneself to all the baggage associated with owning mutual funds or ETFs.
Dividend growth investing recognizes some of the hazards associated with human behavior that lead to poor decision making. When one focuses on stock price and capital appreciation as the primary indicator of investment performance, there is anxiety associated with both significant appreciation of a stock's value as well as any significant correction in the price of that stock. On the one hand, the investor worries about over-valuation and the need to take profits. On the other hand, the investor worries about loss of capital and the possibility of having to sell shares at a loss if one needs to raise cash for any reason. The dividend growth investor pays great attention to valuation at the point of purchase, then pays much more attention to company performance and dividend payments thereafter, releasing one from the anxiety of tracking stock prices on a continual basis. As long as the income stream is rising, the reinvested dividends are producing an accelerating growth in the value of the position and the earnings are healthy, one can largely ignore the stock price. Corrections become buying opportunities rather than reasons for panic. Updrafts in valuation may cause one to re-allocate dividends to a different holding, but don't necessarily mean one should sell some of all of the position if the earnings and dividend story remain intact. The investor can apply the same mental discipline to non-dividend paying holdings, but he/she has one less indicator of how the management feels about the company performance.
There is an ongoing debate between dividend growth investors and critics who favor total return without regard for income. This is a false-dichotomy, because there is ample evidence that companies that pay dividends tend to outperform their more stingy peers. A rising dividend either reflects or drives increasing value, Healthy dividend-paying companies tend to experience healthy levels of appreciation in stock price. I see the difference primarily in the flexibility offered to the owner when he/she is presented with regular dividend checks. One can reinvest, reallocate capital to other investments, or take cash payments for living expenses without the need to sell shares. The total-return investor can be every bit as disciplined in monitoring company performance, but without a flow of cash in the account, one cannot purchase more shares or harvest income for living without selling shares. Every business lives on cash flow, and one's personal budget is no different. You can earn scads of money on paper and still starve if you can't pay your grocery tab.
Another straw-man hoisted up for target-practice between the camps is the issue of tax efficiency. companies that retain earnings and internally reinvest earning are said to be more tax efficient vehicles for wealth accumulation than those that pay dividends. This can be a legitimate issue for investors who are not looking for a steady flow of cash into their accounts. On the other hand, many of us have the majority of our personal wealth in qualified retirement plans or IRAs. These accounts protect one from taxes on dividends and distributions. In the case of Roth accounts, one pays income tax on personal earnings and then never pays another cent in taxes on capital appreciation, dividends or distributions.
I'm quite certain that the debate between DGI disciples and their TRI counterparts will go on into the indefinite future. I find the debate to be tiring at times. In either camp, one can excercise discipline in choosing companies, monitor earnings growth, valuation and capital allocation practices of the management. If you don't care about current income, you can allow company management to do all of the capital allocation for you. You can seek to discern the culture of management and the board using other indicators than dividend policy. Those who choose to employ the flexibility of dividend-paying investments within their personal investment portfolio don't feel the need to benchmark their total return against stock market indices. They march to a different drummer. I don't see an issue with that. If you're like me, you can straddle the fence and sprinkle in holdings that reflect both philosophies of investing. Those who think this issue between DGI and TRI investing is worth fighting over should read the Sneeches and Other Stories, by Dr. Suess. It really IS okay to be different.
That's why I like dividend-growth investing.
Still, I have come to a fairly coherent philosphy on investing in which I am quite comfortable for the time being. Having invested some thousands of hours in the pursuit, it's not too likely that I will make wholesale changes to this approach in the future.
Why do I like dividend growth investing?
First; this school of investing philosophy broadly follows some principles espoused by none other than the Oracle himself, the larger-than-life WB of BRK. One seeks to buy "high quality" companies at a discount to fair value, or at most fair value. That's more a value investing principle than dividend investing principle, but it's a great foundation for avoiding poor investment performance.
Second; this school of investing philosophy emphasizes buy, hold and monitor. Moving rapidly in and out of positions has several hazards. It is a trader's habit, not an investor's habit. It generates significant "leakage" due to trading fees. It fundamentally is about short-term movement in stock prices, rather than long term prospects. Holding respects the wisdom that "time in the market is more important than timing the market". The kind of companies that populate the DGI universe aren't generally momentum stocks. They build value methodically over time. Monitoring is about applying criteria for continuing to hold a stock and then being willing to sell a position if that company's business fundamentals or management performance break down.
Third; DGI focuses on companies with a particular characteristic; that of having paid dividends, and more specifically rising dividends, for a period of time. The DGI investor believes that the history of dividends speaks to the character of management and the board, reflecting a philosophy about the relationship between management and the owners of the company. When you add a few more metrics like pay-out ratio, CAGR of earnings and dividends over short and long term and dividend yield, you identify a company and management that is in a business with steady growth prospects, healthy cash flow and with a discipline about allocation of capital allowing some of the profits to flow to owners each year.
The DGI investor focuses on reliability of earnings, cash flow and the company's ability to fund growth through earnings, rather than through repeated stock offerings that dilute ownership. The DGI investor also has an independent streak, preferring to exercise personal discretion in a portion of the capital allocation decision by either reinvesting in the company, selectively reinvesting dividends in another holding, or harvesting a stream of income for other purposes such as living expenses.
The dividend growth investor recognizes that it's possible to achieve outsized performance investing in a mature company with modest growth, if that company is buying back shares at a favorable price to book ratio and delivering a generous dividend to the owner, who can then reinvest that dividend and watch his/her position grow in an accelerating fashion. That is known as compounding. Growth in earnings per share can be more important than overall earnings growth to the individual investor if the company under scrutiny operates in a mature, slow growing marketplace. The DGI investor recognizes that compounding within the investor's portfolio is just as important as compounding within the position, and even more important than growth in a given company.
The dividend growth investor seeks to protect capital investment with a "margin of safety" at the point of purchase, to avoid the need to sell shares to raise cash for new purchases or living expenses, to allow time and compounding to grow the position and produce a stream of income at or greater than the rate of inflation.
The dividend growth investor believes that the individual has the capacity to achieve adequate diversification, safety and performance through the purchase of a basket of individual stocks without paying a professional manager year-in and year-out and exposing oneself to all the baggage associated with owning mutual funds or ETFs.
Dividend growth investing recognizes some of the hazards associated with human behavior that lead to poor decision making. When one focuses on stock price and capital appreciation as the primary indicator of investment performance, there is anxiety associated with both significant appreciation of a stock's value as well as any significant correction in the price of that stock. On the one hand, the investor worries about over-valuation and the need to take profits. On the other hand, the investor worries about loss of capital and the possibility of having to sell shares at a loss if one needs to raise cash for any reason. The dividend growth investor pays great attention to valuation at the point of purchase, then pays much more attention to company performance and dividend payments thereafter, releasing one from the anxiety of tracking stock prices on a continual basis. As long as the income stream is rising, the reinvested dividends are producing an accelerating growth in the value of the position and the earnings are healthy, one can largely ignore the stock price. Corrections become buying opportunities rather than reasons for panic. Updrafts in valuation may cause one to re-allocate dividends to a different holding, but don't necessarily mean one should sell some of all of the position if the earnings and dividend story remain intact. The investor can apply the same mental discipline to non-dividend paying holdings, but he/she has one less indicator of how the management feels about the company performance.
There is an ongoing debate between dividend growth investors and critics who favor total return without regard for income. This is a false-dichotomy, because there is ample evidence that companies that pay dividends tend to outperform their more stingy peers. A rising dividend either reflects or drives increasing value, Healthy dividend-paying companies tend to experience healthy levels of appreciation in stock price. I see the difference primarily in the flexibility offered to the owner when he/she is presented with regular dividend checks. One can reinvest, reallocate capital to other investments, or take cash payments for living expenses without the need to sell shares. The total-return investor can be every bit as disciplined in monitoring company performance, but without a flow of cash in the account, one cannot purchase more shares or harvest income for living without selling shares. Every business lives on cash flow, and one's personal budget is no different. You can earn scads of money on paper and still starve if you can't pay your grocery tab.
Another straw-man hoisted up for target-practice between the camps is the issue of tax efficiency. companies that retain earnings and internally reinvest earning are said to be more tax efficient vehicles for wealth accumulation than those that pay dividends. This can be a legitimate issue for investors who are not looking for a steady flow of cash into their accounts. On the other hand, many of us have the majority of our personal wealth in qualified retirement plans or IRAs. These accounts protect one from taxes on dividends and distributions. In the case of Roth accounts, one pays income tax on personal earnings and then never pays another cent in taxes on capital appreciation, dividends or distributions.
I'm quite certain that the debate between DGI disciples and their TRI counterparts will go on into the indefinite future. I find the debate to be tiring at times. In either camp, one can excercise discipline in choosing companies, monitor earnings growth, valuation and capital allocation practices of the management. If you don't care about current income, you can allow company management to do all of the capital allocation for you. You can seek to discern the culture of management and the board using other indicators than dividend policy. Those who choose to employ the flexibility of dividend-paying investments within their personal investment portfolio don't feel the need to benchmark their total return against stock market indices. They march to a different drummer. I don't see an issue with that. If you're like me, you can straddle the fence and sprinkle in holdings that reflect both philosophies of investing. Those who think this issue between DGI and TRI investing is worth fighting over should read the Sneeches and Other Stories, by Dr. Suess. It really IS okay to be different.
That's why I like dividend-growth investing.
Saturday, October 18, 2014
I stand corrected...
Well, it's here. The dreaded pullback, correction, slump, value reset, whatever. Is it over? I guess we'll know when it's over and things are a ways past in the other direction. Interestingly, it doesn't seem so bad, now that it's happening. We're in the midst of earnings season. Most of my companies are reporting solid earnings. My utilities and REITs haven't budged. A few of my stocks have risen; utilities, KO, a few others. I'm not sure this correction has legs...jobs reports are ok, inflation apparently isn't heating up, Fed hasn't started to raise rates. I'm all in, and not anxious to sell anything to raise cash, so I'm sitting on my hands. Every quarter, my positions grow by 1% or so, in addition to new money flowing into the 401k. It's not clear to me that Syria, Ukraine, Ebola or any other event is likely to change the business climate for my large multinational companies or the American economy, so I can't see a reason to run to cash. Sit tight...that's right.
Saturday, October 4, 2014
Endless monitoring
I'm stuck in a hotel room, so I returned to my favorite internet pastime, reading financial blogs and monitoring my retirement portfolio.
Just for fun, I checked to see how yearly dividends are doing on each of my holdings. Very gratifying...issue by issue, with DRIP, the dividends keep going up. A few didn't, and I checked specifically on these. None are in trouble, none are worth selling, in my view.
I could tell that roughly speaking, I'm getting about 10% more in dividends this year than I did last year.
Since my companies pay 2-5% in dividends per year and I DRIP every one of them, that means that my positions grew by 2-5%, not counting new money invested. Dividend growth per share made up the other 5-7% increase in dividends. At this time new money accounts for about 5% in overall portfolio growth. Some of this is in bigger positions in existing companies, and some is in new positions established.
Capital value went up about 10% as well, but that number changes almost daily and I have sworn not to be a slave to the stock prices or the composite fluctuation in portfolio value. I did a bit of repositioning and it helped my overall yield a bit.
There's more re-balancing that I could do, but I'm not fully convinced that selling the best-performing companies to beef up on the laggards is really what I want to do across the board. Fortunately, I'm following no-ones rules but my own, so I won't be chastised for being less than entirely consistent in my behavior. The first step to changing bahavior is awareness of that behavior, and incremental changes are less disruptive and more likely to be durable than wholesale shifts, so I'm comfortable with the rate that I'm moving towards truly dispassionate portfolio management. Performance consequences are compensated by shoveling as much money as the law allows into my retirement plan.
I'm working towards a system where I keep a running count of my overall share-count, my overall dividend payment rate and the rate of change in those numbers. I think this may take my focus a little more towards where it should be than on the endless price fluctuations that occur daily. Now and again, it's important to examine values and ask if some rebalancing isn't in order, but a dividend growth strategy needs to focus on just that, and the forces that drive it. It starts with earnings and earnings growth. Then dividends and dividend growth. Reinvestment of dividends and new contributions makes up the rest. Pretty simple, huh?
Just for fun, I checked to see how yearly dividends are doing on each of my holdings. Very gratifying...issue by issue, with DRIP, the dividends keep going up. A few didn't, and I checked specifically on these. None are in trouble, none are worth selling, in my view.
I could tell that roughly speaking, I'm getting about 10% more in dividends this year than I did last year.
Since my companies pay 2-5% in dividends per year and I DRIP every one of them, that means that my positions grew by 2-5%, not counting new money invested. Dividend growth per share made up the other 5-7% increase in dividends. At this time new money accounts for about 5% in overall portfolio growth. Some of this is in bigger positions in existing companies, and some is in new positions established.
Capital value went up about 10% as well, but that number changes almost daily and I have sworn not to be a slave to the stock prices or the composite fluctuation in portfolio value. I did a bit of repositioning and it helped my overall yield a bit.
There's more re-balancing that I could do, but I'm not fully convinced that selling the best-performing companies to beef up on the laggards is really what I want to do across the board. Fortunately, I'm following no-ones rules but my own, so I won't be chastised for being less than entirely consistent in my behavior. The first step to changing bahavior is awareness of that behavior, and incremental changes are less disruptive and more likely to be durable than wholesale shifts, so I'm comfortable with the rate that I'm moving towards truly dispassionate portfolio management. Performance consequences are compensated by shoveling as much money as the law allows into my retirement plan.
I'm working towards a system where I keep a running count of my overall share-count, my overall dividend payment rate and the rate of change in those numbers. I think this may take my focus a little more towards where it should be than on the endless price fluctuations that occur daily. Now and again, it's important to examine values and ask if some rebalancing isn't in order, but a dividend growth strategy needs to focus on just that, and the forces that drive it. It starts with earnings and earnings growth. Then dividends and dividend growth. Reinvestment of dividends and new contributions makes up the rest. Pretty simple, huh?
Saturday, September 13, 2014
Southern Comfort
SO- why do I own it.
A while back, while shifting into the dividend investor mode, I bought the newsletter Utility Forecaster. I continued to get it until the editor changed, and a after a few editions of the new editor, I didn't like the content as much and let it go. I had already purchased Duke a long time back, and began adding some utilities. I learned a bunch over the years; regulated versus merchant power, water, gas, electricity, alternative energy. I bought SO as it appeared to be one of the 'best in class' in a part of the country experiencing lots of population growth. It has behaved just as expected: big dividend, with small yearly increases, modest capital growth, for an overall package of a little over 10% total return per year. I look at this one as another foundational holding. Utes have to figure out how to integrate solar/wind, how to integrate distributed generation from rooftop solar, but SO is as big as they get and has had positive relations with regulators, so I think it will perform well for a long time to come.
T is pretty obvious; part of the duopoly of cellular behemoths, big 5% dividend, growing slowly, but with the DRIP I have over 12% per year, over 50% cumulative total return. A cellular price war won't help, but the big dogs tend to win these things as they have deeper pockets than the discounters. I'm not too worried here
TEI- another of those emerging market bond funds I got back then. I have 50% return in under 6 years, it's paying me close to 10% YOC...hasn't hiccuped yet. I think I'll stay in it.
TGP- Liquid Natural Gas shipping- 100% return over 7 years, over 10% YOC now- this is a "secular trend"...we have tons of natural gas, countries like Japan, European countries need it and don't want to be beholden to Russia for it. This will be a great investment for a long time to come.
TUP- my mother bought tupperware. I use tupperware. People around the world need to store food. the original model probably doesn't work all that well in the US, but elsewhere in the world, the home sales model probably works just fine. It has a nice dividend and I don't have anything else quite like it in the portfolio.
USB- formerly an Oregon bank. I like Oregon companies...after all, I live here. Even though they are now based elsewhere, they are one of those super-regionals who minded their knitting and didn't get into the speculative trouble that the big dogs did. They get a lot of income from processing transactions. They got hurt in the downdraft like all banks, but they are performing well, pay a decent and rising dividend and have returned 30% in the 2 years I have owned the stock.
VZ- the other half of the cellular duopoly- probably outperforming T, but why not own both. T pays the bigger dividend, VZ is growing faster, both are great DRIPs. They are the telecoms of the 21st century- VZ has paid me 50% total return over 4 years. I can't see a reason to sell it, ever.
WFC- My only really big bank. WFC managed to dodge the big crisis fairly well. I bought it low, rode it up, like the dividend and expect it will grow. over 50% total return in the 2 1/2 years I've owned it.
WMT- My other retailer- people love to hate Walmart, but just look at the chart and the dividend growth over the last decade. They will capture tons of business overseas, even if the US stagnates.
There are other retailers I could add, but two seems like plenty at the moment. 40% total yield over 3 years, fair dividend with steady dividend growth; fits the mold and is decidedly non-sexy; just my kind of foundational holding.
ZBB- my other plunge into battery storage. pure speculation, could pay off big, or just be another lesson in the dangers of emerging technology.
A while back, while shifting into the dividend investor mode, I bought the newsletter Utility Forecaster. I continued to get it until the editor changed, and a after a few editions of the new editor, I didn't like the content as much and let it go. I had already purchased Duke a long time back, and began adding some utilities. I learned a bunch over the years; regulated versus merchant power, water, gas, electricity, alternative energy. I bought SO as it appeared to be one of the 'best in class' in a part of the country experiencing lots of population growth. It has behaved just as expected: big dividend, with small yearly increases, modest capital growth, for an overall package of a little over 10% total return per year. I look at this one as another foundational holding. Utes have to figure out how to integrate solar/wind, how to integrate distributed generation from rooftop solar, but SO is as big as they get and has had positive relations with regulators, so I think it will perform well for a long time to come.
T is pretty obvious; part of the duopoly of cellular behemoths, big 5% dividend, growing slowly, but with the DRIP I have over 12% per year, over 50% cumulative total return. A cellular price war won't help, but the big dogs tend to win these things as they have deeper pockets than the discounters. I'm not too worried here
TEI- another of those emerging market bond funds I got back then. I have 50% return in under 6 years, it's paying me close to 10% YOC...hasn't hiccuped yet. I think I'll stay in it.
TGP- Liquid Natural Gas shipping- 100% return over 7 years, over 10% YOC now- this is a "secular trend"...we have tons of natural gas, countries like Japan, European countries need it and don't want to be beholden to Russia for it. This will be a great investment for a long time to come.
TUP- my mother bought tupperware. I use tupperware. People around the world need to store food. the original model probably doesn't work all that well in the US, but elsewhere in the world, the home sales model probably works just fine. It has a nice dividend and I don't have anything else quite like it in the portfolio.
USB- formerly an Oregon bank. I like Oregon companies...after all, I live here. Even though they are now based elsewhere, they are one of those super-regionals who minded their knitting and didn't get into the speculative trouble that the big dogs did. They get a lot of income from processing transactions. They got hurt in the downdraft like all banks, but they are performing well, pay a decent and rising dividend and have returned 30% in the 2 years I have owned the stock.
VZ- the other half of the cellular duopoly- probably outperforming T, but why not own both. T pays the bigger dividend, VZ is growing faster, both are great DRIPs. They are the telecoms of the 21st century- VZ has paid me 50% total return over 4 years. I can't see a reason to sell it, ever.
WFC- My only really big bank. WFC managed to dodge the big crisis fairly well. I bought it low, rode it up, like the dividend and expect it will grow. over 50% total return in the 2 1/2 years I've owned it.
WMT- My other retailer- people love to hate Walmart, but just look at the chart and the dividend growth over the last decade. They will capture tons of business overseas, even if the US stagnates.
There are other retailers I could add, but two seems like plenty at the moment. 40% total yield over 3 years, fair dividend with steady dividend growth; fits the mold and is decidedly non-sexy; just my kind of foundational holding.
ZBB- my other plunge into battery storage. pure speculation, could pay off big, or just be another lesson in the dangers of emerging technology.
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