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.
K and on...
why do I own them?
KMR- Pipeline MLP. I love the toll-road concept. I love the domestic oil/gas boom, not so much because we continue to consume hydrocarbons like a drunkard, but because we can stick a finger into the eye of OPEC. With pipeline MLPs, very little commodity price risk in the returns. All transport is contractual, with fixed rates regardless of oil/gas prices. 5 years, 150+% total return, 5% dividends with dividend growth. Dividends paid in stock, so no K-1 concerns. This one will take me well into retirement, even after Mr. Kinder converts it into a C-corp in the near future.
KO- I bought into the mystique. When I bought it, divi was over 3%. This is the classic DGI stock of the last century. there are few places on earth where you can't get a Coke. They sell hundreds of other beverages, including water. I like a company who can package water and convince you to drink it in preference to what comes out of the tap! It has performed flawlessly, almost, across decades. No reason to think it won't continue.
MCD, MMM, MSFT
MCD- franchise, DGI stock, dominant fast food restaurant on the planet. I eat at McDonalds in spite of all the bad press. I like a number of things on the menu and they ARE consistent over time, and uniformly fast in service. 4 years, 50% total return, 3% dividend, with dividend growth.
MMM- decades of innovation in materials, the maker of post-it notes and duct tape, a million other products we can't live without, also DGI stock. 16% total return in about 6 months...not bad.
MSFT- Finally they have shed Ballmer! the unloved sibling of AAPL, which owns 80% of the enterprise software market used by businesses world-wide to send email, process words, do simple spreadsheet analysis. AND, they meet the 3% dividend threshold. over 100% total return in 3 years.
NGG- this has been a fantastic utility ride...4 years, over 100% total return, 4+% dividend, business on both sides of the Atlantic. I love utilities and this one is rock solid.
O- the Monthly Income Company.
I found this one myself...no-one led me to it. It was my first REIT, before I knew what powerful wealth producing machines REITs could be. It has been an absolutely predictable 10% per year return vehicle, with the big dividend, the DRIP, the very conservative capital allocation strategy. I'm totally hooked on triple-net equity REITs and I own several across the sectors. You'll have to pry them from my cold, dead hands. 7 years, 84 dividends, 100% total return. Not sexy, but very reliable. I find that just fine.
OFC- another REIT, in the corporate office space. I bought this one for the story; builds for and leases to US government and defense contractors who need physically and electronically secure buildings. VERY STICKY Leaseholders!!! They pay their rent!!!
2.5 years, 30% total return, large and growing distribution all fit my model. I'm not adding new money, but the DRIP has a big effect on this one due to the large distribution, so it's keeping pace with my other holdings.
PG- big dog in the consumer staples sector. 4 years, 50% total return, 3% dividend with DG and DRIP. Starting to sound familiar? People won't stop buying their stuff.
ROIC- shopping center REIT, centered in upscale western cities, neighborhoods with higher income than average. Grocery store anchor is the model. 2 years, 20% total return, large and growing distribution, DRIP. Wash, rinse, repeat.
RYAM- spin-off from fiber REIT. Small dalliance into the edges of REITdom. Just haven't gotten around to selling it. When I see a good opportunity, I'll sell and reposition into something more orthodox.
RYN-REIT owns woodlands and produces fiber, paid 3.7% dividend, with substantial DG. Just spun out it's specialty fiber business as RYAM- not sure what will happen here; this is a small holding, perhaps best to sell it and go with something more certain.
KMR- Pipeline MLP. I love the toll-road concept. I love the domestic oil/gas boom, not so much because we continue to consume hydrocarbons like a drunkard, but because we can stick a finger into the eye of OPEC. With pipeline MLPs, very little commodity price risk in the returns. All transport is contractual, with fixed rates regardless of oil/gas prices. 5 years, 150+% total return, 5% dividends with dividend growth. Dividends paid in stock, so no K-1 concerns. This one will take me well into retirement, even after Mr. Kinder converts it into a C-corp in the near future.
KO- I bought into the mystique. When I bought it, divi was over 3%. This is the classic DGI stock of the last century. there are few places on earth where you can't get a Coke. They sell hundreds of other beverages, including water. I like a company who can package water and convince you to drink it in preference to what comes out of the tap! It has performed flawlessly, almost, across decades. No reason to think it won't continue.
MCD, MMM, MSFT
MCD- franchise, DGI stock, dominant fast food restaurant on the planet. I eat at McDonalds in spite of all the bad press. I like a number of things on the menu and they ARE consistent over time, and uniformly fast in service. 4 years, 50% total return, 3% dividend, with dividend growth.
MMM- decades of innovation in materials, the maker of post-it notes and duct tape, a million other products we can't live without, also DGI stock. 16% total return in about 6 months...not bad.
MSFT- Finally they have shed Ballmer! the unloved sibling of AAPL, which owns 80% of the enterprise software market used by businesses world-wide to send email, process words, do simple spreadsheet analysis. AND, they meet the 3% dividend threshold. over 100% total return in 3 years.
NGG- this has been a fantastic utility ride...4 years, over 100% total return, 4+% dividend, business on both sides of the Atlantic. I love utilities and this one is rock solid.
O- the Monthly Income Company.
I found this one myself...no-one led me to it. It was my first REIT, before I knew what powerful wealth producing machines REITs could be. It has been an absolutely predictable 10% per year return vehicle, with the big dividend, the DRIP, the very conservative capital allocation strategy. I'm totally hooked on triple-net equity REITs and I own several across the sectors. You'll have to pry them from my cold, dead hands. 7 years, 84 dividends, 100% total return. Not sexy, but very reliable. I find that just fine.
OFC- another REIT, in the corporate office space. I bought this one for the story; builds for and leases to US government and defense contractors who need physically and electronically secure buildings. VERY STICKY Leaseholders!!! They pay their rent!!!
2.5 years, 30% total return, large and growing distribution all fit my model. I'm not adding new money, but the DRIP has a big effect on this one due to the large distribution, so it's keeping pace with my other holdings.
PG- big dog in the consumer staples sector. 4 years, 50% total return, 3% dividend with DG and DRIP. Starting to sound familiar? People won't stop buying their stuff.
ROIC- shopping center REIT, centered in upscale western cities, neighborhoods with higher income than average. Grocery store anchor is the model. 2 years, 20% total return, large and growing distribution, DRIP. Wash, rinse, repeat.
RYAM- spin-off from fiber REIT. Small dalliance into the edges of REITdom. Just haven't gotten around to selling it. When I see a good opportunity, I'll sell and reposition into something more orthodox.
RYN-REIT owns woodlands and produces fiber, paid 3.7% dividend, with substantial DG. Just spun out it's specialty fiber business as RYAM- not sure what will happen here; this is a small holding, perhaps best to sell it and go with something more certain.
Thursday, September 11, 2014
No F stocks...
GIS- why do I own it?
I grew up in a small town. The largest factory in town is a General Mills plant. It's still there nearly 50 years later. When they're making Cheerios, the whole town smells like breakfast. Need I say more? Really...rock solid generous dividend, decades of dividend growth, constant, modest rise in value; anchor stock. Will there ever be a reason to sell? Doubt it... in 12 months, 11% total return with 3% dividend and DRIP. SWAN stock
HCN- Health Care REIT
I'm in health care; actually injury repair. I can't imagine not paying my lease. I can't imagine any of the businesses who are my business associates in the health care enterprise not paying their lease. There isn't a much more recession-proof industry than health care. 8 years, 120% total return, 5% dividend and DRIP. Another SWAN stock.
Intel-
I have had lots of heartache over Intel. Oregon company, smack dab in the center of the tech revolution in my adult lifetime. I've held it for more than one long period and have been left at the alter more than once. However, I can't bring myself to exclude tech from my sector diversification, so I have purchased the most cash-cow, franchise-like tech businesses I can, while avoiding those who must keep the "cult" alive to stay ahead, like AAPL. I LOVE my Apple hardware, have owned it since 1984, but not the company. I own a few monster tech firms who make critical components and own franchise systems like Windows, and oh, yeah, pay a strong dividend. That keeps me in Intel, which FINALLY was rewarded recently with some serious price appreciation.
This time; 4 years, 3+% dividend over most of that time, over 40% total return. I can live with that.
JCI- Johnson Controls
I have this thing about batteries, actually energy storage. It comes out of my interest in green-tech and renewable energy sources. The way to make them like baseload power is with batteries. JCI produces more batteries than anyone else on earth. They are not a classic DGI stock, but 33% total return in 2 years and a modest dividend isn't bad. They're part of the small dallience into alternative energy investments that I have allowed myself in recent years.
JNJ- not much to say about this one. Juggernaut. SWAN...all the acronyms. I'll hold it forever. 6 years, 120% total return, 3% dividend with DG and DRIP. Big pharma, straight out of the DGI mold.
I grew up in a small town. The largest factory in town is a General Mills plant. It's still there nearly 50 years later. When they're making Cheerios, the whole town smells like breakfast. Need I say more? Really...rock solid generous dividend, decades of dividend growth, constant, modest rise in value; anchor stock. Will there ever be a reason to sell? Doubt it... in 12 months, 11% total return with 3% dividend and DRIP. SWAN stock
HCN- Health Care REIT
I'm in health care; actually injury repair. I can't imagine not paying my lease. I can't imagine any of the businesses who are my business associates in the health care enterprise not paying their lease. There isn't a much more recession-proof industry than health care. 8 years, 120% total return, 5% dividend and DRIP. Another SWAN stock.
Intel-
I have had lots of heartache over Intel. Oregon company, smack dab in the center of the tech revolution in my adult lifetime. I've held it for more than one long period and have been left at the alter more than once. However, I can't bring myself to exclude tech from my sector diversification, so I have purchased the most cash-cow, franchise-like tech businesses I can, while avoiding those who must keep the "cult" alive to stay ahead, like AAPL. I LOVE my Apple hardware, have owned it since 1984, but not the company. I own a few monster tech firms who make critical components and own franchise systems like Windows, and oh, yeah, pay a strong dividend. That keeps me in Intel, which FINALLY was rewarded recently with some serious price appreciation.
This time; 4 years, 3+% dividend over most of that time, over 40% total return. I can live with that.
JCI- Johnson Controls
I have this thing about batteries, actually energy storage. It comes out of my interest in green-tech and renewable energy sources. The way to make them like baseload power is with batteries. JCI produces more batteries than anyone else on earth. They are not a classic DGI stock, but 33% total return in 2 years and a modest dividend isn't bad. They're part of the small dallience into alternative energy investments that I have allowed myself in recent years.
JNJ- not much to say about this one. Juggernaut. SWAN...all the acronyms. I'll hold it forever. 6 years, 120% total return, 3% dividend with DG and DRIP. Big pharma, straight out of the DGI mold.
Wednesday, September 10, 2014
Easy E's
EMR EPD ESD
I have wanted to own Emerson Electric forever. I like companies that make durable goods, industrial products. It never presented a great entry point when I had cash in hand, so finally I just bought some and it has returned a very tidy capital gain, along with modest dividend yield, which will compound over time using the DRIP.I doubt I'll be adding new money, as long as the position keeps growing in parallel to my other holdings
Enterprise Product Partners- what a huge performer this MLP has been for me, up over 3-fold in value in a little over 7 years, with a steady 5% dividend the whole time. In spite of the K-1 reporting risk, I think i'll just keep holding this one in the retirement porfolio for the forseeable future.
ESD- another emerging market bond fund; hasn't done as well as the others on price, but pays out a similar steady distribution which I reinvest; eventually it's going to take off with the power of compounding.
I have wanted to own Emerson Electric forever. I like companies that make durable goods, industrial products. It never presented a great entry point when I had cash in hand, so finally I just bought some and it has returned a very tidy capital gain, along with modest dividend yield, which will compound over time using the DRIP.I doubt I'll be adding new money, as long as the position keeps growing in parallel to my other holdings
Enterprise Product Partners- what a huge performer this MLP has been for me, up over 3-fold in value in a little over 7 years, with a steady 5% dividend the whole time. In spite of the K-1 reporting risk, I think i'll just keep holding this one in the retirement porfolio for the forseeable future.
ESD- another emerging market bond fund; hasn't done as well as the others on price, but pays out a similar steady distribution which I reinvest; eventually it's going to take off with the power of compounding.
Daring D's
Deere Digital Duke
Why Deere? Iconic American brand with International penetration. They call it cyclic. It pays rising dividends. The world needs food, and Deere is about food, shelter, roads and the like. Since I'm a long term holder (buy and monitor, they call it), I'm less worried about cyclical behavior and more about long term appreciation and compounding. 3% yield, great dividend growth, solid company growth; what's not to like? Price is important when you buy, after that not so much...
Digital Realty Trust- the first of the REITs. This one is a bit less typical because of the high tech nature of the server farm within the building, but DLR is the big dog in this space and there is no end of enterprises, large and small, looking for a place to securely house their virtual selves. This is a huge secular growth story, not likely to change for a long time, and the REIT structure is perfect for my "pay me now" kind of sensibility. I'm DRIPing as usual, so compounding is working for me. Gotta love that 5% dividend; with that much quarterly cash, all you need is a modest capital gain to exceed 10% total return. freight train...
Duke; what can I say...I bought this utility way back when I was still in the shadow of the full service broker. It spun out Spectra, which I held and rode until it became hopelessly overvalued. It pays that steady dividend, grows slowly and is continually rated at the top of the utility sector. Can't believe I've owned it for 13 years...with Spectra it has appreciated at least 4 fold. I'll hold it forever, I think.
Why Deere? Iconic American brand with International penetration. They call it cyclic. It pays rising dividends. The world needs food, and Deere is about food, shelter, roads and the like. Since I'm a long term holder (buy and monitor, they call it), I'm less worried about cyclical behavior and more about long term appreciation and compounding. 3% yield, great dividend growth, solid company growth; what's not to like? Price is important when you buy, after that not so much...
Digital Realty Trust- the first of the REITs. This one is a bit less typical because of the high tech nature of the server farm within the building, but DLR is the big dog in this space and there is no end of enterprises, large and small, looking for a place to securely house their virtual selves. This is a huge secular growth story, not likely to change for a long time, and the REIT structure is perfect for my "pay me now" kind of sensibility. I'm DRIPing as usual, so compounding is working for me. Gotta love that 5% dividend; with that much quarterly cash, all you need is a modest capital gain to exceed 10% total return. freight train...
Duke; what can I say...I bought this utility way back when I was still in the shadow of the full service broker. It spun out Spectra, which I held and rode until it became hopelessly overvalued. It pays that steady dividend, grows slowly and is continually rated at the top of the utility sector. Can't believe I've owned it for 13 years...with Spectra it has appreciated at least 4 fold. I'll hold it forever, I think.
C stands for characters
I like my C's...a diverse cast of characters
COST, CSX, CTBI and CVS
retail, rail, regional banking and big oil...
Costco is my Peter Lynch stock; I shop there, love the experience, like how the company is run. I pay the executive membership fee, have the AmEx card and pay for the membership fee with My Amex kickback, and I only charge at Costco. That tells you that we spend a lot of money there; I suspect we buy about half our food, most of our household products, personal care products, socks, skivvies, bumming around clothes, even dress shirts and slacks there. It's the one shopping date every month that we actually look forward to.
Not electrifying performance, but about 50% increase in the position over 4 years. The dividend isn't much to talk about, but adds a bit, and I DRIP it. It continues to be the darling of the big-box discounters and as long as I like shopping there, I think I'll own the stock
CSX- After Buffet bought Burlington Northern, I started paying more attention to the railroads. My favorite would be Union Pacific, but I can't bear to pay for over-valued stocks, however much they are growing every year, so I compromised and bought CSX; P/E that I can stomach, nice share appreciation, average dividend, good dividend growth...10% total yield in 6 months; we'll see....
CTBI- I've been staving around trying to settle on a regional bank or two over the last several years; something small enough and sober enough to avoid the "money bank" hubris. I have owned a few, currently own two. this one has acceptable price appreciation, nice dividend, fairly shallow dividend growth; said to be minding it's knitting and avoiding stupid stuff like derivative investments...banks worry me a bit, after being seriously stung by B of A and WaMu back in the day. Still, handling other people's money is a good way to take home a piece of it.
CVS- I love big oil; it runs directly counter to my superficial cloak of "green sensibility", but Chevron has delivered big-time for my retirement portfolio. This is as close to a "set it and forget it" stock as I own. Energy production is for big broad-shouldered companies. Someone else can speculate on the wildcat producers. I like the big diversified producers, pipeline companies and the MLPs. They have done some very heavy lifting for me after the big swoon. Chevron is a stock to bequeath to my son...
that does it for C
COST, CSX, CTBI and CVS
retail, rail, regional banking and big oil...
Costco is my Peter Lynch stock; I shop there, love the experience, like how the company is run. I pay the executive membership fee, have the AmEx card and pay for the membership fee with My Amex kickback, and I only charge at Costco. That tells you that we spend a lot of money there; I suspect we buy about half our food, most of our household products, personal care products, socks, skivvies, bumming around clothes, even dress shirts and slacks there. It's the one shopping date every month that we actually look forward to.
Not electrifying performance, but about 50% increase in the position over 4 years. The dividend isn't much to talk about, but adds a bit, and I DRIP it. It continues to be the darling of the big-box discounters and as long as I like shopping there, I think I'll own the stock
CSX- After Buffet bought Burlington Northern, I started paying more attention to the railroads. My favorite would be Union Pacific, but I can't bear to pay for over-valued stocks, however much they are growing every year, so I compromised and bought CSX; P/E that I can stomach, nice share appreciation, average dividend, good dividend growth...10% total yield in 6 months; we'll see....
CTBI- I've been staving around trying to settle on a regional bank or two over the last several years; something small enough and sober enough to avoid the "money bank" hubris. I have owned a few, currently own two. this one has acceptable price appreciation, nice dividend, fairly shallow dividend growth; said to be minding it's knitting and avoiding stupid stuff like derivative investments...banks worry me a bit, after being seriously stung by B of A and WaMu back in the day. Still, handling other people's money is a good way to take home a piece of it.
CVS- I love big oil; it runs directly counter to my superficial cloak of "green sensibility", but Chevron has delivered big-time for my retirement portfolio. This is as close to a "set it and forget it" stock as I own. Energy production is for big broad-shouldered companies. Someone else can speculate on the wildcat producers. I like the big diversified producers, pipeline companies and the MLPs. They have done some very heavy lifting for me after the big swoon. Chevron is a stock to bequeath to my son...
that does it for C
B is for Blood, and Buffet
On with the drill-down;
BAX- a recent purchase; has the usual DGI credentials, decent dividend and I know something about the products. Blood products are big in my business; Baxter has a niche in the pharma world; processes blood, plasma and etc. to make value-added products for hospitals, surgery, chronic illnesses. The secular trends are going to hold this one up until after I'm dead and gone. More old folks, more surgeries, more chronic illness maintenance.
BRK-B
No value oriented investor can bear to be without at least a token membership in the BRK club. The cult of personality is overwhelming. Since the b-shares came out, us common folk are able to be owners. The performance hasn't been half-bad since I purchased...80% in three-and-a-half years, or over 20% per year; just like the historic performance, but....no dividend; one of the few apostates in my portfolio.
that's all there are for B's
BAX- a recent purchase; has the usual DGI credentials, decent dividend and I know something about the products. Blood products are big in my business; Baxter has a niche in the pharma world; processes blood, plasma and etc. to make value-added products for hospitals, surgery, chronic illnesses. The secular trends are going to hold this one up until after I'm dead and gone. More old folks, more surgeries, more chronic illness maintenance.
BRK-B
No value oriented investor can bear to be without at least a token membership in the BRK club. The cult of personality is overwhelming. Since the b-shares came out, us common folk are able to be owners. The performance hasn't been half-bad since I purchased...80% in three-and-a-half years, or over 20% per year; just like the historic performance, but....no dividend; one of the few apostates in my portfolio.
that's all there are for B's
Drilling down a bit
Since I can't see much excitement on the horizon with new money to invest or great bargains popping up all over, perhaps it makes sense to look at some of the stocks I own with an eye towards asking what I like about them and what I know about them.
Starting with the A's....
I bought ABT a while ago, for the standard reasons; big pharma, lots of products I know and some I prescribe, long history of rising dividends, etc. Then they threw a curve ball; Why they split is beyond me. Other companies are at least as, or more diversified. Look at JNJ; they have pharma, medical supplies, other stuff. Anyway, when ABT split to Abbvie and ABT, I felt I should choose, and stick with the DGI benchmarks I had set out. Abbvie had the higher dividend and the blockbuster drug. ABT has a bunch of stuff, but a lower dividend. I went with Abbvie, not knowing exactly whether it would produce a history conducive to a long term hold.
Well, in less than 2 years it's value has nearly doubled and the dividend remains near 3%, my prior buy threshold. I still don't have a clear sense of it's future, but the performance has been scintilating, and the dividend still hovers around my buy threshold. Until I see a reason to sell, I'll hold on. The dividend growth has a short history, but is adequate.
ADP...
a little history here. I used to be a part-owner of a small business...less than $2 million annual revenue. I became the managing partner, and boy did my eyes get opened! Retirement plan rules and regulations, HR stuff, payroll issues; none of which I knew anything about. My manager suggested that we outsource payroll, and we went to Paychex. They did a great job at a very modest price, freeing up hours of my managers time. She had time to pay much more attention to accounts receivable. Our business improved. I bought Paychex. I also learned that Paychex and ADP were the big dogs in this market, focusing on different pieces of the business world. I liked the performance history of ADP and the dividend, so I bought it.
Now I'm a part owner in a large business; probably 100 million/year in revenues. I sit on the benefits committee; I see the health plan administration, the life and disibility insurance, the pension/profit sharing advisor relationship and etc. Our company does payroll for nearly 1000 persons. Now I know what ADP is about. Payroll and benefits management for larger companies; more complex, more regulations, need for robust computer programs, lots of attention to detail. A bigger reason to consider outsourcing to reduce labor costs, leverage expertise, etc.
ADP has done very well for me... nearly 20% per year over 2.5 years, 2.3% dividend with 10% DG over those 2.5 years. There is a huge market and these two companies have barely penetrated it. I think the runway is pretty long going forward.
AWF... it's a fund, and a bond fund no less. This story is a piece of my newsletter history. It's about Neil George. He's a quirky personality in the newsletter world. Used to work for one of the big independent research/newsletter/advisor groups, got dumped, opened his own shop, then disappeared for a while, then reappeared as the "Lifetime Income Report" editor with Agora Financial.
I like reading his stuff. He's all about secure income; "pay me now", so to speak. He educated me about "minibonds" back in the days after the big meltdown of 2008 and I cleaned up on corporate minbonds at 50% on the dollar, big yields, rode them all the way to face value and sold them when there was little appreciation left.
He also recommended some emerging market bond funds. I still own 3 of the 4 he recommended and they have been very steady performers over 6 years. AWF is one of them. I dumped the Pimco product because of leverage; worried about this exposure if there is interest rate margin compression, but those without leverage are paying their 7% or thereabouts steadily. This one has returned about 150% over 6 years with reinvestment of distributions; it continues to clock along at 7% yield. The price fluctuates up and down a bit, but I'm DRIPing, so my cost basis stays down and i see no reason to step off a moving train.
AXPWD- don't ask me about this one...this is purely speculative, indulges my interest in alternative energy, and allows me to follow a very lively blog. I have taken a bath on it, but have intentionally limited my investment to 2% of the portfolio, so I can't get hurt too bad here. It has nothing to do with my conservative prudent DGI strategy, more a throwback to old undisciplined days...
that's the A's....more details next post.
Starting with the A's....
I bought ABT a while ago, for the standard reasons; big pharma, lots of products I know and some I prescribe, long history of rising dividends, etc. Then they threw a curve ball; Why they split is beyond me. Other companies are at least as, or more diversified. Look at JNJ; they have pharma, medical supplies, other stuff. Anyway, when ABT split to Abbvie and ABT, I felt I should choose, and stick with the DGI benchmarks I had set out. Abbvie had the higher dividend and the blockbuster drug. ABT has a bunch of stuff, but a lower dividend. I went with Abbvie, not knowing exactly whether it would produce a history conducive to a long term hold.
Well, in less than 2 years it's value has nearly doubled and the dividend remains near 3%, my prior buy threshold. I still don't have a clear sense of it's future, but the performance has been scintilating, and the dividend still hovers around my buy threshold. Until I see a reason to sell, I'll hold on. The dividend growth has a short history, but is adequate.
ADP...
a little history here. I used to be a part-owner of a small business...less than $2 million annual revenue. I became the managing partner, and boy did my eyes get opened! Retirement plan rules and regulations, HR stuff, payroll issues; none of which I knew anything about. My manager suggested that we outsource payroll, and we went to Paychex. They did a great job at a very modest price, freeing up hours of my managers time. She had time to pay much more attention to accounts receivable. Our business improved. I bought Paychex. I also learned that Paychex and ADP were the big dogs in this market, focusing on different pieces of the business world. I liked the performance history of ADP and the dividend, so I bought it.
Now I'm a part owner in a large business; probably 100 million/year in revenues. I sit on the benefits committee; I see the health plan administration, the life and disibility insurance, the pension/profit sharing advisor relationship and etc. Our company does payroll for nearly 1000 persons. Now I know what ADP is about. Payroll and benefits management for larger companies; more complex, more regulations, need for robust computer programs, lots of attention to detail. A bigger reason to consider outsourcing to reduce labor costs, leverage expertise, etc.
ADP has done very well for me... nearly 20% per year over 2.5 years, 2.3% dividend with 10% DG over those 2.5 years. There is a huge market and these two companies have barely penetrated it. I think the runway is pretty long going forward.
AWF... it's a fund, and a bond fund no less. This story is a piece of my newsletter history. It's about Neil George. He's a quirky personality in the newsletter world. Used to work for one of the big independent research/newsletter/advisor groups, got dumped, opened his own shop, then disappeared for a while, then reappeared as the "Lifetime Income Report" editor with Agora Financial.
I like reading his stuff. He's all about secure income; "pay me now", so to speak. He educated me about "minibonds" back in the days after the big meltdown of 2008 and I cleaned up on corporate minbonds at 50% on the dollar, big yields, rode them all the way to face value and sold them when there was little appreciation left.
He also recommended some emerging market bond funds. I still own 3 of the 4 he recommended and they have been very steady performers over 6 years. AWF is one of them. I dumped the Pimco product because of leverage; worried about this exposure if there is interest rate margin compression, but those without leverage are paying their 7% or thereabouts steadily. This one has returned about 150% over 6 years with reinvestment of distributions; it continues to clock along at 7% yield. The price fluctuates up and down a bit, but I'm DRIPing, so my cost basis stays down and i see no reason to step off a moving train.
AXPWD- don't ask me about this one...this is purely speculative, indulges my interest in alternative energy, and allows me to follow a very lively blog. I have taken a bath on it, but have intentionally limited my investment to 2% of the portfolio, so I can't get hurt too bad here. It has nothing to do with my conservative prudent DGI strategy, more a throwback to old undisciplined days...
that's the A's....more details next post.
If a tree falls in the forest...
The other day I was surprised when someone sent me an email suggesting my comments here might be of general interest to the lay-investor public on a very active website. This surprised and amused me, as I can't see any evidence that anybody but anybody has visited this site where I periodically talk to myself about my journey to investing enlightenment.
At least there is the illusion of enlightenment, as I can now view my performance over 7 years in comparison with broad indices, if that means anything. Actually, I'm much more motivated by internal metrics, like watching a rising stream of dividend income, watching the relentless acceleration of dividend reinvestment on the portfolio value and recognizing the near certainty that one month's swoon in value is followed by the next month's recovery. Even the great swoon of 2008 and 2009 was followed by an equally dramatic recovery, so I am comforted that disaster is not too likely to strike as long as I don't panic and bail out at the nadir of a market correction. I think I'm fairly well inoculated against that tendency by now, particularly since the dividends don't appear to track in a similar manner for most of the companies I own.
So where are we? While the broad market is both at a near historic high in both price and valuation, there are still substantial number of prudent investment opportunities at average historic price/earnings ratios, with solid and rising earnings to support their valuations. These fall within the collection of companies known as dividend champions, challengers and contenders. They fall within various market capitalization strata, tending towards the large and mid-cap, which is quite fine with me as I am a fan of low volatility and market cap appears to be positively correlated with a low volatility index. For those companies that I already own, reinvesting dividends at a time when valuations are high does not change my average acquisition cost very much, so if I am "losing points" to a more activist redeployment of dividends to the lowest valuation issues in my portfolio, I am making the over-all rebalancing easier, as each position stays closer to it's target weight within the portfolio than would happen if I collected dividends to re-invest in a single issue.
It turns out that there are a number of variations on the general theme of dividend growth investing and provided one is broadly following the principles, the outcome should be favorable even if not mind-blowing in it's total return prowess. As new money comes into the portfolio, there is always the opportunity to fill out smaller positions that I previously bought as partial positions, at the current time when screaming bargains are very difficult to uncover.
I'm pretty happy with an overall growth of the portfolio in the 10-12% range; 3% new money, 3% through dividend reinvestment and another 4-6% capital appreciation. I'm actually beating that by a significant margin over the last 7 years, so as long as I keep my eyes on my own work, I don't fall victim to too much performance envy vis-a-vis someone else's claimed return on investment.
So, if noone but me benefits from my conversation with myself, is it significant? Well, I'm not following a strictly disciplined analysis of each issue on a calendar schedule. I do want to stay within the bounds of some principles I have learned. So, reciting the rules seems helpful. Seeing how to apply them in different market conditions is part of my objective in the conversation. I have chosen not to accumulate cash in this rich market, because fair valued stocks remain available. Will this be a bad choice? Only time will tell. What modest amount of new money trickles in is easily deployed in balancing activities.
At least there is the illusion of enlightenment, as I can now view my performance over 7 years in comparison with broad indices, if that means anything. Actually, I'm much more motivated by internal metrics, like watching a rising stream of dividend income, watching the relentless acceleration of dividend reinvestment on the portfolio value and recognizing the near certainty that one month's swoon in value is followed by the next month's recovery. Even the great swoon of 2008 and 2009 was followed by an equally dramatic recovery, so I am comforted that disaster is not too likely to strike as long as I don't panic and bail out at the nadir of a market correction. I think I'm fairly well inoculated against that tendency by now, particularly since the dividends don't appear to track in a similar manner for most of the companies I own.
So where are we? While the broad market is both at a near historic high in both price and valuation, there are still substantial number of prudent investment opportunities at average historic price/earnings ratios, with solid and rising earnings to support their valuations. These fall within the collection of companies known as dividend champions, challengers and contenders. They fall within various market capitalization strata, tending towards the large and mid-cap, which is quite fine with me as I am a fan of low volatility and market cap appears to be positively correlated with a low volatility index. For those companies that I already own, reinvesting dividends at a time when valuations are high does not change my average acquisition cost very much, so if I am "losing points" to a more activist redeployment of dividends to the lowest valuation issues in my portfolio, I am making the over-all rebalancing easier, as each position stays closer to it's target weight within the portfolio than would happen if I collected dividends to re-invest in a single issue.
It turns out that there are a number of variations on the general theme of dividend growth investing and provided one is broadly following the principles, the outcome should be favorable even if not mind-blowing in it's total return prowess. As new money comes into the portfolio, there is always the opportunity to fill out smaller positions that I previously bought as partial positions, at the current time when screaming bargains are very difficult to uncover.
I'm pretty happy with an overall growth of the portfolio in the 10-12% range; 3% new money, 3% through dividend reinvestment and another 4-6% capital appreciation. I'm actually beating that by a significant margin over the last 7 years, so as long as I keep my eyes on my own work, I don't fall victim to too much performance envy vis-a-vis someone else's claimed return on investment.
So, if noone but me benefits from my conversation with myself, is it significant? Well, I'm not following a strictly disciplined analysis of each issue on a calendar schedule. I do want to stay within the bounds of some principles I have learned. So, reciting the rules seems helpful. Seeing how to apply them in different market conditions is part of my objective in the conversation. I have chosen not to accumulate cash in this rich market, because fair valued stocks remain available. Will this be a bad choice? Only time will tell. What modest amount of new money trickles in is easily deployed in balancing activities.
Thursday, July 17, 2014
Dog days
We're well past May and the swoon hasn't happened yet. While the popular press chants "overvalued", individual stocks are available at fair value and modest discounts to same. The paparazzi want their correction, and are chanting for it with ever more shrill persistence.
What's an impatient amateur to do? The hardest thing of all is to sit on one's hands. I don't have cash anyway, so all the reading and examining is just entertainment. There just isn't any major repositioning work to do. I'm tempted to to reposition against the Intel run-up, but inertia has set in on my resolve to buy more shares of anything. I could sell some puts, perhaps...will think about it a bit longer.
Pretty soon there'll be a profit sharing distribution and I'll be forced to think a bit harder, so in the mean time I'm taking a holiday from the hyper-vigilence.
What's an impatient amateur to do? The hardest thing of all is to sit on one's hands. I don't have cash anyway, so all the reading and examining is just entertainment. There just isn't any major repositioning work to do. I'm tempted to to reposition against the Intel run-up, but inertia has set in on my resolve to buy more shares of anything. I could sell some puts, perhaps...will think about it a bit longer.
Pretty soon there'll be a profit sharing distribution and I'll be forced to think a bit harder, so in the mean time I'm taking a holiday from the hyper-vigilence.
Monday, May 26, 2014
Rarified air
Can you hear the wind whistling? Have we reached the precipice? Are we staring down the abyss?
Who knows. Equity prices keep creeping up. Earnings seem to be up, in spite of anemic guidance and endless fears of tightening credit, rising interest rates and the like. International hot-spots continue to be hot. It's all a muddle.
One thing is certain; fewer companies in my universe of stock candidates are clearly under-valued, and those that are have warts, for the most part. I own 50 some-odd dividend payers, mostly dividend growers and I scan them repeatedly for valuation problems. I have sold a few clearly over-valued equities, rotated into others at fair value, trying to strengthen the quality of the earnings and dividends. I'm trying to buy more of the stuff people can't do without, and less of what they can avoid buying in a tight spot.
I'm mostly keeping with that 3% dividend threshold, although a I'm letting a select few 2.5% payers into the fold if they have a solid dividend growth history. I'm also scanning for companies I don't own but want to. Most of those that fit that category have serious valuation issues. I'm taking advice to heart from the masters that purchasing at high valuations can destroy a lifetime of position growth potential.
I find that one of the hardest things to do is to sit on cash and I can't sell options in my 401k account, so cash covered puts are out. I've been lurking around the small cap world, looking for some hidden issues that the big shops don't write about constantly. They aren't easy to find.
I have less problem continuing the DRIPs in this environment, because a few commission-free stocks are diluted into a much lower cost-basis and additional shares also contributes to rising dividend payments. If I weren't DRIPing, there'd be an accumulation of cash and no really tempting investments to make.
There are only two ways out of this situation; rising earnings or a market correction. Rising earnings would be good, but one doesn't hear much positive news about the world economic health status. I wonder if this is an artifact of the media, which grasps at every piece of potential bad news and rarely emphasizes anything positive about the world. Earnings don't lie for the most part, and the world interprets flat or softening earnings as reason for doom and gloom. No-one wants a correction, but dividend investors like me would prefer to buy stocks when valuations are down, so that may be the price we pay to put new money to work. It's certainly hard to look at the portfolio value dropping, but if the dividends are preserved or even growing, then one should force oneself to see that as a fundamentally good thing.
I'm not particularly good at selling holdings at higher valuation. I'm not happy with a big cash balance. Although I have dabbled in options, I'd still rather be long than betting on market movements one way or the other. So, in spite of rising anxiety around me and the temptation to "do something", I think I'll just sit tight.
Who knows. Equity prices keep creeping up. Earnings seem to be up, in spite of anemic guidance and endless fears of tightening credit, rising interest rates and the like. International hot-spots continue to be hot. It's all a muddle.
One thing is certain; fewer companies in my universe of stock candidates are clearly under-valued, and those that are have warts, for the most part. I own 50 some-odd dividend payers, mostly dividend growers and I scan them repeatedly for valuation problems. I have sold a few clearly over-valued equities, rotated into others at fair value, trying to strengthen the quality of the earnings and dividends. I'm trying to buy more of the stuff people can't do without, and less of what they can avoid buying in a tight spot.
I'm mostly keeping with that 3% dividend threshold, although a I'm letting a select few 2.5% payers into the fold if they have a solid dividend growth history. I'm also scanning for companies I don't own but want to. Most of those that fit that category have serious valuation issues. I'm taking advice to heart from the masters that purchasing at high valuations can destroy a lifetime of position growth potential.
I find that one of the hardest things to do is to sit on cash and I can't sell options in my 401k account, so cash covered puts are out. I've been lurking around the small cap world, looking for some hidden issues that the big shops don't write about constantly. They aren't easy to find.
I have less problem continuing the DRIPs in this environment, because a few commission-free stocks are diluted into a much lower cost-basis and additional shares also contributes to rising dividend payments. If I weren't DRIPing, there'd be an accumulation of cash and no really tempting investments to make.
There are only two ways out of this situation; rising earnings or a market correction. Rising earnings would be good, but one doesn't hear much positive news about the world economic health status. I wonder if this is an artifact of the media, which grasps at every piece of potential bad news and rarely emphasizes anything positive about the world. Earnings don't lie for the most part, and the world interprets flat or softening earnings as reason for doom and gloom. No-one wants a correction, but dividend investors like me would prefer to buy stocks when valuations are down, so that may be the price we pay to put new money to work. It's certainly hard to look at the portfolio value dropping, but if the dividends are preserved or even growing, then one should force oneself to see that as a fundamentally good thing.
I'm not particularly good at selling holdings at higher valuation. I'm not happy with a big cash balance. Although I have dabbled in options, I'd still rather be long than betting on market movements one way or the other. So, in spite of rising anxiety around me and the temptation to "do something", I think I'll just sit tight.
Thursday, March 6, 2014
New opportunities
2013, a huge year for the stock market. Now the pundits are asking, what could be in store for 2014.
No one knows and many will gladly substitute for that lack of foresight with speculation. I don't waste time on that. Speculation is like playing the lottery. The odds are infinitesimally small that I'll win.
What I can do is save. I'm going to save every dollar I can squirrel away, both in my qualified plan and after taxes in life insurance cash value. Lots of people say that cash value life insurance policies are a poor investment. however, they're happy to endorse term life insurance. I have experienced the tepid returns of cash value policies. I also know that their gains are tax deferred, and I can, and have, borrowed against the cash value. In my tax bracket, putting after tax money into a cash value life policy is a no-brainer. I immediately avoid about 40% taxation on ordinary earnings, 15% on qualified dividends. That makes up for some tepid investment performance. The cost of insurance isn't much different from term life.
Maximizing income deferral is my other strategy. The government allows $52,000 maximum this year. I'll do my best to defer every bit of that much. Across my employed lifetime, The average maximum deferral will probably average about $47,000 and the average earnings duration will be about 16 years. That would suggest that each year of contribution will be worth somewhere around $120,000. That puts the qualified plan maximum (at 7% ROE) of about $3.6 million. I'll be lucky to hit $2 million given my age and prior history. Still, I'm working to defer as much as I am allowed to under the law, and then another 40% beyond that after tax.
I doubt I'll find another investment strategy that suits me better than DGI. I spent 7 years looking, after all. I don't like the logic of any other of the strategies I investigated.
I don't see the pundits offering any clearer view of the future than in prior years, so I'm left with the same old investment theme; try to buy best in class companies at or under fair value, focus on companies that pay above average dividends and grow those dividends. The goal is a rising stream of income. A secondary goal is capital appreciation, but I'm not measuring success against a benchmark.
So, big savings, rising dividends, moderate capital appreciation, lots of diversity. I'm insured against single company meltdowns by portfolio size. I see myself becoming more conservative. I'm not reaching for yield anymore; instead looking for relentless earnings growth, relentless dividend growth, moderate payout ratios, companies that make stuff people need come rain or shine. Not too sexy, but meant to help me SWAN.
I'm pretty happy with the monitoring function. I use FastGRAPHS premium and keep my portfolio loaded. I may start customizing the data fields to make the earnings growth and dividend growth rates a little clearer. I can easily follow the entire portfolio without spending a lot of time.
I'll need to get a little more disciplined about keeping issues in the portfolio that aren't performing to specifications; the sell issue is one of the more difficult disciplines in personal investing.
No one knows and many will gladly substitute for that lack of foresight with speculation. I don't waste time on that. Speculation is like playing the lottery. The odds are infinitesimally small that I'll win.
What I can do is save. I'm going to save every dollar I can squirrel away, both in my qualified plan and after taxes in life insurance cash value. Lots of people say that cash value life insurance policies are a poor investment. however, they're happy to endorse term life insurance. I have experienced the tepid returns of cash value policies. I also know that their gains are tax deferred, and I can, and have, borrowed against the cash value. In my tax bracket, putting after tax money into a cash value life policy is a no-brainer. I immediately avoid about 40% taxation on ordinary earnings, 15% on qualified dividends. That makes up for some tepid investment performance. The cost of insurance isn't much different from term life.
Maximizing income deferral is my other strategy. The government allows $52,000 maximum this year. I'll do my best to defer every bit of that much. Across my employed lifetime, The average maximum deferral will probably average about $47,000 and the average earnings duration will be about 16 years. That would suggest that each year of contribution will be worth somewhere around $120,000. That puts the qualified plan maximum (at 7% ROE) of about $3.6 million. I'll be lucky to hit $2 million given my age and prior history. Still, I'm working to defer as much as I am allowed to under the law, and then another 40% beyond that after tax.
I doubt I'll find another investment strategy that suits me better than DGI. I spent 7 years looking, after all. I don't like the logic of any other of the strategies I investigated.
I don't see the pundits offering any clearer view of the future than in prior years, so I'm left with the same old investment theme; try to buy best in class companies at or under fair value, focus on companies that pay above average dividends and grow those dividends. The goal is a rising stream of income. A secondary goal is capital appreciation, but I'm not measuring success against a benchmark.
So, big savings, rising dividends, moderate capital appreciation, lots of diversity. I'm insured against single company meltdowns by portfolio size. I see myself becoming more conservative. I'm not reaching for yield anymore; instead looking for relentless earnings growth, relentless dividend growth, moderate payout ratios, companies that make stuff people need come rain or shine. Not too sexy, but meant to help me SWAN.
I'm pretty happy with the monitoring function. I use FastGRAPHS premium and keep my portfolio loaded. I may start customizing the data fields to make the earnings growth and dividend growth rates a little clearer. I can easily follow the entire portfolio without spending a lot of time.
I'll need to get a little more disciplined about keeping issues in the portfolio that aren't performing to specifications; the sell issue is one of the more difficult disciplines in personal investing.
Thursday, January 2, 2014
Auld Lang Syne
New Years is past. 2013 is in the rear view mirror. As is the rest of the world, I am looking back and looking forward. The last several years have been a "duck head" time. The agenda has been pour in more capital, move money (and debt) around, hope for recovery, continue with saving discipline, stop spending on travel, toys, etc.
I entered 2013 in the throes of a major professional transition, merging a small business into a large one and withstanding the cash flow dislocation and cultural transformation required to manage that. In the midst of that I was managing the contract renewal and growing expectations of a junior associate, negotiating the anticipated retirement of another partner and strategic planning for the succession plan. Fortunately, 2013 was financially a good year and we didn't have too much stress on the cash-flow side.
With respect to the retirement planning, one qualified plan turned into IRAs, a new qualified plan was opened and funded. I'm now becoming used to the fact that there is no new money flowing into the "used-to-be" qualified roth and traditional accounts, and the now-Roth and traditional IRA accounts are only traded to rebalance, or replace equities. This has been a good thing, as it has forced me to evaluate how each equity is performing and whether or not it still belongs in the portfolio. New money is going into a smaller qualified account with a small-cap DGI focus. I am still not doing much outside the tax-deferred arena and probably won't, aside from trying to keep up on life insurance premiums. Loans against life insurance will have to wait, as will the big mortgage, until property values have adequately recovered to allow us to get out from under the current home without bringing cash to the equation. Rentals will stay in place until this spring/summer, at which time we'll test the market and hopefully sell the majority of them.
This anticipates the issue of 2014 goals;
1) Continue maximizing pre-tax income deferral.
2) manage IRAs for dividend growth and total return, in that order
3) Sell one rental house, one rental condominium and reposition the cash receipts (refund life insurance cash values)
4) Test the market on primary residence, either sell later in 2014 or plan to sell in 2015.
5) Reduce expenses where possible; pay off auto loan with bonuses. Potentially pay of LID debt on street improvement
Goals for retirement investments
1) Total return 8% or greater
2) Portfolio dividend yield 3% or greater
3) Each holding grows dividend at greater than rate of inflation
4) Reinvest all distributions and dividends
5) Maximum pre-tax deferral including "catch up"
6) total portfolio growth in value for 2014 ( capital appreciation, dividends reinvested and salary deferral) should be 13% or greater
I think these are all very realistic goals that can be achieved, unless the country falls into another recession and property values plummet, market returns plummet.
I entered 2013 in the throes of a major professional transition, merging a small business into a large one and withstanding the cash flow dislocation and cultural transformation required to manage that. In the midst of that I was managing the contract renewal and growing expectations of a junior associate, negotiating the anticipated retirement of another partner and strategic planning for the succession plan. Fortunately, 2013 was financially a good year and we didn't have too much stress on the cash-flow side.
With respect to the retirement planning, one qualified plan turned into IRAs, a new qualified plan was opened and funded. I'm now becoming used to the fact that there is no new money flowing into the "used-to-be" qualified roth and traditional accounts, and the now-Roth and traditional IRA accounts are only traded to rebalance, or replace equities. This has been a good thing, as it has forced me to evaluate how each equity is performing and whether or not it still belongs in the portfolio. New money is going into a smaller qualified account with a small-cap DGI focus. I am still not doing much outside the tax-deferred arena and probably won't, aside from trying to keep up on life insurance premiums. Loans against life insurance will have to wait, as will the big mortgage, until property values have adequately recovered to allow us to get out from under the current home without bringing cash to the equation. Rentals will stay in place until this spring/summer, at which time we'll test the market and hopefully sell the majority of them.
This anticipates the issue of 2014 goals;
1) Continue maximizing pre-tax income deferral.
2) manage IRAs for dividend growth and total return, in that order
3) Sell one rental house, one rental condominium and reposition the cash receipts (refund life insurance cash values)
4) Test the market on primary residence, either sell later in 2014 or plan to sell in 2015.
5) Reduce expenses where possible; pay off auto loan with bonuses. Potentially pay of LID debt on street improvement
Goals for retirement investments
1) Total return 8% or greater
2) Portfolio dividend yield 3% or greater
3) Each holding grows dividend at greater than rate of inflation
4) Reinvest all distributions and dividends
5) Maximum pre-tax deferral including "catch up"
6) total portfolio growth in value for 2014 ( capital appreciation, dividends reinvested and salary deferral) should be 13% or greater
I think these are all very realistic goals that can be achieved, unless the country falls into another recession and property values plummet, market returns plummet.
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