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.
Saturday, September 13, 2014
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.
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