Thursday, April 28, 2016

Dividend Growth Investing at Work - A Double Dose Of Increases


Something I love about dividend growth investing is that each month I get to hear about companies I own deciding to pay me more money in dividends.  Just for owning a small portion of said companies.  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  That's dividend growth investing at work!  I mean who doesn't like getting a raise for doing nothing?

Wednesday, April 27, 2016

Dividend Growth Investing at Work - 3 Pay Raises? Yes, Please!


Something I love about dividend growth investing is that each month I get to hear about companies I own deciding to pay me more money in dividends.  Just for owning a small portion of said companies.  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  That's dividend growth investing at work!  I mean who doesn't like getting a raise for doing nothing?

Tuesday, April 26, 2016

5 Ways Companies Can Grow


As dividend growth investors the most exciting part is the growth.  Dividend growth streaks aren't built by happenstance.  Companies that can amass decades long streaks have one thing in common: they grow.  Companies must constantly figure out ways to grow earnings, cash flow and most importantly revenue in order to grow their dividend.

How do they grow?

It's pretty simple actually, but not all growth is created equally.  Whenever you're analyzing potential investments it's important to make sure the companies are actually growing.  That means looking at the nominal numbers rather than the per share values to determine if the growth is real or manufactured.

Saturday, April 23, 2016

Weekly Roundup - April 23, 2016


Just a quick update this week.

This week started off very hectic.  My phone started alarming Sunday night/Monday morning because of a tornado warning luckily though we were spared of that.  However, we couldn't escape the rain which was bad enough to essentially shut down the city of Houston on Monday.  Our area was spared from the flooding, but there's so many areas that were hit extremely hard.  Some spots were estimated to have received 20 inches of rain in about 8 hours which is absolutely ridiculous.  The devastation is eye opening.

There were a couple things that really shocked me about everything that's gone on this past week.  For starters I knew they were expecting rain but I hadn't heard of any forecasts calling for anything quite like this until after the rain started.  The other thing that I don't understand is why some areas weren't evacuated on Tuesday/Wednesday/Thursday prior to the flooding getting downstream.  I've seen several reports of people that escaped the initial flooding on Monday just to end up getting flooded out later in the week.  The flood control districts have plenty of computer models and I can only hope that the reason for that was a lack of accurate information and not that someone just completely dropped the ball.

On top of all the rain we received my body finally decided to do its semi-annual sickness recharged.  I don't get sick often and thankfully when I do it's not too bad and this time was no different.  Just lethargy, congestion, some sinus pressure and on and off head aches.  It didn't make for a fun week, but a few days of laying around have gotten me back on track.  So unfortunately I didn't get much writing done.

Thursday, April 21, 2016

Net Worth Update - March 2016


While cash flow is more important when it comes to financial independence, it's still good to look at the balance sheet too, which is why I provide these net worth updates.  Since more and more of my net worth is tied to the markets, there's a larger correlation between my net worth and the markets but in the long run as I continue to save and invest the net worth trend should be higher even though short term fluctuations can vary wildly.  As a dividend growth investor I'm not overly concerned with the short-term gyrations as long as the dividend stream remains in tact, but the markets' effect is noticeable.

The start to the year was brutal for the markets with big declines during January and the first half of February.  However, what goes down must come up as is typical with the stock markets and March was no different.  The S&P 500 climbed 6.6% during the month which was a huge move forward.  Since the bulk of my net worth is tied up in the markets it was a welcomed reprieve to see things start churning higher.

Although with a long term investment horizon the changes are just noise over the short term and are typically best to be ignored.  Of course receiving over $800 in dividends and 5 dividend increases helps out too.  Dividends are great because they are always a positive portion of return.

For the month our net worth increased $55,980.13.

And BOOM goes the dynamite!

Sunday, April 17, 2016

Weekly Roundup - April 17, 2016


Another week has already come and gone.  I don't know about you guys but the weeks just keep flying by faster and faster.  There wasn't much to report on with the portfolio this past week with the only real developments being some dividends rolled in, there were 3 increases announced and the latest batch of ESPP shares hit my account.  I'll be selling this latest group soon although the proceeds won't go towards anything fun like investing.  Just continue to build cash and maybe go to paying down some debt.

I spent the early part of the week finishing up our taxes which wasn't fun but it was a necessary evil.  No one wants Uncle Sam on their case for anything.  We're getting a $4k+ return this year which is great, although I try to get it to between $500-$1,000 because I'm not in the business of making interest free loans.  It seems like every year for the past 4 or so years is that we've had major changes that's complicated our taxes.

We got married in 2012, bought a house in 2013, had a kid in 2014 and unfortunately lots of medical bills and 2015 brought a major decrease in income (about $100k lower gross, OUCH!) between my wife quitting her job and me not working as much due to our son's health issues as well as a couple pay cuts along the way.  Not to mention the fact that my income is highly variable from month to month since I'm paid a small base salary but make my real money whenever I'm at work.  Hopefully 2016 will be a bit calmer for taxes so we can do some better planning, but I'm sure something else will pop up because it always does.

Friday, April 15, 2016

Dividend Growth Investing at Work - 2 More Increases


Something I love about dividend growth investing is that each month I get to hear about companies I own deciding to pay me more money in dividends.  Just for owning a small portion of said companies.  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  That's dividend growth investing at work!  I mean who doesn't like getting a raise for doing nothing?

Wednesday, April 13, 2016

2016 Goals - About D*mn Time!


I know, I know I'm a little bit late on getting these out since we're already into 2Q.  Seriously how in the world has 3 months of the year already gone by?  Better late than never right?

Our financial goals are pretty simple this year which I've alluded to in a couple posts.  The main theme for this year is to build up cash and pay down debt.

As many of you know I work in the oil field and I honestly have no idea what things are going to be looking like over the next 6-12 months.  Even if oil prices do rebound, as they've been doing recently, I'm not sure at what point we'll actually see drilling come back.  As of earlier this year there were at least 700 wells in Texas alone that were drilled not completed or "DNC".  Essentially they've been drilled, but the E&P companies are delaying fracking for a better pricing environment. There's estimates of 4,000+ wells nationwide that are DNC so my guess is that drilling will be the last thing to come back as the "fracklog" gets worked down.  So yeah, a large cash reserve is a must right now especially with a baby coming in July.

Financial Goals

Monday, April 11, 2016

Dividend Growth Investing at Work - 60 Years of Dividend Growth for this Consumer Giant


Something I love about dividend growth investing is that each month I get to hear about companies I own deciding to pay me more money in dividends.  Just for owning a small portion of said companies.  Not going and doing R&D for new products or technology.  Not selling any products.  Not managing any employees or inventory.  Not making sales calls.  All I had to do was have the foresight to invest some of my savings in excellent companies.  That's dividend growth investing at work!  I mean who doesn't like getting a raise for doing nothing?

Sunday, April 10, 2016

Weekly Roundup - April 10, 2016


Another week down and another week full of work.  Although given the current state of the oil field I can't complain too much about being busy.  I don't normally have people to talk about business/investing with on a regular basis but it's been great this past week since my counterpart is interested in investing.  It's just great to be able to throw ideas around about business opportunities, business models, future trends and much more.

One thing I noticed this past week while researching another company and well GAAP accounting doesn't make sense in some cases.  The company in question has a large investment in another company and while reading through the annual reports and financial statements I saw that the net income for this company is increased by the earnings that their ownership stake represents even though none of those earnings were actually transferred to the company.  That's why it's so important to read through the financial reports and most importantly the footnotes.

Thursday, April 7, 2016

Forecasting Dividend Growth


The start of the year is typically a great time for dividend growth investors with many companies getting off to a fresh start with higher payouts.  The first quarter of the year was no exception with 13 of my holdings giving out 14 raises.  In total my forward dividends have increased by $67.69 through dividend increases alone.

April looks to be an especially fruitful month with 7 companies slated to announce raises based on the timing of their previous raises and maybe an 8th could join the party.  Even better is that some of the financials that I own, Wells Fargo, Bank of America and J.P. Morgan might announce increases as well depending on when their capital allocation plans are approved by the Fed.  That's a minimum of 7 and potentially 11 raises that I could get in April alone.

As a dividend growth investor that gets me excited.  There's not much that's better in the world of investing than hearing that a company you own wants to give you more money because you own some shares.

Even better is the diversity among these companies.  There's 2 consumer good giants, a consumer/health care company, health care real estate company, a technology firm, industrials company and an an oil giant.  There's also 1 Dividend Challenger, 3 Dividend Contenders and 3 Dividend Champions.

Wednesday, April 6, 2016

Time To Just Collect Your AT&T Inc. Dividends


Over the weekend I examined the prospects of Verizon Communications (NYSE:VZ), and now I want to look at the other U.S. telecommunications giant AT&T (NYSE:T).

The telecommunications or "telco" industry has long been a safe haven for investors due to its stable and slow, but consistent annual growth. The typically high current yields have earned these companies the nicknames of being "widows and orphans" stocks.

AT&T has a 32-year dividend growth streak, earning it the title of Dividend Champion. Annual growth has stalled since 2008, inching forward by just 2% annually. Unfortunately, as we'll examine later, that is likely to continue due to large capital expenditures and high debt load.

Since initiating a position in AT&T in 2011 and adding more in early 2015, I've been more than pleased with the results. I've since received over 11.7% of my investment back in cold hard cash and generated over a 15% rate of return. Even better is the 11% cumulative organic dividend growth from my first shares which, according to USInflationCalculator, has more than doubled the cumulative 5.4% inflation over the same time period.

Continue reading the article on Seeking Alpha.


Tuesday, April 5, 2016

Dividend Update - March 2016 Infographic

Hey everyone I wanted to try something a little different with my monthly dividend update post.  Let me know what you all think in the comments or email.



Dividend Update - March 2016


It's the end of one month and the beginning of another so it's time for my favorite update: my dividend update.  These dividend updates reflect all dividends that I receive through my investing pursuits. I hope they can help inspire you to take control of your own finances and invest to build a passive income stream. What you use that stream for is up to you, whether it's to fund early retirement, just provide some FI/FU money, or even to provide for an annual vacation; the key is that it can provide options and open up all sorts of possibilities. You can check my dividend income or progress pages to see what dedication to an investment plan can give you.

Monday, April 4, 2016

Is It Time To Take Profits From Verizon Communications?


The U.S. telecommunications or "telco" industry is largely a duopoly with the two major players being AT&T (NYSE:T) and Verizon Communications (NYSE:VZ). The telco sector has typically been a safe haven of sorts for investors due to the stable nature of the companies and of course the high current yield.

Verizon has long been a favorite for dividend growth investors for that very reason. With an 11 year dividend growth streak and plenty more to come, Verizon has earned the title of Dividend Contender

Since initiating a position in Verizon just over 2 years ago I've been more than happy with the results. I've received over 7% of my investment back in cold hard cash and generated over a 9% rate of return. Even better is the two dividend increases that have grown my income by 6.6% at a time when cumulative inflation, according to US Inflation Calculator, has amounted to just 0.2%.

However, after reaching an intraday low of $43.79 on January 20 Verizon Communications share price has since increased over 23% to Friday's closing price of $54.02. The rapid share price appreciation has led me to question whether I should consider taking some profits.

Continue reading the article on Seeking Alpha.


Sunday, April 3, 2016

Book Review: The Outsiders by William Thorndike, Jr.


Outsider, n - someone that doesn't belong to a group or goes against conventional wisdom

The Outsiders by William Thorndike, Jr. (affiliate link) profiles 8 CEOs that strayed from the conventional wisdom of the day which led to truly exceptional returns for shareholders.  Running and growing a business is never a straight forward task and the ability to think outside of the box to unlock value is key for CEOs and shareholders alike.

These 8 CEOs all had several things in common.  For starters they all believed in a decentralized management.  Companies don't need 20 Presidents each with their own Vice Presidents.  For the most part the headquarters for all 8 of these companies were no frills places very few employees.

They also placed an emphasis on capital allocation with a focus on simple analytical models.  They focused on cash flow rather than earnings or any other metrics because after all cash is king.

Saturday, April 2, 2016

Weekly Roundup - April 2, 2016


Somehow the first quarter of the year is already over and we're now on to April.  This year seems to just be flying by.  Of course it doesn't hurt that the markets have provided all sorts of action over the first few months.  After what looked like the beginnings of a relentless bear market to start the year off the S&P 500 has now reversed direction and now it seems like we're on a non-stop climb higher.  The S&P 500 added another 1.8% over this past week although oil is starting to retreat yet again.  That just reinforces why cash is king and why our investing will be put on hold for the time being.

Thursday, March 31, 2016

PepsiCo: Too Pricey?


PepsiCo Inc. (NYSE:PEP) is a giant in the consumer staples space. For fiscal year 2015 PepsiCo managed to sell $63 B worth of beverages and snacks. There's 22 brands under PepsiCo's corporate umbrella that each generate over $1 B in annual sales. That's carbonated soft drinks, orange juice, tea, coffee, chips and more.

In February of this year the Board of Directors approved an increase to the quarterly dividend of 7.1% to $0.7525. PepsiCo is firmly implanted as a Dividend Champion and has a 44 year streak of growing dividends to investors.

Every $1 invested in PepsiCo 10 years ago has compounded at a 8.6% rate and is now worth $2.28. Every $1 invested 20 years ago is worth $5.27 good for 8.7% annual growth. Stretch it back to an investment 30 years ago and it's compounded at a 13.3% rate and is now worth $42.85.

I initiated a position in the company in late 2013 and since that time I've received 3 dividend increases growing my income from those first shares by 32.6%. Through the closing price from March 28th, $100.98, I've earned a 14.0% internal rate of return on my PepsiCo investment. So I'm more than pleased with the results I've had with investing in PepsiCo.

Continue reading the article on Seeking Alpha.


Wednesday, March 30, 2016

Who's Next: In Search of the Next Dividend Champions


Dividend Champions are the creme de la creme. A company that reaches Champion status has to increase dividends for at least the last 25 years. That's a major accomplishment when you think back to all of the economic situations the companies have been through. There's the end of the savings and loan crisis of the late 80's/early 90's, the technology boom and subsequent bust, 9/11, the housing bubble and its bursting which led to the financial crisis and a whole host of other economic maladies that have come and gone as well. Through them all the Champions have been able to raise their dividends year in and year out.

There's currently 7 companies that are on the threshold of earning their Championship belt. These 7 companies have all increased dividends for 24 years and assuming everything goes right should gain the title of Champion at the end of this year. Who's next to become a Champion?

I wanted to highlight these companies in order to give them their props for being on the cusp of something truly special. These companies all make for great candidates for further research based on their history alone; however, I've also included some valuation metrics as well as my thoughts on the companies and their respective outlooks.

Continue reading the article on Seeking Alpha.


Image provided by khunaspix via FreeDigitalPhotos

Tuesday, March 29, 2016

Is Johnson & Johnson Overvalued?




Johnson & Johnson (NYSE:JNJ) is a truly excellent company that can be found in many portfolios. It currently makes up 4.5% of my taxable dividend growth portfolio and for good reason: consistency. Johnson & Johnson has managed to grow it's dividend for 53 consecutive years and if history is any guide they'll be announcing another raise in one month's time. This plants them firmly as one of premier Dividend Champions.

Every $1 invested in Johnson & Johnson a decade ago has grown at a 9.29% annualized rate to a value of $2.43. An investment two decades ago has grown 10.40% annually and is now worth $7.25. A $1 invested three decades ago is now worth $61.16 which is good for a 14.69% annualized rate.

It's been nearly 4 months since I last analyzed Johnson & Johnson and its investment potential (Previous analysis can be found here). At the time shares of Johnson & Johnson had risen around 7% in a rather short time period to around $101. We've seen another 6.5% gain since February 11th removing much of the value proposition.

Shares of Johnson & Johnson closed trading on March 24, 2016 at $108.31 providing investors a current yield of 2.77%.

Continue reading the article on Seeking Alpha.


Sunday, March 27, 2016

Net Worth Update - February 2016


While cash flow is more important when it comes to financial independence, it's still good to look at the balance sheet too, which is why I provide these net worth updates.  Since more and more of my net worth is tied to the markets, there's a larger correlation between my net worth and the markets but in the long run as I continue to save and invest the net worth trend should be higher even though short term fluctuations can vary wildly.  As a dividend growth investor I'm not overly concerned with the short-term gyrations as long as the dividend stream remains in tact, but the markets' effect is noticeable.

January was brutal for the markets with the S&P 500 declining 5.1%.  The blood-letting continued during the first half of February declining another 6.7% through the first 11 days.  However, things started to reverse to close out February and the S&P 500 ended with just 0.4% decline for the month.  The bulk of my net worth is tied to the performance of the markets so as they go so goes my net worth.

Although with a long term investment horizon the changes are just noise over the short term and are typically best to be ignored.  Of course receiving over $300 in dividends and a whopping 6 dividend increases sure helps to ease the sting of market volatility.  Dividends are great because they are always a positive portion of return.

For the month our net worth increased $809.77.

Saturday, March 26, 2016

Weekly Roundup - March 26, 2016


Another week down but this time I finally got the call to head back to work.  Having the month off was great but it really puts a hurt on my income.  The even worse part about being home that long is that it makes it so much harder to leave again for work.  As you can imagine when your typical schedule has you home for a week, tops, it gets really hard to leave when that stretches out to a month.  Since we still haven't reached financial independence, it's back to the grind stone.