Wednesday, November 25, 2015

Dividend Growth Investing at Work - More Healthy Dividends

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, November 22, 2015

Weekly Roundup - November 21, 2015

It was a great week as work went pretty smooth and we even finished up another well and I was able to go home.  We're getting our first taste of winter with this latest cold front to come through and it's great whenever I'm home and can get under a blanket and watch some movies with my wife.  I love the cold weather whenever I'm not forced to be outside in it.

Also, Nike (NKE) continues to reward owners as they announce a 14% dividend increase, a huge share buyback, as well as a 2:1 stock split.  Unfortunately I don't have much of a position in Nike and own less than 1 full share of it in my Loyal3 portfolio.  The shares still seem expensive here so I'm not looking to really add significantly to my position but at some point I'll get an opportunity to grow my stake.

I also got to participate in two posts that are absolutely wonderful.  One is a compilation of over 35 personal finance/financial independence bloggers and I felt honored to be able to participate.  Make sure you check it out here.

Who else wants to retire early and be free? by Sustainable Life Blog

The other was an excellent post discussing personality types and the financial independence lifestyle.  It's a bit long but it's well worth the read if you get a chance.

Myers-Briggs Personality Types of Personal Finance Bloggers by Freedom 35

Thursday, November 19, 2015

Is Becton, Dickinson And Company Poised To Continue Double-Digit Returns?

The healthcare industry is poised to continue to grow as the population continues to age. The unfortunate side effect of growing older is that your healthcare expenses tend to rise. A study from 2004 analyzed the medical expenses of a cross-section of users found that almost half of lifetime healthcare expenses are incurred once you reach 65+.

With "Baby Boomers" retiring daily, this will lead to a rather large increase in the number of individuals aged 65 and over each year. There are currently around 45 million Americans over the age of 65, and that number is expected to increase to over 83 million by 2050. The most rapid growth in that segment of the population is expected to occur over the next 10-15 years, with slower, but consistent, gains each year until 2050. Here's how this population is expected to grow, based on a 2014 report from the Census Bureau. (click to enlarge) Forecast Annual U.S. Population Aged 65+ Through 2050

One of my goals for this year was to increase my portfolio's exposure to the healthcare industry. Currently, my portfolio consists of just three healthcare companies that account for 8.7% of my investment capital and 6.4% of my forward 12-month dividends. Ideally, I'd like to get that to between 15-20% of both capital and dividends, so there's a lot of work to do on that front.

Continue reading the Becton, Dickinson & Company stock analysis on Seeking Alpha.

To view more of my analyses check out my Stock Analysis page or in the following Google Sheet.

Image Source

Wednesday, November 18, 2015

Why Dividends Matter: The Calm in the Storm

Dividends.  I love them.  One of the reasons that dividends are so awesome is that they provide a positive portion of return that can't be taken away.  If you receive a $50 dividend in cash that's a positive return.  Forever.  The company won't take it back out of your account if they decide they want some more cash.  It can never turn into a negative return unlike the capital gains portion of total return which is subject to the whims of the markets.  That little bit of return that you get from each payment may not seem like much in isolation but they add up over time.

What I'm talking about is called the payback period.  It's quite simple to calculate as you just divide the cumulative dividends you've received from a company into the total capital you've invested.  Simple as that.  If a company yields 3% you get a 0.75% return with each payment.  So in 33.3 years you'll receive your original investment back through the dividend payments.

However, something magical happens when you combine dividend payments with a company that also grows that dividend.  Just for an example say that 3% yielding company raised the dividend by 10%, now with each and every payment going forward you're receiving 0.825% of your investment back.  You already received 3% of your investment back the first year and the second year you'll receive 3.3%.

Tuesday, November 17, 2015

3M Is A Wonderful Company But Not A Buy Here

The economy is on stable ground but is far from growing by leaps and bounds. Even worse the volatility in the stock markets are playing with investors minds. Back in August and September the stock markets declined significantly, but shot up 10% in October alone to continue higher. Recently the markets have been seeing red with a potential increase in interest rates on the horizon. The uncertainty of the Federal Reserves' actions are whipsawing the markets which makes me want to add to some of the highest quality companies out there.

I consider 3M Company (NYSE:MMM) to be one of those high quality companies and the 57 year streak of growing dividends seems to back that up. The breadth and diversity of their products smoothes out operations. When one segment suffers the others tend to pick up the slack. That can lead to some amazing long term results for investors. Every $1 invested in 3M Company 30 years ago is worth $36.28 today. That's a 12.7% annualized return.

While I'm glad to call myself an owner of this excellent company that doesn't mean I'm willing to purchase shares at any price. The truest fact with investing is that valuation matters. I wanted to reexamine the future return potential if you purchased shares of 3M Company at current levels to gauge whether it could make for a solid investment.

Continue reading the 3M Company stock analysis on Seeking Alpha.

To see more of my stock analyses check out the Stock Analysis page.

Image source

Monday, November 16, 2015

Net Worth Update - October 2015

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.

What a difference a month makes!  The stock market surged higher with the S&P 500 gaining 8.3% in October alone.  The majority of our net worth is tied to the performance of the stock markets so good months like October sees our net worth skyrocket but bad months like August or September sees our net worth decline along with the markets.  In the short term that's just noise to try and discourage you and it's in the bad months that I focus on my dividends.  Whether the markets are up or the markets are down those dividends continue to roll in throughout the month with just over $260 in passive income for the month.  Even better is the SIX dividend increases announced during the month.  That's extra money for doing nothing and I'm way okay with that.  Couple the market surge and a return to positive cash flow from my day job and it turned into a solid month.  During October my net worth charged higher by $26,601.32.

Sunday, November 15, 2015

Weekly Roundup - November 15, 2015

This past week was great.  I was able to go home, although only for a day, and be with my wife which is always a good thing.  We ended up going to see another movie at the theaters which is more than I've seen in probably the previous three years combined.  We're suckers for scary movies even though they tend to be a letdown in the end but watched Crimson Peak anyways.  It was an okay movie, but one that I'd definitely recommend to wait until it goes to Netflix.

It also doesn't hurt that cooler weather has moved in.  Well it's good during the days with highs in the upper 60's and lower 70's, but at night it's a bit too cold for this Texas boy.


If you've been following along this week I was quite busy with the blog/writing.  The good thing about me working nights is that there's less distractions during the time I work.  No checking in o how the markets are doing, less people from town worried about the drilling.  So I get to focus a lot more and get more writing done.  I was able to post 5 different articles, get 3 other articles written that should be going up this week, as well as get started on a 4 part series as well.  There's plenty of ideas rolling around in my head and I'm excited to get a lot more writing done.  It was definitely a good week for writing.

Additions to my Portfolio Tracking

I was also busy making some changes to my FI Portfolio that I track in Google Sheets to be able to get quick visuals of the weightings for my portfolio.  I added a Weights tab that compares the capital weight vs the dividend weight for each sector that I'm invested.  This gives me a quick view of which sectors might be out of whack with how I would prefer my portfolio allocation to be as well as let's me know if a sector is also providing an abnormally high amount of dividends.  There's also a new tab called Tree Map.  Google added the tree map function to their sheets and I really do like it.  Here's what it looks like.

Thursday, November 12, 2015

Hormel Foods Corporation: Valuation Matters

One of my goals for the year was to increase the amount of capital I have invested in consumer staples companies. I like the consumer staples because of the fact that their businesses are rather boring and don't fluctuate much based on the state of the economy. You aren't going to stop eating or doing laundry or brushing your teeth just because the economy is limping along which makes for steady and consistent growth for the companies that provide those products you use every day. 

Unfortunately I haven't been successful at increasing my exposure to consumer staples thus far. The market recognizes the strength of the staples and typically rewards them with a premium valuation. 

One company that intrigued me on initial perusing of David Fish's CCC list was Hormel Foods Corporation (NYSE:HRL). What caught my eye was the dividend growth over the last decade which is quite impressive with double digit annualized growth over the last 1, 3, 5, and 10 year periods. Even more impressive is that they've increased the dividend for the last 49 years and should raise it again when the next payment is announced later this month.

Potential earnings and dividend growth

Let's get some general information out of the way before we get started. My reference entry price will be the close from November 11th, $67.36, with an assumed purchase date of November 12th. For fiscal year 2015 Hormel paid out $1.00 per share in dividends and is expected to generate $2.61 in earnings per share for the year. This gives an expected payout ratio of 38.3% for the year. The sale date will be December 31, 2018 with a price calculated at 20x 2018 earnings per share.

Continue reading the Hormel Foods Corporation stock analysis on Seeking Alpha.

To see more of my analyses be sure to check out the Stock Analysis page.

Image source

Wednesday, November 11, 2015

Dividend Growth Investing at Work - Upping the Ante With the Happy Meal

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, November 10, 2015

The Coca-Cola Company Is Priced For Near Double Digit Returns

I love the consumer staples companies and want to have a bulk of my portfolio tied to their success. Consumer staples tend to have less fluctuation in their operations compared to other sectors simply because their provide consumable items that consumers love. However, the market realizes this too and typically the shares of the excellent companies trade at premiums precisely for the stability and excellence of their operations.

The Coca-Cola Company (NYSE:KO) was one of the first companies I ever purchased for my dividend growth investing portfolio. While I've received better returns from other positions there's few companies that I can say without a doubt will raise their dividend each and every year which The Coca-Cola Company has done for 53 straight years.

Every $1 invested in Coca-Cola 10 years ago has turned into $2.66 today. 20 years ago? $3.70. 30 years ago? $51.59. That's the beauty of investing alongside one of the best companies in the world. Something that's so simple and economical to run that even blundering management can't mess up the operational excellence that is The Coca-Cola Company.

Continue reading The Coca-Cola Company stock analysis on Seeking Alpha.

To see more of my analyses make sure you check out my Stock Analysis page.

Image source

Monday, November 9, 2015

Dividend Update - October 2015

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.

Sunday, November 8, 2015

6 Months Later, Still Not The Time For McCormick

Consumer staples companies typically make for excellent dividend growth candidates. In general, they have rather inelastic demand that doesn't see operations fluctuate with the health of the economy, at least not to the degree that other sectors do. It's the stable nature of the business that makes them for attractive investments for the defensive portion of your portfolio.

Thanksgiving will be here before we know it, so I wanted to take a look at the leading spices and flavors company in the world, McCormick & Company (NYSE:MKC). I looked at the company in May and determined the shares were overvalued. It's been six months; how does the valuation stack up now for this high-quality consumer staple?

Potential Earnings and Dividend Growth 

Let's get some general information out of the way before we jump into the analysis. My reference entry price will be the closing price from November 5th, $85.86, with a purchase date of November 6th. McCormick & Company will pay no more dividends this year but still has one more that will go on record as a fiscal year 2015 payment. The current quarterly dividend rate is $0.40 and based on the consensus estimate of $3.47 for the current fiscal year the payout ratio will come to 46.1%.

Continue reading the McCormick & Company stock analysis on Seeking Alpha.

Also to see more of my analyses make sure you check out my Stock Analysis page.

Saturday, November 7, 2015

Weekly Roundup - November 7, 2015

One of my guilty pleasures is watching CNBC.  I know, gasp!  How could I?  While I typically recommend that we all ignore the financial media there's times where it's actually useful.  Mainly the interviews with some really great business and investment minds that the average Joe just doesn't have access too.  I don't think I could call up Buffett and expect to get him to answer.  I got an idea for a post from one viewing this week which I hope to get up sometime this month but another morning there was an enlightening interview with Mel Karmizan. (I had no idea who he was but he had a very interesting anecdote)

Anyways so he was discussing the future outlook for the markets with the hosts and told us of a recent encounter with some of the best fund/investment managers in the business.  He didn't give names but seeing as how he was the CEO of CBS and Sirius at one point in his career I imagine he has access to some really big time investors.

The question he posed to these excellent managers was what kind of return he could expect if he gave them a large sum of money today that they could manage.  For the most part they responded with 6-7% which seems in line with my own expectations so it's nothing unreasonable.  However, he then proposed that he would give them the money but want a guaranteed 3% return each year and they could keep any excess returns.  Not a single one would guarantee the 3% to take him up on his offer.  I was quite surprised by the lack of interest from some of the "great" investment minds on this.

Thursday, November 5, 2015

The Hershey Company: Sweet Dividends With Consistent Growth

Halloween just passed us by, and if you have children, you likely still have piles of candy in your house: Jolly Ranchers, Payday bars, Kit Kats, Hershey's bars, or my personal favorite Reese's peanut butter cups. These are just some of the great brands that are all made by The Hershey Company (NYSE:HSY). It's these great brands that have given the company a dominant 45% share of the domestic confectionery market and allows it pricing power. I don't know about you, but I've had the non-name brand versions of some of these and they are a far cry from being the same.

Due to its dominant position, brand power, and pricing power, the shares of The Hershey Company typically trade for a premium which is well deserved. The company has grown revenue every single year since 2002 with solid total returns. Over the last decade, total returns have amounted to 7.2% annually. The annual returns jump to 11.7% for the last 20 years and 13.2% over the last 30 years. Put another way, every dollar invested 30 years ago is worth $41.54 now.

I think The Hershey Company gets overlooked by dividend growth investors due to its shorter dividend growth streak. The company kept the dividend the same for 10 straight quarters while the financial crisis was playing out, which was a prudent move at the time. However, in its history, it hasn't decreased the dividend once.

The Hershey Company has delivered excellent returns for shareholders over the years but what could they potentially look like going forward?

Continue reading The Hershey Company quick analysis on Seeking Alpha.

Also, in case you missed it this morning make sure you check out the PepsiCo quick analysis as well.

Check out my Stock Analysis page to find other stock analyses.

Image source

PepsiCo Inc.: You're Paying Up For This Consumer Staple

Consumer staples companies are the bread and butter of the dividend growth philosophy. The biggest reason for that is the consistency in their operations. In general they have rather inelastic demand compared to other sectors of the economy and for the companies with strong brands they have excellent pricing power. You might put off the purchase of a new car if the economy isn't firing on all cylinders but are you really going to stop eating or bathing?

PepsiCo (NYSE:PEP) is a fine example of an excellent consumer staple company with brand recognition, pricing power and even better growth. Forbes even recognized PepsiCo as the 29th Most Valuable Brand earlier this year and I expect PepsiCo to continue moving forward.

Historically, PepsiCo has been a wonderful investment with 43 consecutive years of dividend growth. Every dollar you invested 10 years ago has turned into $2.26 today. Every dollar invested 20 years ago has turned into $6.31 today and every dollar invested 30 years ago has turned into $55.94 today. That's an impressive record and I'm glad to call myself an owner (too bad my shares weren't purchased 30 years ago though).

Continue reading the PepsiCo quick analysis on Seeking Alpha.

For more detailed analyses check out my Stock Analysis page.

Image source

Wednesday, November 4, 2015

Dividend Growth Investing at Work - Disappointing but Expected

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, November 3, 2015

After The Run Up There's Still Double Digit Return Potential For Johnson & Johnson

When you think of some of the greatest companies in the world one name that is sure to come up is Johnson & Johnson (NYSE:JNJ). What's not to like about a company that has earned investors 8.0% annualized total returns over the last decade, 10.8% annualized returns over the last 20 years, and 15.0% annualized returns over the last 30 years. Every dollar invested 30 years ago has turned into $66.21 today. There's very few companies that can match Johnson & Johnson's historic returns. Even more impressive is the 53 consecutive years of growing the dividend. Johnson & Johnson is clearly in very rare territory and has made long term investors very wealthy.

All those years of growth for Johnson & Johnson have grown the company into a $279 B behemoth in the healthcare industry. Johnson & Johnson is unlikely to continue providing double digit annual growth in the company mainly due to their large size.

Shares represented a good opportunity between late August and mid October when they traded in the low $90's. However, since then shares are now trading hands for $101.03. So what kind of returns could you expect if you buy shares today after the recent run-up.

Continue reading the quick Johnson & Johnson stock analysis on Seeking Alpha.

For more detailed analyses check out my Stock Analysis page.

Image sourced from

Monday, November 2, 2015

Recent Sell

Whenever I make a new purchase, or the rare sale, for my portfolio I feel it's only fair to get a post written giving all of the juicy details.  Normally I try to get the posts out as quickly as possible but there was way too much going on in my personal life over the past two months that I just didn't have the time.  So I want to update you all on some of the changes made to my portfolio.  I want to be as transparent as possible with my journey to reach financial independence through dividend growth investing. Being open about the moves I make allows for better discussion with all of you and helps spread ideas around as well as letting me create my own "investing journal" to chronicle why I purchased a company in the first place and that way I can revisit if something changes and make the decision on whether to continue owning the company or not.

Sunday, November 1, 2015


Quick update today that doesn't have to do with investing.  Well not investing like I normally talk about, but rather investing in myself.  For the time being I'm in a location that's close to my gym so I'm taking full advantage of it by working out when I can.  Your health is obviously very important and over the years I've let myself slip way out of shape.  So it's time to fix that.  I've been going to the gym every other day since being over here and I plan to stick to that.  But what better way to make sure I go than to add little weekly updates to let you all know how I did.

While I have access to the gym I'll be giving updates during my Weekly Roundup posts detailing what I did each week.  The overall plan for my workouts is big, compound, Olympic style lifts for the strength training and then I'll try to do "finishers" that task my endurance/cardio to try and burn more calories while still getting a strength component.  Moves like the deadlift, hang clean, shoulder presses will be the full body exercises that I do for strength/power.  The "finishers" will typically include kettle bell swings with something like box jumps, bodyweight lunges/squats, pushups.  Mainly things that will keep the heart rate up to try and burn calories.  I want to maximize my workouts by doing exercises that task my whole body at the same time so I can get in and get out.

Saturday, October 31, 2015

Weekly Roundup - October 31, 2015

Another week down and after today another month will be done with.  Of course that means today is Halloween.  Halloween is one of my favorite holidays.  Down here in Texas the weather is finally starting to get better and there's no shortage of haunted houses.  It's always fun to go to the haunted houses for a little bit of scary fun.  While those are sometimes scary, there's nothing scary about receiving six dividend raises throughout the month.

We finally started doing things again and I was so thankful to have to work.  A week and a half of being away from the house and actually going backwards instead of making progress is way too long.  We're moving slow right now but at least we're moving in the right direction which is more than I can say for last week.  I'm slowly building up my workout regimen and it sure is nice being just a few miles from the gym.  Even better is that since I'm working nights that means I get to go to the gym during the day when there's a whole lot fewer people.  So there's no waiting for people to quit using what I need.  I get in, work out, and leave usually within 30-40 minutes which is great.  Just the little bit of exercising I've done has already made a tremendous difference in the way my body feels.  Focus on your health people!

Friday, October 30, 2015

Dividend Growth Investing at Work - Two More Increases to Close Out October

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?

Thursday, October 29, 2015

Portfolio Management: Considering Closing a Position

In a post last week I discussed our forecast tax situation for 2015.  It's a weird place to be in as I don't expect us to normally be in the 15% tax bracket but there's a big benefit to that: qualified dividends and long term capital gains are taxed at 0%.  That's a great position to be in and since then I've been examining my portfolio for potential candidates to take advantage of the long term capital gains being taxed at a lower rate.  One position I'm considering selling is Baxter International (BAX).

One of the reasons that Baxter is on my consideration list, heck the biggest reason, is that after spinning of the biotech arm in Baxalta (BXLT) they took the opportunity to decrease the combined dividend payout of the two companies.  Prior to the spin-off Baxter was paying $0.52 per share each quarter and now the combined dividends from both companies is equal to $0.185 per share per quarter.  That's a 64% decrease.  I don't have a hard and fast rule about selling no matter what if there's a dividend cut and figured that Baxter has been a truly excellent company for decades if you look at all of the spin-offs they've completed.  I've already disposed of my Baxalta shares so today I wanted to take a closer look at Baxter's future prospects.