Monday, December 31, 2012

Investing Milestone

In December I passed $300 in monthly dividends received.  Granted I would have fallen about $10 short had Medtronic and Caterpillar not accelerated their 1Q 2013 payouts to 4Q 2012, but I'll take it.  It's great to see the progress that I've made in just the short time I've been striving for FI and building up my DG portfolio.  The next goal will be to reach $400 in dividends in a month.  That should come next year, most likely in the September or December payout, although since most companies pay on that schedule it might creep up into June.

I also updated my portfolio page to Google spreadsheets instead of manually updated tables.  This will help make that page run a little smoother and give more up to date information for everyone following along.  Check out the new page here.

Sunday, December 30, 2012

Long-term Dividend Goals

If you happened to notice on my Goals page I've updated it some to reflect my long-term dividend goals.  In this post I'll detail where and how I calculated the numbers for my dividends.  The Dividend Goal is the amount of forward 12-month dividends that I want to have by the end of each corresponding year.  The following dividend goals are only for my FI portfolio and does not include dividends received in my Roth IRA or from converting my 401k into DG stocks when I do get reach FI.  My 401k especially will add a big chunk of capital free to then invest.

Saturday, December 29, 2012

Recent Buy

Medtronic has pulled back since I first initiated my position so I doubled up on it yesterday for a price of $40.75 per share.  This brings my total position up to 90 shares.  I'm hopefully done buying for a bit but I do have some cash available should the right opportunity pop up.  Phillip Morris is high on my list and a pullback into the mid $82's would bring a few more shares my way.  I'd rather not make any purchases this close to the fiscal cliff deadline, for some reason I believe that Congress will come to an agreement and keep us from dropping off the cliff.  Whether a deal is reached or not I expect there to be big moves in the market next week in reaction to an agreement or lack thereof.  Only time will tell.

Caterpillar accelerates dividend

As I was compiling some dividend history for my positions to try and get and weighted average growth rate over the past few years, I noticed that Caterpillar (CAT) was scheduled for 5 payments this year.  Since other companies have gone the route of accelerating their dividend to pay this year I had to double check this on Caterpillar's investor relations website. 

Friday, December 28, 2012

Recent Buy

Since Target has dropped further from my purchase last week due to the overall weak holiday sales I decided that I should add to my position a little bit more and picked up 35 more shares to round out my position at 100 shares.  You can check out my previous 2 purchases here and here.  The latest shares were purchased for $58.71 per share which gives a 2.45% YOC.  I wasn't planning on making any more purchases this year and holding out until January, but the shares fell enough that I felt I should add to my position.  I've been torn on whether I should get my free capital invested quickly or not because the "fiscal cliff" will be a huge catalyst either up or down depending on the outcome.

Tuesday, December 25, 2012

Merry Christmas!!

Just wanted to wish Merry Christmas to everyone!  I hope you get to spend the day relaxing with loved ones.  Unfortunately due to my job I can't always be there around the holidays but I just might be able to run home later today or tomorrow.  Spending time with family is one of the most important things and exactly why I'm pursuing early FI so hard.  My gift to everyone is a stock analysis report on Lockheed Martin and Clorox, a dividend challenger and champion respectively.

Lockheed Martin Stock Analysis

For Christmas, my gift to everyone is some stock analysis reports.  In this one we'll look at defense behemoth Lockheed Martin (LMT).  There's a lot of questions about the fiscal cliff and how it will affect defense contractors since defense spending is targeted in the automatic spending cuts should no agreement be reached.  Lockheed Martin closed trading on Monday, December 24th at $92.77.

Company Background:

Lockheed Martin Corporation, a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of advanced technology systems and products in the areas of defense, space, intelligence, homeland security, information technology, and cyber security in the United States and internationally. It also provides management, engineering, technical, scientific, logistic, and information services. The company operates in four segments: Aeronautics, Electronic Systems, Information Systems & Global Solutions (IS&GS), and Space Systems. The Aeronautics segment offers military aircraft, including combat and air mobility aircraft, unmanned air vehicles, and related technologies. Its products and programs comprise F-35 Lightning II joint strike fighter; F-16 Fighting Falcon multi-role fighter; F-22 Raptor air dominance and multi-mission stealth fighter; C-130J Hercules tactical airlifter; and C-5M Super Galaxy strategic airlifter. The Electronic Systems segment provides surface ship and submarine combat systems; sea-based missile defense systems; ship systems integration; littoral combat ships; nuclear instrumentation and control systems for naval submarines, aircraft carriers, and surface warships; air and defense missile systems; air-to-ground precision strike weapons systems; tactical missiles; munitions; fire control and navigation systems for rotary and fixed-wing aircraft; manned and unmanned ground vehicles; mission operations support, readiness, engineering support, and integration services; simulation and training services; and energy programs. The IS&GS segment offers management services, information technology solutions, and advanced technology solutions. The Space Systems segment provides satellites, strategic and defensive missile systems, and space transportation systems; and space shuttle replacement services.

DCF Valuation:

Analysts expect Lockheed Martin to grow earnings 4.94% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, right around the long term inflation rate. Running these numbers through a two stage DCF analysis with a 10% discount rate yields a fair value price of $126.28. This means that at $92.77 the shares are undervalued by 26.5%.

Clorox Stock Analysis

For Christmas, my gift to everyone is some stock analysis reports.  In this one we'll look at consumer staple giant The Clorox Company (CLX).  I would like to add some more defensive and consumer staples companies to my portfolio so let's see where Clorox stands.The Clorox Company closed trading on Monday, December 24th at $73.63.

Company Background:

The Clorox Company manufactures and markets consumer and professional products worldwide. The company’s Cleaning segment offers laundry additives, including bleach products under the Clorox brand, and Clorox 2 stain fighter and color booster; home-care products primarily under the Clorox, Formula 409, Liquid-Plumr, Pine-Sol, S.O.S, and Tilex brands; naturally derived home care products under the Green Works brand; and cleaning and disinfecting products under the Clorox, Dispatch, Aplicare, HealthLink, and Clorox Healthcare brands. Its Household segment offers plastic bags, wraps, and containers under the Glad brand; cat litter products under the Fresh Step, Scoop Away, and Ever Clean brands; and charcoal products under the Kingsford and Match Light brands. The company’s Lifestyle segment provides dressings and sauces primarily under the Hidden Valley, K C Masterpiece, and Soy Vay brands; water-filtration systems and filters under the Brita brand; and natural personal care products under the Burt’s Bees and güd brands. The Clorox Company also markets its products primarily under the Javex, Glad, PinoLuz, Ayudin, Limpido, Clorinda, Poett, Mistolin, Lestoil, Bon Bril, Nevex, Agua Jane, and Chux brands. The company sells its products primarily through mass merchandisers, warehouse clubs, grocery stores, other retail outlets, distributors, and medical supply providers, as well as a direct sales force, combination of direct sales teams, and network of brokers.

DCF Valuation:

Analysts expect Clorox to grow earnings 8.04% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, right around the long term inflation rate. Running these numbers through a two stage DCF analysis with a 10% discount rate yields a fair value price of $78.83. This means that at $73.63 the shares are undervalued by 6.6%.

Saturday, December 22, 2012

Blog Milestone

I passed 20k page views for my blog last night.  I just want to thank everyone that's stopped by to check out the blog and follow along with my journey.  If anyone has any questions or would like a stock analysis of any company in particular feel free to let me know in the comments.  Thanks again for stopping by!

Thursday, December 20, 2012

Recent Buy

After adding to my Target position, I also initiated a new position in Phillip Morris (PM) this morning by picking up 25 shares at $84.43 each.  If I was able to be near my computer at the open this morning I would have been able to get the shares a little cheaper but I had to run in to the office to finish up some paperwork so I had to set the limit order and hope it hit without dropping too much further through my price.  I've had my eye on Phillip Morris for most of the year but didn't have the capital available when the price got down to this level.  Luckily, this time around I had some cash ready to deploy and got the chance to start a position with them.

Recent Buy

This morning I picked up 25 more shares of Target (TGT) bringing my total position up to 65 shares.  I would still like to add more to the position over time but need the price to come down further before I would continue to average down.  I feel that Target is set up for a long streak of growth of the company and in turn the dividend.

Saturday, December 15, 2012

Weekly Roundup - December 15, 2012

It's been a while since I've gotten a weekly roundup out but I finally got some time to be able to roundup the links.

What I'll be Buying if the Fiscal Cliff Causes Recession - Dividend Growth Stock Investing posted his watchlist.  That's something that I unfortunately don't keep track of as much as I should.  He's got a great list of stocks should the market and economy take a nosedive.

If You Must Value the Market - Dividend Mantra posted about 2 metrics for valuing the market as a whole. While he doesn't use really use these, they can come in handy.

Time:  It's Everything - Speaking of Dividend Mantra, he had another great post earlier this week.  It's all about time and the freedom to do as he pleases.  It's a great post and sums up most everyone that I know that's pursuing early FI.

Thursday, December 13, 2012

How important is valuation?

There's several companies that I would like to own much larger stakes of.  One of these companies is Coca-Cola (KO).  They are a dividend champion with 50 consecutive years of dividend growth.  That's quite a feat.  However, given Coca-Cola's size and stability should you invest your hard-earned money in them no matter the valuation of the shares are?  Let's run some numbers for some hypothetical earnings per share (EPS) and dividend growth for the next 10 years and compare the possible returns.  Coca-Cola closed trading on Wednesday, December 12 at $37.64.

Wednesday, December 12, 2012

Medtronic Stock Analysis

Like my Coca-Cola stock analysis I was surprised when I looked back through my stock analysis archives that I had never posted about Medtronic (MDT).  I had actually gone through the full analysis back in June of this year but couldn't find my post so I"m assuming I ended up getting busy with last minute wedding stuff. Medtronic is another one of the companies that I would love to own a piece of but the price just hasn't been there when my capital was available.  Medtronic closed trading on Monday, December 10th at $42.60.

Company Background:

Medtronic, Inc. manufactures and sells device-based medical therapies worldwide. It provides products for the diagnosis, treatment, and management of heart rhythm disorders and heart failure, including implantable cardiac pacemakers, implantable cardioverter defibrillators, cardiac resynchronization therapy devices, arctic front cardiac cryoablation catheters, arctic front cardiac cryoablation catheters, and patient management tools. The company also offers cardio vascular products, such as percutaneous coronary intervention device, which is used for the treatment of patients with coronary artery disease; renal denervation for the treatment of chronic uncontrolled hypertension; endovascular stent grafts to treat abdomen and thoracic regions of the aorta; peripheral vascular intervention that encompasses various procedures to treat patients with peripheral vascular disease; surgical valve replacement and repair products for damaged or diseased heart valves; transcatheter heart valves; a line of blood-handling products used in arrested heart surgeries; positioning and stabilization technologies that assist physicians performing beating heart surgery; and surgical ablation system, which allows cardiac surgeons to create ablation lines during cardiac surgery. In addition, it provides medical devices and implants that are used in the treatment of the spine and musculoskeletal system comprising thoracolumbar, cervical, and biologics products; neurostimulators for chronic pain, implantable drug delivery systems, and deep brain stimulation systems, as well as urology, fecal, and gastroenterology devices; and integrated diabetes management solutions. Further, the company offers products and therapies to treat diseases and conditions of the ear, nose, and throat, as well as certain neurological disorders; and image-guided surgery and intra-operative imaging systems.

DCF Valuation:

Analysts expect Medtronic to grow earnings 5.21% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, right around the long term inflation rate. Running these numbers through a two stage DCF analysis with a 10% discount rate yields a fair value price of $59.83. This means that at $42.60 the shares are undervalued by 28.8%.

Tuesday, December 11, 2012

Recent Buy

This morning I set a limit order for 45 shares of Medtronic (MDT) and earlier this afternoon the order was executed.  I purchased 45 shares for $42.46 per share.  With the current annual dividend of $1.04 per share my YOC after commissions is 2.44%.  I would have liked to get into the shares a little lower but I feel that today's prices are around the fair value range and still offer a solid return going forward.  As you'll see in my stock analysis report on Medtronic due out tomorrow I picked up the shares for about 6% higher than my fair value calculation so I'll be looking for an opportunity to average down my cost basis.  I finally got a pure-play on the health care industry since Walgreen's was my only exposure to health care.

Sunday, December 9, 2012

New Page Added to Blog

Not much of an update here today, but I did add a Progress page to the blog.  The Progress page will keep track of my yearly net worth improvements as well as annual and quarterly passive income as well as expenses to show the progress that I've made toward reaching early FI.  It's more of a consolidation page if you're looking for a quick overview, obviously you can go through the whole blog to get the details.  I hope that consolidating this information can help motivate people to pursuing early FI because it will truly be a wonderful day when I no longer have to work and can choose to do so however and whenever I want without needing the income.

Friday, December 7, 2012

Wednesday, December 5, 2012

Net Worth Update - November 2012

November ended up being a solid month for my net worth considering it was down pretty low due to the markets during part of the month.  For the month I ended up with just under a $9,000 increase.  About $1,300 was from 401k contributions and the company match the rest came from after-tax savings, interest on savings, dividends and market fluctuation.

Monday, December 3, 2012

Income Update - November 2012

November's income was higher than my average so far for the year which is great because I'm still able tor reduce my expenses so every extra dollar of income gets to be converted into savings mainly dividend growth investing capital.  Not only did I have a higher income for the month but my minimum and total expenses were both lower than I've averaged for the year so far.  My food budget is still really high but that's mainly due to the fact that I am on the road a lot so when I'm home I spend more on restaurants to take my wife out and my grocery bill is elevated for the same reason.  Once we reach early FI I know our food budget will be drastically reduced.  In November my minimum expenses for the month totaled only $1,392.81 which is my lowest for a total month.  Unfortunately my total expenses didn't drop quite as much but they did drop so there was improvement on that front.  Total expenses for November came in at $1,530.60.  My average minimum expenses for the year dropped from $1,519.96 to $1,508.40, of course that includes my debt service payment from earlier this year.  My average since that's been gone is $1,418.22.  My average total expenses dropped from $1,691.36 to $1,676.74 including November.  Dividend and interest income for the month was a little light, coming in at $63.09, this covered 4.53% of my minimum expenses for the month.  My FI number, net worth less traditional retirement accounts based on the monthly income I could generate from the 30 year Treasury yield, increased again to $196.58 with my extra savings.  This covered 14.11% of my minimum expenses for the month.


Sunday, December 2, 2012

Scottrade to offer a fee free semi-DRIP plan?

Read this with a grain of salt because I haven't researched it but on the comment thread from an article on Seeking Alpha, one user commented that Scottrade was making a change to a their dividend reinvestment policy in 2013.  Starting in February they will begin allowing all dividends to accumulate and you can then reinvest in one stock for no commission.  It will still be full shares only but a change like this could be useful.

Saturday, December 1, 2012

Dividend Update - November 2012

November was a decent month for dividends with 5 companies paying out in my FI portfolio but none in my Roth IRA.  This was much better than October's 3 total payouts.  And December is going to be an awesome month with 12 payouts in my FI portfolio and 3 for my Roth IRA.  I had 4 buys in November adding to 3 positions and starting a new position in Target as well as selling out of my small position in Pfizer in my FI portfolio.  I also added to my NSC position in my Roth IRA.  I was able to increase my forward 12-month dividends for my FI portfolio to $1,496.68 from $1,309 with my purchases and dividend reinvestment.  My Roth IRA forward 12-month dividends increased from $180.08 to $202.08.

Friday, November 30, 2012

What do you think of Costco's Special Dividend?

Earlier this week Costco (COST) announced a $7 special dividend payable to shareholders in December.  The idea behind it is to give shareholders an extra bonus prior to the potential dividend tax hike.  Several other companies have announced special dividends but Costco's will cost just over $3 billion.  Costco is a solidly run company that continues to grow.  I've never been to a Costco because where I live Sam's Club dominates the bulk shopping arena.

Thursday, November 29, 2012

Recent Buy

This morning I purchased 40 shares of Target (TGT) for a price of $61.81 per share.  With the current dividend payment of $1.44 I was able to pick up the shares for a 2.32% YOC.  I've been following Target for a while and the price just never quite got to where I felt comfortable jumping in until now.  I'm hoping for a further pullback to allow me to average down a bit in the position.  If you remember from my recent stock analysis on Target I calculated a fair entry price of $60.65.  I paid 2.25% over that price but I feel that this is a good starting point for my position in Target and I'll give it some time to see if there's a pullback.  If it stays flat then I'll probably be picking up some more shares unless there's other opportunities that are more appealing.

Wednesday, November 28, 2012

Recent Transaction

This morning I set a limit order to buy to close my put option on Archer-Daniels Midland (ADM).  I was able to purchase the put option back for $0.33 or $33.  I originally sold the put option in September at the $26 strike price and received after commissions $81.01 in option premium.  After buying to close the option I received a total of $40.03 on the trade for a return of 1.54%.  This is equal to a 7.50% annualized return.

Target Stock Analysis

I've been wanting to pick up some shares of Target (TGT) for a while but the price has always been just out of reach for me.  It's getting close to where I'd feel comfortable initiating a position so I figured I'd post my stock analysis on the company.  During trading on Tuesday, November 27th shares were trading for $62.95.

Company Background:

Target Corporation operates general merchandise stores in the United States. The company offers household essentials, including pharmacy, beauty, personal care, baby care, cleaning, and paper products; hardlines comprising music, movies, books, computer software, sporting goods, and toys, as well as electronics that comprise video game hardware and software; apparel and accessories consisting of apparel for women, men, boys, girls, toddlers, infants, and newborns; and intimate apparel, jewelry, accessories, and shoes. It also provides food and pet supplies, including dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and pet supplies; and home furnishings and décor, such as furniture, lighting, kitchenware, small appliances, home décor, bed and bath, home improvement, and automotive products, as well as seasonal merchandise, which include patio furniture and holiday décor. The company sells its merchandise products under private-label and exclusive licensed brands. In addition, it provides in-store amenities. As of November 15, 2012, the company operated 1,782 stores in the United States. Further, it offers general merchandise through its Website, Target.com. The company distributes its merchandise through a network of distribution centers, as well as third parties and direct shipping from vendors. Additionally, it offers credit to guests through its branded proprietary credit cards, the Target Visa Credit Card and the Target Credit Card, as well as through its branded proprietary Target Debit Card.

DCF Valuation:

Analysts expect Target to grow earnings 11.77% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, slightly above the long term inflation rate. Running these numbers through a DCF analysis with a 10% discount rate yields a fair value price of $93.92. This means that at $67.95 the shares are undervalued by 33.0%.

Tuesday, November 27, 2012

2013 Roth IRA Contribution Limit Increased

The contribution limit for IRA's in 2013 increased from $5,000 to $5,500 if you're under the age of 50 and from $6,000 to $6,500 if you're over the age of 50.  Of course as usual there are income limits imposed in order to make a Roth IRA contribution.  For Married Filing Jointly, the phase-out starts at a modified adjusted gross income of $178,001 and goes to $188,000.  For a MAGI that is less than the $178,001 you can contribute the full $5,500 and for MAGI's over $188,000 you can't contribute anything.  If your MAGI falls in the range, your maximum allowable contribution is decreased on a linear basis over the full range.  So if your MAGI is $183,000 then you can only contribute half of the max at $2,750.  For Single and Head of Household, the MAGI limits are $112,000 and $127,000.

Sunday, November 25, 2012

Coca-Cola Stock Analysis

I can't believe I hadn't posted this before because Coca-Cola (KO) is one of my core holdings that I wish I could add more to and I really enjoy their product.  Coca-Cola closed trading on Friday, November 23rd at $37.93.

Company Background:

The Coca-Cola Company, a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. The company primarily offers sparkling beverages and still beverages. Its sparkling beverages include nonalcoholic ready-to-drink beverages with carbonation, such as carbonated energy drinks, and carbonated waters and flavored waters. The company’s still beverages comprise nonalcoholic beverages without carbonation, such as noncarbonated waters, flavored waters and enhanced waters, noncarbonated energy drinks, juices and juice drinks, ready-to-drink teas and coffees, and sports drinks. It also provides flavoring ingredients, sweeteners, powders for purified water products, beverage ingredients, and fountain syrups. The Coca-Cola Company sells its products primarily under the Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia, and Del Valle brand names. The company offers its beverage products through company-owned or controlled bottling and distribution operators, as well as through independently owned bottling partners, distributors, wholesalers, and retailers.

DCF Valuation:

Analysts expect Coca-Cola to grow earnings 8.20% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, slightly above the long term inflation rate. Running these numbers through a DCF analysis with a 10% discount rate yields a fair value price of $37.40. This means that at $37.93 the shares are overvalued by 1.4%.

Thursday, November 22, 2012

Happy Thanksgiving

Just wanted to wish everyone a Happy Thanksgiving.  I hope that you're getting to spend the day with loved ones.  I'm thankful to have my wife and my great family that supports me as well as a job that will allow me to reach early FI as long as I stay focused, even though sometimes the job is very trying at times.  Unfortunately I won't be spending the day with them, but I will be there in spirit.

Wednesday, November 21, 2012

Saving on trash

Earlier this week my wife changed our trash pickup service companies.  We'll end up saving significantly over the the 3 month billing cycle.  Our last bill was for a little over $105 for the next 3 months of trash pickup twice a week.  With the new company we'll be paying around $63 for 3 months of service but pickup is only once per week.  We don't normally accumulate enough trash to justify twice a week pickup so it was nice that she found a way for us to save on our trash.  It isn't a huge savings but we'll end up keeping around $170 more over the course of the year.

It's good for everyone to take a look at your bills, especially recurring ones to determine whether you're getting full use out of them.  In this case it would be just as easy to just stockpile our trash since we don't have full pickups anyways and save by only getting one pickup per week.

Monday, November 19, 2012

Walmart Moves Dividend Forward

Walmart (WMT) moved their next dividend payment forward from early January 2013 to December 27, 2012.  They did this to be help shareholders receive the payments before potential tax increases due to the fiscal cliff.  There's too many tax issues that they just don't see getting resolved so they moved the payment forward.  Other companies have announced plans to make their dividend payment earlier, but Walmart is by far the biggest company so far.

Friday, November 16, 2012

Recent Sell

This afternoon I decided to go on and sell out of my position in Pfizer (PFE).  I sold all shares at a price of $23.79 which netted a gain of $114.24 on the position.  The shares had a YOC of 4.71% which was nice and they were due for a dividend increase with their first payment of next year.  I'm still set to receive the next dividend payment in early December which will give me another $5.26 once the paid out.  My cost basis for the position was $426.78 for original cost and the adjusted cost basis counting reinvested dividends was $446.86.  The proceeds from the sale amounted to $561.11 after commissions.  My total return based off the initial purchase was 31.48% since September 2011.  My total profit/loss percentage for the position, based off the adjusted cost basis accounting for reinvested dividends, was 25.57%.

What are you buying?

Since the election finally finished the stock market has rarely seen a positive day or even flat day.  The DJIA has shed 700 points, 5.31%, since the Wednesday after the election.

Here's what's on my shopping list at current prices as of Thursday's close.

Friday, November 9, 2012

Recent Buy

With the market continuing to drop I added to another position yesterday by picking up 20 mores shares of MCD for $85.52 each.  McDonald's reported it's first monthly same store sales decline in 9 years and promptly sold off about 2% on the day.  McDonald's still has plenty of growth ahead and as far as I'm concerned this is just a bump in the road.  Unfortunately I'm now out of capital for a little bit until I can get some money transferred over to my FI portfolio.

Blog Milestone

Tuesday of this week marked 1 year of Passive Income Pursuit being up and running. It's been a great year and I expect more and better things in the future. Thanks for following along.

Thursday, November 8, 2012

Recent Buy

Yesterday morning I put in a limit order to pick up 34 more shares of Kinder Morgan, Inc (KMI) at a price of $33.35.  It would have triggered early in trading but I didn't put in the order until later in the morning after the price had already recovered.  As it turns out right before the close of the markets the order was filled.  I was able to average down in my KMI position for a second time with this purchase and now own a total of 125 shares and will be done adding to the position barring a pullback to around $31 or $32.

Wednesday, November 7, 2012

AT&T Increases Dividend

AT&T announced an increase in their quarterly dividend from $0.44 to $0.45 per share.  This is a 2.27% increase.  The new quarterly rate will be payable on February 1, 2013 to shareholders of record as of January 10, 2013.  I wish they could increase the dividend more but they already have a high yield and payout much of the earnings as dividends.

Investing Milestone

My FI portfolio has now passed the $50k mark and my total brokerage accounts including my Roth IRA passed the $60k mark.  It's nice to know that with consistent contribution I can build up my portfolio and increase my net worth and my dividends receivable.

Portfolio Update - November 2012

Today I've updated my portfolio for everyone to see the changes

Check out My Portfolio here.

Tuesday, November 6, 2012

Recent Buy

This morning I set a limit order in my Roth IRA to pick up some more shares of Norfolk Southern Company.  I was able to purchase 11 more shares at a price of $60.96.  This was exactly $1.00 lower per share than my purchase last week.  My fair value price for NSC sits at $67.03, so I was able to pick up the shares at a 9.50% discount.  This pretty much exhausted my capital for my Roth IRA until I can add to it next year.  Our MAGI should be less than the limits for next year so we should be able to continue contributing to it.

Emerson Electric Increases Dividend

Emerson Electric released their earnings for the 3rd quarter 2012 that beat analyst estimates by $0.06.  They also announced a increase in their quarterly dividend from $0.40 to $0.41.  Unfortunately the $0.01 increase in the dividend is only a 2.50% increase.  The new dividend will be payable on December 10th to shareholders of record as of November 16th.

Becton Dickinson Stock Analysis

Since I'm really lacking on health care industry exposure it was time to start looking at some of the different companies, so today we'll look at Becton Dickinson and Company.  Becton Dickinson closed trading on Monday, November 5th at $76.59.

Company Background:

Becton, Dickinson and Company, a medical technology company, develops, manufactures, and sells medical devices, instrument systems, and reagents worldwide. The company’s BD Medical segment produces medical devices that are used in various healthcare settings. This segment’s products include needles, syringes, and intravenous catheters for medication delivery; prefilled IV flush syringes; syringes, pen needles, and other drugs to treat diabetes; prefillable drug delivery systems; anesthesia needles and trays; sharps disposal containers; and closed-system transfer devices. Its BD Diagnostics segment provides products for the safe collection and transport of diagnostics specimens, as well as instrument systems and reagents to detect various infectious diseases, healthcare-associated infections, and cancers. This segment’s products consist of integrated systems for specimen collection; safety-engineered blood collection products and systems; automated blood culturing systems; molecular testing systems; microorganism identification and drug susceptibility systems; liquid-based cytology systems for cervical cancer screening; rapid diagnostic assays; and plated media. The company’s BD Biosciences segment produces research and clinical tools that facilitate the study of cells and their components. This segment’s products comprise fluorescence-activated cell sorters and analyzers; monoclonal antibodies and kits for performing cell analysis; reagent systems for life science research; cell imaging systems; laboratory products for tissue culture and fluid handling; diagnostic assays; and cell culture media supplements for biopharmaceutical manufacturing. It markets its products through independent distribution channels and independent sales representatives to healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry, and the general public.

DCF Valuation:

Analysts expect BDX to grow earnings 6.12% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, slightly above the long term inflation rate. Running these numbers through a DCF analysis with a 10% discount rate yields a fair value price of $92.60. This means that at $76.59 the shares are undervalued by 17.3%.

Monday, November 5, 2012

Net Worth Update - October 2012

October was a pretty good month for my net worth but not as good as I had originally hoped for.  Most of the disappointment can be attributed to the stock market declines and the rest was from a little overspending.    For the month, I ended up with around a $8,150 increase.  Just over $3k came from contributions to my 401k, employer matching and my ESPP shares and the rest came from after-tax savings and changes due to the stock markets.

Sunday, November 4, 2012

Income Update - October 2012

October's spending was right in line with August and September which is good because it hasn't increased but it's still higher that where I would like for it to be.  I was hoping to be able to get my spending down to the $1,300 mark but I just don't see that happening.  I know if I can cut back on my restaurant spending that I'll be able to make some pretty big strides in the reduction because for the most part my restaurant and grocery spending is the largest portion of my spending that I realistically have room to cut from.  My minimum expenses for October ended the month at $1,440.69 which brought my average for 2012 down to $1,519.96.  My average total monthly expenses for October ended up right in line with September at $1,578.41.  This brought my average monthly total expenditures for 2012 down to $1,691.36.  My PRI for October was a pretty disappointing $25.47 which covered only 1.77% of my minimum expenses.  This wasn't a total surprise because I knew that October would be a very light month for dividends.  However, my FI made yet another move higher totaling $185.98 for the month based on the yield on the 30 year US treasury bond of 2.88%.  This covers 12.91% of my minimum expenses for the month.  October was a great month from income bringing in my second highest monthly total for the year.


Saturday, November 3, 2012

Walgreen's Stock Analysis

I've been meaning to post some more stock analysis' so today we'll look at one of my recent buy's, Walgreen's.  On Friday, November 2nd, Walgreen's closed at $34.88.

Company Background:

Walgreen Co., together with its subsidiaries, operates a network of drugstores in the United States. It provides consumer goods and services, pharmacy, and health and wellness services through drugstores, as well as through mail, and by telephone and online. The company sells prescription and non-prescription drugs; and general merchandise, including household products, convenience and fresh foods, personal care, beauty care, photofinishing, and candy products, as well as home medical equipment, contact lenses, vitamins and supplements, and other health and wellness solutions. It also provides specialty pharmacy services for managing complex and chronic health conditions; customers infusion therapy services consisting of administration of intravenous medications for cancer treatments, chronic pain, heart failure, and other infections and disorders; and clinical services, such as laboratory monitoring, medication profile review, nutritional assessments, and patient and caregiver education. In addition, the company operates Take Care Clinics to treat patients, give prescriptions, and administer immunizations and other vaccines. As of October 30, 2012, it operated 7,944 drugstores in 50 states, the District of Columbia, and Puerto Rico, as well as approximately 700 worksite health and wellness centers, and in-store convenient care clinics in the United States.

DCF Valuation:

Analysts expect WAG to grow earnings 12.47% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, slightly above the long term inflation rate. Running these numbers through a DCF analysis with a 11% discount rate yields a fair value price of $64.03. This means that at $34.88 the shares are undervalued by 45.5%.

Friday, November 2, 2012

Recent Buy

Let's start November off right with a purchase after I made 7 in October.  I decided to go on and take the chance to average down a bit in my Walgreens (WAG) position.  I initiated the position back in August by purchasing 35 shares and today I picked up another 32 shares for $35.06 each in my FI portfolio.  I now own a total of 67.275 shares of WAG since I'm currently reinvesting dividends in most of my positions.  Now that my expected forward dividends are starting to be a significant amount, I will probably be turning off the DRIP soon and selectively reinvesting the dividends into the best opportunities that I see at the time.  The Walgreen's purchase gives me semi-related exposure to the healthcare industry.  I need to add more to that portion of my portfolio since PFE is the only stock that is a pure-play health care company.

Pepsi Stock Analysis

It's been a while since I've posted a stock analysis so today we'll look at the other beverage giant PepsiCo (PEP).  Pepsi was trading for $69.44 at mid-day yesterday.

Company Background:

PepsiCo, Inc. engages in the manufacture and sale of snacks, carbonated and non-carbonated beverages, dairy products, and other foods worldwide. It operates in four divisions: PepsiCo Americas Foods (PAF); PepsiCo Americas Beverages (PAB); PepsiCo Europe; and PepsiCo Asia, Middle East, and Africa (AMEA). The PAF division offers Lay’s and Ruffles potato chips, Doritos and Tostitos tortilla chips, Cheetos cheese flavored snacks, branded dips, Fritos corn chips, SunChips multigrain snacks, and Santitas tortilla chips in North America; Quaker oatmeal, Aunt Jemima mixes and syrups, Quaker Chewy granola bars, and Quaker grits, Cap’n Crunch cereal, Life cereal, Rice-A-Roni side dishes, Quaker rice cakes, Pasta Roni, and Near East side dishes in North America; and snack foods under Marias Gamesa, Doritos, Cheetos, Ruffles, Saladitas, Emperador, Tostitos, and Sabritas, as well as Quaker-brand cereals and snacks in Latin America. The PAB division manufactures beverage concentrates, fountain syrups, and finished goods under Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, 7UP, Diet Mountain Dew, Tropicana Pure Premium, Sierra Mist, and Mirinda brands; ready-to-drink tea, coffee, and water products; and concentrate and finished goods, as well as brands licensed from Dr Pepper Snapple Group, Inc. The PepsiCo Europe division offers snacks under Lay’s, Walkers, Doritos, Chudo, Cheetos, and Ruffles brands, as well as Quaker-brand cereals and snacks; and beverage concentrates, fountain syrups, and finished goods under Pepsi, Pepsi Max, 7UP, Diet Pepsi, and Tropicana brands, as well as ready-to-drink tea products in Europe. The AMEA division provides snack food under the Lay’s, Kurkure, Chipsy, Doritos, Smith’s, and Cheetos brands; Quaker-brand cereals and snacks; and beverage concentrates, fountain syrups, and finished goods under the Pepsi, Mirinda, 7UP, Mountain Dew, Aquafina, and Tropicana brands.

DCF Valuation:

Analysts expect PEP to grow earnings 4.25% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, slightly above the long term inflation rate. Running these numbers through a DCF analysis with a 10% discount rate yields a fair value price of $66.23. This means that at $69.44 the shares are overvalued by 4.8%.

Thursday, November 1, 2012

Dividend Update - October 2012

October was a slow month as expected for dividend payouts with only 2 companies paying out in my FI portfolio and only 1 company paying in my Roth IRA.  In my FI portfolio, my forward 12-month dividends to start the month stood at just over $930 and with the 7 purchases that I made in October I've increased my forward 12-month dividends to $1,309 for my FI portfolio and $180 for my Roth IRA.  I made a lot of progress on the forward-12 month dividends but will fall short of my $1,000 received in dividends for 2012.  At least I'm already over that mark for next year assuming all dividends are kept at the same level and not cut.  In October I made 7 total purchases with 6 in my FI portfolio and 1 in my Roth IRA.  I initiated 3 new positions in CAT, CMI and KMI and added to my NSC and KMI positions as well as twice to my MCD position.

Wednesday, October 31, 2012

Recent Buy

Today seemed like a good day to average down in my McDonald's (MCD) position as well.  McDonald's also recently announced slightly disappointing earnings as revenue was up but profit numbers were down.  I'm not worried about McDonald's long-term prospects, especially as a dividend growth stock.  They recently increased the dividend by 10% starting with the next payment in December.  October was a busy month with 7 purchases being made, 6 in the FI portfolio and 1 in the Roth IRA.

Recent Buy

This morning I added to my position in Norfolk Southern Co. (NSC) by purchasing 20 more shares at a price of $61.96 in my Roth IRA.  Earlier this month NSC announced disappointing 3rd quarter results and the share price quickly sold off.  It lost over 7% the day the earnings were released.  With the addition of 20 more shares I doubled my position in NSC from my original purchase in late September.

New Blog Layout

I've been playing around with this for a while and finally decided to go on and make a change to my blog because when I first started it I just chose a very simple and basic one to get started.  I wasn't sure if I would be able to fully commit to the blog so I didn't want to invest a lot of time on the layout before I knew that I would remain focused on the blog.  There's still a few things I might change but I should keep this for a while.

What do you think of the new layout?

Tuesday, October 30, 2012

Dividend Increase - Phillips 66

I'm a little late to the party on this one but I figured it was worth posting in case anyone else missed it like me.  On October 3rd the board of directors for Phillips 66 (PSX) announced a $0.05 increase in their quarterly dividend from $0.20 to $0.25.  This is a 25% increase which is great news for investors because they were targeting a 5% annual dividend increase when they were spun off from ConocoPhillips (COP).  The new rate is payable to shareholders of record as of October 15th and payable on December 3rd.

Monday, October 29, 2012

US Stock Market closed

The US Stock markets will be closed today due to Hurricane Sandy.  Normally this wouldn't be an issue since my desired holding period is forever, but I was hoping to get a chance to pick up some more shares in great DG companies since the futures were pointing to another 100 point drop for the DJIA.  So much for that with the closed markets.

*Update - US markets will be closed again on Tuesday.  This storm isn't physically going to affect me but it's proving to be quite annoying.  I hope that everyone that has been/will be affected will be safe.

Friday, October 26, 2012

Averaging Down in a Position

When given the opportunity to average down in a position that I own and want more of I'll normally take the chance when it's the best opportunity available. Averaging down gives you a chance to lower your cost basis in a company that you have already deemed investment worthy.

Tuesday, October 23, 2012

Recent Buy

This morning I noticed that the stock market was set to sell off early so I set up a limit order for 25 shares of McDonald's $87.76.  I was debating on what price to set my limit order at but chose the $87.76 mark instead of $87.51 because $87.76 is still well under my fair value for McDonald's to trade for.  As it turns out McDonald's sold off to $87.32 at one point so I could have purchased them for a little cheaper, but in the long run it won't make that big of a difference.

Saturday, October 20, 2012

Weekly Roundup - October 20, 2012

Time keeps on rolling by as another week has gone.  I only made one purchase this week and pretty much exhausted my cash for the time being by adding to my recently initiated position in KMI.  Now on to the links.

Blue-Chip Dividend Aristocrats - There is a Lot of Value in this Market: Part 4 - A great article on Seeking Alpha by Chuck Carnevale.  This article should be standard reading for anyone interested in DGI.  He focuses on valuing some well known dividend growth stocks and whether they are under, fairly or overvalued.  

Savings Money is like Losing Weight - Dividend Mantra had a great post discussing how saving isn't a quick process and requires determination and focus to achieve your goals.

Friday, October 19, 2012

McDonald's (MCD) Earnings Miss

McDonald's reported earnings for the 3rd quarter this morning before the opening bell where they beat on sales but missed on profit.  The good news for long-term believers in McDonald's is that shares sold off 3.40% after the announcement and is currently set to open below $90 per share.  I'm hoping for a further pullback so I can average down my position after I get my capital to my brokerage account, but I'd have no qualms with initiating a position at the current price.

Recent Transaction

With today being expiration Friday, I figured we'd revisit the call options that I sold on 200 shares of Bank of America back in mid-August.  I originally performed a buy-write of 200 shares which involves purchasing the shares and simultaneously selling a call option per 100 shares purchased.  The advantage to doing this is that you save on the commission by only having to pay once instead of one for the share purchase and one for the option sale.  Barring over a 15% pullback in tomorrow's trading, the call options should be executed.

Wednesday, October 17, 2012

Kinder Morgan Inc. Dividend Increase

Kinder Morgan Inc. (KMI) announced an increase in their quarterly dividend from $0.35 to $0.36 per share.  The new payout is payable to shareholders of record on October 31st and is due to pay out on November 15th.  This is a 2.86% increase over the last quarterly payout and a 20% increase over the 3rd Quarter 2011 payout.  Since becoming a public company KMI has increased it's dividend in 6 of 7 quarters.  This article sums up the quarterly dividend increase and the highlights of the quarterly report.

Monday, October 15, 2012

Harris Corporation Pullback

Harris Corporation (HRS) has seen it's share price dip from it's recent high of $51.97 to around $46.80, a 10% drop.  I last purchased shares of Harris around this price level and if it dips further it will be high on my list of potential next buy candidates.  I posted my stock analysis on Harris back in April of this year and while it's a little out of date, most of the changes for the company have been positive.  For example, they've increased their dividend twice in 2012, once by almost 18% and once by 12% for a total increase this year of 32%.  While this level of dividend growth can't continue for too long, an annual 10-12% growth is very attainable.

Recent Buy

This morning I picked up 36 more shares of KMI at $34.36.  I added to the recent position that I initiated last week.  You can check out that post here.  The 36 shares will provide an extra $50.40 per year in dividends before future increases or reinvestment.  Speaking of future dividend increases, according to this article, KMI will be recommending a $0.01 increase to it's quarterly dividend payable next month.  If the $0.01 increase goes through that will be a 2.86% increase.  This isn't what I like to see for an increase; however, with KMI they've had history of increasing it on a quarterly basis.  This would be their 6th increase in 7 quarters.  You can check out KMI's dividend history here.

Saturday, October 13, 2012

Weekly Roundup - October 13, 2012

This past week has flown by with me heading back to work.  It also brought about 3 new purchases that will contribute an extra $170 in dividends before any future increases.  You can check out my Recent Buy posts from this past week here, here and here.  Now on to the links.

How to Go from Middle-Class to Kickass - Mr. Money Mustache had a great post highlighting the budgeting aspect to reach early retirement.  His blog is one of the best around.

Recent Sale - Dividend Mantra recently sold his position in Total  (TOT).  Total no longer fit in his portfolio, check out his post to see why.

Friday, October 12, 2012

401k Contribution

I originally had a goal of maxing out my 401k this year but have since changed my goal and lowered my contribution rate.  Since my ultimate goal is to retire by 40 I need as much cash available to invest in taxable accounts as possible.  I was contributing 10% to my 401k which was going to have me on track to contribute around $11.7k this year.  I backed my contribution percentage down by two points to 8% and I am thinking of backing it down further to 6%.  Changing my percentage for the rest of this year is only going to put an extra $700 or so in my pocket before taxes; however, that's an extra $700 I can have full access to whenever I do hit financial independence.

Thursday, October 11, 2012

Recent Buy

I decided to go on a bit of a spending spree today and also purchased of 23 shares of Cummins (CMI) at $87.49 per share.  You can check out my other purchase today here.  It's hard for me to keep cash in my brokerage account because I want to get it working for me.  Based on the last quarterly payout of $0.50 per share my YOC for this position is 2.28%.  The CMI shares will provide an extra $46 in annual dividends before any further increases or reinvestment.  I'll also receive my first payout from Cummins later this year in December with a $11.50 payout.

Recent Buy

This morning I pulled the trigger and purchased 23 shares of Caterpillar (CAT) for $82.75 per share.  Based on the recently announced quarterly payout of $0.52 per share my YOC for the position is 2.50%.  The CAT shares will provide an extra $47.84 in annual dividends before any further increases or dividend reinvestment.  I'll be receiving my first payout from Caterpillar in November with a $11.96 payout.  I was able to purchase the shares at a 16% discount to my calculated fair value.  You can check out my analysis on Caterpillar here.

Portfolio Update - October 2012

Today I've updated my portfolio for everyone to see the changes.

Check out My Portfolio here.

Wednesday, October 10, 2012

Recent Buy

This morning I picked up 55 shares of Kinder Morgan, Inc. (KMI) at $35.04 per share.  Assuming an annual dividend from KMI of $1.40 per share, based on the last quarterly payment of $0.35, my YOC for the position is 3.98%.  The 55 shares will provide an extra $77 annually before any dividend increases or reinvestment, with $19.25 being paid out this year in November assuming they follow the same payout schedule they've already established.  My forward 12 month dividends just breached the $1,000 mark with this purchase, sitting at $1,014 before any further dividend increases or reinvestment.  It's pretty exciting to finally cross that mark.

Sunday, October 7, 2012

2012 Goals - 3rd Quarter Update

Well, another quarter has come and gone so it's time to see how the 3rd quarter went.  The first three quarters of this year have been great for me financially and let's not forget personally.  I got married the middle of this year and can't be happier.  The first nine months of the year have been pretty good on the goals that I set for the year.  Without further adieu let's check out the numbers.

2012 Budeting Goals - 3rd Quarter Results
Goal Actual through 3rd Quarter Status
70% take-home pay savings rate 75.96% average savings (Jan 74.51%, Feb 73.09%, Mar 75.10%, Apr 71.42%, May 66.93%, Jun 87.23%, Jul 81.49%, Aug 74.05%, Sep 79.83%) Exceeded Goal
Less than $1,600 required expenses $1,528.77 average (Jan $1,694.02, Feb $1,682.70, Mar $1,590.72, Apr $1,541.32, May $1,549.48, Jun $1,252.68, Jul $1,608.65, Aug $1,417.13, Sep $1,422.25) Exceeded Goal
Reduce Misc. Expenses by 20% (Exp. < $131.62 per mo) $114.39 Exceeded Goal
Reduce Restaurant Expenses by 20% (Exp. < $128.12 per mo) $148.35 Needs Improvement
Reduce Grocery Spending by 10% (Exp. < $214.07 per mo) $209.52 Exceeded Goal

Saturday, October 6, 2012

Weekly Roundup - October 6, 2012

I can't believe another week has just flown by.  This weekend I'm getting a chance to go camping with my wife and I've been looking forward to it for a while.  It'll be even nicer that a cold front will be moving in over the weekend getting some fall weather down in our neck of the woods.  Here's some interesting posts from my fellow bloggers from this week.

Covered Call Strategy in my Traditional IRA Update - My Journey to Millions highlighted how his covered calls have worked out for him.  I know a lot of people aren't comfortable with options but I like them especially put options because it's another way to put in a limit order.

September 2012 Monthly Expenses - FI Fighter recapped the month of September.  I really like the rental income and hope to be able to get a rental property myself within the next few years.

Friday, October 5, 2012

Net Worth Update - September 2012

September was an awesome month with a $10+k positive move in my net worth.  That was my 3rd highest monthly increase since I've kept track and my 2nd highest for 2012.  Over half of that was from my after-tax savings and the rest came from my 401k contribution, employer match and ESPP withholdings plus the changes due to the markets.  For the month I contributed just over $1,260 to my 401k and another $670 to my ESPP that will be purchased in January of next year.

Wednesday, October 3, 2012

Income Update - September 2012

September was an okay month for my spending.  I let my expenses creep up higher than where I would like but I was still lower than my average for the year so far.  My minimum expenses for September ended the month at $1,422.25.  This brought my average minimum expenses in 2012 down to $1,528.77.  Total expenses for the month was fairly well under control at $1,565.71 although there's still work to be done, mainly on the required expenses front.  My average total monthly expenses for 2012 is down to $1,703.91.  Thanks to one of my lowest expenditure months on top of my highest monthly dividend total my PRI of $169.13 covered a total of 11.89% of my minimum expenses.  My FI at the end of September was $167.21 which would cover 11.74% of Septembers minimum expenses.  I was surprised to see that my PRI, which is just dividend and interest income, covered almost 12% of my expenses.  That was great to see.  I can't wait until I'm averaging at 12% coverage ratio, which based on September is receiving just under $2,000 in annual dividends.  I like seeing the teal line at the bottom of the graph get higher and higher every month.


Monday, October 1, 2012

Dividend Update - September 2012

September was an awesome month for dividend payouts with 13 companies paying me in my FI portfolio and 3 in my Roth IRA.  The month also brought my first $100+ month of dividends for my FI portfolio which I blew past with $165 in dividends.  With the recent addition of 100 shares of INTC my forward 12-month dividends is over $930.  The INTC shares will provide an extra $90 per year in dividend before reinvestment or increases and an extra $22.50 this year with their December payout.  I'm slowly getting close to the $1,000 mark and 2013 will see me surpass that mark on an annual basis.

Saturday, September 29, 2012

Weekly Roundup - September 29, 2012

And yet another week has gone by.  It's been a slow week for the blog and for the FI portfolio with only 20 shares of NSC being added.  I was close to making another purchase yesterday morning but by the time I got to my computer to see how the markets were doing the early morning dip in price had already recovered.  Now, on to the links.

The most challenging aspect of dividend investing - Dividend Growth Investor wrote a great article on the psychology of dividend growth investing.

Your Savings Rate Trumps Your Investment Returns - Dividend Mantra's piece on why focusing on what you can control, such as your savings rate, is so important.  It is especially important for those that are set on retiring early.

Tuesday, September 25, 2012

Recent Buy

This afternoon I purchased 20 shares of Norfolk Southern Corporation (NSC) for $65.14 per share for my Roth IRA. My total cost basis after commission is $1310.75 or $65.54 per share. NSC has increased their dividend twice this year which is a good sign for management's commitment to rewarding shareholders and belief in the underlying business. Railroads are local monopolies and I feel that NSC's business will pick back up. These shares have a 3.05% YOC and will provide an extra $40 per year in dividends before reinvestment or further increases.

Emerson's pullback

Emerson Electric (EMR) has been on a bit of a pullback for the last month or so and has just recently started trading less than $50 which means its starting to get to the fairly undervalued range. I'm hoping for a further pullback to the $45's to give a 3.50% YOC.  The other great thing is that Emerson is due for a dividend increase soon which will push the YOC up even further.  You can check out my analysis on Emerson here.

Sunday, September 23, 2012

Options Update

With Intel closing on Friday at $23.13 my September 22 2012 $25 put option was exercised.  You can see the details and thought process of my selling the put option here.  By selling the put option I received $52.01 in premium.  In order to calculate my new cost basis you take the $25 strike for the put option and subtract the $52.01 option premium which needs to be on a per share basis and then add the applicable brokerage costs back.  For these shares it looks like this:

Saturday, September 22, 2012

Weekly Roundup - September 22, 2012

This week had me busy with work and therefore slow for the blog but I still found time to read some fellow blogger's thoughts.  So here's the roundup for this past week.

YOLO - Dividend Mantra had a great post about why he's saving and investing to become financially independent at a young age.  It was a great article and something I firmly believe in.

3 Easy Steps to Retire by 40 - Going with the early retirement/financial independence theme, here's a post from Retire by 40 outlining the 3 steps to reach FI.  While the 1st step might not be completely realistic for everyone, it's still something to consider, especially when considering career options.

Thursday, September 20, 2012

Dividend Increase - McDonald's

Today, McDonald's board of directors announced a 10% increase in the quarterly dividend from $0.70 per share to $0.77 per share.  The new rate will be payable December 17th to shareholders of record on December 3rd.  This brings the annual payout to $3.08 per share. The increase will raise my quarterly payout from the latest of $22.51 to the next payout being $24.95. My YOC for my shares rose from 3.12% to 3.44%, while my YOC for the portfolio increased from 3.03% to 3.07%. This puts McDonalds on track for 36 years of annual dividend increases. It's a great day when you get to wake up and find you just got a raise.

Investing Milestone

This morning I was pleasantly surprised to see that both McDonald's and Harris had paid out dividends to me.  I knew they were paying out this month but hadn't been paying close attention to when.  Harris's dividend pushed me over the $100 dividends received for the month and up to $125.56.  It's great getting paid to invest in solid companies.  I still have another 3 expected payouts this month which should take me up to around $165.  Sadly I'm not averaging that much every month but it's slowly building.  Baby steps is what I have to remember.

I hope everyone else is having a great month of dividends!

Wednesday, September 19, 2012

When to sell a DG stock

Lately I've been seeing several articles/posts discussing when to sell a DG stock.  While it is tempting to sell at a high, it might not be worth it.  Unless you see companies approaching grossly overvalued why get rid of the position especially if the underlying reason that you're investing is for dividend growth.  Now if a company like Walmart starts trading at a 30 P/E multiple then yes it might be time to sell because thanks to the sheer size of Walmart a 30 P/E multiple is a little ridiculous for a company that can't grow that fast.

Saturday, September 15, 2012

Weekly Roundup - September 15, 2012

Well another week is in the books so that means it's time for another weekly roundup of blog links and articles that got me thinking.  So here goes.

Trading Vs. Investing Dividend Mantra wrote about the difference between trading and investing and why he's first and foremost an investor.

Procter and Gamble: Still a Champion Blue-Chip? Dividend Monk analyzed the status of Procter & Gamble.  He feels it's fairly valued where it's currently trading and wouldn't be buying without a 10% pullback.

Dividend Investors are Getting Paid for Holding Dividend Stocks Dividend Growth Investor had a great post that pretty much sums up the reasons to invest in dividend growth stocks.

Stop the Bleeding! - Internet Service All About Interest wrote about what he's done to lower his bills to find more investment capital.

Philip Morris Increases Dividend Compounding Income highlighted the recent dividend increase by Phillip Morris.(PM).

Dividend Growth Investing; Give Us Your Tired, Poor And Unguided Seeking Alpha is one of my favorite spots on the web to read articles on investing and DGI in particular.

Friday, September 14, 2012

Recent Transaction

This afternoon I sold a Dec 22 2012 Put option on Archer Daniels Midland Company (ADM) for $0.89.  After brokerage costs I netted a total of $81.01.  The put option gives me a good return either way that it works out.

If ADM is trading above $26 on expiration then I will pocket the full $81.01 premium.  That would be a return of $81.01 / $2,600 = 3.09%.  Even better is that I would have gotten that return in 99 days which is equivalent to a 11.39% annual return.

Thursday, September 13, 2012

What to make of QE3

I'm very annoyed that Bernanke announced QE3 today.  The plan is to purchase $40 Billion of mortgage-backed securities each month until they are satisfied that the economy, specifically unemployment, is righted. He also announced today that interest rates will stay near zero until mid-2015.  The hope is to stabilize and hopefully spur the housing recovery.

The American people haven't been purchasing houses because they either don't have jobs, don't work enough hours or have no idea what the future of their job is.  It's not because mortgage rates are too high, they're at all-time lows.  What I see as the reason for doing this is to further clean up the banks' balance sheets by taking MBS off their books and hopefully spurring further lending by the banks with a pocket full of cash and low interest rates.


Wednesday, September 12, 2012

Portfolio Returns - Part II

In Portfolio Returns - Part I I explained how to use Microsoft Excel to calculate your internal rate of return using the built in XIRR function and gave my returns through close on September 9, 2012.  Today I'm going to compare my returns versus investing everything in the SPY ETF.

I was able to compile all the data and crunch the numbers to compare my total returns vs the SPY ETF that tracks the S&P 500.  I gathered data from Yahoo! Finance's Historical Prices for the SPY.  The historical prices gives the open, high, low, close & adj. close prices corresponding to each date.  The adjusted close price is the price adjusted for all dividends and stock splits.  It's an easier way to compare total returns without having to gather data for all dividends and closing prices.  Yahoo! Help has a good explanation and example calculations of how they calculate the adjusted close price.  Now I know that Yahoo! Finance doesn't always have the best information but it's the best that I can get to work with.  All returns are calculated through close on September 9, 2012 to be consistent with my previous post.

Monday, September 10, 2012

Portfolio Returns - Part I

I figured that we should take a look at portfolio returns so we can see exactly where we stand.  If you don't know what you're actually returning then it's hard to tell if it's a good investment.  While some people are focused on just capital gains and some just on dividends and others still on total return, you still need some measure of tracking your progress.  I'm going to look at just annualized returns as calculated using the XIRR function in Excel using the cash flows and current portfolio values.  The XIRR function returns the annual growth rate that when applied to all cash flows returns the portfolio value.

To calculate your portfolio return you enter your cash flows like so.


Sunday, September 9, 2012

Portfolio Update - September 2012

Today I've updated my portfolio for everyone to see the changes.

I reached a small investing milestone of a $40k FI portfolio value.  Hoping that continues to increase every month.

Check out My Portfolio here.

Saturday, September 8, 2012

Weekly Roundup - September 8, 2012

I figured that I would start a Weekly Roundup of my own for posts that I read from other dividend growth and personal finance blogs that got me thinking.  Here's this week's posts.

The Next Bubble is in Canada, and It Will Affect Everybody
The Dividend Guy had a great post about the potential debt bubble forming in Canada.  It's eerily similar to how the US personal debt/income issues led us into the financial crisis and has only gotten worse there.

Appreciating The Small Steps Of Dividend Growth Investing
Dividend Growth Machine had another great article outlining dividend growth investing and compound income in general.  His main point is to focus on the end result and to not get discouraged by the slow beginning.

How to retire with dividend stocks
Speaking of staying focused on the end result, Dividend Growth Investor posted about how to retire with dividend stocks.  It's not a get rich quick scheme by any means, but it is one of the most stable ways to generate solid returns.

Money Down the Drain: Water Conservation and Your Wallet
The Simple Dollar wrote about conserving water in your house and how just a few little changes can save you money.  And just think of what that money could turn into if you invest it.

Smuckers Looks Fairly Priced
Dividend Monk ran the J.M. Smucker Company through a stock analysis and determined it was fairly valued.  Check out the post to see his reasonings.

Dividend Income Update - August 2012
We finally got a dividend income update from Dividend Mantra.  I'm glad to see that he's back from his summer hiatus and posting again.  His blog was a big inspiration for me to start mine.



Friday, September 7, 2012

Recent Transaction

Today I decided to go on and buy back my $7 Jan 18 2014 Put option on Bank of America.  I bought to close the option for $0.89 plus $7.98 in commission/fees.  It cost me a total of $96.98 to close out the position.  I originally sold the put back on February 2 for $1.73 and received a total of $164.32 in option premium.  If I let the put go to expiration and it expired then I would have a received a 23.47% total return which is annualized to 11.99%.  After closing out the put, I ended up with a total of $67.34 in option premium ($164.32 - $96.98) which is a 9.62% return ($67.34 / $700) over 218 days giving an annualized return of 16.12%

Net Worth Update - August 2012

August was another great month for my net worth with almost a $7,900 increase.  Over half of that came from after tax savings with the rest from my 401k and ESPP withholdings and the change in market values.  For the month I contributed just over $1,200 to my 401k and another $650 to my ESPP.  My after-tax savings amounted to just over $4,600.

Thursday, September 6, 2012

Selling Puts for Added Income

This morning Archer-Daniels Midland was trading at $26.97. Since I would like to get more into the stock with it trading around a 14% discount to my calculated fair value, I figured I would check out the potential option moves to make. The fair value price turned out to be $31.31. I will be calculating everything with a commission of $7.95 + $0.75 per contract basis. The December 2012 puts look to give the best option premium and lowered cost basis for either way the stock decides to go. Currently ADM's yield is 2.60%. If sold today the option would be open for 107 days, all annual return are based off this.

Archer Daniels-Midland Dec 2012 Put Options
Strike Price Option Price Cost Basis if Exercised YOC if Exercised Discount to Fair Value Total Return if Expires Annual Return if Expires
$25 $0.77 $24.40 2.87% 22.09% 2.73% 9.32%
$26 $1.12 $25.05 2.79% 20.02% 3.97% 13.55%
$27 $1.55 $25.62 2.73% 18.20% 5.42% 18.48%

I really like the $27 put option because you get a solid YOC entry point as well as a great option premium if ADM is trading above $27 come December 22. It wouldn't surprise me to see the option expire come December so that could be the best way to go, with it currently trading on par with the strike.

If I had the cash on hand I would sell at least one of these puts today, most likely the $26 put to help lower my cost basis on the shares. The $27 put doesn't give as much help since my cost basis on the 35 shares I bought last month is $25.96. The $26 put would lower my total basis to $25.28 and increase my YOC to 2.77%. Which is a good range to be in. This would also get my position to be in at a 19.27% discount to fair value.

Tuesday, September 4, 2012

Recent Buy

This morning I purchased another 40 shares of Harris Corp (HRS).  I purchased these shares for $46.24 each plus commission.  My cost basis ended up being $46.44 which now brings my total cost basis in Harris to $46.84.  I was able to purchase the shares at a 1.7% discount to my previous cost basis.  These shares will add an additional $59.20 in annual dividends before reinvestment or further dividend increases.  I will also receive a total of $29.60 in dividends from HRS this year which will help out the total dividends for the year.  The YOC for the new shares is 3.19% and brought the YOC for the position in HRS up to 3.16% from 3.13%.

Income Update - August 2012

August was a decent month for my spending with it being below my average so far for the year, but it was still higher than it should have been.  My minimum expenses in August ended the month at $1,417.13.  So far in 2012 my minimum expenses have averaged $1,542.09 through August but the average should start creeping down with my $230 debt service payment no longer being made since that's paid off.  Total expenses for the month were $1,615.80.  Considering how poorly I did on a lot of my budget for the month that's a win in my book since I have averaged $1,721.18 per month year to date.  Unfortunately my potential retirement income is still lower than I would like but that was due to a slow payout month.  PRI totaled only $9.87 which is 0.70% of my minimum expenses.  Thanks to a rise in the 30 year treasury rate to 2.67%, my FI at the end of the month was $144.48 which covered a much more respectable 10.20% of my minimum expenses.  Since I am trying to be able to live off of dividends, my PRI is a much better number to go off of with it's sources being dividend and interest income.  Through August my PRI has average 3.51% coverage of my minimum expenses.



Saturday, September 1, 2012

First Full Share from Dividend Reinvestment

With Intel's dividend payment today, I am officially over the 1 share received from dividend reinvestment.  Technically Coca-Cola held that spot but that was due to the 2-for-1 split that went through last month.  It's not a major accomplishment but it's still a sign that things are working right.  In less than a year's time I've been able to increase my share count and therefore my dividend payment by 2.52% by doing nothing but reinvesting in a solid company.

Dividend Update - August 2012

August was a slow month for dividends with only 2 companies paying out during the month.  I'm looking forward to September rolling around when I will have the majority of my portfolio paying out for my largest monthly payout so far.  I'm still holding out for a market pullback to let me get more of my cash working for me at better entry prices.

There were 2 new purchases this month with 35 shares each of Walgreens (WAG) and Archer-Daniels Midland (ADM).  These will add an extra $38.50 and $24.50 to my annual dividends before dividend increases or reinvestment.

Friday, August 31, 2012

Recent Buy

This afternoon I bought 40 shares of Harris Corporation (HRS) for $47.05 per share.  After commission my cost basis is $47.25 per share with a YOC of 3.13%.  I missed my limit order yesterday by $0.01 which is very annoying.  Luckily it wasn't a huge difference in YOC.  I'll be able to get their next dividend payment which goes ex-div next Wednesday.  These shares will add an extra $59.20 in annual dividends with an extra  $29.60 coming in this year before reinvestment.  I'm hoping that the market will sell off some next week prior to some big news out of Europe and that I can buy more into HRS before the ex-div.  My entry price is selling at a 14.35% discount to the average fair value that I calculated in my stock analysis on HRS.  I'll update my HRS stock analysis soon now that another fiscal year for them has passed.  The Harris purchase increased my overall YOC from 2.39% to 2.44% and my non-ESPP share YOC from 2.99% to 3.01%.

Sunday, August 26, 2012

Income Replacement

I made a spreadsheet that will calculate the time needed for income replacement through dividends.  The share price is an irrelevant column as you can change the starting price to whatever you want and it doesn't effect the calculations.  It was easier for me to think about how to set up the spreadsheet by using the column.


Friday, August 24, 2012

Recent Transaction

This afternoon I decided to buy back the September $26 put option. I was torn on whether to buy it back or not because I was getting a solid entry price the way it was set up. I should have let it go the way it was but I got a little caught up with how much it had changed over the week. I had to pay a total of $133.98 to buy back the put option. I received $40.01 when I sold the option so to close out the position it cost me $93.97.

Wednesday, August 22, 2012

Recent Transaction

On Tuesday, I decided to sell another put option on Intel. This time it was a $26 September 22, 2012 Put Option for $0.48. After commission I netted a $40.01 option premium. Here's how the option can play out. 

(1) Option expires - I received $40.01 in option premium on $2,600 to cover the put, that's a return of 1.54% over 32 days which is an annual return of 17.55%.

Sunday, August 19, 2012

Archer Daniels Midland Stock Analysis

It's been a while since I've post a stock analysis so today we'll look at one of my recent buys from last week, Archer Daniels Midland (ADM). Archer Daniels Midland closed on Friday, August 17th at $26.17.

Company Background:

Archer-Daniels Midland Company procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and internationally. The company’s Oilseeds Processing segment originates, merchandises, crushes, and processes oilseeds, such as soybeans and soft seeds, including cottonseed, sunflower seed, canola, rapeseed, and flaxseed into vegetable oils and protein meals. It offers crude vegetable oils, salad oils, partially refined oils, oilseed protein meals, natural health and nutrition products, specialty food and feed ingredients, cottonseed flour, and cotton cellulose pulp for the food, feed, energy, and other industrial products industries. This segment also operates fertilizer blending facilities. The company’s Corn Processing segment converts corn into sweeteners, starches, and bio products. Its products include sweeteners, starch, syrup, glucose, and dextrose. This segment also produces alcohol, amino acids, and other specialty food and animal feed ingredients; corn gluten feed and meal, and distillers’ grains; vegetable oil and protein meal; and citric and lactic acids, lactates, sorbitol, xanthan gum, and glycols. The company’s Agricultural Services segment buys, stores, cleans, transports, and resells agricultural commodities, such as oilseeds, corn, wheat, milo, oats, rice, and barley primarily as food and feed ingredients, and as raw materials for the agricultural processing industry. Its transportation network comprises truck, rail, barge, port, and ocean-going vessel handling and freight services. This segment also processes and distributes formula feeds, and animal health and nutrition products; and procures, processes, and distributes edible beans. In addition, the company offers commodity brokerage services; and cocoa liquor, cocoa butter, cocoa powder, chocolate, as well as writes crop insurance.

DCF Valuation:

Analysts expect ADM to grow earnings 10.00% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter. Running these numbers through a DCF analysis with a 11% discount rate yields a fair value price of $45.16. This means that at $26.17 the shares are undervalued by 42%.

Saturday, August 18, 2012

Option Summary

Since I made the buy-write of the 200 shares of BAC yesterday, I figured it was time to give an update to all of my option moves thus far.

Open Option Positions:

Open Option Positions
Date Sold Option Type Underlying Expiration Date Price Number of Contracts Premium Received Less Comm.
2/2/2012 Put BAC Jan 17 2014 $1.73 1 $164.32
8/17/2012 Call BAC Oct 20 2012 $0.50 2 $98.43

Friday, August 17, 2012

Recent Buy

This morning I performed a buy-write of 200 shares/2 call options for Bank of America (BAC) expiring on October 20, 2012. The reason I went the buy-write route is that you can save on commission by executing them together rather than separate. Let's get into the trade. I purchased 200 shares of BAC for $8.10 per share with a commission of $7.95. I also sold 2 $8 strike call option contracts for $0.50 each with $1.57 in commission. It cost me $1,627.95 to purchase the 200 shares and I received $98.43 in the premium from selling the 2 call options. That means the total trade cost $1,529.52 for a per share cost basis of $7.65.

Thursday, August 16, 2012

Coca-Cola 2 for 1 Split

Coca-Cola's 2 for 1 stock split finally went through this past Friday, August 10th. Of course this does nothing to the value of your position as it doubles the amount of shares you own but halves the value of the shares and, most important to me, the dividend. So everything is pretty much still status quo with it comes to KO. Management's thought process for the split was that it would unlock shareholder value since the shares were trading in the $60's when it was announced and traded up to the high $70's leading up to the split. By halving the share price, it's thought that more investors would get in seeing as how the stock is now cheaper. Of course we all know that's not true as the relative value is all the same. The stock split made KO my first investment that has returned over 1 full share in dividend reinvestments so far, although it's really at 0.796 shares instead of the 1.592.

Wednesday, August 15, 2012

Intel Put Option

With Intel closing at $26.27 on Wednesday August 15th, it appears that the $25 August 2012 put option that I sold back in July will expire yet again unless the share price takes a 5% hit between now and end of trading Friday.


Intel Put Options
Put Option Premium Return (%)
$25 July 20 2012 $45.01 1.80%
$25 August 17 2012 $38.01 1.52%

Tuesday, August 14, 2012

Recent Buy

Earlier this morning I made 2 purchases. I bought 35 shares of Archer Daniels Midland (ADM) for $25.73 per share. My YOC for this position is 2.70% based on the current $0.70 annual payout. I also purchased 35 shares of Walgreens (WAG) $35.85 per share. My YOC for the WAG shares is 3.05% based on the current annual dividend of $1.10. Both Both companies are dividend champions with 36 and 37 year streaks of dividend increases. Over the last 10 years they have raised their payout by 13.0% and 18.9% annually. I'll be getting the next Walgreen's dividend payout in September but shouldn't be getting the Archer Daniels Midland seeing as how the ex-dividend date was today. The ADM shares will provide an extra $24.50 in annual income while the WAG shares will provide an extra $38.50.

Thursday, August 9, 2012

Net Worth Update - July 2012

July was a great month for my net worth with almost an $8,300 increase. A lot of that came from my savings and another good chunk came from the stock market rising. For the month I contributed around $1,250 to my 401k plus another $630 from the company match. I also set aside another $1,000 for my ESPP and had a great month of saving from my take home pay with $6,800 being saved. I'm looking forward to August bringing some lower expenses and hopefully getting a chance to deploy some more of my money that's currently sitting in my brokerage and Roth IRA accounts. While that would probably meaning a less than stellar net worth increase it would be worth it in the long run.

Wednesday, August 8, 2012

Tuesday, August 7, 2012

Recent Sell

Today I sold out of my position in SORL Auto Parts, Inc. I knew for a while that I should have just closed the position but I purchased shares when I first started investing thinking that they would turn into the next worlds largest auto parts manufacturer and turn my measly $350 investment into wealth beyond imagination. When I bought the shares I figured the market was just a crapshoot so why not throw some money that way. As you can tell I've now decided what kind of investor I'm going to be and have actually done quite well, I just wish the stock market would have a good pullback so I can get better entry prices. I figured it was time to go on and sell despite their earnings announcement next week to make sure that I can get the loss to write off against my short term gains from my option selling. All in all, I found a great way to turn $346.95 into $190.05 in less than a years time. That's not exactly the best way to go about investing. Now I can put that money towards a much better opportunity. That's one more lesson learned, thankfully it wasn't a really expensive one.