Thursday, January 31, 2013

Recent Transaction

Yesterday I sold another call option on some of my shares of HAL, my ESPP shares.  I'm currently way overweight my employer's stock.  I have just over 184 shares from the first purchase that went through that has already reached LTCG treatment so I'm trying to collect some premium.  I now have an option on HAL expiring in April 2013 and July 2013.

I sold 1 April 20, 2013 call option with a $39 strike price.  By selling the call option I'm selling the right to buy 100 shares of HAL at $39.  In exchange for selling my right to do with the shares as I please, I was paid the premium in advance.  I can use that cash now to use as I please.  I received $2.54 per share in premium or $254 less commission taking my final premium received to $245.25.

Blog Milestone

It took me about 13 months to reach 20k pageviews but about 5 more weeks to be able to count off another 10k.  I've now surpassed 30k pageviews for Passive Income Pursuit and that's just awesome.  It's great to see more and more traffic flowing to the site and is really inspiring that other people want to check in on my thoughts and progress.  Thanks everyone for stopping by and best of luck for the rest of 2013!

Wednesday, January 30, 2013

V.F. Corporation Stock Analysis

It's time for another stock analysis report so I figured we'd look at clothing and apparel giant V.F. Corporation (VFC).  They are a dividend champion with 40 consecutive years of increasing their dividend.  VFC closed trading on Tuesday, January 29th at $147.00.

Company Background:

V.F. Corporation designs and manufactures, or sources from independent contractors various apparel and footwear products primarily in the United States and Europe. The company offers apparel, footwear, outdoor gear, skateboard-inspired and surf-inspired footwear, backpacks, luggage, handbags and accessories, outdoor apparel, travel accessories, and women’s active wear primarily under the Vans, The North Face, Timberland, SmartWool, JanSport, Eastpak, Kipling, Napapijri, Reef, Eagle Creek, and lucy brands; and denim and casual bottoms, and tops principally under the Wrangler, Lee, Riders, Rustler, and Timber Creek by Wrangler brands. It also provides occupational, protective occupational, athletic, licensed athletic, and licensed apparel primarily under the Red Kap, Bulwark, Majestic, MLB, NFL, and Harley-Davidson brands; men’s fashion sportswear, denim bottoms, sleepwear, and underwear, as well as handbags, luggage, backpacks, and accessories principally under the Nautica and Kipling brands; and premium denim and casual bottoms, sportswear, accessories, luxury men’s apparel and footwear, premium women’s sportswear, and accessories primarily under the 7 For All Mankind, John Varvatos, Splendid, and Ella Moss brands. The company sells its products to specialty stores, department stores, national chains, and mass merchants primarily through its sales force, independent sales agents, and distributors.

DCF Valuation:

Analysts expect VFC to grow earnings 10.50% 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 $201.59. This means that at $147.00 the shares are undervalued by 26.7%.

Tuesday, January 29, 2013

Dividend Increase - Wells Fargo (WFC)

This is a little late but I just saw it as I was checking some of my positions.  On January 23rd, Wells Fargo's Board announced an increase in their quarterly dividend from $0.22 to $0.25 per share.  This represents a 13.64% increase over the previous rate.  The new rate will be payable March 1st to shareholders of record as of February 1st.  I expect this year we'll see some pretty sizable dividend increases from the financial sector and this is the first of my holdings.

Monday, January 28, 2013

So your dividend got cut. Now what?

Of course a dividend cut is the worst thing an investor in dividend growth stocks can have happen.  You just lost some of your future dividend income that you were expecting to be there.  This is why it's best to have a margin of safety in your dividends received versus your expenses when you're planning to live off just the dividends.  Assuming that you didn't see the dividend cut coming and didn't sell out of the position before hand, just how bad is it?

Friday, January 25, 2013

Recent Transaction

This morning I sold another put option, this time on Coca-Cola (KO).  With the bargains being harder to find I've been looking more towards selling puts to add to my passive income either through option premium or by purchasing shares in companies that I want to own at prices I like.  The reason I like selling puts is that you essentially get paid to set a limit order and if you choose the right combination of strike and expiration date you can usually get a solid annualized return on the put contract.  For more information on what I look for when selling puts check out this post.

Wednesday, January 23, 2013

Recent Sell

Yesterday I sold out of my position in Archer Daniels Midland (ADM).  I still like them long-term due to them being tied to food production which the need for that is only going to grow from here as the global population continues to expand; however, short-term I see issues that could possibly lead to a dividend cut.  I figured it's better to regret the dividend growth going forward by getting out now rather than sticking around and having to deal with a dividend cut.  I don't think it's definitely going to happen but after going through Avon's results that led to their dividend cut that shed some light on potential problems with ADM.  Plus ADM was due for a raise with their last payout but did not increase it then.

Saturday, January 19, 2013

Recent Transaction

Yesterday I sold a call option on some of my shares of HAL, ESPP shares.  In early January, the latest purchase went through adding almost 200 more shares to my position.  As to be expected I'm way overweight my employer's stock so I'm trying to set it up to start selling some off.  I still go back and forth on whether it's better to sell as soon as it turns to LTCG or not, I'm leaning that way for the moment.  Anyways, on to the trade.

Friday, January 18, 2013

Anatomy of a dividend cut

Since Avon Products used to be a bit of a DG investor darling with 22 consecutive years of rising dividends, I figured we should take a look at some of their operating results to see what could have tipped us off that a dividend cut was looming.  Let's get into the numbers.

Thursday, January 17, 2013

Dividend Increase - Kinder Morgan, Inc. (KMI)

Yesterday, the Board of Directors for Kinder Morgan, Inc (KMI) announced an increase in the quarterly dividend from $0.36 to $0.37 per share.  The new rate will be payable on February 15th to shareholders of record as of January 31st.  The increase is only 2.78% over the last payment, but is a 19.35% increase over 2012's February payment.  I'm not worried about the low increase this time because the Board has shown a willingness to raise the dividend in most quarters.  They've only had one quarter where the dividend wasn't increased in their short history as a publicly traded company.

Tuesday, January 15, 2013

How Important is starting early?

For those aiming for a traditional retirement age of 65, starting early is their best friend.  If you ask people how much they need to retire most will answer "$1 million".  Now I'm not saying that yes you do or do not need that much, it really depends on your expense level and how you're invested. But for the sake of making the calculations easier we'll assume that anyone can retire at 65 if they save up $1 million.

Saturday, January 12, 2013

3M Stock Analysis


It's time for another stock analysis report and this time I'll look at another dividend champion, 3M (MMM).  3M closed trading on Friday, January 11th at $96.28.

Company Background:

3M Company operates as a diversified technology company worldwide. The company’s Industrial and Transportation segment offers tapes, coated and non-woven abrasives, adhesives, specialty materials, filtration products, energy control products, closure systems for personal hygiene products, acoustic systems products, and components and products used in the automotive, marine, aircraft, and specialty vehicles. Its Health Care segment provides medical and surgical supplies, skin health and infection prevention products, inhalation and transdermal drug delivery systems, dental and orthodontic products, health information systems, and food safety products. The company’s Consumer and Office segment provides office supply, stationery, construction and home improvement, home care, protective material, certain consumer retail personal safety, and consumer health care products. Its Safety, Security and Protection Services segment offers personal protection products, cleaning and protection products for commercial establishments, safety and security products, roofing granules for asphalt shingles, corrosion protection products used in the oil and gas pipeline markets, and track and trace solutions. The company’s Display and Graphics offers optical film solutions for LCD electronic displays; computer screen filters; reflective sheeting for transportation safety; commercial graphics sheeting and systems; architectural surface and lighting solutions; and mobile interactive solutions. Its Electro and Communications segment provides electronic and interconnect solutions, micro interconnect systems, high-performance fluids, high-temperature and display tapes, telecommunications products, electrical products, and touch screens and touch monitors. 3M Company also offers electronic toll collection and parking management hardware and software.

DCF Valuation:

Analysts expect 3M to grow earnings 9.73% 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 $123.02. This means that at $96.28 the shares are undervalued by 21.7%.

Tuesday, January 8, 2013

Determining Dividend Growth Rate of Your Portfolio

In hopes of getting better numbers to project off of, I've been compiling data to calculate the dividend growth rate of my entire portfolio.  Easy right?  Just add up the dividend growth rate for each position and divide by the total number of positions.  Well, that's not quite right because each position is a different size and therefore contributes a different amount to the overall dividend growth.  A 10% position of your portfolio growing the dividend at 20% per year changes your dividends received a lot more than a 1% position growing the dividend at 20% per year.  So how do you calculate it then?

Joined the Yakezie Challenge

In order to reach some of my blogging goals for 2013 I've joined the Yakezie Challenge in hopes of keeping myself focused on the blog and building readership.  It'll be a fun 6 months.

Monday, January 7, 2013

2013 Goals

I made a whole lot of progress in 2012 and now I have a better idea of what I can expect from 2013.  I'm setting some pretty aggressive goals and it'll be tough to hit some of them but setting the bar too low doesn't make it a challenge.

Budgeting goals for 2013:
Average 80% after-tax savings rate
Average less than $1,400 per month in required expenses
Reduce miscellaneous spending by 15% ($96.51)
Reduce restaurant spending by 10% ($128.31)
Reduce grocery spending by 5% ($205.64)

Sunday, January 6, 2013

2012 Goals - 4th Quarter Update

2012 is now in the books so it's time to check up on how my goals went for the year.  Overall I'm very pleased with how the year went although there's still some things I need to work on in 2013.  Without further ado, let's check the numbers.

2012 Budgeting Goals - Full Year Results
Goal 2012 Amounts Status
70% take-home pay savings rate 77.17% 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%, Oct 82.83%, Nov 83.00%, Dec 76.55%) Exceeded
Goal
Less than $1,600 required expenses $1,501.62 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, Oct $1,440.69, Nov $1,392.91, Dec $1,426.97) Exceeded Goal
Reduce Misc. Expenses by 20% (Exp. < $131.62 per mo) $113.54 Exceeded Goal
Reduce Restaurant Expenses by 20% (Exp. < $128.12 per mo) $142.56 Needs Improvement
Reduce Grocery Spending by 10% (Exp. < $214.07 per mo) $216.46 Almost Met Goal

Saturday, January 5, 2013

Happy Birthday to me!

Well today I turn 29 years old, one less year to hit FI before I'm done with my 40th year.

Friday, January 4, 2013

Net Worth Update - December 2012

December turned out to be a really good month for my net worth considering my income was lower than the last few months and the markets didn't help out too much.  For the month I ended up with just over a $9,200 increase. About $930 was from 401k contributions and the company match, while the rest came from my ESPP withholding ($678.00), after-tax savings, interest, dividends and market fluctuation.

Thursday, January 3, 2013

Tax Impact from Fiscal Cliff Deal

After Congress finally ended the fiscal cliff debacle, for now, I was in search of how exactly the tax brackets would look like.  There's now a ridiculous 7 brackets, this isn't close to the most we've had but it seems overly complicated to me.  The big news for investors is that one the brackets were made permanent, so hopefully tax planning will become easier in the future, or course barring future changes by Congress.  The second is that long term capital gains and dividends will continue to be taxed at the same rate.

Wednesday, January 2, 2013

Income Update - December 2012

December's income was lower than what I'd averaged through the first 11 months of 2012 but was still great at almost $6,500.  It wasn't a great month for expenses but considering how much I went over budget on a few areas I'm happy that the expenses were still in line with the last few months.  Gas was a bigger expense than normal this month, but I'm fine with that because I got the chance to go home a few times while we were down at work so I got to see my wife a few extra days and got to see my family on Christmas and the day after.  Both were very much needed and appreciated.  My minimum expenses for the month came in at $1,426.97 which brought my average minimum expenses down to $1,501.62 for the year.  Not bad considering through the first 5 months I averaged over $1,610 per month.  Total expenses for December totaled $1,584.34 which was up from November but still below my average through November of $1,676.74.  After December I ended up averaging $1,669.04 total expenses each month.  Dividend and interest income set a record providing $318.00 in passive income for the month.  This covered 22.28% of my minimum expenses in December.  I know I'm not at the point where I'll be close to averaging that amount of coverage on a monthly basis but it's great to see that over 1/5th of my minimum expenses were covered for the month.  With the 30 year Treasury yield creeping back up to 2.95% and my net worth less my traditional retirement accounts, my FI number increased for the 7th straight month for an average monthly income of $224.63.  This would have covered 15.74% of my minimum expenses in December.


Tuesday, January 1, 2013

Switching Website

I'm in the process of switching my website to www.passive-income-pursuit.com.  This is one of my goals for 2013 so I figured I should get on it.  I apologize for any inconvenience if the website happens to be down for any bit of time.  Thanks for following along.

Dividend Update - December 2012

December was a great month for dividends.  I was nearly able to double September's payout in my FI portfolio which was my previous high month, but December set a new personal record with $314.48 received.  The majority of companies that I own payout on the March, June, September, December schedule so I always have my largest months then.  It's amazing to see that after the 1st quarter of the year my forward 12-month dividends were only around $450 and this month alone I received almost 70% of that in my taxable account.  My Roth IRA also saw it's biggest month yet with 3 scheduled payouts and then Wal-mart's acceleration of their usual January payout to allow shareholders avoid the potential jump in tax rates.

I made 5 purchases in my FI portfolio this month by starting new positions in Medtronic and Phillip Morris as well as adding to my position in Target twice and adding to my new Medtronic position.  These 5 purchases will add $270 in annual dividends before further increases or reinvestment.  My forward 12-month dividends for my FI portfolio now sits at $1,770.93 and for my Roth IRA they're at $203.03

Happy New Year!

Happy New Year to everyone and may 2013 be even more prosperous for you than 2012!