Monday, July 20, 2015

Exclusive Club: Members Only!

In a recent post by Income Surfer, he mentioned that his recent purchase would immediately be joining the $500 club meaning that the position would provide $500 per year in dividends.  I think that's a pretty prestigious club for a holding to be in because it generally means that you have a lot of conviction in the future of the company.  So that got me wondering how many members of my portfolio belong to the different milestone clubs.  Let's start with some general information before I narrow down my portfolio to the undisputed dividend champ.  I own 51 different companies within my FI Portfolio, excluding my employers stock, and those companies will provide $5,997.39 in forward 12-month dividends.  Each club level is inclusive of clubs in a higher level, i.e. a company that provides $205 in annual dividends will show up in the $100 Club and the $200 Club.



The $100 Club

$100 Club
BPHRSAFLGEPEP
KOKMICVXIBMDE
PGTGTXOMJNJOHI
MCDMDTWMTHCP
EMRPMOGIS

There's 23 different members of the $100 Club.  While that's not huge in the grand scheme of things that is a great start for several of these positions.  The $100 Club is full of the essentials of life.  That's 4 food/beverage companies, 5 if you throw DE in there since they make farming equipment.  A consumer staple giant in PG and of course two of the largest retailers in which to buy all of that laundry detergent, cereal, sodas, and chips.  Two health care companies which I think we can all agree are vital to life.  Three real estate companies, two of them being in the health care field.  Two industrial behemoths in GE and EMR.  And four gigantic energy companies which are currently beaten down in share price due to oils decline.  The two semi-outliers would be the insurer, AFL, and the international cigarette maker, PM.

Going forward I'd like to get some more consumer staples and health care companies added to this club and moved up into the higher clubs.  Consumer staples are very consistent in nature.  While they don't normally give huge increases each year, the consistent 5-8% increases year in and year out, even through the bad times, makes them huge winners in the long run.  And health care companies because they are routinely seeing price increases that are 3-5 times the rate of inflation.  Plus, the population aging will be a huge tail wind for the entire sector since unfortunately older bodies tend to break down more which means more medical treatment.

The $200 Club

$200 Club
KOTGTO
MCDPM
KMICVX

Unfortunately the $200 Club is cut down to just 7 companies and with much less sector diversification.  We see a repeat with two energy companies.  Two consumer staples, but we lost one of our retailers.  That international cigarette maker is still around.  As well as one of the largest real estate companies.  Much like the $100 Club I'd love to move some of the consumer staples and health care companies on up into the $200 Club.

The $3/400 Club

$300 & $400 Club
KMI

Well, that run ended quickly.  Kinder Morgan is the undisputed champion when it comes to providing dividends for my FI Portfolio.  It's the only member of the $300 Club and the $400 Club.  My position in KMI currently provides almost $430 in annual dividends which is fantastic.  Although I do have quite a bit of exposure to just one single company with KMI providing around 7% of my annual dividend income.  I love the company and the fact that they give exposure to the energy industry but aren't as effected by the swings in price that oil and natural gas tend to go through.  Plus the company has routinely given investors a high current yield and double digit annual dividend growth.  So there's a lot to like here but with my exposure to energy and large weighting to KMI by itself I don't plan to add shares at any time in the near future.  Assuming Mr. Market doesn't make me an offer I can't refuse.

Near $100 Club

$90+
T
WBA
CMI
VZ
NOV

I do have a few companies that are very close to moving up into the $100 club, but unfortunately none of my positions are that close to moving up into the $200 or $300 Clubs.  WBA and CMI are both very close and should cross over with their next increases.  Sadly though both companies have recently announced increases so I'll have to wait a year for the next one.  At current valuations I don't have plans to add to either position at this time.  The two telco giants in my portfolio are pretty close to crossing into the $100 Club but would most likely need another purchase because they're dividend growth is quite low.  They're 2-3 dividend increases away from joining the club without further purchase of shares.

Conclusion

Overall I like the mix of the companies in the $100 Club but the drop off in members from there to the $200 Club is pretty stark.  And even more so as you move up the club list.  Just one member in the $300 and $400 Clubs is pretty disappointing.

For the rest of this year I have two main goals.  The first being to add more consumer staples and health care companies to my portfolio.  Two such companies that I'm considering at current valuations are The Hershey Company (Full Analysis Here) and Johnson & Johnson (Full Analysis Here). I'd also really like to add McCormick & Company (Full Analysis Here) to my portfolio but the valuation just seems too rich here.  I'll still add to other sectors but if I had my choice and all valuations were equal I would add mainly to consumer staples and health care.

My second goal is to focus on adding to current positions rather than continually adding new ones.  Don't get me wrong it's fun to learn about new companies and research what makes them so great, but there's only so many companies you can have in your portfolio while still being able to adequately manage it.  The good thing about dividend growth investing is that the bulk of the research and homework is done upfront and then after that it's just monitoring to make sure nothing major is changing.  So the annual portfolio maintenance doesn't increase that significantly with a new position.  However, there's still something about determining a core set of companies that I feel will offer the most consistent dividend growth over the long term and help me to reach my crossover point.

I can't wait to get a holding into the $500 Club.  That's a huge milestone for a position.  Most importantly though I want to focus on adding to my current positions to move them up into the higher club levels.

How many members of your portfolio are in each club level?  Do you have a core group of companies that make up the bulk of your portfolio?  Or are you spread more evenly across all positions?  

Image courtesy of Stuart Miles on FreeDigitalPhotos.net.

10 comments:

  1. Nice mix of stocks providing you with income over the year. Good to see some really strong names in the $200 and $300/400 club. That a nice chunk of money coming in from KMI...gotta love that company! I dont have anything over $220 or so per company dividend annual dividends...hoping I can join the 300,400 and 500 club in the coming years

    Thanks for sharing
    R2R

    ReplyDelete
    Replies
    1. R2R,

      The $200 Club is pretty well diversified but I really need to work on moving some more companies up to the $300 and $400 Club. KMI is a great company but 7% of my dividend income is exposed to just one company which is a bit high for my liking. Lots of positions I really want to build up but I missed the cheaper valuations of just a couple weeks ago which is a shame. I got stuck moving cash around between accounts since I had opened a new brokerage account.

      Thanks for stopping by!

      Delete
  2. Thanks for sharing JC. I like the plan. It's nice to have more skin in the game for each position and even nicer to be receiving more income from them. I like have bigger positions and will do the same. I wish you and the family well and best wishes my friend. Take care.

    ReplyDelete
    Replies
    1. Hustler,

      It'll be great to move some positions up into higher clubs. Unfortunately KMI is way ahead because the yield is consistently high and the growth is as well. Not a bad problem to have though. I really want to build up my positions because I feel that I'm stretched probably a little bit too thin and there's still at least another 5-10 companies that I really want to add to my portfolio once the valuations come into a better spot. Mainly the consumer staples but there's still lots of other companies including some insurers, industrials, and some more CDN banks.

      Thanks for stopping by and for the continued well wishes. It's been a rough day for Luke but he's had worse and he's still here fighting.

      Delete
  3. You have worked up a decent portfolio there! I like that you have spread your risk out on that many companies and that will slow you down a little bit to reach the $500 club. However it is good to spread the risk as long as you have the time to keep on top of all your positions. That time is a luxury I, personally don't have at the moment so I've concentrated my portfolio to only 12 companies. That is just so I can stay on top of the reports and easier to follow. 3 of these 12 companies make out 47% of my total portfolio, hence they are all 3 in the $500 club and one of them in the $599 club :) Have a look at it if you want: http://mrlifedesigner.com/portfolio/ (Not sure how you feel about links in your comments so go ahead and remove it if it is not allowed)

    I've set a goal not to have a position that makes out over 20% and no less than 5% just to help the concentration and make sure that the companies I buy are of absolute top quality. Have you ever considered any rules like that for your portfolio?

    ReplyDelete
    Replies
    1. Life Designer,

      I don't have any set rules about my portfolio as far as position size although I should probably come up with some. While my portfolio is a good size at about $200k, it's still much smaller than where it will need to be in order for me to be financially independent so I'm not overly concerned about position weighting currently. I'd like to stick with just the companies I own already but I can name another 5-10 companies that I would love to add to my portfolio still.

      That's a very concentrated portfolio and personally a bit too risky for my liking. But I also have the luxury of more time due to my day job allowing me the ability to read up on companies while I work so it's easier for me to keep up with them.

      I'll have to go and check out your blog to see what you got going on. Congrats on a soon to be $600 club member and on your $500 club members. That's pretty impressive.

      Thanks for stopping by!

      Delete
  4. Interesting way to look at your portfolio. Its all about dividends, right!

    ReplyDelete
    Replies
    1. Ferdi,

      Obviously this isn't the only factor that goes into my portfolio decision making, but it's a good way to look at where my portfolio stands.

      Thanks for stopping by!

      Delete
  5. Maybe with the dividend cut i think KMI might be back in 100s or 200s club

    ReplyDelete
    Replies
    1. desi,

      Sadly the KMI cut dropped them way down and now they're off the list entirely since I closed my position. All the best.

      Delete