Monday, February 29, 2016

8 Key Takeaways from Berkshire Hathaway's 2015 Shareholder Letter


Over the weekend Berkshire Hathaway released their 2015 Annual Report and the most sought after Letter to the Shareholders from Warren Buffett.  Buffett's investment and business track record is truly amazing with 19.2% annualized gains in book value and 20.8% annualized gains in share price from 1965-2015.  Compared to the S&P 500's 9.7% annualized return that is an outstanding track record of beating the market.

Every year this nondescript looking annual report is likely the most coveted by investors.  Buffett shares his investing and business knowledge and has a knack for putting it into the simplest terms.

Saturday, February 27, 2016

Weekly Roundup - February 27, 2016


The layoffs at my employer weren't quite done last week and more were carried out this week as well.  Luckily I've still escaped the layoffs but it sure is a scary time to be in the "patch".  I still expect at least one more round of layoffs if oil prices persist in the $30's or even drift lower over the next couple months.  But that just reinforces the need for us to pile up some cash in the meantime and start brushing up the resume to look for other potential jobs.  It's a shame really because I like the job a lot since I get to manage myself while at work but who knows what the future will bring.

On a positive note oil, well WTI, did show some improvement over the week but I'm sure the volatility is far from over.  The S&P 500 actually showed a decent week of gains with a 1.6% improvement from last Friday's close.  With oil and the S&P 500 showing a gain this week my portfolio and net worth sure did enjoy the ride back up.  But the thing I love seeing most is dividends hitting my account and dividend increase announcements.  I only got one raise this week but I can't really complain since I've received 9 so far this year and many more on their way.

We finished up the last well for the rig that we were drilling on which is a shame on many fronts.  I hate to see yet another rig being stacked due to the downturn and especially one that is only about 1.5 hours from my house.  The good news is that I've escaped this round of layoffs thus far, as I mentioned earlier, and as of now I have a job lined up to go to in a week.  It's been a long time since I've had that much time off of work and I hope to get a lot of things done both around the house and with writing.

Friday, February 26, 2016

Dividend Growth Investing at Work - Banking on Canadian Dividends


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

Wednesday, February 24, 2016

Calling All Starbucks Lovers


Starbucks Corporation (NASDAQ:SBUX) is a Dividend Challenger with 6 consecutive years of dividend growth. The future growth prospects for this company are phenomenal with high-single-digit same-store sales growth and plans to open 1,800 additional stores during 2016. Management is even testing alcohol sales in select locations to make additional use of the existing stores to increase profit per store even more.

Since I initiated a position in the company back in April 2014, Starbucks has been the top performer for my portfolio as judged by internal rate of return. The current yield is a bit low for many dividend growth investors, but the growth more than makes up for it. Thus far, my dividend income from Starbucks has increased over 50%, thanks to consistently high dividend growth.

There's a lot to like about Starbucks the business. However, Starbucks the stock doesn't look intriguing to me at the current price levels. Identifying excellent companies is easier than finding them trading at excellent valuations. However, that doesn't mean that you have to ignore the company and hope for a market selloff before initiating a position.

Continue reading the article on Seeking Alpha.


You can check out more of my stock and valuation analyses on my Stock Analysis page.

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Tuesday, February 23, 2016

Exxon Mobil's Dividend Could Be In Danger


Earlier this month, Exxon Mobil (NYSE:XOM) reported Q4 2015 earnings which, as expected, looked ugly considering the large decline in the price of oil over the last one and a half years. Exxon Mobil has long been one of the largest repurchasers of shares, spending a net of $89.74B on share buybacks during the 2010 through 2015 period. However, during the Q4 earnings release, management stated that share buybacks were being halted, presumably to preserve cash.

Given the current state of the "patch", I don't think you'll find anyone that would argue with management's decision. Management was left with three choices:
  • Reduce/stop share buybacks 
  • Cut the dividend 
  • Leverage up the balance sheet even more 
Due to the large negative stigma associated with a dividend cut, that wasn't a likely option or even necessary just yet.

The balance sheet had already seen a significant deterioration, with total debt increasing over 150% between the end of fiscal year 2010 and the end of fiscal year 2015. Adding additional debt in order to cover both share buybacks and the dividend didn't make sense.

That left door number three: stop the share buybacks. It's a quick and easy way to preserve cash and doesn't carry anywhere near the same weight in the eyes of shareholders as a dividend cut.

Continue reading the article on Seeking Alpha.


Monday, February 22, 2016

Dividend Growth Investing at Work - 54 Classic Dividend Increases


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

Sunday, February 21, 2016

Weekly Roundup - February 21, 2016


The markets surprisingly had a solid week with the S&P 500 gaining over 2.8%.  Who knows if the trend will continue or if we'll see a return to big losses this next week.  But what I do know is that my dividends keep rolling in and even increasing.

The oil field continues to be crushed by low oil prices and unfortunately my employer started another round of layoffs.  This is at least the third round that I know of over the last 12-14 months so it's quite a scary time.  I was expecting another round of layoffs although I thought it might not be until March or April, but February it was.  That's all the more reason to stock pile cash over the coming months.

Friday, February 19, 2016

Dividend Growth Investing at Work - 43 Years of Dividend Growth


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

Dividend Growth Investing at Work - 30 Years of Dividend Growth


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

Thursday, February 18, 2016

Starbucks: Buy the Coffee, Wait on the Shares


Starbucks Corporation (NASDAQ:SBUX) has been the top performer in my portfolio compared to the internal rate of return for each position. I initiated a position in the company in April 2014 and have no complaints with the returns. In that time I've received a dividend return of 2.75% to go along with 53.9% cumulative dividend growth. Price appreciation has come in at 58.4%, giving a total return of 61.2%. That's good for an annualized return of 30.6%.

I've been quite happy with the growth and subsequent returns since starting a position in Starbucks. However, those are historic returns and have no bearing on whether the company is attractive at current prices. Since hitting a 52-week high of $64.00 in October 2015, the share price has retreated back to $55.86 as of the close on Friday, February 12th. That's a decline of 12.7% and piqued my interest in updating my valuation on the company.

Starbucks is a Dividend Challenger with 6 consecutive years of dividend growth and a 5 year dividend growth rate of 30% annually.

Continue reading the article on Seeking Alpha.


You can check out more of my stock and valuation analyses on my Stock Analysis page.

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Tuesday, February 16, 2016

Net Worth Update - January 2016


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

Considering how bad the markets were to start off 2016 I consider January's net worth fluctuation a win.  The S&P 500 was down around 5.1% during January which was a big drag on my net worth.  The bulk of my net worth is tied to the performance of the markets so as they go so goes my net worth.  Although with a long term investment horizon the changes are just noise over the short term and are typically best to be ignored.  Of course receiving $278.50 in dividends as well as three dividend increases sure helps to ease the sting of market volatility.  Dividends are great because they are always a positive portion of return.

For the month our net worth declined by $17,621.88.

Sunday, February 14, 2016

Weekly Roundup - February 13, 2016


The craziness of the markets right now doesn't show any signs of ending.  Last week saw the S&P 500 have big fluctuations and was down 3.7% at it's worst from the close of last week.  Then came Friday with a huge positive day where the S&P 500 added 2.0% ending the week down just 0.8%.  The market has no clear cut direction right now but that's great for investors because many companies have seen their share prices decline and increasing their yields while opening up a lot more long term value.  I have no clue what the next week will bring, but if the start to the year is any indication of what to expect we could be in for another wild ride.

I'm working my way through The Outsiders (affiliate link) right now which is a great book that profiles a handful of CEOs that have had truly amazing returns for their investors.  I hope to get a book review out about it later this month.

Friday, February 12, 2016

Dividend Growth Investing at Work - Pouring Out Larger Dividends!


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

Wednesday, February 10, 2016

Shifting Focus


Change is about the only thing that we're guaranteed in life.  As many of you know the last year and a half has been a time of big change for my wife and I.  We went from the excitement of her being pregnant, to finding out that our son had a very severe case of CDH, to my wife quitting her job to be with our son every day, to him battling for his life for 8.5 months in the hospital, to lots of medical bills, to me having to take a cut in pay due to the slowdown in the oil field and to me working much less than usual which meant less income.  And that's just the changes I can think of off the top of my head.

As such, financial matters weren't our real focus throughout much of 2015 as there were much bigger issues to tackle.  2015 could be defined as a year of treading water financially to say the least.  We made very little progress on our journey to financial independence, but honestly we were just happy that we were on solid enough financial ground that we were able to tread water and not drown.  We had finally gotten on top of all of our finances by the end of 2015 after neglecting many of the issues that had slipped through the cracks throughout the year.

We were hoping that 2016 would bring much calmer waters, but it looks like that won't be the case.  I'm excited to announce that my wife is pregnant again and we are expecting another child on July 11th.  While 2016 looks to be another transition year for our finances we're just hoping that everything turns out fine with our new child.  Everything was "normal" during the last pregnancy until the 20th week ultrasound which my wife will reach later this month.  We don't really expect there to be any issues, but then again we didn't expect there to be any issues the first time.



Tuesday, February 9, 2016

Calling Up Visa For Cash

Image result for visa logo

Step one in the investment decision process lies in identifying companies that are high quality. Whether that's through their moats, their operational excellence, their cash generation, their growth prospects, their credit ratings, their dividend or any other factors the high quality companies are the source of long term investment gains.

Step two in the investment decision process is where you determine what price you are willing to pay for shares. This is a trickier step because it generally entails making assumptions about future growth and is likely the step that has the most variance among investors.

Some use a ratio of the current price to the 52 low and 52 week high. Others use comparisons to traditional valuation multiples such as price to earnings, price to cash flow, price to book value, dividend yield or just about any other per share financial metric. Still others will use some kind I estimation of future dividends or cash flows of the company and discount them back to the present. Personally, I use a combination of many of these but whatever valuation method you use the end goal is a price target.

Once you've identified a price target you can now move on to the actual purchase of shares, of course there's still plenty of choices for that as well. You can set up a limit order to purchase the amount of shares of the company at a specific price and wait for the price to reach your price target. There's also the options market which is a valuable and often overlooked opportunity to generate extra income.

Continue reading the article on Seeking Alpha.

Also make sure to read my recent analysis of Visa on Seeking Alpha.


You can check out more of my stock and valuation analyses on my Stock Analysis page.

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Monday, February 8, 2016

Visa Inc.: Cash Is King, But Credit's Good Too

Image result for visa logo

Visa Inc. (NYSE:V) is a wonderful company that few can argue about its quality as a company. The business model is excellent. Just charge merchants a percentage of every transaction with no liability for the customers' ability to pay. It's essentially a financial toll road that has excellent growth prospects moving forward.

I initiated a position in the company in August 2013 and have been more than pleased with the results as they are the 5th best performer in my portfolio as judged by internal rate of return. In that time I've received a dividend return of 1.60% and share price appreciation of 48.05%. That's good for a total return of 49.65% with an internal rate of return of 22.49%. As a dividend growth investor the even better news is that the dividend has been increased by 69.70% since I initiated the position.

Visa is a Dividend Challenger with 8 consecutive years of dividend growth. At a price of $71.56 the current yield is 0.78%.

However, that's what it's done for me in the past and has no bearing on the future. Is there any value in the shares at the current prices?

Continue reading the article on Seeking Alpha.


You can check out more of my stock and valuation analyses on my Stock Analysis page.

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Saturday, February 6, 2016

Weekly Roundup - February 6, 2016


Another week down and another crazy week for the stock markets.  The S&P 500 had the following returns this past week -0.04%, -1.87%, +0.50%, +0.15% and -1.85%.  All told it worked out to a 3.10% decline for the week.  It appears that January's poor month has spilled over into February, well at least the first week.  It looks like the markets are being controlled by two major themes/rumors.  One being oil which continues to be a drag with its relentless decline.  And the second being the slowing of the global economy and possibility of a recession coming.  Although as dividend growth investors it's important to focus on what really matters: dividends.  Your dividends don't fluctuate just because the markets are jittery.  If the companies you own are in sound financial shape and even growing operations you should use market fluctuations to your advantage and just collect your dividends while you wait for opportunities.

Thursday, February 4, 2016

Data Mining The CCC List: Wrap Up


Company and sector allocation shouldn't be a concern for investors that are just starting out on their investment journey. However, once a portfolio reaches six figures I think allocation needs to start coming into play. Sector allocation shouldn't be the be all and end all of portfolio construction; however, paying some attention to it is part of the portfolio building process. If you don't believe me just ask how investors that were overweight energy over the last year or the financials in 2008/9 feel about it in retrospect.

Each component of the series can be found here.

Part 1 - The Challengers 

Part 2 - The Contenders

Part 3 - The Champions

Today I want to wrap things up by looking at the CCC list in its entirety and compare my current portfolio to see if there's any changes that I should/could make in order to optimize my dividend growth portfolio. By applying a few filters to the CCC list we can get a general overview of sector allocation among its members to help with allocation decisions for our own portfolios. I wouldn't recommend that anyone try to reach a target allocation based on the CCC list or any other group of stocks. A portfolio's sector allocation is just one concern of the individual investor and should be tailored to meet their own risk tolerance.

Continue reading the article on Seeking Alpha.


Image provided by renjith krishnan via FreeDigitalPhotos.net

Wednesday, February 3, 2016

Dividend Growth Investing at Work - 58 Years of Dividend Growth


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

Tuesday, February 2, 2016

Data Mining The CCC List: Part 3 - The Champions


This is Part 3 of my series examining the CCC list in regards to portfolio allocation. This article will cover the Dividend Champions as found on the CCC list provided by David Fish that was downloaded on January 12, 2016. Once again, thank you to David Fish for maintaining this vital resource.

Part 1: The Challengers 

Part 2: The Contenders

The Champions are the creme de la creme. In order to reach Champion status these companies had to raise their dividend payouts each year for the last 25 years. That's a huge feat as these companies have been able to consistently raise dividends through all sorts of market and economic cycles. A 25-year streak encompasses the financial crisis in 2008/9, the dot-com boom and bust of the late 1990s/early 2000s, September 11th and a whole assortment of other economic catastrophes of the day.

All charts/images reference data found in the CCC Spreadsheet downloaded on January 12, 2016.

Continue reading the article on Seeking Alpha.


Image provided by renjith krishnan via FreeDigitalPhotos.net

Monday, February 1, 2016

Dividend Update - January 2016


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