Thursday, March 31, 2016

PepsiCo: Too Pricey?


PepsiCo Inc. (NYSE:PEP) is a giant in the consumer staples space. For fiscal year 2015 PepsiCo managed to sell $63 B worth of beverages and snacks. There's 22 brands under PepsiCo's corporate umbrella that each generate over $1 B in annual sales. That's carbonated soft drinks, orange juice, tea, coffee, chips and more.

In February of this year the Board of Directors approved an increase to the quarterly dividend of 7.1% to $0.7525. PepsiCo is firmly implanted as a Dividend Champion and has a 44 year streak of growing dividends to investors.

Every $1 invested in PepsiCo 10 years ago has compounded at a 8.6% rate and is now worth $2.28. Every $1 invested 20 years ago is worth $5.27 good for 8.7% annual growth. Stretch it back to an investment 30 years ago and it's compounded at a 13.3% rate and is now worth $42.85.

I initiated a position in the company in late 2013 and since that time I've received 3 dividend increases growing my income from those first shares by 32.6%. Through the closing price from March 28th, $100.98, I've earned a 14.0% internal rate of return on my PepsiCo investment. So I'm more than pleased with the results I've had with investing in PepsiCo.

Continue reading the article on Seeking Alpha.


Wednesday, March 30, 2016

Who's Next: In Search of the Next Dividend Champions


Dividend Champions are the creme de la creme. A company that reaches Champion status has to increase dividends for at least the last 25 years. That's a major accomplishment when you think back to all of the economic situations the companies have been through. There's the end of the savings and loan crisis of the late 80's/early 90's, the technology boom and subsequent bust, 9/11, the housing bubble and its bursting which led to the financial crisis and a whole host of other economic maladies that have come and gone as well. Through them all the Champions have been able to raise their dividends year in and year out.

There's currently 7 companies that are on the threshold of earning their Championship belt. These 7 companies have all increased dividends for 24 years and assuming everything goes right should gain the title of Champion at the end of this year. Who's next to become a Champion?

I wanted to highlight these companies in order to give them their props for being on the cusp of something truly special. These companies all make for great candidates for further research based on their history alone; however, I've also included some valuation metrics as well as my thoughts on the companies and their respective outlooks.

Continue reading the article on Seeking Alpha.


Image provided by khunaspix via FreeDigitalPhotos

Tuesday, March 29, 2016

Is Johnson & Johnson Overvalued?




Johnson & Johnson (NYSE:JNJ) is a truly excellent company that can be found in many portfolios. It currently makes up 4.5% of my taxable dividend growth portfolio and for good reason: consistency. Johnson & Johnson has managed to grow it's dividend for 53 consecutive years and if history is any guide they'll be announcing another raise in one month's time. This plants them firmly as one of premier Dividend Champions.

Every $1 invested in Johnson & Johnson a decade ago has grown at a 9.29% annualized rate to a value of $2.43. An investment two decades ago has grown 10.40% annually and is now worth $7.25. A $1 invested three decades ago is now worth $61.16 which is good for a 14.69% annualized rate.

It's been nearly 4 months since I last analyzed Johnson & Johnson and its investment potential (Previous analysis can be found here). At the time shares of Johnson & Johnson had risen around 7% in a rather short time period to around $101. We've seen another 6.5% gain since February 11th removing much of the value proposition.

Shares of Johnson & Johnson closed trading on March 24, 2016 at $108.31 providing investors a current yield of 2.77%.

Continue reading the article on Seeking Alpha.


Sunday, March 27, 2016

Net Worth Update - February 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.

January was brutal for the markets with the S&P 500 declining 5.1%.  The blood-letting continued during the first half of February declining another 6.7% through the first 11 days.  However, things started to reverse to close out February and the S&P 500 ended with just 0.4% decline for the month.  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 over $300 in dividends and a whopping 6 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 increased $809.77.

Saturday, March 26, 2016

Weekly Roundup - March 26, 2016


Another week down but this time I finally got the call to head back to work.  Having the month off was great but it really puts a hurt on my income.  The even worse part about being home that long is that it makes it so much harder to leave again for work.  As you can imagine when your typical schedule has you home for a week, tops, it gets really hard to leave when that stretches out to a month.  Since we still haven't reached financial independence, it's back to the grind stone.

Friday, March 25, 2016

Dividend Growth Investing at Work - 38 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?

Wednesday, March 23, 2016

Dividend Growth Investing at Work - 85 Increases in 23 Years


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, March 22, 2016

Minimum Wage Jobs Suck



Grinding away at some thankless job in fast food asking if someone wants fries with their order.  Or working in the nearest grocery store or big box retailer restocking items or running the cash register.  We've all done it at some point and I think it's safe to say that none of us want to ever go back to working for minimum wage.

Let's face it:  Minimum Wage Jobs Suck

Obviously the money isn't that great when you're working a minimum wage job.  Assuming a 40 hour work week every week of the year you're looking at grossing just $16,847.17 at the average minimum wage rate of $8.10 across the United States.  That's in exchange for 2,080 hours of your life every year.  There's a reason it's called "working for peanuts" because that's about all you can afford to buy.

I don't think anyone's surprised by the fact that there isn't much to be found in the way of financial rewards through minimum wage jobs.  However, the income is just one reason why minimum wage jobs suck.

Saturday, March 19, 2016

Weekly Roundup - March 19, 2016


Well another week gone and another week home.  Even though oil prices have been climbing higher I haven't seen an uptick on the exploration side.  Although I don't really expect to see too much of an increase because even in the high $30's/low $40's many fields aren't profitable even with the lower exploration costs and better efficiencies.  And it's even worse when you factor in the large number of "DNC", drilled not completed wells, that have been drilled over the last 12-18 months.  While I love getting to be home it's been almost 3.5 weeks now so I'm more than ready to get back to work.

Did the markets even dip to start the year?  It certainly doesn't seem that way now.  The S&P 500 added another 1.35% over the week.  As of Friday's close it's actually climbed back higher than it closed out 2015.  What a crazy ride the first 2.5 months of 2016 have been.  Within the first 3 weeks of the year we saw at 10% decline, a re-test of the lows a couple weeks into February and we haven't really looked back since.

It's when we have market action like we've seen so far to start the year that we all need to lock things into our mind.  With the rapid decline to start the year I don't think you could find one analyst/talking head/trader that was "bullish" on the markets over the short term, yet here we are just a little while later and the mood is different.  This just reinforces the fact that no one knows what the markets will do in the coming days, weeks or months.  Focus on finding quality companies with competitive advantages.

Friday, March 18, 2016

Recent Sell


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

Wednesday, March 16, 2016

Dividend Update - February 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.

Monday, March 14, 2016

Dividend Growth Investing at Work - 100+ Years of Dividends Without Reduction


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?

Saturday, March 12, 2016

Weekly Roundup - March 12, 2016


Despite some rocky moments during the week the S&P 500 closed higher with just over a 1% gain for the week.  That makes 4 straight weeks of gains after the first month and half saw went almost straight down.  Even after all of the disruption in the stock markets to start the year the S&P 500 has now clawed its way back higher and sits just 1% off the close from 2015.

It's great to see the markets moving back higher while I'm having to sit on the sidelines and even better to see is oil, via WTI, climbing higher as well.  I don't know if the $38 handle will be maintained and wouldn't be surprised at all to see the low $30's at least one more time.  However, for work it's good to see oil near $40.

Thursday, March 10, 2016

Becoming Fiscally Fit


Getting fit takes planning and patience.  Whenever you want to make a change you have to find out where you are, decide where you want to be and then come up with a plan to get there.  Each step is crucial in the process to becoming fit.  That goes for both physical and fiscal fitness.

The basic formula for weight loss is calories expended > calories consumed.  Similarly, the basic formula for financial success is Income > Expenses.  Without that formula being true you can't save money which means you can't invest which means you can't build wealth.  For the past five years or so my wife and I were doing extremely well.  We were DINKs (dual income no kids) with solid income, relatively low expenses and excellent free cash flow for investing.

However, we've let things get a little bit out of control with some of our spending, mainly purchasing a little bit more house than we need and purchasing a new car for my wife.  Life happened as well over the last 1.5 years and our debt is now around $50k excluding our house.  Of course the downside to having debt is that it increases your required spending each month.  Our monthly debt payments, excluding the house, come to about $1,100 which is way above our comfort level.

Saturday, March 5, 2016

Weekly Roundup - March 5, 2016


What a week for the markets and oil!  The S&P 500 added almost 70 pts or 3.5% and closed just shy of 2,000.  The S&P 500 is now down just 2.2% since the start of 2016.  Oil climbed higher throughout the week as well ending the week above $36 with a 5% gain on Friday alone.

While it's great to see the markets rebounding and my various portfolios climbing along with it, the thing that really gets me going is seeing dividends hit my accounts and getting raised.  This past week two of the companies I own gave me a pay raise which is awesome.  That's now 11 increases among my holdings thus far this year which is absolutely wonderful.  Especially when you add in that I had to take a pay cut from my day job last year, but the majority of the companies I own continue to grow their dividends.

Thursday, March 3, 2016

Dividend Growth Investing at Work - Discounts to 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, March 2, 2016

The Double Edged Sword


When it comes to capitalizing a company management has two options: equity or debt.  If you look across the publicly available companies you'll find all sorts of mixes in capital structures.  Some companies like Visa (V) (Analysis Here) are fully equity financed and carry no debt.  Other companies like Clorox (CLX) (Analysis Here) push their debt and leverage to the max.  As of the end of 2015 Clorox had over $9 of long term debt for every $1 of equity.  You'll also find the majority of companies somewhere in between those two with a healthy dose of leverage.

Debt is commonly known as a double edged sword meaning it cuts both ways.  Debt can help when things are going well and provide much needed capital to businesses to allow them to grow.  This can juice returns during the good times.  However, it can also be a drag on companies whenever operations begin to falter or growth slows.

When investing in companies it's important to look at the capital structure to see how things stand and the direction they're heading.  Debt is okay when it's used prudently; however, you have to be vigilant and make sure that it's appropriate given the business model.

Today I wanted to take a look at the effect that debt can have on the results of a hypothetical company.

Tuesday, March 1, 2016

Dividend Growth Investing at Work - Higher Dividends from Our Neighbor to the North


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?