Tuesday, November 20, 2018

Recent Sale / Recent Buy, November 2018

Caffeinated Gremlin here to discuss a recent sale and buy (I never used to drink coffee, then I became a dad... so it happens sometimes).  I have mentioned the sale before, but I am going to give it a brief discussion here.  The proceeds of the sale, combined with new capital, fueled my new stock purchase.  I like to think of the new stock purchase as my Thanksgiving Day gift, to myself.  The spirit of the holiday is being appreciative for everything around you, so I am just showing some love to the portfolio that will build wealth and passive income for me.

The Sale:

I sold out of my General Electric (GE) position about two weeks ago.  GE.  GE has been on a spectacular downward slide, presenting a cautionary tale for both investors and company executives.  The first lesson is to not over expand beyond logical competencies.  The second is do not load up on debt or buy back shares at terrible valuations.  The third is that any company cannibalizing its holdings to pay off debt has major problems.  GE did all three.

Those lessons are generalizations to an extent, but think about a couple of ludicrously stupid red flags that GE presented the world.  The biggest being flying two corporate jets, you know in case one breaks down.  This company is literally known for its jet engines, so this totally inspires confidence.  GE's aviation group, along with healthcare, is one of their strongest arms; but still it is so dumb.  Then the CEO claimed he did not know about the practice; good job.

The other issue was that of GE's TV ads.  Their ads featured a young girl who has a knack for engineering and grows up to be a GE engineer OR a guy explaining all the coding he does for GE locomotives and wind turbines.  Why on earth is a company that sells jet engines, wind turbines, power systems, and large health machines advertising on regular TV?!  People who are buying those items are not influenced by watching TV.  "Ohh I like the GE turbofan, lets put that on our next plane," said Joe the Aircraft designer - approximately zero times.

If you're going to do things like that, what are the odds your company is installing continuously running toilets in the C-Suite so they can flush money down the drain faster?  So I sold out, and put the cash in a better place.

The Purchase:

Yesterday*, I added to an existing position by purchasing shares of Eastman Chemical (EMN) in my taxable account.  I bought 13 shares, with a total cost of $1,067.75 ($82.12 / share, includes commission).  The current yield is 2.7%. For a detailed summary of their history, etc. please visit: EMN's Seeking Alpha Profile.  This is my second purchase of EMN this year, and I am now at approximately 6% of my portfolio in basic materials between EMN, SON, and WLK.  At this point I am maxed out in this sector, but its one that is clearly underrated.  For all the reasons in that earlier entry, plus a better price, I added to EMN.  My total share count now stands at 25 for EMN.

This purchase will add $29.12 to my forward 12 month dividend income, the sale will decrease my forward income by $21.52.  Net is $7.6 gained.

I will update my portfolio page at the end of the month.

What do you think of EMN?

Happy Thanksgiving!
- Gremlin
- Long EMN, SON, and WLK
* - had I waited a day, the price would have been even better.  Time in, not timing, the market.

Wednesday, October 31, 2018

October Review / November Preview, 2018

Busy Gremlin here to chat about October and November.  Work is ramping up for me, which is a good thing.  I am staring down a new work title, and the new assignments that come with it.  Normally this thing would receive a sigh, but in this case it should be hugely positive in terms of both my day to day and my bottom line.  On the home front the boy is moving a lot, which is great for him and my daily step count.  As a parent there is never a night off and rarely any down time.

While my step count gradually increases, the stock market has taken a recent nose dive.  I think this has been a long time coming, no growth has been historically maintained forever (even if China thinks they can do it today).  Sure enough, history shows this repeated boon / bust business cycle over and over again.  There are always numerous causes for success or failure, the only thing that seems to change is new triggers that cause the next economic downgrade.  Anyways, time to start taking advantage of these prices, especially in the coming month(s).

October:

This month I made one purchase adding by adding acquiring shares of AT&T (T) in my taxable portfolio.  I also sold all of my shares of General Electric (GE) at a loss with their announcement of a dividend cut (essentially all but elimination).  My GE move merits a longer write up, but I don't have time.  So suffice to say, GE is beyond frustrating and reminds me of a train wreck.  "Since the dawn of train man has loved train wrecks" - save for if you are invested in that wreck.

Last month I brought in a total of $95.72 in dividends ($76.22 taxable, $9.5 Roth, and $10 IRA).  This is an increase from last year (68.22 total) by 40%.

In terms of dividend increases, I realized* three raises from Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CM), and Realty Income (O).  The increases are from 4% to about 19%.  I have now realized 43 raises thus far this year.

Next month I will realize three raises from American Express (AXP), Royal Bank Canada (RY), and Verizon (VZ).  The increases are from about 2% to about 11%.

* I only count increases when realized, because until that money is delivered any statements or declarations are simply conjecture.

November:

The mortgage continues has started to see more cash flowing towards the principal - not a huge number, but every little bit counts. Our debts currently outstrip our assets (I choose not to count the house as an asset).  Outside of our house, we still have very low interest auto debt (1.9 and 1.5% for our cars).  My car is getting paid at doublish time, and I suspect I can finish it off within 10 months from now - which will be nice because I plan on keeping that car for 20 years.  Debt is being eliminated, and we are still building and assets.  A second income goes a long way.

November should be slow, and the holidays should help that.  My next purchase will be in November, I hope this market maintains its current unpredictable course, since who doesn't like bargain?

Next month should produce around $265 in dividends, which is a 10% YOY increase.

My portfolio page is currently up to date.

Hope everyone has a great November.
- Dividend Gremlin
- Long all stock tickers mentioned, except GE

Wednesday, October 10, 2018

Recent Buy, October 2018

Phone A Friend Gremlin here to discuss my most recent buy.  Recently a friend of mine got to be on Who Wants to Be a Millionaire.  The main shock for me is that someone is still making new episodes of that show.  Having watched him play, I wish he could have done better, but at least he got to have a good time and win some money.  Definitely seems like something worth trying, who knows maybe I will sign up for it too!

Moving on from that earned game show cash, I recently made another stock purchase.  This means I have been able to purchase shares once each of the last four months counting October.  This is the goal, to be able to add capital and increase my bottom line in terms of future taxable income.  I am still relatively early in the process of accumulating a passive dividend income, but still each action is exciting.  Indeed it feels like a game as well, similar to a long haul strategy games such as Civilization, Caesar, or Sim City.  Each new addition provides more cash to buy more shares.  That comparison reminds me that this is a meaningful venture that can also be fun in addition to producing real value.

Last week, I added shares of AT&T (T) in my taxable account.  I bought 30 shares, with a total cost of $1,027.51 ($34 / share, includes commission).  The current yield is 5.95%. For a detailed summary of their history, etc. please visit: T's Seeking Alpha Profile.

I already own T in my Roth account and Verizon (VZ) in my IRA.  I like that T will be a fully integrated communications company.  The future of both companies, despite current debt and headwinds, is promising.  People just rely on these entities more than they realize, and that reliance will only grow over time.  I work hard on a personal level to disconnect, but even for someone who works at it - it is hard.  Most people are plugged in all the time (if you are here reading this, think about how and why), and they don't even realize how dialed in they are.

Also being plugged into the FIRE movement (online, because where else?), we know how to cut these bills - but most still don't and even then most cut rate companies pay royalties or in some cases are outright owned by the big players.  Also the issue of spectrum ownership will be a huge issue within a few decades, and that will be interesting to witness.

This purchase will add $60 to my forward 12 month dividend income.

I will update my portfolio page at the end of the month.

What do you think of T?

- Gremlin
- Long T and VZ

Monday, October 1, 2018

September Review, October Preview, 2018

No Free Weekends Gremlin here to talk about September with an eye on October.  Just when it seems life might slow down a little bit, it speeds right back up.  When I was younger that was not a problem, and in terms of being able to handle it all, it still isn't.  However, with investing and thinking about expenditures, while maintaining your sanity can be a serious challenge considering all the other stuff that is happening.  In the meantime, the focus is on baby proofing the house - as the little guy has figured out how to move and stand.  At least he has not figured out how to talk back yet!

Getting on with the show, this month I came up just under $400, which is unfortunate.  Dividend growth is starting to kick itself into gear, and so my future totals should start to punch above their weight class.

September:

This month I made one new purchase adding a new, acquiring shares of Broadcom (AVGO) in my Roth portfolio and acquiring shares of Cardinal Health (CAH) in my taxable portfolio.

Last month I brought in a total of $397.50 in dividends ($158.09 taxable, $94.85 Roth, and $144.65 IRA).  This is an increase from last year (319.66 total) by 24.38%.  Almost got that $400 I wanted, I will definitely get it in December.

In terms of dividend increases, I realized* six raises from Hershey's (HSY), Kellogg's (K), Target (TGT), Discover (DFS), J.M. Smuckers (SJM), and Westlake Chemical (WLK).  The increases are from 4% to about 19%.  I have now realized 43 raises thus far this year.

Next month I will realize three raises from Bank of Nova Scotia (BNS), Canadian Imperial Bank of Commerce (CM), and Realty Income (O).  The increases are from about 0.2% to about 3%.

* I only count increases when realized, because until that money is delivered any statements or declarations are simply conjecture.

October:

The mortgage continues has started to see more cash flowing towards the principal - not a huge number, but every little bit counts. Our debts currently outstrip our assets (I choose not to count the house as an asset).  Outside of our house, we still have very low interest auto debt (1.9 and 1.5% for our cars).  My car is getting paid at double time, and I suspect I can finish it off within 10 months from now - which will be nice because I plan on keeping that car for 20 years.  Debt is being eliminated, and we are still building and assets.  A second income goes a long way.

September was a busy month, and October looks like it will be more of the same.  Life should hopefully slow down in November.  My next purchase should be in October, but might be in November if things go less than as planned.

Next month should produce around $87 in dividends, which is a 28% YOY increase.

My portfolio page is currently up to date.

Hope everyone has a great October.
- Dividend Gremlin
- Long all stock tickers mentioned

Monday, September 24, 2018

How Many Stocks, Is Too Many Stocks?

Phone-a-friend Gremlin here to discuss my portfolio size.  There have been numerous articles posted on websites as to how big a portfolio should be, along with talking heads on TV stating that X number of stocks should be the maximum.  Some people on the internet claim that a portfolio of five (5) stocks is sufficient to make one diversified.  Others state 10, 15, or 20 as their numbers.  These hosts include professionals and amateur internet enthusiasts who are all about making wise long term OR extremely speculative short term investments.  My answer is, that their advice is best for themselves, but it is dated.

Currently my portfolio contains 58 stock positions across my taxable, Roth, and IRA accounts.  They run the gambit of industries, with multiple names in most sectors.  It is as if I am building my own personal index fund, which pays me a higher yield than an index.  Portfolio management is minimal, I rarely sell a stock, and my expected holding period is for as long as possible.  Considering my view point, versus that of others, why am I happy to hold many positions?

My answer is threefold.  First, the elephant in the room that modern professional advisers try to brush off is the internet.  The fact is I could have 200 stocks in my portfolio, and as long as I keep my apps on my phone up to date, I would never miss a news piece, dividend issuance or anything else (if I chose to be that plugged in).  The press release happens and within minutes the notice hits my email.  This was not possible 20 years ago.  So to borrow a phrase from a large investment adviser, I don't need anybody to 'make sense of investing' for me.  I can do it faster than they can, reading the same things that most of them do (sure some in high finance have special access, but the information gap small and closing all the time).  So tracking my 58 positions is pretty easy.

Second, I don't chase momentum or yield.  Those kind of plays require constant attention, tracking daily changes even, or risky bets on companies that are always dancing near a cliff.  By focusing on quality stocks that will maintain or increase their dividends with or above inflation, I eliminate the need to buy and sell (aka feed the brokerage).  So having a bigger portfolio does not increase my handling of it all, unlike some more streamlined portfolios that aggressive chase returns upfront.

Third, and most important to me, is that I memorize stuff rather quickly.  So when I research a company I can quickly understand what they do.  After that I can analyze if the company would be a good investment for me at the moment.  For a long time many educators (I know a lot of people are in teaching...) told me that memorization is not as powerful of a skill as understanding and critical thinking.  I find that argument to be a fool's errand, as they are each powerful in their own right for different things.  Specifically, by memorizing facts I can create short cuts - in terms of finding and accessing the right information.  It also helps me track a company over time, as a stock is easier to track the more familiar you are with it.  Knowledge is cumulative, so the

So in the end, how big should a portfolio be?  My answer is as big as you want it to.  Sure not every stock will be a home run, but home runs aren't the only way to score points.  Consistency is the key to making my portfolio become my personal index fund, which reports to me.

- Gremlin

Friday, September 14, 2018

Recent Buy Part 2, September 2018

Back to back to back Gremlin here to discuss another buy.  Over the past three months, including September, I have managed a buy in my taxable account each month.  This is pushing up my taxable dividend income at a rate that is more rapid than ever before.  This is thanks to three things: a special dividend from DPS merger with Keurig to KDP, the fact my brokerage is moving to E*Trade so my partial shares were all sold, dividends accrued, and the fact that my wife returned to work (which means we are back to being a two income household again).  I am unsure if this rate of growth can be sustained as eliminating debt payments might supersede equity growth priorites.  Additionally, my wife is only paid 11 months of the year.  Still, the rate of growth gives me a lot of confidence that I can get our passive income to a place I want it to be sooner rather than later.

Today, I added to a new position by purchasing shares of Cardinal Health (CAH) in my taxable account.  I bought 20 shares, with a total cost of $1,069.35 ($53.12 / share, plus commission).  The current yield is 3.6%. For a detailed summary of their history, etc. please visit: CAH's Seeking Alpha Profile.

CAH is a major distributor of medical goods, especially pharmaceuticals; I will borrow the Seeking Alpha description:

"Cardinal Health, Inc. engages in the provision of pharmaceutical and medical products. It operates through the Pharmaceutical and Medical segments. The Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical, and over-the-counter healthcare and consumer products in the United States. The Medical segment manufactures, sources and distributes Cardinal Health branded medical, surgical and laboratory products, which are sold in the United States, Canada, Europe, Asia and other markets. The company was founded by Robert D. Walter in 1971 and is headquartered in Dublin, OH. "

CAH has been battered this year.  One horrible quarter coupled with intense political / public pressure on their industry (due to opioids) and the Amazon (AMZN) scare are definitely the biggest causes, but not the only reasons.  They operate in a thin margin industry, but it is one of an long term oligopoly.  The distribution industry is something that takes time to build.  Its low margins means those thinking about joining the industry, such as AMZN, would probably look to other parts of that food chain for better margins (they did buy an online pharmacy).  For this reason, along with the long term trends of better availability and necessity of medications, it is clear that CAH and the industry will be around for a long time competing primarily among themsevles.

That is the 800 lb gorilla in the room.  CAH also sports a comfortable payout ratio and still has a steady Medical segment arm.  This gives me exposure to multiple sides of the healthcare sector, which is always appreciated.

This purchase will add around $38 to my forward 12 month dividend income.

I will update my portfolio page at the end of the month.

What do you think of CAH?

- Gremlin
- Long CAH, KDP

Thursday, September 6, 2018

Recent Buy, September 2018

Grab Your Popcorn Gremlin here to discuss my most recent buy.  Also why the popcorn?  Well tonight the NFL season starts.  Though I am not the biggest or best fan by any means, my team is still coming off their first championship win and they start the season tonight.  So go Eagles!  This should be a good season, though if past experience serves my memory right they will probably tank.  Almost no one has their division in back to back years, though I want to see myself proven wrong.

Otherwise, I added to my Roth account today.  I have been mostly neglecting my Roth account due to our former single income set up, and because my focus is now heavily on the taxable income positions that I want to build.  Still today is my Roth's day.

Today, I added to a new position by purchasing shares of Broadcom Inc (AVGO) in my Roth account.  I bought shares, with a total cost of $1,091.04 ($216.82 / share, includes commission).  The current yield is 2.29%. For a detailed summary of their history, etc. please visit: AVGO's Seeking Alpha Profile.

AVGO is a major producer of semiconductors and other technological components; I will borrow the Seeking Alpha description:

"Broadcom, Inc., is a holding company, which engages in the design, development and supply of analog and digital semiconductor connectivity solutions. It serves four primary end markets: wired infrastructure, wireless communications, enterprise storage and industrial & other. Its products include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and displays. In April, 2018, Broadcom redomiciled from Singapore to the United States. The company was founded in 1961 and is headquartered in San Jose, CA. "

AVGO has been growing its dividend at a massive clip for the last 8 years.  In addition, the payout ratio is super low and the stock is clearly undervalued at this point.  However, what is most exciting is that they are a direct supplier to something that will definitely only become more important over time - technology.  I already own MSFT and AAPL, but this perspective is one of the physical needs that drive technology production and efforts.  Sure having a smartphone is a necessity for life, but it is clear that people find it harder and harder to separate themselves from technology.  I try to get away from it all the time, but it is nearly impossible to avoid it - even when you work hard to do that.  So in the meantime AVGO and similar companies will make the chips and materials that feed the tech beast.

This purchase will add $35 to my forward 12 month dividend income.

I will update my portfolio page at the end of the month.

What do you think of AVGO?

- Gremlin
- Long AVGO, AAPL, MSFT