Monday, March 18, 2019

Gremlin Talks Cents

Teachable Gremlin here to introduce a new section and page.  I plan on discussing some of the crazy things I do to save money, some of which are funny, all of which save bottom line cash.  To get this party started, I am going to focus on the value of the penny.  Yes a penny, $0.01.  On its surface it is worth next to nothing, indeed it costs more to make one than it is worth.  Still they have value, even if minimal to the everyday person.  Yet, even things with minimal value can help create something of value.  Take a car, it has hundreds of little screws, bolts, and nuts that on their own are worth very little, but when combined create a very valuable device.  So my first discussion here will be on pennies (really loose change in general).

I keep a penny bank in my house, really it stores all coins, but who cares.  Many of these coins are received when something is purchased in cash - an activity that is rare for me, but much more common for my wife.  In addition to that, I have an eagle eye for anything that is remotely shiny and on the ground.  If I were to say I had a super power, it is finding loose change.  I was blessed with this ability at a real young age, you know when this kind of thing is cute, funny, and seemingly useful.  Fast forward to my early 30s, and its not cute anymore.  However, it is still hilarious.  It has led to so many good jokes at my expense.  The apex of this is an ongoing text conversation where I am asked if I would pick up a coin, and then the picture follows.  Usually the coin is somewhere terrible - in an intersection, urinal, etc.  Often I say no, but sometimes I say yes.  In real life, if there is something socially weird or unsafe, no I touch that crap up, but otherwise - hell yes.  Then that coin along with all the loose change in the house goes into the penny bank.

Once you have all that loose change what will you do with it?  No one is going to roll those coins, no one has that kind of time.  No one is going to go to a Coinstar machine and suffer a 3-6% fee ... OR will they?  The thing I have discovered is Coinstar machines allow people to convert the coins, fee free, to give certificates for companies of your choosing.  These include Netflix (NFLX), Amazon (AMZN), and Walmart (WMT).  Since my wife loves AMZN, the answer is clear.  Recently, I tested this out by taking my coins to the local grocery store, and getting a sweet gift code for Amazon.  The timing could not have been better as I had a necessary purchase to make at that time.  Saved me a solid $85 that I would have otherwise had to take out of my bottom line - away from investments.

Coming full circle, one of my friends is the polar opposite with me when it comes to loose change.  He literally throws it away, especially pennies.  Sure maybe over his lifetime that will about amount to $20-30 total of pennies, but that is one extra hour of your life you need to work.  Rather than doing that work, just save it.  Every cent in your pocket is one more you can have working for you.

What do you do with your loose change?

- Gremlin
- Long WMT

Thursday, March 7, 2019

Recent Buy, March 2019

Busy Gremlin here to discuss a recent buy.  Yesterday I added a new position, keeping the push alive to for FI.  I had considered closing a position to assist in the buy, specifically the Gap (GPS) after they announced the company would split.  However, I did not do that and I will patiently wait to see what happens there.  My GPS position is so small that eventually closing would be worth it as I refocus my effort on building larger positions of greater quality.  Now don't get me wrong, their clothes are fine - and some of the few that actually fit me pretty well (Gap and Old Navy), but I do not see their future including consistent dividend raises comparable to other quality stocks out there.  I must digress, what did I buy?

So yesterday, I added shares of Eaton Vance (EV) in my taxable account.  I bought 25 shares, with a total cost of $1,029.45 ($40.90 / share, plus commission).  This was a limit buy, and when I placed it I thought it would not be fulfilled; I am glad it was - though I could have waited 1 more day.  The current yield is 3.35%. For a detailed summary of their history, etc. please visit: EV's Seeking Alpha Profile.

EV joins Amerprise Financial (AMP) and T. Rowe Price (TROW) as the asset managers in my portfolio.  In addition, many of my Canadian banks and Prudential (PRU) also are involved in this industry.  It is one where scale and growth of the economy / assets work together in some sort of synergy to throw off money like a hurricane at sea throwing around water.

Asset managers are hard to escape, anyone who has a 401k or similar retirement account knows this.  Indeed, many people opt towards various types of funds as a way to set their money and forget it by virtue of letting someone else do it.  In a world where there is more money and people everyday, and where those people are so busy they cannot even slow down enough to enjoy a beer - there will be a space for companies like EV.  That coupled with excellent fundamentals including a great valuation, excellent payout ratio, and dividend growth propelled me to buy EV.

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 EV?

- Gremlin
- Long EV, GPS, AMP, TROW, PRU, and the big 5 Canadian banks

Thursday, February 28, 2019

February Review / March Preview, 2019

Excited Gremlin here to talk about the past and future months.  So far 2019 is shaping up handsomely.  Personally, its been equally rewarding with excellent opportunities popping up at work, fun at home, and with dividends.  The opportunities come from trying and taking chances - one of the best lines I have ever heard is "50% of the battle is showing up," which is beyond true.  Its amazing how many things happen just be giving something a shot.  On the home front Lil Gremlin has been a riot, and his rascally personality, is pay-per-view level entertainment.  If only everything was as funny to me as it seems to be to him.

Meanwhile in the real world some hilarious articles have come out, specifically this one on Vice.  The article offers a very interesting perspective on something I take for granted, but seems to miss the point.  Dovetailing with that article is one that is this gem from the Atlantic.  In a way it seems to vindicate the Vice one - where the cycle of spend, earn, live, repeat and unending progress seem to be the order of the day until you are retired because your fingers are unable to type.  As a person who generally dislikes religion, I found the Atlantic one very interesting and completely disagree with it in the sense that it applies to me.  Happiness is my goal, and I am not defined only by my work.  Also of interest to me was this find about social media is the new opium of the people.  These eschewing of saving, dedication to work, and temporary enjoyment (beyond what you need to keep the train on the rails) all clearly intertwine.  That being said I am writing a blog... so let's cut to the chase, show me the money.

February:

This month I made one purchase adding by adding acquiring shares of Canadian National Railway (CNI) in my taxable account.

Last month I brought in a total of $286.21 in dividends ($71.23 taxable, $66.1 Roth, and $148.88 IRA).  This is an increase from last year (233.83 total) by 22%.

In terms of dividend increases, I realized* five raises from the Bank of Montreal (BMO), one from my employer (Bºº), AT&T (T), Abbott Labs (ABT), and Deere Co. (DE).  The increases are from about 2% to about 21%.  I have now realized 7 raises thus far this year.

Next month I will realize eleven (11!) raises from the Archer Daniel's Midland (ADM), Amgen (AMGN), CNI, Dominion Energy (D), Dunkin Brands (DNKN), Union Pacific (UNP), Waste Management (WM), YUM! Brands (YUM), Prudential (PRU), 3M (MMM), and T. Rowe Price (TROW).  The increases are from about 4% to about 15%+.  I will also realize one cut of approximately 33% by Kraft-Heinz (KHC).

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

March:

The mortgage continues and I am putting a little extra cash towards the principal monthly - 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).  I should be able to pay off my car soon thanks to my tax windfall related to home ownership and having a child - which is a nice silver lining.  Debt is being eliminated, and we are still building and assets.

My next purchase will be in March, which will make for 9 consecutive months of buys across all accounts.

Next month should produce around $426 in dividends, which is a 12% YOY increase, even with KHC's shenanigans.

My portfolio page is currently up to date.

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

Monday, February 18, 2019

Avoiding Simple Explanations

History Gremlin here to discuss something that has been on my mind.  That specifically is the fall of General Electric (GE) from investing grace - I will relate a history lesson to their spiral.  I was long GE through its first of two recent cuts, and not including the cut that occurred during the financial crisis.  GE's most recent dividend cut saw their dividend reduced to $0.01 / per share on a quarterly basis [gross].  Before speaking about GE, for the unfamiliar please look at Seeking Alpha's about page or browse their wiki history - or both.  Ok, good either you knew it or not, now you do.  So the question is - how does behemoth of company slide so deeply?  It is a question that I cannot answer, but perhaps some light can be shed on the situation.

Leadership: This is something has clearly plagued GE.  Read any investment website article on GE and you will see people alternating between blame and praise for various GE leaders.  Often leaders shoulder far more credit than they deserve - regardless of the outcome.  GE employs 313,000 people.  Sure the buck will always stop at the top, but is that individual the only one making important organizational decisions?  Hell no.  Can leaders be bad or do stupid things?  Of course they can, my favorite being of course flying two corporate jets around in case one breaks down.  This coming from a company that manufactures jet engines...

Innovation: Sometimes companies get left behind, and it is not entirely a fault of their own.  Blockbuster fits this scenario the best, where a technology appears a company has no ability or infrastructure to benefit from it.  When a vacuum appears, someone will fill it - Netflix (NFLX) in this case.  This has not entirely happened to GE, since GE supports so many industries.  However, it is completely unlikely they are the cutting edge across all the industries they support.  Sure in a way diversification can be a positive when ideas are shared across divisions, but that is always easier said than done.

Culture: As the sports reference goes - you can't teach height.  Same thing goes for companies and culture / personalities.  I have personally worked for several smaller companies, which ranged from good to terrible depending on the organizational structure and the personalities involved.  Currently, I work for a large company and it is the best place I have ever worked.  My company actively works to transfer knowledge between groups and client missions - thus enabling us to be more proactive and deliver better projects.  GE, with its 313,000 people, likely will find it difficult incorporate that kind of workplace culture.  Indeed it is something larger companies will always struggle with, but large companies can make it work if they are dedicated to it on principle over a long period of time.  Also being focused on narrow(er) subset of industry it will be easier to meet that goal.

So how does this all relate to history?  Well it relates to one of my favorite historical entities, the Roman Empire.  For centuries people have debated why Rome, specifically the Western Empire, fell in 476.  People and historians have blamed everything from internal war / over-expansion, disease, Christianity, general moral decay, external pressures, etc.  The only thing clear is some of these did play a role, but none were the single root cause.  Indeed the only thing that is clear is Rome did fall.  However, it is more a death from a thousand cuts scenario (no pun intended), as opposed to singular unique or specific failings.  Much like GE the only thing that will be clear is they cut their dividend twice and are trying to salvage parts of their company that are clearly getting ravaged.  The CEO and leaders will get the blame, but there are 313,000 other stories out there.  Some will be positive, some negative.  All tell a story why GE has punted financially despite not being on their own goal line.

For a great history of Rome, I suggest listening to Mike Duncan's the History of Rome podcast (also linked in my blogs / books page).  However, if you want to skip to the end, episode 179 - The End, will suffice in giving probably one of the most honest looks as to why 476 was the end for Rome.  It has made me think about business in a different way too.  A reminder that no matter how holistic your approach there are and always will be X-factors that are unaccountable.

In Mike Duncan's words: "... or more precisely, why did the Western half of the Empire fall?  Well I have joked there are 256 different reasons why the Western Empire fell, and though I am obviously exaggerating, it is not that much of an exaggeration.  The decline and fall of something as monumentally complex as the Roman Empire is not going to be able to be explained away by one or two simple causes."

Thanks, and do you like Rome or GE (or not)?

- Gremlin
- Long no stocks in this post

Wednesday, February 6, 2019

Recent Sale / Buy, February 2019

I Could Do That Better Gremlin here to talk about a recent sale and buy.  The thing I could do better is most of the Super Bowl commercials, which were bad.  In fact, all commercials during that game should be funny, or you've screwed up.  No one talks about the heartwarming or cute ones, they talk about the funny ones!  Hell this year no one even wanted to talk about the game or halftime show, which were both snoozes to a neutral participant (me).  That being said there were a few funny ones, but seriously if you have millions of dollars - try to hire someone who is funny.

Right, anyway - at the end of January Tupperware (TUP) announced a major 60% cut in its dividend.  As soon as I read this the shares were gone.  Good bye; their stock crashed harder after opening too.  Now I have had stocks through cuts in the past - GE, PGH, and KMI.  Of those I have only held onto KMI.  I have a strong no cutters policy, and I will stick by it.  In addition, TUP has serious business problems.  Why buy their stuff, when I can get products just as good from my local Chinese food take out?  Riddle me that.  In addition, management promoted someone from HR to run the company.  As an scientist / engineer that is practically the most insulting thing you could do.

So yesterday, I added shares of Canadian National Railway (CNI) in my taxable account.  I bought 15 shares, with a total cost of $1,261.05 ($83.605 / share, plus commission).  The current yield is 1.98%. For a detailed summary of their history, etc. please visit: CNI's Seeking Alpha Profile.

There are 7 Class I railroads in North America - Union Pacific (UNP), BNSF - wholly owned by Berkshire Hathaway (BRK.A/B), Canada Pacific (CP), CNI, Kansas City Southern (KSU), CSX Corp. (CSX), and Norfolk Southern (NSC).  Of those, I already own UNP, and I would like to also CSX, NSC, and KSU in the long run.  Rail is an extremely efficient method of travel, and I should know since my office overlooks a train station that I ride a commuter train to and from.  Yes, rail does have its constraints in terms of geographic reach and difficulties expanding.  However, the barriers to entry are beyond extreme and the obvious efficiencies of the system will shield the industry from other delivery methods.  Trucks are inefficient (yes even the electric ones by comparison) and air travel is costly.  Sea travel is efficient, but is constrained in a similar way rail is, plus shipping across oceans is time consuming.  So I will leave that spiel there, about rail in general, because I only added one of the 7 rail companies.

The reason I purchased CNI is twofold.  First, the stock has an excellent history of rewarding shareholders and growth in value.  Second, they have a major geographic advantage that none of the other rail companies have.  CNI has exclusive access to the closest deep water ports to Asia and Europe from North America.  These ports are Prince Rupert, British Columbia and Halifax Nova Scotia, respectively.  There is a huge advantage to that geography, especially considering the world economy will always involve trade and speedier solutions will always be at a premium.

This purchase will add $22~ to my forward 12 month dividend income.

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

What do you think of CNI?

- Gremlin
- Long CNI, UNP, and KMI

Friday, February 1, 2019

January Review / February Preview, 2019

Frozen Gremlin here to discuss January and look into the future a little bit.  It is currently cold and snowing here, though nothing like the upper Midwest. I am glad that our wind chill is only in the single negative digits (ºF).  Don't get me wrong, I like the cold and hockey, but even I have my rational limits.  On the bright side, I can still work out / lift indoors, yay owning your own weights.

December is the busiest holiday month, and January has a ton of birthdays in my family.  February is a departure from that, a nice slowdown and change of pace.  The stock market is starting to recover, but who knows how long that will continue.  Or what direction it will go tomorrow or next week.  In the meantime it is full steam ahead on saving and investing our hard earned money.  So with that said, let's see how we did.

January:

This month I made one purchase adding by adding acquiring shares of Aqua America (WTR) in my IRA account.  I also sold out of Tupperware (TUP) at the end of the month, which will be discussed during my next buy in February.

Last month I brought in a total of $109.56 in dividends ($90.06 taxable, $9.5 Roth, and $10 IRA).  This is an increase from last year (74.41 total) by 47%.

In terms of dividend increases, I realized* two dividend increases from Realty Income (O), Disney (DIS), and Eastman Chemical (EMN).  The increases are from 0.2% to around 10%.  I have now realized 2 raises thus far this year.

Next month I will realize five raises from the Bank of Montreal (BMO), one from my employer (Bºº), AT&T (T), Abbott Labs (ABT), and Deere Co. (DE).  The increases are from about 2% to about 21%.

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

February:

The mortgage continues and I putting a little extra cash towards the principal monthly - 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).  I should be able to pay off my car next month thanks to my tax windfall related to home ownership and having a child - which will freaking sweet.  Debt is being eliminated, and we are still building and assets.

My next purchase will be in February, which will make for 8 consecutive months of buys across all acounts.

Next month should produce around $281 in dividends, which is a 20% YOY increase.

My portfolio page is currently up to date.

Hope everyone has a great January.  Go Rams...
- Dividend Gremlin
- Long all stock tickers mentioned, minus TUP

Thursday, January 10, 2019

Recent Buy, January 2019

Shutdown Gremlin here to talk about a recent buy.  It is getting cold here in the DC area both inside and out; thanks to the government shutdown and a nice cold front.  The shutdown has been unfortunate as it impacts a significant number of people in the area, including friends and family, most of whom are not even direct Federal employees.  You would think that a shutdown would happen over something more valuable than $5B, but its not.  Which is comical, considering most companies I hold in my accounts are worth more than $5B, and indeed many have that much cash on hand or generate it in a quarter!  I digress, whether you like the movie Fences or if you prefer Wide Open Spaces by the Dixie Chicks - I can assure that neither can be built or enjoyed while stuff is shutdown.

So getting past the shutdown, I had accumulated solid amount of cash in my IRA account and decided to use it to take advantage of some low prices.  Mr. Market has been a fidgety mess since December, so its high time to let the gravity of low prices do some of the hard work for me.  So let's see what I bought.

Yesterday, I added shares of Aqua America (WTR) in my IRA account.  I bought 32 shares, with a total cost of $1,075.88 ($33.40 / share, plus commission).  The current yield is 2.61%. For a detailed summary of their history, etc. please visit: WTR's Seeking Alpha Profile.

The only other utility I currently own is Dominion Energy (D).  WTR is the only water utility in my portfolio.  Potable water itself is not something, at least not in urban areas, that can be substituted easily.  Electrical utilities face pressure from renewable energy, improved efficiencies of electronics, emissions targets, and potential pressure from competitors like natural gas for heat and cooking (my house is electric for the record on both).  Pressures such as those do not really impact the water utilities in a meaningful way.

WTR itself does not boast a massive yield, but has had a couple of decades of 7% dividend increases annually.  Its current yield is one the highest I have seen in the last few years.  WTR has also been expanding its reach, adding numerous local water utilities to its portfolio.  I really like the geographic reach, the industry, and the history of the company.

However, there is some risk associated with the industry especially, capital expenditures (Capex).  The Capex for any utility is high, but for water utilities its even higher.  Water is a heavy and difficult item to move long distances relative to items like electricity or gas (though humans are excellent at engineering and figured them all out).  Also a lot of water infrastructure was built before WWII, especially during the Great Depression.  Old infrastructure leads to higher failure and loss rates.  This will improve over time, but it will be a constant drag on the industry.  Not to mention older infrastructure can effect water quality as seen in Flint, Michigan.  Still its a risk I feel is acceptable - even though I routinely hear of water main failures in the DC area where ~100 year old terracotta or wooden (yes, I am not shitting you on those materials) pipes break.

This purchase will add $28~ to my forward 12 month dividend income.

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

What do you think of WTR?

- Gremlin
- Long WTR, D