Sunday, December 14, 2014

KMI is the next buy.

This month's cash contribution should be posted in the account on Monday or Tuesday. There will be enough cash to make an add-on purchase. That purchase is going to be KMI.

Kinder Morgan Inc. - KMI has recently completed a deal to consolidate the other Kinder companies, KMP, KMR and EPB. KMI is now one of the largest energy company's on the continent. With their size and scale, their diversification and track record of growth throughout market cycles, it becomes one of the best offensive and defensive plays in the midstream space.

KMI now has the scale where there isn't  project on the continent they can't bid on. KMI now has the economy of scale where they can go on an acquisition spree and continue to grow the business.

Institutional Investors have shown they approve of this deal. In an environment where oil prices are dropping and other midstream companies are seeing significant price corrections, KMI is only down 7% from it's all-time high. That's a sign of strength and I buy strength!

Richard Kinder has said they expect to grow the dividend at a rate of 10% per year for the next 5 years. When you add the current 4.4% yield, that makes KMI an ideal dividend growth prospect at this time.

I am purchasing KMI as a Core position and I am willing to pay up to 3 to 5 percent above fair value for a Core. Morningstar says KMI is selling at a 2.0% discount to fair value and S&P says it is selling at a 2,2% premium. So, it qualifies as fair value.

Jefferson Research says KMI has an Earnings Quality rating of STRONG. They have a Cash Flow Quality rating of STRONGEST. They have an Operating Efficiency rating of STRONGEST.

The risk level is rising with weak oil prices, and share price could start falling, following the other midstream companies, but I'm willing to accept this risk given the strong earnings and cash flow ratings. KMI has the financial strength to survive an oil bust cycle.

So there it is! As soon as the cash shows up in the brokerage account, KMI will be the next purchase.

Monday, December 1, 2014

Project $3 Million - November Results

This portfolio belongs to a 29 year old. I manage it for him.

MONTHLY HIGHLIGHTS:

1. This portfolio closed at an all-time high on November 28 at $136,477.34.
2. The monthly dividend income was $454.58 which was 30.4% over November 2013.
3. Year to date dividend income is up 22.7% over year to date 2013.
... Dividend income earned through 11/28/14 is $3,790.55 vs through 11/30/14 of $3,087.65.

Companies that raised their dividend in November.

Automatic Data Processing - ADP ... 2.1%
Sysco Corp - SYY ... 3.4%

Every company that was expected to raise their dividend in 2014 did so. Only FTR did not raise the dividend, and wasn't expected to.

Bought 6 shares of IBM @ $164.18.

Kimberly-Clark - KMB spun off a segment of their business and the portfolio now has 4 shares of HYH as a result of this spin-off.

In order to be on schedule for the $3 Million, the portfolio value needs to be $99,502.96. The current portfolio value of $136,477.34 has the portfolio ahead of schedule by 37.2%.
=============================================================

PRIMARY OBJECTIVE:

Income Replacement!

The objective is to start earning an income stream now to replace the income that will be earned throughout the working years. The goal is to achieve $10,000 per month in retirement from dividends alone and not have to touch the principal.

Income from pensions and Social Security will provide additional income.

The goal is to have the dividend income stream grow at a rate above inflation and this is expected to be achieved with companies that grow their dividends annually.

A portfolio of $3 Million in value with a yield of 4% will accomplish the $10,000 per month in dividend income. Hence the title of this portfolio ... Project $3 Million.
========================================================

MISSION STATEMENT:

To earn an income stream that is reliable, predictable and increasing.
=========================================================

STRATEGY:

To focus on companies with high financial strength ratings and provide safe and growing dividends that are not considered to be at risk during ongoing market conditions.

Capital appreciation and capital preservation are secondary to dividend growth. Total return is expected to be the long-term result as long as the companies in the portfolio are of high quality, pay a decent yield and continue to grow the dividend.

The formula to be followed to assure that this strategy enjoys long-term success is what I refer to as "The Success Formula That Never Fails."

High Quality + High Current Yield + High Growth of Yield = High Total Return.

I explain how to use that formula here:

http://seekingalpha.com/instablog/728729-chowder/2360292-the-chowder-rule

=====================================================

TACTICS:

To contribute $500 per month to the portfolio, plus 5% of income (no match) to the Thrift Savings Plan (TSP), look to earn 8.25% annually, compounded over 40 years, to age 65. The beginning portfolio value at the time of establishing these goals was $42,204.42.

The cash contribution breakdown is to put $5,500 annually into the Roth Ira and $500 annually into the taxable account.

The link below shows the compounding effect and where the portfolio needs to be at the end of each of those 40 years in order to stay on schedule for the $3 Million.

http://www.planningtips.com/cgi-bin/savings.pl?amt=42205.00&dep=500&cmp=annually&int=8.25&yrs=40&Calculate.x=50&Calculate.y=12

All dividends are currently being reinvested back into the companies paying the dividend. Monthly cash contributions will be used to add to existing positions or create new ones.
=======================================================

DIVIDEND HISTORY:

November Dividend History:

2010 ... $233.49
2011 ... $260.07
2012 ... $331.24
2013 ... $348.54 up 5.2%
2014 ... $454.58 up 30.4%
====================================================

NOVEMBER DIVIDENDS RECEIVED:

Taxable Account: (Dividends Reinvested)

General Mills - GIS ............................... $33.18 ... bot 0.629 shares
Deere & Company - DE ........................ $7.33 ..... bot 0.087 shares
Enterprise Products Partners - EPD  ..... $48.15 ... bot 1.374 units
Kinder Morgan Partners - KMP ............ $55.58 .. bot 0.57 units
Magellan Midstream Partners - MMP .. $57.18 ,,, bot 0.656 units
Colgate-Palmolive - CL ........................ $18.57 ... bot 0.274 shares
Halyard Health - HYH .......................... $29.93 (spin-off cash)
-------------------------------------------------------------
Total Dividends ............................ $249.92


Roth Ira: (Dividends Reinvested)

Verizon - VZ ........................ $68.37 ... bot 1.354 shares
Procter & Gamble - PG ........ $23.36 ... bot 0.265 shares
Realty Income - O ................ $16.10 ... bot 0.348 shares
Kinder Morgan Inc. - KMI ... $32.30 ... bot 0.799 shares
Healthcare REIT - HCN ....... $36.55 ... bot 0.524 shares
AT&T - T .............................. $27.98 .. bot 0.804 shares
-------------------------------------------------------------
Total Dividends ................ $204.66

===================================================

TAXABLE ACCOUNT - PORTFOLIO HOLDINGS: ($4,000 equals a full position)

Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company

MMP ..... 86.323 ... $7,155.31 ... UP 179.76% ... **Magellan Midstream Partners
MO ....... 113.755 .. $5,717..33 .. UP 123.80% ... *Altria Group
LMT ...... 49.066 ... $9,399.08 ... UP 121.34% ... *Lockheed-Martin

ADP ...... 40.268 ... $3,448.55 ... up 87.39% ... *Automatic Data Processing
CDK ...... 13.00 ..... $494.91 ... (Spun off from ADP) ... CDK Global
CL ......... 51.846 ... $3,607.96 ... up 70.66% ... *Colgate-Palmolive
CVX ...... 32.454 ... $3,533.27 ... up 18.83% ... *Chevron
DE ......... 12.311 ... $1,066.38 ... up 4.42% ..... *Deere & Company
DEO ...... 31.131 ... $3,835.34 ... up 72.15% ... *Diageo plc
EPD ..... 133.302 ... $4,977.50 ... up 94.63% ... **Enterprise Products Partners
FTR ....... 23.608 ... $166.44 ... (Spun off from VZ) ... Frontier Communications
GIS ....... 81.544 .... $4,301.45 ... up 43.50% ... *General Mills
HYH ...... 4.00 ....... $156.84 ... (Spun off from KMB) ... Halyard Health
JNJ ....... 45.584 ..... $4,943.47 ... up 70.47% ... *Johnson & Johnson
KMB .... 38.334 ..... $4,469.36 ... up 50.90% ... *Kimberly-Clark
KMP ..... 40.272 .... $4,108.95 ... up 37.47% ... **Kinder Morgan Partners
KO ....... 114.586 ... $5,136.89 ... up 81.54% ... *Coca-Cola
KRFT .... 91.71 ...... $5,518.19 ... up 30.39% ... *Kraft Foods
MCD ..... 37.143 .... $3,595.81 ... up 23.11% ... *McDonald's
PEP ....... 34.909 .... $3,494.39 ,,, up 58.85% ... *Pepsico
PM ........ 46.991 .... $4,084.93 ... up 12.73% ... *Philip Morris
SO ......... 74.188 .... $3,518.74 ... up 19.61% ... *Southern Company
SYY ..... 119.156 ... $4,797.22 ... up 33.10% ... *Sysco Corp
Cash ....................... $113.11
-----------------------------------------------------------------------------------------------
Account Value ..... $91,632.42

*Increased the dividend in 2014
** Multiple dividend increase in 2014

==========================================================

ROTH IRA - PORTFOLIO HOLDINGS: ($4,000 equals a full position)

Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company

D .......... 74.399 ... $5,397.65 ... up 51.30% ... *Dominion Rsources
HCN .... 46.502 ... $3,425.34 ... up 31.06% .... *Healthcare REIT
IBM ..... 11.084 ... $1,797.49 ... dn 6.67% ...... *International Business Machines
KMI ..... 74.197 ... $3,068.05 ... up 12.49% .... **Kinder Morgan, Inc
MO ...... 76.37 ..... $3,838.36 ... up 40.04% .... *Altria Group
O ......... 88.254 ... $4,100.28 ... up 26.72% ..... **Realty Income
PG ....... 36.554 ... $3,305.58 ... up 41.17% ..... *Procter & Gamble
ROST .. 14.079 ... $1,287.95 ... up 32.71% ..... *Ross Stores
T .......... 61.639 ... $2,180.79 ... up 2.75% ....... *AT&T
VZ ..... 125.658 ... $6,357.04 ... up 31,72% ..... *Verizon
XOM ... 10.00 ..... $905.40 ...... dn 6.46% ....... *Exxon-Mobile (new position)
Cash .................... $45.64
------------------------------------------------------------------------------------------
Account Value ..... $35,709.55


==========================================================

THRIFT SAVINGS PLAN (TSP) - Federal version of the 401K

There aren't any matching funds from the employer (military). They provide a pension after 20 years at 50% of the current salary at the time of retirement. Therefore, absent any matching funds, only 5% of income is being contributed. This amounts to $64 per month.

Index Funds and Life Cycle Funds are the only options to choose from.

Fund ... Tracking Index ..... Shares ..... Value ..... Percentage of Portfolio

S Fund ... (Small Cap) ...... 158.3916 ... $5,692.61 ... 62.31%
I Fund ... (International) ... 136.2898 ... $3,442.76 ... 37.69%

Ongoing contributions:

S Fund - 60%
I Fund - 40%
========================================================


SOLD POSITIONS - REALIZED GAINS/LOSSES:

Company ... Date ... Gain/Loss ... Reason/Result

BMY ... 11/09 ... $1,001.21 - up 25.85% - Froze dividend, bot VZ and JNJ

KMR ... 02/11 ... $504.94 - up 27.09% - Replaced in taxable account with KMP
O ........ 03/11 .... $639.63 - up 34.55% - sold @35.42 bot back @34.43 don't recall why
ZTR .... 04/11 .... <$55.58> - dn <10.09%> - Cut losses, bot SYY
VZ ...... 05/11 ... $618.16 - up 30.15% - Moved to Roth and added to existing position
CLX ... 06/11 ... $25.25 - up 1.57% - Concerned with debt, replaced with KMB
VFC ... 10/11 ... $897.99 - up 53.07% - Yield dropped below 2%, bot PEP

O ....... 01/12 ... $79.73 - up 3.01% - Moved to Roth
UHT .. 01/12 ... $233.60 - up 10.32% - Wanted to spread tenant risk, bot HCN
FTR ... 03/12 .. <$1,095.08> - dn <49.90%> - Dividend cut, cash to Roth, bot COP
ABT ... 11/12 .. $872.46 - up 31.38% - Company split, took profits, bot KRFT
BP ..... 12/12 ... <$554.03> - dn <17.23%> - Took loss, cash to Roth, bot COP
NUE .. 12/12 .. $164.61 - up 7.33% - Slow dividend growth, cash to Roth, added to COP

COP ... 04/13 ... <$2.46> - dn <0.10%> - Froze dividend, bot MO
------------------------------------------------------------------------------
Total Cash Gains ... $3,330.43






















Monday, November 17, 2014

Add On Purchase - IBM

A couple of weeks ago I was looking at UTX as my top candidate for the purchase in Project $3 Million.

I  had a change of heart as the price for UTX hasn't come down as I was hoping it would. I want to purchase UTX when it is selling at a double digit discount to fair value and I want it to be confirmed by both S&P and Moringstar.

S&P says UTX is selling at a 12.5% discount to fair value and M* says the discount is 6.9%. It's close, but not close enough when the Chowder Rule number is taken into consideration.

The yield is 2.2% and the 5 year dividend growth rate is 8.93% for a Chowder Rule number of 11.13.

The normal Chowder Rule number for an equity is 12, but that's when the yield is 50% higher than that offered by the S&P 500 Index.

The S&P 500 currently has a yield of 2% x 150 for a minimum yield acceptance of 3%.

When the yield is lower than the minimum requirement, which is now at 3%, then I need more dividend growth to make up the difference. I now need to see a Chowder Rule number of 15.

I am instead going to add to the IBM position. The yield is at their historic highs of 2.7% and the 5 year CAGR is 14.61% for a Chowder Rule number of 17.31.

I understand that IBM is going through some changes, and I understand that their share price isn't exactly scheduled to take off any time soon. However, IBM is rated 1 for safety by Value Line and has a Financial Strength Rating of A++.

Here are their other financial strength ratings according to Jefferson Research:

Earnings Quality ... Strongest
Cash Flow Quality ... Strongest
Operating Efficiency ... Strongest
Balance Sheet ... Strongest
Valuation ... Low Risk

These are the type of financial strength ratings I look for when evaluating whether I am willing to grow a position in a company facing headwinds. They are strong enough to survive while they work on improving their revenue growth.

S&P says IBM is selling at a 27.3% discount to fair value and M* says the discount is 16.2%.

This looks like a good candidate for the Project $3 Million Portfolio. The owner of this portfolio has many years to build and hold these positions.

I made the purchase moments ago, 6 shares at $164.18 which now makes the IBM position 11.084 shares with a cost basis of $173.76. The position was down 11%, but is now down just 5.52%. I don't like to average down usually, but the financial strength ratings are too strong not to in my opinion.

Monday, November 3, 2014

Project $3 Million - October Results

This portfolio belongs to a 29 year old. I manage it for him.

MONTHLY HIGHLIGHTS:

1. The portfolio closed at an all-time high on October 31 at $132,292.22.
2. The monthly dividend income was $392.92 which was a 31.6% over October 2013.
3. Year to date dividend income is up 21.8% over year to date 2013.
... Dividend income earned through 10/31/14 is $3,335.97 vs through 10/31/13 of $2,739.11.

Companies that raised their dividend in October.

Kraft Foods - KRFT ... 4.8%
Magellan Midstream Partners - MMP ... 4.3% ... up 19.4% year over year
Kinder Morgan Inc - KMI ... 2.3% ,,, up 9.0% year over year
Enterprise Products Partners ... 1.4% ... up 5.9% year over year
Kinder Morgan Partners - KMP ... 0.7% ,,, up 5.1% year over year

So far in 2014 there have been 25 companies that were expected to raise their dividend by the end of October and all 25 companies have done so.

Automatic Data Processing - ADP spun off a segment of their business and the portfolio now has 13 shares of CDK as a result of that spin-off.

In order to be on schedule for the $3 Million, the portfolio value needs to be $98,362.64. The current portfolio value of $132,292.22 has the portfolio ahead of schedule by 34.5%.
=============================================================

PRIMARY OBJECTIVE:

Income Replacement!

The objective is to start earning an income stream now to replace the income that will be earned throughout the working years. The goal is to achieve $10,000 per month in retirement from dividends alone and not have to touch the principal.

Income from pensions and Social Security will provide additional income.

The goal is to have the dividend income stream grow at a rate above inflation and this is expected to be achieved with companies that grow their dividends annually.

A portfolio of $3 Million in value with a yield of 4% will accomplish the $10,000 per month in dividend income. Hence the title of this portfolio ... Project $3 Million.
===========================================================

MISSION STATEMENT:

To earn an income stream that is reliable, predictable and increasing.
===========================================================

STRATEGY:

To focus on companies with high financial strength ratings and provide a safe and growing dividend that are not considered to be at risk during ongoing market conditions.

Capital appreciation and capital preservation are secondary to dividend growth. Total return is expected to be the long-term result as long as the companies in the portfolio are of high quality, pay a decent yield and continue to grow the dividend.

The formula to be followed to assure that this strategy enjoys long-term success is what I refer to as "The Success Formula That Never Fails."

High Quality + High Current Yield + High Growth of Yield = High Total Return.

I explain how to use the formula here:

http://seekingalpha.com/instablog/728729-chowder/2360292-the-chowder-rule

====================================================

TACTICS:

To contribute $500 per month to the portfolio, plus 5% of income (no match) to the Thrift Savings Plan (TSP), look to earn 8.25% annually, compounded over 40 years (to age 65). The beginning portfolio value at the time of establishing these goals was $42,204.42.

The cash contribution breakdown is to put $5,500 annually into the Roth Ira and $500 annually into the Taxable Account.

The link below shows the compounding effect and where the portfolio needs to be at the end of each of those 40 years in order to stay on schedule for the $3 Million.

http://www.planningtips.com/cgi-bin/savings.pl?amt=42205.00&dep=500&cmp=annually&int=8.25&yrs=40&Calculate.x=50&Calculate.y=12

All dividends are currently being reinvested back into the companies paying the dividend. Monthly cash contributions will be used to add to existing positions, or create new ones.
======================================================

DIVIDEND HISTORY:

October Dividend History:

2010 ... $140.28
2011 ... $181.47
2012 ... $225.82
2013 ... $298.52 ... up 32.2%
2014 ... $392.92 ... up 31.6%
=========================================================

OCTOBER DIVIDENDS RECEIVED:

Taxable Account: (Dividends Reinvested)

Coca-Cola - KO ................................ $34.70 ... bot 0.813 shares
Automatic Data Processing - ADP ... $19.20 ... bot 0.266 shares
Kimberly-Clark - KMB .................... $31.95 ... bot 0.296 shares
Altria Group - MO ........................... $58.50 ... bot 1.255 shares
Philip Morris - PM ........................... $46.44 ... bot 0.547 shares
Kraft Foods - KRFT ......................... $49.46 ... bot 0.882 shares
Sysco Corp - SYY ............................ $34.29 ... bot 0.899 shares
Diageo plc - DEO ............................ $63.08 ... bot 0.562 shares
--------------------------------------------------------
Total Dividends ............................. $337.62


Roth Ira: (Dividends Reinvested)

Altria Group - MO ..... $39.27 ... bot 0.842 shares
Realty Income - O ..... $16.03 ... bot 0.365 shares
--------------------------------------------
Total Dividends ......... $55.30
================================================

TAXABLE ACCOUNT - PORTFOLIO HOLDINGS: ($4,000 equals a full position)

Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company

MMP ..... 85.667 ... $7,013.56 ... UP 180.49% ... **Magellan Midstream Partners
LMT ...... 49.066 ... $9,350.51 ... UP 120.21% ... *Lockheed-Martin
MO ...... 113.755 ... $5,498.92 ... UP 115.26% ... *Altria Group

ADP ..... 40.268 ... $3,293.12 ... up 78.95% ....... Automatic Data Processing
CDK ..... 13.00 .... $436.80 ... (Spun off from ADP) - CDK Global, Inc.
CL ........ 51.572 ... $3,449.14 ... up 64.60% ...... *Colgate-Palmolive
CVX .... 32.454 ... $3,892.86 .... up 30.92% ...... *Chevron
DE ........ 12.224 ... $1,045.64 ... up 3.13% ........ *Deere & Company
DEO ..... 31.131 ... $3,672.52 ... up 64.85% ...... *Diageo plc
EPD .... 131.928 ... $4,868.14 ... up 83.86% ..... **Enterprise Products Partners
FTR ..... 23.609 .... $154.40 ... Received in a spinoff from VZ - Frontier Comm.
GIS ...... 80.915 .... $4,204.34 ... up 41.84% ..... *General Mills
JNJ ...... 45.584 .... $4,913.04 ... up 69.42% ...... *Johnson & Johnson
KMB ... 38.334 .... $4,380.43 ... up 47.90% ...... *Kimberly-Clark
KMP ... 39.702 .... $3,724.05 ... up 26.96% ...... **Kinder Morgan Partners
KO .... 114.586 .... $4,798.86 ... up 69.60% ...... *Coca-Cola
KRFT .. 90.828 ... $5,118.16 ... up 22.39% ....... *Kraft Foods
MCD ... 37.143 ... $3,481.41 ... up 19.20% ....... *McDonald's
PEP ..... 34.909 ... $3,357.20 ... up 53.61% ....... *Pepsico
PM ...... 46.991 ... $4,182.67 ... up 15.43% ....... *Philip Morris
SO ....... 74.188 ... $3,439.36 ... up 16.92% ....... *Southern Company
SYY .. 119.156 ... $4,592.27 ... up 27.42% ....... Sysco Corp
Cash .................... $83.18
----------------------------------------------------------------------------------------
Account Value ... $88,950.57

*Increased the dividend in 2014
** Multiple dividend increases in 2014
===================================================

ROTH IRA - PORTFOLIO HOLDINGS: ($4,000 equals a full position)

Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company

D .......... 74.399 ... $5,304.65 ... up 48.70% ... *Dominion Resources
HCN .... 45.978 ... $3,269.50 ... up 26.88% ... *Healthcare REIT
IBM ..... 5.084 ..... $835.81 ...... dn 11.17% ... *International Business Machines
KMI .... 73.398 ... $2,840.50 ... up 5.40% ...... **Kinder Morgan, Inc
MO ..... 76.37 ..... $3,691.73 ... up 34.69% .... *Altria Group
O ......... 87.906 ,,, $4,046.31 ... up 25.69% ... ** Realty Income
PG ....... 36.289 ... $3,166.94 ... up 36.61% ... *Procter & Gamble
ROST .. 14.079 ... $1,136.46 ... up 17.11% ... *Ross Stores
T ......... 60.835 ... $2,119.49 ... up 1.20% ...... AT&T
VZ .... 124.304 ... $6,246.28 ... up 31.29% .... *Verizon
XOM .. 10.00 ..... $967.10 ...... dn 0.09% ...... *Exxon-Mobile (new position)
Cash ................... $740.71
-------------------------------------------------------------------
Account Value ... $34,365.47

====================================================

THRIFT SAVINGS PLAN (TSP) - Federal version of the 401K

There aren't any matching funds from the employer (military). They provide a pension after 20 years at 50% of the current salary at the time of retirement. Therefore, absent any matching funds, only 5% of income is being contributed. This amounts to $64 per month.

Index Funds and Life Cycle Funds are the only options to choose from.

Fund - Tracking Index ..... Shares ..... Value ..... Percentage of Portfolio

S Fund ... (Small Cap) ..... 157.2644 ... $5,577.92 ... 62.14%
I Fund ... (International) .. 135.1335 ... $3,398.56 ... 37.86%

Ongoing contributions:

S Fund - 60%
I Fund - 40%
=======================================================

SOLD POSITIONS - REALIZED GAINS/LOSSES:

Company ... Date ... Gain/Loss ... Reason/Result

BMY ... 11/09 ... $1,001.21 - up 25.85% - Froze dividend, bot VZ and JNJ

KMR ... 02/11 ... $504.94 - up 27.09% - Replaced in taxable account with KMP
O ........ 03/11 .... $639.63 - up 34.55% - sold @35.42 bot back @34.43 don't recall why
ZTR .... 04/11 .... <$55.58> - dn <10.09%> - Cut losses, bot SYY
VZ ...... 05/11 ... $618.16 - up 30.15% - Moved to Roth and added to existing position
CLX ... 06/11 ... $25.25 - up 1.57% - Concerned with debt, replaced with KMB
VFC ... 10/11 ... $897.99 - up 53.07% - Yield dropped below 2%, bot PEP

O ....... 01/12 ... $79.73 - up 3.01% - Moved to Roth
UHT .. 01/12 ... $233.60 - up 10.32% - Wanted to spread tenant risk, bot HCN
FTR ... 03/12 .. <$1,095.08> - dn <49.90%> - Dividend cut, cash to Roth, bot COP
ABT ... 11/12 .. $872.46 - up 31.38% - Company split, took profits, bot KRFT
BP ..... 12/12 ... <$554.03> - dn <17.23%> - Took loss, cash to Roth, bot COP
NUE .. 12/12 .. $164.61 - up 7.33% - Slow dividend growth, cash to Roth, added to COP

COP ... 04/13 ... <$2.46> - dn <0.10%> - Froze dividend, bot MO
------------------------------------------------------------------------------
Total Cash Gains ... $3,330.43
















Friday, October 3, 2014

Project $3 Million - September Results

This portfolio belongs to a 29 year old. I manage it for him.

MONTHLY HIGHLIGHTS:

1. On September 19, this portfolio established an all-time portfolio value high of $128,960.12.
2. The quarterly dividend income was $978.71 which is a 14.2% increase over Quarter 3, 2013.
3. Year to date dividend income is up 20.1% over year to date 2013.
... Dividend income earned through 9/30/14 is $2,943.05 vs through 9/30/13 of $2,440.59.

Companies that raised their dividend in September:

Diageo - DEO ..... 15.5%
Lockheed-Martin - LMT ... 12.8%
Philip Morris - PM ..... 6.4%
McDonald's - MCD .... 4.9%
Verizon - VZ ..... 3.8%

So far in 2014 there have been 24 companies that were expected to raise their dividend by the end of September, and all 24 companies have.

New Purchase ... Bot 10 shares of XOM at $96.80 in Roth.

To be on schedule of the $3 Million, the portfolio value at the end of September 2014 is supposed to be $75,482.50. ... The portfolio value at the end of September is $128,216.67.

The portfolio is ahead of schedule by 69.9% above where it needs to be.
===============================================================

PRIMARY OBJECTIVE:

Income Replacement!

The objective is to start earning an income stream now to replace the income that will be earned throughout the working years. The goal is to achieve $10,000 per month in retirement from dividends alone and not have to touch the principal.

Income from pensions and Social Security will provide additional income.

The goal is to have the dividend income stream grow at a rate above inflation and this is expected to be achieved with companies that grow their dividends annually.

A portfolio of $3 Million in value with a yield of 4% will accomplish the $10,000 per month in dividend income. Hence the title of this portfolio ... Project $3 Million.
=================================================================

MISSION STATEMENT:

To earn an income stream that is reliable, predictable, and increasing.
====================================================================

STRATEGY:

To focus on companies with high financial strength ratings and provide a safe and growing dividend that are not considered to be at risk during ongoing market conditions.

Capital appreciation and capital preservation are secondary to dividend growth. Total return is expected to be the long-term result as long as the companies in the portfolio are of high quality, pay a decent yield and continue to grow the dividend at an acceptable rate.

The formula to be followed to assure that this strategy enjoys long-term success is what I refer to as "The Success Formula That Never Fails."

High Quality + High Current Yield + High Growth of Yield = High Total Return

I explain how to use the formula here:

http://seekingalpha.com/instablog/728729-chowder/2360292-the-chowder-rule
============================================================

TACTICS:

To contribute $500 per month to the portfolio, plus 5% of income (no match) to the Thrift Savings Plan (TSP), look to earn 8.25% annually, compounded over 40 years (to age 65). The beginning portfolio value at the time of establishing these goals was $42,204.42.

The cash contribution breakdown is to put $5,500 annually into the Roth Ira and $500 annually into the Taxable Account.

The link below shows the compounding effect and where the portfolio needs to be at the end of each of those 40 years in order to stay on schedule for the $3 Million.

http://www.planningtips.com/cgi-bin/savings.pl?amt=42205.00&dep=500&cmp=annually&int=8.25&yrs=40&Calculate.x=50&Calculate.y=12

All dividends are currently being reinvested back into the companies paying the dividend. Monthly cash contributions will be used to add to existing positions, or create new ones.
===============================================================

DIVIDEND HISTORY:

September Dividend History: (Last 5 years)

2010 ... $129.18
2011 ... $216.30
2012 ... $223.87
2013 ... $253.52 ... up 13.2%
2014 ... $262.97 ... up 3.7%

Quarter 3 Dividend History: (Last 5 years)

2010 ... $518.24
2011 ... $583.40
2012 ... $706.33
2013 ... $857.21 ... up 21.4%
2014 ... $978.71 ... up 14.2%
================================================================

SEPTEMBER DIVIDENDS RECEIVED:

Taxable Account: (Dividends Reinvested)

Southern Company - SO .... $38.49 ... bot 0.872 shares
Chevron - CVX .................. $34.43 ... bot 0.279 shares
Johnson & Johnson - JNJ ... $31.70 ... bot 0.303 shares
McDonald's - MCD ............ $29.83 ... bot 0.319 shares
Lockheed- Martin - LMT ... $64.78 ... bot 0.356 shares
Pepsico - PEP ..................... $22.70 ... bot 0.245 shares
Frontier Comm - FTR ........ $2.32 ..... bot 0.36 shares
---------------------------------------------------------------------------------
Total Dividends ....... $194.42

Roth Ira: (Dividends Reinvested)

International Business Machines - IBM ... $5.56 .... bot 0.029 shares
Realty Income - O .................................... $15.93 ... bot 0.37 shares
Dominion Resources - D .......................... $44.25 ... bot 0.648 shares
Ross Stores - ROST .................................. $2.81 .... bot 0.037 shares
-------------------------------------------------------------------------------------
Total Dividends ....... $68.55

=============================================================

TAXABLE ACCOUNT - PORTFOLIO HOLDINGS: ($4,000 equals a full position)

Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company

MMP ..... 85.667 ... $7,211.45 ... UP 188.41% ... **Magellan Midstream Partners
LMT ...... 49.066 ... $8,968.28 ... UP 111.20% ... *Lockheed-Martin
MO ....... 112.50 .... $5,168.25 ... UP 107.06% ... *Altria Group
EPD ..... 131.928 ..  $5,316.70 ... UP 100.80% ... **Enterprise Products Partners


ADP ..... 40.002 ... $3,323.27 ... up 82.50% ..... Automatic Data Processing
CL ........ 51.572 ... $3,363.53 ... up 60.51% ..... *Colgate-Palmolive
CVX ..... 32.454 ... $3,872.41 ... up 30.24% ..... *Chevron
DE ........ 12.224 ... $1,002.25 ... dn 1.15% ....... *Deere& Company
DEO ..... 30.569 ... $3,527.66 ... up 62.96% ..... *Diageo plc
FTR ...... 23.249 ... $151.35 ... Received in a spinoff from VZ - Frontier Comm.
GIS ....... 80.915 ... $4,082.16 ... up 37.71% ..... *General Mills
JNJ ....... 45.584 ... $4,858.80 ... up 67.55% ..... *Johnson & Johnson
KMB .... 38.038 ... $4,091.75 ... up 39.66% ..... *Kimberly-Clark
KMP .... 39.702 ... $3,703.40 ... up 26.25% ...... **Kinder Morgan Partners
KO ..... 113.773 ... $4,853.56 ... up 73.66% ...... *Coca-Cola
KRFT ... 90.828 ... $5,122.70 ... up 22.50% ...... Kraft Foods
MCD .... 37.143 ... $3,521.53 ... up 20.57% ...... McDonald's
PEP ...... 34.664 ... $3,226.87 ... up 48.22% ..... *Pepsico
PM ....... 46.444 ... $3,873.43 ... up 8.29% ........ Philip Morris
SO ........ 74.188 ... $3,238.31 ... up 10.09% ..... *Southern Company
SYY ... 118.257 ... $4,487.85 ... up 25.72% ..... Sysco Corp
Cash ..................... $74.12
-------------------------------------------------------------------------------------------------
Account Value ..... $87,039.72

*Increased the dividend in 2014
**Multiple Dividend Increases in 2014
============================================================

ROTH IRA - PORTFOLIO HOLDINGS: ($4,000 equals a full position)

Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company

D .......... 74.399 ... $5,140.23 ... up 44.09% ... *Dominion Resources
HCN .... 45.978 ... $2,867.65 ... up 11.28% ... *Healthcare REIT
IBM ..... 5.084 ..... $965.10 ...... up 2.57% ..... *International Business Machines
KMI .... 73.398 .... $2,814.08 ... up 4.42% ..... **Kinder Morgan, Inc.
MO ..... 75.528 .... $3,469.76 ... up 28.43% .... *Altria Group
O ......... 87.541 ... $3,570.80 ... up 11.47% .... **Realty Income
PG ....... 36.289 ... $3,038.84 ... up 31.09% .... *Procter & Gamble
ROST .. 14.042 ... $1,061.29 ... up 9.68% ...... *Ross Stores
T .......... 60.835 ... $2,143.83 ... up 2.36% ...... AT&T
VZ ..... 124.304 ... $6,213.96 ... up 30.61% .... Verizon
XOM ... 10 .......... $940.50 ...... dn 2.84% ...... Exxon-Mobile (new position)
Cash .................... $40.71
-----------------------------------------------------------------------------------------------
Account Value ... $32,466.73

=========================================================

THRIFT SAVINGS PLAN (TSP) - Federal version of the 401K

There aren't any matching funds from the employer (military). They provide a pension after 20 years at 50% of your current salary at the time of retirement instead. Therefore, absent any matching funds, only 5% of income is being contributed. This amounts to $64 per month.

Index Funds and Life Cycle Funds are the only options to choose from.

Fund - Tracking Index ..... Shares ..... Value ..... Percentage of Portfolio

S Fund .... (Small Cap) .... 156.0792 ... $5,317.48 ... 61.05%
I Fund ... (International) .. 134.1395 ... $3,392.76 ... 38.95%

Ongoing contributions:

S Fund ... 60%
I Fund ... 40%
========================================================


SOLD POSITIONS - REALIZED GAINS/LOSSES:

Company ... Date ... Gain/Loss ... Reason/Result

BMY ... 11/09 ... $1,001.21 - up 25.85% - Froze dividend, bot VZ and JNJ

KMR ... 02/11 ... $504.94 - up 27.09% - Replaced in taxable account with KMP
O ........ 03/11 .... $639.63 - up 34.55% - sold @35.42 bot back @34.43 don't recall why
ZTR .... 04/11 .... <$55.58> - dn <10.09%> - Cut losses, bot SYY
VZ ...... 05/11 ... $618.16 - up 30.15% - Moved to Roth and added to existing position
CLX ... 06/11 ... $25.25 - up 1.57% - Concerned with debt, replaced with KMB
VFC ... 10/11 ... $897.99 - up 53.07% - Yield dropped below 2%, bot PEP

O ....... 01/12 ... $79.73 - up 3.01% - Moved to Roth
UHT .. 01/12 ... $233.60 - up 10.32% - Wanted to spread tenant risk, bot HCN
FTR ... 03/12 .. <$1,095.08> - dn <49.90%> - Dividend cut, cash to Roth, bot COP
ABT ... 11/12 .. $872.46 - up 31.38% - Company split, took profits, bot KRFT
BP ..... 12/12 ... <$554.03> - dn <17.23%> - Took loss, cash to Roth, bot COP
NUE .. 12/12 .. $164.61 - up 7.33% - Slow dividend growth, cash to Roth, added to COP

COP ... 04/13 ... <$2.46> - dn <0.10%> - Froze dividend, bot MO
------------------------------------------------------------------------------
Total Cash Gains ... $3,330.43



























Saturday, September 13, 2014

New Position

I can use a little more of a sell-off here. I'm due for a scheduled purchase early next week. A check has already been sent to the broker but it won't arrive until Monday or Tuesday.

I'm looking to add a new position and I'm trying to find something that is selling at a 10% or better discount to fair value, and I want that double digit discount to be confirmed by both S&P Capital IQ and Morningstar.

My leading candidates for purchase are:

MA, TJX, UTX and XOM.

MA is selling at a 14.6% discount to fair value according to S&P, but M* does not confirm. They say the discount is just 8.2%.

TJX is selling at a 6.3% discount to fair value according to S&P, but M* says it's a 10.6% discount.

UTX is selling at a 10.6% discount to fair value according to S&P, but M* says it's just a 5.8% discount.

XOM is selling at a 6.5% discount to fair value according to S&P, but M* says it's a 12.0% discount.

So, all four positions are close, but none of them are confirmed by both rating agencies. I will take a final review next week and decide. If none of them have both agencies confirming a double digit discount to fair value, I will then purchase XOM.

I will consider XOM a core position, while the other three won't be core positions. When it comes to core positions I will pay up to fair value. Since XOM is selling at a discount, it would qualify for purchase, but I'd still like to get a better valuation if I can.

So, we'll see how it plays out.

I'll be vacationing this week and I may not have computer access, so I won't be able to provide a detailed analysis of my choice until I make it, and I won't know that until probably Tuesday. It should be from the above list, leaning towards XOM unless one of the other 3 sell off enough to provide that 10% discount to fair value that I'm looking for, confirmed by both rating agencies.

Wednesday, September 3, 2014

Project $3 Million - August Resilts

This portfolio belongs to a 29 year old. I manage it for him.

MONTHLY HIGHLIGHTS:

1. On August 29, this portfolio established an all-time portfolio value high at $128,589.52.
2. This portfolio established a new monthly dividend record of  $400.94.
3. Year to date dividend income is up 22.5% over year to date 2013.
... Dividend income earned through 8/31/14 is $2,680.80.
... Dividend income earned through 8/31/14 was $2,187.07.

Companies that raised their dividend in August:

Altria Group - MO ... 8.3%

So far in 2014 there have been 19 companies that were expected to raise their dividend by the end of August and all 19 have done so.

The average dividend growth rate to date, per company is 7.6%.

Stock Split (Units) 2 for 1 ... Enterprise Products Partners - EPD
===========================================================

PRIMARY OBJECTIVE:

Income Replacement!

The objective is to start earning an income stream now to replace the income that will be earned throughout the the working years. The goal is to achieve $10,000 per month in retirement from dividends alone and not have to touch the principal.

Income from pensions and Social Security will provide additional income.

The goal is to have the dividend income stream grow at a rate above inflation and this is expected to be achieved with companies that grow their dividends annually.

A portfolio of $3 Million in value with a yield of 4% will accomplish the $10,000 per month in dividend income. Hence the title of this portfolio ... Project $3 Million.
============================================================

MISSION STATEMENT:

To earn an income stream that is reliable, predictable and increasing.
============================================================

STRATEGY:

To focus on companies with high financial strength ratings and provide a safe dividend and growing dividend not considered to be at risk during ongoing market conditions.

Capital appreciation and capital preservation are secondary priorities or in other words serve a supporting role in the short to intermediate terms.

Total return is to be the expected long-term result.

The formula to be followed to assure that this strategy enjoys long-term success is what I refer to as "The Success Formula That Never Fails."

High Quality + High Current Yield + High Growth of Yield = High Total Return.

I explain how to use this formula here:

http://seekingalpha.com/instablog/728729-chowder/2360292-the-chowder-rule
================================================================

TACTICS:

To contribute $500 per month to the portfolio, plus 5% of income (no match) to the Thrift Savings Plan (TSP), look to earn 8.25% annually, compounded over 40 years (to age 65). The beginning portfolio value at the time of establishing these goals was $42,204.42.

The cash contribution breakdown is to put $5,500 annually into the Roth Ira and $500 annually into the Taxable Account.

The link below shows the compounding effect and where the portfolio needs to be at the end of each of those 40 years in order to stay on schedule for the $3 Million.

http://www.planningtips.com/cgi-bin/savings.pl?amt=42205.00&dep=500&cmp=annually&int=8.25&yrs=40&Calculate.x=50&Calculate.y=12

All dividends are currently being reinvested back into the companies paying the dividend. Monthly cash contributions will be used to add to existing positions, or create new ones.
===============================================================

DIVIDEND HISTORY:

August Dividend History: (Last 5 years)

2010 ... $166.60
2011 ... $254.24
2012 ... $314.35
2013 ... $338.50
2014 ... $400.94 ... up 18.4%

The 5 year Compounded Annual Growth Rate (CAGR) is 19.2%
================================================================

AUGUST DIVIDENDS RECEIVED:

Taxable Account: (Dividends Reinvested)

General Mills - GIS ................................. $32.91 ... bot 0.644 shares
Deere & Co. - DE .................................. $7.28 ..... bot 0.086 shares
Enterprise Products Partners - EPD ........ $47.01 ... bot 0.667 units
Kinder Morgan Partners - KMI .............. $54.41 ... bot 0.555 units
Magellan Midstream Partners - MMP ..... $54.40 ... bot 0.661 units
Colgate-Palmolive - CL  ......................... $18.46 ... bot 0.285 shares
---------------------------------------------------------------------------
Total Dividends .............. $214.47

Roth Ira: (Dividends Reinvested)

Verizon - VZ .......................... $65.19 ... bot 1.307 shares
Procter & Gamble - PG .......... $23.17 ... bot 0.281 shares
Realty Income - O .................. $15.87 ... bot 0.353 shares
Kinder Morgan Inc. - KMI ..... $31.23 ... bot 0.76 shares
Healthcare REIT - HCN ......... $36.10 ... bot 0.572 shares
AT&T - T  ............................. $14.91 ... bot 0.422 shares
------------------------------------------------------------------------
Total Dividends .......... $186.47
===========================================================

TAXABLE ACCOUNT - PORTFOLIO HOLDINGS: ($4,000 equals a full position)

Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company

MMP ....... 85.667 ... $7,190.03 ... UP 187.55% ... **Magellan Midstream Partners
LMT ........ 48.71 ..... $8,475.54 ... UP 102.69% ...* Lockheed-Martin
EPD ....... 131.928 ... $5,360.23 ... UP 102.45% ... **Enterprise Products Partners

ADP ....... 40.002 ... $3,339.37 ... up 83.38% ...  Automatic Data Processing
CL .......... 51.572 ... $3,338.26 ... up 59.30% ... *Colgate-Palmolive
CVX ....... 32.175 ... $4,165.05 ... up 41.72% ... *Chevron Corp
DE .......... 12.224 ... $1,027.92 ... up 1.38% ..... *Deere & Company
DEO ....... 30.569 ... $3,664.31 ... up 69.27% ... Diageo plc
FTR ........ 23.249 ... $157.86 ... Received in a spinoff from VZ - Frontier Comm
GIS ........ 80.915 ... $4,319.24 ... up 45.71% ... *General Mills
JNJ ........ 45.281 ... $4,697.00 ... up 63.36% ... *Johnson & Johnson
KMB ..... 38.038 ... $4,108.10 ... up 40.22% ... *Kimberly-Clark
KMP ..... 39.702 ... $3,826.48 ... up 30.45% ... **Kinder Morgan Partners
KO ...... 113.773 ... $4,746.61 ... up 69.83% ... *Coca-Cola
KRFT .... 90.828 ... $5,349.77 ... up 27.93% ... Kraft Foods
MCD ..... 36.824 ... $3,451.15 ... up 19.38% ... McDonald's
MO ...... 112.50 .... $4,846.50 ... up 94.17% ... *Altria Group
PEP ....... 34.664 ... $3,206.07 ... up 47.26% ... *Pepsico
PM ........ 46.444 ... $3,974.68 ... up 11.12% ... Philip Morris
SO ........ 73.316 ... $3,255.23 ... up 12.13% ... *Southern Company
SYY .... 118.257 ... $4,473.66 ... up 25.32% ... Sysco Corp
Cash ...................... $74.12
---------------------------------------------------------------------------
Account Value ...... $87,047.18

*Increased dividend in 2014
** Multiple Dividend Increases in 2014
===========================================================

ROTH IRA - PORTFOLIO HOLDINGS: ($4,000 equals a full position)

Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company

D ............ 73.751 ... $5,178.80 ... up 47.00% ... *Dominion Resources
HCN ...... 45.978 ... $3,107.19 ... up 20.58% ... *Healthcare REIT
IBM ....... 5.055 ..... $972.08 ...... up 3.93% ..... *International Business Machines
KMI ...... 73.398 ... $2,955.00 ... up 9.65% ..... **Kinder Morgan Inc.
MO ....... 75.528 ... $3,253.75 ... up 20.44% ... *Altria Group
O .......... 87.171 ... $3,898.29 ... up 22.20% ... **Realty Income
PG ........ 36.289 ... $3,015.98 ... up 30.10% ... *Procter & Gamble
ROST ... 14.042 ... $1,059.05 ... up 9.44% ..... *Ross Stores
T ........... 60.835 ... $2,126.79 ... up 1.55% .... AT&T (new position)
VZ ...... 124.304 ... $6,192.83 ... up 30.17% ... Verizon
Cash ..................... $718.70
-------------------------------------------------------------------------------------
Account Value ...... $32,478.45

===============================================================

THRIFT SAVINGS PLAN (TSP) - Federal version of the 401K

There aren't any matching funds from the employer (military). They provide a pension after 20 years instead. Therefore, absent any matching funds, only 5% of income is being contributed. This amounts to $64 per month. ... Index Funds and Life Cycle Funds are the only options to choose from.

Fund - Tracking Index ..... Shares ..... Value ..... Percentage of Portfolio

S Fund .... (Small Cap) .... 154.9695 ... $5,563.20 ... 61.38%
I Fund  ... (International) .. 133.1255 ... $3,500.69 ... 38.62%

Contributions going forward:

S Fund ... 60%
I Fund ... 40%
===============================================================

SOLD POSITIONS - REALIZED GAINS/LOSSES:

Company ... Date ... Gain/Loss ... Reason/Result

BMY ... 11/09 ... $1,001.21 - up 25.85% - Froze dividend, bot VZ and JNJ

KMR ... 02/11 ... $504.94 - up 27.09% - Replaced in taxable account with KMP
O ........ 03/11 .... $639.63 - up 34.55% - sold @35.42 bot back @34.43 don't recall why
ZTR .... 04/11 .... <$55.58> - dn <10.09%> - Cut losses, bot SYY
VZ ...... 05/11 ... $618.16 - up 30.15% - Moved to Roth and added to existing position
CLX ... 06/11 ... $25.25 - up 1.57% - Concerned with debt, replaced with KMB
VFC ... 10/11 ... $897.99 - up 53.07% - Yield dropped below 2%, bot PEP

O ....... 01/12 ... $79.73 - up 3.01% - Moved to Roth
UHT .. 01/12 ... $233.60 - up 10.32% - Wanted to spread tenant risk, bot HCN
FTR ... 03/12 .. <$1,095.08> - dn <49.90%> - Dividend cut, cash to Roth, bot COP
ABT ... 11/12 .. $872.46 - up 31.38% - Company split, took profits, bot KRFT
BP ..... 12/12 ... <$554.03> - dn <17.23%> - Took loss, cash to Roth, bot COP
NUE .. 12/12 .. $164.61 - up 7.33% - Slow dividend growth, cash to Roth, added to COP

COP ... 04/13 ... <$2.46> - dn <0.10%> - Froze dividend, bot MO
------------------------------------------------------------------------------
Total Cash Gains ... $3,330.43