Monday, April 7, 2014

Project $3 Million - March Results

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

MONTHLY HIGHLIGHTS:

March was another good month.

1. The portfolio closed at an all-time high of $115,618.87.
2. March dividend income, year over year ... up 10.6%
3. First quarter dividend income, year over year ... up 19.5%

Companies that raised the dividend in March:

General Mills - GIS ......... up 7.9%
Colgate-Palmolive - CL .. up 5.9%
Realty Income - O .......... up 0.2%
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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 principle.

Income from pensions and Social Security will be additional income.

The objective also includes having the income stream continue to grow above the inflation rate.

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

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

To focus on the safety of the dividend, then to focus on the growth of the dividend, and then to focus on the total return (capital appreciation plus dividend growth).

The formula to be used to put this strategy into effect is what I call, "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
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TACTICS:

To contribute $500 per month to the portfolio, 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 link below shows the compounding effect and where the portfolio needs to be at the end of each of those 40 years to achieve 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.
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STATUS:

To stay on schedule for the $3 Million, in the time allotted, according to the link above, the balance at the end of year 2014 needs to be $100,643.33.

This portfolio is ahead of schedule! ... The current portfolio value is $115, 619.87.
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DIVIDEND HISTORY:

March Dividend History: (Last 5 years)

2010 ... $85.79
2011 ... $194.47
2012 ... $184.45
2013 ... $249.36
2014 ... $275.91 ... up 10.6%

First Quarter Dividend History: (Last 5 years)

2010 ... $264.95
2011 ... $542.81
2012 ... $621.20
2013 ... $779.87 ... up 25.5%
2014 ... $931.78 ... up 19.5%
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 MARCH DIVIDENDS RECEIVED:

Taxable Account (Dividends Reinvested)

Southern Company - SO ..... $36.32 ... bot 0.869 shares
Chevron Corp - CVX ......... $31.63 ... bot 0.276 shares
Johnson & Johnson - JNJ .... $29.48 ... bot 0.316 shares
McDonald's - MCD ............ $29.35 ... bot 0.302 shares
Lockheed-Martin - LMT ..... $63.74 ... bot 0.391 shares
Frontier Comm. - FTR ......... $2.25 .... bot 0.402 shares
Pepsico - PEP ..................... $19.40 ... bot 0.234 shares
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PORTFOLIO HOLDINGS: ($4,000 equals a full position)

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

ADP ...... 39.518 ... $3,053.16 ... up 71.25% ... Automatic Data Processing
CL ....... . 51.012 ... $3,309.15 ... up 60.74% ... *Colgate-Palmolive
CVX ...... 31.902 ... $3,793.47 ... up 30.59 ...... Chevron Corp
DE ......... 12.072 ... $1,096.14 ... up 9.57% ..... Deere & Company
DEO ...... 30.253 ... $3,769.22 ... up 77.36% ... Diagio, plc
EPD ....... 64.64 ..... $4,483.43 ... up 75.48% ... *Enterprise Products Partners
FTR ....... 22.454 ... $128.10 ... Received-spinoff from VZ - Frontier Comm.
GIS ........ 79.653 ... $4,127.62 ... up 42.40% ... *General Mills
JNJ ........ 44.976 ... $4,417.99 ... up 55.75% ... Johnson & Johnson
KMB ..... 37.467 ... $4,130.74 ... up 44.10% ... *Kimberly-Clark
KMP ..... 38.452 ... $2,843.53 ... up 0.63% ..... *Kinder Morgan Partners
KO ...... 112.068 ... $4,332.55 ... up 58.92% ... *Coca-Cola
KRFT .... 89.194 ... $5,003.78 ... up 22.41% .... Kraft Foods
LMT ...... 48.313 ... $7,886.61 ... up 91.54% .... Lockheed-Martin
MCD ..... 36.532 ... $3,581.23 ... up 25.16% .... McDonald's
MMP ..... 84.356 ... $5,882.99 .. UP 145.70% .. *Magellan Midstream Partners
MO ...... 109.863 ... $4,112.17 ... up 72.06% .... Altria Corp
PEP ....... 34.177 ... $2,853.78 ... up 33.66% .... *Pepsico
PM ........ 45.436 ... $3,719.85 ... up 6.55% ...... Philip Morris
SO ........ 72.442 ... $3,183.10 ... up 11.10% .... Southern Company
SYY .... 116.402 ... $4,205.60 ... up 20.09% ... Sysco Corp
Cash ...................... $74.12
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Account Value ...... $79,988.33

*Increased Dividend in 2014
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ROTH IRA: (Dividends Reinvested)

March Dividends:

International Business Machines - IBM ... $4.75 ..... bot 0.025 shares
Realty Income - O ................................. $15.49 ... bot 0.368 shares
Dominion Resources - D ........................ $43.50 ... bot 0.616 shares
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PORTFOLIO HOLDINGS:

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

D ......... 73.123 ... $5,191.00 ... up 49.20% ..... *Dominion Resources
HCN ... 44.84 ..... $2,672.46 ... up 6.68% ....... *Healthcare REIT
IBM ..... 5.025 .... $967.26 ...... up 4.03% ....... International Business Machines
KMI .... 71.733 .. $2,330.61 .. dn  <11.51%> .. Kinder Morgan, Inc
MO ..... 73.758 ... $2,760.76 ... up 4.96% ........ Altria Corp
O ........ 85.386 ... $3,488.87 ... up 12.22% ...... *Realty Income
PG ...... 35.721 ... $2,879.11 ... up 26.72% ...... Procter & Gamble
T ......... 32.00 ..... $1,122.24 ... up 7.45% ........ AT&T (new position)
VZ .... 121.626 ... $5,785.75 ... up 25.01% ...... Verizon
Cash ................... $23.87
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Account Value ... $27,221.94

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

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

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

C Fund (S&P 500) ..... 107.1829 ... $2,605.78 ... 30.99%
S Fund (Small Cap) ..... 93.3937 .... $3,229.68 ... 38.41%
I Fund (International) ... 99.9023 .... $2,573.14 ... 30.60%
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Account Value ...... $8,408.60

Contribution Allocations:

C Fund ... 20%
S Fund ... 35%
I Fund ... 45%
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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
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Total Cash Gains ... $3,330.43

































15 comments:

  1. Nice going, keep the good job!

    ReplyDelete
  2. Congrats on another solid month. What's up next on your radar? Add to DE or another existing position? New position?

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  3. Thanks both for the congrats. ... I don't know yet Bruce. The next purchase won't be until June. I know I won't be adding to DE this year. I would like to add another company, but it all depends on valuations at the time of purchase.

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  4. Bruce, here are my top prospects for purchase next. ... MA, BAX, NSC and TGT.

    All would be new positions. MA for cap growth, the others dividend growth.

    It'll be about 5 to 6 weeks before the next purchase and a lot can change between now and then, but those are the prospects for further research as of today.

    ReplyDelete
    Replies
    1. Chowder,
      I wanted to thank you again for sharing this portfolio and your comments on the SA site. I've adopted a similar investment strategy, and wanted to let you know that TGT and T were purchased in my portfolio a couple months ago. T is closer to a full position and TGT is at a third of a position for now. I wasn't able to get into the core holdings as early as this portfolio, so I'm still looking for windows to purchase round out those positions. I know paying a premium for these foundation stocks isn't the best value, but I notice waiting for a lower entry point doesn't seem to work either... Best of luck and thanks again for sharing.

      Delete
    2. I love that you're stalking NSC, TGT, BAX, and MA. I own MA, and the other 3 are near the top of my list, along with WAG and ETN. Great minds, right?

      Delete
  5. Hi Chowder,
    I would love to see your updates, as soon as they are published.
    I was wondering - is it possible to get automatically e-mail or some other notification, so I would not miss the next update? Or just checking the blog is the only way to not miss it?

    Thank you.

    ReplyDelete
    Replies
    1. Sofi, I thought if one was a follower of this blog, they would get the updates as soon as something was published. Other than that, I guess people would just need to periodically check.

      Delete
  6. http://www.changedetection.com/ is what I use to let me know when any part of the blog has changed.

    ReplyDelete
  7. Hi Chowder! I just stumbled across your blog and wanted to let you know I've enjoyed reading all your posts. Great job on your portfolio and being a couple years ahead of schedule. Based on the stocks you're buying... have you looked into buying IEP? Looks like it might be a good fit for you. Keep up the good work and thanks for sharing your process and progress with the rest of us!

    ReplyDelete
    Replies
    1. Thanks for the suggestion. I'll check it out.

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  8. Hi Chowder, is the goal $3 million or 120k per annum? I'm thinking with your YoC steadily rising, you should hit the 120k faster than the $3 million. Just a thought about your title. BTW - thank you sincerely for this blog. I am a little older than your son and I too turned to DGI after some speculative moves that didn't pan out but taught me valuable lessons. Separate question, if you just recieved a sum of $$, ~15% of total portfolio, would you invest immediately or hold off a bit to see how things play out i.e. elimination of QE3, etc.? Thanks again.

    ReplyDelete
    Replies
    1. It's too early to tell if the $3 Million comes first of the dividend income objective. We'll take cap appreciation or dividend growth for now since both are an important part of the overall strategy.

      As to your second question, that depends on you and your objectives. I can only express what I do and why then it's up to you to adopt the strategy or ignore it.

      I stay 100% invested and will continue to do so. If I can't find something selling at a discount to fair value, then I'll simply add to the core positions that are closest to fair value.

      I don't ever expect to sell companies like T, JNJ, CL, CVX, PG and GIS for example, so it isn't a priority to create capital gains above market performance. With my core positions I simply want to continue increasing the number of shares I own and do it at a decent price. I will pay for quality when necessary.

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  9. So the question becomes how do you determine fair value? I want to be 100% invested but just not sure what is and isn't a good buy. I want to add GIS but is ~53 a good value? I'm not sure. Full disclosure, I started in 2010 with one position of MO and now hold 14 names across 3 accounts, 2 retirement and a taxable. I would like to add a couple of names however I'm trying to determine a good thesis on entry points. Would love to hear your views.

    ReplyDelete
    Replies
    1. That's an easy question to answer. I look to Morningstar and S&P Capital IQ which I get through both of my brokers, Fidelity and TD Ameritrade.

      I'll be looking to add XOM as a core position to this portfolio, if not in the next couple of weeks, at some time in the near future. XOM is currently selling at $99.23 and M* says fair value is $109.00. Therefore, XOM is selling at a discount to fair value and would qualify for purchase.

      Anything with 4 or 5 stars with M* is considered selling at a discount to fair value.

      http://quotes.morningstar.com/stock/xom/s?t=xom

      Delete