Saturday, May 3, 2014

Project $3 Million - April Results

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

MONTHLY HIGHLIGHTS:

April was another good month.

1. The portfolio closed at yet another all-time high of $119,964.24.
2. The portfolio established a new monthly dividend income record at $350.84.
3. Year to date dividend income is up 26.5% over year to date 2013.
... Income earned through 4/30/13 was $1,013.74.
... Income earned through 4/30/14 is $1,282.67.

Companies that raised their dividend in April:

International Business Machines - IBM ... up 15.8%
Procter & Gamble - PG ......................... up 7.0%
Chevron Corp. - CVX ........................... up 7.0%
Johnson & Johnson - JNJ ....................... up 6.1%
Magellan Midstream Partners - MMP ..... up 4.7% second increase this year
Southern Company - SO ........................ up 3.4%
Kinder Morgan Inc. - KMI ..................... up 2.4%
Kinder Morgan Partners - KMP ............. up 1.5% second increase this year
Enterprise Products Partners - EPD ........ up 1.4% second increase this year
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STATUS:

This portfolio has a dual objective, total return plus income replacement.

Total Return - To stay on schedule for the $3 Million, the total return number for ending April 2014 is supposed to be $91,520.74. The actual result is $119,964.24. The portfolio is ahead of schedule by 31.1%.

Dividend Income - To stay on schedule for the $10,000 per month in dividends, the average monthly income for ending April 2014 is supposed to be $305.07. The actual average monthly dividend in 2014 is $320.67. The portfolio is ahead of schedule by 5.1%.
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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 and we count on dividend growth to accomplish this.

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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DIVIDEND HISTORY:

April Dividend History: (Last 5 years)

2010 ... $112.64
2011 ... $133.71
2012 ... $158.94
2013 ... $233.87
2014 ... $350.89

The April dividends have a 5 year compounded annual growth rate of 25.52%.
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APRIL DIVIDENDS RECEIVED:

Taxable Account (Dividends Reinvested)

Coca-Cola - KO ............................. $34.18 ... bot 0.89 shares
Automatic Data Processing - ADP ... $18.97 ... bot 0.245 shares
Kimberly-Clark - KMB ................... $31.47 ... bot 0.287 shares
Altria Corp - MO ............................ $52.73 ... bot 1.399 shares
Diageo, plc - DEO ........................... $39.29 ... bot 0.316 shares
Philip Morris - PM .......................... $42.71 ... bot 0.506 shares
Kraft Foods - KRFT ...................... $46.83 ... bot 0.822 shares
Sysco Corp - SYY ......................... $33.76 ... bot 0.927 shares

Roth Ira: (Dividends Reinvested)

Altria Group - MO ......................... $35.40 ... bot 0.939 shares
Realty Income - O .......................... $15.55 ... bot 0.366 shares
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TAXABLE ACCOUNT - PORTFOLIO HOLDINGS: ($4,000 equals a full position)

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

ADP ...... 39.763 ... $3,099.92 ... up 72.04% ... Automatic Data Processing
CL ......... 51.012 ... $3,433.11 ... up 66.76% ... *Colgate-Palmolive
CVX ...... 31.902 ... $4,004.34 ... up 37.85% ... *Chevron Corp
DE ......... 12.072 ... $3,753.26 ... up 12.63% ... Deere & Company
DEO ...... 30.569 ... $3,753.26 ... up 73.38% ... Diageo, plc
EPD ....... 64.64 ..... $4,727.12 ... up 85.02% ... **Enterprise Products Partners
FTR ....... 22.856 ... $135.99 ... Received-spinoff from VZ- Frontier Comm.
GIS ........ 79.653 ... $4,223.20 ... up 45.69% ... *General Mills
JNJ ........ 44.976 ... $4,555.62 ... up 60.60% ... *Johnson & Johnson
KMB ..... 37.754 ... $4,237.89 ... up 46.23% ... *Kimberly-Clark
KMP ..... 38.452 ... $2,898.51 ... up 2.57% ..... **Kinder Morgan Partners
KO ...... 112.958 ... $4,607.56 ... up 66.92% ... *Coca-Cola
KRFT .... 90.016 ... $5,118.31 ... up 23.79% ... Kraft Foods
LMT ...... 48.313 ... $7,930.10 ... up 92.60% ... Lockheed-Martin
MCD ..... 36.532 ... $3,703.61 ... up 29.44% ... McDonald's
MO ..... 111.262 ... $4,462.72 ... up 82.70% ... Altria Group
PEP ....... 34.411 ... $2,955.56 ... up 37.18% ... *Pepsico
PM ........ 45.942 ... $3,924.83 ... up 11.06% ... Philip Morris
SO ......... 72.442 ... $3,320.02 ... up 15.88% ... *Southern Company
SYY .... 117.329 ... $4,274.30 ... up 20.89% ... Sysco Corp
Cash ...................... $74.12
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Account Value ...... $82,826.94

*Increased the dividend in 2014
** Multiple dividend increases in 2014
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ROTH IRA - PORTFOLIO HOLDINGS: ($4,000 equals a full position)

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

D ......... 73.123 ... $5,304.34 ... up 52.46% ... *Dominion Resources
HCN ... 44.84 ..... $2,828.96 ... up 12.92% ... *Healthcare REIT
IBM .... 5.025 ..... $987.26 ...... up 6.18% ...... *International Business Machines
KMI ... 71.733 .. $2,342.80 .. dn <11.04%> ... *Kinder Morgan Inc.
MO .... 74.697 ... $2,996.10 ... up 12.39% ..... Altria Group
O ........ 85.752 ... $3,725.92 ... up 19.25% ..... *Realty Income
PG ...... 35.721 ... $2,948.77 ... up 29.79% ..... *Procter & Gamble
T ......... 32.00 ..... $1,142.40 ... up 9.38% ....... AT&T (new position)
VZ .... 121.626 ... $5,683.58 ... up 22.81% ..... Verizon
Cash ................... $723.87
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Account Value .... $28,684.00

*Increased the dividend in 2014
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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) ..... 107.7257 ... $2,638.58 ... 31.21%
S Fund (Small Cap) ..... 94.0579 .... $3,172.33 ... 37.53%
I Fund (International) ... 101.0598 .. $2,642.39 .... 31.26%

A change has been made in this account and will be reflected in the May results. This portfolio will only hold the S and I funds going forward. The C Fund has been divided between the S and I. There will no longer be any money being contributed to the C Fund. Since the taxable account and Roth Ira hold companies held in the S&P 500, I didn't need the duplication in the TSP as well.

Contributions going forward:

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

























14 comments:

  1. Chowder, you seem to have omitted MMP from your portfolio holdings! I see you included their dividend raise, so I know you didn't sell it.
    Congrats on another solid month

    ReplyDelete
    Replies
    1. Oh no! MMP is the best performing company in this portfolio. Beats me why I missed it.

      I don't know what it was on 4/30 as I didn't write it down. The brokerage account shows the up to date numbers, as of Friday's close, and I'll list those below.

      MMP ... 84.356 shares ... Mkt Value ... $6,357.91 ... UP 165.54%.

      Delete
    2. I own MMP also, so I always look to see how awesome you (we) have done in it. I knew if you sold it, I would have noticed! Congrats on killing it with that one. I've been riding SXL and MMP for quite a while, and they're both phenomenal and phenomenally consistent

      Delete
  2. Hello Chowder, As usual clear and to the point on progress. Question how do you keep track of dividend increases, do you subscribe to some new feeds or how do you keep track of those when its due etc. Thanks much.

    ReplyDelete
    Replies
    1. I believe he checks here:
      http://online.wsj.com/mdc/public/page/2_3022-dividends.html?mod=topnav_2_3000

      Delete
    2. Hello Div Investor, I use a couple of sources to track dividend increases, both are free.

      The first site is Dividend Investor. This is where I find my 5 year compounded annual growth rate and when dividend increases are usually announced.

      If you will scroll down to the Dividend Information section, you'll see that PG has a yield of 3.1%, a 5 year CAGR of 8.35% which gives me my Chowder Rule number of 11.45%. Below that it shows the number of consecutive years PG has had a dividend increase, which is 60 years.

      At the bottom of the Dividend Information section is a blue tab labeled, Dividends Paid Since. Click on that and the page that opens up shows a 5 year dividend historical record.

      If you'll look at the Declaration Date you'll notice that PG usually announces dividend increases in April. Historically they have announced between the 11th and the 19th of the month. This year they were early, it was the 7th.

      Anyway, I keep a spiral notebook near the computer which I track dividend increases in, I have them listed by the month they are supposed to announce. When they announce, I mark the increase amount next to their company symbol.

      In tracking this information, I can see that I don't have any scheduled dividend increase announcements due in May for this portfolio. I have one due in June and 4 due in July, for example.

      http://www.dividendinvestor.com/?chk=b178a1399211116&symbol=pg&submit=GO

      The next site I use is the Wall Street Journal Dividend page. Again, it's free. Every day around 6 PM, the site is updated with the latest dividend increase announcements, those that reduced the dividend, and those that declared a dividend. Easy peasey.

      http://online.wsj.com/mdc/public/page/2_3022-dividends.html?mod=topnav_2_3000

      At the top of the page, under Competing Yields, you'll see a little symbol to the right that looks like a calendar. This is an Historical Data icon. If you click on the calendar, you can find the date you wish to pull up in order to see what announcements were made on that day. ... Cool!

      Delete
  3. Congrats on the portfolio's all time high!
    any potential candidates for next purchase?

    thanks

    ReplyDelete
    Replies
    1. I still have a couple of weeks before making a final decision, but MA and NSC are top contenders as of a week ago. I haven't done a follow up since that analysis.

      Delete
  4. Chowder, have you ever looked at ACE, AFL, or BLK for the portfolio?

    ReplyDelete
    Replies
    1. The only insurance companies I would consider owning are CINF or CB. I wouldn't own AFL due to most of their business coming from Japan. I'm just not comfortable owning a company with that large of an exposure to one country.

      I can't get a financial rating on ACE, so I wouldn't consider owning them.

      I wouldn't own BLK because I'm not interested in financials other than maybe MA, V or AXP. But that's as far as I would go for now.

      Delete
    2. Chowder, if you go to this page and click on the "Rating Agency Ratings" you should be able to view a pdf of their ratings as of 12/31/2013. Looks solid to me.
      http://www.acegroup.com/Investor-Information/SP-Raises-ACEs-Financial-Strength-Ratings-to-%27AA-%27.html?ht=

      Delete
    3. Okay, thanks Bruce. I found it.

      Delete
  5. Just discovered your blog today...well done. It appears like you've grown your portfolio nicely in the last 5 years. It also looks like you have great companies in your portfolio. Keep it up!

    Wishing you continued success on your journey!

    ReplyDelete