Thesis: Last updated January 28, 2015
Basket Ck is doing very well in the long bull market. The thesis is that dividends are an important part of a retirement strategy because the Fed flattened interest rates and they are one of only a few sources of decent yield. While I am still working, I reinvest the dividends to grow the size of the basket, when I need the income I will have the money accrue in the account and transfer it to my bank to live on.
Reinvesting Dividend Sidebar =================
There are two interesting articles posted by Seeking Alpha, (I use them for ideas not guidance). I think the first one to consider can be summed up this quote from the article: "Had you purchased 100 shares or AT&T at the beginning of 2005, at a cost near $26, you would have collected $129 in dividends to allocate as you please." Yup the author is correct, as near as I can tell that is what the pros do. However, I am not a pro. I am a working man. I do my best to research a stock, buy it, and try to set it up to be as "fire and forget" as possible. The other article can probably be largely summed up by these two quotes: "Depending on the company, total return (price + dividends) may be much larger than price return alone." "Reinvesting dividends generates still larger returns. Over long time periods, price return may provide less than half the total return that you receive from an investment." I am not going to spend much time commenting, my bias, (and the reason for it), is fairly obvious, but make sure not to gloss over one part of the second quote, over long time periods. If our basket is not oriented towards buy and hold reinvesting is not for us.
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A key point to a dividend strategy is not to panic, there may be times to close a worthless position, but not to freak out if there is a bear market, solid companies will still be paying dividends. I think the term bubble is overused, but the actions of the Fed probably do mean the prices of these equities are a bit higher than they would be otherwise, so if interest rates start to rise there may be a bit of downwards pull. I can accept that.
Rules of the basket:
- No equity can be more than 10% of the basket
- US stocks that allow dividend re-investment only, or at least as much as possible
- No equity with a debt to asset ratio > 35
- No company that is losing money, too much risk they will have to cut dividends
- Strong preference for companies that have been paying dividends for many years
- Companies that are in other baskets are fine
10/30/15 Signed forms to in-kind transfer to Vanguard. Basket was up 23.63%. Closing out this strategy, just do not have the time.
8/24/15 WFC 100 Limit 45.75
4/17/15 Limit order for Wal-Mart hit. The plumbinggate explanation is weak at best, but happy to add to the position.
WMT 60@79.00 currently 78.15 so there may be even more opportunity. This was a core holding in the Es basket, but it was reduced over the Mexican bribery issue. All in all the fundamentals still seem to look good.
4/6/15 Our family's financial advisor, Jack Farrington from Merrill Lynch was able to help me find the maker of batteries for the Kobalt too line. Here is what he said, "I have researched your Kobalt tool question and find that most of the tools are made by the Danaher Corporation. The company makes many things and these tools are a relatively small part of their sales. The stock symbol is DHR. The company is a well regarded manufacturer. It’s yield is 0.5%."
DHR 30 Market 85.15
The thesis is far more complex than just DHR and Kobalt. It is all about batteries. A robot car just crossed the entire United States, Telsa will one day be able to power a house with a battery. Renewable energy is becoming more and more important and batteries are how we store the energy. And batteries have a LONG way to go. This is going to be a mega trend over time.
4/1/15 WMT trying to open a position, 60 Limit 79.00 Last Close 80.79
3/10/15 Market was generally down today, the VLO limit hit: 20@ 58.00. Valero closed at 57.77. Let's set up a potential buy:
PHO 175 Limit 23.25 Last Close 24.43
3/6/15 Today WHR got smacked the hardest compared to the other equities in the basket. Put in a limit 15@185, who knows?
3/5/15 The limit on PHO hit, 80@25.00 Last Close 24.70. This is a very long view play for me. Water may be the most precious resource on earth, you can't eat or drink diamonds or gold and you can't live without water. It might make sense to set another deep limit, need to ponder that over the weekend.
3/3/15 The limit on FGL hit, 235@21.30 current price 21.56
3/2/15 The limit on XLU hit, 45@44.50 closed at 44.36
Valero, (VLO) got smacked today.
VLO 30 Limit 58.00 Last Close 58.96
Two remaining limit orders:
BANF 40 Limit 54.00 Last Close 60.47, need to look for another candidate I think.
PHO 80 Limit 24.70 Last Close 25.52, if I am serious, I need to sweeten the pot
Change PHO 80 limit 25.00
One last bit of business, I think I want to open a position in Fidelity and Guarantee, the idea as baby boomers exit and prepare to exit into retirement, they will want fixed income and annuities are one way to do that.
FGL 235 Limit 21.30 Last close 21.44
2/6/15 Set a very mild limit on Whirlpool, they have low debt and their stuff is in demand, when you need a fridge, you need a fridge.
WHR 15 Limit 210.50 Current 210.59, it hit immediately, should have probably gone for an extra ten cents or so.
PHO still has not hit grrrr. Change limit to 24.70, sure hope that Beta of 1.28 works in my favor.
Siemens Energy has had some rough patches. They are going to have to do layoffs, no small feat in Europe. I am pretty sure they will drop, but how much? I have a position, but I think an aggressive limit might be the ticket as a defensive move. I decided not to take action at this time. Reason, while I like Siemens and I like Germany in general, there are hidden costs to ADRs that I do not understand.
XLU got hit hard as well, let's add to the position with the same aggressive attitude:
XLU 45 Limit 44.50 Current 46.52 NOTE dropped $2.12 already today
1/19/15 Two of the four limit orders hit:
IBKR 70@26.75 Last close 28.09
VLO 50@45.00 Last close 45.40
Two are still queued up, need market conditions to drop or chop to make these work:
PHO 80@23.50 Last close 24.49 1/29/15 24.81 Change Limit to 24.20, I think people are starting to catch on to this water play.
BANF 40@54 Last close 56.76 1/29/15 58.02, I guess this train has left the station. For today I am going to leave this limit as is in hopes of a miracle.
On to new business. OHI is a health care REIT positioned to be a player as the baby boomers age. This is a gutsy, (or is that foolish), move on my part. They hit their lifetime high today, so my brain is screaming "buy high sell low". In addition they have a lot more debt than I normally invest in.
OHI 90 Market Last Close 44.07
UPDATE: 1/2015 90 shares@44.44 LC 44.40 It is only pennies, but it does illustrate why I prefer limit orders if I have to set up my trades at night when the market is closed.
6/11/14 Post cleaning house, we are 10% cash. Time to really pay attention to this basket. Put in two limits for equities that are under market chop. BA 10 133.00 L 134.03 and CTBI 35 34.75 L 35.28.
6/7/14 Cleaning house. When I first started this basket I purchased some foreign stocks (ADRs). It is not possible to re-invest the dividends, there is also an ADR management fee and foreign tax paid. If I had it to do over again I would have kept this basket all US stocks so reporting would be less complex and it would be easier to understand what I am really earning. This basket is up 24.44%, so now if a really good time to clean house and put some money on the sidelines if we start having buying opportunities.
I have two ADR losers. If I look at the difference between cost basis and market value, I can get a pretty good idea of what my losses are, not counting trade fees and whatever the market does in the first few minutes tomorrow.
CAJ - 384.00
VOD - 1369.91
1753.91
On the plus side:
RY 624
ABB 356.37
CRH 404.55
ORAN 307
1691.92
The numbers are close enough there should not be much of a tax implication, (I hope). I should not have to worry about ex-dividend since they are ADRs. Everything is a sell all market order. Hopefully, when the smoke clears I will have a cleaner basket.
1/10/15 Setting up orders for Monday.
PSX 50 L 65 LC 67.31
VLO 50 L 45 LC 48.65
BANF 40 L 54 LC 59.11
V 5 M LC 260.53
IBKR 70 L 27 LC 29
PHO 80 L 23.5 LC 25.13
Opening a position with another water ETF. PHO just has not performed. Going to try CGW, started with a small investment as a gentle limit.
CGW 175 L 27.40 LC 27.65
1/9/15 We just switched from T-Mobile to Verizon via the Costco plan. Since phone contracts are a two year commitment I did some research on all the mobile carriers. I had not realized how big their network actually is. We already had a position with VZ but added 75 shares market last close 47.18.
UPDATE: 1/10/15 market order went through bought at 47.27 LC on Friday 46.76.
6/7/14 I just read a fascinating analysis of whether or not dividends actually affect stock price. Apparently analysts are of two minds. And the answer is, heck yes, what amazes me is if anyone is surprised. Anyway, this is a must read.
5/15/14 Jeepers, Bristol-Meyers got slapped today, 25 BMY 47.5 L 48.65
5/5/14 Looking to set up a trade for Monday. Exelon is in the basket. They have made a bit of progress this year and the polar vortex didn't hurt their chances of selling energy this past winter. Debt is not horrible for a utility company, P/E is 17, low beta so if I use a limit it should probably be conservative. Their dividend yield is 3.46% which beats what I get on my checking account :). I am 15.5% down since I bought it and do not have a major position. 50 L@35.70 L 35.84.
4/15/4 (Hopefully buying, these are limits) SI 10 L@131.00 L 131.45, ADM 25 L@44.00 L 44.24
4/10/14 Buying on dips, V 10@M 201.09, IBKR 50 L@21.50 L 21.88
3/11/14 Market had some downward movement, DD 20@M, LC 66.01. NKSH 35@M, LC 36.86.
3/8/14 Looking for dips. 3 positions were down enough to peek at, AXIT, no action and
SI 10 Limit 129.00 LC 129.25. RY 15 L 64.50.
2/12/14 I was reading the interview of Bruce Greenwald and he commented people are incredibly loyal to their toothbrush brand. The two leading brands are Colgate and Crest, or CL and PG. These are kept in the dividend - as a dividend reinvestment (DRIP) when possible. The idea is to continue to compound the earning potential until we actually need the money. PG's top brands are Pampers, Gillette and Duracell according to this article. But there are a few signs they are at the top of their rational value. When I compared them to CL, one thing I did not like to see was the amount of debt CL has. 15 shares PG@market, LC 77.49.
One more Greenwald nugget, "character rules in investing. Smart helps, but discipline and resistance to the roar of the crowd . . ."
2/3/14 Market is choppy, hoping for some limits to kick in. 25 BANF L47.5, 100 T L30, 100 NKSH L32.
1/30/14 Another dip day, Boeing, (BA), got kicked in the teeth. 20 Limit@120. Last close 129.78
1/24/14 Market dropped back a bit to day, BMY and VLO took the worst hits in the dividend basket.
50 BMY Limit@45 last close 50.94
50 VLO Limit@45 last close 49.04
5/17/13 BMY was down 3% today, 25 Market, last close 42.77
4/20/13 Red Greens
Reds, best to worst
5 30 90 180 1 5yr
SAFT - - 1 2 1 1
RY - 1 - 4 3 2
KCLI - - - 5 2 -
CRH - - 3 1 4 -
IBKR - - 2 3 - -
Decision: No action, all good companies, they are just bumping around, but as long as they are not in danger of going out of business and still pay dividends, let it ride.
Action: Keep an eye on the Free Cash Yield on IBKR
Greens, low to best
5 30 90 180 1 5yr
SI - - - - 1 -
MCD - 3 1 3 2 2
SLB - - - - - -
CAJ 1 1 3 2 - -
SBUX - 2 2 1 - 1
Decision:
Buy MCD Limit 15@98
Buy CAJ Limit 35@37.25
Buy SBUX Limit 30@57.5
4/19/13 ADP Thesis
Just opened a position in ADP 100 shares@Market last close was 65.23. I probably paid too much and will likely see a temporary drop, but expect it will continue climbing. My thesis is that they get to use float without some of the risks insurance companies incur. I will be adding a Google alert and am considering trying to make them a core stock over the next couple years.
4/15/13 Perhaps the Boston Marathon bombing brought down the market. Our prayers are with the injured on those grieving the loss of a loved one.
Added 50 PSX Market
150 PROV Market
70 NKSH
4/4/13 Blood in the water
The market traded down today. Bought on dips:
25 PSX Market
35 NKSH Limit 32
60 PROV Limit 16
40 ADM Market
Set a limit in place to attempt to open a position on PAYX, 50 shares
Crazy Canadians
3/23/13 Before I decided to use this online broker for our dividend mutual fund, I was using it for international ETFs in particular, Canadian. My thesis was and still is, well run government, debt under control and massive numbers of natural resources. And at one point some of these where way up. But when I started on the dividends, they were down, but I decided to keep them as they all pay dividends ( though FXC is a penny I think).CNDA -30%
EWC -11.4%
FXC -5.4%
RY -1.8%
FICDX +14.6%
CWGL Who are you and what are you doing in my basket?
3/23/13 As I was looking through the mutual fund, I noticed this equity, 20 shares worth a whopping $158.24. What? Turns out Leucadia spun them off.11/29/12 GIS
Put a limit of 50 shares @ 39.00 on General Mills in basket Ck. Hopefully volatility will cause it to hit.
Update December 8, 2012 No such luck, they are up about 3% over the past 30 days.
Update December 17, 2012 41.73
Update December 22, 2012 41.10, staying the course and hoping the fiscal cliff panic will cause this limit to hit.
Update January 9, 2013 41.23, they did drop .04, but time to start thinking about a market order or a less aggressive limit. Decision: 50 limit@41.00.
SAFT
3/19/13 Added 30 shares SAFT ( boutique auto insurance) with dividend reinvestment. Tip from Motley Fool income investor. Thesis, unlike most auto insurance companies, Safety Insurance Group actually makes money on its underwriting, not just its investments.Update March 22, 2012 Reds, worst to best
5 30 90 180
INTC 2 2
EXC 1 1 1 1
FTE 2 3
CNDA
PBR 2
Let's drill down on EXC. Exelon is an energy provider. They have a bit more debt than I like to see, but lower than the industry tends to have. And they are huge, operating in 47 states. But their financials are not as pretty as they were just a year ago ( which helps explain why this is a red). Decision: hold for now.
Health and Status Analysis March 10, 2013
Dividend Stocks ( DRIPed when possible) 55.60% of basketDividend ETFs 20.31%
FICDX 4.72%
Fixed Income 11.73%
Cash 7.65
Portfolio return 90 days: 6.93%, 1 year 10.17%
Open limit orders: CSCO, KMB, MCD, TAP, VZ
ACTION: Close position on MOS, building cash for shopping in a downturn.
February 24, 2013 Open Limit Orders
CSCO 200@17 Last close was 20.90
KCLI 50@ 37.25 - 37.87
KMB 25@85.00 - 94.50
MCD 25@85 - 95.25
SBUX 50@50.00 - 54.17
TAP 50@41.00 - 46.48
2/16/13
New Positions:
I did a screen for dividend payers with zero debt and found three that seemed to be fairly well rated:
KCLI 50 Limit@37.25 3/23/13 closed and we are in the green
TAP 50 Limit@41.00 3/23/13 48.96
CAJ 75@Market, last close was 35.49
I also added:
Kimberly Clark (KMB) 25 Limit @85 3/23/13 95.66
Cisco (CSCO) 200 Limit@17 3/23/13 20.75
Greens:
The only green I want to add to right now is Starbucks (SBUX) and only if a deep limit hits:
50 SBUX Limit@50
Red Report: While the basket is up, when ever you create a mutual fund there will be some laggards.
Ticker 5 30 90
CLF - - -
EXC - 1 2
FTE - - -
INTC 1 - 3
PBR 3 - -
MCD 2 2 1
Decision: 25 MacDonalds (MCD) Limit@85
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