Friday, April 18, 2014

A Real Dividend Growth Machine: Q1 2014 Review

A new article of mine has been published on the investing website Seeking Alpha. The article is entitled A Real Dividend Growth Machine: Q1 2014 Review and it provides a review of my dividend growth investing progress in the first quarter of 2014.

I hope this quarterly review provides my blog readers with a decent update of my investing over the past few months. My job continues to absorb much of my time, but I am making good progress at work in terms of both research and teaching, so I think it is time well spent. Unfortunately, little time is left over for other activities, such as investing. As indicated by my review, I continue to build and maintain my portfolio, and I also keep up with company news, earnings reports, and dividend increases. However, I have had to cut back almost entirely on blogging and commenting activity, though I do continue to visit other investors' blogs periodically to stay updated on their progress.

I hope everyone is off to a good start with their investing in 2014!

Monday, February 3, 2014

Hiatus

Some of you may have noticed lately that I have been slow to respond to comments, my posts about new purchases are delayed, and I have been generally inactive in commenting on the blogs of other dividend growth investors. The reason: I have been very busy with work since the start of the new year. On the teaching front, this semester I have to prepare more lectures each week -- from scratch -- than I did last semester, which consumes a great deal of my time. On the research front, for the first time I have several undergraduate students working in my lab during the semester, resulting in considerable time and effort spent on training and managing them. Moreover, I am still solely responsible for designing, setting up, analyzing, interpreting, and writing up various research projects. Unlike some 9-to-5 jobs where work can be left at the workplace, in my job there are things that simply need to get done in a timely manner regardless of what else is happening, so I have been putting in long hours during the week and spending time at work on the weekends. As a result, it has been difficult to find spare time and energy for blogging activities, over and above the time spent monitoring my portfolio.

In consideration of this situation, I have decided to take a break from blogging for a while. My blog will remain online, but I will not be updating it for an indefinite time period -- until I can achieve a better work-life balance. Even though my blog will be inactive, I want to assure you that there will be no change in my dividend growth investing: I plan to continue regularly investing new capital in attractively valued dividend growth stocks to build a rising stream of dividend income.

Finally, I want to say thanks to everyone who has visited this blog (over 200,000 pageviews since January 2012) and posted comments. I appreciate your support of my dividend growth investing efforts and I wish you all the best in your own investing endeavors!

Thursday, January 30, 2014

Dividend Increase: HCP

HCP, Inc. (HCP) is increasing its quarterly dividend by 3.8%, from $0.525 to $0.545 per share, putting the company on track for its 29th consecutive year of dividend growth (news release). Given that I own 115 shares of HCP, my quarterly dividend increases from $60.38 to $62.68 and my yield on cost becomes 5.50%. The extra $9.20 in annual dividend income raises my forward 12-month dividend total to $4,269.

Dividend Increase: CNI

Canadian National Railway (CNI) is increasing its quarterly dividend by 16.3%, from C$0.215 to C$0.25 per share, putting the company on track for its 18th consecutive year of dividend growth (news release). Given that I own 40 shares of CNI, my quarterly dividend (before tax withholding) increases from $8.60 to $10.00 and my yield on cost becomes 2.65%. The extra $4.76 in annual dividend income (after tax withholding) raises my forward 12-month dividend total to $4,259.

Wednesday, January 29, 2014

Dividend Increase: NVS

Novartis (NVS) is increasing its annual dividend by 6.5%, from CHF 2.30 to CHF 2.45 per share, putting the company on track for its 17th consecutive year of dividend growth in its home currency of Swiss francs (news release). Due to exchange rate fluctuations, it is difficult to determine the exact amount of the forthcoming dividend, which is usually paid in April. However, the exchange rate is better now than it was at this time last year (i.e., CHF is stronger), so the effective dividend increase in USD will likely be slightly higher than 6.5%.

Monday, January 27, 2014

Stock Bought: MCD

Today I bought shares of McDonald's (MCD), one of the largest restaurant chains in the world. My most recent previous purchase of MCD was in December 2013. The stock continues to be weighed down by sluggish sales growth, but I think the company is taking appropriate actions to address the issue, such as revamping its dollar menu to attract value-focused customers and renovating hundreds of restaurants to improve the dining experience. In addition, the company's sponsorship of the Winter Olympics and World Cup this year may give a short-term boost to sales.

I think MCD is slightly undervalued at the current price. It has a P/E of 17.0 (vs. a 5-year historical average of 16.8), P/S of 3.4 (vs. 3.3), P/B of 6.2 (vs. 5.7), and dividend yield of 3.4% (vs. 2.9%). Using a Dividend Discount Model with a dividend growth rate of 7% (lower than the 5-year historical rate) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $100.54. Morningstar gives a fair value of $105.00 and a 4-star rating. The average of those two estimates is $102.77, which implies an 8.6% margin of safety at my purchase price.

I bought 15 shares of MCD at the price of $93.96 per share plus commission, giving me a 3.43% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $12.15 from this purchase, which will add a total of $48.60 to my annual dividend income. This purchase was made in my Roth IRA using rollover money and it reduced the cost basis of my MCD position in that account by 0.5%. I now have a total of 80 shares of MCD and I will receive combined quarterly dividends of $64.80. My forward 12-month dividend total increases to $4,255.

As I did with my previous purchase of MCD, I celebrated this investment with a Big Mac meal on my way home from work. :)

I have now invested all of the rollover money in my Roth IRA, which means my investing activity going forward will return to the normal level of one or two purchases per month. I just contributed $2,500 in new capital to my Roth IRA, with the goal of maxing it out for 2014 by the end of the first quarter. Once I achieve that goal, I will likely turn on Scottrade's flexible dividend reinvestment program for the remaining three quarters of the year and steer my dividend reinvestment toward whichever stock I deem to be attractively valued. I will then resume contributions of new capital to my taxable account.

Saturday, January 25, 2014

Stock Bought: PM

My third (and final) purchase during this past week occurred mid-afternoon on Friday, when I bought shares of Philip Morris International (PM), one of the largest tobacco companies in the world. My most recent previous purchase of PM was over two years ago (October 2011), before I had started this blog.

I think PM is slightly undervalued at the current price. It has a P/E of 15.9 (vs. a 5-year historical average of 15.1), P/S of 4.3 (vs. 1.6), and dividend yield of 4.6% (vs. 4.0%). Using a Dividend Discount Model with a dividend growth rate of 7% (lower than the 5-year historical rate) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $87.47. Morningstar gives a fair value of $93.00 and a 4-star rating. The average of those two estimates is $90.24, which implies a 9.4% margin of safety at my purchase price.

Josh Peters, Editor of Morningstar's DividendInvestor newsletter, considers PM to be a "top pick" for this year. The stock is profiled in the latest issue of the monthly newsletter, where it is acknowledged that 2014 will be a tough year for the company. However, Peters thinks the short-term slowdown in growth is already reflected in the stock's price, resulting in an excellent buying opportunity. Coincidentally, I had independently reached the same conclusion before reading the newsletter article.

I bought 20 shares of PM at the price of $81.75 per share plus commission, giving me a 4.58% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $18.80 from this purchase, which will add a total of $75.20 to my annual dividend income. This purchase was made in my Roth IRA using rollover money. I now have a total of 70 shares of PM and I will receive combined quarterly dividends of $65.80. My forward 12-month dividend total increases to $4,206.