Tuesday, July 23, 2013

Stock Bought: KMI

Today I bought shares of Kinder Morgan, Inc. (KMI), the third-largest energy company in North America and operator of an extensive network of pipelines for transporting natural gas, crude oil, and petroleum products. I made previous purchases of KMI in October 2012 and March 2013.

I consider KMI to be fairly valued at the current price, making it a decent purchase in the context of a broader stock market that is near an all-time high. Using a Dividend Discount Model with a dividend growth rate of 10% (which is the company's long-term target) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $43.07. Morningstar gives a fair value of $41.00 and a 3-star rating. The average of those two estimates is $42.03, which implies a 7% margin of safety at my purchase price. In general, I think KMI is a decent purchase whenever it yields over 4%.

I bought 40 shares of KMI at the price of $39.15 per share plus commission, giving me a 4.07% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $16.00 from this purchase, which will add a total of $64.00 to my annual dividend income. The stock goes ex-dividend next week, so these shares will pay their first dividends to me in mid-August. This purchase was made in my taxable account by combining $700 in new capital with $900 in dividends that had accumulated over the last few months. Given that I already owned 40 shares in my taxable account and 50 shares in my Roth IRA, I now have 130 shares of KMI and I will receive combined quarterly dividends of $52.00. My forward 12-month dividend total increases to $2,503.

After a few months of inactivity it was nice to finally make a purchase. I would have preferred to buy a deeply undervalued stock, but good deals are hard to come by in the market these days. KMI seemed to be one of the better opportunities available, so I deemed it worthwhile to increase my position. It is now the second-largest holding in my portfolio, with a weight of 5.8%. My next stock purchase will depend on when I receive my moving expense reimbursement and associated supplement; the paperwork has been submitted but I was told it would probably take 2-3 weeks to process. Thus, I will likely have new capital for investment by mid-August.

Dividend Increase: NSC

Norfolk Southern (NSC) is increasing its quarterly dividend by 4.0%, from $0.50 to $0.52 per share, putting the company on track for its 12th consecutive year of dividend growth (news release). Given that I own 95 shares of NSC, my quarterly dividend increases from $47.50 to $49.40 and my yield on cost becomes 3.09%. The extra $7.60 in annual dividend income raises my forward 12-month dividend total to $2,439. Thus far this year, there have been dividend increases for 20 of the 28 stocks in my portfolio.

Wednesday, July 17, 2013

Dividend Increase: KMI

Kinder Morgan, Inc. (KMI) is increasing its quarterly dividend by 5.3%, from $0.38 to $0.40 per share (news release). This is the third increase from KMI this year, resulting in an overall increase of 11.1% in 2013. Given that I own a total of 90 shares of KMI (40 in my taxable account and 50 in my Roth IRA), my quarterly dividend increases from $34.20 to $36.00 and my yield on cost becomes 4.43%. The extra $7.20 in annual dividend income raises my forward 12-month dividend total to $2,432. Thus far this year, there have been dividend increases for 19 of the 28 stocks in my portfolio.

Tuesday, July 16, 2013

A Real Dividend Growth Machine: Q2 2013 Review

A new article of mine has been published on the investing website Seeking Alpha. The article is entitled A Real Dividend Growth Machine: Q2 2013 Review and it provides a review of my dividend growth investing progress in the second quarter of 2013.

Tuesday, July 9, 2013

Dividend Increase: CMI

Cummins (CMI) is increasing its quarterly dividend by 25.0%, from $0.50 to $0.625 per share, putting the company on track for its 8th consecutive year of dividend growth (news release). Given that I own 15 shares of CMI, my quarterly dividend increases from $7.50 to $9.38 and my yield on cost becomes 2.83%. The extra $7.52 in annual dividend income raises my forward 12-month dividend total to $2,425. Thus far this year, there have been dividend increases for 19 of the 28 stocks in my portfolio, although this has been the largest percent increase.

Thursday, July 4, 2013

Monthly Review: June 2013

The end of June and the start of July coincided with my big move, hence the delay in posting this review. I spent June 28-30 packing and loading my belongings, as well as cleaning my apartment so I can get my deposit back. I then made the 7+ hour drive to my new city and started moving into my new apartment on July 1. Since then I have been pretty busy with unpacking, running errands, getting things set up, and buying a few pieces of furniture and other household stuff (the frugal side of me cringes at how much money I have spent during the past few days). At this point I do not have too much left to do, aside from more unpacking and organizing, which I should be able to finish this weekend. Overall, the move has proceeded more or less according to plan, with only a few minor hiccups.

Not surprisingly, I paid very little attention to the stock market during the past week. Here is a review of what happened in June:

Dividends: I received a total of $244.51 in dividends from the following stocks:
  • BDX: $12.38
  • CMI: $7.50
  • CVX: $20.00
  • INTC: $42.75
  • JNJ: $23.10
  • MCD: $38.50
  • MSFT: $26.45
  • NSC: $47.50
  • ROST: $4.25
  • UTX: $13.38
  • VFC: $8.70
This represents an 85.8% increase compared with the same month a year ago, which is excellent. In fact, it is my highest monthly dividend total ever. My year-to-date dividend total is now $1,070.05 (this month put me over the $1,000 mark) and my forward 12-month dividend total is $2,417.00.

Dividend Increases: I was pleased to see a dividend increase announced for one of my stocks (click on the stock to see my post about the increase):
  • MDT: 7.7% increase, $4.40 more in annual dividend income
Thus far this year, there have been dividend increases for 18 of the 28 stocks in my portfolio. The mean increase has been 9.5%.

Savings: This month I saved $1,035 (35.6%) of my net job income, which is relatively low but not unexpected. Major expenses included renewals of my six-month car insurance and annual renter's insurance premiums, as well as a few moving-related items. Thus far this year, my mean monthly savings has been $1,334 (45.9%).

Transactions: None

Portfolio: My portfolio (taxable account and Roth IRA together) currently consists of 28 stocks and has a market value of $83,990.11 (including cash), which is a 0.8% decrease over last month's value. The dip was not surprising in light of the turbulence in the stock market during the month.

Seeking Alpha: This month I did not publish any new articles on the investing website Seeking Alpha. However, I received $10.54 from page views of my previous articles, increasing my Q2 total to $284.36 (to be paid in mid-July) and my year-to-date total to $718.31.

Looking Ahead: My dividend total will be lower in July because I have fewer stocks that pay in that month. I expect dividend increases to be announced by CMI and possibly INTC near the end of the month. I will have no savings in July because I will have no job income; my new job officially starts at the end of the month. Thus, my July expenses will be paid from a portion of my savings over the past few months, which is how I planned it. However, as noted above, I will receive my Q2 payment from Seeking Alpha in mid-July, and at some point (more likely in August) I will get reimbursed for a large chunk of my moving expenses. Until all that happens and my income/expenses have returned to "normal" I will continue to sit on the sidelines with respect to investing. I anticipate that I will finally be in a position to resume new capital investment sometime in August, which is just as well because for the next several weeks I will likely be absorbed in activities related to my new job.

Bonus: Earlier this week I got a library card at the public library in my new city. I was delighted to discover they provide free online access to both Morningstar Premium and Value Line.