Tuesday, July 8, 2014

A Real Dividend Growth Machine: Q2 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: Q2 2014 Review and it provides a review of my dividend growth investing progress in the second quarter of 2014.

As indicated by my review, I continue to build and maintain my portfolio, but I do not have time for regular blogging anymore. However, I am still around and I try to stay updated on what is happening with my fellow dividend growth investors.

Friday, April 25, 2014

My First Double

Upon checking my portfolio this morning, I noticed that I had my first double -- a stock with an unrealized capital gain of 100%:


The stock is Illinois Tool Works (ITW), a diversified machinery company that is a Dividend Champion. My one and only purchase of ITW occurred in November 2011 when I was in the process of transitioning to a 100% dividend growth stock portfolio. At the time, I doubt I would have predicted that ITW would be my first two-bagger, but I am happy that it has performed well in terms of dividend growth and total return.

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.

Stock Bought: CVX (Again)

My second purchase during this past week occurred on Friday, when I bought shares of Chevron (CVX), one of the largest integrated oil and gas companies in the world. My most recent previous purchase of CVX was just two weeks ago. A further decline in the stock price motivated me to make another purchase.

I think CVX is slightly undervalued at the current price. It has a P/E of 9.6 (vs. a 5-year historical average of 9.3), P/S of 1.1 (vs. 0.8), P/B of 1.6 (vs. 1.7), and dividend yield of 3.4% (vs. 3.2%). Using a Dividend Discount Model with a dividend growth rate of 8.5% (slightly lower than recent dividend increases) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $127.10. Morningstar gives a fair value of $130.00 and a 4-star rating. The average of those two estimates is $128.55, which implies an 8.9% margin of safety at my purchase price.

I bought 15 shares of CVX at the price of $117.14 per share plus commission, giving me a 3.40% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $15.00 from this purchase, which will add a total of $60.00 to my annual dividend income. This purchase was made in my Roth IRA using rollover money and it reduced the cost basis for my CVX position in that account by 1.5%. I now have a total of 70 shares of CVX and I will receive combined quarterly dividends of $70.00. My forward 12-month dividend total increases to $4,131.

Stock Bought: WMT

I made three purchases during this past week. My first purchase occurred on Tuesday, when I bought shares of Wal-Mart Stores (WMT), the largest retailer in the world by revenue. My most recent previous purchase of WMT was in October 2013 and I wrote an article about it for Seeking Alpha at that time.

I think WMT is fairly valued to slightly undervalued at the current price. It has a P/E of 14.5 (vs. a 5-year historical average of 14.5), P/S of 0.5 (vs. 0.5), P/B of 3.3 (vs. 3.1), and dividend yield of 2.5% (vs. 2.1%). Using a Dividend Discount Model with a dividend growth rate of 10% (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 $83.16. Morningstar gives a fair value of $80.00 and a 4-star rating. The average of those two estimates is $81.58, which implies a 7.3% margin of safety at my purchase price.

I bought 20 shares of WMT at the price of $75.60 per share plus commission, giving me a 2.48% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $9.40 from this purchase, which will add a total of $37.60 to my annual dividend income. This purchase was made in my Roth IRA using rollover money. I now have a total of 45 shares of WMT and I will receive combined quarterly dividends of $21.15. My forward 12-month dividend total increases to $4,071.

Friday, January 24, 2014

Dividend Increase: ARCP

American Realty Capital Properties (ARCP) is increasing its monthly dividend by 6.4%, from $0.07833 to $0.08333 per share, in light of the pending closing of its merger with Cole Real Estate Investments (news release). Given that I own 170 shares of ARCP, my monthly dividend increases from $13.32 to $14.17 and my yield on cost becomes 7.72%. The extra $10.20 in annual dividend income raises my forward 12-month dividend total to $4,033.

Tuesday, January 21, 2014

Dividend Increase: NSC

Norfolk Southern (NSC) is increasing its quarterly dividend by 3.8%, from $0.52 to $0.54 per share, putting the company on track for its 13th consecutive year of dividend growth (news release). This increase comes just two quarters after the company's previous increase, announced in July 2013. Given that I own 95 shares of NSC, my quarterly dividend increases from $49.40 to $51.30 and my yield on cost becomes 3.21%. The extra $7.60 in annual dividend income raises my forward 12-month dividend total to $4,023.

Tuesday, January 14, 2014

A Real Dividend Growth Machine: 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: 2013 Review and it provides a review of my dividend growth investing progress in 2013.

Monday, January 13, 2014

Stock Bought: TGT

Today I bought shares of Target (TGT), operator of over 1,800 retail stores selling general merchandise in the United States and now Canada. My most recent previous purchase of TGT was in November 2013. The stock price has floundered recently after the company revealed in December that hackers had stolen credit/debit card data and personal information of millions of customers. While this kind of security breach is embarrassing and a PR nightmare, I view it as a short-term problem that will eventually fade away. For example, TJ Maxx shows no lasting ill effects of a massive security breach revealed in 2007 that affected the credit/debit card data of over 45 million customers. I expect that Target will recover from the current debacle in due course.

I think TGT is slightly undervalued at the current price. It has a P/E of 16.4 (vs. a 5-year historical average of 13.6), P/S of 0.5 (vs. 0.5), P/B of 2.4 (vs. 2.4), and dividend yield of 2.8% (vs. 1.8%). The current P/E ratio is a bit misleading because earnings have been hurt in recent quarters due to Target's struggles with its expansion into Canada. Using a Dividend Discount Model with a dividend growth rate of 10% (half of 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 $67.65. Morningstar gives a fair value of $64.00 and a 3-star rating. The average of those two estimates is $65.83, which implies a 6.6% margin of safety at my purchase price.

I bought 25 shares of TGT at the price of $61.50 per share plus commission, giving me a 2.78% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $10.75 from this purchase, which will add a total of $43.00 to my annual dividend income. This purchase was made in my Roth IRA using rollover money and I was able to reduce my cost basis by 1.6%. I now have a total of 55 shares of TGT and I will receive combined quarterly dividends of $23.65. My forward 12-month dividend total increases to $4,015.

Saturday, January 11, 2014

Stock Bought: CVX

Yesterday I bought shares of Chevron (CVX), one of the largest integrated oil and gas companies in the world. My most recent previous purchase of CVX was in November 2013. The stock price dipped after the company released an interim update on Thursday in which they stated that "earnings for the fourth quarter 2013 are expected to be comparable with third quarter 2013 results." Evidently, this news disappointed some investors and traders.

I think CVX is slightly undervalued at the current price. It has a P/E of 9.9 (vs. a 5-year historical average of 9.3), P/S of 1.1 (vs. 0.8), P/B of 1.6 (vs. 1.7), and dividend yield of 3.3% (vs. 3.2%). Using a Dividend Discount Model with a dividend growth rate of 8.5% (slightly lower than recent dividend increases) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $131.00. Morningstar gives a fair value of $130.00 and a 4-star rating. The average of those two estimates is $130.50, which implies a 7.5% margin of safety at my purchase price.

I bought 15 shares of CVX at the price of $120.74 per share plus commission, giving me a 3.30% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $15.00 from this purchase, which will add a total of $60.00 to my annual dividend income. This purchase was made in my Roth IRA using rollover money. I now have a total of 55 shares of CVX and I will receive combined quarterly dividends of $55.00. My forward 12-month dividend total increases to $3,972.

Thursday, January 9, 2014

Monthly Review: December 2013

Here is a review of what happened in December:

Dividends: I received a total of $365.16 in dividends from 15 stocks, as indicated on my Dividends page. This represents a 53.8% increase compared with the same month a year ago. My 2013 dividend total ended up at $2,509.20, which is 52.1% higher than my 2012 dividend total.

Dividend Increases: I was pleased to see dividend increases announced for the following stocks (click on each stock to see my post about the increase):
  • VTR: 8.2% increase, $8.80 more in annual dividend income
  • T: 2.2%, $2.20
  • O: 0.2%, $0.48
Dividend increases occurred for 34 of the 35 stocks in my portfolio in 2013.

Contributions: I contributed $1,475 in new capital for investment, which was deposited in my taxable account. My 2013 contribution total was $18,965 (excluding rollover money), which is an average of $1,580 per month. Despite variation in my contributions during the year, I managed to slightly exceed the $18,300 total that I contributed in 2012.

Transactions: I made four purchases during the month (click on the transactions to see my posts about them): It was nice to put more of my rollover money to work and diversify my REIT exposure by purchasing ARCP and VTR. I also appreciated the opportunity to average down on the KMI position in my taxable account. These purchases will increase my annual dividend income by $397.60. My forward 12-month dividend total is $3,912.

Portfolio: My portfolio (taxable account and Roth IRA together) consists of 35 stocks and has a market value of $133,393.47 (including cash), which is a 3.2% increase over last month's value. The combined value of my 403(b) and 401(a) retirement plans is $5,577.94, all of which is invested in a low-cost S&P 500 index fund.

Seeking Alpha: I did not publish any new articles on the investing website Seeking Alpha. However, I earned $8.62 from page views of previous articles, increasing my Q4 total to $178.29 (to be paid in January) and my 2013 total to $1,149.30. Given that I wrote nine articles in 2013, that works out to average earnings of $127.70 per article.

Looking Ahead: January's dividend total will be more than double what I received in the same month a year ago. Dividend increases might be announced by CNI and HCP before month's end. I will likely contribute some new capital to my taxable account, but I still have over $9,700 in cash sitting in my Roth IRA. None of the stocks on my watch list are currently at my target prices, although a few stocks are getting close (within 3%), so I am not sure when (or what) my next purchase will be. With the start of earnings season, I am hoping that Mr. Market knocks on my door with a few good investment opportunities.