Monday, April 7, 2014

Project $3 Million - March Results

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

MONTHLY HIGHLIGHTS:

March was another good month.

1. The portfolio closed at an all-time high of $115,618.87.
2. March dividend income, year over year ... up 10.6%
3. First quarter dividend income, year over year ... up 19.5%

Companies that raised the dividend in March:

General Mills - GIS ......... up 7.9%
Colgate-Palmolive - CL .. up 5.9%
Realty Income - O .......... up 0.2%
-------------------------------------------------------------------------

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.

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.
-----------------------------------------------------------------------------

MISSION STATEMENT:

To earn an income stream that is reliable, predictable and increasing.
-----------------------------------------------------------------------------

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
------------------------------------------------------------------------------------

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.
--------------------------------------------------------------------------------------

STATUS:

To stay on schedule for the $3 Million, in the time allotted, according to the link above, the balance at the end of year 2014 needs to be $100,643.33.

This portfolio is ahead of schedule! ... The current portfolio value is $115, 619.87.
----------------------------------------------------------------------------------------

DIVIDEND HISTORY:

March Dividend History: (Last 5 years)

2010 ... $85.79
2011 ... $194.47
2012 ... $184.45
2013 ... $249.36
2014 ... $275.91 ... up 10.6%

First Quarter Dividend History: (Last 5 years)

2010 ... $264.95
2011 ... $542.81
2012 ... $621.20
2013 ... $779.87 ... up 25.5%
2014 ... $931.78 ... up 19.5%
========================================================

 MARCH DIVIDENDS RECEIVED:

Taxable Account (Dividends Reinvested)

Southern Company - SO ..... $36.32 ... bot 0.869 shares
Chevron Corp - CVX ......... $31.63 ... bot 0.276 shares
Johnson & Johnson - JNJ .... $29.48 ... bot 0.316 shares
McDonald's - MCD ............ $29.35 ... bot 0.302 shares
Lockheed-Martin - LMT ..... $63.74 ... bot 0.391 shares
Frontier Comm. - FTR ......... $2.25 .... bot 0.402 shares
Pepsico - PEP ..................... $19.40 ... bot 0.234 shares
========================================================

PORTFOLIO HOLDINGS: ($4,000 equals a full position)

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

ADP ...... 39.518 ... $3,053.16 ... up 71.25% ... Automatic Data Processing
CL ....... . 51.012 ... $3,309.15 ... up 60.74% ... *Colgate-Palmolive
CVX ...... 31.902 ... $3,793.47 ... up 30.59 ...... Chevron Corp
DE ......... 12.072 ... $1,096.14 ... up 9.57% ..... Deere & Company
DEO ...... 30.253 ... $3,769.22 ... up 77.36% ... Diagio, plc
EPD ....... 64.64 ..... $4,483.43 ... up 75.48% ... *Enterprise Products Partners
FTR ....... 22.454 ... $128.10 ... Received-spinoff from VZ - Frontier Comm.
GIS ........ 79.653 ... $4,127.62 ... up 42.40% ... *General Mills
JNJ ........ 44.976 ... $4,417.99 ... up 55.75% ... Johnson & Johnson
KMB ..... 37.467 ... $4,130.74 ... up 44.10% ... *Kimberly-Clark
KMP ..... 38.452 ... $2,843.53 ... up 0.63% ..... *Kinder Morgan Partners
KO ...... 112.068 ... $4,332.55 ... up 58.92% ... *Coca-Cola
KRFT .... 89.194 ... $5,003.78 ... up 22.41% .... Kraft Foods
LMT ...... 48.313 ... $7,886.61 ... up 91.54% .... Lockheed-Martin
MCD ..... 36.532 ... $3,581.23 ... up 25.16% .... McDonald's
MMP ..... 84.356 ... $5,882.99 .. UP 145.70% .. *Magellan Midstream Partners
MO ...... 109.863 ... $4,112.17 ... up 72.06% .... Altria Corp
PEP ....... 34.177 ... $2,853.78 ... up 33.66% .... *Pepsico
PM ........ 45.436 ... $3,719.85 ... up 6.55% ...... Philip Morris
SO ........ 72.442 ... $3,183.10 ... up 11.10% .... Southern Company
SYY .... 116.402 ... $4,205.60 ... up 20.09% ... Sysco Corp
Cash ...................... $74.12
--------------------------------------------------------------------------------
Account Value ...... $79,988.33

*Increased Dividend in 2014
======================================================

ROTH IRA: (Dividends Reinvested)

March Dividends:

International Business Machines - IBM ... $4.75 ..... bot 0.025 shares
Realty Income - O ................................. $15.49 ... bot 0.368 shares
Dominion Resources - D ........................ $43.50 ... bot 0.616 shares
-----------------------------------------------------------------------------

PORTFOLIO HOLDINGS:

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

D ......... 73.123 ... $5,191.00 ... up 49.20% ..... *Dominion Resources
HCN ... 44.84 ..... $2,672.46 ... up 6.68% ....... *Healthcare REIT
IBM ..... 5.025 .... $967.26 ...... up 4.03% ....... International Business Machines
KMI .... 71.733 .. $2,330.61 .. dn  <11.51%> .. Kinder Morgan, Inc
MO ..... 73.758 ... $2,760.76 ... up 4.96% ........ Altria Corp
O ........ 85.386 ... $3,488.87 ... up 12.22% ...... *Realty Income
PG ...... 35.721 ... $2,879.11 ... up 26.72% ...... Procter & Gamble
T ......... 32.00 ..... $1,122.24 ... up 7.45% ........ AT&T (new position)
VZ .... 121.626 ... $5,785.75 ... up 25.01% ...... Verizon
Cash ................... $23.87
--------------------------------------------------------------------------------
Account Value ... $27,221.94

=======================================================

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) ..... 107.1829 ... $2,605.78 ... 30.99%
S Fund (Small Cap) ..... 93.3937 .... $3,229.68 ... 38.41%
I Fund (International) ... 99.9023 .... $2,573.14 ... 30.60%
-------------------------------------------------------------------------------
Account Value ...... $8,408.60

Contribution Allocations:

C Fund ... 20%
S Fund ... 35%
I Fund ... 45%
========================================================

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
------------------------------------------------------------------------------
Total Cash Gains ... $3,330.43

































Friday, March 14, 2014

Portfolio Update

It has come to my attention that several people are concerned about my posting the ongoing performance of this portfolio. They seem to be concerned that I don't list the amount of money going into the TSP every month. I only show the money going into the brokerage accounts.

When I started publishing this portfolio online, it wasn't my intent to influence others to invest the way I do. Originally, this portfolio was published for a way to keep my son updated as to what was going on in his portfolio and as a teaching tool, to show him how and why I bought and sold positions.

My son is in the military and has traveled all over the world. Having a blog was the easiest way to communicate. We understood that others would be able to eavesdrop, and we had no problem with that.

Since the portfolio was published for my son's benefit, I never thought to ask what his monthly TSP contributions were. They show up on his pay stub, so I assumed he already knew that. Now that others are following along, they want to compare the results with other strategies and to do that they need more information.

The blog wasn't set up for that purpose, but I have nothing to hide. That's why I announce all moves in advance, something other public portfolio's don't do. And more importantly, I don't hide my mistakes. At the end of every month's update is a list of companies that used to be in this portfolio. People can see for themselves whether I made the right decisions in selling or not.

I don't breathe a sigh of relief when I'm able to remove a position from the portfolio and it goes unseen forever, saving me from embarrassment. I don't get to simply brag about my successes, the failures are there for all to see as well, and that's where the true lessons come from. It's only through our failures, and our efforts to avoid making them again that we learn to become better investors.

So, the mistakes stay and the TSP monthly contributions will be shown in future monthly updates under the TSP section of the update.

The bi-weekly contribution is $63.93. That's in addition to his $500 per month contribution to his brokerage account.


Monday, March 10, 2014

New Purchase

A check will be sent to TD Ameritrade tomorrow and should show up in the account this coming Friday afternoon. There will be enough cash in the portfolio, at that time, to purchase another position in the Roth Ira. ... That new position will be T.

The portfolio currently has a position in VZ and I want to add another high quality telecom.

The first thing I look at in the stock selection process is the company's financial strength. If a company doesn't pass this test, I go no further in my research.

I look for companies that rate a 1 or 2 for safety by Value Line, or a BBB+ rating or higher with Morningstar, or a B+ rating or higher with S&P Capital IQ.

Value Line shows a safety rating of 1, a Financial Strength rating of A++ and Morningstar shows a Credit Rating of A-. This is the type of company I prefer to own over the long term.

In looking at the company earnings, S&P Capital IQ shows operating earnings at 5.0%. I place telecom companies under the utility umbrella and a 5.0% earnings growth is a number I look for. So, T qualifies there as well.

Looking forward regarding total return results, S&P Capital IQ thinks that over the next 5 years T will show total annualized returns of 12.0%. Value Line thinks 12.0% is the low number and thinks T now has the potential to show a total annualized return of 14.0% on the high side.

When looking at valuations, T has a PE of 10.1 and the historical PE over the last 10 years has been 16.2. That would indicated that T is undervalued based on historical performance. However, Morningstar thinks T is fairly valued at $32.00 and Capital IQ thinks fair value is $29.10.

I am willing to buy "high quality" companies at fair value, and companies don't get higher grades for quality than what Value Line assigns to T.

According to Jefferson Research, a company who rates as one of the top companies for accuracy when assigning buy, sell or hold ratings for T, has a Buy rating at this time.

They list Earnings Quality as Strongest. ... Cash Flow Quality as Strong. ... Operating Efficiency as Strongest. ... Balance Sheet as Weak, but up from Weakest. ... Valuation as Least Risk.

In looking at their Balance Sheet rating, they say T shows the ability to pay its bills and fund future growth. Their cash position has increased from $1,480M to $3,445M and with more cash on hand, T is better able to meet its financial obligations including its dividend. T has increased the amount of current assets relative to current liabilities.

Fidelity has an analysts rating system called StarMine who shows an Equity Summary Score (ESS) for each company. The ESS system rates various investment firms for their accuracy in making buy, sell or hold calls for the following 6 to 12 months after they make their call.

The ESS system then takes the views from the various investment houses and comes up with a score from 1 to 10.

9.1 to 10 = Very Bullish
7.0 to 9.0 = Bullish
3.0 to 6.9 = Neutral
1.1 to 2.9 = Bearish
Below 1.1 = Very Bearish

I have been tracking T for a couple of months and back on 12/23 the rating was 5.5. The rating rose in January and on 1/30 the rating was 6.8. Following the most recent earnings report, the rating has risen to 8.5 ... Bullish.

Value Line has a Timeliness Rating from 1 to 5 with 1 being best. Anything rated 1 or 2 for Timeliness means they expect the company to outperform the other companies they cover over the next 6 to 12 months. They assign T a rating of 2.

So, ESS and VL say now is the time to purchase T. Since T meets most of the metrics required, the only thing left is the yield and dividend growth.

T has raised the dividend for 8 consecutive years. It has a current yield of 5.60% which is well above the minimum requirement. It's 5 year compounded annual growth rate of the dividend is 2.37%.

When I'm looking at utilities, and I place telecom under the utility umbrella, I look for a total dividend return (yield plus 5 year dividend growth) of  8.0%. ... T currently has a rating of 7.97%. It's close enough for me given the high quality of this company.

With this in mind, as soon as the funds hit the account, T is the next purchase!






















Sunday, March 2, 2014

Project $3 Million - February Results

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

MONTHLY HIGHLIGHTS:

February was a good month. Two milestones were established.

1. The portfolio closed on 2/28 at an all-time high of $113,001.10
2. The portfolio established a new all-time high in monthly income at $363.19.

Companies that raised the dividend in February:

Pepsico - PEP ................. up 15.4%
Coca-Cola - KO ............. up 8.9%
Kimberly-Clark - KMB ... up 3.6%
-----------------------------------------------------------------------

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 income in retirement and not have to sell any assets to do so.

The objective also includes having the income stream continue to grow above the inflation rate.

A portfolio of $3 Million with a yield of 4% will accomplish the $10,000 per month in income. Hence the title of this portfolio ... Project $3 Million.
---------------------------------------------------------------------------

MISSION STATEMENT:

To earn an income stream that is reliable, predictable and increasing.
---------------------------------------------------------------------------

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. 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
-----------------------------------------------------------------------

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.
-----------------------------------------------------------------------------------

STATUS:

To stay on schedule for the $3 Million, in the time allotted, according to the link above, the balance at the end of year 2014 needs to be $100,643.33.

This portfolio is ahead of schedule! ... The current portfolio value is $113,001.10.
-------------------------------------------------------------------------------------

DIVIDEND HISTORY:

February Dividend History: (Last 5 years)

2010 ... $98.91
2011 ... $246.16
2012 ... $294.07
2013 ... $317.80 ... up 8.1%
2014 ... $363.19 ... up 14.3%
========================================================

FEBRUARY DIVIDENDS RECEIVED:

Taxable Account (Dividends Reinvested)

General Mills - GIS .............................. $30.03 ... bot 0.637 shares
Deere & Company - DE ...................... $6.12 ..... bot 0.072 shares
Enterprise Products Partners - EPD ..... $44.74 .... bot 0.722 units
Kinder Morgan Partners - KMP .......... $51.42 .... bot 0.641 units
Magellan Midstream Partners - MMP .. $48.94 .... bot 0.701 units
Colgate-Palmolive - CL ....................... $17.25 .... bot 0.276 shares
========================================================

PORTFOLIO HOLDINGS:  ($4,000 equals a full position)

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

ADP ...... 39.518 ... $3,073.71 ... up 72.40% ... Automatic Data Processing
CL ........ 51.012 .... $3,205.08 ... up 55.59% ... Colgate-Palmolive
CVX ..... 31.626 .... $3,647.43 ... up 26.95% ... Chevron Corp
DE ........ 12.072 .... $1.037.35 ... up 3.69% ..... Deere & Company
DEO ..... 30.253 .... $3,803.10 ... up 78.95% ... Diagio, plc
EPD ...... 64.640 .... $4,337.99 ... up 69.79% ... *Enterprise Products Partners
FTR ...... 22.454 .... $109.58 ... Received in a spinoff from VZ - Frontier Comm
GIS ....... 79.653 .... $3,985.04 ... up 37.48% ... General Mills
JNJ ....... 44.660 .... $4,114.08 ... up 46.56% ... Johnson & Johnson
KMB .... 37.467 .... $4,134.48 ... up 44.23% ... *Kimberly-Clark
KMP .... 38.452 .... $2,855.83 ... up 1.06% ..... *Kinder Morgan Partners
KO ..... 112.068 .... $4,281.00 ... up 57.03% ... *Coca-Cola
KRFT ... 89.194 .... $4,929.75 ... up 20.60% ... Kraft Foods
LMT ..... 47.922 .... $7,777.74 ... up 91.87% ... Lockheed-Martin
MCD .... 36.230 .... $3,447.28 ... up 21.73% ... McDonald's
MMP .... 84.356 .... $5,708.37 .. UP 138.41% .. *Magellan Midstream Partners
MO .... 109.863 ..... $3,983.63 ... up 66.69% ... Altria Corp
PEP ...... 34.177 ..... $2,736.55 ... up 28.17% ... *Pepsico
PM ....... 45.436 ..... $3,676.23 ... up 5.30% ...... Philip Morris
SO ....... 71.573 ...... $3,031.12 ... up 7.15% ..... Southern Company
SYY ... 116.402 ..... $4,192.80 ... up 19.73% .... Sysco Corp
Cash ....................... $74.12
------------------------------------------------------------------------------
Account Value ........ $78,142.26

*Increased Dividend in 2014
=======================================================

ROTH IRA: (Dividends Reinvested)

February Dividends:

Verizon - VZ ......................... $63.74 ... bot 1.366 shares
Procter & Gamble - PG ......... $21.32 ... bot 0.272 shares
Realty Income - O ................. $15.42 ... bot 0.359 shares
Kinder Morgan, Inc. - KMI ... $29.06 ... bot 0.867 shares
Healthcare REIT - HCN ........ $35.15 ... bot 0.63 shares
-------------------------------------------------------------------------------

PORTFOLIO HOLDINGS:  ($4,000 equals a full position)

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

D ........ 72.507 ... $5,031.99 ... up 46.46% ... *Dominion Resources
HCN .. 44.840 ... $2,633.90 ... up 5.14% ...... *Healthcare REIT
IBM ... 5.00 ....... $925.85 ...... up 0.08% ....... International Business Machines
KMI .. 71.733 .. $2,284.70 .. <dn 13.25%> ... Kinder Morgan, Inc
MO .... 73.758 ... $2,674.47 ... up 1.68% ....... Altria Corp
O ....... 85.018 ... $3,776.50 ... up 22.08% ..... Realty Income
PG ..... 35.721 ... $2,809.81 ... up 23.67% ..... Procter & Gamble
VZ ... 112.626 ... $5,786.97 ... up 25.04% ..... Verizon
Cash .................. $578.34
-----------------------------------------------------------------------------
Account Value .... $26,502.52

========================================================

THRIFT SAVINGS PLAN: (TSP) - Federal Version of the 401K

There isn't any matching employer funds in this account. Therefore, 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) ..... 106.6259 ... $2,570.48 ... 30.76%
S Fund (Small Cap) ..... 92.7202 .... $3,228.62 ... 38.64%
I Fund (International) ... 98.7226 ..... $2,557.22 ... 30.60%
-----------------------------------------------------------------------
Account Value: ................................ $8,358.32

Contribution Allocations:

C Fund ... 20%
S Fund ... 35%
I Fund ... 45%
==================================================

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
------------------------------------------------------------------------------
Total Cash Gains ... $3,330.43






















































Monday, February 3, 2014

Project $3 Million - January Results

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

MONTHLY HIGHLIGHTS:

On January 22, this portfolio established an all-time new high at $112,149.31.

Companies that raised the dividend in January:

Dominion Resources - D ...................... up 6.7%
Magellan Midstream Partners - MMP ... up 4.9%
Healthcare REIT - HCN ...................... up 3.9%
Enterprise Products Partners - EPD ...... up 1.4%
Kinder Morgan Partners - KMP ........... up 0.7%
------------------------------------------------------------------------------------

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 income in retirement, and not have to sell any assets to do so.

The objective also includes having the income stream continue to grow at a rate above inflation.

A portfolio of $3 Million with a yield of 4% will accomplish the $10,000 per month in income. Hence the title of this portfolio. ... Project $3 Million.
-------------------------------------------------------------------------------------

MISSION STATEMENT:

To earn an income stream that is reliable, predictable and increasing.
----------------------------------------------------------------------------------------

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. 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
--------------------------------------------------------------------------------------------

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.
--------------------------------------------------------------------------------------------

STATUS:

To stay on schedule for the $3 Million, in the time allotted, according to the link above, the balance at the end of year 2014 needs to be $100,643.33. This portfolio is ahead of schedule.
----------------------------------------------------------------------------------------------

DIVIDEND HISTORY:

January Dividend History: (Last 5 years)

2010 ... $80.25
2011 ... $102.18
2012 ... $142.68
2013 ... $212.71 ... up 49.1%
2014 ... $292.68 ... up 37.6%
===============================================================

JANUARY DIVIDENDS RECEIVED:

Taxable Account (Dividends Reinvested)

Automatic Data Processing - ADP ... $18.86 ... bot 0.233 shares
Pepsico - PEP ................................. $19.26 ... bot 0.234 shares
Kimberly-Clark - KMB ................... $30.11 ... bot 0.289 shares
Altria Group - MO .......................... $52.06 ... bot 1.398 shares
Philip Morris - PM ........................... $42.22 ... bot 0.511 shares
Kraft Foods - KRFT ....................... $46.38 ... bot 0.855 shares
Sysco Corp - SYY .......................... $33.48 ... bot 0.939 shares
===============================================================

PORTFOLIO HOLDINGS: ($4,000 equals a full position)

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

ADP ..... 39.518 ... $3,027.08 ... up 69.78% ... Automatic Data Processing
CL ........ 50.736 ... $3,106.57 ... up 52.17% ... Colgate-Palmolive
CVX ..... 31.626 ... $3,530.41 ... up 22.88% ... Chevron Corp
DE ........ 12.000 ... $1,031.52 ... up 3.74% ..... Deere & Company
DEO ..... 30.253 ... $3,631.87 ... up 70.90% ... Diagio, plc
EPD ...... 63.918 ... $4,242.88 ... up 69.03% ... *Enterprise Products Partners
FTR ...... 22.454 ... $105.14 ... (Received in a spinoff from VZ) - Frontier Comm.
GIS ....... 79.016 ... $3,794.35 ... up 32.27% ... General Mills
JNJ ....... 44.66 ..... $3,951.07 ... up 40.75% ... Johnson & Johnson
KMB .... 37.467 ... $4,097.77 ... up 42.95% ... Kimberly-Clark
KMP .... 37.811 ... $3.005.22 ... up 8.32% ..... *Kinder Morgan Partners
KO ..... 112.068 ... $4,238.41 ... up 55.47% ... Coca-Cola
KRFT .. 89.194 .... $4,669.31 ... up 14.23% ... Kraft Foods
LMT .... 47.922 .... $7,231.91 ... up 78.40% ... Lockheed-Martin
MCD ... 36.230 .... $3,411.78 ... up 20.48% ... McDonald's
MMP ... 83.655 ... $5,559.71 .. UP 137.04% .. *Magellan Midstream Partners
MO .... 109.863 ... $3,869.37 ... up 61.91% ... Altria Group
PEP ...... 34.177 ... $2,746.46 ... up 28.63% ... Pepsico
PM ....... 45.436 ... $3,550.37 ... up 1.70% ..... Philip Morris
SO ....... 71.573 ... $2,951.67 ... up 4.35% ..... Southern Company
SYY ... 116.402 ... $4,083.38 ... up 16.60% ... Sysco Corp
Cash ..................... $74.12
----------------------------------------------------------------------------------
Account Value ...... $75,910.36

*Increased Dividend in 2014
=========================================================

ROTH IRA: (Dividends Reinvested)

January Dividends:

Altria Group - MO .... $34.95 ... bot 0.939 shares
Realty Income - O ..... $15.35 ... bot 0.398 shares
-----------------------------------------------------------------------------------

PORTFOLIO HOLDINGS: ($4,000 equals a full position)

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

D ......... 75.507 ... $4,923.95 ... up 43.32% ... *Dominion Resources
HCN ... 44.210 ... $2,560.64 ... up 3.67% ..... *Healthcare REIT
IBM ..... 5.000 .... $883.40 ..... dn <4.51%> ... International Business Machines
KMI .... 70.866 ... $2,410.15 .. dn <7.46%> ... Kinder Morgan, Inc
MO ..... 73.758 ... $2,597.76 .. dn <1.24%> ... Altria Group
O ......... 84.659 ... $3,452.39 ... up 12.16% .... Realty Income
PG ....... 35.449 ... $2,716.10 ... up 20.68% ... Procter & Gamble
VZ ...... 120.26 .... $5,774.89 ... up 26.52% ... Verizon
Cash .................... $278.34
----------------------------------------------------------------------------------
Account Value .... $25,597.62

============================================================

THRIFT SAVINGS PLAN (TSP) - Federal Version of the 401K

There isn't any matching employer funds in this account. Therefore, 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 Portfolo

C Fund (S&P 500) ....... 106.0372 ... $2,444.32 ... 31.04%
S Fund (Small Cap) ....... 91.9957 .... $3,038.42 ... 38.59%
I Fund (International) ..... 97.4812 .... $2,391.54 ... 30.37%
---------------------------------------------------------------------------------------
Account Value: ................................ 7,874.28

Contribution Allocations:

C Fund ... 20%
S Fund ... 35%
I Fund .... 45%
=============================================================

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
------------------------------------------------------------------------------
Total Cash Gains ... $3,330.43






























































Saturday, January 11, 2014

New Purchase

As you people know, I prefer to announce my buys and sells in advance. I want people to know what I'm going to do before I do it and why I'm doing it. I hate when people give me after the fact information, when they've had a chance to enjoy some success first.

We can't learn from that! This blog is about me explaining what I do and why I do it and then we all can see what works and what doesn't. That's how we learn, by helping each other.

Anyway, a check was sent off to TD Ameritrade today and should hit the account by next Tuesday. It might be Wednesday before the purchase is made. I'm going with IBM unless some market moving news comes out between now and then.

Here is the thought process:

In the next few days, I will be making another purchase in the Project $3 Million Portfolio. I thought I'd share some insight into how I go about the process.
I've had quite a few requests about my stock selection process, and although I don't mind sharing it, it is time consuming to take people through the process. So, I thought I would write it down here and simply link to it when asked again.
The very first thing I look at is a company's financial strength ratings, their credit rating if you will. I look for companies that rate a 1 or 2 for Safety by Value Line, or a BBB+ rating by Morningstar if you don't have access to Value Line, and I look at S&P Capital IQ for Quality ratings of B+ or better.
If a company doesn't meet the quality rating, or I can't confirm one, I go no further, unless I'm specifically looking for a speculation company.
These companies I purchase are supposed to provide us with a lifetime of income and the best way to insure that is to own quality. Quality is job #1.
I have a watch-list of 48 companies that pass the quality stage. These are the companies I monitor for opportunity.
As I look over the watch-list, I have to see what I own and decide which sectors I want to go with. Here is the current portfolio weightings:
Consumers ... 43.2%
MLP's ... 14.5%
Utilities ... 13.5%
Industrials ... 8.1%
REIT's ... 5.6%
Healthcare ... 4.2%
Business Services ... 4.1%
Energy ... 3.8%
Technology ... 3.1%
Financials ... ZERO
Since the portfolio is so heavily weighted in consumers, anything consumer related is out this time around. That would include WMT or TGT for example.
I decided to focus on the sectors with weightings under 10%, to help build some balance as we go forward this year.
In looking over my watch-list, it isn't valuations I look to first. I look for companies rated to beat the market over the next 6 to 12 months. Fidelity has a rating system called StarMine and the research firms in the system provide ratings from zero to ten to determine where the collective firms rate a company currently. Anything from 7.0 and up is a Bullish rating.
The reason I want some momentum here is because I want the position to have a good chance of getting off to a good start. We're in a good economic and market environment right now where the tide is supposed to raise all boats. By getting off to a fast start, it provides peace of mind during market corrections.
Out of 48 companies on the watch-list, and considering the sectors I was looking to invest in, only 3 companies passed the StarMine ratings test. They were MSFT... 9.0, IBM ... 9.5 and CSX ... 9.1 If I was willing to add consumer related, WMT rated out at 7.4.
Once I have the list narrowed down, I then look to see who provides the best discounts to fair value. I use S&P Capital IQ for these ratings. According to S&P, MSFT is selling at an 18.8% discount. IBM is selling at a 30.7% discount to fair value, and CSX is overvalued by 4%. I like to see discounts of 15% or more, but will settle for less when I have to. I eliminated CSX from consideration until better valuations present themselves.
The next step, since this is a dividend growth portfolio, is to determine the total dividend return when you combine yield to the dividend growth number, what is known as the Chowder Rule.
I won't delve into the fundamentals until the quality ratings, discounts and dividend growth numbers are acceptable. I don't wish to dig deep and then find out the dividend growth is unacceptable.
When you take the current yield and add it to the 5 year compounded annual growth, I want to see a number of 12% or better when the yield is 3% or higher, or a number of 15% or better when the yield is under 3% but above 2%.
MSFT has a Chowder Rule number of 18.98%. IBM has a Chowder Rule number of 16.27%, so both companies qualify.
I want to see where the company has a consecutive string of raising the dividend. I'll accept 5 years, but I prefer 10 or more. The more the better.
IBM has a 17 year string and MSFT has a 7 year string. Both qualify.
At this point I look at earnings. I look at the last 10 years and I want to see where earnings have increased at least in 7 of those 10 years.
IBM has seen their earnings rise in 10 of the last 10 years. I really like this! MSFT has seen their earnings rise in 7 of the last 10 years. Both qualify.
At this point, it isn't a matter of who has the better numbers, both companies qualify for the next step, where the final decision will be made.
This is important! I don't go with the best yield and dividend growth. I go with the company with the better underlying fundamentals, and that's the next step.
I look at current PE's vs historical PE's to help determine valuation.
IBM's current yield is 11.% and normal PE is 16.6%. MSFT's current PE is 13.3% and normal PE is 18.1%. Both are still looking good. But when I look at return on equity and return on invested capital, I see that IBM's numbers are on the rise and MSFT's numbers are on the decline.
Estimated earnings growth, and I realize they are just estimates, show IBM at 10.2% and MSFT at 9.1%.
When I look at all the firms that cover these companies, StarMine tracks their buy, sell or hold ratings for accuracy. I always look at the reports by the top two firms for accuracy on a company and these companies aren't tops with every company they cover.
The top two firms for accuracy calls on IBM are Jefferson Research with an 84% accuracy rating and then comes Ford Equity Research with a 73% accuracy rating. Both companies have a Buy rating on IBM.
The top two firms for accuracy calls on MSFT are the same two companies, so this makes this easier to decipher. Jefferson Research has an accuracy rating of 84% and has a Hold rating on MSFT. Ford Equity has a 73% accuracy rating and has a Strong Buy on MSFT.
Since Jefferson Research is more accurate than any other firm with their calls on these two companies, I delved a little deeper into their research.
IBM:
Earnings Quality ... Strongest
Cash Flow Quality ... Strongest
Operations Efficiency ... Strongest
Balance Sheet ... Strongest
Valuation ... Least Risk
MSFT:
Earnings Quality ... Strongest
Cash Flow Quality ... Strong
Operation Efficiency ... Strong
Balance Sheet ... Weakest
Valuation ... Least Risk
....
Both companies are still worthy of purchase, and some people may choose MSFT because of the higher yield and slightly better Chowder Rule number, but IBM presents the stronger fundamentals at this time, and it's those fundamentals that are going to drive the dividend growth.
So, when the cash hits the account, I will be taking out a position in IBM the middle of next week.

Saturday, January 4, 2014

Project $3 Million - December Results

This portfolio belongs to a 28 year old person. I manage it for him.

MONTHLY HIGHLIGHTS:

The portfolio ended at an all-time high on December 31 at $111,161.93.

A quarterly dividend income record was established in the fourth quarter at $924.88.

An annual income record was established with $3,365.47 paid in dividends during 2013.
------------------------------------------------------------------------------------------------

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 income in retirement, and not have to sell any assets to do so.

The objective also includes having the income stream continue to grow at a rate above inflation. ... (Keep in mind, this portfolio was designed under today's dollar. As time moves on, we understand adjustments will need to be made as inflation rises. More funds will be contributed as pay raises allow. Other adjustments will be made as necessary.)

A portfolio of $3 Million with a yield of 4% will accomplish the $10,000 per month in income. Hence the title of this portfolio. ... Project $3 Million.
---------------------------------------------------------------------------------------------

MISSION STATEMENT:

To earn an income stream that is reliable, predictable and increasing.
-----------------------------------------------------------------------------------------------

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. 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
-----------------------------------------------------------------------------------------

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 new positions, or create new ones.
------------------------------------------------------------------------------------

STATUS:

To stay on schedule for the $3 Million, in the time allotted, according to the link above, the balance at the end of year 2013 needed to be $86,959.44. ... Project $3 Million is ahead of schedule.

The portfolio value at the end of December (year end) is $111,161.93. ... This is an all-time portfolio high. ... This amount of money already exceeds what the portfolio is supposed to show at the end of 2014.

The portfolio is just 3.8% shy of being two years ahead of schedule.
-----------------------------------------------------------------------------------------

DIVIDEND HISTORY:

December Dividend History:

2009 ... $207.43
2010 ... $179.20
2011 ... $260.87
2012 ... $247.33
2013 ... $277.82

Year End Dividend History:

2009 ... $684.38
2010 ... $1,693.33
2011 ... $2,404.02
2012 ... $2,808.46 ... up 16.8%
2013 ... $3,365.47 ... up 19.8%
===========================================================

DECEMBER DIVIDENDS RECEIVED:

Taxable Account (Dividends Reinvested)

Southern Company - SO ..... $35.88 ... bot 0.871 shares
Chevron - CVX .................. $31.37 ... bot 0.256 shares
Johnson & Johnson - JNJ .... $29.27 ... bot 0.313 shares
McDonald's - MCD ............ $29.10 ... bot 0.313 shares
Lockheed-Martin - LMT ..... $63.16 ... bot 0.43 shares
Frontier Comm. - FTR ........ $2.20 ...... bot 0.47 shares
Coca-Cola - KO ................ $31.16 .... bot 0.8 shares
===========================================================

PORTFOLIO HOLDINGS: ($4,000 equals a full position)

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

ADP ..... 39.285 ... $3,174.19 ... up 79.94% ... *Automatic Data Processing
CL ....... 50.736 ... $3,308.49 ... up 62.07% ... *Colgate-Palmolive
CVX .... 31.626 ... $3,950.40 ... up 37.50% ... *Chevron Corp
DE ....... 12.00 ..... $1,095.96 ... up 10.22% ... Deere & Company (new position)
DEO .... 30.253 ... $4,006.10 ... up 88.50% ... *Diagio, plc
EPD ..... 63.918 ... $4,237.76 ... up 68.83% ... **Enterprise Products Partners
FTR ..... 21.984 ... $102.23 ...... (Received in spinoff from VZ ... Frontier Comm.)
GIS ...... 79.016 ... $3,943.69 ... up 37.47% ... *General Mills
JNJ ...... 44.66 ..... $4,090.41 ... up 45.71% .... *Johnson & Johnson
KMB ... 37.178 ... $3,883.61 ... up 36.92% .... *Kimberly-Clark
KMP ... 37.811 ... $3,049.84 ... up 9.93% ...... **Kinder Morgan Partners
KO .... 112.068 ... $4,629.53 ... up 69.82% .... *Coca-Cola
KRFT .. 88.339 ... $4,762.36 ... up 17.84% .... *Kraft Foods
LMT  ... 47.922 ... $7,124.08 ... up 75.74% .... *Lockheed-Martin
MCD ... 36.23 ..... $3,515.40 ... up 24.14% .... *McDonald's
MMP ... 83.655 ... $5,292.85 .. UP 125.67% .. **Magellan Midstream Partners
MO ... 108.465 ... $4,163.97 .... up 78.11% .... *Altria Group (held in two accounts)
PEP ..... 33.943 ... $2,815.23 ... up 33.05% ..... *Pepsico
PM ...... 44.925 ... $3,914.32 ... up 13.49% ..... *Philip Morris
SO ...... 71.573 ... $2,942.37 ... up 4.02% ........ *Southern Company
SYY .. 115.463 ... $4,168.21 ... up 20.17% ...... *Sysco Corp
Cash .................... $74.12
-------------------------------------------------------------------------------------------
Account Value .... $78,245.12

*Increased the dividend in 2013
**Multiple dividend increases in 2013
================================================================

ROTH IRA: (Dividends Reinvested)

December Dividends:

Realty Income - O ............ $15.25 ... bot 0.391 shares
Dominion Resources - D ... $40.43 ... bot 0.628 shares
----------------------------------------------------------------------------------------------

PORTFOLIO HOLDINGS: ($4,000 equals a full position)

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

D ......... 72.507 ... $4,690.48 ... up 36.52% ... *Dominion Resources
HCN ... 44.21 ..... $2,368.33 .. <dn 4.12%> .. *Healthcare REIT
KMI .... 70.866 ... $2,551.18 .. <dn 2.05%> .. **Kinder Morgan, Inc
MO ..... 72.819 ... $2,795.41 ... up 7.71% ...... *Altria Group (held in two accounts)
O ......... 84.261 ... $3,145.46 ... up 2.70% ..... **Realty Income
PG ....... 35.449 ... $2,885.90 ... up 28.22% .... *Procter & Gamble
VZ ...... 120.26 .... $5,909.58 ... up 29.47% .... *Verizon
Cash .................... $513.48
------------------------------------------------------------------------------------
Account Value: .... $24,859.93

========================================================

THRIFT SAVINGS PLAN (TSP) - Federal Version of the 401K

There isn't any matching funds in this account. Therefore, 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) ....... 105.4986 ... $2,518.80 ... 31.26%
S Fund (Small Cap) ....... 91.3291 .... $3,075.11 ... 38.17%
I Fund (International) ..... 96.3436 .... $2,462.97 ... 30.57%
---------------------------------------------------------------------------------------
Account Value: ................................ $8,056.88

Contribution Allocations:

C Fund ... 20%
S Fund ... 35%
I Fund ... 45%
===========================================================

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
------------------------------------------------------------------------------
Total Cash Gains ... $3,330.43