Additional funds have it the account today bringing the cash level up over the $1,000 level for additional purchases. I was hoping the funds hit yesterday but it didn't happen. Anyway, I will be purchasing shares in CVX tomorrow to add to an existing position in CVX.
Morningstar has a fair value on CVX at $125.00. Price is right on it. I realize M* prefers a margin of safety between the entry and fair value, but this is a long term position and I don't mind paying fair value.
Value Line and F.A.S.T. Graphs seem to think CVX is undervalued at this point.
CVX did announce an 11.1% increase in the dividend last month, as we go forward this year, and I want to capture that dividend growth as well.
CVX has raised the dividend for 19 consecutive years now and it's 5 year compounded annual growth rate on the dividend is 9.24%.
The yield is 3.2% and when you add the 5 year CAGR of 9.24% I get a Chowder Rule number of 12.44% which qualifies for purchase. I like to buy companies where the total dividend return (the Chowder Rule) is 12% or more.
I realize some would fear buying up in this price range, but again it's a long term position, and it's a core position. I want to build as many shares in core positions over time as I can since future dividend income will be based on the number of shares you own.
The current cost per share on the existing CVX shares is $78.52. I'll be averaging up which shouldn't make the cost basis rise enough to cause concern.
There you have it! I'll be buying CVX tomorrow.
Tuesday, May 14, 2013
Sunday, May 12, 2013
Portfolio Review -- Sold Positions
One of the responsibilities of a self directed investor is to look back at the positions they sold and compare them to the ones they replaced them with, to insure you are upgrading your portfolio. If you find that you aren't improving the results with your moves, then adjustments need to be made.
This entry is going to take a look at the positions that were sold from 2009 to 2011. I think it's too soon to judge the 2012 positions. I'll do that at a later date.
In November 2009, BMY froze their dividend. What I did not know at the time was that BMY would only freeze the dividend for a year and then start raising it again. If I had known that at the time, I may have held on. I don't know for sure.
In any event, I sold BMY for a profit, up 25.85% and I took the entire proceeds and split it up between VZ and JNJ. At the time I did increase the yield and income flow. Here are the total returns of all three positions from that time through the end of April 2013:
BMY ... up 83%
VZ ....... up 106%
JNJ ...... up 52%
I am going to call this move a wash. I think it's six of one and half a dozen of the other. I'd like to see how they compare a couple of years from now as JNJ is finally getting their act together.
I sold KMR in February 2011 for a profit, up 27.09% and I purchased KMP in its place. This was done in a taxable account and what I was looking to do at the time was manage the tax consequences by not having to pay current taxes on the distributions since KMP's distributions are considered mostly return of capital.
Since I accomplished what I set out to do, I'll call this move a success.
In March 2011 I sold shares of O for a profit, up 3.01%. The selling price was $35.42. I bought the shares back at a lower price of $34.43. I do not recall why I did this. I don't think I was trying to sell and buy back later, which might make me look smart, but that isn't the objective with this portfolio. All I can think of is that I accidentally sold O and then asked what in the world are you doing? ... Ha!
Anyway, O is up 61% in that time frame, so I did the right thing in purchasing them back and I did it at a better price. I'll chalk this move up to being lucky.
In April 2011 I was showing a loss in ZTR. I decided to cut my losses short as ZTR was down <10.09%> I turned around and bought shares in SYY. Since then ZTR has had a total return of 14% and SYY is up 30%. This was a successful move.
In June 2011 I was concerned about the debt level of CLX and decided to clear my mind of the worry over their debt, and I sold them for a profitable trade, up 1.57%. I turned around and bought KMB which also increased the yield and income stream. Since then CLX is up 36% and KMB is up 66%. This was clearly a successful move.
In May 2011 I locked in profits with VZ, up 30.15%. I wanted to move VZ from the taxable account to the Roth Ira. I had to sell VZ first, then move the cash to the Roth, and then repurchase VZ. This is what I did. VZ is up another 43% since that move was made and the dividends are no longer taxed. A successful move.
In October 2011 VFC was showing some price strength and as a result of a rising dividend, the yield dropped below 2%. Since the dividends are being reinvested in all of the portfolio's holdings, I wanted a higher yield. So, I sold VFC with a 53.07% gain and I purchased PEP with the proceeds. I immediately created more income with the higher yield.
VFC kept going higher which initially made the move a bad trade, but since then, VFC is up 33% and PEP is up 37%. So I did indeed make the correct move at the time.
There you have it! Those are the moves that were made from 2009 - 2011. I think you'd have to say the overall performance was upgraded and consider the portfolio management up to there has been a success.
I'll review the 2012 moves in another year or so.
This entry is going to take a look at the positions that were sold from 2009 to 2011. I think it's too soon to judge the 2012 positions. I'll do that at a later date.
In November 2009, BMY froze their dividend. What I did not know at the time was that BMY would only freeze the dividend for a year and then start raising it again. If I had known that at the time, I may have held on. I don't know for sure.
In any event, I sold BMY for a profit, up 25.85% and I took the entire proceeds and split it up between VZ and JNJ. At the time I did increase the yield and income flow. Here are the total returns of all three positions from that time through the end of April 2013:
BMY ... up 83%
VZ ....... up 106%
JNJ ...... up 52%
I am going to call this move a wash. I think it's six of one and half a dozen of the other. I'd like to see how they compare a couple of years from now as JNJ is finally getting their act together.
I sold KMR in February 2011 for a profit, up 27.09% and I purchased KMP in its place. This was done in a taxable account and what I was looking to do at the time was manage the tax consequences by not having to pay current taxes on the distributions since KMP's distributions are considered mostly return of capital.
Since I accomplished what I set out to do, I'll call this move a success.
In March 2011 I sold shares of O for a profit, up 3.01%. The selling price was $35.42. I bought the shares back at a lower price of $34.43. I do not recall why I did this. I don't think I was trying to sell and buy back later, which might make me look smart, but that isn't the objective with this portfolio. All I can think of is that I accidentally sold O and then asked what in the world are you doing? ... Ha!
Anyway, O is up 61% in that time frame, so I did the right thing in purchasing them back and I did it at a better price. I'll chalk this move up to being lucky.
In April 2011 I was showing a loss in ZTR. I decided to cut my losses short as ZTR was down <10.09%> I turned around and bought shares in SYY. Since then ZTR has had a total return of 14% and SYY is up 30%. This was a successful move.
In June 2011 I was concerned about the debt level of CLX and decided to clear my mind of the worry over their debt, and I sold them for a profitable trade, up 1.57%. I turned around and bought KMB which also increased the yield and income stream. Since then CLX is up 36% and KMB is up 66%. This was clearly a successful move.
In May 2011 I locked in profits with VZ, up 30.15%. I wanted to move VZ from the taxable account to the Roth Ira. I had to sell VZ first, then move the cash to the Roth, and then repurchase VZ. This is what I did. VZ is up another 43% since that move was made and the dividends are no longer taxed. A successful move.
In October 2011 VFC was showing some price strength and as a result of a rising dividend, the yield dropped below 2%. Since the dividends are being reinvested in all of the portfolio's holdings, I wanted a higher yield. So, I sold VFC with a 53.07% gain and I purchased PEP with the proceeds. I immediately created more income with the higher yield.
VFC kept going higher which initially made the move a bad trade, but since then, VFC is up 33% and PEP is up 37%. So I did indeed make the correct move at the time.
There you have it! Those are the moves that were made from 2009 - 2011. I think you'd have to say the overall performance was upgraded and consider the portfolio management up to there has been a success.
I'll review the 2012 moves in another year or so.
Thursday, May 2, 2013
Project $3 Million - March 2013 Results
This portfolio belongs to a 28 year old.
MONTHLY HIGHLIGHTS:
Project $3 Million once again closed at an all-time high. Total portfolio value is $101,432.66. ... In order for this portfolio to stay on schedule for the $3 Million, the value at year end 2013 needs to be $86,959.44. This portfolio is ahead of schedule and has built in a margin of safety in the event the market pulls back.
Companies that increased their dividend in April are:
Chevron (CVX) ... up 11.1%
Johnson&Johnson (JNJ) ... up 8.2%
Procter&Gamble (PG) ... up 7.0%
Southern Company (SO) ... up 3.6%
*Magellan Midstream (MMP) ... up 3.1% ... up 19.0% YoY
*Enterprise Products (EPD) ... up 1.5% ... up 6.8% YoY
*Kinder Morgan, Inc. (KMI) ... up 2.7% ... up 18.8% YoY
*Kinder Morgan Partners (KMP) ... up 0.8% ... up 8.3% YoY
* = Second Increase This Year
YoY = Year Over Year
------------------------------------------------------------------------------------------------------
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 is also to see 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:
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 value needs to be in 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. New cash will be used to add to positions or create new ones.
STATUS:
To stay on schedule for the $3 Million, according to the link above, the balance at year end 2013 needs to be $86,959.44. ..... Project $3 Million is more than a year ahead of schedule. Portfolio value at the end of April is $101,432.66 and that exceeds year end 2014 as well.
=================================================================
DIVIDEND HISTORY:
The total dividends for April are $233.87.
Total dividends for 2013 are $1,013.74. ... up 29.9% year over year through April.
THE CHOWDER INDEX:
The Chowder Index is what I use to determine if the portfolio is accomplishing its goals or not. Since the priority is income replacement, and we want that income to grow, we want to see where the income for each quarter is higher than the corresponding quarter of a year ago. I also want to see year over year income growth.
April Results ........... Year To Date Results (year over year)
2009 ... $31.74 ...... $139.74
2010 ... $112.64 .... $377.59
2011 ... $133.71 .... $676.52
2012 ... $158.94 .... $780.14
2013 ... $233.87 .... $1,013.74
================================================================
APRIL DIVIDENDS RECEIVED:
TAXABLE ACCOUNT: (Dividends Reinvested)
Automatic Data Processing (ADP) ... $16.77 ... bought 0.257 shares
Kimberly-Clark (KMB) ................... $21.40 ... bought 0.218 shares
Altria Group (MO) .......................... $45.97 ... bought 1.291 shares
Philip Morris (PM) .......................... $27.91 ... bought 0.294 shares
Kraft Foods (KRFT) ...................... $42.96 ... bought 0.841 shares
Sysco (SYY) .................................. $31.55 ... bought 0.902 shares
Diagio, plc (DEO) ........................... $32.61 ... bought 0.268 shares
Frontier Comm (FTR) ... dividend paid last month reinvested this month ... 0.52 shares
Lockheed Martin (LMT) ... dividend paid last month reinvested this month .. 0.424 shares
---------------------------------------------------------------------------------
PORTFOLIO HOLDINGS:
Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company
ADP ...... 38.809 ... $2,613.40 ... up 51.05% ... Automatic Data Processing
CL ......... 24.957 ... $2,980.12 ... up 49.73% ... *Colgate-Palmolive
CVX ...... 22.931 ... $2,797.81 ... up 55.38% ... *Chevron Corp.
DEO ...... 29.789 ... $3,640.22 ... up 75.96% .... Diagio, plc
EPD ....... 61.749 ... $3,745.08 ... up 57.18% .... **Enterprise Products Partners
FTR ....... 20.964 ... $87.21 ... Shares received in a spinoff from VZ ... Frontier Comm.
GIS ........ 77.35 ..... $3,899.99 ... up 40.10% .... *General Mills
JNJ ........ 43.678 ... $3,722.68 ... up 36.86% ..... *Johnson&Johnson
KMB ..... 26.638 ... $2,748.78 ... up 54.07% ..... *Kimberly-Clark
KMP ..... 36.08 ..... $3,191.28 ... up 21.39% ..... **Kinder Morgan Partners
KO ....... 109.684 .. $4,642.92 ... up 76.31% ..... *Coca-Cola
KRFT .... 86.758 ... $4,467.17 ... up 13.04% ...... Kraft Foods
LMT ...... 46.575 ... $4,615.12 ... up 18.86% ...... Lockheed Martin
MCD ..... 35.369 ... $3,612.59 ... up 31.45% ...... McDonald's
MMP ..... 81.311 ... $4,311.92 ... up 94.74% ...... **Magellan Midstream Partners
MO ....... 105.757 .. $3,861.19 ... up 72.38% ...... Altria Group
PEP ....... 33.472 .... $2,760.44 ... up 32.86% ..... *Pepsico
PM ........ 33.126 .... $3,166.51 ... up 31.79% ..... Philip Morris
SO ........ 69.052 .... $3,330.38 ... up 22.33% ..... *Southern Company
SYY .... 113.591 .... $3,959.78 ... up 16.31% ..... Sysco Corp.
Cash ....................... $872.66
-----------------------------------------------------------------------------
Account Value: ....... $69,027.22
* Increased the dividend in 2013
** Multiple dividend increases in 2013
==============================================================
ROTH IRA: (Dividends Reinvested)
April Dividends:
Realty Income (O) ... $14.70 ... bought 0.308 shares
---------------------------------------------------------------------------------------
PORTFOLIO HOLDINGS:
Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company
D ............ 70.51 .... $4,349.06 ... 31.17% ... *Dominion Resources
HCN ...... 42.662 .. $3,198.37 ... 34.89% ... *Health Care REIT
KMI ....... 68.671 .. $2,685.04 ... 6.46% ..... **Kinder Morgan Inc.
O ............ 81.447 .. $4,151.35 ... 41.08% ... **Realty Income
PG .......... 34.676 .. $2,662.08 ... 21.69% ... *Procter&Gamble
VZ ......... 116.67 ... $6,289.68 ... 43.58% .... Verizon
Cash ....................... $13.48
-----------------------------------------------------------------------------------
Account Value: ....... $25,941.26
========================================================
THRIFT SAVINGS PLAN (TSP) - Federal Version of the 401K
There isn't any matching funds in this account. 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
F Fund (Fixed Income) ... 18.4120 ... $297.84 ...... 4.61%
C Fund (S&P 500) ........ 101.7590 .. $2,067.98 ... 31.99%
S Fund (Small Cap) ........ 76.7758 ... $2,126.79 ... 32.80%
I Fund (International) ...... 85.7199 ... $1,971.57 .... 30.50%
----------------------------------------------------------------------------------
Account Value ................. $6,464.66
Contribution Allocations:
F Fund ... 10%
C Fund ... 10%
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 with KMP in taxable acct.
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
CLX .... 06/11 ... $25.25 ... up 1.57% ... Concerned with debt, replaced with KMB
VZ ....... 05/11 ... $618.16 ... up 30.15% ... Moved cash to Roth and added to existing VZ position
VFC .... 10/11 ... $897.99 ... up 53.07% ... Took profits as yield dropped below 2%, bot PEP
O ........ 01/12 ... $79.73 ... up 3.01% ... Moved cash to Roth and repurchased
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, moved 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, moved cash to Roth, bot COP
NUE ... 12/12 ... $164.61 ... up 7.33% ... Slow dividend growth, moved cash to Roth, added to COP
COP ... 04/12 ... <$2.46> ... dn <0.10%> ... Froze dividend, bot MO
---------------------------------------------------------------------------------
Total Cash Gains ... $3,330.43
MONTHLY HIGHLIGHTS:
Project $3 Million once again closed at an all-time high. Total portfolio value is $101,432.66. ... In order for this portfolio to stay on schedule for the $3 Million, the value at year end 2013 needs to be $86,959.44. This portfolio is ahead of schedule and has built in a margin of safety in the event the market pulls back.
Companies that increased their dividend in April are:
Chevron (CVX) ... up 11.1%
Johnson&Johnson (JNJ) ... up 8.2%
Procter&Gamble (PG) ... up 7.0%
Southern Company (SO) ... up 3.6%
*Magellan Midstream (MMP) ... up 3.1% ... up 19.0% YoY
*Enterprise Products (EPD) ... up 1.5% ... up 6.8% YoY
*Kinder Morgan, Inc. (KMI) ... up 2.7% ... up 18.8% YoY
*Kinder Morgan Partners (KMP) ... up 0.8% ... up 8.3% YoY
* = Second Increase This Year
YoY = Year Over Year
------------------------------------------------------------------------------------------------------
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 is also to see 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:
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 value needs to be in 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. New cash will be used to add to positions or create new ones.
STATUS:
To stay on schedule for the $3 Million, according to the link above, the balance at year end 2013 needs to be $86,959.44. ..... Project $3 Million is more than a year ahead of schedule. Portfolio value at the end of April is $101,432.66 and that exceeds year end 2014 as well.
=================================================================
DIVIDEND HISTORY:
The total dividends for April are $233.87.
Total dividends for 2013 are $1,013.74. ... up 29.9% year over year through April.
THE CHOWDER INDEX:
The Chowder Index is what I use to determine if the portfolio is accomplishing its goals or not. Since the priority is income replacement, and we want that income to grow, we want to see where the income for each quarter is higher than the corresponding quarter of a year ago. I also want to see year over year income growth.
April Results ........... Year To Date Results (year over year)
2009 ... $31.74 ...... $139.74
2010 ... $112.64 .... $377.59
2011 ... $133.71 .... $676.52
2012 ... $158.94 .... $780.14
2013 ... $233.87 .... $1,013.74
================================================================
APRIL DIVIDENDS RECEIVED:
TAXABLE ACCOUNT: (Dividends Reinvested)
Automatic Data Processing (ADP) ... $16.77 ... bought 0.257 shares
Kimberly-Clark (KMB) ................... $21.40 ... bought 0.218 shares
Altria Group (MO) .......................... $45.97 ... bought 1.291 shares
Philip Morris (PM) .......................... $27.91 ... bought 0.294 shares
Kraft Foods (KRFT) ...................... $42.96 ... bought 0.841 shares
Sysco (SYY) .................................. $31.55 ... bought 0.902 shares
Diagio, plc (DEO) ........................... $32.61 ... bought 0.268 shares
Frontier Comm (FTR) ... dividend paid last month reinvested this month ... 0.52 shares
Lockheed Martin (LMT) ... dividend paid last month reinvested this month .. 0.424 shares
---------------------------------------------------------------------------------
PORTFOLIO HOLDINGS:
Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company
ADP ...... 38.809 ... $2,613.40 ... up 51.05% ... Automatic Data Processing
CL ......... 24.957 ... $2,980.12 ... up 49.73% ... *Colgate-Palmolive
CVX ...... 22.931 ... $2,797.81 ... up 55.38% ... *Chevron Corp.
DEO ...... 29.789 ... $3,640.22 ... up 75.96% .... Diagio, plc
EPD ....... 61.749 ... $3,745.08 ... up 57.18% .... **Enterprise Products Partners
FTR ....... 20.964 ... $87.21 ... Shares received in a spinoff from VZ ... Frontier Comm.
GIS ........ 77.35 ..... $3,899.99 ... up 40.10% .... *General Mills
JNJ ........ 43.678 ... $3,722.68 ... up 36.86% ..... *Johnson&Johnson
KMB ..... 26.638 ... $2,748.78 ... up 54.07% ..... *Kimberly-Clark
KMP ..... 36.08 ..... $3,191.28 ... up 21.39% ..... **Kinder Morgan Partners
KO ....... 109.684 .. $4,642.92 ... up 76.31% ..... *Coca-Cola
KRFT .... 86.758 ... $4,467.17 ... up 13.04% ...... Kraft Foods
LMT ...... 46.575 ... $4,615.12 ... up 18.86% ...... Lockheed Martin
MCD ..... 35.369 ... $3,612.59 ... up 31.45% ...... McDonald's
MMP ..... 81.311 ... $4,311.92 ... up 94.74% ...... **Magellan Midstream Partners
MO ....... 105.757 .. $3,861.19 ... up 72.38% ...... Altria Group
PEP ....... 33.472 .... $2,760.44 ... up 32.86% ..... *Pepsico
PM ........ 33.126 .... $3,166.51 ... up 31.79% ..... Philip Morris
SO ........ 69.052 .... $3,330.38 ... up 22.33% ..... *Southern Company
SYY .... 113.591 .... $3,959.78 ... up 16.31% ..... Sysco Corp.
Cash ....................... $872.66
-----------------------------------------------------------------------------
Account Value: ....... $69,027.22
* Increased the dividend in 2013
** Multiple dividend increases in 2013
==============================================================
ROTH IRA: (Dividends Reinvested)
April Dividends:
Realty Income (O) ... $14.70 ... bought 0.308 shares
---------------------------------------------------------------------------------------
PORTFOLIO HOLDINGS:
Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company
D ............ 70.51 .... $4,349.06 ... 31.17% ... *Dominion Resources
HCN ...... 42.662 .. $3,198.37 ... 34.89% ... *Health Care REIT
KMI ....... 68.671 .. $2,685.04 ... 6.46% ..... **Kinder Morgan Inc.
O ............ 81.447 .. $4,151.35 ... 41.08% ... **Realty Income
PG .......... 34.676 .. $2,662.08 ... 21.69% ... *Procter&Gamble
VZ ......... 116.67 ... $6,289.68 ... 43.58% .... Verizon
Cash ....................... $13.48
-----------------------------------------------------------------------------------
Account Value: ....... $25,941.26
========================================================
THRIFT SAVINGS PLAN (TSP) - Federal Version of the 401K
There isn't any matching funds in this account. 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
F Fund (Fixed Income) ... 18.4120 ... $297.84 ...... 4.61%
C Fund (S&P 500) ........ 101.7590 .. $2,067.98 ... 31.99%
S Fund (Small Cap) ........ 76.7758 ... $2,126.79 ... 32.80%
I Fund (International) ...... 85.7199 ... $1,971.57 .... 30.50%
----------------------------------------------------------------------------------
Account Value ................. $6,464.66
Contribution Allocations:
F Fund ... 10%
C Fund ... 10%
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 with KMP in taxable acct.
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
CLX .... 06/11 ... $25.25 ... up 1.57% ... Concerned with debt, replaced with KMB
VZ ....... 05/11 ... $618.16 ... up 30.15% ... Moved cash to Roth and added to existing VZ position
VFC .... 10/11 ... $897.99 ... up 53.07% ... Took profits as yield dropped below 2%, bot PEP
O ........ 01/12 ... $79.73 ... up 3.01% ... Moved cash to Roth and repurchased
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, moved 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, moved cash to Roth, bot COP
NUE ... 12/12 ... $164.61 ... up 7.33% ... Slow dividend growth, moved cash to Roth, added to COP
COP ... 04/12 ... <$2.46> ... dn <0.10%> ... Froze dividend, bot MO
---------------------------------------------------------------------------------
Total Cash Gains ... $3,330.43
Wednesday, April 24, 2013
Milestone Achievement
Yesterday is the first time where the value of this portfolio closed above $100,000.
Closing value as of April, 23 is $100,735.42. The portfolio is two years ahead of schedule in achieving the $3 Million objective.
Closing value as of April, 23 is $100,735.42. The portfolio is two years ahead of schedule in achieving the $3 Million objective.
Sunday, April 7, 2013
A Portfolio Change
COP has not raised their dividend on time. They have a funding gap between dividends and capital growth. They have been selling off assets and rearranging their business which creates an air of uncertainty for me.
I'm not sure they are going to raise the dividend this year and if I were them, I'd focus on the capital growth as well. That doesn't do me any good as a dividend growth investor though.
I think COP will do okay over the longer term, and some are willing to be paid 4.5% (the dividend) to wait. In my case, I can get 4.5% elsewhere and still grow the dividend while I wait.
I will look to replace COP in the coming week and it doesn't have to be in energy. MO is a consideration. Higher yield and still growing the dividend. I haven't decided yet.
I can always come back to COP when they start increasing the dividend again, but for now, dividend growth means dividend growth and COP isn't coming through for now.
I will announce any moves I decide to make, in advance.
I'm not sure they are going to raise the dividend this year and if I were them, I'd focus on the capital growth as well. That doesn't do me any good as a dividend growth investor though.
I think COP will do okay over the longer term, and some are willing to be paid 4.5% (the dividend) to wait. In my case, I can get 4.5% elsewhere and still grow the dividend while I wait.
I will look to replace COP in the coming week and it doesn't have to be in energy. MO is a consideration. Higher yield and still growing the dividend. I haven't decided yet.
I can always come back to COP when they start increasing the dividend again, but for now, dividend growth means dividend growth and COP isn't coming through for now.
I will announce any moves I decide to make, in advance.
Saturday, March 30, 2013
Project $3 Million - March 2013 Results
This portfolio belongs to a 28 year old.
Monthly Highlights:
Project $3 Million once again closed at an all-time high. Total portfolio value is $97,365.05. In order for this portfolio to stay on schedule for the $3 Million, the value at year end 2013 needs to be $86,959.44. This portfolio is ahead of schedule and has built in a safety margin in the event the market pulls back.
Companies that have increased their dividends this month:
General Mills (GIS) ... up 15.2%
Colgate-Palmolive (CL) ... up 9.7%
Realty Income (O) ... up 0.2%
Colgate-Palmolive (CL) also announced a 2 for 1 split.
---------------------------------------------------------------------------------
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 the assets to do so.
The objective is also to see the income stream continue to grow and stay ahead of 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:
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 value needs to be in 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. New cash will be used to add to positions or create new ones.
STATUS:
To stay on schedule for the $3 Million, according to the link above, the balance at year end 2013 needs to be $86,959.44.
Project $3 Million is a year ahead of schedule. Portfolio value at the end of March is $97,365.05.
===================================================================
DIVIDEND HISTORY:
The total dividend for March are $231.49.
Total dividends for 2013 are $736.84. ... 18.6% over ytd 2012.
THE CHOWDER INDEX:
The Chowder Index is what I use to determine if the portfolio is accomplishing its goals or not. Since the priority is income replacement, and we want that income to grow, we want to see where the income for each quarter is higher than the corresponding quarter of a year ago. I also want to see year over year income growth.
Quarterly Results: (first quarter)
2009 ... $108.00
2010 ... $264.95
2011 ... $542.81
2012 ... $621.20
2013 ... $736.84
==================================================================
MARCH DIVIDENDS RECEIVED:
TAXABLE ACCOUNT: (Dividend Reinvested)
Southern Company (SO) ......... $33.48 ... bought 0.734 shares
Chevron Corp. (CVX) ............ $20.48 ... bought 0.172 shares
Johnson & Johnson (JNJ) ........ $26.44 ... bought 0.337 shares
McDonald's (MCD) ................ $27.02 ... bought 0.274 shares
Lockheed Martin (LMT) ......... $40.42 ... won't be reinvested until 4/1
Frontier Comm. (FTR) ............ $2.04 ..... won't be reinvested until 4/1
-------------------------------------------------------------------------------------------------
PORTFOLIO HOLDINGS:
Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company
ADP ...... 38.552 ... $2,507.04 ... up 46.32% ... Automatic Data Processing
CL ......... 24.957 ... $2,945.67 ... up 48.00% ... *Colgate-Palmolive
CVX ...... 22.931 ... $2,724.66 ... up 51.32% ... Chevron Corp.
DEO ...... 29.521 ... $3,714.92 ... up 82.44% ... Diagio plc
EPD ....... 61.749 ... $3,722.85 ... up 56.25% ... *Enterprise Products Partners
FTR ....... 20.444 ........ $81.57 ... Shares received in a spinoff from VZ ... Frontier Comm.
GIS ........ 77.35 ..... $3,814.13 ... up 37.01% ... *General Mills
JNJ ........ 43.678 ... $3,561.07 ... up 30.92% ... Johnson & Johnson
KMB ..... 26.42 ..... $2,588.63 ... up 46.85% ... *Kimberly-Clark
KMP ..... 36.08 ..... $3,238.90 ... up 23.20% ... *Kinder Morgan Partners
KO ....... 108.937 .. $4,405.41 ... up 69.25% ... *Coca-Cola
KRFT .... 85.917 ... $4,427.30 ... up 13.26% ... Kraft Foods
LMT ...... 46.151 ... $4,454.49 ... up 15.93% ... Lockheed Martin
MCD ..... 35.369 ... $3,525.94 ... up 29.30% ... McDonald's
MMP ..... 81.311 ... $4,344.45 ... up 96.21% ... *Magellan Midstream Partners
MO ...... 104.466 ... $3,592.59 ... up 63.75% ... Altria Group
PEP ....... 33.248 .... $2,630.25 ... up 27.69% ... *Pepsico
PM ........ 32.832 .... $3,043.85 ... up 28.17% ... Philip Morris
SO ........ 60.052 .... $3,239.92 ... up 19.01% ... Southern Company
SYY .... 112.689 .... $3,963.27 ... up 17.50% ... Sysco Corp.
Cash ........................... $272.66
--------------------------------------------------------------------------------------------------
Account Value: ......... $66,799.05
* Increased the dividend in 2013
=================================================================
ROTH IRA: (Dividends Reinvested)
March Dividends:
Conoco Phillips (COP) ....... $27.72 ... bought 0.483 shares
Realty Income (O) .............. $14.62 ... bought 0.329 shares
Dominion Resources (D) ..... $39.27 ... bought 0.689 shares
Health Care REIT (HCN) ... dividend paid last month reinvested this month ... 0.526 shares
------------------------------------------------------------------------------------------------
PORTFOLIO HOLDINGS:
Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company
COP .... 42.483 ... $2,553.23 ... 1.08% ..... Conoco Phillips
D .......... 70.51 ..... $4,102.27 .... 23.73% .. *Dominion Resources
HCN .... 42.662 .... $2,897.18 ... 22.19% ... *Health Care REIT
KMI ..... 68.671 .... $2,656.19 ... 5.32% ..... *Kinder Morgan, Inc.
O .......... 81.139 .... $3,679.65 ... 25.68% ... *Realty Income
PG ........ 34.676 .... $2,672.13 ... 22.15% ... Procter & Gamble
VZ ....... 116.67 ..... $5,734.33 ... 30.91% ... Verizon
Cash ...................... $19.72
-------------------------------------------------------------------------------------------------
Account Value ...... $24,314.71
==================================================================
THRIFT SAVINGS PLAN (TSP) - Federal Version of the 401K
There isn't any match in this account. 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
F Fund (Fixed Income) ... 18.0506 ... $289.05 ...... 4.62%
C Fund (S&P 500) ........ 101.4693 .. $2,023.13 ... 32.37%
S Fund (Small Cap) ........ 76.0287 ... $2,092.56 ... 33.48%
I Fund (International) ...... 84.5292 ... $1,846.02 .... 29.53%
-----------------------------------------------------------------------------------------------
Account Value: ........ $6,250.76
Contribution Allocations:
F Fund: ... 10%
C Fund ... 10%
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
CLX .... 06/11 ... $25.25 ........ up 1.57% ..... Concerned with debt, bot KMB
KMR ... 02/11 ... $504.94 ...... up 27.09% ... Replaced with KMP, re: taxable account
O ......... 03/11 ... $639.63 ..... up 34.55% ... Sold @ $35.42, repurchased at $34.43 I don't recall why
VFC .... 10/11 ... $897.99 ...... up 53.07% ... Took profits as dividend dropped under 2%, bot PEP
VZ ....... 05/11 ... $618.16 ..... up 30.15% .... Moved cash to Roth and repurchased VZ adding to an existing position.
ZTR ... 04/11 . <$55.58%> .. dn <17.23%> .. Cut losses, bot SYY
O ........ 01/12 ... $79.73 ...... up 3.01% ......... Moved cash to Roth and repurchased O
UHT ... 01/12 ... $233.60 .... up 10.32% ....... Wanted to spread tenant risk, bot HCN
ABT ... 10/12 .... $872.46 .... up 31.38% ...... Split into two companies, took profits, bot KRFT
FTR .... 03/12 .. <$1,99.49> .. dn <49.90%> ... Took loss, moved cash to Roth, bot COP
NUE ... 12/12 .... $164.61 .... up 7.33% ... Sold, moved cash to Roth, added to COP
-------------------------------------------------------------------------------------------------
Total Cash Gains: ... $3,329.48
Monthly Highlights:
Project $3 Million once again closed at an all-time high. Total portfolio value is $97,365.05. In order for this portfolio to stay on schedule for the $3 Million, the value at year end 2013 needs to be $86,959.44. This portfolio is ahead of schedule and has built in a safety margin in the event the market pulls back.
Companies that have increased their dividends this month:
General Mills (GIS) ... up 15.2%
Colgate-Palmolive (CL) ... up 9.7%
Realty Income (O) ... up 0.2%
Colgate-Palmolive (CL) also announced a 2 for 1 split.
---------------------------------------------------------------------------------
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 the assets to do so.
The objective is also to see the income stream continue to grow and stay ahead of 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:
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 value needs to be in 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. New cash will be used to add to positions or create new ones.
STATUS:
To stay on schedule for the $3 Million, according to the link above, the balance at year end 2013 needs to be $86,959.44.
Project $3 Million is a year ahead of schedule. Portfolio value at the end of March is $97,365.05.
===================================================================
DIVIDEND HISTORY:
The total dividend for March are $231.49.
Total dividends for 2013 are $736.84. ... 18.6% over ytd 2012.
THE CHOWDER INDEX:
The Chowder Index is what I use to determine if the portfolio is accomplishing its goals or not. Since the priority is income replacement, and we want that income to grow, we want to see where the income for each quarter is higher than the corresponding quarter of a year ago. I also want to see year over year income growth.
Quarterly Results: (first quarter)
2009 ... $108.00
2010 ... $264.95
2011 ... $542.81
2012 ... $621.20
2013 ... $736.84
==================================================================
MARCH DIVIDENDS RECEIVED:
TAXABLE ACCOUNT: (Dividend Reinvested)
Southern Company (SO) ......... $33.48 ... bought 0.734 shares
Chevron Corp. (CVX) ............ $20.48 ... bought 0.172 shares
Johnson & Johnson (JNJ) ........ $26.44 ... bought 0.337 shares
McDonald's (MCD) ................ $27.02 ... bought 0.274 shares
Lockheed Martin (LMT) ......... $40.42 ... won't be reinvested until 4/1
Frontier Comm. (FTR) ............ $2.04 ..... won't be reinvested until 4/1
-------------------------------------------------------------------------------------------------
PORTFOLIO HOLDINGS:
Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company
ADP ...... 38.552 ... $2,507.04 ... up 46.32% ... Automatic Data Processing
CL ......... 24.957 ... $2,945.67 ... up 48.00% ... *Colgate-Palmolive
CVX ...... 22.931 ... $2,724.66 ... up 51.32% ... Chevron Corp.
DEO ...... 29.521 ... $3,714.92 ... up 82.44% ... Diagio plc
EPD ....... 61.749 ... $3,722.85 ... up 56.25% ... *Enterprise Products Partners
FTR ....... 20.444 ........ $81.57 ... Shares received in a spinoff from VZ ... Frontier Comm.
GIS ........ 77.35 ..... $3,814.13 ... up 37.01% ... *General Mills
JNJ ........ 43.678 ... $3,561.07 ... up 30.92% ... Johnson & Johnson
KMB ..... 26.42 ..... $2,588.63 ... up 46.85% ... *Kimberly-Clark
KMP ..... 36.08 ..... $3,238.90 ... up 23.20% ... *Kinder Morgan Partners
KO ....... 108.937 .. $4,405.41 ... up 69.25% ... *Coca-Cola
KRFT .... 85.917 ... $4,427.30 ... up 13.26% ... Kraft Foods
LMT ...... 46.151 ... $4,454.49 ... up 15.93% ... Lockheed Martin
MCD ..... 35.369 ... $3,525.94 ... up 29.30% ... McDonald's
MMP ..... 81.311 ... $4,344.45 ... up 96.21% ... *Magellan Midstream Partners
MO ...... 104.466 ... $3,592.59 ... up 63.75% ... Altria Group
PEP ....... 33.248 .... $2,630.25 ... up 27.69% ... *Pepsico
PM ........ 32.832 .... $3,043.85 ... up 28.17% ... Philip Morris
SO ........ 60.052 .... $3,239.92 ... up 19.01% ... Southern Company
SYY .... 112.689 .... $3,963.27 ... up 17.50% ... Sysco Corp.
Cash ........................... $272.66
--------------------------------------------------------------------------------------------------
Account Value: ......... $66,799.05
* Increased the dividend in 2013
=================================================================
ROTH IRA: (Dividends Reinvested)
March Dividends:
Conoco Phillips (COP) ....... $27.72 ... bought 0.483 shares
Realty Income (O) .............. $14.62 ... bought 0.329 shares
Dominion Resources (D) ..... $39.27 ... bought 0.689 shares
Health Care REIT (HCN) ... dividend paid last month reinvested this month ... 0.526 shares
------------------------------------------------------------------------------------------------
PORTFOLIO HOLDINGS:
Symbol ... Shares ... Mkt Value ... Gain/Loss ... Company
COP .... 42.483 ... $2,553.23 ... 1.08% ..... Conoco Phillips
D .......... 70.51 ..... $4,102.27 .... 23.73% .. *Dominion Resources
HCN .... 42.662 .... $2,897.18 ... 22.19% ... *Health Care REIT
KMI ..... 68.671 .... $2,656.19 ... 5.32% ..... *Kinder Morgan, Inc.
O .......... 81.139 .... $3,679.65 ... 25.68% ... *Realty Income
PG ........ 34.676 .... $2,672.13 ... 22.15% ... Procter & Gamble
VZ ....... 116.67 ..... $5,734.33 ... 30.91% ... Verizon
Cash ...................... $19.72
-------------------------------------------------------------------------------------------------
Account Value ...... $24,314.71
==================================================================
THRIFT SAVINGS PLAN (TSP) - Federal Version of the 401K
There isn't any match in this account. 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
F Fund (Fixed Income) ... 18.0506 ... $289.05 ...... 4.62%
C Fund (S&P 500) ........ 101.4693 .. $2,023.13 ... 32.37%
S Fund (Small Cap) ........ 76.0287 ... $2,092.56 ... 33.48%
I Fund (International) ...... 84.5292 ... $1,846.02 .... 29.53%
-----------------------------------------------------------------------------------------------
Account Value: ........ $6,250.76
Contribution Allocations:
F Fund: ... 10%
C Fund ... 10%
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
CLX .... 06/11 ... $25.25 ........ up 1.57% ..... Concerned with debt, bot KMB
KMR ... 02/11 ... $504.94 ...... up 27.09% ... Replaced with KMP, re: taxable account
O ......... 03/11 ... $639.63 ..... up 34.55% ... Sold @ $35.42, repurchased at $34.43 I don't recall why
VFC .... 10/11 ... $897.99 ...... up 53.07% ... Took profits as dividend dropped under 2%, bot PEP
VZ ....... 05/11 ... $618.16 ..... up 30.15% .... Moved cash to Roth and repurchased VZ adding to an existing position.
ZTR ... 04/11 . <$55.58%> .. dn <17.23%> .. Cut losses, bot SYY
O ........ 01/12 ... $79.73 ...... up 3.01% ......... Moved cash to Roth and repurchased O
UHT ... 01/12 ... $233.60 .... up 10.32% ....... Wanted to spread tenant risk, bot HCN
ABT ... 10/12 .... $872.46 .... up 31.38% ...... Split into two companies, took profits, bot KRFT
FTR .... 03/12 .. <$1,99.49> .. dn <49.90%> ... Took loss, moved cash to Roth, bot COP
NUE ... 12/12 .... $164.61 .... up 7.33% ... Sold, moved cash to Roth, added to COP
-------------------------------------------------------------------------------------------------
Total Cash Gains: ... $3,329.48
Thursday, March 21, 2013
Time For Another Purchase
It is time to add to an existing position in the portfolio. There are four companies due for an upgrade, they are ADP, CVX, KMB and PEP. Of the four, only CVX is undervalued at this time. In looking at other positions in the portfolio, LMT looks like the best valuation at this point and I'm thinking of adding LMT in the coming days. I think it's going to pull back a little here, so yeah, I'm trying to do a little market timing.
I'm looking at buying with a 5% yield vs a 3% yield with CVX.
The cash flow per share, which is where the dividend and dividend growth comes from, has risen 9 out of the last 10 years. Since we went through two recessions in that time frame, I think that's a strong performance. Earnings per share has risen in 8 out of 10 years. I require earnings to rise at least 7 out of 10 years, so LMT qualifies for purchase. The dividend has been raised for 10 consecutive years.
In looking forward, analyst projections are a 5 year annual return of 14.9%, again very strong numbers and the highest in the defense industry.
The Chowder Rule is a total dividend return metric that I require for purchase. As a dividend growth investor, I focus on the dividend growth. I look at the current yield and add the 5 year compounded annual growth rate (CAGR) to come up with a total return number. I require that number to be 12% or more.
The current yield is 4.70% and the 5 year CAGR is 22.89% for a total return of 27.59%, well above the 12% requirement.
The company is rated 1 for safety by Value Line, the highest rating you can have. They have an A++ financial rating.
The main concern with LMT is the budget cuts as a result of sequester. Since the market looks forward 6 months or more, I think most of that has already been priced into the stock. Value Line thinks that LMT will weather the budget cut storm better than the other defense contractors.
So, in following the formula for success in investing ... High Quality + High Current Yield + High Growth of Yield = High Total Return has been met with this selection.
If the price is up on the day near the close, I'll enter the position today. If the price is down on the day, I'll wait for tomorrow.
I'm looking at buying with a 5% yield vs a 3% yield with CVX.
The cash flow per share, which is where the dividend and dividend growth comes from, has risen 9 out of the last 10 years. Since we went through two recessions in that time frame, I think that's a strong performance. Earnings per share has risen in 8 out of 10 years. I require earnings to rise at least 7 out of 10 years, so LMT qualifies for purchase. The dividend has been raised for 10 consecutive years.
In looking forward, analyst projections are a 5 year annual return of 14.9%, again very strong numbers and the highest in the defense industry.
The Chowder Rule is a total dividend return metric that I require for purchase. As a dividend growth investor, I focus on the dividend growth. I look at the current yield and add the 5 year compounded annual growth rate (CAGR) to come up with a total return number. I require that number to be 12% or more.
The current yield is 4.70% and the 5 year CAGR is 22.89% for a total return of 27.59%, well above the 12% requirement.
The company is rated 1 for safety by Value Line, the highest rating you can have. They have an A++ financial rating.
The main concern with LMT is the budget cuts as a result of sequester. Since the market looks forward 6 months or more, I think most of that has already been priced into the stock. Value Line thinks that LMT will weather the budget cut storm better than the other defense contractors.
So, in following the formula for success in investing ... High Quality + High Current Yield + High Growth of Yield = High Total Return has been met with this selection.
If the price is up on the day near the close, I'll enter the position today. If the price is down on the day, I'll wait for tomorrow.
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