Tuesday, December 25, 2012

Portfolio Changes

I am going to sell BP and NUE in the taxable account tomorrow 12/26. When the funds clear, I will move the proceeds into the ROTH Ira for the 2013 contribution. At that time, I will replace BP with COP and replace NUE with KMI.

There will be a net loss, due to BP showing capital losses at this time, so that will be used for tax purposes.

COP carries a higher safety rating with Value Line and is expected to outperform BP in the coming year. I expect I can repurchase BP at a later date, with new funds, and not give up much price appreciation. I want to wait until the legal woes over the Gulf spill have been settled.

NUE has slowed their dividend growth down to almost nothing. The year ahead growth is just 0.7%. Like BP, I think I can come back to NUE at a later time, if I so choose, and not give up a lot of price appreciation. In fact, I may even get it at a better price. We'll see.

I'm giving up $137.70 in annual dividends with BP. Giving up $82.02 in annual dividends with NUE. Total is $218.72.

I'm gaining $118.80 in annual dividends with COP. Gaining $91.92 in annual dividends with KMI. Total is $210.72.

An $8.00 annual loss.

I think I can make that loss up in dividend growth going forward.

The 3 year compounded annual growth rate (CAGR) for NUE is 1.41% ... The 3 year CAGR for BP is still negative.

BP did raise the dividend 14.2% this past year.

The 3 year CAGR for COP is 11.79%. ... The 3 year CAGR for KMI is 0%.

KMI hasn't been around long enough to have a 3 year record. Richard Kinder is on record as saying he expects to grow KMI's dividend by at least 12% per year out to 2015. The dividend did rise 20% fourth quarter 2012 over fourth quarter 2011.

So, when I look at the two deletions to be, and the two additions to be, I think the $8.00 annual dividend income loss will be made up with the dividend growth going forward.

2012 Dividend Growth Update

This portfolio had held 28 positions this year, currently holding 27. Of the 28 positions, 26 of them raised the dividend, 1 lowered the dividend, and the other position initiated a dividend.

This is how the dividend income has grown since the inception of Project $3 Million:

2009 - $684.38
2010 - $1,693.33
2011 - $2,404.02
2012 - $2,808.46 - up 16.8% over 2011

Here is how the dividend growth broke down:

LMT - 15.0%
MMP - 14.6%
BP -- 14.2%
CVX - 11.1%
PM -- 10.4%
ADP - 10.1%
MCD - 10.0%
KO -- 8.5%
GIS - 8.2%
MO -- 7.3%
D --- 7.1%
JNJ - 7.0%
PG -- 7.0%
CL -- 6.9%
DEO - 6.9%
ABT - 6.3%
KMP - 5.9%
KMB - 5.7%
EPD - 5.3%

PEP - 4.4%
SO -- 3.7%
SYY - 3.7%
HCN - 3.5%
VZ -- 3.0%
O --- 2.0%
NUE - 0.7%

FTR - <46.7%>

KRFT initiated a dividend to start in January 2013 which would yield 4.4% at today's price.

ABT is no longer in the portfolio, having switched it out for KRFT.

Monday, December 3, 2012

Project $3 Million - November 2012 Results

This portfolio belongs to a 27 year old.

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. The income stream will need to continue to grow to stay ahead of inflation. A portfolio of $3 Million with a yield of 4% will accomplish that objective. 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 first on the safety of the dividend, then to focus on the growth of the dividend, and then to focus on 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 Returns.

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 to be used in achieving 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 will be reinvested back into the companies paying the dividend. New cash will be used to add to positions or create new positions.

STATUS:

To stay on schedule for the $3 Million, the portfolio balance at the end of 2012 needs to be $74,355.59.

The portfolio balance on November 30 is $84,857.59.
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YEAR END PORTFOLIO VALUES:

2009 ... $42,205.42
2010 ... $54,949.87 ... up 30.2%
2011 ... $73,303.61 ... up 33.4%
2012 ... $84,857.59 ... up 15.8% (year to date)
=======================================================

DIVIDEND HISTORY:

Total Dividends for November ... $331.24 ... a new monthly record.

Total dividends year to date ... $2,561.13 ... also a new record with a month to go.

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 in any month is higher than the same month a year ago.

Monthly Results: Year Over Year ...

November 2009 ... $104.63
November 2010 ... $233.49 ... up 123.2%
November 2011 ... $260.07 ... up 11.4%
November 2012 ... $331.24 ... up 27.4%
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NOVEMBER DIVIDENDS RECEIVED:

TAXABLE ACCOUNT: (Dividends Reinvested)

General Mills (GIS) ................ $25.21 ... bought 0.627 shares
Enterprise Products (EPD) ..... $39.41 ... bought 0.778 units
Nucor Steel (NUE) ................ $19.94 ... bought 0.494 shares
Kinder Morgan (KMP) .......... $44.08 ... bought 0.576 units
Magellan Midstream (MMP) .. $38.58 ... bought 0.979 units
Colgate-Palmolive (CL) ......... $15.30 ... bought 0.146 shares
Abbott Laboratories (ABT) .... $28.34 ... sold position last month ... 31.4% capital gain
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Portfolio Changes:

ADP ... Raised Dividend 10.1%
SYY ... Raised Dividend 3.7%

PORTFOLIO HOLDINGS:

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

ADP .... 38.267 ... $2,171.46 ... up 28.0% ... *Automatic Data Processing
BP ....... 62.928 ... $2,627.87 ... dn <19.9%> ... *BP, plc
CL ....... 24.819 ... $2,692.86 ... up 36.4% ... *Colgate-Palmolive
CVX .... 22.571 ... $2,385.53 ... up 35.6% ... *Chevron Corp
DEO .... 29.521 ... $3,529.83 ... up 73.4% ... *Diageo, plc
EPD ..... 60.987 ... $3,160.96 ... up 35.0% ... *Enterprise Products Partners
FTR ..... 19.985 ... $96.13 ... Shares received in spinoff from VZ ... ~Frontier Comm.
GIS ...... 76.745 ... $3,145.78 ... up 14.0% ... *General Mills
JNJ ...... 42.973 ... $2,996.51 ... up 12.3% ... *Johnson & Johnson
KMB ... 26.195 ... $2,245.44 ... up 28.9% ... *Kimberly-Clark
KMP ... 35.558 ... $2,898.33 ... up 12.2% ... *Kinder Morgan Partners
KO ..... 108.202 .. $4,100.86 ... up 59.24% .. *The Coca-Cola Co.
KRFT ... 85 ......... $3,845.40 ... dn <0.6%> .. Kraft Foods
LMT .... 34.711 ... $3,237.84 ... up 16.4% ... *Lockheed Martin Corp.
MCD ... 34.799 ....$3,028.90 ... up 12.4% ... *McDonald's Corp.
MMP ... 80.519 ... $3,581.49 ... up 64.7% ... *Magellan Midstream Partners
MO .... 103.083 ... $3,485.24 ... up 62.2% ... *Altria Group
NUE .... 55.116 ... $2,269.68 ... up 1.6% ...... Nucor Steel
PEP ..... 32.993 ... $2,316.44 ... up 13.4% .... *Pepsico, Inc.
PM ...... 32.522 ... $2,923.08 ... up 24.5% .... *Philip Morris International, Inc.
SO ...... 44.814 ... $1,951.65 ... up 17.7% .... *Southern Company
SYY ... 111.70 .... $3,535.30 ... up 5.8% ..... *Sysco Corp.
Cash  ................... $451.30
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Account Value ...... $62,679.24

*Means Increased The Dividend
~Means Decreased The Dividend

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ROTH IRA: (Dividends Reinvested)

November Dividends:

Verizon Communications (VZ) ... $58.72 ... bought 1.303 shares
Procter & Gamble (PG) ............. $19.18 ... bought 0.289 shares
Realty Income (O) ..................... $12.05 ... bought 0.314 shares
Health Care REIT (HCN) ......... $30.79 ... bought 0.532 shares
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PORTFOLIO HOLDINGS:

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

D ............ 69.117 ... $3,532.57 ... up 9.0% ... *Dominion Resources
HCN ...... 42.136 ... $2,481.39 ... up 6.1% ... *Health Care REIT, Inc.
O ........... 79.907 ... $3,250.62 ... up 13.1% ... *Realty Income Corp.
PG ......... 34.426 ... $2,403.97 ... up 10.9% ... *Procter & Gamble Co.
VZ ........ 115.332 .. $5,088.45 ... up 17.8% ... *Verizon Communications
Cash ...................... $34.75
=======================================================

Account Value ..... $16,791.74

No Portfolio Changes

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

There isn't any company 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) ... 16.6144 ... $266.37 ....... 4.95%
C Fund (S&P 500) ........ 100.2404 .. $1,790.62 ... 33.24%
S Fund (Small Cap) ........ 72.8500 ... $1,726.52 ... 32.05%
I Fund (International) ...... 79.6651 ... $1,603.10 ... 29.76%
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Account Value ...... $5,386.61

Contribution Allocations:

F Fund ... 10%
C Fund ... 10%
S Fund ... 35%
I Fund ... 45%