Wednesday, May 31, 2017

May 2017 Dividends

Hello folks,

As the month of May is coming to a close, it's as good a time as any to wrap up the month with a dividend income summary. So let's get to it.

Taxable Accounts
AT&T (T)  - $13.73
Verizon (VZ) - $2.31
CVS Health (CVS) - $5.50
Abbott Labs (ABT) - $9.28
Apple (AAPL) - $4.41
Amerigas (APU) - $25.74
Prospect Capital (PSEC) - $20.35
Lazard Ltd (LAZ) - $2.87
Williams-Sonoma (WSM) - $13.65

Taxable Accounts Total: $97.84


Roth IRA Account
Toronto-Dominion (TD) - $9.83
Abbott Labs (ABT) - $6.75
Omega Healthcare Investors (OHI) - $17.72

Roth IRA Account Total: $34.30

Overall Dividend Income for May 2017: $132.14

Forward 12-month Projected Dividend Income: $1,785.96

My May Buys:
Compass Minerals (CMP) - 2 shares
CVS Health (CVS) - 1 share
HanesBrands Inc. (HBI) - 2 shares
Lazard Ltd (LAZ) - 3 shares
Vanguard Growth ETF (VUG) - 4 shares
W.W. Grainger (GWW) - 4 shares

We still have not started the joint account, so I'm continuing to add buys as long as I can, to put any surplus money to work.

I decided to once again take advantage of any pullbacks, and any stocks with attractive valuations. I did decide to add to my position in the growth ETF, which resides in my Roth IRA, as I wanted to have exposure to more growth stocks, but still receive some type of dividend/distribution payment.

Looking forward to June, I have my eyes on adding more GWW, CVS, and QCOM.

I also have my eyes on Abbvie (ABBV), Travellers Insurance (TRV), and General Motors (GM), as far as potential new positions. I look forward to researching these companies more.


My Thoughts on the Month

It is nice to summarize one of the higher paying months, after getting through the lean month of April. My additions to my CVS and WSM positions helped to increase my dividend income over the results from the previous quarter. It is also nice to see more and more of my positions paying me dividends in the double figures, meaning that I am making very good progress on growing my dividend income.

Let's take a look at the hard numbers for dividend payment history:


Month2014201520162017
January$14.38$14.42$70.45
February$49.07$50.38$112.01
March$50.22$52.16$182.28
April$10.83$27.91$64.56
May$46.52$59.42$132.14
June$6.69$47.51$90.97
July0$18.99$51.37
August$33.96$50.11$86.07
September$54.75$55.61$101.70
October$10.94$14.42$72.53
November$48.79$50.11$103.31
December$63.55$49.89$168.03


and then represented graphically



So let's summarize. After a first look at this month, and comparing with history, I very much like the results!

Y/Y:
A year ago, my May 2016 dividend income tallied up to $59.42. I was a couple months into my new DGI strategy at the time. A year later, it has grown nicely to $132.14.

That is an impressive increase of  +122.4%. No matter how you slice it, that is pretty awesome!

Q/Q:
3 months ago, my dividend income for February 2017 was $112.01. A quarter later this has gone up to $132.14 for May 2017. This resulted in a nice Q/Q increase of +18%.

Pretty cool for just a few months!

So, why the great results?

Over the past few months I have been adding to my positions, many of which were stocks that paid dividends in May (ie, WSM, CVS, LAZ). Of course this has added up over the previous months, and culminated in a nice May report.


In Conclusion:
May was a very encouraging month, evidently from looking at the healthy increases over the last quarter and the last year. June should be even bigger, as I am expecting another all-time high month for dividends paid, maybe even surpassing the $200 mark. We shall see...

How was your May 2017?

Hopefully you didn't "sell in May and go away" and rob yourself of future dividends.

Let me know in the comments!






Thursday, May 11, 2017

My System for Stock Selection

Greetings, thanks for stopping by.

Some time ago, I shared my saving system, on how I end up with money every week to invest. Now, I want to show the other side of that process, how I decide what to invest in, once the money makes its way to my brokerage account.

I'll focus here on stocks, and not get into ETFs.

This is by no means a complex, sophisticated method. This is just what I've developed from the last few years of investing, and especially the last year or so of Dividend Growth Investing.

This process will start with me just hearing of a certain company, from various sources: other investors, blogs, financial website articles, and other things. Once I become interested in a certain company, I will then start gathering info on it, en route to adding it to my Google Sheets spreadsheet. I will have 2 tabs involved in this process, one labeled "Prospects" for companies I am thinking about starting a position with, and then another labeled "Holdings" which are existing positions which I analyze to see if I want to add to those positions.


External Values

I start off with values that the spreadsheet cannot provide, either by lookup or calculation. These include:
  • Annual Dividend [finviz.com]
  • Yield History [gurufocus.com]
  • Shiller PE Ratio [gurufocus.com]
  • Median Shiller PE over last 10+ yrs [gurufocus.com]
  • Industry Shiller PE ration [gurufocus.com]
  • Morningstar Fair Value (when available) [Morningstar.com Premium]
  • PE 10 year average [gurufocus.com]
  • PE Industry [gurufocus.com]
  • Annual EPS Growth over last 5 yrs [finviz.com]
  • 3-year Dividend Growth Rate (DGR) [gurufocus.com]
  • Payout Ratio [finviz.com]
  • Years of Consecutive Annual Dividend Raises [dividend.com]
I do pay for Morningstar Premium, but all other resources are free.

I use the common P/E ratio, but also use the Shiller P/E ratio as it is less impacted by sudden short term shifts in earnings numbers, as it uses the average earnings over the last 10 yrs, adjusted for inflation.

For each of these items, I will look these up from a separate website (shown in the brackets)


Google Sheets Formulas/Calculations

Then I will use the Google Sheets formulas for the following key calculations:

  • Price [pulled by Google Sheets]
  • EPS [pulled by Google Sheets]
  • Yield [Annual Dividend / Price]
  • P/E Ratio [pulled by Google Sheets]
  • Fair Value (based on Shiller PE) =
[Price/((Shiller PE)/minimum(Historical Shiller PE, Industry Shiller PE))]

  • Average Fair Value =
[Average of all Fair Values provided in the spreadsheet]

  • Target Price =
[0.9*Avg Fair Value]

  • Modified Dividend Discount Model Fair Value = 
[Annual Dividend * (1+ min(EPS Growth Rate, DGR))/Yield]

  • Fair Value (based on P/E Ratio) =
[Price/(PE/minimum(Historical PE, Industry PE)]

  • Minimum(5 yr EPS Annual Growth Rate, 3 yr DGR)
  • Chowder# =
[Yield + DGR (Dividend Growth Rate)]

  • Beta [pulled by Google Sheets]
Now these are by no means complex valuation formulas, as you can tell. I wanted to keep it simple, using mostly the commonly available ratios to give me an idea that a certain stock may be fairly valued, or undervalued. I am basically comparing P/E ratios to their historical average, and the average for that particular industry. I am of the belief, that using this method, it gives you a general idea that the particular stock is likely to be undervalued if the price falls below the calculated target price. 

Ranks

Also I use Google Sheets to provide rankings of various parameters. They have a nice :RANK" function which can provide rankings in both direction for any set of values. I rank the following items for each stock:

  • Shiller PE Valuation Ratio:
[Shiller PE/minimum(Shiller historical PE, Industry Shiller PE)]
  • Growth Rank (relative rank of minimum of EPS 5 yr growth rate and 3 yr DGR)
  • Chowder Rank (relative rank of the Chowder Number)
  • Beta
  • Yield
  • Payout Ratio
  • Dividend Raise Streak
  • Average of all rankings
I will then average all rankings to come up with a Total Rank number. From there I will rank the Total Rank Number, and then sort by that ranking. So the higher it shows up in my spreadsheet, the more that particular stock "ticks the boxes" of various parameters which make for an attractive position to start, or one to add to.



Conditional Formatting

I will also have conditional formatting to highlight the average fair value, when it is higher than the current price. Also as part of the conditional formatting, it will highlight the target price when it is higher than the current price. After everything is ranked, I look for stocks that have the target price highlighted, to show me that there is at least a little bit of margin of safety. See example below:



Filtering

I can also use filtering in the spreadsheet to limit certain criteria (ie Payout Ratio less than 70%, Yield over 2.5%, etc)

Conclusion

Of course, I use these rankings as a guide, as nothing is absolute here. It simplifies the comparison among the many companies on the spreadsheet, but in the end, I need to look at each potential holding qualitatively, determining whether it is a company I want to invest in, taking into account their prospects for the future, and whether it is a viable business that will be around long term.

So each week, I review this spreadsheet, update the sorting by Total Rank, to see which stocks rate the highest, and those I give serious consideration for the next Friday Buy-Day (for those unaware, I purchase stocks every Friday in my Robinhood Account, and do not pay a commission).

Ultimately, the decision is a qualitative one that I make, after reviewing what the spreadsheet spits out. Truth be told, the spreadsheet has become somewhat of a monster at this point (90 rows, and columns out to "AQ"), but one that I enjoy reviewing before making any stock buys.


Thanks for spending some time here. Have you developed a system to help you identify your next stock purchase(s), or have thoughts on my system? Let me know in the comments!

Sunday, April 30, 2017

April 2017 Dividends

Hello everyone,

So all my April 2017 dividends are in, and there actually a couple days left in April, so I figured it would be good to get a jump on my dividend report.

Taxable Accounts
Walmart (WMT) - $1.53
Cardinal Health (CAH) - $7.18
Prospect Capital (PSEC) - $20.20
Cisco Systems (CSCO) - $11.02
New Residential (NRZ) - $18.72

Taxable Account Total: $58.65

Roth IRA Account
Cardinal Health (CAH) - $5.91

Roth IRA Account Total: $5.91

Overall Dividend Income for April 2017: $64.56

Forward 12-month Projected Dividend Income: $1,732.35


My April Buys:
Cardinal Health (CAH) - 6 shares
CVS Health (CVS) - 6 shares
Lazard Ltd (LAZ) - 2 shares
Qualcomm (QCOM) - 3 shares
VF Corporation (VFC) - 9 shares
Williams-Sonoma (WSM) - 6 shares
W.W. Grainger (GWW) - 1 share

For April I decided to take advantage of some pullbacks to either start or add to some positions. I also received my yearly bonus at the end of March, so I put that money to work in April to give that dividend train a little more fuel!

The fiance and I haven't started our joint account to save for the 2018 wedding yet, so in the meantime, I figured I'd load up on the DGI holdings, while I can. Though not ideal, if we need to, we can draw from it later. We're hoping we won't need to.

Going forward to May, I am interested in adding to my positions of GWW, QCOM, and CVS. I also have my eye on ABBV (Abbvie) as a potential new position for May


My Thoughts on the Month:
I can't sugarcoat it, April is part of my leanest group of months for the year (January, April, July, October).

My portfolio is not well-balanced in dividend payout timing across the months of the year. They are mainly stacked for the March, June, September, and December payouts. In these months I should be approaching, if not exceeding, $200. The February, May, August, November are not too far behind and put up a decent showing. April, however, is quite lean, as it has not even come close to eclipsing $100 yet.

This is ok, because I know over the next 2 months, higher dividend income is there, awaiting to be summarized. Also, because of pullbacks with Cardinal Health in April, I was able to add to my positions, so when July comes around, the number should increase,

Let's take a look at the Dividend Payment History:


Month2014201520162017
January$14.38$14.42$70.45
February$49.07$50.38$112.01
March$50.22$52.16$182.28
April$10.83$27.91$64.56
May$46.52$59.42
June$6.69$47.51$90.97
July0$18.99$51.37
August$33.96$50.11$86.07
September$54.75$55.61$101.70
October$10.94$14.42$72.53
November$48.79$50.11$103.31
December$63.55$49.89$168.03

...and represented graphically:







Looking at the Year/Year and Quarter/Quarter comparison, I see there is good news and not so good news:

Y/Y:
My April 2016 dividend income was $27.91, and a year later it has increased 131.3% to $64.56! If you can't tell, this is the good news.

Q/Q:
In the previous quarter, my dividend income for January 2017 was $70.45. Yeah, this is the not so good news (cue the Darth Vader theme).

Dividend Income has actually decreased -8.4% since January 2017. I haven't sold any of these holdings, so how can this be?

One culprit, you could say, is Disney (not really a culprit, but simply a reason). Disney doesn't pay their dividends quarterly, they pay every 6 months instead. Their last payment was in January 2017 ($8.58), and so obviously that payment did not come in April.

In also some of the previous quarters, I had reaped the benefits of late ETF payments for the March/June/September/December months, and some had spilled over to the following month. No such luck this time!

With these 2 factors contributing, it doesn't look so bad, other than the fact that this group of months really lag behind the other months. This happens as balanced months is not my main goal, it is purchasing shares in great companies at a good value. Sometimes that value in present in companies that pay in certain months and not others.

One upcoming bright spot, as mentioned earlier, is that later in April, I added some shares to my CAH holdings, on the big drop after they announced a lower guidance. It offered a better price, and so I jumped in, as I feel good about the company over the long haul (people are going to need their meds, both brand name and generics), so I feel good about the purchase.


In Conclusion:
So there you have it for April 2017, not my greatest month ever (that was March 2017), but with a deeper look into it, the progress is still there, and I will continue to move it forward.

How was your April 2017? Let me know below in the comments!