Thursday, February 27, 2014

First Milestone Passed

Today was a pretty big day in the history of this blog.  As of today my investment portfolio crossed the $10,000 mark. While $10,000 is not much to some, for me it is huge.  Just two months ago my path to retirement was murky.  I was storing up my funds in a bank account earning almost nothing for interest.  I was spending money unnecessarily and not putting the funds that I had accumulated to work.  With the decision to start investing and tracking the journey it seems as though a path has materialized in front of me.  I know that if I simply continue to walk on this path that I will find success.

Here is a snapshot of my future financial milestones.  I look forward to sharing with you every time I manage to fill in one of the dates.

While today I hit the 10,000 dollar portfolio value mark, I expect this number to fluctuate above and below this threshold until I make up my mind on which stock to buy for March.  As you can see above I also managed to reach a net worth of $10,000 back around October of 2013.  Below is a graph (from mint) showing this change in net worth since my graduation date in May of 2013.

  It is amazing how quickly being frugal, and saving the majority of your income can add up.  It is also important to remember that investing and saving money is not a competitive race but rather a personal challenge where you are your only competition.  Challenge yourself to spend less than the previous month, constantly audit your budget and find new places where you can save.  Never accept complacency.

Thank you all for stopping in and sharing this moment with me. By taking a moment to recognize the little victories and set your sights on the next goal you will always find the finish line.

Have you passed any of your milestones lately?

Tuesday, February 25, 2014

Stock Spotlight, Kimberly Clark Corp

Kimberly-Clark is a company that has been on my radar for awhile now as alluded to in my last months stock analysis post.  At the time I decided not to pull the trigger on KMB, instead opting to buy shares of Altria group.  Well, as a new month rolls around and the old war chest is filling up with new spoils I am once again considering this purchase.  I have been holding off on KMB recently hoping for a better entry price but as I sit on the sidelines the stock continues to chug right along leaving me out in the cold.  Lets take a look at KMB and see if it is worth these premium prices.

Kimberly Clark was founded in 1872 and was initially in the paper mills industry.  The company quickly evolved inventing cotton substitutes that eventually led to the first disposable feminine hygiene products.  The company is now famous for its brands which include Huggies diapers, Kotex feminine hygiene products, Kleenex brand tissues, and most recently its expansion into the health care industry.  KMB currently sits on a market cap of $41.73 billion which seats it in the top 20 non-cyclical consumer goods and services industry category.

Quick Stats:

  • 52 week range $91.44-$111.68
  • Current Price $109.99
  • P/E 19.88 
  • Dividend $0.84/3.05%
  • EPS 5.53
  • Inst Ownership 71%

KMB is currently trading near its 52 week and all time high.  It trades with a P/E ratio of 19.88 which is above the industry median of 18.11.  A dividend raise was announced today for KMB marking its 42nd straight year of an increase.  This is an increase of only 3.7% compared to last years raise of 9.5% which could indicate low expected sales growth.  KMB will pay out its dividend on April 2, 2014 with an ex dividend date of March 7, 2014.

While a yield rate of 3.05% does not seem too impressive by itself KMB has experienced tremendous growth rates at the same time.  Over the last five years KMB (growth of 129.18%) has managed to keep close to the S&P 500 (growth of 151%) in overall growth rates while still offering its dividend.  Compared to a company like AT&T which offers a juicy 5.72% dividend yield which has a total five year growth of 51.22% it becomes clear that dividend yield is not the only factor when selecting a stock.  KMB has also outpaced some of its major competition which can be seen below.

Figure 1: KMB's 5 Year Growth vs S&P 500 & Competition

   KMB is currently seeing stagnated growth in the United States but in emerging markets it is experiencing significant growth (6%) in its KC Professional line, (5%) in its personal care line, and declining growth overall in its health care business which is to be spun off (tax free) later in the year.  By removing this burden KMB should be able to focus on its core industry and growing its most profitable segments. 

I believe that KMB is making a good decision by spinning off its healthcare division and getting back to its basics.  I am personally long term bullish on KMB and believe that it will continue to grow its revenue from the emerging markets sector.  I would like to add one or two major consumer goods stocks to my portfolio as to me they are a hedge against any major recession.  While I am not one to predict calamities, one thing that I do know is that even when the markets are down diapers and feminine hygiene products are still required.    

Current watch list  (looking to purchase one in the next 2 weeks): CL, CLX, PG, KMB, JNJ 

What company is your current favorite in the non-cyclical consumer goods and services industry?

Thursday, February 20, 2014

Dividend Increase, Coke Bubbling Up More Dividends

Coca Cola (KO) has recently announced that they will be increasing their dividend from $0.28 to $0.305 per share.  This constitutes an increase of 8.9% from their previous payout.  I don't know about you, but getting an 8.9% raise in a year for doing absolutely nothing seems pretty nice to me!  This is the power of dividend growth investing in action.

I personally have 26 shares of coke in my portfolio.  Today's action increases my yearly dividend payout from $440.61 to $443.21 per year.  A total increase of  $2.60.  While this may not seem like much, every single penny counts, and this snowflake just became integrated into my little snowball forever.  I have updated my portfolio to reflect this change.

Wednesday, February 19, 2014

Beverage Battleground, Coke vs Pepsi vs Doctor Pepper

The Players

Every dividend growth investor is well aware of Coca Cola (KO) and many also track the slightly less popular PepsiCo (PEP).  These two carbonated drink behemoths have been steadily providing juicy dividend growth to investors for years.  While these two brothers battle it out for supremacy of the beverage industry what about their lesser known brother, the often forgotten yet still distinguished Dr. Pepper (DPS) and his sidekick Snapple.

The Champion

Coca Cola was born in the 19th century, created by Pharmacist and Colonel, John Pemberton.  Originally designed as an alternative to the addictive opiate Morphine, Coca Cola was marketed to cure a great number of different ailments.  While not quite the miraculous potion it was touted to be, it managed to cure more than one shareholder of an empty wallet.  From its humble beginnings Coca Cola has been able to propel itself to the head of the beverage industry currently sitting at a market cap of 163.31 billion dollars.

The Contender

PepsiCo also found its beginnings in the late 19th century, created by Pharmacist Caleb Bradham.  While this underachiever did not rise up through the ranks of the military he did create an extremely successful beverage which eventually grew into a beverage and snack company hybrid that currently sits at a market cap of 118.24 billion dollars.  In 2005 PepsiCo managed to briefly dethrone the champ after 112 years of constant battle, eventually losing the throne back to Coca Cola.  Currently the main sources of beverage revenue for PepsiCo is attributed to brands Gatoraid and Tropicana not the original fizzy drink of fame that brought the company its original fortune.

The Challenger

Not to be forgotten, the third leg of the beverage tripod goes by the name of Dr. Pepper.  Dr. Pepper actually preceded Coca Cola by one year with its "Hello World" introduction in 1885.  The good doctor was created by Pharmacist Charles Alderton who shortly after birthing the famed beverage sold the recipe to his business partner to focus on his medical career.  While not as impressive as the other two titans of the industry, Dr. Pepper should not be counted out as it has grown to a noteworthy market cap of 10.09 billion dollars.

Summary Statistics

Values Current as of 19 Feb 2014

From the data presented we can see that both Coca Cola and PepsiCo are considered dividend champions having achieved consistent dividend growth over vast periods of time.  Dr. Pepper initiated its dividend in 2009 and has been a solid grower every year since then. 

 All three companies have a very similar dividend yield, with Dr. Pepper edging out the others at 3.22%  

PepsiCo has the greatest earnings per share and also maintains an extremely aggressive share buyback program which it initiated in March of 2013, pledging to buy 10 billion dollars worth of shares back over a 3 year period.  Both Dr. Pepper and Coca Cola maintain much smaller share buyback programs.  

The P/E ratios of all three companies are very similar with Dr. Pepper taking the edge at 16.66.

As a dividend growth investor, lower (compared to historical value) share prices are not always a bad thing since we tend to buy and hold stocks for very long periods of time to collect the dividend.  As long as the environment of the company has not changed significantly, buying at market lows allows us to reduce our cost basis and increase our yield on cost for a position.  Both Coca Cola and Pepsi had lackluster 4th quarters for 2013.  As such their share prices have suffered in the last few weeks creating interesting buy opportunities.  Coca Cola in particular is currently trading near its 52 week low.  Dr. Pepper reported excellent earnings for this same quarter with share prices reaching historical highs.  

All three companies have a majority of institutional ownership.  Dr. Pepper leads the pack with a whopping 96%.  On one hand this shows that the directors, officers and employees of Dr. Pepper have a high level of confidence in their product.  On the other hand, a major sell off by institutional owners (who often have massive positions within the company) could saturate the market quickly when supply overshadows demand.

The Intangibles 

Russell Wilson didn't recently lead the Seattle Seahawks to Superbowl victory because he is the most genetically superior or experienced athlete on the field. Russell has a characteristic that is difficult to quantify, a fire that burns in his heart so strongly that there was simply no way he could accept failure.  Each of these companies also has an intangible, a characteristic or unique property that sets them apart.  

Coca Cola has charged into the foreign market.  Greatly expanding operations in China and India that could provide the company with billions of new customers.  With billions of dollars invested Coke recently opened its forty-third bottling company in China.  In 2013 Coca Cola managed a sales volume increase of 1% total with 8% and 5% increases in India and China respectively.  Coca Cola also recently acquired K-Cup maker Green Mountain Coffee which could provide an interesting growth opportunity as the companies work together to launch a soft drink portfolio to challenge Sodastream's do-it-yourself soda market.  

When most people think of PepsiCo they immediately think of the sugary beverage that is the namesake of the company.  They often fail to realize that PepsiCo has a much deeper pool of products that are driving its earnings and growth potential.  PepsiCo is the global leader in the savory snack category with a massive assortment of snacks ranging from Life Cereal to Sun Chips.  PepsiCo also has a 10 billion dollar "Good-for-You" product line which includes companies like Naked Juice, Quaker Oats and Aquafina.  With the combined potential of their beverage and snack branches PepsiCo is capable of dominating multiple industries at the same time.  

Dr. Pepper is finally taking steps to join Coca Cola and PepsiCo on the pedestal.  They have recently worked their way into the energy drink industry with the "Venom" line of beverages.  While I'm not sure that drinking Venom is good for you, this product could allow Dr. Pepper to take a healthy bite out of the energy drink market.   They are also making a huge move by expanding on their newer bottling services.  Dr. Pepper has historically outsourced this integral part of their operation to Pepsi (30%), Coke (30%) and other outside services (40%).  One major setback faced by Dr. Pepper is the fact that they do not own rights to their own product outside of North America.  Currently Dr. Pepper products outside of this region are owned by both Coca Cola and Pepsi who purchased the trademark from Dr. Pepper because they have greater capability to distribute the product worldwide.  


These are three dividend growers whose seeds were planted at the same time, in the same soil, but grew into completely different products.  Coca Cola may wear the crown currently, but Pepsi with its retinue of snacks still poses a constant threat.  While Coke and Pepsi turn to foreign lands and new industries for growth, Dr. Pepper has found room to expand and grow at home by increasing its infrastructure.  All three companies offer an interesting opportunity for dividend growth investors and should not be overlooked.   

What is your favorite soft drink company moving forward and why? 

  (I am currently long KO)


Friday, February 14, 2014

February Stock Purchase

This morning marked a pretty big event in the history of this blog... my first stock purchase.  As alluded to in my previous entry I decided to make the jump and pick up shares of Altria.  I bought 40 shares of MO at a price of $35.18 per share for a total cost of $1,407.20.  This satisfies my monthly goal to invest $1,000.  Most importantly Altria is currently paying $0.48 per share in dividends, increasing my yearly dividend by
$76.80 for a total new yearly dividend of $440.61.

This purchase brings me closer to my yearly dividend goal of $700.  For the sake of challenge I have decided to alter this goal to attempt to hit $900 of forward dividends per year by the end of December 2014.  With this new goal I have 10 months to increase my dividend by $459.39.  I believe this new goal should provide a more adequate challenge as most stocks I invest in will likely not have a 5.4% yield like Altria.

This purchase weighs my portfolio rather heavily in the tobacco industry with my previous position in Phillip Morris.  Going forward this will be corrected as I choose new stocks monthly and diversify my portfolio more.

Always remember to read my disclaimer before following me in any and all stock purchase decisions.  

Thursday, February 13, 2014

Stock Analysis February Edition

The tax man stopped by this month and left me with a little present.  What better to do with a gift then use it to create more smaller gifts every quarter for the rest of my life?  So with this new found capital I have decided to write up my likely stock buy for tomorrow.

Altria Group (MO) is the domestic (US) version of Phillip Morris (PM) (the international version), which provides consumers with tobacco and tobacco related products.  Some quick Altria facts:

  • Price to earnings ratio of 15.60 vs the industry average of 19.5
  • EPS of 2.26
  • Current Yield 5.44%
  • Increased dividend 47 times in the last 44 years
  • Diversified into the e-cig, smokeless tobacco and wine industries.  
I also speculate that Altria will be a strong play if the US ban on Menthol cigarettes occurs.  This will cause many traditional menthol smokers switch over to new tobacco products.  This move could be devastating to LO where menthol currently accounts for almost 90% of its profits.

But what about your morals!?

My personal stance is that we all own 100% of the shares which make up our body.  What we decide to do with those shares is our own choice.  I personally have many smokers in my immediate family and have lost members to relevant cancer related illnesses.  This does not change the fact that they are adults who don't need anyone to tell them what they can and cannot do.     

Other stocks I am currently considering for my upcoming buy: KMB, TGT, T

What are your favorite dividend stock picks right now?

Monday, February 10, 2014

Goals and Dreams for 2014

Without goals it is too easy to slip into routine.  One way that I stay motivated and moving ever forward is to keep a checklist and attack it vigorously.  It is also important to include a few "low hanging fruit" items because the act of crossing an item off that checklist can provide a huge confidence boost.  When I was going through engineering school I remember being completely overwhelmed by the enormity of finishing the degree, at that time my ultimate goal.  By breaking the monumental task up into ever smaller pieces I was able to digest it one item at a time, eventually leading up to the completion of the ultimate goal.  

Financially my ultimate goal is to earn enough money passively that at any time I would no longer need to rely on a job to survive.  Currently that goal is so far out it seems all but impossible.  But by breaking it into smaller chunks, one investment, one blog post at a time I know that it is achievable.  So without further ado, these are my goals for 2014.

1)  Achieve a forward 12-month dividend of 700 dollars per year.
2)  Invest at least $1,000 in a dividend paying stock each month.
3)  Update this Blog with a new post at least once per week.
4)  Have an average spending per month of $2,200 or less.
5)  Close my darn #2 captains of crush grip strength gripper.  

These goals provide me with weekly, monthly and yearly goals.  Since I am completely new to this it is a bit difficult to fully gauge how realistic my goals are, but I will give them my best.  I am confident that I will look back on this year in 2015 with a smile.  (The gripper will likely kick my butt though)

What are your goals for 2014?


Sunday, February 9, 2014

January Spending Report

Spending totals for the month of January were $2,231.  This is slightly below my six month average spending of $2467.  Unexpected expenses during the month included auto licensing and registration and a $319 energy bill to heat the old house I am renting.  My Spending for the month is as follows:

The bills and utilities category includes the $319 utility fee as well as costs for phone and internet service.  In March when my phone contract expires I am hoping to decrease the bill by around $40 per month by switching to Republic Wireless's $10 plan.  This comes with the expense of having to buy a new phone but on the plus side I will join the rest of the people in this decade with a smart phone.  The $121.95 student loan charge will be picked up by Uncle Sam starting in June which is one perk of government work.  My entertainment category was extremely low this month partially because most of my hobbies don't cost money, combined with the fact that I have been very busy at work.

For February my goal is to focus on lowering my food and dining category by using my crock pot and Vitamix blender more often.  This typically forces me to eat more healthy and cost effective food.

Saturday, February 8, 2014

New Year, New Beginning.

With the beginning of the new year I have decided to chronicle my journey to financial independence online for the world to see.  I made my first stock purchases in the last days of December, 2013 when I injected almost $8,000 into eight different dividend paying stocks.  My goal is to invest at least $1,000 every month into whichever dividend stock I feel provides the highest value at the time and share with you my journey to financial freedom.  My portfolio is currently:

Portfolio as of January 2014

This results in a forward yearly dividend payout of $363.81.  In January a total of two stocks in my portfolio paid dividends, they include:

PSEC: $11.03
CHK: $3.94

The final tally for dividends earned in
January 2014 was $14.97.  It might
not seem like much but we all have
to start from the beginning.  

This covered 0.671% of my total spending for the month.  If you pull out your magnifying glass you can almost see the tiny green bar.

Hopefully this is the start of a long and rewarding journey.  I do not know if anyone will ever actually read this blog but maybe the process of writing about my personal finance and investment ideas will keep me motivated and on the path to financial independence.

Take care and have a lovely weekend.