Friday, November 28, 2014

Stock Purchase: Ensco (ESV)

Today I added shares of Ensco (ESV) to my portfolio and it is now a full position at 260 shares.

  • ESV: 100 shares @ $33.80 --- 8.88%

Total capital invested is $3400.00 including commission and will increase my yearly dividends by $300.00. Oil prices continue to plummet and anything even remotely associated with energy is getting decimated.

Please note this company is considered highly speculative at this point and the recent news of SDRL's dividend being eliminated is concerning. I personally feel that ESV's dividend will be covered, but a prolonged depression in oil prices could result in a dividend cut or outright elimination.

ESV's dividends are now responsible for about 5% of my total dividend income. This is about 2% higher than what I consider safe. Because I have the ability to equalize my dividends through rapid purchases in other companies within other sectors, I am not overly concerned with my portfolio being out of balance during the short run. In fact during the accumulation phase of a dividend portfolio, this is a pretty normal event. As of this purchase, energy/oil companies, including ESV and KMI, now represent about 11.7% of my portfolio. This is still within my tolerance levels.

Late last year when REITs and companies like TGT were being left for dead, I took opportunistic positions in them knowing there would be short term pain but long term benefits. If I did not have adequate liquidity or needed the money for normal living expenses, I would not have made those decisions then or this purchase now.

Tuesday, November 25, 2014

Weekly Sharebuilder Purchases

Here is the automatic investment that I made for this week.  S&P 500:  2069 (Another record)
  • BBL:  4.96 shares @ $50.22 --- Yield  4.94%

Total capital invested is $250.00 and my yearly dividends will increase by $12.29.

I must admit it feels a bit strange only adding $250.00 to my portfolio this week. I think that I may be suffering from withdrawal (no pun intended) symptoms. I must admit I am pleased to have my savings account exceed $2000 for the first time in many months.

Even better is the fact that this week's purchase was entirely funded courtesy of accumulated Sharebuilder credits. Throughout the year Sharebuilder gives certain cash incentives if you transfer or invest X amount of dollars within a certain time period.  I originally received $100 after I surpassed the $10k mark.  Later this year, Sharebuilder was promoting a three month "contest" to add funds and in return they would deposit additional money in my account. Because of bad timing, I typically don't do well with these types of promotions. I can't even count the number of times I have ignored retailers that promise X% off your purchase if you open a store credit card. I usually dismiss the offer simply because I don't want 10 extra cards to keep track of. Even bank cards are a pain as they usually require to make purchases from different merchants during select months to qualify. I find that just paying cash is the simplest method.

Anyway back on topic, I received an additional credit from Sharebuilder in the amount of $200 this month which brings my yearly total to $300. Again this may not seem like a lot of money, but it essential covers all my transaction costs for the year as I have currently made 184 weekly stock purchases at $1 per transaction. Additionally if I go back to only 12 purchases per month I can almost cover the transactions costs for all of next year.

So if you see me making smaller purchases and are wondering how I overcome the fees, this pretty much summarizes how I have been able to invest essentially for free.

Stocks on my radar for next week include CVX, BP, RDS-b, BBL, ESV, ITW, PX, and XOM.


I hope everyone has a safe, fun, and Happy Thanksgiving!!!!

For those of you who will spend the holiday weekend grinding away, I will be right there with you.

Tuesday, November 18, 2014

Goal reached: $14,500 Forward Passive Income

 
 


Warning:  Longer post than usual ahead!

Here are my automatic investments for this week.

  • BP:  16.96 shares @ $41.28 --- Yield  5.81%
  • RDS-b:  9.55 shares @ $73.16 --- Yield  5.14%
  • CVX:  6.06 shares @ $115.42 --- Yield  3.71%
  • XOM:  7.36 shares @ $95.03 --- Yield  2.90%

Total capital invested is $2800 ($700 in each company).  The combined yield of this week's purchases is 4.39% and will add $122.92 to my yearly dividends.

$100/week Challenge --- Week 30 (Final Week)   S&P 500:  2048 (Another all time high)

Since this is going to be the last week for my $100/week challenge I decided it might be a good idea to actually hit the mark. Energy stocks have been the focus of my purchases for several weeks and continue to be.

Thank God this gauntlet is over!

Why did I decide to tackle this challenge 30 weeks ago? I really don't know. It's kind of like asking Forrest Gump "Why did you starting running across America?" I woke up one day laced up my shoes and started running. I knew that I had written down a high passive income goal for 2014 and I was way behind. It just seemed like a good idea at the time to test my savings ability and more importantly my resolve. Win, lose, or draw I was going to give it my best effort.


Stretch goals OR just an alligator mouth overloading my hummingbird ass?

Back in April when I started this challenge I really had no idea what I was getting myself into.  I may as well have said that I plan on running a marathon by then end of the year (but enough about next year's goals). Immediately after I made the post I realized that it was going to a sonofabitch and almost deleted it because of the extreme work commitment it would take to follow through with this goal. I had some cash in the bank so I knew that I could probably make it a month or two without too much difficulty. Not surprisingly, it didn't take long to burn through what little cash I had in reserves and by July I had exhausted all of my savings. Couple that with my wife wanting a new $4000 fence for the backyard and I was pretty much toast.  LET THE REAL CHALLENGE BEGIN!

It sounds a bit crazy but there were a few times that I actually had less than $50 in my checking account. I'll never forget the time I tried to pay the bill at a Mexican restaurant a few months back and my debit card was declined.  My first reaction was "Oh shit, I overcontributed to my Sharebuilder account and now I can't pay for a $7.99 tacos al carbon lunch special. Mr. Waiter will you take an IOU?  After all I will receive a $10 dividend check from Pepsi in the morning. Better yet, how a about one share of ARCP!" Luckily the waiter re-ran the card and to my surprise and relief, it went through. At this point in my journey I knew things were starting to get a bit ridiculous and perhaps unsustainable. Ultimately these types of minor nuisances were not going to deter my efforts.  I did make sure to carry cash with me when I went out to eat from that point forward.

Fortunately, I only experienced a few more inconveniences like this along the way. I guess I never was really in a dire situation as my credit card could have been used if there was too much of a financial pinch.  Also I suppose that I could have stopped the investments, but I really wanted to accelerate my FI goals so failing was not a reasonable option for me. In the end, I am so glad that I didn't use any safety nets during this period.  Investing while simultaneously accumulating consumer debt is not part of my investing or FI plans.

On the other hand, 70 hour work weeks were an unavoidable part of the equation.


Is it a good idea to work 301 days in one calendar year?

Hell no it's not! While many people have worked this many days and more, I sure as hell have not and don't plan on repeating this behavior again any time soon. If my calculations are right, by year end I will have worked the entire year except for 52 Sundays, 10 vacation days, Thanksgiving and Christmas and no sick days (knock on wood).  Strangely enough, even though I am whining about this year's schedule, I have actually always worked long hours and working weekends is nothing new.  In fact, I have always believed that the slight difference that exists between successful people and everyone else is what they do in their spare time. With that said, I am certainly not trying to win The Employee Who Worked the Most Hours and Still Lived Award!  It was simply a means to an end for me....nothing more or less. Once emotion was removed from the equation things become more bearable.....for a while at least.

While I am glad that I was able to make enough money this year to reach this goal, I don't recommend this type of work schedule for many people. I am really lucky that I have a wonderful wife who fully supports our long term goals and makes many sacrifices herself so that we can continue to make progress with our dreams. Support from family and friends is certainly important when trying to achieve a difficult goal.  However, many times while they can be supportive but I'm sure they are also thinking "What an kind of idiot would continue in that type of career situation?" 

Haven't you ever heard about the frog that was placed in a pot of cold water before the burner is slowly turned up?


What did I learn during the last 30 weeks?

Nothing worthwhile comes easy.

While my savings rate has been high over the last 10 years, the past few and this one in particular have been insane. I really cranked things up reaching 87% in September which also happened to be my largest dividend month. While I still haven't had a 100% savings rate in any month and most likely won't for another year or so, it was awesome to be so close. After all if I can hit 100% consistently for twelve straight months, I feel highly confident that I will have reached FI.

I also learned that I will probably stick with more conservative companies going forward.  I have a few holdings in my portfolio that are somewhat questionable.....ARCP anyone? I simply refuse to get emotional or sidetracked because of any one good or bad investment decisions. If I make a mistake I choose to learn from it and change course if necessary.

John Maxwell once said "It is easier to move from failure to success than it is to move from excuses to success." Sitting on the sidelines watching others play the game will not help your build your own dreams. While someone may never get burned with a  bad stock selection they never make, they probably also will never experience the joy of the good ones. Ultimately this will lead to many regrets later on in life.  Regrets suck!


$10-12k per month invested month after month......how is this even possible???

As recently as 2009, I would have said "Get the F$#% out of here with that S!@#."

Until four years ago, at age 39, I had never earned over $100k in a single year. In fact, the first 10 years of my career I averaged about $55k gross salary and the next five I averaged about $85k. So the idea is saving this much seems just as jacked up to me as it should to anyone else.

Having a relatively normal income for most of my career is the reason that I have been able to save as much as I have this year. I simply have avoided lifestyle inflation to the best of my ability. You see I had been trying to devise an exit strategy from the Rat Race much like Andy Dufresne was trying to exit the Shawshank prison. Similar to Andy, I was patiently using my little rock chisle to slowly dig myself out. Four years ago unexpectedly my mini rock chistle was replaced with a huge jack hammer. This past year a Caterpillar bulldozer was my digging machine of choice. If I can expedite my progress due to a substantially higher paying job so be it. In the future I may end up with that mini rock chisel again and so I will start digging with it no different than before.

While I have typically made above average income during my career, in 2009 (peak of the crisis) my income was back below $60k (don't get me wrong, this is still really good especially in Houston). That year provided the wet blanket to my otherwise happy go lucky life. Suddenly I realized that LIFE CAN BE DAMN TOUGH!

In 2009, while many people across this country were losing their jobs, losing their homes, and making less money (me too), I made the crazy decision to pay off my house. Talk about The Road Less Travelled. Again, with all hell breaking loose around the country and my income falling 35% I decided to put every dime I had towards paying off my house.

From March 2009 through September 2010 I literally kept no money in my checking account the entire year and a half while I cleared my mortgage. The economy obviously was very fragile (if not totally collapsing) at the time, but I knew FI can only truly begin when debt is 100% eliminated. Even though the market was climbing during the end of 2009, paying off my house was the best decision that I have ever made regarding financial independence. I was truly expecting to live through tough times for the next decade or so and wanted to lower my expenses and reduce all of debt to zero. After all, who cares what the economy is like if you don't have to worry about bills?

Amazingly enough, just as my mortgage was paid off at the end of 2010, the economy was rebounding here in Houston and I found myself with a great and unexpected job promotion. Over the next three years, my income has more than tripled.  Here is the weird part, while it is nice that I was making more a lot more money, I never anticipated is lasting very long so I continued to spend very little.  Now four years later everything at work is still in humming along and is even getting better except for the hours.  Maybe I can summon my inner-Peter from Office Space and convince the higher ups that I need a 4 hour work week. :-) Very low probability

Moving along, in 2011 with a paid off house and a rapidly rising income, I was still preparing for the worst and focused on building up a cash reserve.   I'm sure many people were doing the same as the coast was not completely clear at the time. Since the worst of the recession seemingly was in the rear view mirror, it was time to go on offense and start building my own dreams.

In 2012 with a pile of cash and no interest on savings from the banks, I decided to invest in mutual funds that focused on income and started making monthly contributions that would help alter my beliefs on total return investing, passive income, and early retirement. If you look at my 2012 dividend/interest totals, you can see the slow but steadily increasing income stream that was forming. Truly awesome stuff in hindsight! I am so glad that I took this path a few years back. By the middle of 2013 after experimenting with mutual funds I decided to buy shares of industry stalwarts like Microsoft, Intel, Atria, and AT&T.  The rest as they say is history.


So now what?

Not surprisingly my first thought is to just suck it up and hit the $15k mark by January. After all it's a nice round number and it wouldn't take too much effort at this point in the journey. But then what? Do I give everyone $2.00 Christmas gifts, so that I can finish the year with a nice round number?  I dunno....maybe! Wouldn't that be fun trying to explain to my nephews and nieces...."Uncle MDP is giving you a nice fruit cake instead of a cool Wii game because he needs to hit $15k in passive income."   While I am frugal by nature, I am not interested in becoming the family Scrooge. There is plenty of time in the future for that. :-)

Ideally, I plan on cutting my current weekly investments by around 60-70%. My cash balance is way below my tolerence level and this became increasingly evident during last month's pullback.  Don't get me wrong, I am very pleased that I was able to add to positions at lower prices. In fact, the reason why I wish to rebuild my cash position is so that future opportunites will not be missed.

Also, it is almost time to start planning for tax season (property and income).  This past year I was not able to fully take advantage of the big Jan/Feb decline in the markets since I was in the process of paying 2013's tax bill. I want to be in a better position for next year.


If you thought the public library was great, try browsing DGI blogs.

I would also like to thank all the many bloggers that I visit regularly. Y'all are great researchers, educators, stock evaluators, and motivators. I do have to admit that I have ridden the coat tails of many of your purchases.  Only the good ones though :-)  In all seriousness, the DGI and FI community contains a wealth of knowledge that hopefully more people will take advantage of in the future. I know that I will! If I had stumbled upon some of the FI blogs 10 years ago...it would game, set, and match.  Anyway, better late than never.

This rant has gone on long enough. Now back to business...

Here are some of the stocks that I will be considering for next week:

PX, ITW, PG, XOM, UL, GE, CVX, and KO. 



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Tuesday, November 11, 2014

Weekly Sharebuilder Purchases

Here are my automatic investments for this week.

  • RDS-B:  6.78 shares @ $73.74 --- Yield  5.10%
  • BBL:  9.50 shares @ $52.63 --- Yield  4.71%
  • GM:  16.00 shares @ $31.24 --- Yield  3.84%
  • BAX:  7.06 shares @ $70.87 --- Yield  2.93%
  • IBM:  3.06 shares @ $163.55 --- Yield  2.69%

Total capital invested is $2500 ($500 in each company).  The combined yield on this week's purchases is 3.85%  and will increase my yearly dividends by $96.35.


$100/week Challenge --- Week 29   S&P 500: 2040 (New all time high)

I fell just a bit short of $100 this week.  The good news is that I am on track to reach $14,500 in forward passive income with next week's purchases.  This has been a grueling, meat grinder of a year for me, but I am pleased to be closing in on this milestone much earlier than anticipated.

Any evidence of the recent market correction has not only been erased, but it appears that the bull market is back and breaking through new all time highs. I am not going to lie...this is a bit frustrating.

While it is tempting to jump into some more aggressive companies like V, AAPL, SBUX, and MSFT, I will probably continue a more contrarian investing approach and focus on my energy positions along with out of favor companies like T, PFE, GE and IBM.



Tuesday, November 4, 2014

Weekly Sharebuilder Purchases

Here are my automatic investments for this week.

  • BP:  12.03 shares @ $41.56 --- Yield  5.77%
  • RDS-B:  7.01 shares @ $71.31 --- Yield  5.27%
  • BBL:  9.70 shares @ $51.54 --- Yield  4.81%
  • GM:  16.26 shares @ $30.76 --- Yield  3.90%
  • BAX:  7.28 shares @ $68.64 --- Yield  3.03%

Total capital invested is $2500 ($500 in each company).  The combined yield on this week's purchases is 4.56% and will increase my dividends by $113.90.

$100/week Challenge --- Week 28   S&P 500:  2004

Energy companies continue to fall along with oil prices.  This morning oil was trading around $76 a barrel.  This is creating a tremendous amount of pressure within the broader energy sector. On the other hand, I noticed Clorox was trading over $102 and Procter is close to $89.  This may be related to the recent Ebola outbreak.  In any event I am glad that I own both. 

I should reach my goal of $14,500 in forward passive income within the next couple of weeks.  It should be noted that about $200/year comes from ARCP so I may actually still be short.  Regardless of what happens to ARCP, I will still hit the goal even with smaller weekly investments especially with raises still to come from T, GE, and PFE.

Stock on the radar for next week include the above companies along with IBM, GE, XOM, UL, and COP.

Saturday, November 1, 2014

October 2014 Passive Income

Below is the summary of my passive income and purchases for October. 

The market has been very volatile during the past month with extreme moves in both directions.  During the middle of the month, the S&P 500 was trading in the mid 1800s and then rallied strong to finish the month at a record high of 2018.  Unfortunately I wasn't able to move as quickly into some positions as I would have liked to.  I was hoping for more than a two week correction as we all were. It is interesting to note that there was a major correction within the overall market correction that was very exciting to dividend investors.

Oil prices plummeted to $80 a barrel which crushed the shares of many oil and oil services companies. My portfolio was certainly wobbling quite a bit while this adjustment took place.  Despite the uneasiness in this area of the market, energy is still an area where I will continue to fish when making purchases. Hopefully other opportunities will present themselves for us in November.

Anyway here are the results from last month.


Taxable Account
  • AHITX --- $291.66
  • PM --- $115.58
  • GE --- $78.75
  • MO --- $78.00
  • KO --- $55.81
  • CSCO --- $45.60
  • KRFT --- $41.25
  • BAX --- $14.32
  • ARCP --- $12.39
Total taxable income is $733.36.



New Capital Invested
  • XOM --- $2100
  • RDS-b --- $2100
  • CVX --- $1000
  • BBL --- $1000
  • GE --- $1000
  • IBM --- $600
  • BAX --- $600
  • ESV --- $550
  • APU --- $500
  • PEP --- $500
  • GM --- $500
  • ARCP --- $500
Total capital invested is $10,950.


Wednesday, October 29, 2014

BP and AFL raise dividends --- New yields are 5.54% and 2.60%

Yesterday BP raised its quarterly dividend from $.585 to $.60.  This represents a 2.56% increase from last quarter and a 5.26% over last year.  Since I own 225 shares, my yearly dividends will increase by $13.50.

Aflac also announced that it will increase its quarterly dividend from $.37 to $.39. This represents am increase of 5.4%.  This is a rather unimpressive increase in a relatively low yielding stock, but I suppose any increase is better than no increase. I currently own 67 shares so my dividends will increase $5.36.

The combined increase in yearly dividends is $18.86.


Other news:

ARCP has seen its shares collapse today with shares trading as low as $8.93.  Apparently there are some accounting irregularities that have surfaced.  When I first started buying shares, I mentioned that this investment should be viewed as speculative.  My current share count is only 191 shares and this represents less than 0.6% of my portfolio.  The yield is now in excess of 10% and should be viewed as unsustainable in my opinion.  While I have no plans to sell right now, I will be watching it closely.

This is a classic example of why we should always remember to diversify across sectors, companies, and asset classes.