Monthly Archive: December 2014

Last week, I bought 25 shares of Coca Cola (KO) for $42.04 per share. I covered some of the reasons that I love Coke in another article (Taking a sip of Coke). At the time of this purchase, the PE ratio was over 23, the payout ratio was over 68%, and the yield was 2.9%. These statistics might seem unfavorable based on my usual entry criteria. However, this is a company that we miss having in our portfolio, and technical indicators on its stock chart are not indicating the price will get much lower in the near future. The reason these stats look this way is their EPS is lower than when I wrote the previous article ($1.93). I have no reason not to expect growth next year.

This is a case where I would rather buy a wonderful company at a mediocre price than a mediocre company at a wonderful price. Additionally, its dividend is poised to be raised next year, which should push the entry yield for this purchase over 3%.

It’s also important to keep track of where this purchase puts me in terms of my goals.

This is one more company on the path to 10 companies, putting me at 4/10 for that goal.

This is (at current yield) $30.50 per year, putting me at $226.42/$500.00 for the annual passive income goal. Almost half way there!

It also works out to $2.54 per month, which certainly isn’t much, but every little bit adds up. It puts me at an average of $18.86 per month, almost 20% of the way to my $100/month goal.

As 2014 is coming to an end, now is an excellent time to take a good look at our current status and our goals for next year. In a recent article, I said I was going to rededicate myself to transparency. So I’m going to take this opportunity to share the current holdings in the account I track on this blog.

This is my joint account with my wife, and we’re hoping to use the dividends from this account to become financially independent. This is what it looks like (Ticker – shares – annual dividends paid):

BP – 50 shares – $120.00 per year
CVX – 9 shares – $38.52 per year
MCD – 11 shares – $37.40 per year

My goal going forward is to share the new stock purchases I make as I make them.

I had some yearly goals for 2014 that I will talk about in another post closer to New Years Eve. However, there are some other goals I want to start tracking here for both short and long term. These are kind of milestones, but could also be though of as achievements in a video game.


– Save 50% of our joint income for at least one month (in other words, keeping our expenses below 50%).
– $500 forward annual dividend income
– $1200 forward annual dividend income ($100 per month average)
– Own 10 companies
– Own 20 companies

These goals are obviously not massive in scope, but they are the targets I want to achieve on my way to financial independence. It’s unlikely I will achieve all of them in the coming year, so these goals do not have deadlines. However, it will keep me on track to how how much closer to each goal I am with each purchase that I track here.

I’ve learned new aspects about my risk tolerance by playing perma-death games recently. In most games, when your character dies, it’s only a minor setback. Usually, you lose a little bit of progress and carry on as if nothing happened. In games with permanent death (or perma-death), your character doesn’t respawn, and you have to live with that loss. These mechanics make you play differently since every choice carries much more weight, and as you play, you’ll find you’re much more emotionally invested.

Right now, I am playing a hardcore Diablo 3 character with my wife. This means that each of our characters has the potential to be gone forever if things go south. We had done this once before and got to about level 22 before my wife’s character died in a fight we weren’t expecting. My wife was very sad, and I found myself feeling almost nihilist futility while finishing the fight. Our recent characters are at the maximum level and are tackling much greater challenges.

Because of that previous experience, we’re playing much more conservatively this time. Additionally, I am playing much more defensively to keep her alive, probably more so than I would while playing solo.

The interesting thing is that I can see direct parallels to this in the way I approach our investments. In my personal account, I’m willing to take greater risks and trade on margin in hopes of bigger wins, but in our joint account, I invest very conservatively in blue chip dividend growth stocks.

I’m also currently playing Pokemon on the 3DS with self-imposed rules from the Nuzlocke challenge, which basically applies perma-death rules to Pokemon who faint in battle. One special rule here is that you have to give nicknames to each Pokemon so that if they fall you feel a deeper loss. In this case, I still find myself playing much more defensively and conservatively than I would without those rules.

Instead of getting all “YOLO” here, I’d like you to think about this: At any moment, you could lose all of your money. It sounds pretty unlikely, especially if you’re diversified, but bad decisions can balloon to the point where the consequences are much greater than you planned for. Sure, we can comfort ourselves by saying “you can always make that dollar back,” but it won’t be the same dollar. You can only lose a specific dollar bill once.

The risk tolerance I’ve seen in my perma-death gaming is much lower than has been exhibited in my recent trading. I think everyone should try games like these to learn more about their own psychology and risk tolerance.

I have a confession to make. I have not been practicing what I preach lately. Greed has gotten the better of me and I’ve been doing some short term trading trying to make a quick buck. On top of that, I have been eating unhealthily, and neglecting my home gym. Sometimes you have some extra stress and you break your good habits so you can relax a little, it happens to everyone. The hardest part is not putting your foot down and getting back into good habits. The hardest part is keeping it up 3 days later.

I don’t usually write about fitness on this blog, but it’s entirely relevant. I believe keeping a good diet and exercising regularly are one of the best investments you can make. Not only do you feel better, but you’ll save yourself thousands in healthcare costs throughout your life by maintaining a healthy lifestyle.

When I fall into a rut, I often feel like I don’t have control of my life. I’ve found that the best way for me to take back control of my life has been lifting weights. It reminds me that I am in control of how I spend my time. It also reminds me that I’m not perfect, and it’s better to take a step in the right direction than to lament not meeting your lofty expectations.

However, working out after a long period of laziness has a dark side. Delayed Onset Muscle Soreness (DOMS) often comes 24 to 48 hours after a workout, and it is especially bad after you’ve skipped your workouts for a week or more. This is one of the worst things that happens when you’re trying to get back on track. The pain feels like a punishment for making the right choice. Some people are empowered by this pain, but not me. This creates a major psychological hurdle on your path to getting back on the wagon.

If you’re trying to workout after a break, there are some things you can do to prevent DOMS, as well as reduce it after you’re already afflicted.

– Drink a protein shake before your workout
– Make sure you’re adequately hydrated.
– Stretch before and after your workout.

– Eat lots of protein, most body builders say 1 gram for every pound of body weight.
– Keep stretching.
– Stay hydrated.
– Workout even more (lightly).

The last one sounds like the complete opposite of what you want to do while you’re sore, but it’s true. DOMS is typically the result of built up lactic acid in your muscles, by doing a light workout, you will pump more blood through your muscles and clean out some of that lactic acid. Don’t rush into a heavy workout too soon though, your body needs time to rebuild the muscles you’ve broken down.

Hopefully, this has been helpful for anyone that needs a kick to get back into shape.

Now back to investing. As I have made some poor choices lately in my arrogance, I’m going to rededicate myself to maintaining full transparency so I am accountable for my investing choices. In the coming days, you can expect a full disclosure of the investing account I track on this blog, as well as updates with upcoming purchases.

At the beginning of 2014, I was looking into other strategies used by investors seeking financial independence. One of the strategies I came across was the “Dogs of the Dow.” In a nutshell, this strategy is to invest in the 10 highest yielding blue chip stocks out of the 30 that make up the Dow Jones Industrial Average. The idea being, that companies of this caliber should only have a high yield if they are significantly under priced. So around January 7th, I decided to make a google portfolio to track how I would do if I invested roughly $1000 into each company.

At the beginning of this year, the Dogs of the Dow list included T, VZ, MRK, INTC, PFE, MCD, GE, CVX, CSCO, and MSFT. In the interest of full disclosure, I’ve owned or still own positions in all but 2 of these companies. So far this year (not much left). Someone who invested in these companies would not have had bad returns. They would have seen capital gains to the tune of 11%, the bulk of which was from MSFT, MRK, INTC, and CSCO. Additionally, someone with an evenly distributed portfolio of $10,000 would have earned over $310 in dividends which works out to net gains of about 14-15%. For reference, the S&P 500 has had a YTD return of around 11% and my personal portfolio has had about 14%.

So, based on the past year, someone who doesn’t enjoy screening stocks and just wants to pick from a small list of quality dividend paying companies would have had some solid returns going with the dogs. I don’t recommend blindly trusting a list of companies that anyone gives you. How someone else evaluates whether a stock is a good buy or not may not properly align with your beliefs. However, considering the 2 companies on the list that I have not owned in the last year were 2 of the bigger winners from the list, I have to admit that the strategy seems legit.

What’s your take on the Dogs of the Dow?

My investing strategy is to take my excess money each month and buy attractive dividend growth stocks. The act of buying stocks every month is usually considered to be “dollar cost averaging” where your returns are going to average out from buying at both high and low prices throughout the year. While this applies to the broader market, it doesn’t account for the fact that each month there is usually a company or sector that is lagging behind the rest of the market and provides a discount. This means that as the market rises and falls, the intelligent investor is still getting a good deal.

For instance, over the past month oil prices have been dropping, and after OPEC made the decision not to cut production (and thus cause prices to rise by reducing supply), the big oil stocks like Chevron (CVX), BP, Exxon Mobil (XOM), and others have seen their prices fall 5% or more. This decrease in price also means an increase in entry yield. At the time of writing this, CVX’s entry yield is 3.76%, BP’s is 5.52%, and XOM’s is 2.91%. Earlier this year, I wrote about ConocoPhillips (COP). At that time (April), the entry yield was 3.9%, now it is up to 4.15%.

If you were thinking about adding oil stocks to your portfolio, now is the time. I’ve personally purchased new positions in CVX and BP. This is not a “once in a lifetime” opportunity, but it’s a strong example of how savvy dividend investors can get great deals throughout the year. Currently, the S&P 500 is at a new high for the year, but you can pick up these individual stocks at a significant discount.

Earlier this year, we also saw Target (TGT) suffering from some bad press after the data breach (Which I wrote about as well). Back then, Target’s entry yield was about 3%, and that wasn’t even the lowest price Target hit this year. In the past few months Target has regained it’s share price level, and even increased their dividend, but the current entry yield today is 2.85%. Hopefully, you readers snagged this one up at a good price like I did. Today, Target seems a bit overpriced with a PE ratio over 30, so I wouldn’t recommend buying it right now, but that’s certainly no reason to sell either (by my standards).

It’s not every day that you get to see a great deal on dividend growth stocks, but there are definitely deals that stand out from time to time. If you’re investing new capital each month, and do your research, you’ll be sure to catch some good ones.

How about you, are you grabbing these oil companies at their current discounted price?