Sunday, December 14, 2014

2014 Goals Achieved!

I started this investing journey exactly one year ago. At the time, I had just finished reading a sea of material about investing, stocks, dividends, balance sheets, and market behavior. I had already made my decision that my first purchase would be ExxonMobil (XOM), I was determined to take the plunge and start investing my first savings into the market, I knew I had learned a lot both from my months-long research and from diligently follow the blogs of many fellow admired dividend investors

It was hard not to be scared, it was all theory and no practice, but dividend investing is not trading, it is a long-term endeavor which makes it hard to "paper trade" and see how good you were. There's also the fact that "paper trading" allows you to control your emotions much better due to not having actual money at stake. I figured that the only way I was going to get practice was by actually doing it. 

So I set some goals for the year of 2014 based on both my expected income, saving ability and potential setbacks that can happen to anyone and I got started. At the time, everything seemed pretty ethereal, could it really be? By yearend next year I would be earning a small but noticeable income and this income would be permanent. If I were to stop investing, this income stream would keep coming my way and growing yearly above inflation, it required dedication and discipline but the income stream would be "permanent".

Here we are now, exactly one year later, with my main goal achieved, this year I have earned $311 in dividends which surpasses my goal of $300 for the year, and, considering my current average yield and current invested capital, If I were to stop investing, I could expect a monthly income next year of around $50/month. 

Sadly, my current shares yield an average of 2.8% which is slightly below the average I was looking for of 3%. Anyway I am not disappointed, the yield is close enough to my objective, and I expected not to to reach it perfectly when trying to invest in the best opportunities available. 

I am very happy with this year, this was the first step in what I hope will be a multi-year journey. I hope that we are all here in 20 years, reading about a much larger scale dividend income. Thank you for following me through this journey! As we reach the end of December, I will assess my prospects for next year, look at where I am at that point, and set up my next year goals. Stay tuned!

Summary of Goals

Dividend Income: 300$ (Achieved December 2014)
Average Yield: 3% (2.8% Not Achieved)
Forward Monthly Yield50$ (Achieved September 2014)

How is your investment year going?

Thursday, December 11, 2014

Dividend Growth Investment Visa and Mastercard

This week I initiated a position in these two companies - Visa (V) and Mastercard (MA). As I mentioned in my previous post I made significant investments during October's market panic. 

There were many companies that were trading at very attractive prices but like any investor, I had to make choices, and at the time, even though I considered Visa (V) to be the most undervalued company, they were offering a very low dividend yield and I was interested in maintaining my average dividend yield around 3%. This led me to pass on it at the time. Ironically, I intended to initiate a position in December as soon as I had capital available. Unfortunately for me, the price increased dramatically on the results announcement combined with the announcement that China would open itself to foreign payment processing services.

As I evaluated the current opportunities presented by the market I noticed there weren't many bargains around - Everything I was following rebounded strongly after October. So, according to my analysis, after the rebound, I still see Visa as the best opportunity available.

Previously, the valuation difference between Visa and Mastercard was significant, which led me leave Mastercard out of my options. However, right now, I see their valuations as being in-line with each other and so I considered Mastercard as well. 

In a quick summary, they are very similar companies, they both operate world-scale payment processment networks. Contrary to popular belief, they are not lending or credit companies. Their cards are merely a means for you to execute a transaction through their network, meaning that they are able to use other means to connect with their network, such as web APIs, apps on mobile, and apps and other devices. This is their moat - A time-tested and already proven acceptably secure payment network combined with the trust already earned with so many financial institutions that rely on these networks. I am of the opinion that it is simpler for Visa and Mastercard to replicate the innovation of others, that it is for others to be able to emulate the security and trustworthiness enjoyed by these brands.

Currently, Visa is the bigger player of the two and has much higher volume of transactions. On the other hand, Mastercard has traditionally been able to provide faster growth. They are by far the two biggest players in the non-paper payments industry. 

This is an industry poised for immense growth. The advantages of non-paper based payments are evident and so it is not hard to see that this is and will be a core industry of our society. However, what really sparked my interest was discovering that as of right now, only 15% of all the transactions made in the world are made through non-paper based mechanisms, meaning that the growth in this space is still in front of us. Even notwithstanding the population growth and the rise of the middle-class in emerging markets, there is currently an unserved market more than 5 times bigger than the current served market. On top of that, no one is better positioned to capture this growth than Visa and Mastercard which currently hold a combined market share of approximately 87.4%.

Not only is the market large and interesting, but the players in the industry have so far done a wonderful job at capturing growth. For example, Visa sports a 5 year EPS CAGR of 16.54% and Mastercard shows 21.12%. This growth is not forecast to stop anytime soon, as the industry itself is expected to keep growing at an accelerated pace. 

Looking at their balance sheets individually they are quite similar and follow roughly the same strategy regarding capital allocation. On top of that they have flawless balance sheets sporting no debt and a high free cash flow on account of a low capex required to maintain and grow their earnings. Their capital allocation strategy is the following:
1. Invest in maintaining and improving the infrastructure to seize opportunities
2. Pay a small dividend but grow it agressively
3. Use the remainder of the operational cash on share buybacks

These are exactly the kind of companies I like. They focus on ensuring a safe and growing dividend, sport a very high free cash flow, and have low capex requirements. 

Company Capex Coverage Cash Flow Dividend Coverage 5yr Dividend Growth Rate 5yr Share Buyback Growth Rate
Mastercard 87.34% 88.11% 37.68% 51.37%
Visa 90.25% 86.03% 35.52% 32.72%

As shown in this table, they have sported impressive growth coupled with impressive shareholder returns. Based on their initiatives to integrate with new players (such as Apple Pay) and to provide a strong service of mobile and e-payments, I see no reason for this growth not to continue well into the future. 

I know that I am making this purchase right after a significant spike in the price and I would not be surprised if the shares drop in the short-term. But that is not predictable, and I do not attempt to time the market, I deploy cash as soon as I have it available on opportunities that I consider fairly priced for the potential risk/reward they might provided, and that is just what I did.

Stock Price: 262$
Dividend Yield: 0.7%
Dividend Raise Streak: 6 Years
Typical Yearly Dividend Growth (5yr): 30%

Stock Price: 87.58$
Dividend Yield: 0.7%
Dividend Raise Streak: 8 Years
Typical Yearly Dividend Growth (5yr): 60.55%

What do you think of these companies and their current prices?

Sunday, November 2, 2014

Stock Picks For This Year

It's probably too early to start celebrating christmas unless you are a city mall already trying to lure shoppers into spending that extra christmas money months before the season starts.

I usually write a post for each of my purchases, but this was my early christmas - There was a very nice market dip a few weeks ago which resulted in prices dropping significantly. As I saw many of the companies I am interested in reaching my price targets simultaneously, I had to take advantage of such opportunity and make sure that I purchased the companies that were offering better value for their cost. At the same time, the earnings season was coming and I was very confident that strong companies would stay on course and would deliver good results again - I had to act fast!

Since I decide how much cash I will deploy into my investments at the beginning of the year, it doesn't matter to me the exact timing of my purchases as long as I reach that amount by yearend. So, I spent the latest weeks submerged in annual reports, analyzing and confirming that my previous impressions were as right as before, so I could decide which companies I wanted to buy. It's absolutely great when companies have absolutely no fundamental change but sell significantly cheaper. So, I took most of my emergency and bought aggressively adding 387$ of yearly dividend income to my portfolio. These were the positions I initiated/increased and the price that I got them for:

Ventas (VTR) - 62$

Ventas is my favorite healthcare REIT on the market. I find this sector to have an incredibly bright future, the number of seniors in the US is already a large chunk of the population and the growth of this number is expected to move even faster in the US. 

Ventas is tremendous capital allocator and has managed to increase its FFO by 10% CAGR over the last ten years, all this while reducing its debt ratio.

I'm a big admirer of Ventas CEO, Debra Cafaro, she picked up a company when it was a very small REIT in a debt downward spiral and transformed it into what it is today, providing an incredible shareholder return in the process (320% in the last 10 years period). They have a strong balance sheet and some properties in the UK and Canada. Even though the US currently offers a very promising environment, UK and Canada are expected to follow suit and can be promising hubs of future growth. Their portfolio is very well diversified by type and by tenant as show below.

I also expect that their strong balance sheet and disciplined capital allocation will allow them to take advantage of a fragmented market to consolidate through acquisitions as shown by acquisitions of Holiday and HCT. I can see them maintaining growth in the order of 9% year-on-year while they can borrow at these low interest rates and can see that growth slowing down to 6/7% on a higher interest-rate environment. The price to FFO ratio of this purchase was 14.2 which I consider very good value for such a high quality asset.

3M (MMM) - 137$ 

3M is a company that I have been following for a while. It sells simple high-margin products that are useful for a wide array of applications, but can't be easily replicated due to intellectual patents and the sheer talent that a company of this size has amassed over the years. The greatest thing about this industry is that it is not glamorous like tech is nowadays, not many people think "I'm going to start a business selling a new innovative kind of adhesive". Even in this case, these kind of product line makes it easier for 3M to acquire and integrate other companies fairly easily. These opportunities for capital deployment is highlighted by their average ROCE of 20%

They have grown earnings at close to 10% CAGR which is quite impressive for a company of this size.

3M is an aristocrat among aristocrats, paying an uninterrupted dividend for 98 years and having 56 years of consecutive increases. Their typical dividend increase is not particularly high but the company has a very high security to keep raising the dividend.

Not only do they return capital to shareholders through dividends but they also have a massive share buyback in place. This is all possible due to the very high cash conversion that they sport, with an average cash conversion of 100% they have a very high free-cash-flow, providing flexibility for acquisitions and security for shareholder returns. Their market is incredibly hard to disrupt and since they update their product lineup regularly, they can adapt incredibly fast.

This is exactly the kind of company I look for and I intend to add as much as possible to this position when the price provides opportunities. 

Johnson&Johnson (JNJ) - 99$ 

JNJ is a position increase. The latest results were great and slightly better than my expectations. Although the extra gain was based on Olysio the hepatitis C drug that should lose its competitive advantage next year, I don't see this being much of a problem and I am confident the company will keep performing in line with my expectations. Together with 3M, this is one of the companies that I want to buy as much as possible. My position increase made JNJ by biggest position at the moment which is in-line with my goals. My view on the company has not changed since my latest article

Unilever (UL) - 39.4$ 

Unilever is another position increase. The company has a very strong return on equity and a strong brand line-up, they also performed very well in emerging markets in the latest years. The price drop in this case was warranted as the company faces strong headwinds both from currency and from a very subdued market in its categories. Still, I see these as temporary and in the meantime the company managed to capture market share and grow ahead of its markets. I believe this pressure will help the company further streamline their operations which will result in even stronger growth when markets over the world start becoming a bit stronger. Overall, I maintain my previous analysis

Bank of Nova Scotia (BNS) - 60$

Nothing has changed with BNS recently and for a long-term investor like me, that's great news. Because of the energy drop the whole Canadian index dropped, dragging BNS with it. It's important to keep in mind that BNS is a very international bank with no more than 50% of it's revenues coming from Canada. Their latest results were in-line with what I expected and so I am quite happy to have added to this holding. The price I got was very close to my original price.

United Technologies Corporation (UTX) - 107$

This was a position increase of a very recent purchase. Nothing has changed but the latest results were in-line with my expectations.

AMEC - 10.80£ (Increased position)

Amec is an oil services company listed in London. Their growth was slightly lower than expected and was further beaten down by incredibly strong currency headwinds. However, their acquisition of Foster Wheeler (FWLT) has been approved and should be completed by yearend. They have very strong fundamentals with no debt (prior to the acquisition) and a very well covered 4.3% yield. The industry fundamentals have weakened slightly, but not enough to warrant such a price drop. The original analysis article can be found here.

Other Companies Considered

All these are companies that I consider to have very strong long-term perspectives and were selling at great valuations at the time. I am still making up my mind of whether it was reckless or opportunistic to invest my emergency fund like this. As I mentioned I have an yearly budget that I calculate in the beginning of each year, and since I have almost reached my investment target for this year, I will now focus on rebuilding my emergency fund. I also intend to write a dedicated article for my new positions (Ventas and 3M), both companies that I have been following for a long time.

Three companies that I thought were very strong opportunities were Chicago Bridge and Iron (CBI), Visa (V) and Apple (AAPL). I considered both CBI and V the companies that were poised for higher total returns (appreciation + dividend). However their current yield is very low and would bring my overall average down significantly. I intend to find opportunities to buy these  two companies next year, when their individual impact won't be so large on my portfolio.

Regarding APPL, their cash position is immense and just their buybacks and dividend already provides strong returns if their revenues were to keep constant. However, I find myself unable to estimate growth for them, so I decided to pass on this opportunity at this point.

What companies did you get on this dip? Did you think it was a reckless move to use my emergency fund like this?

Sunday, September 21, 2014

Dividend Growth Investment Chicago Bridge and Iron

A month has gone by, a new paycheck has arrived meaning more cash to be invested. The latest month was particularly work-intensive, but by keeping the  goal of building up equity in high quality businesses in mind, each paycheck feels twice as rewarding, as it represents one more stone to build my castle. 

My purchase this month was Chicago Bridge and Iron (CBI) which is a very ironic name - The company is not based in Chicago, does not build bridges and does not use iron. This is a somewhat odd purchase for me, as their dividend has a small track record and is only 0.45%. However, for me a stock is just a document that represents ownership in the actual underlying business, meaning that the principles for my investment approach are - "Would I like to own this business if I could purchase 100% of it? If so, how much would I be willing to pay?", the spread between the current business valuation and how much I would be willing to pay, is the driving force for my decision.

CBI is what I would call an oil services and support company as it provides services specifically tailored to the oil industry. This is an industry where I see great potential going forward. As the world population increases and a significant number of people are raised from poverty into the middle classes in emerging economies, we will observe a gradual energy demand increase to sustain this transformation. 

Combine the increased energy demand with the fact that it is getting more expensive to find sustainable oil and gas reserves and renewable energy sources are far from being mature enough to represent a significant percentage of the worldwide energy consumption and we start seeing a promising context emerge. 

CBI is perfectly positioned to capture this market, the main services and products provided by the company are: 

  • Technology for facilities, refineries and processing plants
  • Engineering, construction and maintenance of infrastructure for the oil and gas industry
  • Piping solutions, storage tanks and vessels for oil and gas

One subtle advantage they enjoy, is the fact that they provide services and products accross the whole supply-chain of the Oil&Gas industry. They cover upstream, midstream and downstream. In an industry where many of its clients operate accross the whole supply-chain, this gives them a strong opportunity to cross-sell their services and products. For example, they might win a contract for downstream work and upon building a relationship with the client, they might win further work on the upstream. Currently, they are the only company in this industry with this advantage. The success of this model captured the eye of other similar companies such as AMEC (AMEC), a company I also own, that will go through with the purchase of Foster Wheeler (FWLT) by year-end to be precisely able to offer solutions across the whole supply-chain.

While this indeed draws a nice picture, let's look at actual numbers, and this really shocked me. CBI is a company currently valued at $6.6B market cap, while boasting a backlog of work of $30.7B. That's right, thirty billion dollar backlog for a company valued at roughly 6 billion dollars. Even considering an optimistic estimation from their part, and an and inability to handle some of that work, there's clearly a lot of growth to be achieved just by capitalizing on already "guaranteed" work.

As many of you are probably aware, the reason why this great company is trading at such a significant discount to its usual price is due to accounting concern raised by a short seller called "Prescience Point". They provide their report online in case you are interested in reading their view. The report is quite lengthy so I don't want to focus on its content step by step. The main factor that scared most investors is that CBI currently presents growing earnings but negative cash flow, and so I will provide my view on that issue.

Looking at the cash flow statement from Morningstar we can see that the net income is progressing strongly at roughly 29% CAGR. What's causing the negative operating cash is a significant deficit in the working capital of the company. 

This by itself might mean many things, some of them are worrisome such as the company not being able to collect the payments for its services and some of them are not so worrisome, such as the company keeping a very efficient supply chain. 

In the case of CBI the supply chain efficiency is not a very plausible explanation at all, considering it is mostly a construction services provider. Since the working capital is current assets - current liabilities, the answer to this issue is on their balance sheet where current assets and current liabilities are detailed. 

The detailed current assets for 2013 can be seen in the imagine below:

The area highlighted shows the major cause of the high current liabilities and the reason why working capital is negative. This kind of balance sheet entry is quite typical of a construction company that has contracts on a project completion basis. This works in the following way, a company, like CBI, accepts construction projects and agrees to be payed based on the percentage of project completion, which means, if 20% of the project is completed, the client pays 20% of the total amount of the project cost. Of course gauging what exactly constitutes 20% of a construction project is hard, so more often than not, the construction company ends up either receiving more or less than the percentage of completion. A simple example where this can happen is when the company receives a small percentage upfront before starting the project.

In the case where the company receives less than the percentage of the project completed, that value will go into the assets as "Cost in excess of billings" thus being added to the cash flow, because even though the company did not receive that money yet, it already completed the construction milestone necessary to receive it. In the case the contrary happens, and the company received more payment than it has completed, this will show in the liabilities section "Billing in excess of costs". Even though the company received that money already, it did not yet complete the correspondent part of the work and as such is not allowed to include that cash in the cash flow. 

It is very common for companies who have a lot of new projects or just starting projects to have high current liabilities (Billings in excess of costs) because they tend to take a percentage upfront to help supply capital to ramp up the construction. There is obviously no guarantee that CBI will be able to deliver on these construction projects and so, it is indeed possible that not all of the cash currently billed in excess of costs will actually be received. However, let's assume that CBI actually fails to deliver (which I do not consider a likely possibility), and let's assume that Prescience Point is actually right and CBI failure results in the -$1.6B loss they propose. So, we assume that out of the $2.7B that CBI would be allowed to declare as cash, they will only receive the remaining $1.1B. I also assume that the projects accounted for in "costs in excess of billings" will also be successful, so I will count that cash as current assets. This would lead us to a positive working capital of around $250M. 

So, assuming CBI was allowed to account for this cash, finished their projects successfully as they historically have, and was indeed masking a -1.6$ loss, it would still lead to around $800 operating cash flow, which in my opinion is more than enough cash to proceed with operations and I don't see this as being an issue.

Disclaimer: I am not an accountant nor am I a specialist in this field. This article expresses my view after extensive research. There is still a probability of this being wrong or incomplete and you should not take this as professional advice.

Even though I do not particularly appreciate appealing to authority, I find it reassuring that Berkshire Hathaway (BRK.A) has a sizable stake in the company. When Berkshire invests in a company of this size, they actually send people to the physical offices to see how things are done and to ask questions directly to the management, and while they might be wrong about the company's long term perspectives, I strongly doubt they would let such an accountancy issue go unseen.

Stock Price: 62$
Dividend Yield: 0.44%
Dividend Raise Streak: 1 Years
Typical Yearly Dividend Growth (5yr): Doesn't increase every year
CAGR Dividend Growth (10yr): 13%

This company was more of a buy based on valuation than for the dividend itself, I just felt it was too good of an opportunity to pass on. Would you consider buying a big bargain if the dividend history is kind of wonky?

Monday, August 18, 2014

Dividend Growth Investment United Technologies Corporation

My most recent acquisition was United Technologies Corporation (UTX). I actually executed this transaction a while ago, so my cost base is a bit higher than what UTX is currently trading for. 

United Technologies Corporation is an almost 100 years company, that exists in its current form since 1975 as a diversified industrial conglomerate. This is exactly the kind of company that I appreciate, they have a competent and strong management team, a strong balance sheet, an impressive track record and operate in industries that I consider to be of high potential in the future.

Despite my interest in the company, I was being able to find better opportunities somewhere else cost-wise. However, UTX dropped dramatically upon reporting the latest quarterly results (which were good, by the way), and so I pulled the trigger at this opportunity.

United Technologies Corp has consecutively increased its dividend for 20 years and has a pretty high CAGR of 10-15%. I consider all of their industries to be aligned with strong megatrends - urbanization and increase in commercial aircraft passengers. Currently their business is organized in the following segments:

The green segment comprises the aerospace industry - Pratt & Whitney produces jet engines and aerospace systems produces systems and products to help operate planes (like cabin systems). The green segment is useful both in military aircrafts (defense sector) and commercial airplanes (commercial sector) and for me that makes it one of the biggest advantages. 

It came of quite a shock to me, but roughly 85% of the people in the world have never flown in an airplane before. As more and more people are uplifted from poverty into the middle class, and the cost of flying keeps dropping, I expect to see great sustainable growth in the demand for airplane engines and systems. What usually causes a strong drops in commercial flights is predictably armed conflict. However, that would probably result in an increase in demand for military investment, balancing the downtrend in commercial flights with increased demand in the defense sector.

The blue segment includes essentially building technologies. Otis is an elevator/escalator manufacturer, it probably does not need any introduction as they are pretty common in many buildings and airports. The climate, controls and security includes many other appliances that are required in any building: Heating, air conditioning, ventilation, fire alarms, security alarms and some innovations regarding efficient energy management in buildings.

These are the kind of technologies that are always needed in any building in the world, and more than that, all these appliances need maintenance, which the company can provide itself. Meaning each sale, actually secures a strong post-sales contract for the future.

From a financial perspective they are very strong, they have one of the strongest dividend cash-flow cover I have seen recently. Last year they had free cash flow of $5B and payed dividends of $1.9B. Since the management is so conservative, I don't expect this cash generation to translate into faster dividend growth, and I am fine with that. They recently acquired GoodRich and still have some outstanding debt, which they are aggressively paying down. This is the reason for the slight reduction in the dividend growth rate, but after the debt is payed, there will be a significant portion of surplus cash for both dividends, share buybacks and further acquisitions.

I am not fully happy with the dividend on cost I got which was 2%, but considering the company, I'm confident that this was a great acquisition to my portfolio, and coincidentally, it fits particularly well because I didn't have any company in the industrial sector yet.

Stock Price: 115$
Dividend Yield: 2%
Dividend Raise Streak: 20 Years
Typical Yearly Dividend Growth (5yr): 10%

The company is currently trading at around 105$ which I find to be a great cost and I will probably average down as soon as I have capital to deploy. What do you think of the industrial sector?

Monday, July 14, 2014

Dividend Growth Investment Walmart

Just a few days ago, I had another opportunity of deploying fresh capital, and the result as you can recognize by the logo, was Walmart (WMT). I got to say, this was one of the investments that took me the longest to reach a decision.

From a dividend growth investor stand-point, Walmart is definitely extremely interesting. With a market cap in the magnitude of $200B, a dividend of 2.5%, 41 consecutive years of dividend increases and a recent average increases around 15%, there is nothing not to like.

In terms of performance track record and industry, they have a very compelling proposition, and used to have strong growth in what is considered the most defensive industry. Just as a reference, from the highest peak to the lowest drop, Walmart just dropped 22% in the great recession, reaching its lowest in mid-2009. By the end of the year, all of it was recovered.

I have always been very wary of investing in the retail industry because quite frankly, defensive or not, it is extremely brutal. As a retailer you have very low margins, your brand power is not very high, but can damage you hard if you're perceived in a negative light, and on top of that, sales are all about ease of access by customers and the best price. In recent years, Walmart has been facing some hardships, both in terms of brand image and facing headwinds in growing their business. This has reflected itself in the dividend increase this year, resulting in a "disappointing" increase of 2%.

The headwinds they face do not scare me at all. Even this year, they still managed a small increase in the their total revenue and, if it were not for adverse currency movements, revenue would have grown by 2.1%, a very impressive growth for such a huge retailer in a time where consumer spending is low in the U.S. and where China has slowed down. While many were disappointed by this, and considered the bad weather as a "cheap" excuse, keep in mind that all retailers showed worse results than they usually do, which at least demonstrates that the retail sector as a whole was in difficulties this latest quarter.

Having looked at past and present, all that was left was looking at the future prospects and competitive advantage of the company. For me the future of retail is undoubtably rooted in e-commerce: Be available to customers at the distance of a click, allow them to shop comfortably, use the data you gather from their behavior to better help them find products they like, thus promoting happier customers while increasing your sales, and combine that digital offer with a very strong physical presence. This means, having nearby stores that can allow customers to pick their orders from the stores if so they wish, while the stores work as warehouses to allow faster delivery to customers who want their deliveries at home.

In the department of e-commerce, surprisingly to many, Walmart is acting fast and effectively. They created a fairly independent division called Walmart E-commerce with a very "Tech company" vibe. They have offices in Silicon Valley, where a significant portion of the tech talent is based. They have trendy "techy" offices to attract talent, and they are hiring en-mass, including talent from other top tech companies, such as Amazon, Microsoft and Google. This investment is boding well for them, their e-commerce platform has revenues of around $10 billion, growing at around 30% y-o-y, and is the second biggest e-commerce platform in the Western world (if you exclude Apple's site, which isn't really a direct competitor).

What about competition? I was not very keen on buying Target (TGT), but I got to say I saw them as a big threat for WMT, they are big and seem to have a much more positive image in the U.S. This has kept me from investing in this space, on one side, while I fully recognize Target as a good dividend investment, it just doesn't cut it for me, for some reason, it seems like nothing stands out. On the other side, I was not sure if WMT could cope with the competition going forward. However, seeing how well WMT is executing in the e-commerce space and looking at how Target is executing, I see a definite competitive advantage forming to the favor of WMT.

I also appreciate their drive for efficiency and sustainability as they expect to able to reduce costs by $1B by being able to have 100% energy generated from renewable sources.

Stock Price: 76$
Dividend Yield: 2.5%
Dividend Raise Streak: 41 Years
Typical Yearly Dividend Growth (5yr): 12%

What about you, what do you think of the future of retail?

Wednesday, July 2, 2014

June Dividends Update

Ever since I started this journey, I have been eager to write a post like this. I started building my portfolio a few months ago, and so it took a warm-up period to start getting regular dividends from several sources. 

As of June, I am currently invested in 7 companies. Surprisingly, a few of them pay dividends within a few days of each other. So, this month of June was pleasant surprise, and the first time I saw what it looks like to have a passive stream of income coming your way, and I must say, it felt amazing. This month, I got the following dividend payments:

Bank of Nova Scotia $10 (end of May)
Exxon Mobil $8.38
Unilever $16.84
Chevron $13.00

Total: $48.22

I also had Bank of Nova Scotia pay me by the end of May, meaning that I got all these dividend payments a few days apart from each other. For most, especially investors who have much larger portfolios, this is nothing but pocket change, but I already find it impressive. 

I started this journey only 6 months ago, and invested most of the income I could save every month. I was psychologically prepared to wait a long time before I saw any meaningful returns from these investments, but It took much less time for dividends to start rolling in than I expected. I consider $48 a noticeable amount - it's actually enough to pay one of my household bills, so it is already an amount that could make a small difference in my life. 

While this kind of income won't happen every month, it's incredible how fast each quarter goes by and how fast is pay time again. I was initially concerned that it would take a long time to see the impact of consistently invest in a disciplined manner, but this was not the case at all, time just went by so fast, it leaves me wondering where I will be a year from now. This definitely works as a motivating factor to keep my investing strategy on track and leaves me very excited looking forward.

My advice for anyone fearful of investing for the first time is: just go ahead and do it! It is said that time flies, and that's a bad thing, as time is something that can't be bought. By buying high quality businesses that pay you regularly, and having the compounding factor on your side, you have at least one reason to be joyful that time passes so quickly.

Thank you all for the support so far and I look forward to see how these values snowball from here. Like I said in my first post, let’s go!

PS: You have probably noticed, but I am changing to a new font to make the blog posts more easily readable.