Portfolio Update – March 2015

The market in month of Feb was up by 5.62% (ETF: SPY), last month in Jan, it was down by close to 3%. The moody market never goes straight up or down but over long period, direction of market is up and will reward patient investors.

Month of Feb remained a busy month for me. I allocated capital in following securities:
Johnson & Johnson (JNJ): 10 ($1022.49)
General Electric (GE): 20 ($509.99)
Digital Realty (DLR): 10 ($663.89)

These buys in JNJ, GE, DLR will add $80.40 annually to my passive dividend income. This will push me closer to being financially independent.

My DRIP Portfolio was also active in Feb, 2015 and below positions were initiated/added:
Chevron Corp. (CVX): 10.4 ($1150)
Conoco-Philip (COP): 8.02 ($550)
Phillip-Morris (PM): 6.1 ($500)
BHP Billiton (BBL): 4.8 ($250)
The Clorox Corp. (CLX): 1.75 ($200)
Verizon Comm. Inc. (VZ): 3.05 ($150)
IBM (IBM): 0.9 ($150)
AbbVie Inc. (ABBV): 0.8 ($50)
Colgate-Palmolive Inc. (CL): 0.7 ($50)
Exxon Mobile Corp. (XOM): 0.55 ($50)

Currently, I’ve got 4 Portfolios: DRIP, HID1, HID2 and a recently added Roth IRA account. New capital is distributed across these 4 portfolios in both taxable and tax-free accounts so that I’ve freedom to enjoy my passive dividend income whenever they are able to cover all my expenses. I also contribute towards 401K account in order to get employer’s match and help lower taxes as well.

My total portfolio value at the end of February is $67,094.55. It was a big jump of 13.19% over last month of January Portfolio value of $59,274.97. This was mostly due to capital appreciation with market being happy :) and addition of extra capital in JNJ, GE, DLR and DRIPs in CVX, COP, PM, BBL, CLX, VZ, IBM, ABBV, CL, and XOM.

Last year 2014, I crossed a very important and big milestone for me, i.e, crossing half-mark across a 6-figures portfolio size. 

Full Disclosure: Long on the above mentioned securities.

Thanks for reading.

How is your portfolio doing recently and own some of these securities?

Philip Morris Examined for Dividend Investors

This is a guest post by Ben Reynolds. Reynolds founded Sure Dividend, which is dedicated to helping individual investors pursue a long-term investment strategy in high quality dividend growth stocks.

Philip Morris was a recent buy of Passive Income Mavericks and owned by Dividend Diplomats also. I’m long Philip Morris International as well. This article discusses the investment merits of Philip Morris International, including the company’s current valuation and future growth prospects.

Business Overview

Philip Morris is the largest cigarette stock in the world; it has a market cap of $120 billion. Philip Morris sells branded tobacco products internationally.  The company’s flagship brand is Marlboro.  Altria (Philip Morris’ parent company) sells the same branded tobacco products exclusively in the U.S.  The businesses split about 7 years ago so Philip Morris could pursue a fully international strategy and Altria could pursue a different business strategy in the U.S.

Philip Morris operates in 4 geographical segment.  Each segment is shown below along with the percentage of operating income each segment produces:

  • Eastern Europe, Middle East, & Africa:  34% of total operating income
  • European Union:  31% of total operating income
  • Asia:  26% of total operating income
  • Latin America & Canada:  9% of total operating income

As the bullet points above show, Philip Morris’ operating income is highly geographically diversified.  The Eastern Europe, Middle East, & Africa segment is its largest based on operating income, followed closely by the European Union and Asia segments.  Latin America & Canada generate the smallest portion of operating income for Philip Morris.

Fundamentals & Dividend Metrics

Philip Morris stock has an exceptionally high 5.1% dividend yield.  Additionally, the company has a price-to-earnings ratio of just 16.3 and a payout ratio of 65%.  The company maintains a fairly high payout ratio as it returns much of its cash flows to shareholders in the form of dividends.  Philip Morris has paid increasing dividends for 31 consecutive years, including its history as a part of Altria.

Since separating from Altria, Philip Morris has grown revenue per share at 8.6% a year.  Dividends have grown at more than 10% a year over the same time period.  In addition, Philip Morris has a fairly low stock price standard deviation of 24%.  The company ranks very highly using The 8 Rules of Dividend Investing thanks to its extremely high dividend yield, solid growth rate, fairly low payout ratio, and long dividend history.

Future Growth Prospects

Philip Morris is expecting an 8% to 10% currency neutral earnings-per-share growth rate in 2010, around the same growth rate the company has experienced over the last several years.  Adding in the company’s 5%+ dividend yield gives investors an expected total return of 13% to 15%; not bad for a boring cigarette company.

Philip Morris is growing earnings-per-share despite operating in the slowly declining cigarette industry.  Here’s how Philip Morris is growing in spite of lower cigarette volume:

  • Market share gains
  • Lower operating costs
  • Higher prices
  • Share repurchases and effective capital allocation

Philip Morris raises its cigarette prices whenever taxes increase.  Since the demand curve for cigarettes is relatively inelastic (people keep buying them no matter the price – within reason), the company can raise prices more than cigarette tax increases, and increase its margins in the process.

Slowly declining cigarette volume has caused Philip Morris to analyze its operations and become more efficient.  This has helped reduced operating costs for the company and increased margins further.  Additionally, the company continues to slowly gain market share in many of its major markets around the world.  This is due primarily to the company’s extremely strong Marlboro brand.

Finally, Philip Morris’ management is excellent at capital allocation.  The company currently pays a 5% dividend yield.  It has been taking on long-term debt with an interest rate at less than 4% and using much of these funds to repurchase shares.  This is a prime example of excellent capital allocation.  By borrowing money at less than 4% and repurchasing shares that the company pays 5% on, it is increasing current cash flows while simultaneously reducing share count.

Additional Growth Prospects

In addition to Philip Morris’ core business growth, the company has other growth prospects that could speed growth in the future.  The company is working in tandem with Altria (makes you wonder how ‘split’ the companies really are) to develop heated tobacco products.  The new brand of heated cigarettes and e-cigarettes could be the future of the industry.  Adoption rate has been slower than expected, but the category is still growing rapidly.  If these new categories take off, Philip Morris could potentially benefit greatly.

Final Thoughts

Philip Morris is a perfect example of a high quality business trading at a fair price (if not slightly undervalued) with a very shareholder friendly and competent management team. The company has an expected total return of 13% to 15% a year from dividends (5%) and earnings-per-share growth (8% to 10%).  This is a great company to buy for long-term oriented investors looking for both capital appreciation and high current income.

Disclaimer: This post is meant for educational or informational use only. Before making any investment, please do own research and consult with an investment professional or tax professional.

Thanks for reading.

Recent Buy

I’m looking for companies that are fairly valued, have a decent dividend yield(3% to 6%) and have a fairly long history of paying dividends consistently for 10 years or more. However, there could be some cases for exceptionally good company or a strategic buy for a very long term.

Here are three purchases for this month of March.

1) BHP Billiton, Plc (BBL)

BHP Billiton is one of the largest mining and resources company in the world, headquartered in Melbourne, Australia with more than 100K employees located in Brazil, Australia, Mozambique, South Africa, Asia among over 25 countries. Billiton has origin back in 1851 as a tin mine company on a small island Billiton (Belitung) in Indonesia while BHP (Broken Hill Proprietary) began its journey in Broken Hill, Australia in 1885 and two merged in June 2001 as BHP Billiton.

BBL is trading at P/E ratio of just 8.0 but with a healthy dividend yield of 5.96% and Market Cap of $110.84B. It has ran up to $71.44 at its 52 week high and currently trading at $41.64 almost 42% lower, kissing almost 5 year low due to slowing world growth but at this price, provides an excellent entry point.

I bought BBL at $48.56 on 3/05 and added 10 positions in this company, making it overall 30 positions in taxable account. It will add $24.80 of passive income on an annual basis that I do not have to earn and work for :)

2) Digital Realty Trust, Inc. (DLR)

Digital Realty is a real estate investment trust (REIT) that acquires, owns, and manages technology-related real estate, incorporated in 2004 and is headquartered in San Francisco, CA. The company focuses on strategically located properties that house services critical to day-to-day operations of technology companies and corporate data center users. Digital Realty’s portfolio consists of 131 properties, most of them 104 are in North America, 22 are located in Europe, 3 in Australia and 2 are in Asia. 

DLR is trading at P/E ratio of 64.90 with a healthy dividend yield of 5.27% and Market Cap of $8.75B. It traded at $75.39 at its 52 week high and currently at $64.47, it is almost 15% lower than its recent high and I think it is decently priced right now, though, further slide could not be ruled out if interest rates were to suddenly spike and new aggressive competitors were to emerge.

I bought DLR at $66.19 on 3/05 and added 10 positions. It will add $34.00 of annual passive income on a forward basis.

3) Philip Morris Intl. Inc. (PM)

Philip Morris Intl. Inc., is one of the prominent tobacco company internationally with 6 of the top 15 international brands, like Marlboro, Virginia Slims, L&M, Parliament, Merit, Bond Street, Philip Morris, Chesterfield, Lark, Muratti, Red & White. It sells its products in more than 180 markets with 15.7% share outside US. PM is headquartered in New York City, NY but does not operate in United States, where brands are owned by former owner: Altria Group (MO).

PM is trading at P/E ratio of 16.3, a healthy dividend yield of 5.15% and Market Cap of $120B. It has ran up to $91.63 at its 52 week high and currently trading at $77.65 almost 15% lower and gives an excellent opportunity to add or initiate positions at current valuations in my opinion.

I bought PM at $81.85 on 3/05 and added 15 positions. It will add $60.00 of annual passive income on a forward basis, making a total of $118.80, that will help propel me towards FI journey.

Full Disclosure: Long on above mentioned securities.

Thanks for reading.

What do you think about these buy? Are you considering adding any one of them to your portfolio also.

Dividend Income Update – February 2015

Its time for me to post dividend income earned from my portfolios: DRIP, HID1, HID2, & RothI enjoy sharing them as these passive dividend income provides me great inspiration and encouragement to keep chugging along and hopefully to the readers.

I scored close to double hundred in total passive dividend Income: $178.84 to be precise. This month alone, my dividend income was more than 9.06% compared to last year’s Nov and out of park as compared to last Feb, over 1000%. That’s awesome. It only shows the power of Dividend Income engine. I’m that much closer to being Financially Independent (FI) and living a life that I want to live, be independent and not have to rely on someone else. Isn’t that a powerful motivator!

Passive Dividend Income – February 2015

1. Dividend Re-Investment Plan Portfolio (DRIP) 
Abbvie Inc. (ABBV): $11.68
Colgate-Palmolive Co. (CL): $2.56
The Clorox Company (CLX): $9.89
The Proctor & Gamble Company (PG): $28.31
Verizon Comm. Inc. (VZ): $6.70

2. High Dividend Income Growth Portfolio 1 (HID1
American Capital Agency (AGNC): $11.00
General Mills Inc. (GIS): $8.20
Realty Income Corp (O): $9.45
Omega Healthcare Inc. (OHI): $26.50
Prospect Capital (PSEC): $11.07
Pimco Corp & Opportunity (PTY): $13.00

3. High Dividend Income Growth Portfolio 2 (HID2: None

4. Roth IRA
HCP, Inc. (HCP): $12.43
Deere & Comp. (DE): $7.20
Kinder Morgan Inc. (KMI): $13.50
Vanguard Natural Res LLC (VNR): $7.35

Total Passive Dividend Income: $178.84

I want to own securities of Blue chip Aristocrats (companies with 25+ yrs of growing earnings) and Dividend Champions. Once the earned passive dividend income covers all my expenses, I will own my time as well and truly free from 9 to 5 tread mill.

I’d setup a goal of earning $3500.00 in total passive dividend income for this year and have received total of $473.20, 13.52% of target. I’m hoping  my passive dividend income for next month would be blockbuster and cover some more ground to achieve target.

Full Disclosure: Long in all above mentioned securities.

How did your Dividend Income come along this month of Feb. 

Thanks for reading.

Recent Buy

I’m looking for companies that are fairly valued, have a decent dividend yield(3% to 6%) and have a fairly long history of paying dividends consistently for 10 years or more. However, there could be some cases for exceptionally good company or a strategic buy for a very long term.

Here are two final purchases for this month of February.

1) General Electric (GE)

General Electric is a diversified infrastructure and financial services company, founded by Thomas A. Edison and incorporated in 1892 with headquarter in Fairfield, Connecticut. GE operates in a varied range of products and services: aircraft engines, power generation, household appliances, water equipment, medical imaging devices, industrial items, business and consumer financing. GE has wide geographical footprints across over 100 countries. 

GE is trading at reasonable P/E ratio of 17.30 with a decent dividend yield of 3.54% and Market Cap of $261.0B. It traded at $27.53 at its 52 week high and currently at $25.99, is fairly valued in my opinion and a long term hold.

I bought GE at $24.98 on 02/13 and added 20 positions in taxable account, making it 45 positions. It will add $18.40 of passive income on an annual basis.

2) Digital Realty Trust, Inc. (DLR)

Digital Realty is a real estate investment trust (REIT) that acquires, owns, and manages technology-related real estate, incorporated in 2004 and is headquartered in San Francisco, CA. The company focuses on strategically located properties that house services critical to day-to-day operations of technology companies and corporate data center users.

Digital Realty’s portfolio consists of 131 properties, most of them 104 are in North America, 22 are located in Europe, 3 in Australia and 2 are in Asia. 

DLR is trading at P/E ratio of 69.10 with a healthy dividend yield of 5.12% and Market Cap of $9.0B. It traded at $75.39 at its 52 week high and currently at $66.38, it is almost 12% lower than its recent high and I think it is decently priced right now, though, further slide could not be ruled out if interest rates were to suddenly spike and new aggressive competitors were to emerge.

I bought DLR at $65.38 on 02/26 and initiated 10 positions. It will add $34.00 of passive income on an annual basis that I do not have to earn and work for.

Thanks for reading.

What do you think about these buy? Are you considering adding any one of them to your portfolio also.