2014 has been a crazy, unreal year for my portfolio. I have pushed myself to invest more capital than I was comfortable investing for the sake of reaching financial independence that much faster. When 2014 began, I was projected to earn only $750 in dividend income. My portfolio only had $17k invested in income producing assets with some major funds just sitting on the sidelines. When the calendar flipped, I initially set a projected dividend income of $1,500 and surpassed this total early in the year. I decided to increase this goal $250 and set a new target of $1,750. I can now proudly say I my projected annual dividend income is $1,752, surpassing my goal. So how did I do it?
On August 1st, I was bracing myself for a relatively quiet month. My cash reserves were reaching my emergency fund level and I was very comfortable with my holdings. Sometimes Mr. Market presents you with opportunities you cannot resist. I was faced with the decision of dipping into my reserves to purchase shares or liquidating a position to purchase the discounted companies. Why have one when you can have both?? That’s exactly what I did in my listing of transactions below. I apologize for not writing detailed articles about each transaction, but I will make up for it by describing my purchases and thought process below.
Transactions 1: Purchase 21 Shares of Aflac (AFL), Adding $31 of Projected Income
I was not shy about my portfolio’s lack of a financial company. I love my Bank of America stock, those 11 shares were a cherished gift from my grandma. But it just wasn’t cutting it anymore. In July I created a Watch List of insurance companies and banks that were on my Watch List for a continued dip in their stock price. AFL was one of the featured companies on this list for every reason that it is a holding in many dividend growth investors’ portfolio. Very solid earnings, strong dividend growth, low P/E ratio, and so on. I also really like the fact that the company is not as exposed to natural disasters as property and casualty insurance companies. Each year the storms seem to become more powerful, cause more damage, and case unprecedented dollars of damage. I don’t want any part of that, at least not right now. Lanny also wrote a very solid analysis (unbiased opinion) on AFL and featured the company on his August Watch List. AFL was the perfect fit for many reasons and it just didn’t make sense anymore that I did not own a position in the company. I took the plunge on 8/5/14 and purchased the 21 shares for $1,239, adding $31 of projected income to my portfolio. While I like to purchase shares in a greater dollar amount now (close to $2,000 per investment), only purchasing 21 shares was a product of my cash available at the time. My portfolio had a major gap filled and I am finally back in the financial sector!
Transaction 2: Sell 31 shares of Schweitzer-Mauduit International (SWM), Decreasing Projected Income $43
Woah, wait. Did I type have a typo? No, it is correct. While it may seem counter-productive for a dividend investor to sell a stock and forfeit dividend income, it was finally time to liquidate my position in SWM. I won’t go into too much detail since I wrote about selling this stock in an earlier article, but it was time for it to go! The stock had not been producing for me (I was down around 10% when I decided the sale was going to happen) and there were just too many other opportunities available to continue to sit in a stock that was not going anywhere. Since I was low on cash and still wanted to purchase new stock, my position was liquidated. Selling the stock provided me with $1,300 of capital to re-deploy on 8/7/14. Let’s see where the funds were deployed!
Transaction 3: Purchase 11 shares of Diageo (DEO), Adding $38 of Projected Income
I used the majority of the proceeds from my sale of SWM to purchase 11 shares of DEO. The stock was on my watch list based on an analysis we performed earlier in the month. Finally, a couple of Friday’s ago, Lanny and I pounced on the alcohol giant when the stock suddenly dipped 2% dip at the beginning of the day. Our stock analysis showed the company has a very strong market share domestically and internationally, a diversified alcohol portfolio containing some of the most recognizable names in every bar/liquor store, and a history of increasing their dividend by an above average amount. It seemed like a no-brainer at the time of the dip so we both took the plunge and initiated a position in the company.
Transaction 4: Purchase 21.3284 shares of Scotts Miracle Gro (SMG), Adding $38 of Projected Income
This is where I really dipped into the reserves. While I still had a few hundred dollars left from my sale of SWM, I dipped a little more than I would have preferred into the emergency fund to jump on this opportunity. Similar to my purchase of AFL, I piggy-backed off of Lanny for this investment; but rightfully so! Earlier in the month he performed a great stock analysis which eventually led to his purchase of ~32 shares of the company. In his analysis, he highlighted the stock had declined during the period, the dividend yield of >3%, the short but strong history of dividend growth, and a P/E Ratio of less than the S&P 500. The timing wasn’t right at the time of the analysis, so I decided to hold off on purchasing the stock. Then one day, I received a text from Lanny that said “search SMG.” Before responding, I logged into my Sharebuilder account and purchased the shares. What prompted the sudden purchase was the announcement of both a dividend increase and a $2 special dividend! The ex-date was a few weeks away and the stock was down a percent that day. Again, a no brainer investment decision for me. Thanks Lanny!
Re-Upping My Projected Annual Dividend Income Goal
So where do I go from here? I can’t just remain satisfied with the fact I hit my initial dividend goal, that wouldn’t be fun. So it is time to reassess my goal for 12/31/14. I still have approximately $3,000 left for an investment in my Roth IRA and I like to purchase stocks yielding at least 4% to fully maximize the benefit of a Roth. Assuming a 4% rate, that would provide an additional $120 in dividend income. I should also receive ~$700-$800 in additional dividends throughout the rest of the year, which should add about $30 to my projected income. So this leaves me at about $1,900. The question is…can I crack $2,000? I am sure as heck going to try! From this point on, my new goal for the last 4 months of the year is to get to $2,000! Let’s do this!
Bert