Monday, October 16, 2017

Lessons in Pragmatism

Somehow Still Calm Gremlin here with a few general updates and thoughts on the future.  So, the update is that there is now a Lil Gremlin living in my house.  The Lil Gremlin even has an online profile stating that he likes milk, long walks - so long as you are holding him, car rides, things similar to car rides, and sleeping (just kidding, but if one did exist it would probably say that).  I was there when Lil Gremlin was born and it was a powerful experience.  It is something I would not have missed for the world, and it is the type of event that is beyond life altering.

This new addition has gotten me thinking, what will I teach Lil Gremlin as he grows.  To start there is the obvious stuff - how to tie your shoes, how to ride a bike, the best flavors of ice cream, how to rock at Tetris, etc.  What I mean is, what will I teach him about personal finance?

My wife and I have a good idea of what kind of education Lil Gremlin will get in school.  However, personal finance only receives limited coverage in school.  Most of what I have learned is from my own trial and error, with some extras from friends and family.  What I learned came later in life than it should have; that information would have been amazingly valuable had I learned it sooner. 

First, I plan to teach him how to save and why to save.  It is one thing to have extravagant plans for investing, but it is impossible to accomplish those goals without having the capital to do so.  I surmise this will require small lessons such as how you can save money such as by biking places.  In the syllabus will be how to save on the every day things, getting the best value on the big ticket items, and most importantly not caring about what the Jones' have.  After all, it does not take a lot of money to get the most enjoyment out of life.

Second, I plan to teach him the power of compounding and investing.  This will be done by establishing an account for him and for him to see the power of it via my accounts.  I will continue the focus on dividend growth stocks and work on establishing for him a bank of stocks and or funds that work for him and us.

Third, I plan to teach him the power earning more.  As powerful as saving can be, earning a higher income is the 2nd punch that really can propel people to financial independence.  Lots of things contribute to improving earnings - having a side hustle, professional certifications, advanced education, fields studied, and hard work of course.

Finally, I plan to teach him to lookout for bad advice.  This is one that I wish was covered more often by those in the dividend growth community.  Some of the bad advice is easy to spot and can come from anyone - friends, family, late night advertisements, etc.  That advice usually starts with the phrase 'its okay you can afford / deserve it.'  Usually this is followed by statements that make it seem normal or expected to be in debt.

However, there is much more subtle bad advice out there parading around as if it was good advice (no not the Indexing vs Dividend Growth argument, I think they are 2 sides of the same coin that is made up of FU / FI money).  What I am talking about here are some popular platforms that have large followings.  Some such as the Financial Education Channel - on YouTube* have large subscriber followings, so you would think the advice given is sound.  It often is anything but sound; examples include the presenter concentrating his portfolio in 1 to 5 stocks or overly frequent re-balancing.  Other bad advice can come from those who often give good advice.  Here is an example from Dave Ramsay covering credit cards.  Ramsay is all about paying off debt (good), but refuses to see how small amounts of interest earned from things such as credit cards can help (he would laugh at many DGIers' side hustles).  His advice is clearly aimed at people in the community who need more rudimentary advice.  This all runs counter to my beliefs, which is every dollar counts - Mr. Money Mustache said it better in this article (one of my favorite articles of all time in any form).  Ramsay states that people spend more with plastic than cash, which is not necessarily true.  Having worked at a bar I know people who pay in cash usually tip significantly more.  There is merit to the idea that card users spend more money, but once again that is a mind set that a strong willed person can easily overcome.  The fact is the world is progressing away from cash at a steady rate.  Might as well learn how to deal with it now and take advantage. 

Naturally, Lil Gremlin will need to learn a lot of things for himself.  Sure I can try to teach him everything, but that does not mean everything will stick or matter to him.  I like soccer and hockey, he might prefer ping pong.  However, I can still attempt to pass on important financial advice that I wish I had when I was younger.

* There are some good dividend growth / investment videos out there, but it seems like the majority or at least the ones that pop up in searches first are not among them.

- Daddy Gremlin
- PS I do intend to teach him that pizza and ice cream are the best dinner - dessert combo on the planet!

Sunday, October 8, 2017

First Dividend Initiation

Self-Hazing Gremlin here to talk about initiation.  From the looks of it one may think I am talking about a college initiation with heavy drinking or something similar.  Rather I am talking about a dividend initiation.  I have experienced over 30 dividend increases this year already, and have had over 70 since 2014 without a doubt.  Some of those are as small as 0.2% (I appreciate the consistence Realty Income - O!), with others getting as high as 16+%.  However, I have never had a dividend initiated by a spun off company.  That all changed last week.

YUM China (YUMC), was spun off from YUM Holdings (YUM) in December of 2016.  The split at first meant a lower payout combined, with YUM decreasing its dividend accordingly and YUMC not paying one.  Some might take this as a good reason to sell one or both stocks, I did not.  My mindset was to put YUMC on a clock, and see if they cannot rectify this situation.  They did, my clock was about 1.5 years long.  This past week they declared their first ever divided, unexpectedly to many.

YUMC's announcement was very exciting.  Sure it is not a ton of cash - $0.10 per share (assumed to be quarterly), but it is a start.  The yield should come out to be approximately 1.0%.  The payout ratio will likely be very low (once past year numbers are fully tallied, we will have a better idea), hence there will be a lot of room to grow the payment.  This is what matters when it comes to compound growth - time, patience, and growth!

Have you had a dividend initiated before, or are you sharing in this YUMC experience?

- Gremlin
- Long O, YUM, and YUMC

On tap when writing: Victory Brewing (PA), Sour Monkey - 9.5% ABV.  Biting sour flavor, not too heavy body.  Been a big fan of sour beer of late.

Saturday, September 30, 2017

September Review / October Preview, 2017

Cold(er) Weather Gremlin here to talk about the last month and take a peek through the looking glass into next.  The end of September has finally brought some chillier weather to my area.  Being that I bike to the train for work, I enjoy not getting on board and being a sweaty mess.  In addition, the wife will appreciate it, as being pregnant in hot weather is considered less than desirable.  Either way, the big deal is the baby around the corner.  We have done some classes, gotten the room ready, and all that other fun stuff.  The real challenges and fun are still ahead.

September:

This month I made no new purchases, but I should next month.

Last month I brought in a total of $319.66 in dividends ($106.24 taxable, $80.64 Roth, and $132.78 IRA).  This is an increase from last year ($115.43 total) by 177%.  This total is extra high as Discover (DFS) changed its payout month, and it will be the last time that the IRA really blows that percentage out of proportion.

In terms of dividend increases, I realized* seven this month from DFS, Hershey's (HSY), Kellogg's (K), Kraft-Heinz (KHC), Target (TGT), J.M. Smucker's (SJM), and Westlake Chemical (WLK).  The raises range from 3.3% to 16.8%.  Thus far for 2017, I have realized 38 dividend increases!

Next month I will realize three raises from CIBC (CM), Scotiabank (BNS), and Realty Income (O).  The increases range from 0.3% to 6%.

* I only count increases when realized, because until that money is delivered any statements or declarations simply appear to be conjecture.  

October:

The mortgage has started, so at least part of our 'rent' counts towards our house. Our debts currently outstrip our assets.  Outside of our house, we still have very low interest auto debt.  Both my car and house are receiving slightly out-sized payments monthly.  We will be effective at eliminating debt, while still building and assets. This is a long game, and I am nothing if not patient.

I have cash on hand to make another buy, but I might not depending on other needs.

Next month should produce around $68 in dividends, which is a 15% YOY decrease.

My portfolio page is currently up to date.

Hope everyone has a great September, sorry for those who are back to school, but don't want to be...
- Dividend Gremlin
- Long all stock tickers mentioned

Monday, September 18, 2017

Big Changes

Real Talk Gremlin here to talk about some major changes.  In life most changes come slowly.  We get older, wiser, taller, slower, stronger, etc. over a long window of time.  However, there are specific times where things can change rapidly.  Going off to school, buying your first house or car (just like the house we bought...), and having a child come to mind.  Well that last one will be happening soon, which makes for several major changes in the past year: a new job, new house, and new person in our house. So that there is a huge change.

Naturally everyone points to the cost of raising a new child, which in some ways is undeniable.  Clothing, food, and medical needs are all requirements and will be present in someway for a baby.  However, many of the believed requirements are not requirements - especially as kids age.  For instance, if your child wants to learn an instrument, they don't need top of the line equipment to start.  Now to be honest, our child will have opportunities to do fun / stimulating stuff, but it will not be rammed down their throat.  Part of being a kid is about trying and learning new things, if there is too much emphasis on specific things that bigger picture of the world is missed - and from their perspective its likely not fun.  So the goal is to give them a chance to explore their world while not forcing on them nor breaking the bank.

"You don't have to buy your kid a Stradivarius if they want to learn to play the violin." - me

From a family perspective, I also see a relative cost savings up front on some items.  Food - we won't be trying as many new places outside of our kitchen.  Travel - probably not happening very much, outside of our family events.  I doubt there will be any splurges of any sort, outside of stocks and the occasionally required ice cream.

Regardless of these big changes, I still intend to pursue financial independence.  Debt is being knocked out faster, and investments are still being made.  I will continue working at two jobs to achieve this faster, and obtaining professional certifications to further my main money making abilities.  Not all is lost, in fact really nothing is lost - including my time.  Children demand time, regardless of the age, however that is no way time lost.  Its just a different journey, one that is much less predictable.

Here's to new beginnings.
- Gremlin

Friday, September 1, 2017

August Review / September Preview, 2017

Bug Eyed Gremlin here to talk about the roller-coaster that has been this past month. We bought a house - cool.  My commute is different, but takes about the same amount of time, and it does not impact my budget (and no car) - also cool.  Mostly everything has been organized, except for the presents we got because sometime late September or mid October there will be a copy of me gracing this Earth. A scary thought indeed.  What is most notable is how fast it all has happened.  At this point a year ago I had just started a new job and taken a trip to Europe.  None of these other items - a house, kid(s), or a backyard to mow were in my mind.

Inserted in all of this is the fact that I have taken on new job responsibilities, which should benefit me in the long run, but do add a small layer of stress in the short term. Still, no matter how crazy life gets, the goal here is to generate passive income by building a quality portfolio of dividend paying stocks.

August:

This month I made one new purchase, Archer Daniel's Midland (ADM), in my taxable portfolio.

Last month I brought in a total of $239.61 in dividends ($37.44 taxable, $58.34 Roth, and $143.83 IRA).  This is an increase from last year ($95.21 total) by 151%.  It could have been higher had Discover (DFS) paid this month as expected, but they moved their payment back to September.

In terms of dividend increases, I realized* one from this month from Omega Healthcare Investors (OHI).  The raise was around 2%.  Thus far for 2017, I have realized 31 dividend increases!

Next month I will realize six raises from Discover Financial (DFS), Hershey's (HSY), Kellogg's (K), Kraft-Heinz (KHC), Target (TGT), J.M. Smucker's (SJM), and Westlake Chemical (WLK).  The increases range from 3.3% to 16.8%.

* I only count increases when realized, because until that money is delivered any statements or declarations simply appear to be conjecture.  

September:

My wife and I have moved into our new home, now the mortgage bills can start - bye bye rent. Our debts for the moment currently outstrip our assets.  However, I am not selling stocks to pay for it all.  Rather it is time to double down - blast debt and buy assets. 

I have cash on hand to make another buy, but I might not depending on other needs.

Next month should produce around $315 in dividends, which is a 174% YOY increase.

My portfolio page is currently up to date.

Hope everyone has a great September, sorry for those who are back to school, but don't want to be...
- Dividend Gremlin
- Long all stock tickers mentioned

Tuesday, August 15, 2017

Recent Buy, August 2017

Rained Out Gremlin here.  It has been a strong summer.  My wife and I moved, I was a best man in a wedding, we had a mini family reunion, and on and on.  The new house is mostly set up, but it feels like there is always something to do.  As a new homeowner, yes we bought a house, it feels like there is no time to slow down.

Perhaps that is why, now more than ever, I view each dollar I make passively as getting some of my time back.  I figure for every $25 made passively, it is as if I have worked one extra hour.  Thus, at some point those extra bucks will become the main bucks, and I will be able to sleep in with no one stopping me.  Therefore in the back of my mind, I make a tally of how many extra hours that my money has worked for me.  So to keep the train rolling, I made another dividend growth investment.

Today, I added to a position by purchasing shares of Archer Daniel's Midland (ADM) in my taxable account.  I bought 30 shares, with a total cost of $1263.95 ($41.90 / share, plus commission).  The current yield is 3.10%.  The P/E ratio for ADM sits today at approximately 17.74, trailing.  This is better than the historical 5 year average for the stock with the average yield being 2.38% and the average P/E being just under 17.84.  ADM boasts a trailing payout ratio of approximately 53%.  ADM has 42 years of dividend growth and is a member of the Dividend Champions.  This purchase will add $38.40 to my 12-month forward income.

I already have ADM in my IRA, where I hold 70 shares that I purchased for a similar valuation back in September of 2016.  It was a monstrous amount of buys that I made with my transferred 401k funds from old job.  With this purchase I finally have 100 shares of a DGI stock in my portfolio.  If I want, options are literally now on the table.

So ADM, what do you do?  Well here is a description in their words:

"Archer Daniels Midland is a major processor of oilseeds, corn, wheat, and other agricultural commodities. Additionally, the firm owns an extensive network of logistical assets to store and transport crops around the globe. The company's end products include vegetable oil and meal, corn sweeteners, flour, feed ingredients, and ethanol."

I like that description.  It is simple and understandable.  The need for food products, oils, sweeteners, and similar foodstuffs will not likely go down.  It is possible the products could become cheaper, but the demand should always be present - pending any worldwide catastrophic events.  As someone who likes to cook a lot, I recognize that these items are so essential.  Even more necessary, but often misunderstood, is the food transport, distribution, and warehouse network.  I work near train tracks where daily ADM rail cars come by as part of larger trains.  This infrastructure takes a long time to build and is cost prohibitive.  This framework has an intrinsic value that is difficult to quantify, but is impossible to deny.

I will update my portfolio page at the end of the month.  Stronger 2017!

What do you think of ADM? 

- Gremlin
- Long ADM

Wednesday, August 2, 2017

July Review / August Preview, 2017

Let Me Dress for the Weather Gremlin here to talk about July and August.  It has not been the hottest July on record, which is very nice.  I took two trips out of the area.  One for a mini family reunion over a weekend, and another to Las Vegas to work.  I am ever the cautious investor, I did not even step foot into a casino.  Sure gambling can be fun, but its not fun to do it by yourself (as I said business trip), nor is it fun to lose money in such vast quantities as the average person does in Vegas.  Also no interest in their shows, especially since the town I live in is already part circus.

On serious note, my wife and I closed on a house.  We will be moving in shortly, and as everyone knows - moving sucks (ask all of my friends who owe me for helping them move, its their turn).  I digress, the fact is our 'rent' is now going to be headed towards equity, which is a nice change.  My wife's commute should stay the same.  I will be on a new train line, though farther out - it is more direct. Overall buying a house is smart in the long term, however it is stressful.  For some reason it is less stress inducing than buying a car, until you see that final number on your mortgage...

July:

This month I added one new position to my Roth account, J.M. Smucker's (SJM).

Last month I brought in a total of $73.19 in dividends ($72.19 taxable, $0.00 Roth, and $0.00 IRA).  This is an decrease from last year ($84.98 total) by 14%. The decrease is mainly related to KHC switching their payout month.

In terms of dividend increases, I realized one from this month from Realty Income (O).  The raise was around 0.2%.  Thus far for 2017, I have realized 30 dividend increases!

Next month I will realize two raises from Discover Financial (DFS) and Omega Healthcare Investors (OHI).  The increases are 16.8% and 1.5%, respectively.

August:

Within the last week my wife and I bought a house.  I have stated it earlier that this would happen, and sometimes things move faster than plans, so here we are.  Our debts for the first time, since practically ever, outstrip our assets.  However, I am not selling stocks to pay for it all.  Rather it is time to double down - blast debt and buy assets. 

I have cash on hand to add a new position, but I might not depending on how moving goes.

Next month should produce around $250 in dividends, which is a 160% YOY increase.

My portfolio page is currently up to date.

Hope everyone has a great August!
- Dividend Gremlin
- Long all stock tickers mentioned