All posts by DGIfortheDIY

Gilead, Church & Dwight Boost Dividends

Two weeks ago I published my predictions for the 11 dividend increase announcements there were expected in my portfolio during the first quarter. Shortly thereafter, Polaris Industries Inc. $PII announced a 5.45% boost to its dividend, which was a pleasant surprise to the upside compared to my prediction.

On February 7th, two more companies, Gilead Sciences $GILD and Church & Dwight Co., Inc. $CHD, announced their new rates. Before we discuss the increases, let’s take a look at my original prediction.

DGI For The DIY – Q1 Dividend Growth Projections

Continue reading Gilead, Church & Dwight Boost Dividends

Dividend Payout Ratio: Is It Relevant?

I was just going over some of my sector-based watch lists and was struck by the wide variety of dividend payout ratio targets that have been set by companies. This got me thinking about how often investors, and specifically dividend investors, use payout ratio as an initial screening tool for finding potential investments.

Not only do payout ratios vary significantly from sector to sector, but they also can vary significantly between companies operating in similar businesses. For example, it is quite common for utility companies to pay out more than 50% of their earnings in dividends, as they operate in generally stable businesses that have predictable earnings. However, when looking at my 30 stock utility watch list, there is a range of targeted payout ratios from 40-75%, with UGI Corporation $UGI on the low end and Dominion Resources $D at the top.

Continue reading Dividend Payout Ratio: Is It Relevant?

Polaris Industries Raises Dividend 5.45%

PII Logo

I got a nice surprise this afternoon when Polaris Industries Inc. $PII announced a 5.45% increase to the dividend by raising the quarterly payout from $0.55 to $0.58 per share.

Just yesterday I released my predictions for dividend increases in Q1, where I wrote this about my expectations for Polaris:

Polaris Industries Inc. (NYSE:PII) has really struggled the last year and saw earnings fall by nearly 50% in 2016. While they are expected to rebound in 2017, the payout ratio is well above the historical ~30% rate, which will likely lead to another minimal increase in the dividend. I am predicting a penny increase to $0.56, which is just 1.8% more than last year.

Needless to say, I am happy to see management step up and give a decent dividend boost despite the headwinds. It’s also good to hear management make a point to talk about the dividend, as it reinforces the fact that dividends are a top priority for the company.

This is what CEO and Chairman Scott Wine said in the press release (bolded by me):

“We are very proud of our 22-year history of increasing dividend payments. We have maintained a disciplined, consistent approach to returning cash to shareholders, and dividends remain one of the important ways we can deliver further value. We believe this most recent dividend increase underscores our confidence in Polaris’ future growth and profitability prospects, steady cash flow generation, and continued strong financial position.”

One of the great things I like about dividend growth investing is that by focusing on the dividend rather than the share price helps keep me from acting on emotion with my investments. It’s easy to throw in the towel during times like this when a company has a setback or two, sees earnings take a hit, and the share price suffers.

However, emotions of fear and dismay can cause one to sell out of a position at the worst time, often near the bottom before things turn around and shares head higher.  This is something I personally struggle with, and am making a point of emphasis this year to limit turnover in my portfolio.

Polaris has certainly had its share of miss-steps over the last two years, and those coupled with a tough business climate has caused earnings to be cut in half. However, it deserves to be given a long leash considering its tremendous performance over the last two decades, which is why I continue to hold my shares.

Today’s announcement  gives me some encouragement that I’m doing the right thing by doing so.

11 Stocks In My Portfolio With Impending Dividend Increases

One of the more enjoyable aspects of dividend growth investing is being able to see my income grow on a consistent basis. Between the reinvestment of dividends and the organic growth produced by dividend increases, my portfolio income has been on a steady march higher since it was built in early 2013.

It’s a nice comfort knowing that my income will grow regardless of what the market is doing on a day to day, monthly, or quarterly basis. Even better, if the market does have a large correction, it actually works in my favor, as my dividends are reinvested at an even higher yield than they would have otherwise, further increasing my income.

Seeking Alpha contributor David Fish recently wrote a series of articles highlighting the Champions, Contenders, and Challengers that are expected to raise their dividends during the first quarter of 2017. This gave me the inspiration to take a closer look at the holdings in my portfolio, and see which ones are due to raise their payouts.

Between David’s list and my own tracking spreadsheet, I was able to find 11 companies that are likely to announce increases with their next declaration. Here they are, along with their recent dividend growth information:

Historical Dividend Growth Rates

I wrote up an article on Seeking Alpha providing my dividend growth expectations for each company, and my guess at the date that they will be announced.

If you are interested in seeing those predictions please follow the link below.

DGI For The DIY: 11 Companies With Impending Dividend Increases

DGI For The DIY: 2016 Portfolio Update

Another eventful year in the market has come to a close, and that means it is time to provide a new update on my dividend growth portfolio.

This update is a bit different for me, as it is the first one I’ve made since starting this new website. I’m still trying to find balance between simply restating what I already said in my Seeking Alpha update, and providing some new insight here.

2016 was a good one for the markets, as the DJIA gained more than 15%, while the S&P gained 11% for the year. My portfolio also did quite well, putting up 15.6% income growth and increasing in value by 24.1% (including contributions).

Value, Contributions, and Income Chart

Continue reading DGI For The DIY: 2016 Portfolio Update

Finding Green Shoots Among My Healthcare Stocks

After taking a beating in 2016, it appears that the Healthcare Sector may be on the rebound. I have been taking advantage of the cheap prices by consistently adding to my positions over the last 6 months, with new positions and multiple buys made in Abbott Labs $ABT and CVS Health $CVS, along with adding to my positions in Omega Healthcare $OHI, and AbbVie Inc. $ABBV.

Here are the prices for those transactions, and how they have done so far.

Health Care Sector Investments

On the surface, those numbers don’t look all that great, as the first three purchases made are still underweight. I was a bit early in jumping in on CVS Health Corp., and my first two buys remain under water. However, I made a third purchase following the big drop on earnings, and that has worked out well so far, as that buy is up nearly 11%.

Continue reading Finding Green Shoots Among My Healthcare Stocks

Top 100 Blogs For Dividend Investors…Guess Who Is #25?

It was a busy Tuesday in the Landis household, as I had my first day back at work after Christmas vacation, and with my son’s 5th birthday coming up tomorrow, we needed to make a Costco run to pick up some supplies for his big day.

After making the trek through the store with my two sons in tow, getting the loot loaded into the mini-van, and then freezing my ears off filling gas in sub-zero wind chills, I got a nice surprise when I checked my phone and saw an alert from Twitter.

Enclosed was a message from Lewys Thomas and a link to his blog post highlighting his picks as the Top 100 Blogs For Dividend Investors That Will Drive Returns. To my surprise, he called me out as #25 on the list, along the likes of some of my favorite authors including: Brad Thomas, Jason Fieber, Chuck Carnevale, and Mr. Money Mustache.

To say that I feel honored to be mentioned among them is quite an understatement. Never in my wildest dreams did I think my passion for investing, and interest in sharing my thoughts on it, would earn me notoriety or any sort of following. It was simply a way for me to continue learning about the market and hopefully make a few bucks a month to pay for my fantasy sports habit.

Now, nearly four years after penning my first piece, I have over 3,000 followers on Seeking Alpha, 99 published articles that have generated a half-million pages views, and this sparkling new website. All I’ve ever wanted to do was share my passion about the stock market with others, and I am humbled and ecstatic that people value my work.

I’m hopeful that this website can live up to my dream for it (and the ranking bestowed to it by Lewys), and that it can prove useful to others trying to build up the courage to start their own portfolios.

We all start from scratch, here’s to continued learning and making the most of what we’re blessed with!

Best wishes,

Eric

 

Education Center Added

Just giving a quick update that I have begun construction of an “Education Center” that will cover some of the basic questions of Dividend Growth Investing.

Thus far I have the topics “Portfolio Weighting“, “Dividend Reinvestment“, and “Yield Vs. Growth“.

I am also planning on adding “Stock Selection” and “Portfolio Construction” pages, but thought I’d also open it up to readers as well to see if they can think of other important topics that should be covered.

As of now I am just populating these different topics with articles that I have personally written, but as time goes on I also plan to add articles from other authors from Seeking Alpha and other sites as I come across them.

Do you have any MUST READ articles in your bookmarks that you think would be worthwhile to others? If so, please share in the comments below and I will consider them for addition.

Thanks, and Happy New Year!

Eric

2017’s Top Ten Utilities For Dividend Growth And Income

My latest coverage of the utility sector was posted on Seeking Alpha, highlighting my Top Ten picks for 2017.

The sector as a whole remains quite expensive on a historical basis, with 27 of the 30 companies trading at least 10% above my “fair value” estimate. Nonetheless, there are still a few companies worth a look, especially for those looking investors looking specifically for income.

For quick reference, here is the list of the Top Ten, as well as the valuation and projection spreadsheets from the article.

A list of my top ten utility stocks for dividend growth and income for 2017.
Valuation Spreadsheet
Income and total return projections.

Finally, here is the article:

2017’s Top Ten Utility Stocks For Dividend Growth And Income

 

Chowder’s Investing Words Of Wisdom

For those new to dividend growth investing, the name “Chowder” may not mean much to you. However, for any regular visitor to the “dividends and income” section of Seeking Alpha, he is one of the most well-known and well-respected members of the site.

His no-nonsense, straightforward approach to investing has guided many novice investors along their way, and with a comment total now approaching 15,000 posts, he has certainly made his impact well known.

He has been in prime form of late, and I thought it would be worthwhile to highlight a few of the comments he’s recently made.

On Christmas Day, he made a comment about fund managers and what advantage individual investors have over them, because they have different goals with their portfolios:

I was reading an article by Cramer yesterday who had some success as a stock broker in selecting companies and decided he was good enough to start his own fund. He stated he wasn’t prepared for the performance demands of running a fund. He quickly learned that if he wanted a portfolio to perform in the short term, which most people investing in funds require, then he had to start taking daily action as opposed to sitting idle while a good long term investment took a beating short term.

His favorite company was Heinz, but he couldn’t treat Heinz as an investor would normally do, buy more shares when the price corrected. He had to try and determine what the short term buy and sell points were.

The enemy of the fund manager, and why they have such a hard time at beating the S&P 500 consistently, is sector rotation. Everyone is chasing short term performance as opposed to simply building good long term positions and letting performance come to them in time. All it takes is a little discipline and patience.

People have difficulty in accepting the simplicity of the process.

Chowder used to have his Series 6 license, so he knows a thing or two about mutual funds.  I thought this comment was a good one, and is a big reason I’ve decided to become a DIY investor and build my own personal mutual fund and not rely on “professionals” to do it for me. By taking control of my investments, there are no worries about whether the fund is being run with my best interests in mind, because I’m doing it myself.

Just today, he followed with another comment about not chasing growth and trying to beat the market, but rather focus on high quality stocks trading at a discount to fair value:

I have commented many times on SA over the past year and there are a handful of comments that I think are critical to one’s mindset if they wish to become a better investor and this comment is one of them.

Stop chasing growth!

Stop allowing your fears to prevent you from buying high quality companies facing headwinds.

High quality companies earned the high quality rating because they have a history of overcoming adversity. You can’t allow yourself to be afraid of buying quality at discount prices. 

People have a tendency, myself included, of wanting to buy when the outlook is hunky dory. This isn’t always the best approach. I try to balance my buys between companies expected to show earnings growth and companies facing adversity.

At the beginning of 2016 people questioned my purchases in CAT, DE, IBM and CVX for example. Nobody, and I mean nobody was predicting they would outperform the market over the next year, myself included. However, my job is to buy quality and I do not let headwinds get in the way of it, which had me buying companies last January that others were avoiding.

Check out these performance stats coming off the January lows:

CAT has rebounded 72% off the January lows. … You heard that right! 72%! … Back in January they hit a low of $54.80, now at $94.28 while I type, and they still aren’t projecting earnings growth.
IBM has rebounded 47.7%
DE has rebounded 50.7%
CVX has rebounded 65.0%
EMR has rebounded 43.5%

And these are just some of the positions we hold across various accounts.

Now I realize nobody is going to catch the bottom, but that’s a wide profit range where opportunities presented themselves to buy.

So, as I look forward in 2017, I’ll still look to add companies with great earnings expectations, but I will also look to add to high quality companies facing headwinds. I’ll continue to look for a balance between the two.

I bolded what I see as the most important lesson, focus on quality and ignore the noise! Amen Chowder!

Today you can pick up shares of AbbVie Inc. (ABBV) at a forward PE of just 11.3 and a yield over 4%. Gilead (GILD) trades at a forward PE under 7, and is generating $4B+ in cash every quarter. CVS Health (CVS) trades  at a forward PE of just 13.5 while yielding over 2.5% for the first time in a long time. I’ve added to both CVS and ABBV in recent weeks, GILD may be up soon as well.

For more of Chowder’s musings, check out CHOWDER’S INVESTING WORDS OF WISDOM, PART II.