Glatfelter - Gone!

Who said I get emotionally attached to a stock? :P

So, Wednesday, I set the sell price at $20 - it had closed Tuesday at 18.98 and was running up for the dividend payout date.  I did not expect it to sell at that price, and it didn't.  Meanwhile, I was researching all the financial data available and found out just how volatile this mid/small cap stock was!  I was also using this as opportunity to learn about financial indicators.  Now, it can all mean nothing if an Enron or a 9-11 situation happens, but I would say a few red flags on the numbers should be cause for attention.  GLT has SO many red flags.  So right before the bell, the stock was at 19.89, one dollar higher than previous close.  If I sold, I would be making $80 in a day.  The stock was up 24.88% from when I bought it (15 and change) ten years ago, so I would be making over 5 years of dividend yields after 10 years from a volatile stock, even after trade costs.  I pulled the trigger.

I spent the rest of the afternoon researching which two stocks to buy.  I wanted to make more per year with my two new combined stocks, so I created a formula in excel to determine that.  I then wanted stocks with no red flags in their financials currently, with an annual yield of around 3%.  I then looked at their 52 week high/low position (I prefer it to be on the low side).  I found one consumer/noncyclical and one energy stock.  Energy stocks are SO attractive in the Trump administration - I'd like to own more of it.  Here's a snapshot of my "scratchpad":
  
 

						Symb	Annual	Beta	P/E	Yield
						NEE	43.12	-0.17	17.34	2.76
						KMB	46.56	0.51	21.7	2.95
						PEP	42.12	0.26	25.04	2.78
Price	Shares	Div	Annual			D	60.8	0.08	21.81	3.88
62.19	12.0	0.52	24.96			PG	46.92	0.37	24.79	3.11
						MO	48.8	0.33	10.19	3.24
	Edit column B for amount of $					KHC	43.2	0.38	31.14	2.74
						SO	74.24	-0.13	18.36	4.7
						QCOM	63.84	1.49	18.44	4.11
			12 shares 24.96 annual			WEC	52	0.05	20.92	3.32
			14 shares 26.88 annual			GIS	53.76	0.64	20.58	3.53

   Today was a bloodbath - but a good day to buy!  Everything dropped in my portfolio and my watchlist, unlike Wednesday when everything went up.  The only two stocks that did not drop were Abbot Labs and my son's farmland stock.  I had calculated to buy 12 and 14 shares of WEC and GIS respectively.  Because of the price drops, I was able to snag 13 shares of WEC and 14 shares of GIS.  

 WEC!  I got another energy stock.  Despite the fact I recently watched the Enron documentary which was an energy broker, I feel like this is the time for energy to shine.  Free from regulations, out of the Paris accords, OPEC walking around confused, I think this is a good one to hang onto.  Current annual dividend $2.08/share.

General Mills - not much to say here.  $1.92/share annually.  I'm going to create another page with a bar chart of my annual earnings.  I'll probably update my Current Holdings page tomorrow.

One thing I did learn, I *could* have waited until the opening to sell my GLT shares - and still be eligible for the dividends.  The price was fine for the first 15-30 minutes then declined about 20 cents/share by the end of the day.  Live and learn - I'm out $10.  I'll always have a soft spot for GLT - it was the stock that made me aware of the possibilities of dividends.

Diversify

 Wednesday, June 28th

I have decided to continue diversifying before increasing holdings.  After much research, I found that many recommend what seekingalpha.com recommends:

"Maximum Stock Position (3-5% of total portfolio) - We believe that a diversified dividend portfolio should include at least 20-30 high-quality dividend stocks, with no stock accounting for more than 5% of the total portfolio."

Half of my portfolio today has a weight 5-10%, so I need to purchase more just to balance that out.  Plus, YD has 39 different stocks at last count, and I'm at 15.  Therefore, I need to definitely diversify more to get to at least 30.  I'm not too concerned at this point, as he was only at 10 at July of '14, so I figure I'm a bit ahead of the game.  YD also has three of his 39 stocks weighted at 5.58%/6.74% /13.97% - JNJ, PM, & Altria respectively. 

I am considering selling some or all of my GLT stock to help diversify.  GLT's P/E is currently over 50, with a beta of 1.9, so it is volatile at the moment.  Advisors have it at a moderate buy/long hold.  GLT is currently earning me $40 a year with 80 shares in.  I've had a 20% gain in it over the 10 years I've held it - selling it would net me 5 years of dividends at once to reinvest into two other stocks.  I'll see what happens on the ex-dividend date (tomorrow), after I qualify for my quarterly $10.

Seekingalpha's next rule for Asset Allocation:

"Maximum Industry Position (15-20% of total portfolio) - Ideally, a long-term Dividend Portfolio should include stocks from a variety of industries. However, under no circumstances should one specific industry or sector account for over 20% of the total portfolio."

I think I am on track for this, currently.  I notice YD doesn't follow this too closely, holding 44% in staples (he's a fan of the non-cyclical consumer market - for good reasons).  I think if I'm going to have a sector at or above 20%, it should be that.  I still own no tech stocks, other than health tech, which is probably a good thing right now.

And their third rule:

"Maximum Portfolio Beta (less than 1.0) - We believe that low beta dividend stocks offer investors the best long-term risk-adjusted yields. As such, we suggest a weighted-average beta of less than 1.0 for a long-term Dividend Portfolio. Generally speaking, low beta stocks tend to dampen overall portfolio volatility. It's ok to have some higher beta names in the portfolio, but make sure your average is less than 1.0."

My dividend stock beta average is 0.67 (non-weighted), the highest being GLT at 1.9 :( it is easily looking to be the most volatile of my stocks, and of course puts it high on the chopping block.  Selling it and turning it into 2 other less volatile dividend stocks will be difficult not to do.  I  may run the numbers and see if I can do it while still maintaining the $40 a year return tomorrow.

Everything else in my portfolio looks good.  It is interesting to see other's opinions and ideas of what you should/should not do, but diversifying definitely seems like the way to go, followed by even weighting.  You want to have each of your nest eggs in a different basket, in the hopes that losing one egg will be offset by the production of more eggs in a different basket.  The beta/PE analysis decisions I am still researching.  So far the only benefit I see to that is that everyone else is doing it, so you want to bet on the institutional investments, but pulling out before they do seems chancy.

Added page Current Holdings

I've been messing with google docs, using formulae I found at Dividend Meter, and I decided to add the first two charts I made with them.  A holdings spreadsheet, and a bar graph showing how much I have in what stocks.  I have also made the dividend meter, and currently set the goal to 50k a year.  While that is higher than my original 40k, it is more realistic in case I have to spend my retirement in the U.S. instead of Central/South America (which needs about 30k/year).  I may change that later.


The guy who came up with the Dividend Meter (I'll call him DM), is a fairly aggressive dividend trader in relation to Young Dividend (YD).  I was perusing DM's site, and he has "Buy/Sell" flags for when a dividend increases/decreases for a given company.  I did end up adding the color change to my spreadsheet for increases/decreases, but I wasn't too keen on the buy/sell perspective.  Then I saw my Home Depot (HD) stock tumble the most from what I own - about 5% - which I somewhat expected since it is retail (see my previous post on retail stocks).  I had also discussed with my wife while traveling this weekend on being able to psychologically handle the possibility of 1/2 or all of my stocks losing their value - so it was fortuitous for me when I came back from my trip to see this encouragement on YD's blog:

"I'm probably sounding like a broken record by now... The purpose of my investments is to become an income source for my personal use in the future. I do not buy low to sell high. In fact I do not very much mind buying high as long as what I buy can provide me with income. Every share I buy I treat it like an ATM machine. As long as the company I buy can keep spitting cash out to me every quarter life is good. If the ATM machine starts to break because of deteriorating fundamentals, I will sell it since I want the ATM machine to keep spitting out cash.

My investing philosophy is much different than the popular media's view on stocks. I invest for income. Every share I purchase will pay me every quarter. Every quarter, that company will (literally) send a check to my mailbox which I can cash in to pay for my groceries, transportation, entertainment, and housing. I do not plan to ever sell shares in businesses that I own unless I believe there is something direly wrong with the company's fundamentals. In essence, I hold stock like I hold rental properties. Stocks provide me income every month of the year. I could care less what the market values the business as long as the business pays me every quarter.

In addition to providing income every month, I want my investments to increase their dividend checks every year by themselves. Companies grow either organically or through M&A. Inflation happens, causing company earnings to grow as well. The whole purpose of the CEO is to ensure that the company makes money and grows. His job is to do everything in his power to make that happen. In essence, the CEO is working for us, the shareholders. If management is not doing a good job, then the shareholders will vote to elect new members in. In the end, I want to benefit from the growth in the enterprise and that benefit is through dividend checks.

Since income is so important to me, I want to make sure that the businesses that I own are capable of paying me dividends every quarter without issue. I also want to make sure the business can increase that dividend every year no problem. As a result, I tend to rely on businesses with non-cyclical personalities. During economic recessions, the last thing I want to see is for a company to cancel its dividend due to "hard times". Most of the companies I own are in the consumer staples business. These companies sell products like food, drinks, toilet paper, cleaning supplies, shampoo, toothpaste, etc. They are boring companies but they provide very consistent growth and a very stable cashflow even during economic recessions."  

<  THIS.  

And so, I wait for my next cash infusion (probably in 9 days, as I have just set up external transfers on my account) to hopefully buy more Home Depot stock at a discount.  I have been debating at this level whether to diversify more, or increase holdings.  I think I will alternate every 2 weeks (as money comes in) between the two - if my watchlist has a better deal, I'll jump on it, if my current holdings have a better deal, I'll buy that.  Since I don't have free trades like YD (yet), and because I am starting slow (and low) on a percentage of my paycheck, I'll slowly test the waters before I jump in.  In the end, I want to buy low, not because I will sell high, but because I want to get as much stock as possible to pay out dividends.  I don't expect to post all of my assets as YD does, just this particular retirement goal.  I have my fingers in at least three other areas - 401k, property, and emergency funds (I have several of these, being a paranoid person, but the largest is enough to live off of the first three years in Central America - and it gets bigger every year).

Finally, I've been looking at tech stocks with a skeptical eye - especially Qualcomm.  It might just make it to my watchlist today... 

Purchases for June 15th

 The Big Initial Investment

Stocks pulled back early today, so I was able to get some bounces.  I found 7 stocks to invest $2k each into, and at $7 a trade, I should have been down $49 all things equal, but I ended up down only $26.  My nice 6.8% profit growth is now around 1.8% with the new flatliners coming in.

The basic formula for my initial choices was to DIVERSIFY first priority, then P/E for risk, then dividend payout.  That should create a good foundation, along with sticking to dividend aristocrats.

Here were my picks and why I picked them. 

O (Realty Income Corp) - A risk with the current interest rate announcements, but I think they are stable enough vs. other similar stocks.  I am also taking into account the hiring blitz in this climate, and the jobs outlook.  My wife sells knick-knacks on the side, and has the most successful month in a long time.  We attribute that to jobs and economic confidence - and with that comes business & personal property purchases.  This one had the nicest bounceback today.  It also has a monthly dividend of 0.211, and the price is right for a large amount of shares.  And as of a few hours ago, they announce the dividend increase to 0.2115!  The shorties predict this stock to take a dive in the next week or two, we will see.
 


APD (Air Products & Chems) - I am very familiar with this company from personal experience, and believe they have a firm foothold in their field.  My only pause is their global presence, which may be impacted by the Paris Treaty, but then again, their Middle East and Asian presence may more than make up for it.  They have many contracts with large corporations, and their name implies quality which usually means they don't have to be the lowest bidder for a contract.








HD (Home Depot) - I tend to avoid retail stocks.  With the advent of Amazon and other online sellers, I think many brick & mortar based retailers are not a good investment.  I know Young Dividend disagrees, with TJX and ROST on his list.  I went with HD for a few reasons:  How many times did you need a tool or part, and had to get it fixed same day?  Your Amazon Prime and similar shipping options won't help you with getting that drywall in an hour.  Heck, yer not even sure it is the right color online!  So you run out to Home Depot, Lowe's, Ace, etc.  I don't see that changing anytime soon.  Plus HD has not opened a store in 3 years, which means they know their markets, and their online sales have increased dramatically.  ALSO, they are a good trickle down for the upcoming infrastructure improvements.  When the government is footing the bill, who cares what that dremel costs, Amirite?


JNJ (Johnson & Johnson) - Abbot Labs is up 10% since I bought them 2 weeks ago.  I think the Health related stocks are a good gamble with the dissolution of Obamacare.  Young Dividend loves JNJ, and they have their hands in so many different pots I can see they will adjust to any changes in the market.  How can this one go wrong?



MA (Mastercard) - Finance stocks can slip and slide a little, but I wanted a piece of either MA or Visa, as I think they can weather most storms.  The proliferation of the chip cards, and their constant RnD into protecting against fraud, I think they are ready to make sure the world is in debt to them.  I don't like the idea of owning both, but I may look into Visa as time goes by.





MCD (McDonald's) - If I could invest in Subway, Chik-Fil-A or In-N-Out, I would.  However, they are not publicly traded.  That leaves the big M.  My hometown is currently building the "Automated McD" as I type this.  They razed the old building, and putting up the frame of a new building which will not have counter workers.  I also believe they will be automating the kitchen as much as possible.  While not good for the minimum wage crowd (it is their own fault for voting for an increase in my state), it should be good for Ronald M. overall.  Profits will go up.

PM (Philip Morris) - I believe the spectre of the smoker has died down a bit, and in a free society it is ultimately the choice of the individual.  With stressful political situations around the world giving people nicotine fits, I think PM will do well in the next decade.  I don't smoke, but I believe in your right to.  I do a lot of global travel, and there are still parts of the world where you cannot eat without smoke, nor can you stay in a smoke free hotel room.  PM's global presence makes it very attractive. 



I had some $$ left over after this, so I checked the dividend aristocrats for the cheapest stock.  Found ORI Old Republic International, an insurance underwriter.  0.19 a quarter with a trend of increasing for $20 a share - not bad to risk.  Growth is slow but steady, and a portion of the market that flourishes in a healthy economy and one I didn't have a hat in the ring for yet.




What?  No tech stocks?  Just doesn't feel right.  I think many non-trader RCGs have been entering the technical work force, participating in SPPs, and sitting on them thinking their company is the greatest.  Historically, the tech sector is affected by the younger generation of investors, and thus a tad too volatile (*COUGH* SNAPCHAT).  I will have to research this one a lot more to find something I like.  There are no tech stocks that stand out in the aristocrat list.

I'm not sure when my next cash influx will be, but hopefully it will be soon.  May is typically an expensive month for me, and there's still some cleanup halfway into June from it, but I should recover in two weeks to (hopefully) make another investment.  My decision now is to further diversify, or, take advantage of any dividend stocks that are dropping to strengthen my position.  The good news is that I'm now making an extra $45 a month (on average) from dividends.  I'll need to show the dividend patterns like Young Dividend does at some point.

401k Loans

While I'm waiting for my 401k loan to transfer, and it is taking too long IMHO, I thought I'd put in my perspective on such loans.  I'll begin with a little story.

I am no expert by any means, and have only my experience to draw on.  However, picture that you had found and bought the cave to Aladdin's treasure, and the Djinn at the entrance said that you are welcome to have all this treasure granted you live to a certain age.  You know that you cannot possibly attain this age except through some miracle, so you explain this to the Djinn.  He then looks upon your sickly physical temple, and feeling some mercy, explains you may take a loan out on your own treasure, provided you pay it back (with interest).

Now, Aladdin's kin would inherit this vast fortune, but Aladdin, who is doing pretty good for himself, would like to stop working at the Agrabah Bazaar, and enjoy other pursuits of his own choosing.  He sees that the treasure loan would actually continue to accumulate (magic coins or something), and he would be adding more to it with a loan, so he does so, reinvesting the loan money so he can use it when he retires early.

Alright, I started digressing at the end.  Here are the pros and cons:
Pros:
-You can tap into money you can't touch, and turn it into money you can touch.
-If you have had any growth, you can safely take the money out to compensate for any taxes/penalties incurring if you default.  i.e. Your total assets, while smaller, are still in the black.
-You pay back more interest *to yourself*.  This may not make up for the gains in the market, but if you blow it all at a casino, you have only yourself to blame.  If you reinvest it for dividends or even long/mid-term growth, then you can probably make it up or at the very least break even.
-If you use it to pay off a home loan, or to buy a home/property to reduce your mortgage, then more money goes to you than to the bank, which is a waste.

Cons:
-If you default, or lose your job, you will have to either pay back the loan immediately, or take a 10% penalty and pay taxes on it.  If you lose your job early in the year, i wouldn't worry too much about the tax portion - it counts as regular income.  If you lose your job on the last week of December, then I guess you get a double whammy.  This is probably the biggest gotcha, and if you are just starting out, probably not a good idea.  If you have confidence your job is secure, and you have money in other areas, or if you are reinvesting it, probably not a big deal.
-You pay back the pre-tax loan with post-tax dollars.  Once again, you need to run the numbers to see if this is a win in the long run.  Always assume that when the 401k starts paying out, you live in a socialist country with a daunting tax rate.  Perhaps the government will run efficiently someday and we won't have hardly any taxes, but I wouldn't bank on it.  Most first world countries are going into a globalist agenda which doesn't bode well for the latter outlook.
-Origination fees, for mine, $50.  Run the numbers.

In my situation, it is a no-brainer.  As soon as we could pay off our house with a 401k loan, we jumped at it.  I turned a 30 year loan into a house paid off in 12 years (this is after re-fi with lower interest rate and reduction in loan term a few years in).  I have a bit left to pay off on that 401k loan, but if I default, I'll still end up better than throwing money away at some bank in interest.  I had been paying extra payments as well just to get the 401k back to where it was, before I found a place to put my extra money.

Now my 401k has gained 17% in the last year, and 8.5% since January 1st.  Not too bad, but again, money I probably won't see.  So why not spend it now, and turn it into something I can use before age 65?  I'll never see Social Security, and I've been paying into that.  With property and assets and the 401k, my wife is well taken care of.  Besides, I'm only borrowing a small percentage of it.  In the end, if it works out, I'll be able to actually have a retirement.

Now, as eager as I am to start finishing my initial investment, I need to wait.  401ks have to sell off your assets equally to accumulate the money needed, wait 3 business days for the settling, then transfer to your financial institution (that's what I'm waiting for.. 5 business days later).  Then I need to transfer it to my broker - I don't have a direct line to my broker from my 401k, hence the wait.  The loan will be paid off in 4 years - I took the maximum amount of time and will pay it off at my leisure.  Who knows, once it is paid off, I might do it again!

I'm assembling my list of initial purchases and researching while I wait, so I guess it is a good thing in the long run.

Initial investment May 2017

Initial investment May 2017

 Something Old.
About a month ago, I blew off the dust and took a look at my fair-to-middlin' slightly failing portfolio from the past 10 years.  I proceeded to sell all the stocks and bonds, some at a loss, but without much attachment since that was from another lifetime.  They were all poor decisions.  There was one exception.  80 shares of Glatfelter (GLT).  Not only was this stock a 20% total gain (and I found out later, quite a bit higher at some point), but I had 400+ dollars of accumulated dividends.  I decided against selling it for a few reasons.  It proved to be a solid dividend investment.  GLT has been around since 1864, initially offered in 1980.  I ran through the numbers, and I'm no expert and am aware that anything can happen - but paper typically isn't something that the bottom falls out of, at least not any more.  I know the chart is a bit rocky (below is from the day I bought it, for 15.82), but analysts are bullish.  I may increase my holdings if it drops.  0.13/share, 80 shares in.

 

(Green is S&P, Orange is Nasdaq, Yellow is Dow)

Something New.
I took my modest losses, added some mad money, and was ready to invest about $6k in dividend stocks to start with.  I set up a watch-list of some heavily influenced prospects (thanks to Young Dividend), and began to dig deeper.  This was before I intended to invest up to 20k and get more serious with an end-game plan.  The solid companies I had selected were all priced high for my moderate investment, no round lots for me, unless I want to put all my eggs in one basket.

Starting at the low end of my watchlist, I bought 14 shares of Aqua America (WTR) - I was waiting for some of my sales to settle, but didn't want to miss a bounce (some old habits die hard) so snagged it at 31.68, up 3% today from when I bought.  0.19/share, 14 shares in.  Got the bounce!

Next up, Hormel foods (HRL).  Chances are, it is in your refrigerator right now.  I wanted to get this before the earnings announcement, but they fell short, so a bit of a dip right off the bat, but it is recovering.  0.17/share, 20 shares in.  Need to remember to try Spam.

 Abbott Labs (ABT).  I remember attending a symposium on virtual reality at one of their facilities.  I moved to the other side of the country, and there is another one in my current town.  On top of that, I used to go on field trips to some of their properties in elementary school.  They've made solid in-roads, and while not a household name like Spam, they are pretty well esteemed in the health care field.  This is a field that may have a major shakeup soon, but not the suppliers of the tech so much.  0.265/share, 17 shares.  I really like this one and will most likely increase my holdings.

 Coca-Cola (KO).  What else to say?  Leader in its industry, household name, constantly offering new and varied products, contracts with fast food chains, etc etc etc. 0.37/share, 16 shares.

AT&T (T).  I did want to avoid this company, since I don't agree with some of their ethics.  However, that's not thinking like a capitalist, but an emotional investor.  I have been known to boycott, and have seen the meltdown of a few companies because of it, but there's no getting around AT&T.  It is a juggernaut in so many communications markets.  Being old enough to remember Ma Bell and one of the original baby bells, AT&T has to command some respect.  Recently they have been upgrading their infrastructure, a sign of a healthy company.  0.49/share, 18 shares.

Finally, at the end of May, I cashed in some recently vested options with my company, and sent it off to the brokerage.  I was looking for another Utility, then maybe increase holdings after that point, and went with Excel Energy (XEL).  Energy stocks I think have a lot of chances for growth, and under the current administration, have potential to earn higher profits. 0.36/share, 24 shares.

 I want to continue diversifying until I have something in every area.  So far I have:  GLT (Basic Industries-Paper),  WTR (Utilities-Water), HRL (Consumable-Food), ABT (Health Care-Tech), KO (Consumable-Drink), T (Utilities-Communication), XEL (Utilities-Energy).

Something Borrowed.
 Today I received my first dividend from this new venture, Aqua America shelled out a whopping 2.68 - as Scrooge McDuck said, "You gotta start somewhere.".  My stocks have been performing well so far, which I attribute to the jobs report today, and pulling out of the Paris Accords yesterday.  In fact, the market hit a record.  From a long-term perspective, my portfolio is already up 6.28%, with a net gain of 361.28 after trade costs.  Probably the best my portfolio has ever been (thanks Young Dividend for the inspiration and doing much of the heavy lifting research-wise).  Anyhow, because I don't want to miss the next four years of record growth in many industries, and after much thought, soul searching, and talks with the wife, I'm going to borrow against my 401k to invest.  Another time I'll go into the reasoning behind it, and why it is a good idea, at least for my situation.  This will be the other 14k to begin at the magic 20k starting point Young Dividend started at.  The funds should be available sometime next week.  I do most of my trading on Thursday/Friday, so hopefully it will be in by then.  If any of the above stocks have a dip, I'll consider increasing my holdings.  If not, I will probably go with less than 10 new stocks with better positions... hey maybe even a round lot!  In the meantime, I have a lot of reading and research to do until those funds are available.  With 6k in, I am looking at an annual income of 177.48.

Something (out of the) Blue.
No, not IBM.  Not a blue chip company.  I can never resist playing with a penny stock.  I bought a Texas based oil company, Zion Oil & Gas, who is attempting to drill for oil in Israel, in-land.  I know, it's a bit out there, but if they ever hit oil, who knows what the stock will do.  And if they don't well then I guess I'm out $45.  0.00/share, 32 shares.  I won't waste my time with penny or dividend stocks going forward.