Tuesday, July 22, 2014

June 2014 Budget

I am back from vacation at the beach and was looking at my TODO list.  Last months I started using Leankit.com for my personal Kanban board (the list).  It helps me get things done and focus on important goals.  One of them is presenting my budget every month.  It is well into July so I better get my June budget up.

This month was another tough one.  Not many people know this but when I switched jobs to reduce my stress I took close to a 10% pay-cut.  This hurt allot so the year hasn't been going well.  The bulk of the money I earn goes into support my family of six who I love.

Fixed Costs

58% over target

On the bright side I spent $200 dollars less on food this month compared to May.  On the not so bright side I had to have some maintenance done to my wife's 2006 minivan so that offset any food savings. 

My utilities did jump up this month as well.  With summer in full swing and my phone bill finally kicking in that bumped it by almost $200 dollars.  At my previous job I had a company cell phone.  When I left I had to go out and buy a phone and get a plan.  Since my wife and older kids already had phones I did some shopping and got a family plan which costs us $160 a month.  That was the best deal all around.

Looking over my data for 2014 and 2013 I am regularly over in this category.  Maybe living off of 60% of your income for a family of six isn't realistic.  I have a couple of things in this category I need to write about and get peoples thoughts on.  

Investments

63% under target

I think I wrote about this briefly before but I have part of my paycheck taken and put directly into the cash account I use for investing.  This is way under my target but I am having a hard time bumping it up.  Need that cash for living.

Savings

156% under target

I found out that you can't put negative numbers in a pie chart this month.  So I just set it to 0.  This month I had to dip into my savings to pay some credit card bills.

I always pay my credit card bills off every month.  Living debt free is important and one of the first steps to being able to save money.  There is no point in saving money if you have to pay interests to your credit card company.  In the long run that will always be higher than any savings rate you could find.

Guilt Free Spending Money

%44 under target

This is a good under.  Like some of my other categories had to squeeze them to make ends meet.  Not how I like to roll but this one is OK.  I still got to do some fun (and free) things with the family, eat out a couple of times and enjoy BOGO DVD rentals from Redbox.com.

Ending Comment

Overall 89 percent of the budget went to providing for the family.  I would love to get that under 60% or even 50% like some supper savers do.  That would increase my savings and accelerate my investing.  The more I can invest now the more time it has to compound over the years.  Shaving off years to get to retire at 55 would be awesome and I will continue to strive for that.


Saturday, July 12, 2014

Analysis of China Petroleum & Chemical Corp - SNP

I do not have much of a format for analysis yet.  We will take a look at the 4 areas I rank each stock on and then have some discussion around the company. My goal is to take no more than an hour researching and writing this post to maximize my time with the family.  Over time I will have to come up with an approach that is repeatable to maximize this research time.  As always your feed back and tips will be welcome.

One of the things I do to reduce the number of stocks I have to rank in my screen is to solely use Dave Fish's U.S Dividend Champion's spreadsheet (USDC).    This thing rocks!  The Champions have raised dividends for 25 or more straight years.  The Contenders for a little less time but still pretty decent are at 10-24 years.  The last are the Challengers.  They have only been doing it for 5-9 straight years. He has all 3 combined on the All CCC worksheet.  I like to include all three as some of the younger dividenders (is that a word?) have some potential for growth in allot of areas and are worth including in your portfolio.

Also note that although Dave calls this the U.S. Dividend Champion list it also includes ADR's (American Depository Receipts.)  These are foreign companies that have dividend streaks as well.  I guess since they trade on a U.S. Exchange they are included.

This is a massive time saver for me as allot of the numbers I am looking for are right in the spreadsheet.  No having to go out to various sights and gather the information.  Nor do I have to do any major calculations for ratios (although once you have a nice spreadsheet with functions and calculations it is not so bad.)


Lets get started.



SNP keeps coming out as the #1 overall rank in my screen.  I thought I should give it a closer look to see why.  It is in the top 20 in 3 out of the 4 areas I look at.  It ranks in the top 100 for the quality factor.

Its core business is petroleum and petrochemical production.  They also do natural gas as well.  This puts them in the Oil&Gas industry.  It covers all parts of production including marketing.  Marketing must be pretty important as they mention it 3 times in the summary paragraph describing themselves.


Value


According to the USDC spreadsheet it has a trailing twelve months price-to-earnings ratio of 7.09.  As of this writing they were at 6.91 PE.  Usually something in this range is undervalued or thought to be in decline.
I took a look at Yahoo's Industry PE's and for Oil & Gas Refining and Marketing it is 18.7.  Another valuation metric you could use is price-to-sales.  For SNP it is sitting at a pretty TTM ratio of .15.  SNP is generating almost enough revenue as the price of the share itself.  

These are all good signs the company is priced right for value investors.

Doing dome digging it looks like one of the most important things to look at in this industry is free cash flow.  There is allot of CAPEX and debt incurred in this industry to explorer and get that money (oil or gas) out of the ground.  On Morningstar the price-to-cash flow reporting in at 4.6. 

Single digits are usually a good sign that it is undervalued. 


Growth


The past 5 year average growth rate is at 19.2% however things are starting to slow down and the prediction for the next 5 years is back to single digits with a 5.3%   The TTM earnings per share is at 13.41.  The higher the better the ranking.


Quality


This was the worst in my ranking system.  The price-to-book ratio is not bad at all.  It is sitting at 1.18.  They also seem to be managing their debt well.   The debt-to-equity ratio is at .58.  I like to see companies with less than one.  From my reading this ratio for the Oil & Gas industry tends to vary widely and is mostly dependent on the size of the company.


Yield


The spreadsheet had it listed with a 4.16 yield.  The price has been rising recently and it was 3.71% as of this writing.  Man if I don't get this written soon all the prices will change and I will have to start over.  The other thing a good dividend investor would look at is by how much the dividend has been raising for the past 5 years (and hopefully longer.)  SNP has a pretty good record these past 5 years It has averaged 19.8%.  With a payout ratio around 47% that could last a few more years.  However with growth predicted to slow that could easily dwindle to single digits.  In fact the 1 yr. dividend growth rate was only 8.4%.  Not bad but it is slowing down. 

This is an ADR as well.  That usually means that dividends are not quarterly.  For SNP it is twice a year.  This will have the potential to slow down compounding.  That and tax complexities usually cause me to stray from them.


What's the talk?

There was not much news available from my broker.  The last was a downgrade by JP Morgan.  They downgraded it from overweight to neutral.   Looking at other ratings they seem to be split on Strong Buy and Hold.  As for me I will be watching this one for now.  I have allot of weight already in this sector and don't want to put all of my eggs in one basket.

This analysis went over my 1 hour allotment (closer to 3).  Although short since it was my first it took longer to organize my thoughts and put them down on the e-paper.  I hope you enjoy reading it and gain some insight.

Anything else I should be looking at when doing an analysis?  I don't have allot of time to read detailed reports but if you know of a site with good summaries let me know.

Full Disclosure: I don't own this.


Wednesday, July 9, 2014

Saving With Home Repairs

Hello readers.  This post doesn't have much to do with dividend investing but I wanted to share with you the things I do to save a buck (so that I can invest).  Houses are a money pit.  Things break in my house faster than I can fix them.  I will have the run the numbers someday but I am pretty sure I spend my on my house (not including the mortgage) than I do investing.

The Frugal Project

Toilet leaking

The Real Project (still frugal but not fun)

Fix that and more and more.

Estimated Cost of a Contractor Fixing

$300

My cost

$40

Savings for investing

$260

My half bath on my first floor had a funky smell to it.  I had replaced the failing wax ring when we painted the room about 3 years ago.  Since then the nuts holding the toilet had become loose over time and the toilet must have rocked just enough over the past years that it would leak every now and then.  Eventually I noticed some discoloration in the wood and a wet spot in my basement.  Once my man cave had water in it I immediately shut down that bathroom and removed the toilet.  Sure enough the wood was soaked.  Tore up my nice hardwood floor and discovered moldy (and funky) wood sheathing underneath.  Tore that off and found a rotten sub-floor.  Tore that off and breathed a sigh of relief.  The joists were still good.  



So instead of spending my time researching investments or spending time with the family over the fourth of July I was working on this bathroom

I reinforced the joists and laid down a new sub-floor made from plywood (stronger than OSB board that was previously there).  After that I put 1/4 inch plywood to bring the floor up to the same level as the rest of the bathroom (I only tore up half the floor).

Luckily I still had some of the original hardwood floor left by the previous owners in my basement.  This I laid down myself and now all is well.

So I still lost out on this one.  Had to put more money into the house and lost time.  That is what is most important to me.  That time I missed doing something fun with my family.  I suppose it could have been worse.

Thank you for reading.  I am off to bed.  Just 1 more day until vacation.  Hopefully I will have some time tomorrow to look at some of the stocks based on my screen and share my findings with you.

Worthy of the Dividend Family Guy blog?

Tuesday, July 8, 2014

The Dividend Family Guy Stock Screen

Time is Short

As a busy family man I have about an hour each night to get things done like this blog, paying bills and other things I choose not to do while my kids are awake.  While they are awake I try to spend as much time with them as possible.

I did not realize how much time it takes to write a good blog.  My writing skills are no where near what they should be.  I hope to improve upon that by sharing with you several times a month. I applaud all of the well written blogs I read.  Maybe it comes naturally or maybe it takes them allot of time.  All I can say is they do a good job and I hope to be like them one day.

However being on a time crunch I have to develop investment strategies that take the least amount of time.  One of them involves my monthly screen.  After I developed my initial spreadsheet with calculations I can put it together in about fifteen minutes.  After that it is about researching the top overall stock picks.  


What is Overall?

I have 4 categories I rank stocks on, Value, Growth, Quality and Yield.  Then I combine all 4 and create an overall ranking.  This provides me with a list of the top stocks across all 4 categories.  Currently I do not weight any category.


Value

By definition a value stock is one that trades at a lower price relative to it's fundamentals.  It is undervalued by investors  You could use several characteristics to help in determining a value stock.  Some of the more common ones are low price-to-earnings (PE) ratios, low price-to-book ratio (P/Book) or a high dividend yield.  I tend to look at these ratios over time using the most recent quarter (MRQ) or the trailing twelve months (TTM).  Using these timelines smooths things out a bit so I see allot of repeat stocks each month.  I may look to alter this in the future.


Growth

These types of stock by name grow fast.  In other words the companies are growing quickly and hopefully that translates into higher stock price or faster rates of dividend growth.  Some key metrics for these stocks are earnings per share (EPS), price-to-earnings (PEG) ratio and their growth rate.


Quality

This one I found interesting when I first learned about it.  Is the company well run?  Does it make good or bad decisions around managing debt?  There are some characteristics to look for to help guide you on this one.  Things like the quick ratio or various debt ratios will show you if they have enough cash to cover liabilities or short term debt.  A history of dividend growth may also fall undo quality.  Management that is able to increase dividends for years or even decades has proven themselves to the shareholders.


Yield

Who doesn't like a high yield?  Well that is a trick question.  If you can give me one and their is plenty of free cash flow (dividend coverage ratio or payout ratio) and all of the 3 categories above rank high I am sold.  However that is not always the case.  High yield may be an indicator of a falling stock price or involve other types of stock like REITs or MLPs.  There are many reasons why the price is dropping so you have to do your research and look at other metrics to help guide you on making a good decision.


Dividend Family Guy Screen

Here is one thing I look at in each category.  I look at some others but I won't share all my secrets yet.

Value - Low price-to-earnings ratio (< 20)
Growth - High 5 year growth rate (double digits are nice)
Quality - Low debt-to-equity ratio
Yield - Dividend Yield (Well I do like dividend$)

Even with that there are still to many stocks to look through them all.  I will share another thing I do when I show some of the results for the July screen in my next post.

Am I looking at the right things?  Let me know your thoughts.

Image courtesy of nongpimmy / FreeDigitalPhotos.net

Thursday, July 3, 2014

June 2014 Dividends

For the month of June I decided to also include my IRA that I started in April.  I started a new job this year and transferred my 401k from my previous employer to a place where I was in control.  This gave me the freedom to focus on quality stocks that pay decent dividends.  I do contribute 6% pretax into my current employer's 401k.  This is solely to get the "free" money they match.  The only downside to that is I won't be 100% vested in until I work for them for 4 years.  I guess that makes it not entirely free.  I will probably include those numbers as well when I post my net worth.

My taxable account generated a whopping $26.31.  That is barely enough money to buy my family one meal at a fast food restaurant.  It isn't much but it is something I know will continue to grow over time.

My IRA is about 4 times the size of my taxable account.  For June this generated $379.86.  This is enough income to pay for my electric, gas and cable bills.  Not bad at all.  Unfortunately I can't touch this until I am well past my goal of early retirement.

This is my best month yet with a combined total of $406.17.   See the numbers on my dividends page.

How was June for you?

Tuesday, July 1, 2014

May 2014 Budget

Here are the May Budget numbers for the Dividend Family Guy (or percentages) for what I am tracking against.  Currently I am doing percentages until I decide if I want to disclose my actual income.  My budget has 60% allocated to Fixed/Needs, 10% to investments, 10% to savings, 15% to Guilt Free Spending Money (GFSM) and 5% to various charities.



Income


The Day Job +50%

My budget accounts for just 2 paychecks a month.  This month was one of two triple paycheck months.  This comes in handy and helps with unexpected expenses.

Expenses


Fixed + 4%

I am not overly pleased with being 4 percent over.  Mainly because this is a triple paycheck month.  I should have been way under given 60 percent of 3 paychecks is allot more than 60% of 2.  The two largest expenses are my mortgage (30%) and close behind are groceries (20%.)  With the cost of food increasing (seems like monthly) feeding six people on a budget is difficult.  This does not include dining out as that falls under GFSM.  I usually budget $200 a week.  This month was an extra $200 for some additional items I bought from the CSA I belong to.  These extras are delivered weekly all summer long so my grocery cost will be less going forward.  Just 10 years ago when we were a family of 4 I remember spending less than $100 a week on groceries.  At a later time I will break this down in more detail.

Investments -52%

I purchased some stocks from cash from prior months.  I did deposit some cash into the cash account I use for investments.  However it wasn't what I budgeted for.  Some of this money along with savings went to pay a credit card bill (see Savings.)

Currently I am not taking enough directly out of my paycheck to put into the cash account I use for investments.  This has the bad effect of spending it rather than saving.  I need to adjust my direct deposit to align with my savings goal.

Savings -191%

With a triple paycheck month this should have been allot higher as well.  In reality I saved less than 10% of 2 paychecks.  I had to dip into the savings reserve to pay a credit card bill from the previous month.  This bill included prepayment on our family vacation this summer.  

Family is very important to me and ever since we paid off our last credit card about 6 years ago we now take a family vacation every year.  I will only get to enjoy my kids (at their current age) once.  The memories will last me a lifetime so that dividend will always be there.

Guilt Free Spending Money -45%

This is my best area for the month of May.  I spent less than the 15% allocated to this category.  Some of the big ticket items in this category included dining out (55%) and gifts (34%).  May is my daughter's birthday and our wedding anniversary.  We also had a few family events this month were we gave gifts of money (hopefully wisely invested.)

Charity -99%

For the whole year I am not doing well on this category at all.  Kinda embarrassing that my money is going elsewhere instead of causes that need it more than I do.  This is usually the category that gets squeezed the most when I need to pay bills.  Unfortunately I have to take care of my family first.  This means all the other categories get priority so that my family can thrive.   I am not sure that is the best word for it.  One of the reasons I am doing this blog is to improve my communication and writing skills.   As this trend of little giving is likely to continue I may group it together with GFSM/discretionary spending going forward.  This combined with GFSM would then total 20% of my income.

How does this compare to your budget?  Anyone else out there spending more on food that everything else?

Image courtesy of   Stuart Miles / FreeDigitalPhotos.net

Thursday, June 26, 2014

The Budget

Budget Organization

Some time ago I read a book (Name has been lost to me) that aligned how you use your money into five categories. If someone knows where this model came from let me know so I can give the person credit please. These categories fit into how most people could divide up their income.  I used to go overboard and categorize every expense in Quicken. This led to a messy budget I never adhered to. Last month I decided to start putting all expenses into one of these categories. That would be my budget going forward and hopefully help me save more. Let's take a look at each one and then I will share with you my target for each category.

Fixed

These are your needs. Certain essential items such as food, clothing, utilities and a roof over your head. I will go into more detail later on that roof piece. That is always a hot topic between my wife and I on our housing choices over the years. I even place things like diapers and basic necessities into this category. In other words I have to have this to perform some function in my life. I don't buy it to solely get enjoyment out of it. Believe me I even tried to save a buck and be green with cotton diapers on my first kid. I did not enjoy that and neither did the baby who got poked with those safety pins. So yes I do consider disposable diapers a need.

Long Term Investment

This is where this blog comes in. As an investor in quality stocks that will pay me a dividend, I budget so that I can invest monthly. This is the tough part because I am not doing so well here. When I show you what it takes to support a family of six these days you may choke a little and decide to keep the propagation of the human race in check at your house.

Savings

This is where short term cash goes. It includes things like your emergency fund. Savings for needs that are paid quarterly or longer intervals (think home insurance). If you are older it could be for living expenses that are held as cash. This is also where I stash cash until I invest it. I get a better rate than my money market fund. Both are in Capital One ShareBuilder accounts.

Guilt Free Spending Money

Some of the money you earn should go towards things you enjoy. This is a flexible area but whatever you choose to spend it on there should be no guilt associated with it. If you enjoy investing it could go there. If you enjoy dining out (especially on those nights you are too tired to cook after a long day of work) spend it there. Gifts for family and friends also come from this category. If money is short this is where you start to turn on the frugal side of your brain.

Charity

Why would I have a budget category for charity? You don't see that too often in most budgets. I live in one of the wealthiest counties in the world. What little I give to those goes towards their needs. This sharing of wealth teaches others to share and makes it a place worth living in. Charity doesn't mean just giving to the needy or your religion. I also give to causes I have a passion for (like The Nature Conservancy) and other charitable events at work and for family. This is probably the toughest one for me to stick to. I have to pay myself and the bills first. What is left gets split (unevenly) between GFSM (Guilt Free Spending Money) and this category. When I am older and pulling in more in dividends than I need to live off of I plan on catching up in this area. I am not perfect and neither is my budget. It is a guideline to try to live by.

The Breakdown

This is the breakdown from the book I read. I think it is geared towards the young and not someone older who needs to catch up on saving. This is applied to net income (after taxes and other deductions in my paycheck like health & life insurance.)

Fixed = 60%
Investment = 10% (I do not include pre-tax 401k in this 10%. This is in addition to my 401k)
Savings = 10 %
Guilt Free Spending Money = 15%
Charity = 5 %

Does this seem like an even split?  Is there too much in GFSM? 

Image courtesy of   Stuart Miles / FreeDigitalPhotos.net