Sunday, December 14, 2014

November 2014 Dividends

A slight bit of increase (a whopping $6.78) from last quarter (August) in the taxable account.  In the IRA about the same with an increase of $10.88.  The largest payer in my taxable account was El Paso Pipeline Partners LP.  That was my final dividend from them.  December will show the transition to KMI plus some cash.  I look forward to owning KMI and the rising dividend they will provided me in the future. 

Below is a look at dividends for this year.  Whatever I end up with as a total for the year will be leaps and bounds compared to last year.  Next year I may actually set a goal to keep the increase growing.



Full Disclosure: Long on EPB now KMI.

Friday, December 12, 2014

November 2014 Budget

November was a normal month with prepping for winter in the beginning and then enjoying Thanksgiving towards the end.  I have much to be thankful for.  For one I have not gone in debt any further this year.  That I am proud of considering I took a 10% pay cut in February from a career change.  Another thing to be thankful for is my family's good health this year.  No broken bones, surgeries, etc.  Even with my insurance if something were to happen health wise I would have gone into more debt.  The reason being is I used my company funded HAS to get Lasik done on my eyes (another thing to be thankful for) and help pay for my son's braces.  Lastly I am thankful I had some money to invest this year by investing in dividend paying companies who raise dividends over the years. 

Expense Breakdown
In short I had a net loss of $425 dollars this month.  We will see in my expenses that car maintenance and fuel jumped again to 12%.  My wife's tires were bald and after she took a near collision from some ice it was time to hunt for a good bargain on decent tires.  

Food was a big help this month.  Over $200 less than last month.  This is one of those variables that helps me keep things in check.  Utilities remain high (water bill was over $300 and next month is $300+ sewer bill).  I have this leaky bathroom faucet I need to deal with this weekend.  Next year I am considering a water saving washing machine.  I think that is where most of the cost is.

I need to get this post more organized.  I think I like how I am breaking down categories like Miscellaneous.  What do you think?  Easier to read & understand my expenses?



Miscellaneous (8%)
Household is the high one in this category.  My wife was utterly thrilled to finally get a new vacuum cleaner.  I was able to pick up a $130 vacuum for $80 from Amazon warehouse deals.  It was a return/open box but other than that it was unused and in new condition.  No more dealing with taping up your vacuum to keep it together!

Childcare was up this month vs. last month from several clothing purchases.  This is the time of the year to pick up clearance on summer/fall clothing.  The only challenge is trying to figure out how much the kids will grow by next year and buying that size.

Expense
Amount
Vs. Last Month
Childcare
$135
J
Household
$291
K
Personal Care
$57
K
Clothing
$2
K
Healthcare
$10
K

Guilt Free Spending Money (10%)
I do not have a formal budget item any longer for this buy I still track it.  I have to correct last month still but the backpack blower I spoke of ended up being reconciled this month and not last month.  That accounted for half of the spending in this category.  Another 25% was dining.  A big chunk of that was in celebration of my son's 5th birthday.  For birthdays the kids get to pick their favorite restaurant. 

Investments
Everything was reinvested automatically.  You can see the year on my dividend page.  I will post about income for this month in my next post.  I think I am switching Windstream back to reinvesting until my portfolio income is over $500 a month.  Doesn't make sense to have cash just sitting there not working for me for months on end until I build up enough to buy something.

Savings
Well you need tires.  That is about all I will say regarding my savings rate this month.  I hope your rate was better than mine!

Savings rate for the Month = 0%!



Image By Mister GC and courtesy of www.FreeDigitalPhotos.net (Yes I am lazy and reused the same image from last month)

Saturday, December 6, 2014

Holiday Shopping Finds

The Christmas season is upon us and for the past week I have been sick.  I am behind on allot of things but not so much with the shopping.  My kids are done and I have just a few more presents to buy for the gift exchange with my side of the family.  Here are some of the better deals I picked up.

  • Old Navy - Who doesn't like $12 sweaters.  Stocked up for the family and spent $100.  With that I got $40 in Old Navy cash and another $20 Visa gift card for signing up for Visa Checkout.   Shipping was free.
  • Famous Footwear - Shoes were worn and giving me back problems.  Upon many recommendations I bought 2 pairs of Rockport's.  The sale was buy one get one half off plus another 15% plus $10 coupon I had.  So normally the shoes together would have been $280 and I got them for  $167 or $84 bucks a pair.  I have never spent this much money on shoes but my back has been killing me and I attribute it to poor work shoes.  My last pair were Walmart oxford's I got for $10.  I usually don't get anything (but my family) for Christmas.  This year was a big splurge.  Question is should I wrap my own present or just start wearing them?
  • Amazon - Most of my shopping is done here.  Love the store but don't own any stock in it.  I had $125 in gift cards to use courtesy of my wife and I racking up points with my work's health plan.  We were able to then cash out like 25,000 points for the cards.  Special thanks to my wife for doing 10,000 steps a day for months on end.  We did shop around online to make sure toy prices were the same or lower than other stores (like Toys R Us & Walmart).  Plus we did the free shipping and got $1 credits towards digital music and videos.
    • Lightning deal $11 Little Tikes T-ball set for my son
    • Computer Games for $10 - My kids want an Xbox but we have enough electronics in the house.
    • Hardback books my kids wanted for under $10

That is about it.  My kids don't ask for much and when I ask the wife she asks for nothing.  She does get presents but it is very hard to shop for her.  I recently bought her a new vacuum (another deal on Amazon) and new tires for her car.  My kids told my wife and I that was her present but I don't dare say that.  I have learned over the years that needs don't qualify as gifts. 


Recently I read an article that said to focus your gifts on experiences you can share with the person.  Those tend to make them (and you) the happiest.  The study showed material things don't make you as happy and are less likely to be remembered.  So I just need to think of something affordable in that area.

Have a good holiday season and shoot me a message if you have a frugal experience I can get my wife.

Friday, November 28, 2014

I Don't Like Smoking but I Like Money


I grew up in a family were both parents smoked.  My grandparents smoked and so did my aunts and uncles.  I remember at holiday gatherings the smoke being so thick you could not see from one end of the living room to the other.  Slight exaggeration but it was pretty foggy.  I did not enjoy any part of it and have never tried a cigarette in my life.  It is very addictive though so I don't see tobacco products going away any time soon.  It is a personal preference and I am fine with that so long as it doesn't affect my family. 

There is money in tobacco though so I thought I would take a look in my rankings to see if any stood out.  There is only one that made the top 100, Universal Corp.  The others all have high yields but looking at their other numbers who knows if they can pay that yield long term.   Of the six we are looking at today only UVV and MO are dividend champions.  That is a good indicator that dividend will continue to increase over the next few decades but that doesn't tell the whole story.  Let's take a look and see how they stack up against each other using the DFG ranking system.

The numbers are from the October edition of the U.S Dividend Champions spreadsheet.  If I were to look at purchases any of these companies I would reevaluate based on more current numbers.

Value
Several of the companies do offer some value at this time (under 20 PE).  What gives UVV the edge is the low price-to-sales ratio.  Companies with a ratio of less than one are generating more in sales than what the stock is costing me.  If kept up long term and managed properly that will create lots of cash that could be returned via dividends.  If that were the only metric I looked at I would buy them right away.  However we have to look at some other metrics to determine if this value will provide us with long term income.

Company Name
Symbol
Industry
P/E
P/S
Universal Corp.
UVV
Tobacco
14.46
0.43
Philip Morris International
PM
Tobacco
16.58
4.28
Lorillard Inc.
LO
Tobacco
19.71
3.10
Reynolds American Inc.
RAI
Tobacco
20.27
3.79
Altria Group Inc.
MO
Tobacco
21.17
3.73
Vector Group Ltd.
VGR
Tobacco
61.61
1.77

Growth
Only Lorillard stands out with double digit growth over the past five years.  PM still takes the top spot here with close to double digit growth but a higher earnings per share over the past twelve months than LO.

Company Name
Symbol
Industry
Past 5yr Growth
TTM EPS
Philip Morris International
PM
Tobacco
9.7
5.03
Lorillard Inc.
LO
Tobacco
12.9
3.04
Reynolds American Inc.
RAI
Tobacco
6.6
2.91
Universal Corp.
UVV
Tobacco
4.0
3.07
Altria Group Inc.
MO
Tobacco
8.8
2.17
Vector Group Ltd.
VGR
Tobacco
(8.3)
0.36

The picture below is a little more interesting when you look at the stability of the EPS over time.  Normally you want to see it grow steadily over time.  Upon closer inspection of the mess of lines below you can see that LO and PM are not as jagged as the others and have grown over the past ten years. Even between the 2, PM had some early dips 10 years ago while LO is slow and steady.  Earnings may not be as high but the trend is the best. UVV had a dip in 2011 and the TTM show another dip as well.  This instability has probably led to some of the value we saw earlier.  If management can stabilize things than the value presents an opportunity for us.  RAI also had some moderate growth with a few minor dips.



Quality
UVV is 2 for 3 at this point.  Wow look at how well they are managing debt.  Way under the 1 mark for quality debt management.  Also the price-to-book value is under 1 telling us Universal Corp. has plenty on the books to justify the price this past quarter.  The last 3 were n/a in the spreadsheet.  Usually I don't consider companies that don't have metrics available.  Looking on Morningstar LO had a book value per share  TTM of -5.99.   PM had -6.51 and VGR had a book value per share of -0.82.

The definition of book value per share from www.investopedia.com is this:
In simple terms it would be the amount of money that a holder of a common share would get if a company were to liquidate.
That puts things in perspective.  Who would want to hold a company that much in the red?

Company Name
Symbol
Industry
MRQ P/Book
Debt/Equity
Universal Corp.
UVV
Tobacco
0.90
0.49
Reynolds American Inc.
RAI
Tobacco
6.43
1.20
Altria Group Inc.
MO
Tobacco
20.69
3.18
Lorillard Inc.
LO
Tobacco
-
-
Philip Morris International
PM
Tobacco
-
-
Vector Group Ltd.
VGR
Tobacco
-
-

Yield
PM takes the lead on yield.  With the second highest yield and a mega dividend growth rate I can see why it may be appealing to some investors.

Company Name
Symbol
Industry
Dividend Yield
DGR 5 Year
Philip Morris International
PM
Tobacco
4.80
28.4
Lorillard Inc.
LO
Tobacco
4.11
29.1
Altria Group Inc.
MO
Tobacco
4.53
9.2
Reynolds American Inc.
RAI
Tobacco
4.54
7.5
Vector Group Ltd.
VGR
Tobacco
6.87
5.0
Universal Corp.
UVV
Tobacco
4.60
2.1

However looking at free cash flow and the payout ratio gives a better picture of the sustainability of these yields and the ability for the dividend growth rate to continue.  None of the metrics over the past twelve months paint a pretty picture for the dividend investor.  Sure the top 3 have plenty of cash to burn but for how long?  That surely isn't sustainable over decades that a dividend investor looks at.  Would they be worth buying now to collect the dividends until they are cut?  Tough call and would depend on the entry price and the potential capital loss when you sell them.

Metric/Company
PM
LO
MO
RAI
VGR
UVV
Free Cash Flow TTM (Mil)
7,522
1,119
4,419
1,528
71
-107
Payout Ratio %
76.6
76
89.9
89.2
173.70
79.60

News
It is black Friday and there are deals to be had in the energy sector (again).  The news for tobacco shows cigarette volume down for PM and LO loses a lawsuit over the summer worth 23.6 BILLION dollars.  E-cigarettes are on the rise for high school students and over the past ten years cigarette consumption has risen 13%.  The rise is mostly in other counties and not the U.S.A.  This is a lot of mixed news and hard to interpret where the industry will be in 10-20 years.  Back in July Reynolds American had announced plans to buyout Lorillard for 27.4 billion dollars.  This may be to your advantage if you can obtain LO at a deep discount.  To close to 20 PE for me to be interested in it.  After that merger is complete RAI will control 42% of the U.S cigarette market but Altria will retain the top position with 51%.

Conclusion
Overall UVV comes out on top with quality and value that stands out in this industry.  The yield is not too shabby either but it compares to the dismal growth rate of utility companies that have been paying a dividend for a long time.  On the flip side they have been paying an increasing dividend for a long time.  So for current income this would be a good company to own.  I am not sure what to do about the merger.  LO has a lot of debt but the combined companies will dominate the market.  Tough call so I will keep an eye on it for now.  Happy Thanksgiving!
 
Company Name
Symbol
Industry
Dividend Yield
Universal Corp.
UVV
Tobacco
4.60
Philip Morris International
PM
Tobacco
4.80
Lorillard Inc.
LO
Tobacco
4.11
Reynolds American Inc.
RAI
Tobacco
4.54
Altria Group Inc.
MO
Tobacco
4.53
Vector Group Ltd.
VGR
Tobacco
6.87

Thursday, November 13, 2014

Battlefield Oil


Gas was $2.80 for me this weekend.  That was with my gas card's 3 cents/gallon discount.  Going through my ranking system for the month 3 big oil companies were in the top 100 list.  High yields?  Good value?  Let's take a look at how the 3 end up in a battle against each other using the DFG ranking system.  I do need to work some more on that page once I have some more time.

The companies I will be looking at are all well-known companies.  ConocoPhillips (COP), Chevron Corp. (CVX) and of course ExxonMobil Corp. (XOM).  All of them are energy companies that have businesses that deal with exploration of oils and gasses, production, refinement, etc. though out the world.  XOM and CVX are both dividend champions (25+ straight years of higher dividends) while COP is an up and coming contender (10-24 straight years of higher dividends.)  

Value
ExxonMobil has the best value when I put the ranking together.  The price to earnings and sales both out did COP and CVX.  The company continues to make a ton of money.  We will see if that continues the rest of the year if prices remain low throughout the holidays.

Company
P/E
P/S
XOM
11.98
0.95
CVX
11.39
1.04
COP
11.79
1.65

Growth
There are some benefits to being smaller.  This has allowed COP to grow fast and over the last 5 years they have seen 21.1% growth.  CVX takes second with a dismal negative 1%.  XOM has had negative 3.2% over the same time and takes last place.

I am still working on learning trend lines in Excel.  2011-2012 were the tops with earnings in 2013 and the past twelve months staying steady.  The only bad year was 2008, the Great Recession, and only for COP.  The other 2 behemoths were able to weather the storm.


Quality
Again CVX shines on this as it ranked 39 companies ahead of XOM and 43 ahead of COP.  I would have expected COP to be last because of its size and cash flow.  XOM on the other had has tons of free cash but ranks very close to COP regarding quality.   XOM's high P/B is the primary driver behind the ranking.  From this perspective you would prefer CVX on dips and get more bang for your buck as the 2 have very close Debt-to-Equity ratios.

Company
MRQ Price/Book
Debt/Equity
CVX
1.47
0.15
XOM
2.23
0.12
COP
1.71
0.38

Yield
One of the more important factors for dividend investors.  This has been fluctuating quite a bit lately for oil companies.  If you were lucky you bought in the October dips and are starting off with a nice entry yield.  I look at the 5 year growth rate mainly because I look at all Champions, Contenders and Challengers.  I would prefer 10 year metric but that would weed out some good potential growth companies.

COP has been affected more by the recent swings.  I get alerts on dip sent to my phone and the texts pile up on it more than the other 2.  It's high yield and double digit growth rate over the past 5 years puts it at the top.  We will see if COP can continue the growth over the long haul.  CVX and XOM are very respectable as well.  I plan on holding all three companies eventually.

Company
Dividend Yield
5 Year Dividend Growth Rate
COP
3.82%
13.3%
CVX
3.59%
9.0%
XOM
2.93%
9.7

All the payout ratios are well below the 75% guideline pretty much every dividend investor uses.  The guideline helps us to determine if there is enough cash to cover the dividend and how likely it is to be cut (no cash).  Morningstar where I get allot of good information didn't have a payout ratio for COP for 2008 thus the dip down to 0 that year.  Being a smaller company it is still investing heavily and hasn't built up the cash reserves that the other two have.

Had problems with this chart on Excel Online so it is just an image.


News
I did a quick scan in my ShareBuilder account to check the news on all three companies.  All the news was centered around the cost of oil per barrel.  At this time I am not worried about the price.  Oil and gas are not a renewable resources so companies in this area will remain profitable until an alternate energy source overtakes them.  That might not be for decades so for now I am okay with the news.

The Winner
The final votes are in and the winner is COP.  Yes that was surprising to me as well.  I do not put a weight on yield but I think it played an important part in the overall score.  Since I already own COP I may look at the other two on dips as they are all good companies to own.  

Any of these on your radar this month?

Company
Overall Rank
COP
11
CVX
26
XOM
50

Full Disclosure: Long on COP

On a side note I have started using royalty free clip-art.