Tuesday, July 29, 2014

Windstream, My friend or foe?

I was sitting at my desk and got an alert on my phone.  The price of WIN jumped way up (52 week high of $13.30).  I was very curious as to why but since my time is not my own I had to wait until lunch to see what was going on.

Looks like Windstream (WIN) is going to attempt to spin of assets into a publicly traded REIT.  I have a 37% of my taxable portfolio allocated to WIN.  I used to work for the company so I understand the business.  However I purchased these stocks before I knew much about dividend investing and evaluating stocks.  I did a quick screen of stocks under $15 dollars that had the highest yield.  Never even looked at the P/E, dividend growth rate, or even knew what a dividend aristocrat was.  

That was about four years ago and not much has changed with the company.  Yes I collect a nice dividend every quarter but it hasn't moved and neither has the companies stock price.  Then along comes this year.  I can only guess this spin-off was a rumor or people were flocking to dividend stocks in fear of a market crash.  The company is up over 50% just this year.  I had a better metric but deleted the alert from my phone.


The presentation I went through points out allot of good things that will come from this.  Windstream has allot of assets including buildings, land and FIBER.  It is one of the top 5 fiber networks in the U.S.A covering 48 states.  I believe Hawaii and Alaska are the 2 not covered.  It is a cash cow telecom that has managed to stay alive and pay a $1/share annual dividend.

They plan on splitting the assets into a REIT most likely to avoid the huge tax bill that they get hit with.  This is good because the REIT will be the most tax efficient mechanism while still allowing some capital for acquisitions and growth on the asset side of things.  I think that is pretty smart.  Why have one large business that has limitations when you can have two that allow for growth and change on one side and asset management returning money to shareholders on the other.  The division allows each company to focus on on those goals individually and with a greater chance of success.  

The payout ratio for WIN then drops to 10-25% which is nice and the REIT follows the dividend guidelines for that sector.  The expected free cash flow also gets a boost from $830 million to a combined $946 million.  This is probably a result of tax savings and the revenue adjustments.  I am not an accountant so I don't see how you can go from $5.9 billion in revenue to $6.55 billion.  For now I will go with it as I am sure there are reasons (growth, acquisitions, funny money.)

There was an article in one of the blogs I read that was about companies that split tend to do well over the long run.  If you wrote that article let me know and I will update this post.  My limited time writing this prohibits me from spending too much time searching.

On the plus side all other telecom type stocks also saw a boost today.


I did not see any dividend growth rate projections for either WIN or the newly created REIT.  They are saying the original $1/share annual dividend will become just $.10 cents/share for WIN and $.60 cents for the REIT.  So a negative 30% change to just $.70 cents a share annually.  From my perspective that is a dividend cut.  Sure I will have twice the number of shares (if that is how they split it).  Double shares will lead to higher payouts for me but until I see that stock in my account I am not so sure.

Tax rates may change for me as well since the REIT dividends may be taxed as ordinary income or qualified dividends.  This may further reduce the yield I was getting prior to the split.

Now if the stock price goes up for both companies because they achieve the goals they have set forth this won't be to bad.  If the dividend growth rate is better than 0 (like the current) and actually keeps up with inflation or better this is good for shareholders.  I guess only time will tell.  For now I am holding on.

Should I stay or go on WIN?

Full Disclosure: Long on WIN

Thursday, July 24, 2014

The Cost of A Vacation for Six

All investing and no fun can lead to a happy me but a not so happy family.  I am the only one who actually doesn't mind managing the finances and money matters in my family.  The kids are slowly learning and my wife leaves it to me since I use my computer and online services.  Both systems work but my system allows me to get things done faster and produce reports I enjoy studying.

Here is the breakdown of our 7 night trip to the beach and a 2 day visit with my brother:



This was the largest expense.  We stayed at hotels during the trip there and while visiting my brother.  Luckily we have a relative that works at a major hotel chain and is able to pass a discount on to us.  The remainder of it which was the big chunk was the condo on the beach that we stayed at.  

I found it as one of the deals on Kayak.com.  Overall the site was easy to use and compare different places.  Unfortunately I should have listened to the reviews.  We have stayed in condos and beach houses before but this was probably the most run down and outdated condo we have ever stayed at.  I felt like I stepped back into the 80's and the mold and rotten wood set my house fixing senses tingling.



We did our best to keep this expense down.  Several trips to the grocery store provided snacks and breakfast.  Our condo was equipped a kitchen so I did pancakes and french toast.  Some days it was just cereal or a bagel so we could get out to the beach. 

One of the nice surprises is the hotel did provide us with lunch for the entire stay.  They gave us tickets and we could trade them in for a lunch.  The choices were limited but this saved allot of money.  

Feeding six and not doing fast food every night was were the majority of the cost came from.  You can see it in the break down.  When it broke $50 dollars that was probably for a decent dinner.  Eating healthy and avoiding fried foods was our goal and we did pretty good at that.

Fun & Souvenirs


Not everyday was spend entirely at the beach.  We did some shopping for souvenirs and went to an old plantation turned garden.  It was full of beautiful sculptures and flowers and the pass was good for 7 days.  It also had a small zoo of animals indigenous to the area.  My wife and I enjoyed strolling through them as the kids raced around hiding in the mazes it created.  One of the other larger expense in this category and actually cost more than the gardens was a trip to an aquarium with my brother and his family.  I did not realize it cost that much to run one and pass that on to us.  Must the salt water fish.  I hear they are pretty expensive. 

I did put my wife's frequent visits to The Fudgery in here as well.  Can't justify all that sugar as food (sorry dear.)  However it is the best fudge I have ever had in my life.

Gas & Tolls


Unfortunately I cannot afford to fly the entire family anywhere.  So all of our trips are road trips.  The kids spend the time watching movies and watching the landscape go by.  My wife and I switch on and off with the driving which we don't mind.  The old minivan is still going strong and we will probably continue to use it until it falls apart.  Space is limited so I use my master packing skills to squeeze in 5 suitcases and all the other beach stuff into the back and any nook and cranny I can find.  It gets about 21 MPG on the highway so gas wasn't that much.  There were a couple of toll roads but they were limited and we were blessed with no traffic jams.


The total cost for 6 people for 9 days of fun and relaxation came to $3,404.  That is roughly 567 dollars per person.  If anyone can do a vacation to the beach for less than that per person please let me know your secrets.

While this doesn't have much to do with investing I though this would be worth sharing.  Any tips you can learn to save money will lead to more money you can invest.  My kids will only be young once.  I try to balance good memories with them and achieving my goals.  That is how I succeed in life.

Thank you for reading!

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 supporting my family of six.

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.  


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.


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.


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. 


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.


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.


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


My cost


Savings for investing


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.


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.


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.


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.


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.


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.


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