Thursday, January 8, 2015

Quarterly Review, Q4-2014

This Saturday will be two years since my first post on this blog. Its been a wonderful journey and I've learned a lot about dividend growth investing and the benefits of blogging about something you're passionate about.

The past quarter, the 8th for DivGro, has been quite illuminating. After joining Seeking Alpha in September, the increased exposure created more traffic for DivGro and helped generate some passive income through Google Adsense. Additionally, I wrote three premium articles for Seeking Alpha, which earned some additional income. My plan is to deposit this money into my DivGro account.

In my previous quarterly review, I reported that DivGro's page views had crossed the 100,000 mark. Well, I'm happy to report that DivGro's page views have now crossed the 150,000 mark. That's 50,000 page views in about three months at an average of about 555 page views per day.

In October, I added to my position in Seadrill Limited (NYSE:SDRL) which turned out to be a terrible move! The company suspended its dividend in November, causing SDRL's stock price to plunge. I wrote a post entitled Win Some, Lose Some, attempting to learn from the mistake and trying to figure out what to do about the losing investment.

Well, I did nothing about it. I'm keeping my SDRL shares and I'm adopting a wait-and-see attitude. Cue sera sera... The worst case scenario is that SDRL's price continues to slide and the company eventually goes bankrupt. If I'm lucky, SDRL survives and somehow turns things around. I'm quite sure that won't happen quickly, though. So, I'll string SDRL along as a reminder of my mistake and hopefully avoid similar mistakes in future.

Enough about SDRL.

This past quarter, I contributed capital funds in the amount of $8,350 to DivGro, including three regular monthly deposits of $2,500 each and a bonus deposit of $850. Dividend income in Q4-2014 totaled $1,137, slightly less than Q3-2014 dividend income of $1,244. For comparison, DivGro generated $587 in Q4-2013.

I initiated positions in Avista Corporation (NYSE:AVA), AT&T Inc (NYSE:T), and Helmerich & Payne Inc (NYSE:HP), while adding shares to existing holdings in SDRL, BHP Billiton plc (NYSE:BBL) and Chevron Corporation (NYSE:CVX).

AFLAC Incorporated (NYSE:AFL), Energy Transfer Partners, LP (NYSE:ETP), Intel Corporation (NASDAQ:INTC) and T announced dividend increases in Q4-2014. As mentioned, SDRL suspended its dividend payments, while the dollar equivalent dividend of Nippon Telegraph and Telephone Corporation (NYSE:NTT) was slightly lower than expected.

The net result is that DivGro's projected annual dividend income increased to $4,886, from $4,592 at the end of Q3-2014. This represents an increase of 6.4%.

Markets:
Sep 30, 2014
DOW: 17,042.90S&P 500: 1,977.2910-YR BOND: 2.51%
Dec 31, 2014
DOW: 17,823.07S&P 500: 2,058.9010-YR BOND: 2.17%

In the quarter ending December 2014, the Dow Jones Industrial Average increased by 4.58% while the S&P 500 increased by 4.13%. In comparison, DivGro's value decreased by 1.43% (when measured by internal rate of return (IRR) for Q4-2014).

At the end of Q4-2014, DivGro's market value of $118,213 represents a simple return of 14.4% on $103,350 invested. Of course, simple return does not take into account the timing and size of cash deposits as IRR does. DivGro's IRR since inception is 34.1%.

Here is a spreadsheet summarizing DivGro's performance for the quarter ending December 2014:
Dividend Adjustments:
  • New buys AVA, T, HP, BBL, and CVX added $561.36 in projected annual dividend income.
  • AFL declared a new quarterly dividend of 39¢ per share, increasing projected annual dividend income by $4.00. Yield on Cost (YoC) of AFL is now 3.12%.
  • ETP announced an increase of its quarterly distribution to 97.5¢ per share. The increase adds $8.00 to projected annual dividend income, while ETP's YoC increases to 8.22%.
  • INTC increased their quarterly dividend to 24¢ per share, adding $7.20 to projected annual dividend income. YoC of INTC is 4.53%.
  • T approved a quarterly dividend of 47¢ per share, raising YoC to 5.59%. The increase adds $3.00 to projected annual dividend income. 
  • SDRL suspended its dividend, removing $688 from projected annual dividend income. 
  • NTT's dollar equivalent dividend payment reduced projected annual dividend income by $1.69. NTT's YoC is now 3.59%
Dividends Received:
  • Total for Q4 of 2014: $1,136.69 (down from $1,243.97 in Q3-2014)
  • Total year-to-date: $3,945.10
Dividend Details
  • 2014-10-01: Cash Dividend Receipt BAX: $19.24
  • 2014-10-01: Cash Dividend Receipt PNNT: $60.20
  • 2014-10-07: Cash Dividend Receipt SNP: $40.11
  • 2014-10-09: Cash Dividend Receipt CHL: $41.92
  • 2014-10-10: Cash Dividend Receipt MO: $36.00
  • 2014-10-10: Cash Dividend Receipt PM: $31.00
  • 2014-10-15: Cash Dividend Receipt VNR: $37.80
  • 2014-10-21: Cash Dividend Receipt ACE: $15.12
  • 2014-10-30: Cash Dividend Receipt PMT:$73.20
  • 2014-11-01: Return of Capital ETP: $97.50
  • 2014-11-03: Cash Dividend Receipt DE: $18.00
  • 2014-11-06: Return of Capital APU: $105.60
  • 2014-11-14: Cash Dividend Receipt GD: $21.70
  • 2014-11-14: Cash Dividend Receipt VNR: $37.80
  • 2014-11-20: Cash Dividend Receipt CAT: $21.00
  • 2014-12-01: Cash Dividend Receipt AFL: $19.50
  • 2014-12-01: Cash Dividend Receipt COP: $27.74
  • 2014-12-01: Cash Dividend Receipt HP: $19.94
  • 2014-12-01: Cash Dividend Receipt INTC: $27.00
  • 2014-12-01: Cash Dividend Receipt PRE: $18.09
  • 2014-12-01: Cash Dividend Receipt TGH: $35.25
  • 2014-12-09: Cash Dividend Receipt JNJ: $21.00
  • 2014-12-10: Cash Dividend Receipt TGT: $20.80
  • 2014-12-10: Cash Dividend Receipt CVX: $26.75
  • 2014-12-10: Cash Dividend Receipt XOM: $20.70
  • 2014-12-10: Cash Dividend Receipt IBM: $15.40
  • 2014-12-11: Cash Dividend Receipt MSFT: $24.80
  • 2014-12-12: Cash Dividend Receipt WBA: $14.85
  • 2014-12-15: Cash Dividend Receipt VNR: $37.80
  • 2014-12-15: Cash Dividend Receipt NTT: $40.35
  • 2014-12-15: Cash Dividend Receipt MCD: $22.95
  • 2014-12-15: Cash Dividend Receipt MDP: $23.79
  • 2014-12-15: Cash Dividend Receipt AVA: $23.81
  • 2014-12-31: Cash Dividend Receipt NU: $23.55
  • 2014-12-31: Cash Dividend Receipt TRV: $15.95
Goals 2014: achieved all my goals for 2014, with the exception possibly of having a balanced portfolio across all 10 sectors. However, I do have a system in place to adjust DivGro's target sector distribution on a monthly basis and I'll continue to bias purchases to candidates in underweight sectors.

Outlook For Q1-2015: I have some very challenging goals for 2015, so I'll need to start working on those as soon as possible. I'm keeping monthly deposits at $2,500 this year even though we have larger monthly mortgage payments. Hopefully, this will help us reduce spending in other categories! As far as portfolio size is concerned, I'm planning on slowly adding to DivGro's number of holdings, but I'm also happy to add to existing holdings. My target for this year is 36-42 holdings. As mentioned, DivGro's second anniversary is this Saturday, January 10th. Look for my second annual review of DivGro's performance in an upcoming post.

Thanks for reading!

8 comments :

  1. Looking good, FerdiS. Too bad your investment in SDRL didnt work out, but like you said, you win some you lose some. Looks like overall, 2014 and the last quarter was great for you.

    Thanks for sharing
    R2R

    ReplyDelete
    Replies
    1. Thanks, R2R. Yes, pity about SDRL but I'll just move on now and hopefully learn from my mistake! SDRL did have a negative impact on my quarter results, with total dividends down and a decrease in total portfolio value. In future, I'll be really careful about high yielding stocks. So, we learn.

      Take care!

      Delete
    2. Not to rub salt in the wound but do you think the reason that SDRL turn out so badly is because you went outside of your normal screen? How would you prevent this in the future? By sticking to your screens? Or is this just one of those things that happens regardless? Just curious.

      Delete
    3. Fair question, Anonymous!

      In fact, SDRL showed up in my normal screening process. However, when I did my analysis, I noticed a few warning signals that I deemed (at the time) not to be too serious. Turns out, I should have heeded those signals.

      I justified the pick of SDRL with its higher risk profile as OK given its yield at the time (about 11% I recall). Also, I wrote in my buy post that SDRL is one of my riskier picks. I knew that going in and it just didn't work out for me, specifically because the oil price took a tremendous plunge since June of 2014. I believe if the oil price remained at those elevated levels, SDRL would today still be paying its dividend (and the stock price wouldn't have plunged!)

      I still carry a few other high yielding stocks in DivGro and, so far, they're doing fine. A few of them may cut their dividends and then I'll respond accordingly.

      Delete
  2. Happy 2 year anniversary to your blog! Congrats on the 2 years as well as a very nice month. Putting $8,350 of new capital to work in a quarter is a wonderful accomplishment. And by the looks of it, all but SDRL, will provide you with additional dividend income. Keep up the great work...wishing you continued success in 2015 and beyond! AFFJ

    ReplyDelete
    Replies
    1. HI AFFJ -- thanks for the wishes and words of encouragement. Really appreciate it!

      I can't believe its been 2 years. Things have worked out nicely and the dividend growth snow ball is growing larger and larger. I'm excited for this year to see where I can go with DivGro. There are some stretching goals to tackle!

      All the best to you, too!

      Delete
  3. FerdiS,
    Anonymous here again. Thank you for the reply on SDRL. I have one last question.

    Now that SDRL has fallen would you buy at this point or is it too risky? Based on your stock research the price of the stock is very appealing. There seems to be a lot of upside at this point however SDRL now is the subject to a class action lawsuit. It seems like a frivolous lawsuit like many but I'm not sure what the ramifications are to this. What are your thoughts about the lawsuit (does it concern you) and buying at this price (risk/reward)?

    Here is a link to announcement of lawsuit:
    https://finance.yahoo.com/news/shareholder-alert-brower-piven-encourages-212900681.html

    ReplyDelete
    Replies
    1. I wouldn't buy SDRL at this point because it doesn't pay dividends anymore. For DivGro, I only invest in dividend growth stocks, which SDRL is no longer due to its suspended dividend. (Strictly speaking, I should sell SDRL for that reason. But I'm considering my investment in SDRL dead money for now. Perhaps it will make a comeback, but I'm not holding my breath.)

      One can argue that a lot of the risk is now priced in, but I would wait for evidence of a turnaround first. I don't think that would happen before the crude oil price recovers, which will not happen as long as there's an oversupply. I agree the lawsuit is frivolous, but it is an unwelcome distraction and adds to the risk.

      Delete

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