Monthly Review, October 2013

October was my most productive month so far for DivGro. I wrote 10 posts, including a milestones post, a bonus deposit post, and a quarterly review post. I added two stocks, ExxonMobil Corp. (XOM) and China Petroleum & Chemical Corp. (SNP), and a publicly traded LLC, Vanguard Natural Resources (VNR). These acquisitions (and a dividend increase from MicroSoft Corp.) increased DivGro's projected annual dividend income to $2,415, up from $1,766 in September.

With a market value of $58,105, DivGro's projected annual dividend income of $2,415 averages to a yield of 4.16%. The increase from September's average of 3.85% is due to the excellent yields offered by SNP and VNR.

I've earned dividend income of $196.96 in October, for a total of $957.07 this year.

Milestones

A milestone is either a stone functioning as a milepost – which this post is not about, or a significant event or point in development – which this post is about. 

I wrote my first post on January 10, 2013, some 284 days ago. Since then, I've written 58 posts, many of them taking several hours of research and preparation time. In the process, I've learned a tremendous amount about blogging, dividend growth investing and, especially, how to value dividend stocks. 

Reporting on one's investment decisions is an interesting thing. It requires discipline and perseverance. It inspires and invigorates. It establishes a kind of accountability – demanding clarity of thought; openness; even obligation and vulnerability. 

Recent Buy: VNR

Oct 21, 2013: Bought 180 units of VNR at $28.17 per unit.

Vanguard Natural Resources (VNR) is a publicly traded limited liability company, or LLC. Formed in October 2006, VNR focuses on the acquisition and development of oil and natural gas properties in the United States. Through operating subsidiaries, VNR owns properties in the southern portion of the Appalachian Basin, in the Permian Basin, and in south Texas. VNR completed its initial public offering in October, 2007.

LLCs pay out most of their cash flow in cash distributions, just like master limited partnerships (MLPs). They also have similar tax advantages and disadvantages. Because MLPs require special treatment at tax time, I require a premium yield of at least 6.75%. In my view, the extra work involved with MLP (and LLC) ownership at tax time is only worth my effort if I can earn a great yield. With a starting Yield on Cost of 8.84%, VNR certainly qualifies!

In September 2012, VNR changed from quarterly to monthly distributions. It currently pays 20.75c per unit per month. With my purchase of 180 units, I'll be earning $37.50 every month!

Recent Buy: SNP

Oct 18, 2013: Bought 31 shares of SNP at $80.61 per share.

China Petroleum & Chemical Corp. (SNP), also known as Sinopec Corp, is headquartered in Beijing, China. It is China's largest manufacturer and supplier of petroleum and major petrochemical products.

SNP is a Dividend Challenger with a modest 5-year streak of dividend increases. It pays semi-annual dividends, usually in June and September. As is the case with several semi-annual dividend payers, SNP has a pattern of paying one larger dividend and one smaller dividend every year. The pattern of payments since 2010 looks like this:

( $1.099  $0.802 )   ( $1.367  $1.066 )   ( $2.193  $1.075 )   ( $2.222  $1.293 )

Dividend payments of $3.515 at a buy price of $80.61 represents a starting Yield on Cost of 4.36%.

Bonus Deposit, October 2013

Today, I deposited another $10,000 cash into my DivGro portfolio.

The last time I reported on a similar bonus deposit, I explained the need to slowly decrease the relative size of my aggressive investments, in favor of more conservative income and dividend growth investments. Today's deposit is another step in that direction: I'm transferring cash from an account in which I mainly traded options.

Dividend Increases, Sep/Oct 2013

Time again for my mid-month post on recent dividend increases for stocks in my watch list!

Regular dividend increases are important for a dividend growth portfolio. The main goal of DivGro is to generate a reliable and growing dividend income stream. Reliable income comes from stable companies that not only pay dividends regularly, but can be counted on to pay the same (or increasing) dividends over time. Of course, I prefer companies that increase their dividends over time. To do so, these companies must grow their earnings sufficiently to continue to afford their growing dividend payments.

Recent Buy: XOM

Oct 10, 2013: Bought 30 shares of XOM at $85.18 per share.

ExxonMobil Corp. (XOM) is the world's largest publicly traded international oil and gas company. Founded in 1882 and based in Irving, TX, XOM is engaged in oil and natural gas exploration and production, petroleum products refining and marketing, chemicals manufacture, and other energy-related businesses. Approximately 83% of Exxon's earnings come from its operations outside the United States.

XOM is a Dividend Champion with an impressive 31-year streak of dividend increases. It pays quarterly dividends of $0.63 per share in March, June, September and December. Starting Yield on Cost is 2.96%.

7 Dividend Growth Candidates for October, 2013

I keep a watch list of dividend growth stocks as candidates for DivGro. It contains tickers of companies with continuous streaks of dividend increases, the so-called CCC stocks (Champions, Contenders, and Challengers) maintained by Dave Fish, as well as a few other dividend payers that pay (but do not raise) dividends regularly.

The watch list is organized by sector and by yield. Every month, I update the watch list to reflect any additions or deletions of CCC stocks. I also adjust for changes in dividend yield, which happen when stock prices or dividend payments change.

This month, two watch list stocks were affected. I deleted DX after its recent dividend decrease, and I moved PNNT to the non-CCC list following its deletion for Dave Fish's CCC stocks. Note that I recently bought shares of PNNT for DivGro.

Every month, I score stocks in my watch list based on my selection criteria. I assign a star rating to each candidate out of a maximum of 7 stars and compile a dashboard of candidates, sorted by star rating. This month, the top ten stocks are CHL, INTC, NTT, CVX, XOM, SNP, RCI, COP, MSFT, and PG.

I already own shares in the highlighted stocks. To diversify my portfolio, I choose 7 stocks from my dashboard that I don't own yet, for further analysis. The 7 candidates for October are:

Quarterly Review, Q3-2013

The third quarter of DivGro has ended and its time again to look at the portfolio's performance.

In Q3, I contributed $3,000 in capital funds to DivGro. Dividend income for the quarter was $385.89, up from $235.34 received in Q2. This is the second consecutive quarterly increase in dividend income.

I purchased shares in five new dividend growth stocks, adding $617.38 to DivGro's projected annual dividend income, which now totals $1,766.19.

Monthly Review, September 2013

September was one of the quieter months for DivGro. I added only one stock, PennantPark Investment Corp. (PNNT), increasing DivGro's projected annual dividend income to $1,766. In comparison, August's projected annual dividend income was $1,522.

With a market value of $45,992, DivGro's projected annual dividend income of $1,766 averages to a yield of 3.85%.

TRV's dividend payment this month helped me reach my 2013 goal of earning at least $750 in dividend income with DivGro stocks! I've now earned $760.11 in dividend income.