Okay, guys. After taking a rather lengthy break from regularly updating the portfolio, I’m finally once again excited to put these monthly updates together.
I was conserving and managing resources over the last couple years in order to focus on high-level concepts that discussed important, holistic aspects of financial freedom. I really had to get some of these ideas out of my head.
In addition, I’ve always been moderately concerned about burning myself out on writing, which is another reason why I’ve mixed things up over the years.
The end result of that is that I’m just as (if not more) excited about writing in 2018 as I was in 2011.
And that’s led me to get back to doing these regular updates.
The FIRE Fund is my real-life and real-money dividend growth stock portfolio. I call it the FIRE Fund because the portfolio allows me FI/RE (financial independence/retired early).
This six-figure collection of some of the best businesses in the world is generating the five-figure and growing passive dividend income I need to sustain myself in life and cover my personal basic expenses. It provides me an opportunity to live a blissful job-free existence that promotes time over money, passions over paychecks, and value over prices.
I’ll below go over any and all transactions from the preceding month, covering any buys and/or sells that occurred since the last update. You’ll see exact transactions (including dates and prices). And I’ll quickly discuss some of the rationale behind each respective transaction.
Keep in mind, however, that these monthly updates are just snapshots in time. Moreover, the actual market value of the FIRE Fund (which is constantly oscillating) means very little in the grand scheme of things, as it’s the dividend income the Fund generates that actually unlocks financial freedom for me.
To that point, I’ll also go over any dividend increases that were announced since the last update, as well as how that affects the Fund’s expected annual dividend income over the next 12 months.
I purchased 2 shares of British American Tobacco PLC (BTI) on 3/5/18 for $58.63 per share. I then picked up another 5 shares on 3/14/18 for $58.73 per share.
British American Tobacco PLC is a global consumer goods company that provides tobacco and nicotine products to adult consumers worldwide. They’re one of world’s largest such companies.
This is a position that I never actually initiated on my own. Rather, I was given stock in the company after British American Tobacco acquired Reynolds American Inc. in 2017.
That acquisition added Newport (among other products) to an already venerable portfolio of traditional cigarette brands. And the company has been aggressively moving into potentially reduced-risk products through brands like glo, vype, and vuse (that aggressiveness shown by the aforementioned acquisition).
I was content to leave the small position as it was – until the stock dropped rather considerably over the last few months, at which point I thought the valuation became compelling enough to buy a bit more. A number of basic valuation metrics for the stock are well below their respective recent historical averages, which has subsequently pushed the yield up to a very appealing 4.7%+.
Their products are addictive, with immense pricing power. And the ongoing move to e-cigarettes and other potentially reduced-risk products should be an avenue for long-term growth in this industry. But regulation (especially in regard to their menthol products) is a huge risk.
It’s a high-yielding stock with solid dividend growth. Plus, the stock may be slightly more attractive to some US investors after it recently moved to quarterly dividend payments.
It’s still a relatively small position in the Fund, so I may add some more over the next few months. The stock price notably dropped quickly and sharply below what I purchased these additional shares for, only to just as quickly and sharply rebound. Unfortunate timing, but I’m happy with the valuation I bought in at. Still, though, I’d look forward to another drop like that in the near term.
This purchase added $19.32 in annual dividend income.
I purchased 3 shares of National Grid PLC (NGG) on 3/9/18 for $54.70 per share.
National Grid PLC is a large utility company that focuses on transmission and distribution of electricity and gas in the UK and the US.
This transaction rounded my position up to an even 30 shares in National Grid. I originally purchased 30 shares, but the company announced a share consolidation in 2017 that replaced every 12 shares with 11 shares; they also paid out a large one-time dividend as part of that process which was initiated as part of their Gas Distribution sale.
National Grid, like most utilities, has seen its stock price drop rather precipitously over the last six or so months. For perspective, the stock was in the mid-$60s as recently as September. Fine by me, as it provided me what I saw as the first chance to add to the position in quite a while.
A utility is a ubiquitous, necessary, and monopolistic business model. That’s offset by regulation, a constant need to invest, and geographic limitations. Overall, though, I have a place in the portfolio for utilities due to the big and reliable dividends they typically offer.
The valuation for this stock looks good across the board. There’s nothing that would indicate this stock is even close to pricey right now. If anything, it’s downright cheap.
National Grid isn’t blowing anyone’s doors off with its business growth, but the stock yields a comfortable and sustainable 5.3%+. The dividend should continue to grow in line with UK RPI inflation, which is in the low single digits (similar to most other utilities that offer a yield in this range).
However, that growth doesn’t always translate over into increased income in USD, due to currency exchange rates. This is similar to BTI – both companies/stocks are regularly increasing their respective dividends, but the streaks don’t readily pop up due to currency exchange fluctuations.
This purchase added $8.73 in annual dividend income.
I purchased 5 shares of Enbridge Inc. (ENB) on 3/16/18 for $31.69 per share.
Enbridge Inc. is an energy distribution and transportation company that owns and operates crude and natural gas pipelines across the United States and Canada.
After merging with Spectra Energy Corp. in 2017, Enbridge has become one of the largest energy infrastructure companies in North America.
One of the biggest tobacco companies in the world. A massive intercontinental utility. And now one of the biggest energy infrastructure companies on this side of the planet.
Notice a trend?
Enbridge has become silly cheap, in my opinion. Take your pick of any valuation metric – the odds are pretty good that it will be substantially below its five-year average. And that’s before they had Spectra.
While Enbridge, like any pipeline company, has risks, those seem to be more than priced in here.
The stock is now yielding an incredible 6.5%+ on healthy ACFFO. And that’s with Enbridge forecasting 10% annual dividend growth through 2020 (they’ve already made good on that in 2018 with the Q1 2018 dividend coming in at 10% higher than the Q4 2017 dividend).
They’ve increased their dividend for 22 consecutive years now. There doesn’t appear to be any reason why that won’t continue for the foreseeable future.
This purchase added $10.40 in annual dividend income.
There were no sales since the previous Fund update.
There were a number of dividend increases that were announced since the last Fund update on March 2, 2018.
General Dynamics Corporation (GD) announced a 10.7% increase in its dividend, upping the quarterly dividend from $0.84 to $0.93. This added $7.20 in annual dividend income.
Colgate-Palmolive Company (CL) announced a 5% increase in its dividend, upping the quarterly dividend from $0.40 to $0.42. This added $4.00 in annual dividend income.
Qualcomm, Inc. (QCOM) announced a 8.8% increase in its dividend, upping the quarterly dividend from $0.57 to $0.62. This added $12.00 in annual dividend income.
Armanino Foods of Distinction Inc. (AMNF) announced a 12.5% increase in its dividend, upping the quarterly dividend from $0.02 to $0.0225. This added $13.50 in annual divided income.
Realty Income Corp. (O) announced a 0.2% increase in its dividend, upping the monthly dividend from $0.219 to $0.2195. This added $0.57 in annual dividend income.
Williams-Sonoma, Inc. (WSM) announced a 10.3% increase in its dividend, upping the quarterly dividend from $0.39 to $0.43. This added $4.00 in annual dividend income.
Raytheon Company (RTN) announced a 8.8% increase in its dividend, upping the quarterly dividend from $0.7975 to $0.8675. This added $7.00 in annual dividend income.
The FIRE Fund is now valued at $350,105.02. That’s an increase of 0.5% over the last reported market value of $348,506.57.
There are 110 companies in the Fund. This is unchanged since the last update.
The Fund is now expected to generate a total of $12,419.51 in annual dividend income over the next 12 months. That’s an increase of 0.8% over the prior update’s annual expectation.
A fantastic tool for tracking your portfolio, progress, and performance is Personal Capital.
Everything is humming along. The market goes up and down, but market volatility doesn’t matter much to a dividend growth investor living off of dividend income.
I’m extremely pleased with this collection of world-class businesses. Most are operating as anticipated.
Expected annual dividend income is up nicely, which only adds to my freedom, flexibility, and options in life. I couldn’t be happier.
For perspective, the $48.27 increase in annual expected dividend income that came about completely organically, via dividend increases, is the same as investing $1,379 in fresh capital at a 3.5% yield (the approximate yield of the portfolio as a whole) – except I didn’t invest a dime to lay claim to that extra passive income.
It’s old money making new money. That’s a dividend growth snowball in action.
Looking forward, I anticipate being about as busy in April as I was in March. That is to say, I’ll likely invest a few hundred dollars or so in high-quality dividend growth stocks trading at attractive valuations.
Aggressively buying stocks is no longer a major priority for me. Stock purchasing is now more or less a function of the pure enjoyment of investing as a hobby and passion (rather than a function of becoming financially independent as fast as possible).
But I continue to enjoy building up the Fund and adding pieces as I go. It’s great fun. And I know that most of the wealth it eventually builds for me will be eventually given away, which just adds to the pleasure.
There appears to be some solid value in select REITs, utilities, energy companies, and even some consumer goods companies in the food space. Also, I wouldn’t mind buying more British American Tobacco PLC, as noted.
All in all, I’m looking forward to April. And I hope you are, too!
Full disclosure: I’m long all aforementioned stocks.
How was your month? Are your investments performing to your expectations?
Thanks for reading.
Image courtesy of: Sira Anamwong at FreeDigitalPhotos.net.
P.S. If you’re also aiming to become FIRE, make sure to check out some amazing resources that helped me become financially free at 33.