FIRE Fund Update For December 2019

The FIRE Fund is my real-money dividend growth stock portfolio.

I call it that because the portfolio allowed me to reach financial independence and retire early (FIRE) at just 33 years old.

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 essential expenses.

The Fund provides me an opportunity to live a blissful job-free existence that promotes time over money, passions over paychecks, and value over prices.

How and why I’ve saved and invested my way to FIRE at such a young age has been covered in my two best-selling books: The Dividend Mantra Way and 5 Steps To Retire In 5 Years (also available in paperback).

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. These updates are furthermore simply a peek at what the maintaining of a dividend growth stock portfolio post-FIRE looks like, as I’m no longer aggressively buying stocks so that I can achieve FIRE.

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 the ongoing casual investing of fresh capital does add to my passive income, lifestyle options, and long-term philanthropic firepower.

Moreover, the actual market value of the FIRE Fund (which is constantly oscillating) means very little in the grand scheme of things; the dividend income the Fund generates is what actually unlocks financial independence 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.

PURCHASES

I purchased 10 shares of The GEO Group, Inc. (GEO) on 11/5/19 for $15.79 per share. I purchased another 5 shares on 11/11/19 for $14.91 per share. Finally, I purchased 5 more shares on 12/2/19 for $14.02 per share.

The GEO Group, Inc. is a leading provider of diversified correctional, detention, and residential treatment services to various government agencies around the world.

I discussed my rationale for buying shares in The GEO Group last month, so I won’t rehash that.

I’ll just note that the stock’s valuation – sitting at a forward P/AFFO ratio of about 5 – is insane. It somewhat reminds me of what was recently happening with WestRock Company (WRK) and Altria Group Inc. (MO).

You had big and sudden downward pressure on their respective industries/sectors, along with company-specific issues. And these two events conspired to pummel valuations on the two stocks.

Well, The GEO Group is suffering from the fact that REITs in general have been killed over the last month or so (which has also negatively affected the Fund as a whole, as it’s slightly heavy on REITs). Plus, there are political pressures that are specific to the company. These two challenges have consequently pushed the valuation way down, which has allowed me an excellent opportunity to scoop up more shares at a 13%+ yield.

This is a tiny position in the Fund, however. And it’ll remain that way. I have no plans to add to this position from here on out. There are simply too many unknowns for me to get excited about going any heavier, but I think a small stake is worth the stretch at this ludicrous valuation.

These purchases added $38.40 in annual dividend income.

I purchased 1 share of Delta Air Lines, Inc. (DAL) on 11/11/19 for $57.16 per share.

Delta Air Lines, Inc. is a global airline company.

This position was initiated back in July. As I noted when I went over the investment rationale, I plan to slowly accumulate shares in the business while the valuation remains in this range.

I never would have thought that any domestic airlines would start running high-quality businesses. But here we are. The fundamentals, at least for Delta Air Lines, are fantastic.

I’ll continue accumulating, but it is a name that I’ll probably end up underweight in. Just not yet enough of a track record for me to have a significant investment in an airliner.

This purchase added $1.61 in annual dividend income.

I purchased 1 share of Exxon Mobil Corporation (XOM) on 11/15/19 for $68.88 per share. I purchased another 1 share on 11/25/19 for $68.81 per share. Then I purchased another 1 share on 12/2/19 for $68.66 per share.

Exxon Mobil Corporation is an integrated energy company engaged in the exploration for, and production of, crude oil and natural gas, the manufacturing of petroleum products, and the transportation of oil, natural gas, and petroleum products.

I’m basically piggybacking here onto the two shares I picked up last month at a very similar price. When Exxon Mobil stock, a Dividend Aristocrat with 37 consecutive years of dividend increases, is yielding over 5%, that’s obviously on my radar.

However, my overall exposure to O&G names is at a good level, if not slightly high. Thus, I’ll probably cap the position here, at least for the time being.

These purchases added $10.44 in annual dividend income.

I purchased 1 share of Simon Property Group Inc. (SPG) on 11/18/19 for $154.33 per share. I also purchased 1 share on 11/20/19 for $147.74 per share.

Simon Property Group Inc. is a self-managed real estate investment trust that owns, develops, and manages a real estate portfolio that’s primarily focused on regional malls.

I explained my thesis for investing in Simon Property Group back in October, when I initiated my stake.

As I noted then, I plan to modestly add to this position over time, assuming the valuation stays in this range. I like the fundamentals, yield, and valuation, but I do have some questions regarding the company’s ability to stay relevant and shift itself. I’ll be watching closely while I keep it a small stake.

These purchases added $16.80 in annual dividend income.

I purchased 5 shares of Invesco Ltd. (IVZ) on 11/20/19 for $17.21 per share.

Invesco Ltd. is a global asset manager that provides investment management services to both retail and institutional clients.

This is a position I initiated last month. I noted then that I planned to add to it in the near term, assuming the valuation remains in this range.

As I also said, though, it’s not the kind of stock that I’d like to go too crazy with in terms of position size. It’s simply not the kind of blue-chip stuff I usually stick to. But I think it’s worth a small stretch when looking at the overall blend of quality, valuation, and yield.

I have some room for more, so I’ll look to opportunistically buy.

This purchase added $6.20 in annual dividend income.

SALES

There were no sales since the last update.

DIVIDEND INCREASES

Emerson Electric Co. (EMR) announced a 2% increase in its dividend, upping the quarterly dividend from $0.49 to $0.50. This added $3.40 in annual dividend income.

WestRock Company (WRK) announced a 2.2% increase in its dividend, upping the quarterly dividend from $0.455 to $0.465. This added $1.20 in annual dividend income.

Nike Inc. (NKE) announced an 11.4% increase in its dividend, upping the quarterly dividend from $0.22 to $0.245. This added $0.50 in annual dividend income.

National Grid PLC (NGG) announced a 3.0% increase in its interim dividend, upping the interim dividend from 16.08 pence to 16.57 pence. This added $0.90 in annual dividend income.

Hormel Foods Corp. (HRL) announced a 10.7% increase in its dividend, upping the quarterly dividend from $0.21 to $0.2325. This added $1.80 in annual dividend income.

South Jersey Industries Inc. (SJI) announced a 2.6% increase in its dividend, upping the quarterly dividend from $0.2875 to $0.295. This added $1.50 in annual dividend income.

FIRE FUND

The FIRE Fund is now valued at $426,827.96. That’s a 0.2% decrease from the last reported market value of $427,591.32.

There are 126 companies in the Fund. That’s unchanged from last month.

The Fund is now expected to generate a total of $14,564.18 in annual dividend income over the next 12 months. That’s an increase of 0.6%, or $84.55, over the prior update’s annual expectation of $14,479.63.

A fantastic tool for tracking your portfolio, progress, and performance is Personal Capital.

CONCLUSION

Another great month. Solid stuff across the board.

I’m very happy with the selected additions to the Fund. I’m picking up some solid bargains in this market, without sacrificing quality. These are all highly profitable enterprises paying growing cash dividends. Those growing dividends constitute the proof in the “profit pudding”.

And most of these buys were minor additions to relatively small positions in the Fund. That’s perfect for me, now that I’m no longer in accumulation mode.

One glaring oddity about this month’s update is the lopsidedness between organic dividend income growth and the dividend income growth that came about from new purchases. Almost all growth in the Fund’s expected annual dividend income came about from new purchases. I don’t have any recent memory of a month quite like this. The opposite is usually the case.

It’s unusual in the sense that the stocks I bought over the course of November are all yielding much higher than the portfolio average. That was simply a coincidence. In addition, November was a particularly lethargic month for dividend raises – most were smaller raises that happened to come from smaller holdings in the Fund. I was expecting a dividend raise from Walt Disney Co. (DIS), but it looks like it’ll come through a bit later.

December should see the ship right itself.

I cannot think of any major news event that affected any of the Fund’s holdings. More earnings reports have come through, but all has been more or less as expected.

The only major news event that occurred in November is the same major news event that has been taking place every month since I started investing.

Compounding. 

It might not make your local 5 o’clock news broadcast, but I’m telling you that it’s more newsworthy than whatever cool event is happening in your downtown tonight.

The compounding dividend snowball is gaining size and speed, even while I go about my life and do as I please.

I’ll put that in perspective.

The $9.30 increase in my annual dividend income that came about by way of the organic dividend increases announced by my holdings this past month is analogous to investing $265 in fresh capital at a 3.5% yield (the average portfolio yield) – except I invested exactly $0 to achieve that increase in passive dividend income.

That’s organic dividend growth compounding away. And it’s amazing.

Coming up with almost $300 in a single month to invest is no easy chore. Many Americans struggle to do just that.

Yet I experienced the same result to my dividend income as if I had invested that much, even without investing a dime. And that was during an extremely slow month on the dividend growth front.

The trees in my forest continue to produce ever-more bountiful dividend fruit.

Stock prices go up and down, but dividends are almost always “in the green”. My favorite color.

Looking toward December, it’s business as usual for the Fund.

I’ll aim to invest $500 to $1,000 in fresh capital, which is my monthly target with the Fund now in “maintenance mode” from here on out. The snowball is doing the heavy lifting – err, rolling – now.

I’m very excited to finish the year strong. Even though I’m not as active as I used to be with stock buying, it’s still fun for me to put a little capital to work in high-quality dividend growth stocks at appealing valuations.

A number of financial names, including many of the big banks, look good here. Technology is an area where I’d like to be busier. And the airlines are doing some great things, yet the stocks are still in the bargain bin. So I’ll likely direct my capital toward certain stocks in these spots throughout December. I’d be surprised if Delta Air Lines and Invesco don’t pop up as buys once again in December.

Beyond that, I’m sure other ideas will spring up and interest me. I’m looking forward to sorting through those opportunities and putting a little bit of money to work.

What I’m most looking forward to, though, is just enjoying my life and taking maximum advantage of the freedom this dividend income provides me. It’s not something I take lightly. I’m very cognizant of my good fortune. And I’m grateful for it all.

I’m excited to live out another month in the life of my dreams. FIRE is absolutely, without a doubt, worth every ounce of effort and so-called “sacrifice”.

I honestly couldn’t imagine living any other way. Having the freedom to live life totally on my terms is a huge gift. Owning my time is the greatest luxury of all.

Let’s all continue to make our dreams come true!

As always, I’ll publish stock purchases in real-time over at Twitter and Facebook. So make sure to follow me on social media (where I also share numerous other updates about my life as an early retiree living abroad).

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: imgflip and Warner Bros. Pictures.

P.S. If you’re also aiming to build a dividend growth stock portfolio and the necessary dividend income to become FIRE, make sure to check out some amazing resources that helped me reach financial freedom at 33!