The FIRE Fund is my real-life and real-money dividend growth stock portfolio.
I call it that because the portfolio allowed me to reach financial independence and retire early (FIRE).
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.
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, options, and philanthropic firepower.
Moreover, the actual market value of the FIRE Fund (which is constantly oscillating) means very little in the grand scheme of things; 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 5 shares of Altria Group Inc. (MO) on 1/15/18 for $47.90 per share. I purchased another 5 shares on 1/24/18 for $42.43 per share.
Altria Group Inc. is one of the world’s largest tobacco companies. It is the largest cigarette manufacturer in the United States.
It’s no secret that the tobacco majors have been in the doldrums lately. Of course, that’s music to a value investor’s ears, assuming there’s nothing broken about the basic business model or fundamentals.
This stock’s descent from the mid-$60s in November to where it’s at today was initially catalyzed by the FDA’s November announcement regarding a potential ban on menthol cigarettes. Altria responded to this almost immediately. The short take is this: a total ban is unlikely, and any major actions here would take years to play out.
The stock’s more recent slide has seemingly been accelerated by a series of moves that Altria undertook in order to protect and diversify the business. Namely, they acquired large stakes in both Canadian cannabis company Cronos Group Inc. (CRON) and privately-held e-cigarette company Juul Labs.
The jury is still out on whether or not these large investments will pan out. I do think that Altria is hedging its bets and protecting itself in the face of aggressive language by the FDA. Investors should applaud this. It’s really just the valuations here, particularly regarding the Juul Labs investment, that are questionable.
Altria paid $12.8 billion for 35% of Juul Labs, valuing the entirety of Juul Labs at $38 billion – substantially higher than Juul’s valuation just this past summer. The valuation here honestly seems nuts. Moreover, it’s a minority stake that doesn’t seem to generate ongoing cash flow, although some kind of future dividend isn’t off the table.
Still, Altria’s management team has been widely lauded for many years now. For good reason. They’ve been fantastic stewards of capital, and they’ve run Altria with adeptness in the face of a sharply declining customer base. I’m giving them the benefit of the doubt(s) here.
It’s easier for me to do that considering Altria’s own valuation, which has been killed over the course of the last few months.
The stock’s 30%+ drop from early November to where I last picked up shares pushed the yield past 7%. A yield this high on this stock hasn’t been seen in many years. It’s a blue-chip dividend that’s about as big as it gets. Altria has been increasing its dividend for 49 consecutive years. I don’t see that changing anytime soon, outside of a full-on menthol ban.
That ban, by the way, seems to be completely priced in at where I last bought shares. Menthol products account for an estimated 20% of Altria’s profit. A 30%+ drop on MO has already priced in a total ban on menthol, as well as basically a worthless Juul Labs stake. Said another way, the stock in the low $40s features a valuation that implies Menthol profit will disappear and the Juul Labs investment is a total loss. I think either event is unlikely in isolation; both events coming to pass simultaneously seems like an impossibility.
But I’m more than happy to scoop up the stock at this valuation. For perspective, the P/CF ratio is less than half of its three-year average. One could argue that three-year period sported a premium pricing on the stock due to low interest rates, but it’s now gone from (arguably) expensive to ludicrously cheap. Valuations tend to overshoot and over-correct due to emotion.
Said simply, investors were willing to pay over $65/share as recently as a few months ago – without JUUL or Cronos. Now investors are only willing to pay less than $43/share – with JUUL and Cronos. Mr. Market’s irrationality is what makes rational people rich over time.
That said, my overall exposure to tobacco at the portfolio-wide level is almost 4% based on the combined securities’ market value. Based on dividend income, it’s even higher. As such, I’m not keen to buy any more tobacco stocks. It’s unfortunate because they’re very cheap here, but I’m always extremely prudent regarding risk.
These purchases added $32.00 in annual dividend income.
There were no sales since the last update.
Bank OZK (OZK) announced a 4.8% increase in its dividend, upping the quarterly dividend from $0.21 to $0.22. This added $1.20 in annual dividend income.
Realty Income Corp. (O) announced a 2% increase in its dividend, upping the monthly dividend from $0.221 to $0.2255. This added $5.13 in annual dividend income.
Fastenal Company (FAST) announced a 7.5% increase in its dividend, upping the quarterly dividend from $0.40 to $0.43. This added $6.00 in annual dividend income.
EPR Properties (EPR) announced a 4.2% increase in its dividend, upping the monthly dividend from $0.36 to $0.375. This added $7.20 in annual dividend income.
ONEOK, Inc. (OKE) announced a 0.6% increase in its dividend, upping the quarterly dividend from $0.855 to $0.86. This added $2.00 in annual dividend income.
Wells Fargo & Co. (WFC) announced a 4.7% increase in its dividend, upping the quarterly dividend from $0.43 to $0.45. This added $7.20 in annual dividend income.
Kimberly-Clark Corp. (KMB) announced a 3% increase in its dividend, upping the quarterly dividend from $1.00 to $1.03. This added $2.40 in annual dividend income.
Norfolk Southern Corp. (NSC) announced a 7.5% increase in its dividend, upping the quarterly dividend from $0.80 to $0.86. This added $13.20 in annual dividend income.
Air Products & Chemicals, Inc. (APD) announced a 5.5% increase in its dividend, upping the quarterly dividend from $1.10 to $1.16. This added $4.80 in annual dividend income.
Chevron Corporation (CVX) announced a 6.3% increase in its dividend, upping the quarterly dividend from $1.12 to $1.19. This added $5.60 in annual dividend income.
Diageo PLC (DEO) announced a 4.8% increase in its interim dividend, upping the interim dividend from 24.9 pence to 26.1 pence. This added $1.58 in annual dividend income.
Polaris Industries Inc. (PII) announced a 1.7% increase in its dividend, upping the quarterly dividend from $0.60 to $0.61. This added $0.80 in annual dividend income.
Aflac Incorporated (AFL) announced a 3.8% increase in its dividend, upping the quarterly dividend from $0.26 to $0.27. This added $7.20 in annual dividend income.
Gilead Sciences, Inc. (GILD) announced a 10.5% increase in its dividend, upping the quarterly dividend from $0.57 to $0.63. This added $4.80 in annual dividend income.
There are 115 companies in the Fund. That’s unchanged since the last update.
The Fund is now expected to generate a total of $13,541.23 in annual dividend income over the next 12 months. That’s an increase of 0.9%, or $121.27, over the prior update’s annual expectation of $13,419.96. (I corrected a previously incorrect annual dividend income amount in the spreadsheet for Realty Income for this update, which is the reason for the discrepancy.)
A fantastic tool for tracking your portfolio, progress, and performance is Personal Capital.
Another wonderful month as a dividend growth investor. Also another wonderful month of living the early retirement dream lifestyle in Thailand.
I don’t think so.
The former aids the latter. I’m able to go about my blissful job-free life, without major economic worries, precisely because my essential expenses are totally covered by passive dividend income. Every time a dividend rolls in, a bill is paid. There’s a continual sense of relief there.
It’s amazing stuff. I’m so, so fortunate. Deciding to walk the path toward FIRE back in 2009 is one of the best decisions I’ve ever made.
I feel great with the way 2019 has started.
First, let’s just talk about those dividend increases.
14 dividend raises up there. What a way to begin the year. Incredible!
Just try getting 14 pay raises in a month from your day job. Ain’t gonna happen.
I remember being a naive young man, thinking a paycheck was the path to a secure financial future. Getting fired during the depths of the financial crisis was the wake-up call I needed. A paycheck from a job isn’t secure at all!
On the other hand, dozens upon dozens of dividends from high-quality companies is about as secure as it gets. I truly cherish being in this position.
For perspective on that, the $69.11 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 $1,975 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.
The dividend growth snowball continues to roll faster work harder, even if I don’t. Knowing that my passive dividend income is growing as if I’m still investing thousands of dollars per month, even when I’m not, keeps me sleeping like a baby at night.
That said, I do still invest occasionally. This is largely because I enjoy investing as a pastime. It’s something I’ll always be passionate about. I’m just not obsessed about it like I was during the climb up Mt. Freedom, because FIRE is no longer this all-encompassing goal in my life. The extra passive income from new investments gives me additional lifestyle options. Moreover, I plan to give away most of my money on/before my death, so actively growing the FIRE Fund’s assets and income gives me more philanthropic firepower down the road.
I invested a little fresh capital this month, as you can see above.
I typically aim to invest $500 to $1,000 per month in this new, post-FIRE phase of my arc as an investor.
I’m satisfied with where I came out in January. I was planning on buying Broadcom Inc. (AVGO) for the fifth month in a row, but its rise combined with the simultaneous fall in Altria’s stock shifted my attention. I’ll likely get back to acquiring shares in Broadcom next month.
Beyond that, it’ll be business as usual. More dividend increases, a little fresh capital put away, and (most importantly) enjoying FIRE.
Let’s all continue to make our dreams come true and make the most of our lives!
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!