FIRE Fund Update For January 2020

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; it’s the Fund’s growing dividend income that 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 1 share of Cracker Barrel Old Country Store, Inc. (CBRL) on 12/3/19 for $153.34 per share. I purchased another 1 share on 12/12/19 for $153.08 per share. Then I purchased another 1 share on 12/16/19 for $153.73 per share.

Cracker Barrel Old Country, Inc. is an American chain of old country restaurants that come attached with themed stores. The company also owns a non-controlling stake in Punch Bowl Social, an experiential chain of concept restaurants that offer various entertainment options.

This is a new position for the Fund.

I first looked at this business a few years ago. The stock was priced similarly to where it’s at now, but the valuation was higher and the yield was lower. However, the company has grown its earnings and dividend nicely in the years since, while the stock price has basically languished (due, perhaps, to prior overvaluation). This has created a more favorable valuation and yield currently, and I used that as an opportunity to finally add the stock to the Fund.

The fundamentals across the board are great.

EPS has almost tripled over the last decade, net margin is in the high-single-digit range, and the balance sheet is solid.

As a dividend growth investor, the dividend growth track record is obviously of great importance to me.

Well, the company has increased its dividend for 17 consecutive years, which speaks volumes. And the payout ratio remains moderate, leaving plenty of room for future dividend raises.

The ~3.4% yield is very attractive in this market, which is before factoring in the sizable special dividends the company has been paying since 2015. Assuming 2020 is similar to 2019, the forward yield is actually sitting at well over 5%.

I applaud some of the recent moves they’ve made, including the equity investment in Punch Bowl Social. One thing that kind of held me back regarding this business model is the distinct focus on an older demographic. But with Punch Bowl Social, which is a hip urban concept, the company has broadened its base and now appeals to a younger demographic. On the other hand, one does wonder how complementary PBS is to the core Cracker Barrel business.

With most basic valuation metrics at or below their respective recent historical averages, in an otherwise expensive market, I like this stock and plan to opportunistically add to it.

These purchases added $15.60 in annual dividend income.

I purchased 1 share of Delta Air Lines, Inc. (DAL) on 12/3/19 for $54.94 per share.

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

I’ve spent the last few months slowly acquiring shares in this airline. This transaction represented a continuation of that theme.

I recently wrote up a lengthy piece describing why it’s so appealing right now, so make sure to check that out.

This will end up as a relatively minor position in the Fund. That’s simply because of the business model. But I’m not done with it yet, so I’ll aim to continue buying more throughout early 2020.

This purchase added $1.61 in annual dividend income.

I purchased 1 share of Discover Financial Services (DFS) on 12/5/19 for $82.50 per share. I purchased another 1 share on 12/23/19 for $85.95 per share. Then I purchased another 1 share on 12/31/19 for $84.85 per share.

Discover Financial Services is a direct banking and payment services company that offers a variety of direct loan products and credit cards.

This is the first time I’ve added to this stake in more than a year. Since I initiated my position in 2017, Discover Financial Services has basically gone gangbusters. The business is performing at an extremely high level.

Even with that high level of business performance, the stock looks attractively valued. In my view, the valuation has not kept pace with the business. Make sure to check out my full analysis and valuation on this stock, which was published in early December.

I would like to buy even more in January. And I plan to do so.

These purchases added $5.28 in annual dividend income.

I purchased 1 share of Cisco Systems, Inc. (CSCO) on 12/10/19 for $43.89 per share.

Cisco Systems, Inc. is the world’s leading designer, manufacturer, and supplier of data networking equipment and software.

They have a dominant position in routers and switches, positioning them to take advantage of the increasing move toward the Internet of Things as people, government, and businesses continue to rely more on the digital space for everyday activities.

This is the first time I’ve added to this position in more than two years. The stock has advanced about 40% in price since the last time I bought it, but it’s also way off of its 52-week high of over $58/share. After a post-earnings decline (on the back of a disappointing report) that seemed overdone to me, I feel like it’s once again a good time to buy this stock.

Cisco Systems is shaping up to be a dividend growth stalwart.

The company has already increased its dividend for nine consecutive years. I think that’s just the start of what they’re ultimately capable of.

With a well-covered 3%+ yield and a five-year dividend growth rate of 14.5%, this offers me the one-two combination of yield and growth that I typically look for.

The company has compounded its EPS at an annual rate of almost 8% over the last decade in a fairly secular manner. They sport a rock-solid balance sheet. And profitability is fantastic.

I don’t think the stock is a steal here. But with a P/E ratio under 18 and a yield that’s slightly higher than its five-year average, it’s a quality business trading for a fair (or better) price.

This purchase added $1.40 in annual dividend income.

I purchased 1 share of Simon Property Group Inc. (SPG) on 12/11/19 for $145.51 per share. I purchased another 1 share on 12/18/19 for $144.41 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 talked quite a bit about this holding in the last FIRE Fund update, so I won’t rehash that.

This valuation is pretty attractive, in my view. I’m happy to have the opportunity to add to my stake.

However, as I noted before, I planned all along on keeping this a very small position. I’ll probably cap it here. It’s fundamentally a high-quality business, no doubt, but there are some qualitative concerns regarding viability over the long run.

These purchases added $16.80 in annual dividend income.

SALES

There were no sales since the last update.

DIVIDEND INCREASES

WEC Energy Group Inc. (WEC) announced a 7.2% increase in its dividend, upping the quarterly dividend from $0.59 to $0.6325. This added $4.25 in annual dividend income.

C.H. Robinson Worldwide, Inc. (CHRW) announced a 2.0% increase in its dividend, upping the quarterly dividend from $0.50 to $0.51. This added $1.00 in annual dividend income.

Eastman Chemical Company (EMN) announced a 6.5% increase in its dividend, upping the quarterly dividend from $0.62 to $0.66. This added $2.40 in annual dividend income.

Enbridge Inc. (ENB) announced a 9.8% increase in its dividend, upping the quarterly dividend from C$0.738 to C$0.81. This added $19.58 in annual dividend income.

Realty Income Corp. (O) announced a 0.2% increase in its dividend, upping the monthly dividend from $0.227 to $0.2275. This added $0.57 in annual dividend income.

Amgen, Inc. (AMGN) announced a 10.3% increase in its dividend, upping the quarterly dividend from $1.45 to $1.60. This added $6.00 in annual dividend income.

Broadcom Inc. (AVGO) announced a 22.6% increase in its dividend, upping the quarterly dividend from $2.65 to $3.25. This added $9.60 in annual dividend income.

Abbott Laboratories (ABT) announced a 12.5% increase in its dividend, upping the quarterly dividend from $0.32 to $0.36. This added $5.60 in annual dividend income.

Dominion Resources, Inc. (D) announced a 2.5% increase in its dividend, upping the quarterly dividend from $0.9175 to $0.94. This added $2.70 in annual dividend income.

AT&T Inc. (T) announced a 2.0% increase in its dividend, upping the quarterly dividend from $0.51 to $0.52. This added $8.00 in annual dividend income.

Pfizer Inc. (PFE) announced a 5.6% increase in its dividend, upping the quarterly dividend from $0.36 to $0.38. This added $4.80 in annual dividend income.

W.P. Carey Inc. (WPC) announced a 0.2% increase in its dividend, upping the quarterly dividend from $1.036 to $1.038. This added $0.64 in annual dividend income.

FIRE FUND

The FIRE Fund is now valued at $438,363.16. That’s a 2.7% increase from the last reported market value of $426,827.96.

There are 127 companies in the Fund. That’s an increase from last month due to the initiation of a position in Cracker Barrel Old Country Store.

The Fund is now expected to generate a total of $14,680.63 in annual dividend income over the next 12 months. That’s an increase of 0.8%, or $116.45, over the prior update’s annual expectation of $14,564.18.

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

CONCLUSION

What an awesome way to finish out 2019. The Fund closed the year with a bang for sure. I love it.

I added to some older legacy positions that were due for boosting. Both Cisco Systems and Discover Financial Services are well-run businesses moving in the right direction, but their respective stocks have been more or less left behind by the market in recent months. When opportunity knocks, you open the door with a fistful of cash.

I can’t recall any major specific news events from any of the Fund’s holdings. Other than macroeconomic stuff, which isn’t ever really on my radar, December was fairly quiet on the corporate front.

However, that quietness wasn’t present in the one area where I like noise.

I’m talking about dividend increases.

12 different Fund holdings announced dividend increases since the last update.

I was mostly pleased.

C.H. Robinson Worldwide disappointed a little bit, but that was made up for by a whopper of a dividend raise by Broadcom.

The rest of the dividend increases were more or less within my expectations.

When 12 different companies raise their dividends, that tends to move the needle in a noticeable way.

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 $65.14 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 $1,861 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.

Back in early 2010, when I first started investing, I could not come up with $1,800 in a single month to invest. It just wasn’t possible. I was making barely $40,000/year at my day job. And I was still trying to get my life (and savings) right-sized while I embraced frugality and minimalism.

Yet I’m now in a position where the Fund provides the same net result as if I had invested that kind of money, even though I don’t have to lift a finger.

Snowball rolling is one of those things that starts off really difficult. But it gets easier and easier over time. It’s now practically effortless.

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 January, 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 excited to start a new year with new opportunities in a new city. I find myself in Kuala Lumpur, partially due to some of the recent visa changes in Thailand. I’ll be exploring my new surroundings as much as, or more than, I’ll be exploring stocks to add to the Fund.

Truth be told, though, January will in all likelihood look a lot like December in terms of where I’ll be most active with stock purchases.

Cracker Barrel Old Country Store, in particular, is a stock that I plan on buying more of.

I also still have some room for more Delta Air Lines, although I’ll probably cap that position off here pretty soon.

I’d like to be more busy than I have been in both financials and the tech space. Perhaps January will offer me better looks in those areas.

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!