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.
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, freedom, and options.
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 Hanesbrands Inc. (HBI) on 5/1/18 for $17.26 per share. I purchased another 5 shares on 5/9/18 for $16.76 per share.
Hanesbrands Inc. is an apparel marketer and manufacturer, with a portfolio of apparel brands across t-shirts, innerwear, casualwear, activewear, socks, and hosiery.
I love this business model.
It’s easy to understand: we all know what clothing is.
It’s ubiquitious: we all have to wear clothing.
This is one of those Peter Lynch type of moves, where you look around you and find the simplest and most obvious investment ideas. It doesn’t get much more simple and obvious than t-shirts and hosiery. In fact, it was Lynch’s noticing of his wife’s preference for L’Eggs hosiery that led to a big investment in Hanes, way back before it was bought out by Consolidated Foods.
In addition, Warren Buffett long ago bought up the whole of Fruit of the Loom. I don’t own the whole of Hanesbrands, but it’s great to know I’m on the same page as Buffett here.
Hanesbrands complements my existing investments in Nike Inc. (NKE) and VF Corp. (VFC) by giving me exposure to the value end of the spectrum with brands like Hanes, Champion, Bali, Playtex, L’Eggs, and Wonderbra.
The company’s fundamentals across the board are pretty spectacular, other than the debt load (which is a bit higher than I’d like to see). However, much of that debt has been used to fund many acquisitions over the last decade that have thus far turned out to be excellent and accretive bolt-on moves.
Hanesbrands has a five-year track record for dividend growth. While short, the three-year dividend growth rate is a monstrous 26%. The company is somewhat limited in terms of legacy numbers because it was spun off from Sara Lee Corporation in 2006.
But the 2018 dividend increase hasn’t come to pass yet. And the debt is a touch high. This leads me to keeping this as a somewhat small position.
Otherwise, the valuation is pretty compelling against great fundamentals.
The normalized P/E ratio is significantly below its five-year average, the P/CF is about 1/3 of its three-year average, and the yield is over twice as high as its five-year average.
If a few things were clicking just a bit better, I’d probably be way more aggressive with the accumulation of stock in this business. But I still think it’s highly worthy of investment as-is.
These purchases added $6.00 in annual dividend income.
I purchased 5 shares of Tanger Factory Outlet Centers Inc. (SKT) on 5/2/18 for $20.39 per share.
Tanger Factory Outlet Centers Inc. is a real estate investment trust that owns and operates, or has an ownership position in, outlet retail centers across the United States and Canada. Their portfolio includes 44 upscale outlet shopping centers that total over 15 million square feet.
This is arguably more of a speculative position for the portfolio. But I think that speaks more to the bulletproof nature of my portfolio than anything particularly wrong about Tanger, as this is a Dividend Aristocrat (with 25+ consecutive years of dividend increases under its belt) we’re talking about here.
Still, the nature of retail is changing very quickly. And how those changing dynamics will eventually affect this specific company, and the very business model, remains to be seen. That’s why I believe it’s a bit speculative.
But I think the valuation and yield compensate for much, or even all, of that.
Furthermore, the company is still growing, the dividend is very healthy, and the occupancy rate is 95.9%. This is not a business in dire straits.
The valuation, though, would indicate otherwise.
The REIT is guiding for $2.40 to $2.46 in diluted FFO/share this fiscal year. The stock is under $22. So we’re talking less than 9 times forward FFO/share. Pretty insane – unless this company is nothing more than a slow slide into obsolescence.
It’s yielding a sky-high 6.48% as of this writing, with the annual dividend sucking up just 57.6% of the midpoint of FY 2018 guidance for FFO/share.
I wouldn’t want to go too heavy on this name. Indeed, I’ll probably cap it here.
But this is still a rock-solid business with 25 consecutive years of dividend growth, strong fundamentals (including a very good balance sheet), and a management team that is excellent at communicating challenges and opportunities and executing appropriately.
This purchase added $7.00 in annual dividend income.
I purchased 5 shares of PPL Corp. (PPL) on 5/14/18 for $27.63 per share. I purchased another 5 shares on 5/16/18 for $27.12 per share. I purchased another 5 shares on 6/4/18 for $26.97 per share.
PPL Corp. is an energy and utility holding company that, through its subsidiaries, generates and markets electricity in the northeastern and western US and delivers electricity in Pennsylvania and the UK.
I went over my rationale for buying up shares in PPL last month, so I won’t bother to rehash that.
The only thing I’ll quickly note is that I’m probably done accumulating shares in this business. I feel comfortable with the position size. And I have quite a bit of exposure to utilities in general.
I may add a few more shares over the next month or two, but I find it more likely that I’ll be buying up stock in other companies. That is unless the stock drops in price by some substantial degree, making the valuation even more appealing.
These purchases added $24.60 in annual dividend income.
I purchased 5 shares of General Mills, Inc. (GIS) on 5/16/18 for $42.85 per share.
General Mills, Inc. manufactures and markets a number of global branded food products.
This is another repeat from last month. You can visit the link above to read about my thoughts on this company and its stock.
I think I have enough room in the portfolio for a few more shares, so it’s likely that I’ll buy up just a little more of this stock in the near term.
This purchase added $9.80 in annual dividend income.
I purchased 5 shares of Kinder Morgan Inc. (KMI) on 5/16/18 for $16.41 per share. I purchased another 5 shares on 5/29/18 for $16.32 per share.
Kinder Morgan Inc. is a midstream energy company that provides crucial infrastructure, owning and operating more than 80,000 miles of pipeline and 155 terminals.
This is yet another repeat from last month. I’m nothing if not consistent. As such, I won’t go over the rationale again.
Like PPL, though, I’m unlikely to buy up more stock in this business. It’s not that this position specifically is that large; it’s rather a situation where my overall exposure to this industry as a whole is more than enough.
In addition, after a massive dividend cut in late 2015, Kinder Morgan has a long way to go in terms of proving itself as once again a premier investment for dividend growth investors like myself.
These purchases added $8.00 in annual dividend income.
There were no sales since the previous Fund update.
Apple Inc. (AAPL) announced a 15.9% increase in its dividend, upping the quarterly dividend from $0.63 to $0.73. This added $8.00 in annual dividend income.
Phillips 66 (PSX) announced a 14.3% increase in its dividend, upping the quarterly dividend from $0.70 to $0.80. This added $10.80 in annual dividend income.
Cardinal Health Inc. (CAH) announced a 3% increase in its dividend, upping the quarterly dividend from $0.4624 to $0.4763. This added $1.67 in annual dividend income.
National Grid PLC (NGG) announced a 3.7% increase in its dividend, upping the full-year dividend from 44.27 pence to 45.93 pence. This added $3.00 in annual dividend income (based on exchange rate between pence and USD).
Chubb Ltd. (CB) announced a 2.8% increase in its dividend, upping the quarterly dividend from $0.71 to $0.73. This added $1.20 in annual dividend income.
Flowers Foods, Inc. (FLO) announced a 5.9% increase in its dividend, upping the quarterly dividend from $0.17 to $0.18. This added $10.80 in annual dividend income.
There are 110 companies in the Fund. This is unchanged since the last update.
The Fund is now expected to generate a total of $12,652.39 in annual dividend income over the next 12 months. That’s an increase of $79.82, or 0.6%, over the prior update’s annual expectation.
A fantastic tool for tracking your portfolio, progress, and performance is Personal Capital.
Another really solid month, in my view.
I added shares in some great businesses that are very beaten down right now.
And a number of world-class businesses I own a slice of continue to do what they do best: hand out bigger dividends, backed by the substantial and growing profit they produce.
For perspective on that totally organic dividend growth, the $35.47 increase in expected annual dividend income that came about purely through announced dividend increases is the equivalent of investing just over $1,000 in fresh capital at a 3.5% yield (the approximate yield of my portfolio as a whole).
So that end result to my passive dividend income is like I invested $1,000, except I didn’t. That’s how a rolling snowball works – and this wasn’t even all that phenomenal of a month in regard to dividend growth.
June will almost surely look a lot like May. I aim to add at least a few hundred dollars in fresh capital to the portfolio every month. It’s nowhere near the thousands of dollars per month I was investing a few years ago, but this deceleration in investment is on purpose: money is simply a means to an end for me, and FIRE/life is about a lot more than the accumulation of wealth.
And so I’ll opportunistically buy select high-quality dividend growth stocks at attractive valuations throughout the course of June.
In particular, General Mills stock is still on my radar. I also believe a lot of stocks in that same space look appealing. Hershey Co. (HSY), for example, is another name in this space that I think is pretty compelling.
I also plan on coming back around to British American Tobacco PLC (BTI), which is a stock I was busy buying in April. This one is high on the watch list.
In healthcare, Cardinal Health Inc. (CAH) and CVS Health Corp. (CVS) look awfully cheap, although I don’t have a lot more room for either one.
I’m very excited for another month. And I don’t mean that just in terms of buying stocks and collecting dividends; I’m very excited to live this amazing life, go through new experiences, and grow as a person. Every month has millions of seconds – millions of moments – to make the most of your life. Don’t squander those opportunities.
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.