FIRE Fund Update For May 2019

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.

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.

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.

Purchases

I purchased 3 shares of CVS Health Corp. (CVS) on 4/2/19 for $52.46 per share. I purchased another 2 shares on 4/10/19 for $53.60 per share.

CVS Health Corp. is a pharmacy healthcare provider that operates one of the largest pharmacy retail chains in the US, with more than 9,800 locations across the US and the District of Columbia, Puerto Rico, and Brazil. It’s also one of the largest pharmacy benefit managers in the US, with more than 93 million PBM plan members. With the recent acquisition of Aetna Inc. now completed, they’re also one of the largest managed healthcare companies in the United States.

I discussed this particular holding, as well as the rationale behind adding to my stake, quite a bit last month. So I won’t bother repeating myself.

I’ll only quickly note that I don’t have any plans to add to this position in the future. It’s full now.

These purchases added $10.00 in annual dividend income.

I purchased 5 shares of WestRock Company (WRK) on 4/2/19 for $39.31 per share. I purchased another 5 shares on 4/15/19 for $39.09 per share. Then I purchased 3 shares on 4/16/19 for $35.91 per share and 2 shares on 4/16/19 for $35.36 per share. Finally, I purchased 5 shares on 5/1/19 for $38.71 per share.

WestRock Company is a leading integrated manufacturer of various corrugated and consumer packaging materials.

This is a new position for the Fund.

I highlighted this stock as a compelling long-term idea just a few weeks ago. There’s not much to add.

It’s a boring business, which is my favorite kind of business. And the valuation here is unbelievably cheap, even taking into account the cyclical nature of the business model.

But I’m not extremely enamored with some of the numbers. The balance sheet is particularly problematic for me.

Overall, I see the risk here as slightly elevated relative to my bread and butter. As such, I plan on keeping this a rather small position in the Fund. I see it as an ancillary position in the same vein as an Iron Mountain Inc. (IRM) or The GEO Group, Inc. (GEO).

It’s a strategic holding that offers a lot to like in terms of value and income. After all, a little bit of yield goes a long way.

I have no plans to add to this position in the future.

These purchases added $36.40 in annual dividend income.

I purchased 1 share of JPMorgan Chase & Co. (JPM) on 4/12/19 for $110.57 per share.

JPMorgan Chase & Co. is an American multinational investment bank and financial services company with assets over $2.5 trillion.

This is a new position for the Fund.

I’ve been looking at this bank for a while now. Admittedly, I should have bought this stock a long time ago. Fortunately, I don’t need to bat .1000 in order to become fairly wealthy, achieve FIRE, and otherwise do really well in life.

But I decided to finally right my wrong and initiate a position after the bank reported an incredible Q1 2019 quarter that saw just about every worthwhile metric up big. Investment assets, credit card sales volume, deposits, loans, revenue, profit, etc. Take your pick. It’s a beautiful sight.

Jamie Dimon is arguably the best bank manager around, and he continues to steer things in the right direction. Other than the sheer size of the bank (which is massive), there’s not much to dislike about this business.

I think banks continue to get a bad rap. Some of that is deserved. Much is not. Regardless, recency bias continues to make people believe that another recession on par with the Great Recession is right around the corner. And this keeps the banks cheaper than they probably ought to be.

Now, I don’t think this stock is cheap. I wouldn’t say it’s undervalued. But I’m never against paying a fair price for a wonderful business, especially when this transaction comes in conjunction with the hardcore value plays discussed above. I like value. But I love quality.

With eight consecutive years of dividend raises, a low payout ratio, and monstrous quarters like Q1, it stands to reason that this bank will continue handing out generous dividend increases for the foreseeable future. And that’s coming on top of the near-3% yield the stock offers right now.

I see this as eventually being a good-sized position in the Fund, so I’m looking forward to opportunistically accumulating shares over time.

This purchase added $3.20 in annual dividend income.

Sales

There were no sales since the last update.

Dividend Increases

Procter & Gamble Co. (PG) announced a 4.0% increase in its dividend, upping the quarterly dividend from $0.7172 to $0.7459. This added $5.85 in annual dividend income.

Southern Co. (SO) announced a 3.3% increase in its dividend, upping the quarterly dividend from $0.60 to $0.62. This added $6.80 in annual dividend income.

Kinder Morgan Inc. (KMI) announced a 25.0% increase in its dividend, upping the quarterly dividend from $0.20 to $0.25. This added $15.00 in annual dividend income.

Unilever PLC (UL) announced a 6.0% increase in its dividend, upping the quarterly dividend from €0.3872 to €0.4104. This added $8.76 in annual dividend income.

Travelers Companies Inc. (TRV) announced a 6.5% increase in its dividend, upping the quarterly dividend from $0.77 to $0.82. This added $2.00 in annual dividend income.

ONEOK, Inc. (OKE) announced a 0.6% increase in its dividend, upping the quarterly dividend from $0.86 to $0.865. This added $2.00 in annual dividend income.

Exxon Mobil Corporation (XOM) announced a 6.1% increase in its dividend, upping the quarterly dividend from $0.82 to $0.87. This added $4.00 in annual dividend income.

Cullen/Frost Bankers, Inc. (CFR) announced a 6.0% increase in its dividend, upping the quarterly dividend from $0.67 to $0.71. This added $3.20 in annual dividend income.

Johnson & Johnson (JNJ) announced a 5.6% increase in its dividend, upping the quarterly dividend from $0.90 to $0.95. This added $20.00 in annual dividend income.

International Business Machines Corp. (IBM) announced a 3.2% increase in its dividend, upping the quarterly dividend from $1.57 to $1.62. This added $4.00 in annual dividend income.

Apple Inc. (AAPL) announced a 5.5% increase in its dividend, upping the quarterly dividend from $0.73 to $0.77. This added $3.20 in annual dividend income.

FIRE Fund

The FIRE Fund is now valued at $403,980.07. That’s a 1.3% increase from the last reported market value of $398,730.25.

There are 119 companies in the Fund. That’s an increase since last month due to the initiation of positions in WestRock Company and JPMorgan Chase & Co.

The Fund is now expected to generate a total of $13,887.86 in annual dividend income over the next 12 months. That’s an increase of 1.0%, or $134.61, over the prior update’s annual expectation of $13,753.25.

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

Conclusion

Well, there’s just not much to say here. I can only express an immense and overwhelming sense of gratitude for the position I’m in.

Almost 120 companies are out there working hard for me. This allows me the latitude I need in order to go about life as I please – including living at the latitude I prefer.

The Fund is simply the culmination of a lot of hard work and taking advantage of opportunities. I could have easily just shown up to my job, spent all my money, wasted my time, and continued to feel helplessly thrust into the future.

But I didn’t do that. I took control of my life. I took ownership of both my past losses and future wins. And now I feel like I’m winning every day. This is the power of capitalism, which is available to everyone.

It comes down to choices and consequences. Make good choices, face good consequences.

Speaking of consequences, one of the consequences of being a dividend growth investor is receiving pay raises for doing nothing other than being a shareholder. If that’s not easy work, I don’t know what is.

The compounding snowball that I started rolling nine years ago continues to accelerate and grow bigger, even without any pushing from me. That’s great, because I’m getting older!

Let’s put that dividend growth in perspective.

The $74.81 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 $2,140 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.

Incredible. Really incredible.

Now, I almost never make a big deal about the value of the Fund, because it truly doesn’t matter to me or have any impact on my life.

However, this month is notable because the Fund crossed over $400,000. This is the first monthly portfolio update in which there’s a 4 handle there.

Now, that in and of itself isn’t particularly noteworthy.

What’s noteworthy is the time frame in which the Fund hit this number.

I observed back in my 2013 interview with the Today Show that I might be able to hit $400k by the time I was 35 years old. I actually didn’t want to commit to a number like this because what matters is passive income, but mainstream media likes a big number to throw out there.

Anyway, this was a very aggressive number that I was putting out almost just to see how it would shake out. It wasn’t something I was all that serious about. I figured I’d just go crazy with that a little bit.

But the real crazy thing is, I hit this number at 36 years old. That’s only a year after I said I might hit it – and that’s even after quitting my job at 32 (eight years ahead of schedule) and ending the aggressive accumulation of stocks more than three years ago!

Pretty neat.

In other news, another divergence from the norm.

I usually don’t examine reports regarding individual holdings in these updates. That’s because the vast majority of the companies I invest in run very boring business models. There’s just not much to talk about on a recurring basis.

Furthermore, I don’t micromanage or make much out of anything that happens on a month-to-month basis.

However, there were two major events during the last month that impacted three holdings in the Fund. These events will likely have an immense impact on the below companies, so I’m going to deviate a bit with this update and quickly discuss what happened.

First, there was the agreement between Qualcomm, Inc. (QCOM) and Apple Inc. to drop all litigation, putting an end to one of the biggest disputes in the history of tech. This deal included a large royalty payment from the latter to the former, as well as a six-year global patent license agreement and chipset deal between the two companies.

This is massive. And I’m very happy to hear of it. It’s beneficial for both companies to move on, work together, and build great products. There’s plenty of money to be made for everyone.

But it’s particularly significant for Qualcomm, as it has cleared up a lot of uncertainty regarding their future profitability/viability and ability to work with the largest consumer electronics company on the planet.  QCOM’s price unsurprisingly (but unfortunately) shot up almost in a straight line immediately after this announcement.

Second, Walt Disney Co. (DIS) showed off its new Disney+ OTT streaming service during its recent investor presentation in early April. Priced at just $6.99 per month and loaded with a deep bench of beloved content, this is going to dramatically alter the entire streaming landscape.

The service itself has long been telegraphed and expected, but I think company pleasantly surprised everyone with both the richness of the service and the low price.

Walt Disney has long been my favorite play in media and entertainment. And they have shown an ability time and time again to adapt and set themselves up to compete for the long haul. This is another example of that ability.

Looking toward May, it’s business as usual.

I’ll aim to invest $500 to $1,000, which is my monthly target with the Fund now in “maintenance mode” from here on out.

As noted earlier, JPM is on the radar. I’d like to accumulate a share per month over the foreseeable future, if possible.

Also, I like Eastman Chemical Company (EMN) here.

I recently highlighted it as a high-quality dividend growth stock that appeared to be mildly undervalued.

With opportunities limited in this market, and with my Fund filled with a lot of great stocks that I’m already comfortably exposed to, this is a very good chemical company I wouldn’t mind owning a stake in.

Beyond that, there are a number of smaller positions in the Fund that I’d love to swing back around to.

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 there (where I also share numerous other updates about my life as a dividend expat).

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!