FIRE Fund Update For October 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) 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 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.

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 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 5 shares of KeyCorp (KEY) on 9/3/19 for $16.26 per share.

KeyCorp is a bank holding company that, through its subsidiaries, provides a range of retail and commercial financial services.

I put forth my investment rationale for KeyCorp not too long ago. So I won’t rehash that.

As I stated in the last few portfolio updates, my current plan is to continue to accumulate shares in this bank. That hasn’t changed, and I’ll very likely continue to buy shares throughout November.

This purchase added $3.70 in annual dividend income.

I purchased 2 shares of AbbVie Inc. (ABBV) on 9/4/19 for $64.98 per share.

AbbVie Inc. is a global pharmaceutical company with a particular focus on immunology and oncology.

I added to my AbbVie position back in late June, after the announcement that they had agreed to acquire Allergan PLC (AGN) for ~$63 billion sent AbbVie’s stock tumbling. This price is cheaper than where it was when I last added, making it even more attractive as a long-term investment.

I’m not necessarily a fan of the Allergan acquisition. But I think the huge downward correction in valuation, off of an already-low base, is unwarranted.

That said, I don’t have any plans to add to this position. I’m happy with where it’s at and consider it now complete.

This purchase added $8.56 in annual dividend income.

I purchased 5 shares of Enbridge Inc. (ENB) on 9/9/19 for $34.49 per share.

Enbridge Inc. is an energy distribution and transportation company that owns and operates crude and natural gas pipelines across the United States and Canada. It also operates a gas utility business. Additionally, the company has considerable exposure to renewable energy through a diversified portfolio of renewable energy projects.

I recently highlighted this stock as a compelling high-yield opportunity.

Well, I decided to eat my own cooking and add to my existing position.

My overall exposure to energy in general, and pipelines specifically, isn’t terribly large. But I also feel pretty comfortable with where things are at. I don’t want to be aggressive here, but I thought I had a little more room for Enbridge here. Some of these energy companies look attractive right now.

This purchase added $11.20 in annual dividend income.

I purchased 5 shares of Altria Group Inc. (MO) on 9/11/19 for $44.77 per share.

Altria Group Inc. is one of the world’s largest tobacco companies. It is the largest cigarette manufacturer in the United States.

You’re getting a Dividend King for approximately 13 times earnings at my price. I mean, that says it all right there.

The stock offered me a 7.5% yield, and that dividend is about as rock-solid as they come. In fact, Altria just recently increased their dividend for the 50th consecutive year.

There’s some uncertainty here, especially in regard to increasing regulation and scrutiny around vaping. There’s a chance that Altria’s gamble on JUUL isn’t going to pan out as expected. But low expectations are already more than priced in, in my view. If you look at the market cap of Altria before the JUUL investment became even a hint of an idea, the entire JUUL stake is almost being valued at zero now.

The stock market is a voting machine over the short term; it’s a weighing machine over the long term. This stock is very unpopular right now, but I’m confident the weight of the business’s value will bear itself out over the long run.

I now have 100 shares in Altria. Interestingly, I also have an even 100 shares in Philip Morris International Inc. (PM).

My overall exposure to tobacco is now higher than I’d really like it to be. But I think that’ll work itself out over time as I continue to modestly build out other areas and dilute this exposure as a percentage of the portfolio.

This purchase added $16.80 in annual dividend income.

I purchased 5 shares of Tanger Factory Outlet Centers Inc. (SKT) on 9/13/19 for $16.53 per share. I purchased another 5 shares on 9/18/19 for $15.65 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.

So this has been a pretty terrible investment thus far.

I noted back when I first initiated a position in Tanger Factory Outlet Centers that I believed it was fairly speculative. That’s why I’ve made it such a small position in the Fund. I thought it was worth the stretch, but I also have some concerns about the nature of the business model moving forward.

I wouldn’t say that operations have been disastrous. But they’ve not been all that great.

On the other hand, though, the stock has been downright miserable. The stock has performed as if the business is totally going under, but that doesn’t appear to be the case at all. The stock is down over 25% over the last year, and that was off of an already-low valuation. I don’t see anything in the operations that have deteriorated by 25%.

I’m not super optimistic about this one, and I still view it as rather speculative.

But with a P/AFFO ratio of ~7 (based on the midpoint of forward AFFO/share guidance), and a well-covered ~9% yield, I’m willing to take a small stab at it and average down on the position. After all, this is a Dividend Aristocrat we’re talking about.

These purchases added $14.20 in annual dividend income.

I purchased 1 share of Delta Air Lines, Inc. (DAL) on 9/16/19 for $58.42 per share.

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

I initiated a position in the air line in back 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.

The company is firing on all cylinders. The fundamentals are arguably better than ever. But I still have concerns about the broader industry, which is why I don’t plan to make this a sizable position in the Fund.

But it is highly likely that I’ll buy more stock in Delta Air Lines in October. I’d like to own more.

This purchase added $1.61 in annual dividend income.

I purchased 1 share of Simon Property Group Inc. (SPG) on 9/17/19 for $154.02 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.

This is a new position for the Fund.

I put together a piece on Simon Property Group back in late July, describing why it’s compelling at this valuation.

While a lot of my other ideas are starting to run away from me a bit, this stock is actually down very slightly since I last looked at it. So on a relative basis, it’s become even more attractive for my capital.

As such, I decided to initiate a position. I look forward to modestly adding to it over the coming months, assuming the valuation doesn’t materially change.

This purchase added $8.40 in annual dividend income.

I purchased 1 share of JPMorgan Chase & Co. (JPM) on 9/24/19 for $117.57 per share.

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

As I’ve been noting in prior Fund updates, my current plan is to continue accumulating shares in JPMorgan Chase. That plan hasn’t changed, so I picked up another share in September.

This is the sixth month in a row in which I’ve bought the stock. It’s pretty likely that I’ll continue adding to the position for the rest of the year.

This purchase added $3.60 in annual dividend income.

SALES

There were no sales since the last update.

DIVIDEND INCREASES

Verizon Communications Inc. (VZ) announced a 2.1% increase in its dividend, upping the quarterly dividend from $0.6025 to $0.6150. This added $3.75 in annual dividend income.

STORE Capital Corp. (STOR) announced a 6.1% increase in its dividend, upping the quarterly dividend from $0.33 to $0.35. This added $3.60 in annual dividend income.

Philip Morris International Inc. (PM) announced a 2.6% increase in its dividend, upping the quarterly dividend from $1.14 to $1.17. This added $12.00 in annual dividend income.

Realty Income Corp. (O) announced a 0.2% increase in its dividend, upping the monthly dividend from $0.2265 to $0.227. This added $0.57 in annual dividend income.

W.P. Carey Inc. (WPC) announced a 0.2% increase in its dividend, upping the quarterly dividend from $1.034 to $1.036. This added $0.64 in annual dividend income.

Microsoft Corporation (MSFT) announced a 10.9% increase in its dividend, upping the quarterly dividend from $0.46 to $0.51. This added $5.00 in annual dividend income.

Texas Instruments Inc. (TXN) announced a 16.9% increase in its dividend, upping the quarterly dividend from $0.77 to $0.90. This added $2.60 in annual dividend income.

McDonald’s Corporation (MCD) announced a 7.8% increase in its dividend, upping the quarterly dividend from $1.16 to $1.25. This added $19.80 in annual dividend income.

FIRE FUND

The FIRE Fund is now valued at $422,426.61. That’s a 2.3% increase from the last reported market value of $412,851.43.

There are 125 companies in the Fund. That’s an increase over last month due to the initiation of a position in Simon Property Group.

The Fund is now expected to generate a total of $14,361.61 in annual dividend income over the next 12 months. That’s an increase of 0.8%, or $116.03, over the prior update’s annual expectation of $14,245.58.

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

CONCLUSION

Well, that’s some really good stuff.

The Fund is firing on all cylinders – and then some.

I’m excited to see the annual expected dividend income creep up toward $14,400, which averages out to an even $1,200 per month. This is pushing up my overall passive income to $1,500 per month now. That’s a lot of money to make without lifting a finger, particularly here in Thailand. With a tripling of my purchasing power, that’s roughly the equivalent to $4,500 per month in passive income in any desirable US city.

What’s really exciting is to see this kind of naturally manifest itself, as I basically gave up aggressively buying stocks almost four years ago (after achieving FIRE).

It’s one thing to talk about money working for you. It’s another thing altogether to see it play out in real-time. There’s rarely a day I wake up in which a fresh dividend isn’t sitting there for me. I’m just super fortunate.

I can’t think of anything especially newsworthy regarding any of the Fund’s holdings.

But what they regularly do is newsworthy in my book.

All of the 100+ companies I’m invested in are consistently plodding along, more or less. They’re world-class enterprises that are selling more products and/or services, to more people, at higher prices. These are the companies that make the world go round. And they tend to just slowly improve the bottom line month after month.

Speaking of consistency, the dividend increases this month came in just like clockwork. I would say most of them were right as expected, although Texas Instruments came through with a pretty impressive dividend raise.

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 $47.96 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 $1,370 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, folks.

It wasn’t that long ago that I struggled to come up with $1,370 in a single month for investment. I mean, I started the journey to FIRE when I was still barely making $40,000 per year. After paying expenses, $1,370 is a lot of money to put aside at that kind of income level.

But I’m now able to experience the same net result to my dividend income as if I had invested almost $1,400, even without putting away a dime.

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 October, 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 expect some familiar names to pop back up in October. I’m actively building positions in a number of companies mentioned above. So it’s going to be fairly repetitive. I am nothing if not consistent.

One stock I didn’t get around to buying more of in September is Leggett & Platt, Inc. (LEG). I’ll aim to rectify that in October.

Beyond that, I’m sure other opportunities will spring up and interest me. I’m looking forward to sorting through those opportunities and putting some 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 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!