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, 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 Cardinal Health Inc. (CAH) on 8/6/18 for $50.88 per share.
Cardinal Health Inc. is a major distributor of pharmaceuticals and medical supplies to a variety of healthcare clients.
This might just be one of the most undervalued dividend growth stocks out there, as I discussed in early August.
I first initiated a position in Cardinal Health back in August 2016. The stock price has dropped somewhat precipitously since then, mostly due to concerns over the business model instead of any particular issue with business performance.
Of course, that’s something I’m actually happy to see, so I’ve averaged down on the stock on three separate occasions.
However, I view myself as properly exposed to this company now, so it’s unlikely I’ll add any more shares from here on out.
This purchase added $9.52 in annual dividend income.
I purchased 5 shares of Starbucks Corporation (SBUX) on 8/16/18 for $53.24 per share.
Starbucks Corporation is the world’s leading retailer of high-quality, specialty coffee products. These products are sold in more than 28,000 stores across 76 different markets, in addition to multi-channel retail.
This is a stock I’ve been actively accumulating for months now. Since I’ve described my rationale with depth, I won’t needlessly repeat myself.
This is another position that is probably full. If another substantial compression in valuation were to occur, I’d be interested in revisiting that. Otherwise, I like my allocation to this world-class coffee chain here.
This purchase added $7.20 in annual dividend income.
I purchased 5 shares of Papa John’s International Inc. (PZZA) on 8/16/18 for $43.58 per share.
Papa John’s International Inc. operates or franchises more than 5,000 pizza delivery and carryout stores in 45 countries and territories around the world.
Another repeat purchase. I took some time last month to lay out my thought process regarding this stock.
I always love opportunities like this, where you have a good company with an unchanged product/service that’s taking a beating on the stock price because of some short-term, ancillary problem.
That said, I had never planned on this position being a large portion of the Fund, so it’s pretty likely I’ll cap it here.
This purchase added $4.50 in annual dividend income.
I purchased 5 shares of Altria Group Inc. (MO) on 8/27/18 for $58.96 per share.
Altria Group Inc. is one of the world’s largest tobacco companies. It is the largest cigarette manufacturer in the United States.
This is an old holding of mine. I accumulated the bulk of the position back in September 2010 for $24.01 per share. The stock has obviously increased in price since then, but the value of the business has also increased (as have the dividends).
I haven’t added to this position in years. The last time I bought shares in Altria Group was back in the summer of 2013. So it’s been a while.
But I believe the YTD drop in the stock price, along with the two dividend increases this year, have resulted in a pretty compelling valuation here.
Although this position isn’t that large, my overall allocation to tobacco as an industry is at about 4% (a level I’m comfortable with, but not interested in going too far over). As such, it’s unlikely I’ll be too aggressive with this name (or any other tobacco name) in the near term. I might be able to swing another small handful of shares, but that would be it.
This purchase added $16.00 in annual dividend income.
There were no sales since the previous Fund update.
Illinois Tool Works Inc. (ITW) announced a 28.2% increase in its dividend, upping the quarterly dividend from $0.78 to $1.00. This added $30.80 in annual dividend income.
Altria Group Inc. (MO) announced a 14.3% increase in its dividend, upping the quarterly dividend from $0.70 to $0.80. This added $32.00 in annual dividend income.
Harris Corporation (HRS) announced a 20.2% increase in its dividend, upping the quarterly dividend from $0.57 to $0.685. This added $18.40 in annual dividend income.
Bank of Nova Scotia (BNS) announced a 3.7% increase in its dividend, upping the quarterly dividend from C$0.82 to C$0.85. This added $9.60 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 $13,010.66 in annual dividend income over the next 12 months. That’s an increase of $134.42, or 1.0%, over the prior update’s annual expectation of $12,876.24.
A fantastic tool for tracking your portfolio, progress, and performance is Personal Capital.
I just couldn’t be more pleased with how the Fund is coming along.
Indeed, I couldn’t be more pleased with how my life, which is underpinned by financial freedom, is coming along. And it’s largely thanks to the Fund, and the dividend income it generates, that I can live the way I do.
It was another consistent month where I put a little capital to work in high-quality businesses that value me as a shareholder, proving out that value by rewarding me with those growing dividends. I purchased shares in these businesses at compelling valuations, and I intend to hold for the long term.
On top of that, some fine, fine companies announced some massive dividend raises this month. What I lacked in quantity, I more than made up for in quality. And two of these companies (Altria and Bank of Nova Scotia, respectively) delivered their second dividend increases this year.
To put this dividend growth in perspective, the $90.80 increase in my annual dividend income that came about by way of totally organic dividend growth (via those dividend increases) is akin to investing ~$2,600 in fresh capital at a 3.5% yield (the average portfolio yield) – except I invested $0 to achieve that result.
That’s my snowball… well, snowballing.
The Fund’s organic dividend growth once again did the heavy lifting in terms of advancing my annual dividend income, which is how it’s been for a while now. The portfolio is more or less in “maintenance mode” now, as I no longer need to spend an inordinate amount of time focused on money and buying stocks.
My money is now buying me time, rather than other way around.
It was the plan all along, and it feels great when a plan comes together like this.
Speaking of feeling great, I hit a new milestone this month!
The Fund is now, for the first time ever, expected to generate over $13,000 in dividend income over the next 12 months.
It’s nice to see these round numbers start to roll over more quickly. For perspective on that, the $12,000/year milestone occurred with the February 2018 Fund update. So we’re talking seven months to go from $12,000 in expected annual dividend income to $13,000 in expected annual dividend income – all while no longer investing aggressively. It’ll be neat to see how fast the $14,000 mark comes about.
Looking forward, the consistency I’ve been showing over the last few months is probably going to end. A lot of stocks I’ve been buying recently have added up to positions that I feel fairly comfortable with, so I may end up allocating capital differently for the rest of the year.
Also, my spending may be a bit heavier than usual as I wind down the year, which will limit investment capital. Things for September look really good (perhaps even better than average), but it’s likely that I’ll lighten up rather significantly over the course of the fourth quarter of the year.
Getting into future investments, I wouldn’t mind adding to my Omnicom Group Inc. (OMC) position soon. Adding to JM Smucker Co. (SJM) is also on my mind.
In my view, W.P. Carey Inc. (WPC) offers an attractive yield and valuation here, so I might add to my position in the near term.
Healthcare almost across the board still looks good to me.
I’ve been circling Ingredion Inc. (INGR). Broadcom Inc. (AVGO) is also interesting. Either of these would be a new position.
And there are some plays in energy that look pretty strong right now.
Investing certainly isn’t the priority it once was for me, but I do still greatly enjoy the process of finding and buying shares of wonderful businesses at appealing valuations for the long term.
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 except INGR and AVGO.
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 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!