My Full-Time Fund is my dividend growth stock portfolio. I think it’s an apt name for it, because it works full time so I don’t have to.
Indeed, the Fund generates five-figure dividend income for me that, when combined with other sources of passive income, allows me to choose my endeavors not based on money but rather happiness and purpose. And that is, in my view, how life should really be lived.
The Fund has undergone a lot of changes over the years – changes which I’ve documented as much as possible along the way. And it’s in that spirit of openness and transparency that I continue revealing to the world exactly where I’m putting my money to work (and keeping my money at work).
I’m incredibly proud of the collection of stocks that now make up my portfolio. These are really fantastic businesses. And I’m very happy to own a very small slice of all of them. They have competitive advantages that allow them to, over longer periods of time, grow their profit and dividends, which in turn grows my wealth and income.
My main goal with the Fund, however, is to grow my passive dividend income. Stock prices go up and stock prices go down (I usually prefer the latter), but it’s really the dividend income the Fund generates that is the backbone of the financial freedom that affords me my lifestyle.
So I’ll go over the transactions from the prior month, showing what I bought (or sold), along with a little discussion on the thought process behind these transactions.
I set out this month to improve the overall quality of the portfolio, while simultaneously increasing the overall yield.
With that in mind, my first move was to sell 40 shares of Computer Programs & Systems, Inc. (CPSI) on 11/4/16 for $22.55 per share.
I completely sold out of this position.
This has been perhaps the most bewildering investment I’ve ever made.
When I first started looking at the company late last year, it checked pretty much all the boxes for me.
The fundamentals were strong. The yield was outstanding. The company was regularly increasing the dividend, and they had a fairly lengthy track record of managing a large dividend. On top of all that, the balance sheet was outstanding: no debt.
Shortly after I invested, the company started moving in the opposite direction.
They took on a good chunk of debt to fund an acquisition that has, so far, proven not to be worthwhile. The company’s fundamentals have quickly and astonishingly deteriorated. Worse yet, the conference calls from management have left me speechless. They either do not realize that they’re struggling or they just don’t want to realize it. Either way, I’ve just been shaking my head after looking at the last few quarterly reports. I don’t think I’ve seen something move so fast in the wrong direction. And to feel like management has no clue of direction is disappointing.
It gets even worse. To in part help service debt they’re not used to having, they adopted a variable dividend policy (which substantially reduced the dividend). So it pretty much moved 180 degrees on me.
I should have sold as soon as the dividend policy changed. But I wanted to see if the company could get moving in the right direction again. Well, they’re not. Perhaps they turn it around. Or maybe they do not. But it’s just not an investment for me.
That’s all right. Sometimes investments don’t turn out as you like. Sometimes you lose. The key is to win far more often than you lose, which is something I’m generally pretty good at.
I was wrong on this one, which I’m okay with. I can live with being wrong but sticking to the plan, whereas making a clear mistake is something that bothers me more (as I’ll talk about below).
This sale reduced my annual dividend income by $38.40.
That capital was immediately redeployed, as I purchased 15 shares of AbbVie Inc. (ABBV) on 11/4/16 for $56.37 per share.
I added to my AbbVie position largely because I believe it’s a high-quality dividend growth stock that currently appears to be undervalued.
Moreover, it’s currently operating at a much higher level than Computer Programs & Systems. Plus, the yield was higher at the time of investment. More income, more dividend growth, and more quality means I’m sleeping better at night already.
This purchase added $38.40 to my annual dividend income.
Keeping with healthcare, I then purchased 10 shares of Cardinal Health Inc. (CAH) on 11/4/16 for $65.68 per share.
I’ve discussed this company at length before.
The only thing that changed between the last time I bought shares and this time is that the stock became cheaper. So it was even more attractive than before. That makes me a very happy long-term investor.
This purchase added $17.96 to my annual dividend income.
Further increasing the quality of my portfolio by kicking out a company that recently cut its dividend, I sold 55 shares of Viacom, Inc. (VIAB) on 11/10/16 for $38.31 per share.
This completely closed my position out.
I’ve never really been a fan of Viacom. Much of its product portfolio is outdated and under assault, and I think they’ve been mismanaged for a long time now. The corporate structure/drama just makes it that much less appealing.
However, the stock became cheaper and cheaper. And I thought it was worth a shot in the low $40s.
Well, I was wrong. Whereas Computer Programs & Systems was baffling, Viacom was just a mistake. I chose value over quality, which is really against my ethos. That’s an error on my part.
I’ve always reiterated Warren Buffett’s famous stance that it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price, but I didn’t listen to that sage advice here. I invested in a mediocre company at a really good price. The price dropped, but that’s only because the company continues to struggle and dish out plenty of corporate drama. It’s just not a business for me here. Never really was, but I let the potential value entice me. The dividend cut sealed the deal, even if I didn’t realize it right away.
This sale reduced my annual dividend income by $44.00.
Quickly redeploying that capital, I then purchased 35 shares of Welltower Inc. (HCN) on 11/10/16 for $61.21 per share.
This is a new position for the Fund.
Welltower offers me everything I’m looking for.
More than a decade of dividend growth? Check. Big yield? Check. Great fundamentals? Check. Welltower is growing its underlying profit (FFO) at a nice clip, along with that big (5.5%+) yield.
Welltower was the last healthcare REIT I wanted to own, but I just never got around to picking up shares for one reason or another. So many stocks, so little capital. That problem is made even worse now that I’m not investing as aggressively as I used to. But it’s all been rectified now.
This swap also boosted my Fund’s yield and income quite a bit, too. That’s just icing on an already delicious cake.
This purchase adds $120.40 to my annual dividend income.
My last transaction for the month saw me purchase 10 shares of National Grid PLC (NGG) on 11/30/16 for $57.26 per share.
This was an addition to an existing position, where I averaged down.
Although this company doesn’t show up on typical dividend growth stock screens, it actually has a track record for dividend growth stretching back to at least the late ’90s. But because the exchange rate impacts what US investors receive (National Grid pays its dividend in British pounds), payments can fluctuate. The only real hiccup for National Grid over the last couple decades occurred in 2011, as they slightly cut the dividend due to a rights issue that was designed to fund ongoing projects that would improve their generation mix (moving toward cleaner energy) while simultaneously maintaining their credit rating.
Nonetheless, it’s one of the largest utilities in the world, operating the electric and and gas transmission system in England and Wales. In addition, they do significant business in the Northeast of the US.
It isn’t growing terribly fast (a hallmark of most utilities), but it does offer a yield of ~5.2% here. And with dividend growth that’s expected to be at least in line with UK RPI inflation, it’s one of the larger dividends available that’s almost guaranteed to keep coming and continue growing for the foreseeable future and beyond.
This purchase adds $29.87 to my annual dividend income.
In addition to the moves I made, there were some moves made by companies I own stakes in.
Specifically, Yum! Brands, Inc. (YUM) spun off its operations in China into a separate company, Yum China Holdings Inc. (YUMC). As such, YUMC is a new position for the portfolio. I’m excited about its prospects as an independent company and anxiously awaiting more information on the dividend going forward.
In addition, HCP, Inc. (HCP) spun off its portfolio of skilled nursing facilities, which are largely tied to the operator HCR ManorCare. HCR ManorCare has had issues with operations; they’re also facing an investigation by the Department of Justice over billing practices. The spin-off is a new, independent company called Quality Care Properties Inc. (QCP). In all honesty, I’m not terribly enthusiastic about this spin-off, but it’s probably too small of a position for me to do anything with. At this time, I’m just holding it.
Netting everything out, I added $124.23 to my annual dividend income.
So that’s an extra ~$10 per month that I’ll be collecting over the next year, adding just a little bit more freedom and luxury to an already free and luxurious life.
The Fund is now worth $310,239.95, and it’s spread out across 106 positions. That’s a 2.8% increase over last month’s published value of $301,857.85.
Many of the sectors I’m heavily exposed to (especially REITs and Consumer Staples) have been really hammered lately, which is really just wonderful. Although I’m not nearly as active as I used to be, I still looking forward to intermittently picking up equity in some great companies at solid prices.
A few stocks that look appealing to me right now (in terms of valuation and having room in the portfolio) are CVS Health Corp. (CVS), VF Corp. (VFC), Diageo PLC (DEO), Abbott Laboratories (ABT), and Nestle SA (NSRGY). Many high-quality domestic utilities are also a little cheaper now than they’ve recently been. I should be able to make at least one stock purchase this coming month, but it’ll really depend on capital availability and needs. Either way, I’m excited to see how things unfold.
As a final note, I recommend using Personal Capital to manage your portfolio. It aggregates your accounts and gives you powerful visualizations that are actionable. The best thing of all is that it’s free!
How did November go for you? Is your collection of businesses operating as planned? Looking forward to any particular stock purchases?
Full disclosure: I’m long all aforementioned stocks except CPSI and VIAB.
Thanks for reading.
Image courtesy of: bplanet at FreeDigitalPhotos.net.
Hi Jason,
I’m a big fan and a long time follower of your blog. I really liked the how you used to do the ‘recent buy/sell’ posts. I’m just wondering if you’ll go back to the old format instead of one giant post like this one.
DGG
DGG,
That’s a good question. I addressed a similar question on social media a while back.
The answer is no. I don’t really have any plans to do that. I cover dividend growth stocks on the freelance side, but I’m really more interested in covering higher-level topics on life, purpose, and happiness here. Writing 40 articles per month on stocks is not something I’d want to do for a decade or more. I have great balance in my life now, which is something I think we should all strive for. I initially wasn’t even intending to publish portfolio and income updates, preferring to keep this site a lot less focused on money. But financial freedom is inextricably linked with money, so there you go.
Cheers!
Congrats on reaching the balance! That is probably the best news for you.
As always, I appreciate your transparency in your writing style.
I am closing in on 2k per year in future dividends. Just added another 9 shares of ABBV.
shaymychael,
Thanks so much!
I suppose eclipsing round numbers (like $200k, $300k, etc.) is psychologically rewarding, but I’d honestly prefer most stocks within my portfolio to be priced lower, dropping the Fund’s value in the process. But we take what we get. 🙂
Congrats to you on closing in on $2k/year. That’s great. It was really only a few years ago that I was in the same spot. Keep it up!
Best regards.
Jason,
Thank you for continuing to share your monthly updates. I often have people ask me for advice about stocks and investing in general and I point them to your blog. I let them know that by following your thoughts for a few months they will pick up a set of great thoughts about owning companies and then begin to develop in their own ways of thinking about investing.
symallad,
Thank you. I appreciate you spreading the message like that.
Although I don’t discuss the investing side as much as I used to, I’m really happy to show how it all clicks together. It’s all of these little lifestyle elements that work together, holistically, to really improve one’s quality of life and happiness. Once you’ve got the money figured out, it’s then figuring out how to really achieve inner peace, balance, and happiness. An ongoing journey for sure, but a lot of fun. 🙂
Best wishes!
Hello Jason, you are always an inspiration for me. I have followed you for a few years and can see your progress as outstanding. Im happy for you been able to retire so early in life, I wish I could have started at your young age. I just turned 55! Im close to reaching my 6K mark in annual dividends and is great to start looking at around $500 more each month and able to reinvest it in quality companies. Take care and the lunch offer still stand, and yes McDonalds is fine. I own that one too.
Omar,
Appreciate the support very much. I only hope to motivate and inspire people. If nobody enjoyed my work and/or found inspiration in it, I would have stopped writing a long time ago. I’m blessed to be able to positively impact people. It’s all about making the world a slightly happier (and better) place. 🙂
Looks like you’re doing great over there. We can’t go back in time, of course, but you’re working hard to get to a better spot. And that’s all we can really do. We can only give it our best effort. I’ve certainly made many mistakes, but they’re just challenges to overcome. You’ll get there!
The offer sounds great. If we ever meet up, I’ll look for some coupons.
Best wishes!
IT goes to show once you are focused on building passive income you can do it. I remember back in 2010 when you started, and now 300K later. Great achievement and keep on motivating Jason. I think I will hit 6 to 7K this year in dividends, I have a ways to catch up.
RichUncle EL,
It’s been a crazy ride! 🙂
I always knew this was inevitable, but I’m also sometimes surprised that I got here so quickly. At the same time, I was working so hard there for years. I mean, it was just work from the time I got out of bed until the moment I got back into bed. But I think that proves that hard work goes a long way, especially when you’re lucky.
Best of luck with growing your passive income. I’m sure you’ll achieve all of your goals before you know it.
Cheers!
Doing really well, Jason! I too am puzzled by the arrival of QCP via HCP shares. It’s less than a thousand bucks at cost basis so it isn’t worth commissions to sell the position. I’ll probably hold forever. I can at least say the position is up 13 bucks since the spinoff.
FV,
Yeah, I’m with you. I sometimes get free trades, so I might unload it that way. But I’d be surprised to not see a dividend at some point in the near future, depending on their results (since they’re a REIT). An extra buck or two is lunch for me, so I might just hold it. 🙂
Cheers.
Hi Jason,
I did similar moves last month. I sold few low quality positions and added some higher quality stocks.
Because of this, my estimated yearly income down a bit but I guess my dividend portfolios look great now and ready to handle any market swings.
Cheers,
FJ,
Hey, I hear you there totally. We have to sometimes take a hit to income to make that swap, but I think that’s okay.
I’m guilty of chasing yield here and there. It’s worked out many times. And it’s not worked out other times. All in all, I’m pretty happy with where things have gone, but I’m going to do my best to only buy high-quality businesses from here on out. This site should hold me accountable. 🙂
Sounds like you’ll be sleeping a little better at night. Great call!
Thanks for dropping by.
Cheers.
Nice moves for your portfolio. Clearly, the biggest theme has been health from your latest moves. As you know I like ABBV, CAH, HCN and even HCP post spin off. Stick to the quality versus just good ‘ole plain value. I have been focused on many staples as of late as DEO, UL, KMB, VFC even KO are trading at much better values and yields compared to just last summer. Sure, they aren’t super cheap compared to other sectors/stocks but more attractive these days than in a long, long time and all offer ‘quality’ for any dividend income portfolio. Thanks for sharing.
Keith,
Yeah, I love great businesses in healthcare. It’s one of my favorite areas to invest in. I can’t see demand for most great companies in that space going anywhere but up over the long haul. The world is getting bigger, older, and richer. Bodes well. 🙂
I agree with you on some good consumer names. Many have dropped to more appealing levels, although many still aren’t super cheap. DEO and VFC are both on my radar, as I think the valuations are good. Plus, I have room for both. Not buying as aggressively as I used to, so I won’t be able to scoop up all I’d like. Always another day to fight the good fight.
Thanks for stopping by!
Best regards.
Man, that CPSI. I don’t think I’ve seen a stock kick your you-know-what that hard since the ARCP scandal a couple years ago.
You’re killing it with the dividend income. And it’s amazing that the fund has gotten where it is. I remember seeing your first Freedom Fund Update on Dividend Mantra with it being $20,000 and change total. Wait until your annual dividend income is that.
You and I both have DEO in our crosshairs. It would be a brand new position for me, and as I told DivHut recently, owning it would make me feel better about drinking enough Guiness to fuel Ireland’s economy. Are you not looking at KMB as well? JNJ is also down, though I know you aren’t looking for any more of them.
Sincerely,
ARB–Angry Retail Banker
ARB,
Yeah, ARCP was a real headache. But ARCP is probably closer to VIAB for me. It was a mistake on my part to invest in something that really didn’t fit my criteria. And one obviously cannot totally protect against fraud. CPSI, on the other hand, checked all the boxes. Slow and steady. Then they did a full 180. But, yeah, they really packed a punch just like ARCP did. Never fun to lose money, especially when you work really hard for it. The ironic thing is that I could have sold for a very healthy gain not long after I invested. But as a long-term investor, I wasn’t even thinking about it. Really thought they were destined for greater things. The last few financial reports have just been stunning. I don’t know what’s going on over there. Quite odd. But I’m on to bigger and better things.
The passive income has been great. This whole journey has been great. It’s all just amazing to me. I’m so grateful and so fortunate. And to be able to share the journey with the world like I’ve been doing is such an honor. Truly blessed. 🙂
DEO looks pretty good here. A lot of stocks in the consumer space do, though. That’s been hit pretty hard, which is just fantastic for many of us actively accumulating these shares. KMB looks better now than it has in some time. It’s been on my watch list for many years now, but just never got around to pulling the trigger for one reason or another. Perhaps I’ll rectify that in the near future. Looks to be roughly fairly valued to me, but it’ll be interesting to see what future dividend growth looks like. Happy shopping over there!
Best wishes.
I know you like your consumer staples. Take a gander at $BUD. Been hammered lately with rotation out of staples/yield names. Largest brewer in the world run by some of the best operators in the world. Would fit in nicely with DEO.
Nick,
That’s a great suggestion. The problem with it (as a US-based investor) is the potential foreign dividend taxation. DEO fits my needs a lot better due to the tax treaty. I’ll have to check with my brokerage to see if the paperwork has already been filed to qualify for the 15% rate (rather than the 25% rate). If so, that’s recoverable. Fortunately, I actually already own a little BUD via Altria’s stake (after the SAB merger). So I still have some exposure there. 🙂
Cheers!
That’s a very good point. I’m 98% sure there’s a favorable dividend rate on BUD dividends assuming you do the paperwork. On that point, does your broker proactively send you the tax forms to get that favorable tax rate or do you have to prod them for it? I own DEO and BUD but both in retirement accounts so I’ve never gotten one.
Nick,
Well, if the paperwork is completed, it should just be the 15%, which is recoverable (in a taxable account). Otherwise, it’s 25%. I’ve never had to fill out any paperwork, though. That’s done at the brokerage level. After all, the shares are generally held in street name. But I’ll contact them to find out. I wouldn’t mind a few more BUD shares on top of the (relatively small) exposure I have through MO.
Cheers!
Really impressed with the way you identified problem stocks and cut them. I know first hand how hard it can be to admit you made a mistake on a position! Better off watering the flowers than the weeds, after all.
ADI,
Better off watering the flowers, indeed! 🙂
Yeah, I’ve made many mistakes. Many. But I think that just goes to show the robustness and resiliency of this lifestyle. You can make mistake after mistake and still get to where you want to be in fairly short order. Helps to not go too overboard with things and learn from those mistakes. It’s my aim to never buy a mediocre company at a good price again, so it’s my hope that this site holds me accountable.
Best regards.
Hey Jason!
Coming right behind you, portfolio value now 85 000€, although 17k is margin =)
Osinkokuningas
Osinkokuningas,
Hey, man. You’re making great progress. Keep it up! 🙂
Cheers.
Jason, I’m really glad to see you back. I sold some stocks last month and we’re holding some cash for now. You’re a great guide for dividend investors and I’m looking forward to seeing more.
BTW, we just came back from our 3 weeks trip to Thailand. It was quite good. Hope things are going well in FL.
Joe,
Hey, great to hear from you. Glad you had a good trip over in Thailand. I was over in Chiang Mai earlier this year. It was pretty neat, but I don’t think it’s for me in terms of a long-term solution. I can definitely see why so many digital nomads and early retirees like it over there, however. So cheap. I mean, wow! I know you have family over there/from there, so your experience is naturally a bit different from mine. Still, it was enjoyable. I’m happy I checked it out.
Thanks for stopping by. Hope all is well with the family over in Portland!
Best wishes.
Nice going, Jason!
I like most of the moves you’ve made in the portfolio.
Not so sure about the dividend streak of NGG, though.
NGG paid 38,49 pence per ordinary UK-listed share in 2010.
They cut it to 36,37 pence per share in 2011.
They only have a growing dividend since 2012.
Been buying CVS and DEO lately.
Shall take a look at CAH, which I’m only vaguely familiar with.
Good to have you back blogging again!
Rooney,
Hmm, that’s interesting. I haven’t been a shareholder in DEO that long, so I can’t speak from personal experience. But their IR says otherwise:
For 2010: interim dividend of 14.60 pence and final dividend of 23.50 pence, for a total of 38.10 pence.
For 2011: interim dividend of 15.50 pence and final dividend of 24.90 pence, for a total of 40.40 pence.
Source is Diageo’s IR: http://www.diageo.com/en-us/investor/shareholderservices/ordinaryshares/Pages/Dividend-Information.aspx
Thanks so much for stopping by. It’s great to be back at it. 🙂
Cheers.
Jason,
I’m sure you are correct about DEO in your reply.
However, I’m discussing NGG (not DEO):
http://investors.nationalgrid.com/dividend/dividend-history.aspx
Cheers!
Rooney,
I’m so sorry. I misread your comment.
You’re correct about that. I kind of eyeballed it because David Fish’s CCC list isn’t necessarily accurate for European stocks (because of the currency differences), and I do remember them having a rather long streak of growing dividends. It looks like the overall long-term story is still there, but they had some issues back then due to a rights issue and a big capex program designed to help future-proof the business (improving their generation mix).
Thanks for adding that. I’m going to edit the article to reflect that.
Cheers.
Nice month Jason. A lot of moving parts here. Can’t believe the CPSI story. Just goes to show you that nothing is guaranteed in the dividend investing arena and crazy things can happen. We base our decisions on the past and try to use it to the best of our abilities as an indicator for the future. But we are prone to sudden changes such as the one CPSI experienced if the news is out of the blue. We aren’t in the board rooms and only get the information when it is public. Smart move to sell out of a stock that fundamentally changed and redeploy your capital as needed.
Bert
Bert,
Definitely, man. Nothing is guaranteed. You try to stick to companies that have done great things, more or less, over a long period of time. With that, the odds are on your side that they’ll continue doing so. But anything is possible. That’s why we diversify. If things were guaranteed, I’d just buy the highest-yielding stock in the world and go on about my day.
CPSI will probably go down as my most baffling investment. I’m not sure there’s a lot I can learn here. I looked at it closely again before selling to see if there was something I missed. I just don’t have anything. The profitability was especially impressive, considering the lack of leverage. And although they didn’t have a multi-decade run of dividend growth like I usually like, the fact that they were able to maintain a very large dividend through the Great Recession was mighty impressive. But, yeah, I’m not privy to boardroom meetings. I’m not sure what’s going on over there. And maybe the acquisition will go down as a great move. I just won’t take that ride if operations and dividend income are unreliable/unstable.
Thanks for dropping by!
Best regards.
I like these moves. Like you said, a move to quality. I too have been a DGI since 2011, and have also had a few bad investments (SDRL for one). The truth to them all…they had low quality ratings. My goal is dividend growth, and that goal is more at risk when a divy gets cut. It’s now my first filter. I stick to BBB+ (Morningstar) or better now, and have rid my portfolio of non SWAN stocks. Luckily, the wins far outweigh the few losers, but they still hurt.
What sources do you use to measure quality and dividend safety?
KingZ,
I hear you there. I feel the same, though. If you win far more often than you lose, you’re going to do really well over a very long period of time. Can’t win them all.
As for dividend safety, I look at standard fundamental metrics. How is the dividend being funded? What’s FCF? EPS payout ratio? Is the dividend growing faster than earnings? What’s the future forecast for earnings, and how much room is there for further dividend growth? It’s just taking a look at the whole business and then determining what’s likely to happen. Of course, a business can pass all of that, take on an unprecedented negative action, and then change the dividend. You can’t predict the future. You can only try to mitigate those things.
Cheers!
Hi Jason,
Seems like some good additions to the portfolio. I’m also looking to National grid currently, the pound is really cheap for us europeans currently and since the dollar is getting expensive it is time to add some other currency to my portfolio.
Keep up the good work!
Cheers,
DC
DC,
Hey, that sounds good. I like National Grid. It’s a pretty unique utility with its geographical exposure. Although dividend growth won’t be huge, I like the stable and reliable income it provides. I have many lower-yielding stocks that should provide more growth. All part of balancing things out. 🙂
Happy shopping!
Cheers.
How do I sign up to your blog? I used to read your old blog but since it closed, I had no idea you have opened this one. You’re doing a great job and I will like to continue to follow your beautiful story. Thanks
immigrantfinances,
Unfortunately, I don’t have an email service or anything like that. The best way to follow new posts is to follow me via social media. There are Twitter and Facebook icons on the right side of the page, where you can follow me.
Dividend Mantra became very time consuming to run. And one of the things I decided that I didn’t want to deal with is the email stuff. The last thing I want to do is get something unmanageable going again here, so I decided to streamline things.
Hope you continue to stop by!
Cheers.