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.
My first transaction of the month was a sale, which is unusual for me. I don’t sell stocks often, but I am active in terms of managing the portfolio so as to make sure that positions are right-sized for my needs.
I sold 15 shares of Albemarle Corporation (ALB) on 10/10/16 for $83.36 per share.
I first loaded up on Albemarle when its stock was priced in the $40s. I thought the risk was worth the reward at that particular point, with the valuation appealing, the yield pretty decent, and the future prospects (especially in regard to lithium) bright.
In all honesty, it’s not a prototypical dividend growth stock due to the cyclical nature of the business and the low starting yield, but I think it’s a fine business. Moreover, Albemarle has increased its dividend for 22 consecutive years, so it’s no new kid on the block.
While I still like the company quite a bit, the stock’s rapid appreciation from my cost basis meant the position became relatively large for the Fund.
With the business being fairly cyclical, the stock offering a ~1.5% yield, and the most recent dividend raise being somewhat disappointing, I felt it prudent to lighten up on this stock just a bit.
With the position now being right about 1% of the portfolio, I feel more comfortable here.
This sale reduced my annual dividend income by $18.30.
I then used some of that capital to purchase 20 shares of Southern Co. (SO) on 10/10/16 for $49.36 per share.
Southern’s 4.5% yield is attractive in this environment. And I don’t think the valuation is totally crazy now, at about 20 times earnings for the stock, as the company continues to make some strong moves toward cleaner energy sources.
Southern is one of the more consistent dividend growers out there, with 16 consecutive years of dividend increases.
The utility isn’t going to hand out monster dividend raises year in and out, but this is a stock that nicely balances the portfolio. Southern is a stock that provides that current income for me, balancing out a lot of other holdings (like ALB above) that should provide a lot more income growth over the long haul.
This stock is now just under 1% of the Fund, and that’s a level I feel pretty comfortable with. I’ve never been a huge fan of utilities in general, but I do think Southern’s increasing foothold in natural gas infrastructure is appealing, as is their increasing presence in solar.
This purchase adds $44.80 to my annual dividend income.
I then finished this month up by purchasing 30 shares of Chatham Lodging Trust (CLDT) on 10/17/16 for $17.85 per share.
Lodging is heavily cyclical. No doubt about that. And Chatham’s “tenants” essentially sign very short-term “leases”, which severely limits the company’s predictability, as well as the dividend’s reliability.
Nonetheless, the business is very cheap right now, in my view. Chatham’s AFFO mid-point guidance for this fiscal year is $2.29. So that means the stock is trading hands for less than 8 times that mark. And since the monthly dividend is $0.11, the dividend coverage is quite strong.
There are some risks to keep in mind here, but the valuation and 7.50% yield might just be worth the stretch over the long haul. The major risk I see is a recession, though that’s a risk for most businesses.
This purchase adds $39.60 to my annual dividend income.
Lastly, I received 10 shares of Versum Materials Inc. (VSM) this past month as a spin-off from Air Products & Chemicals, Inc. (APD). This is a new position. The stock currently pays no dividend. However, it’s a tiny position. So unless I have a very good reason, I’ll probably just sit on it. It’s not economical to do anything else with it right now.
Looking at the activity over the month of October, I’m pretty happy. I was a bit busier than I really like to be, but ALB’s rapid price appreciation left me uneasy, as the position became a little bigger than I had in mind. Reducing that exposure while simultaneously increasing my dividend income is a win-win.
Netting everything out, I added $66.10 to my annual dividend income.
So my lifestyle looking out over the next 12 months is looking just that much better.
The Fund is now worth $301,857.85, and it’s spread out across 105 positions. That’s a 2.5% decrease from last month’s published value of $309,692.20. The Portfolio page has been updated accordingly.
This is one of the larger decreases that I’ve experienced over the course of my six or so years of investing. I’ve noticed that many higher-yielding stocks (especially REITs) have dropped fairly dramatically over the course of the last month. Since I have plenty of exposure there, the value of the portfolio naturally responded. However, my passive income continues to just march along, though recent moves (as noted above) have allowed that march to speed up just a tad. And that’s what I care most about.
Looking forward, I plan to make at least one stock purchase this month, although that’ll really depend on capital needs. I continue to divert free cash flow toward philanthropic giving, which is proving to be just fantastic. At the same time, my passive income just barely covers my core personal expenses, so I appreciate opportunities to bolster my annual dividend income so as to create a larger buffer. Stocks like VF Corp. (VFC), Cardinal Health Inc. (CAH), Williams-Sonoma, Inc. (WSM), and AbbVie Inc. (ABBV) all look attractively valued, while I also have room for any/all of them in the portfolio. As such, they all remain on my radar.
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 was October for you? Took advantage of some opportunities? Dividend income growing to your expectations?
Full disclosure: I’m long all aforementioned stocks.
Thanks for reading.
Image courtesy of: bplanet at FreeDigitalPhotos.net.