I’ve been investing for more than nine years, using dividend growth investing to achieve FIRE at a very young age.
I poured my heard-earned savings into high-quality businesses that pay reliable and increasing dividends. I bought these stocks at good values, then I just sat on them and collected/reinvested the growing dividends.
My FIRE Fund is the result of that activity. The bulk of that Fund was built in a six-year period, from 2010-2016.
It’s my real-money early retirement stock portfolio.
The Fund generates enough passive income to cover my essential expenses in life, rendering me financially independent.
Haven’t had a job in five years. Don’t anticipate needing one ever again.
I say that because the portfolio is heavily diversified across more than 100 world-class enterprises, and I’m very confident about their future prospects and the growing dividend income this collective group of businesses pays me.
The Fund is like a small forest, with each holding being a tree in that forest. Every tree produces the bountiful dividend fruit that I live off of. In fact, almost every tree is producing more fruit this year than it was last year.
A lot more.
Now, some trees are taller and healthier than others, and some trees produce more fruit than others, but the overall size and breadth of the forest as a whole is a beautiful thing.
I sleep incredibly well at night because of this diversification. Diversification is pretty much the only “free lunch” available to investors.
However, while the Fund is heavily diversified, the top 10 positions make up approximately 25% of the portfolio’s market value.
So these are companies that I’m essentially betting a large percentage of my early retirement and passive income on.
I’ve noticed that mainstream media and people in forum boards like to endlessly debate the hypothetical and theoretical, but I guess I’ve always been more interested in the application of concepts.
This is why I thought it’d be interesting to take some time today to examine some of the real-life largest long-term financial investments I’ve made. After all, this isn’t theory. It’s real money. I actually retired in my early 30s and live off of dividend income.
These are the biggest and tallest “trees” in my forest.
Let’s quickly take a look at my top 10 holdings.
Johnson & Johnson (JNJ) – #1
This position’s market value, as of the last portfolio update, is $14,195.00. That’s a 3.5% weighting. This is the biggest position in the Fund by far.
If I absolutely had to bet my whole life on one company, it’d be this one.
It’s a global healthcare conglomerate that produces the pharmaceuticals, consumer health products, and medical devices that billions of people rely on.
With the world growing bigger, older, and richer, demand for and access to these products will surely rise over time.
This bodes well for Johnson & Johnson’s ability to grow profit and pay an increasing dividend.
As things sit, they’ve increased their dividend for 57 consecutive years. That’s one of the lengthiest and most impressive track records in existence.
They’re not going to knock your socks off with revenue, profit, or dividend growth – all are up moderately over the last decade – but I can’t imagine a world in which this company isn’t paying a much higher dividend 20 years from now. I sleep very well at night with this business as my largest investment.
The valuation here isn’t super attractive. But I also don’t think it’s expensive. If I weren’t already maxed out on this holding, I’d be buying shares right now.
Norfolk Southern Corp. (NSC) – #2
This position’s market value, as of the last update, is $11,011.00. That’s a 2.7% weighting.
This fantastic transportation company operates a ~20,000 mile route across more than 20 eastern US states.
I’ve been a big fan of railroads ever since using them to win Monopoly 99% of the time I played. I never lost with the railroads. As fate would have it, the rails are helping me win in FIRE, too.
Railroads are super interesting due to the fact that they have built-in durable competitive advantages. It’s the nature of the very business model. You just can’t go out and build a new railroad.
And with more people buying more stuff over time, those goods have to be moved. Railroads are a very efficient way to get that done.
Norfolk kept its dividend static for a short period of time between 2015 and 2016, but they’ve more than made up for that with explosive dividend growth over the last two years. For perspective, the current annual dividend of $3.44 is almost 50% higher than the $2.36 they were paying in 2016. That’s incredible.
The rails aren’t cheap right now. So I wouldn’t be going crazy here if I wanted exposure to railroads. But I’m more than happy to be a long-term shareholder in this wonderful business.
McDonald’s Corporation (MCD) – #3
This position’s market value, as of the last update, is $10,679.35. That’s a 2.6% weighting.
One of the largest restaurant companies in the world, they serve millions upon millions of people all over the planet every single day.
People have to eat. Most people prefer to eat food that’s convenient, appetizing, and inexpensive. That was true 50 years ago. It’ll be true 50 years from now.
I was a happy consumer of their products before I was a happy shareholder of the business. Being both has elevated each one. Eating a Big Mac tastes that much better when I know I’m earning a portion of that sale back.
The company has increased its dividend for 43 consecutive years. I don’t see why they can’t continue doing so for another 43 years.
They’ve done an amazing job with margins, comps, and share reduction in recent years, propelling the stock price and valuation. As a result, the stock now looks rich. But I don’t mind continuing to collect my growing dividends from this food empire.
Union Pacific Corporation (UNP) – #4
This position’s market value, as of the last update, is $10,521.60. That’s a 2.6% weighting.
One of the world’s largest transportation companies, Union Pacific Corporation operates more than 32,000 route-miles across 23 western US states.
I have the east covered with Norfolk Southern Corp. And I’ve got the west locked down with Union Pacific Corporation. Just like in Monopoly, I enjoy owning all available areas.
I’m obviously strongly invested in railroads – two railroad companies are in my top-five holdings. As such, I have no plans to add to these businesses or buy competitors.
This company has increased its dividend for 13 consecutive years, and they continue to hand out raises like clockwork.
Railroads are, admittedly, a bit more sensitive to the economy than a lot of my other holdings. But they’re an integral part of the world we live in, and they’re money machines. Buffett’s a big fan (with his acquisition of the rest of BNSF Railway back in 2009). So am I.
As I noted earlier, the rails aren’t cheap. But they’re operating at phenomenal levels, and the metrics across the board are impressive. I remain a happy shareholder here, made to be even more happy every time I collect a dividend.
PepsiCo, Inc. (PEP) – #5
This position’s market value, as of the last update, is $9,797.48. That’s a 2.4% weighting.
This is a global manufacturer and distributor of a variety of non-alcoholic beverages, foods, and snacks. In all, they own 22 different billion-dollar brands across their beverages and snacks portfolio.
As a multinational food, snack, and beverage company that produces a variety of branded food products that people everywhere enjoy, this is about as surefire as an investment gets. People are gonna snack. Beverages will be consumed. This company will profit. It’s very simple.
There’s no other company out there that has this degree of a one-two punch in snacks and beverages. It’s a unique business in that regard.
I think there are some challenges regarding food companies in terms of changing consumer preferences and a focus on health awareness, but this company has adapted with some key shifts in marketing, products, and acquisitions. Indra Nooyi did a great job with some of these subtle adjustments.
The dividend track record is one of the best in the world, with 46 consecutive years of dividend raises. And the company has a very clear commitment to continuing its dividend payments and raises.
What’s surprising is that the valuation isn’t crazy here. If I wanted to invest in this business, I wouldn’t feel uncomfortable buying it right now.
Aflac Incorporated – #6
This position’s market value, as of the last update, is $9,039.60. That’s a 2.2% weighting.
This insurance company provides a wide range of supplemental insurance products in both the US and Japan.
Insurance has long been one of my favorite businesses. You can build a solid and profitable underwriting business, but the money’s really made with the float. Buffett realized early on how amazing this low-cost and low-risk source of capital is. Didn’t take me too long to pick up on that, either.
This company, in the face of tough underwriting and low interest rates, has been using a common playbook in the insurance industry: they’ve plowed cash flow into buybacks, engendering growing dividends. Music to my ears, frankly.
They’ve increased their dividend for 37 consecutive years, and I think the odds are very good that they’ll continue increasing that payout for many more decades to come.
The buybacks have been especially commendable in this case. Frankly, this stock has looked undervalued for many years.
Even now, I don’t think the stock is expensive. If I wanted to invest in a wonderful insurance company right now, I’d take a close look at Aflac.
Philip Morris International Inc. (PM) – #7
This position’s market value, as of the last update, is $8,578.00. That’s a 2.1% weighting.
This is the world’s largest publicly traded tobacco company. They’re engaged in the manufacture and marketing of tobacco and related products.
Now, I don’t personally smoke, nor do I go out of my way to advocate smoking.
But I’m a huge fan of personal freedoms. This is, obviously, one of the driving forces behind my journey to become financially free. If you’re not financially free, you’re beholden to a lot of people and systems that might not have your best interests at heart. I like doing precisely what I want to do, every single day.
With that in mind, if an adult decides to purchase and consume legal tobacco products – I say go for it.
As the world’s foremost competitor in this industry, they’re positioned quite well to take advantage of that personal freedom.
I will say, though, that this investment has been a bit disappointing for me thus far. Not because the stock price hasn’t shot up (I’d prefer it to stay low), but rather because the business hasn’t performed as expected. This has led to dividend growth below expectations.
Still, it’s a big dividend payer (yielding 5%+), and they continue to grow the dividend like clockwork – 11 consecutive years in a row of higher dividends, which goes back to the spin-off from Altria Group Inc. (MO).
I’d actually argue it looks even better as an investment today than it was when I invested a number of years ago, due to the attractive valuation, lower expectations, and recent success with RRPs (most notably of which is iQOS). If this position weren’t already maxed out, I’d be buying.
National Retail Properties, Inc. (NNN) – #8
This position’s market value, as of the last update, is $7,634.25. That’s a 1.9% weighting.
This real estate investment trust invests in high-quality properties subject to long-term net leases.
It’s a triple net lease REIT. I can’t think of a better stock ticker for that than NNN. Bravo!
Real estate is wonderful. It’s always a good idea to get your hands on a piece of dirt. They’re not making more of it (other than a few tiny reclamation projects here and there).
The problem with RE, in my view, has always been in regard to the hassles it involves. A REIT solves that for you, since you get to collect your “rent check” – those beautiful dividends – without the headaches of being a landlord. Certainly works for me.
What I particularly love about this REIT is that its property portfolio is largely insulated from the e-commerce headwinds that might ensnare a lot of other companies out there. National Retail Properties counts the likes of car washes, gyms, gas stations, and restaurants among its top tenants. Can’t get any of that online.
They’ve increased their dividend for 29 consecutive years. That’s one of the longest such streaks among all REITs. I’m a very, very happy long-term shareholder.
The valuation is a bit strong here, however. New investors who want exposure to this REIT might want to wait for a more opportune time to pick up shares.
Harris Corporation (HRS) – #9
This position’s market value, as of the last update, is $7,186.80. That’s a 1.8% weighting.
This technology company and defense contractor provides a range of products that take advantage of its expertise in communications, electronics, and space systems.
What an interesting company in a pretty niche field.
This is a business that has definitely exceeded my expectations. When I first invested in the company, I thought it was fundamentally solid across the board. The valuation, though, was particularly exciting.
The company has no doubt performed well over the last decade. But the stock – up ~400% from where I bought in 2011 – has done even better, outpacing business gains by a long shot. So the stock has gone from materially undervalued to arguably overvalued in the process. This is a good example of why valuation matters.
However, recent results at the business level have been extremely impressive. And the company is poised to knock it out of the park with their approved combination with L3 Technologies Inc. (LLL) – of which I believe Harris gets the better end of the deal.
The company has increased its dividend for 17 consecutive years. They’ve never been in such a strong position as they are right now, which bodes well for more dividend raises.
Again, I don’t think the stock is cheap here. But the stock hasn’t looked cheap in some time. And the approved merger is probably going to make this an even better business (on a pro forma basis) than it was before.
The Coca-Cola Co. (KO) – #10
This position’s market value, as of the last update, is $6,802.60. That’s a 1.7% weighting.
This is a global behemoth in beverages, offering more than 500 brands in more than 200 countries and territories. 20 of those brands are billion-dollar brands.
There’s no country anywhere in the world that isn’t familiar with, or consuming, products from this company. It’s amazing. Even here in Thailand, many people (including yours truly) regularly enjoy having a Coke and a smile.
It’s a blue-chip business that is about as safe and predictable as it gets. The odds are incredibly strong that people will still love these beverages (branded water, soda, fruit juice, etc.) 20 years from now. In fact, it’s highly likely that more people will be paying higher prices for more beverages.
Increased volumes speaks volumes (pun intended) for the company’s ability to pay and grow its dividend. And when you’re relying on passive income to fund your life, that means a lot.
As it sits, the company has increased its dividend for 57 consecutive years. It doesn’t get much more impressive than that.
I don’t think the stock is undervalued right now. But this is a fine business worth paying a fair price for.
I have well over 100 businesses in the portfolio. Over 100 trees in my “forest”. Having that level of diversification allows me to sleep soundly.
I don’t ever think for even a second that my growing dividend income might not be there for me at some point in the future. There’s no fear or worry whatsoever that I won’t have more “fruit” to live off of next year and every year thereafter. It’s instead highly likely that the forest will have taller trees producing much more fruit for many more years to come.
And while not every company is firing on all cylinders at all times, even a dividend cut or two wouldn’t phase me. Dividends are, after all, almost always “in the green”. Even if/when one tree is slightly withering for a time, the rest of the trees should remain quite lush.
That said, the portfolio does have a certain level of concentration at the top. These 10 largest positions account for almost 1/4 of the portfolio’s total market value.
Even then, though, I feel fantastic about being a bit more heavily exposed to these particular businesses. They’re all blue-chip companies that keep my cash flowing and growing. I suspect that will continue for many more years to come.
Someone is sitting in the shade today because someone planted a tree a long time ago.
These 10 trees are providing me a lot of shade… and bountiful dividend fruit.
Full disclosure: I’m long all aforementioned stocks.
What do you think? Are these 10 solid companies? What are your top 10 holdings?
Thanks for reading.
P.S. If you’re ready to invest in blue-chip companies and become financially independent, check out some awesome resources I personally used on my to becoming financially free at 33!