Ultimate Sustainable Dividend Portfolio – October 2014 Update – Tough Market

avatar By: IS
Date posted: 10.17.2014 (3:00 am) | Write a Comment

Dollar treeAs many of you know the Ultimate Sustainable dividend portfolio was built over a year ago as an attempt to slowly become financially free. It is the most important part of my passive income plan and in weeks like the past 2 ones where we start to see panic in the financial markets, it’s a good process for me to go back and see how the portfolio is doing.

As is always the case, you can get extra information in my newsletter, it’s free to sign up for here:

Without further wait, let’s get started. Here are the portfolio holdings as of last night:

Ticker
Name
Shares
Oct 16 2014 Prices
Oct 16 Values
OMCOmnicom Group Inc32$66.16$2,117.12
MSFTMicrosoft Corp75$42.74$3,205.50
JCIJohnson Controls Inc43$40.69$1,749.67
PEPPepsiCo Inc/NC31$90.79$2,814.49
ETNEaton Corp34$59.92$2,037.28
DOVDover Corp27$73.44$1,982.88
ITWIllinois Tool Works Inc37$83.07$3,073.59
XLNXXilinx Inc40$38.49$1,539.60
SJMJM Smucker Co/The22$97.88$2,153.36
BLKBlackRock Inc14$310.69$4,349.66
TROWT Rowe Price Group Inc32$75.43$2,413.76
OXYOccidental Petroleum Corp25$86.44$2,161
XOMExxon Mobil Corp22$90.60$1,993.20
ADIAnalog Devices Inc47$44.60$2,096.20
HASHasbro Inc32$54.21$1,734.72
MATMattel Inc46$29.62$1,362.52
AFLAflac32$55.86$1,787.52
BAXBaxter International27$68.18$1,840.86
IVZInvesco Ltd70$35.85$2,509.50
CVXChevron21$111.06$2,332.26
TXNTexas Instruments Inc33$43.59$1,438.47
VWOVanguard FTSE Emerging Markets74$40.63$3,006.62
BNDVanguard Total Bond Market36$82.97$2,986.92
Cash$2,401.53
USDP$55,088.23
SPX17.0219547$3,395.03$57,790.05

Dividends Received

It has not happened much but this October will actually generate less money than October 2013 ($30.78 vs $41 last year). I’d have to check but I’d imagine it’s caused by a company moving its dividend dates a bit. Not a big deal but I’ll certainly continue to monitor.

 

usdp2

Ultimate Sustainable Dividend Portfolio News

Ticker Name News
TXN Texas Instruments Inc Dividend increase of 13.3%
VWO Vanguard FTSE Emerging Markets Dividend increase of 6.7%
BND Vanguard Total Bond Market Dividend increase of 3.8%

Returns

These are volatile times in the financial markets and in days like these, I’m thankful that I have some strategies where the focus isn’t as much about the value of the portfolio but rather the income that the portfolio generates. That being said, as we’d expect, the portfolio did out-grow the S&P500.
The worst return:
Dover Corp (DOV) -16,49%
The best return:
Vanguard Total Bond Market (BND) +1,1%
Clearly vindication that in a down market, there is a lot of value in holding some other asset classes.

 

usdp1

Trades

In addition to the normal “dividend reinvestments”, I also decided to add a bit to our positions in 2 of the stocks that have paid dividends since the last USDP update:

-Illinois Tool Works Inc (ITW) 6 shares – $500
-Vanguard FTSE Emerging Markets (VWO) – 12 shares – $500

Top 100 Dividend Stocks – October 2014 Edition – A New Leader Takes Charge

avatar By: IS
Date posted: 10.08.2014 (3:00 am) | Write a Comment

maldivesA few days late, but it’s that time of the month again. We’re starting to see a bit more volatility which always provides a few more investing and trading options. There are still some great opportunities out there and I’m always on the lookout for ways to improve my Ultimate Sustainable Dividend portfolio. Why? Because it’s a key part of increasing my monthly passive income (see last update here). There is no “perfect” stock of course. The market is fairly efficient so it’s all about finding high quality stocks that are a good match for my portfolio and provide a good potential/downside risk ratio. Obviously, yield is just one criteria but it’s an important one and for that reason, looking at the top large cap stocks in terms of dividend payout is a great way for me to get started.

Here is the list!

Ticker
Name
Price
Dividend Yield
Payout Ratio
Ex-Dvd
DODiamond Offshore Drilling Inc3310.6288.6910/30/2014
RIGTransocean Ltd30.159.9563.7911/12/2014
WINWindstream Holdings Inc10.949.14250.7712/31/2014
ESVEnsco PLC38.267.8436.912/11/2014
NENoble Corp plc20.247.4125.211/13/2014
FTRFrontier Communications Corp6.446.21362.4212/09/2014
IRMIron Mountain Inc33.15.74213.9112/24/2014
HCPHCP Inc40.15.44106.9211/06/2014
CTLCenturyLink Inc415.27#VALUE!12/04/2014
TAT&T Inc35.365.253.1310/08/2014
HCNHealth Care REIT Inc62.785.073110.7711/06/2014
TETECO Energy Inc17.754.9696.6611/10/2014
MATMattel Inc31.7754.7855.211/24/2014
SOSouthern Co/The44.144.76107.3611/06/2014
PMPhilip Morris International Inc84.514.7368.0712/23/2014
VTRVentas Inc62.744.62164.0612/17/2014
PBCTPeople's United Financial Inc14.464.5687.6710/29/2014
RAIReynolds American Inc59.444.5179.112/10/2014
MOAltria Group Inc46.194.581.2112/22/2014
PCLPlum Creek Timber Co Inc39.224.49135.5111/12/2014
PPLPPL Corp33.484.4579.7912/09/2014
KMIKinder Morgan Inc/DE38.864.43138.4810/31/2014
VZVerizon Communications Inc49.714.4251.7310/08/2014
EDConsolidated Edison Inc57.034.4267.8911/10/2014
SCGSCANA Corp48.524.3360.312/10/2014
FEFirstEnergy Corp33.494.3245.2302/04/2015
ETREntergy Corp77.824.2783.1111/10/2014
DRIDarden Restaurants Inc51.594.26157.3710/08/2014
DUKDuke Energy Corp75.174.2382.3811/12/2014
TEGIntegrys Energy Group Inc65.624.1561.8411/28/2014
AEEAmeren Corp38.894.1175.8112/08/2014
KIMKimco Realty Corp21.964.1174.4812/29/2014
PNWPinnacle West Capital Corp55.534.0960.3110/30/2014
LOLorillard Inc60.274.0869.9211/26/2014
POMPepco Holdings Inc26.794.03245.4512/12/2014
SPLSStaples Inc11.9554.0244.2612/24/2014
PCGPG&E Corp45.54100.6112/30/2014
PEGPublic Service Enterprise Group Inc37.263.9758.5712/05/2014
XELXcel Energy Inc30.613.9258.4312/23/2014
COPConocoPhillips74.773.9141.6610/09/2014
FCXFreeport-McMoRan Inc32.323.8784.8210/10/2014
MACMacerich Co/The64.323.86252.3511/12/2014
COHCoach Inc35.113.8547.8812/05/2014
CNPCenterPoint Energy Inc24.733.84114.1511/14/2014
GASAGL Resources Inc51.263.8270.9311/19/2014
GRMNGarmin Ltd50.453.8157.4412/11/2014
AEPAmerican Electric Power Co Inc52.873.7864.4611/10/2014
KRFTKraft Foods Group Inc56.33.7345.0510/13/2014
CINFCincinnati Financial Corp47.633.752.2212/15/2014
CVXChevron Corp117.713.6734.8911/19/2014
CACA Inc27.463.6450.3911/18/2014
CMSCMS Energy Corp29.993.659.6911/05/2014
DTEDTE Energy Co76.873.5968.5312/18/2014
MCDMcDonald's Corp94.863.5855.7611/26/2014
OKEONEOK Inc64.253.58117.511/05/2014
WECWisconsin Energy Corp43.813.5656.9611/12/2014
PFEPfizer Inc29.223.5657.6811/05/2014
EXCExelon Corp34.883.5673.5511/17/2014
LEGLeggett & Platt Inc34.993.5487.7112/10/2014
PLDPrologis Inc37.633.51288.8212/18/2014
GEGeneral Electric Co25.43.4653.1112/24/2014
NUNortheast Utilities45.553.4558.8712/09/2014
FFord Motor Co14.593.432210/28/2014
PAYXPaychex Inc44.323.4381.3710/31/2014
DDominion Resources Inc/VA70.043.4372.8812/03/2014
CVCCablevision Systems Corp17.773.42122.8611/13/2014
SESpectra Energy Corp39.263.4180.5611/12/2014
LMTLockheed Martin Corp178.343.365211/26/2014
PSAPublic Storage167.63.34105.0212/08/2014
GMEGameStop Corp40.463.2637.2111/28/2014
AVBAvalonBay Communities Inc142.693.26932.9412/30/2014
GISGeneral Mills Inc50.473.2553.4110/08/2014
AIVApartment Investment & Management Co32.223.2431414.2711/12/2014
KKellogg Co61.193.236.1611/28/2014
EQREquity Residential62.613.19#VALUE!12/18/2014
WMWaste Management Inc47.63.15696.9411/28/2014
SPGSimon Property Group Inc165.813.14111.9611/10/2014
KMBKimberly-Clark Corp107.73.1258.0812/03/2014
ADIAnalog Devices Inc47.583.160.3212/03/2014
HASHasbro Inc55.423.172.8810/30/2014
MCHPMicrochip Technology Inc46.133.0971.1411/18/2014
SYYSysco Corp37.73.0872.3101/07/2015
WUWestern Union Co/The16.243.0834.7212/18/2014
PBIPitney Bowes Inc24.383.0862.6411/12/2014
NEENextEra Energy Inc94.233.0865.1111/26/2014
STXSeagate Technology PLC56.083.0735.8511/03/2014
CLXClorox Co/The96.473.0766.1610/27/2014
PGProcter & Gamble Co/The83.793.076110/15/2014
CSCOCisco Systems Inc25.313.0147.8501/02/2015
OXYOccidental Petroleum Corp95.96334.8412/08/2014
CAGConAgra Foods Inc33.333140.910/29/2014
LLYEli Lilly & Co65.672.9844.8911/14/2014
CPBCampbell Soup Co42.452.9450.8810/08/2014
MRKMerck & Co Inc59.92.94116.5312/11/2014
VNOVornado Realty Trust99.822.93#VALUE!11/05/2014
NUENucor Corp51.982.8596.7412/30/2014
BMYBristol-Myers Squibb Co50.852.8490.4401/07/2015
WYNNWynn Resorts Ltd182.282.7496.5911/07/2014
MWVMeadWestvaco Corp41.362.4255.3111/25/2014
CMECME Group Inc/IL80.952.32151.0612/05/2014

It’s Not All About Yield

Of course, as I always mention, dividend yield is one criteria and Diamond Offshore Drilling Inc (DDO) is a great example of that fact. Yes, it has a solid 10% dividend yield but look at the trajectory of its earnings, revenues and dividends:

ycharts_chart (1)

oh and the stock price hasn’t been doing too well either:

ycharts_chart

I will be writing more about these names soon in our free mailing list, join now if you have not done so yet:

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Increasingly Confused by Amazon ($AMZN)…the Good, The Bad And The Great

avatar By: IS
Date posted: 09.30.2014 (3:00 am) | Write a Comment

$AMZNMany of you know how much I believe in my “web ecosystem theory”. I have started working on a new article about it and the impact that mobile has had on that theory but as you can guess, I’m still a big believer in placing chips on the 5 major ecosystem players ($GOOG, $AAPL, $FB, $MSFT, $AMZN). I have already taken significant longer term stakes in Apple and Facebook which have worked out well so far. I’m certainly not saying that other tech players can’t have success but it’s important to keep in mind that they will need to co-exist with these established players in order to do well. Netflix ($NFLX), Twitter ($TWTR) and TripAdvisor ($TRIP – which I recently bought – are a few of the players which I think will do well despite not “controlling their ecosystem”.

Does Amazon Belong To The Group?

The one player that I often got questions about in this group was Amazon because the nature of their activites (ecommerce) was so different but the 5 names seem to be converging rather quickly and as players like Google move towards ecommerce and shipping while Amazon starts working on mobile devices, advertising services, video websites, gaming platforms, etc, it’s increasingly clear that the collisions between these 5 players are only getting started. One area where Amazon does not fit with them however is in terms of market cap. Just take a look at the biggest US companies (in terms of market cap):

topmktcap

You will see that 3 of the ecosystem plays are among the top 4. Facebook is not that far behind and being the most recently founded company, is well on its way to get there. The missing company? Amazon of course is ranked #26 on that list despite its incredible growth story? Why? It’s a rather simple reason: “Lack of profits”. Today I wanted to take a new look at Amazon after reading two very thought provoking posts written by two of the top guys when it comes to tech in the recent weeks that got me thinking. I highly recommend both:

-Losing my Amazon religion @ Stratechery
-Why Amazon has no profits (and why it works) @ Benedict-Evans

I won’t go over every statement in those 2 posts but if you are investing or considering trading Amazon, you do need to read both.

The Good

I certainly feel like Benedict-Evans explained it extremely well and perhaps even more clearly is the tweet by legendary VC Marc Andreeson:

Clearly, the reason why Amazon’s net profit has consistently been around $0 is because that is exactly what Jeff Bezos is trying to do.

ycharts_chart (1)

credit: yCharts.com

Spend as much as you can. Why? Because Amazon’s mission requires an incredible amount of resources. What is that “mission”. I’ll agree that it’s not clear and even being the “everything store” seems to under-estimate what Amazon is trying to accomplish. It’s much more than a “store” that can sell you everything.  Jessica Lessin, editor of the Information (a paid but incredibly valuable website) has the best vision that I’ve heard of what Amazon is trying to do: “Amazon-as-city“. Amazon wants to sell more than physical and digital goods and is increasingly moving towards services. The good news is that it’s working as it continues to gain market share and eliminate competition:

yyyy

1Amazon has also been able to make incredible progress when it comes to building these incredible warehouses. This post from Re/code gives a few maps that give you some idea of the progress that’s been made.  Clearly, no other company comes close to what Amazon has been able to build. Even companies such as Walmart that have a much broader physical presence are nowhere near as organized which is showing up in the numbers (no surprise here).

Amazon is taking over markets one at a time and if books are any indication, Amazon will be able to innovate greatly once it reaches that point. Just think of how it changed the whole ebook market, its print-as-you-go initiative, unlimited Kindle subscriptions, etc.

The Bad

I feel like Ben Thompson expressed it very well (again the link) and there are many products or ideas that Amazon is working on that make me scratch my head. Bezos is incredible and it’s a tough position to doubt Amazon’s success but it’s hard to argue that Amazon is not well positioned to compete with players such as Apple and Google when it comes to smartphones and tablets for example. Rumors that Amazon has only sold 35,000 Fire phones are a good way to think about how far the company has to go if it wants to become relevant. I understand why it would be important to dominate mobile but at what cost? How much are these products costing to develop and is it even clear that Amazon has a shot of catching up?

When Amazon spends a billion dollars to buy video gaming video community Twitch, it’s not clear how this will end up profiting Amazon. Yes, it’s a terrific property that Google was looking to buy and yes Amazon would like to have terrific video content to provide on all of its platforms. But what makes Amazon uniquely qualified to run Twitch? It seems like one more distraction.

I was very critical of eBay trying to launch an advertising network and can probably be almost as critical about Amazon’s idea to do the same. Yes, Amazon seems like its slightly better positioned but the strategy remains a mystery to me. Wouldn’t it make more sense to use that billion dollars to build more warehouses?

The Great

All of that being said, in the end I do think that Amazon remains worth the gamble. More transparency would certainly help because I’d like to make sure that most of what the company is reinvesting is being used for warehouses and other strategic purchases to feel even more at ease. But the fact remains that in its core business, Amazon is dominant, faces little to no competition (I’m not buying efforts like Google Shopping Express or ebay same-day shipping to this day) and as long as that trend continues, I do believe the “make no profits” philosophy makes sense. If this is a whole new industry that is being created and that we are still its infancy, it makes a lot of sense to reinvest as much as it possibly can to built the best infrastructure for this new world.

I have not yet found an entry point to my liking but believe me that I will be buying at some point if we see a setback.

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Adding Alibaba ($BABA) To The Stocks That I Follow

avatar By: IS
Date posted: 09.24.2014 (4:18 am) | Write a Comment

$BABAUnless you’ve been living on some other planet, you’ve heard about the very recent Alibaba ($BABA) IPO. I often discuss the ecosystem play where I think owning the US Players ($GOOG, $AAPL, $FB, $AMZN, $MSFT) that dominate the web ecosystem is a great way to play it. Those players dominate to some extent everywhere around the world…almost. There is one major country where they are all but shut out: China. Some of it is caused by their refusal to abide by the rules over there that would be necessary to do business but perhaps more importantly is how different of a market it truly is. They are dominated by 3 very different kind of players (so called BAT players):

-Baidu ($BIDU)
-Alibaba ($BABA)
-Tencent (listed on Hong Kong Exchange)

I could explain what each represent but there has been so much written about them that I fear I would not be adding much value here (try this collection of links). One thing that I’ve been unable to do is buy these 3 stocks to this point. Why? I think this article expresses part of my view:

-Alibaba bubble

I’m personally not as concerned about who is benefiting from the IPO but trying to get a good feel for what these companies are up has been extremely challenging. I have found a few good sources of information, try to read the earnings transcripts and I’m hoping that at some point I’ll feel like I have a good enough understanding of the Chinese internet market.

ycharts_chart

What This Also Means

I have not been active on Chinese names lately but I had also been staying out of Yahoo ($YHOO) given its high volatility linked to its Alibaba stake. That will now change and hopefully I can start putting bets on Yahoo in the near term which is extremely interesting. I’m hoping that e can also now finally start getting some answers on how much taxes Yahoo will be paying on future sales of BABA stock.

Have any of you purchased stocks of Alibaba, Tencent or Baidu?

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Ultimate Sustainable Dividend Portfolio – September 2014 Update – Moving Ahead

avatar By: IS
Date posted: 09.18.2014 (4:20 am) | Write a Comment

 

Dollar treeAs many of you know the Ultimate Sustainable dividend portfolio was built over a year ago as an attempt to slowly become financially free. By that I mean having enough passive income to not “need” to work any longer. I track my progress every month and I’m looking at many different ways to get that done which include real estate, my own business, etc. That being said, the core of my strategy relies on income generated from my portfolios.

The USDP, along with my ETF portfolio generate the bulk of my passive income and I decided to track this with a monthly post in order to keep myself accountable and also because I’ve heard from many of you that this would be helpful.

As is always the case, you can get extra information in my newsletter, it’s free to sign up for here:

Without further wait, let’s get started. Here are the portfolio holdings as of last night:

Ticker
Name
Shares
Sept 17 2014 Prices
Sept 17 2014 Values
OMCOmnicom Group Inc32$70.33$2,250.56
MSFTMicrosoft Corp74$46.52$3,489
JCIJohnson Controls Inc42$46.37$1,993.91
PEPPepsiCo Inc/NC30$92.85$2,878.35
ETNEaton Corp33$66.36$2,256.24
DOVDover Corp26$84.72$2,287.44
ITWIllinois Tool Works Inc30$88.63$2,658.90
XLNXXilinx Inc39$43.92$1,756.80
SJMJM Smucker Co/The21$99.71$2,193.62
BLKBlackRock Inc13$329.74$4,616.36
TROWT Rowe Price Group Inc31$79.30$2,537.60
OXYOccidental Petroleum Corp24$98.17$2,454.25
XOMExxon Mobil Corp21$97.08$2,135.76
ADIAnalog Devices Inc46$49.63$2,332.61
HASHasbro Inc31$53.77$1,720.64
MATMattel Inc45$34.16$1,571.36
AFLAflac31$58.33$1,866.56
BAXBaxter International26$72.65$1,961.55
IVZInvesco Ltd69$40.85$2,859.50
CVXChevron20$124.72$2,619.12
TXNTexas Instruments Inc32$48.37$1,596.21
VWOVanguard FTSE Emerging Markets81$44.20$2,696.20
BNDVanguard Total Bond Market46$81.46$2,932.56
Cash$2,550.94
USDP$58,216.04
SPX16.17845817$3,643.33$60,943.46

Dividends Received

Things are going absolutely great from this perspective. You will see in the below chart a clear trend in monthly income when you compare to the same period the previous year.

usdp2

 

Ultimate Sustainable Dividend Portfolio News

Not much to report here. I can’t say I’d blame these companies for not announcing dividend increases in the middle of the summer!

Returns

Overall returns continue to be decent but I did not yet catch up on that S&P500 uptick. The main stocks that have let me down from that perspective so far this year are:
Mattell (MAT): -26% so far this year (total return)
ETN Corp (ETN): -10,55%
Of course, it’s one more example of the importance of diversification in a portfolio like this one.

usdp1

 

Trades

Not much going on from that perspective but you can expect a change or two before year-end.
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Time To Get Out Of eBay ($EBAY)

avatar By: IS
Date posted: 09.15.2014 (3:00 am) | Write a Comment

$ebayI’ve written a decent amount about eBay (EBAY) over the years and have generally been a believer. Today, as I take a new look at things, I’m not as convinced. Why? There area few reasons that I’ll get into. But the one thing that seems apparent is that the current web ecosystem plays ($AAPL, $GOOG, $FB, $AMZN, $MSFT) are now very much ready to take on eBay and I don’t think the company has been able to properly prepare itself. It’s not impossible to survive in such a context (Netflix ($NFLX) and Twitter ($TWTR) are 2 great examples but I feel like eBAY is about to run out of time on that front.

Turns Out Carl Icahn Was Right.. But Maybe Too Late

A few months ago, Carl Icahn waged a very public war with eBay’s board, arguing that they were not doing their job and among other things, should spin out Paypal. Even at the time, I had argued that he was right but I’m believing that more and more. The company is reportedly still considering the move but at some point it will be too late. The problem isn’t so much about having both an auction store and the leading internet payment site in the same company. The issue is that Paypal didn’t get the attention it deserved. I’ve personally said for years that I was valuing eBay as a payments company because that was where the growth and the future was.

So what did Paypal need to do? It needed to quickly build a customer and offline business base that were very active, to support developers (what % of apps that you use try to get you to pay through Paypal?), etc. On those fronts, Paypal has made very little progress.

ycharts_chart

What Just Changed?

For years, Google has been trying to build a payments solution, Facebook has built “Facebook credits” while Amazon’s “Payments” has slowly but surely continued to gain ground. But what changed was Apple’s recent “Apple Pay” announcement.

Not only does that confirm how serious Apple is taking “Payments” but it will force competing players to up their game VERY quickly because you can bet that Apple will become a major player in the payments space. Apple Pay will also be used for online payments in apps, websites, etc. That is very serious competition for eBay’s Paypal and you can bet that Amazon, Google and Facebook will react to this news very quickly.

The Game Is Not Lost… YET

Of course, Apple only offers payments to its customer base leaving a majority of users unsupported. It is likely that at least one more player will emerge in this space and eBay could certainly compete. I don’t think its chances are good compared to a few years ago when it was by far the dominant payment player. Paypal has around 150 million active users and Apple will almost reach of that number when its new operating system ships next month:

iphone

credit Statista

 

Apple has also signed up all 3 major credit card issuers as partners, will have hundreds of thousands of retail points from the start, etc. Paypal was apparently pushing to be part of Apple’s payments effort but that has clearly failed.

And again… eBay is not so focused on Paypal. Instead last week it announced:

ebay2

 

 

An Ad Network?!?!? To compete with Apple, Google, Facebook, Twitter and others in an ultra-competitive business where eBay has little to no competitive advantage? I don’t think I need to argue this one. Yes eBay knows a lot about what its users like to shop for… but an ad network??? It’s even worse than the focus on same day shipping. eBay is not a technology company or an ad specialist.. so where does this make sense? Why not focus on the area where the company makes most of its money and is being targeted by the world’s leading ecosystems?

Disclosure: Long eBay (EBAY).. but not for long

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