October 2013 Dividend Earnings

The totals are in for my Dividend earnings for October 2013.  I had three positions pay out this month, General Electric, Philip Morris International, and Coca Cola.

HoldingDividend/Shr# SharesDividend TotalReinvestedNew SharesAccount
$65.49
GE$0.19110.842$21.06YES0.807ROTH IRA
PM$0.9428.152$26.46YES0.3117Brokerage
KO$0.2864.1729$17.97YES0.4767Brokerage

The biggest news this month for my Portfolio was the PM dividend increase taking effect.  My payout went from the previous $0.86 per quarter up to $0.94 for a whopping extra $2 in dividends.  It may not sound like much, but I’ll take it!

Of the $65 income $44 was earned in my taxable brokerage account, while the other $21 is tax-free in my ROTH IRA. I’m slowly getting closer to my initial goal of averaging $100 a month.  Probably another $5000 worth of investments will push me pat that target.

 

Purchase of NSRGY – Nestle

Nestle Logo

Nestle Logo

After resolving my block for trading Pink Sheet stocks – my Merrill Edge Safepass arrived in the mail – I have finally moved forward with my Nestle purchase.  The addition of the NSRGY ADR to my portfolio is a goal I’ve long targeted.

The bad news for me is that due to the delay caused by waiting on the security mechanism to arrive, the price of the security increased by roughly $5 per share.  I had set my limit order to $68.00, and sat and waited for the purchase to trigger. While I would have preferred a sub $65 price – where it was trading a while back – I still feel it is attractive at sixty eight.

Nestle is a Swiss based firm, largely focused on the food industry, that has in the neighborhoods of 30 billion dollar brands.  It is truly a huge company, and with the breadth and depth of its product offerings it will not be going away anytime soon.  Amongst its chief competitors are General Mills, Kraft, and Kelloggs.  The firm also has a large beverage division – particularly in the bottled water arena – so also competes to a certain extent with Coca Cola and Pepsico. As I have already purchased KO I now have multiple positions in the beverage industry.

While not a hugely popular holding for individual investors in the US, many people hold them in their 401k accounts due to its presence in a large number of major index funds.  The main listing for the company is on the SIX Swiss Exchange, and one side effect of this is that many of the US based financial statistics aggregating sites have bad information for the firm.  Sites like Yahoo finance and Google finance should not be relied upon for dividend data for these international firms, it is best to go direct to the source – i.e. the firms’ corporate website.

Nestle, being a non-US forms, has some unique characteristics that makes it different to my other holdings.  For one, it only pays a dividend once a year, rather than every quarter.  Also, the dividend is paid in Swiss Francs (CHF) which is of course converted into USD for the ADR.

This means the size of the dividend – and of course the price of the underlying security- will vary over the years depending on the underlying CHF-USD exchange rates.  This does expose me to some foreign exchange risk, but since Nestle sells products worldwide I am not concerned about this.  I had a lot of trouble finding accurate historical information on the Nestle Dividend, this is probably the best reference (straight from the source) as it eliminates confusion caused by taxes and currency conversions.

With this firm I am exposed to every currency – some of which will be strong and some weak in any given year.  The major concern I would have is if I were forced to liquidate my position at a particularly unfavorable time – when the Dollar is weak against the Franc.  I plan on holding this stock for life however.

Purchase of 37 shares of NSRGY at $67.98, for a cost basis of 2,515.26. Dividend yield at time of purchase 2.71%. Dividend Reinvestment enabled. Initial dividend income $67.17 annually.  Note – this yield reflects 15% withholding.  My research indicates I should get credit for this at tax time, if this proves to be the case I will come back and adjust the yield upwards accordingly.

 

 

 

 

September 2013 Dividend Earnings

It is time to document my earnings from my dividend stock portfolio for September 2013.  The way my portfolio has been chosen a lot of payouts dates happen to fall in September, so I have quite a few items to report.

HoldingDividend/Shr# SharesDividend TotalReinvestedNew SharesAccount
$108.55
ADM$0.1975$14.25YES0.395ROTH IRA
XOM$0.6330$18.90YES0.215ROTH IRA
INTC$0.225105$23.63YES1.058ROTH IRA
RDSA$0.9038$34.20NO0Brokerage
CSX$0.15100$15YES0.5681Trad IRA
MCD$0.7710$7.70NO0Trad IRA

For several of my newer positions I received my first dividend payout ever. Intel, Shell, Clorox and McDonalds I purchased too late to received their earlier June 2013 payouts.  The ADM and Exxon payouts were a repeat of last quarter, but this time I had dividend reinvestment enabled as opposed to getting a cash deposit – so the money was invested in  fractions of additional shares.

McDonalds was an aberration this month.  I had several buys and sell of MCD while finalizing its position in my portfolio, the end result being I only received dividends on 10 shares and it was not reinvested.  This issue should be resolved now and I expect a full payment in December 3013.

I had a signficant issue with my investment with Royal Dutch Shell.  I was under the impression I would receive my dividends thru Shells’ Scrip program, where you are paid in shares – rather than in cash which needs to be reinvested into shares.  This is supposed to exempt you from paying a Foreign Dividend Tax.  Unfortunately this did not work out for me, I received $34.20 in dividends but then has $5.13 deducted for ‘Fgn Div Tax’.

I am going to monitor this issue if there is an easy way to get this back at tax time.  I may end up changing the location and type of Shell investment in the future to optimize the situation, but for now I I’m not too concerned – it is only $20 a year after all.

$108 of dividend income if my first triple digit month so far.  Here is  hoping it is the first of many!

Completion of KO Position

KO Logo

KO Logo

After failing to purchase NSRGY earlier today, I instead used a portion of my funds to complete my position in Coca Cola. I needed to purchase a little over a thousand dollars’ worth to achieve my desired cost basis of $2500.

While KO was a little cheaper earlier in the week, I am content with my price of $38.62 for 37 additional shares.  This gave me a very slight ‘averaging down’ in the price per share of my whole position – bringing it down to $39.52. Overall I believe this was a reasonable price to buy, but not a huge discount to fair value. I am confident that their business will continue to produce solid returns, and my position has a solid chance of being very lucrative in the long term.

My earlier Coke trades are documented first here, and second here.

With this soda company purchase complete, I will put my thoughts of buying to buy PEP (Pepsi) or DPS (Dr Pepper) on the back burner.  While they appear reasonably valued, I would like to diversify my portfolio into some other sectors with my next few purchases.

Overall position is 64 shares of KO at $39.52, for a cost basis of 2529.28.  Overall dividend yield at time of completion of position is 2.83%. Dividend Reinvestment enabled. Initial dividend income $71.68 annually.

UPDATE – added to KO position!

Trading Requirement – Merrill Edge SafePass®

I finally decided to purchase a chunk of Nestlé S.A. ADR today (NSRGY), I signed into my brokerage to place the order and ran into a little bit of a roadblock.  To purchase Nestle in my brokerage account there are some additional security requirements.

Due to Nestle being a Pink Sheet ADR, my ML self-directed account prompted me to enroll in their SafePass program – the SafePass® card is required in order to trade Over-The-Counter and Pink Sheet securities.  This card is a physical card that produces a code authorizing a trade.

Merrill apparently considers Nestle to be a high risk security.  I do understand the thinking, as since NSRGY is not officially US listed they could in theory have all sorts of funny stuff going on in their accounting.  I am not at all worried however, as it doesn’t get much more blue chip than Nestlé!

I went ahead and enrolled for a SafePass®, now I have to wait for it to arrive before I can authorize the purchase of NSRGY. Hopefully the price will not go up in the interim!

UPDATE: The Safepass device arrived from Merrill roughly a week after ordering.  It is a small credit card sized/shaped gadget that has little touch sensitive panel you hold down to generate a 6 digit number in a small display. The envelope included instructions for activating the device – which walks you to the appropriate screen on your Merrill Edge account and has you generate and enter two random numbers using the card.

I have placed my Safepass with my sock drawered credit cards – I used it once to place my NSRGY limit order – as I won’t need to use it often but want to be sure I can find it when needed!

 

August 2013 Dividend Earnings

August offered slim pickings for my dividend investments.  Only one of my holdings paid out this month – the agricultural and construction equipment behemoth John Deere.

HoldingDividend/Shr# SharesDividend TotalReinvestedNew SharesAccount
$15.30
DE$0.5130$15.30YES0.184ROTH IRA

While best known my most people for the deep green of their lawn and farm equipment, my chief interest in the firm is the green of the first cash dividend I received from them this month!  Due to automatic dividend reinvestment in my Merrill Edge account, this became an extra 1/6th of a share.

There is not much to say about a mere $15 income for the month – better than nothing perhaps?  I really hope some of the future purchases I build will have dividend payouts in August just to eliminate future recurrences of this dismal result.

Completion of MCD Position

MCD Logo

MCD Logo

As discussed yesterday, I had two trades for MCD scheduled for this morning.  I have replaced the 10 shares of McDonalds in my brokerage account with 27 shares in my traditional IRA.  Both trades were market trades that executed at $95.01 per share.

This trade completes the establishment of my full position in MCD, and allows me to direct future investment capital into different companies.  With the recent dip from $100/per share it lowers my entry point a little also.

While MCD faces some tougher competition from other fast food chains – such as YUM – than it has in the past, I’m fairly comfortable that due to its sheer size and international scale it will maintain a dominant position.

I am hoping for an ongoing annual dividend increase of 9% per year or more, which is a little less that it has given in recent years.  My starting yield is over 3%, so I can live without a double digit dividend growth rate, but would certainly welcome it!

The completion of this position in McDonalds takes care of diversification into the ‘dining out’ sector of the economy. I am enjoying see my portfolio grown in breadth, and seeing these great names slowly added.  These are not exciting investments I am making, but hopefully they will prove to be successful ones in the long term.

Purchase of 27 shares of MCD at $95.01, for a cost basis of 2,565.27. Dividend yield at time of purchase is 3.13%. Dividend Reinvestment enabled. Initial dividend income $83.16 annually.

Moving My McDonalds Holdings to Make Space for Nestle

I have been doing some thinking about how best to split my portfolio amongst my Taxable brokerage account, my Traditional IRA (an old 401k rollover) and my Roth IRA account.

I have a surplus of uncommitted funds in my Traditional IRA, and a shortage of free cash in my Taxable account. This is proving a bit troublesome as some of the companies I have an interest in – namely RDSA (Shell) and NSRGY (Nestle) are best purchased in a non tax advantaged account.

Word on the interwebs is that the Nestle dividend is subject to partial withholding, but that those moneys can be recovered at tax time. To do this however, the ADR must be held in a taxable account. Is this accurate? I’m not sure – but I’m going to assume so for now,

To this end I have decided to liquidate my partial position in McDonalds from my regular brokerage account, to free up this cash for a possible Nestle purchase. At the same time I will use some of the uncommitted cash in my tIRA to establish a full MCD position in that account, taking advantage of the dip in price of Mcdonalds in the last week or two.

The net result of this change will be:

  • MCD moves from partial to full weighting in my portfolio.
  • Roughly $1000 will be freed up in my brokerage account for a possible future purchase of NESTLE – or another company that similarly benefits from placement in that account.
  • I no longer have to scrimp and save my ‘new’ investable capital to finish building out my MCD position.

I may end up doing something similar with my KO holdings one day, but for now I will leave them as is.

I have placed the orders for these two MCD trades to execute tomorrow. They will be fee free thanks to my brokerage firm – well, if I ignore the 2 cent sales fee from the SEC.  I will post a McDonalds positions update to reflect this once the trades have gone through.

For portfolio tracking purposes I will adjust my cost basis in MCD to whatever value Merrill Lynch shows me. This won’t reflect the fact I lost a bit of money since my initial purchase, but I can live with that slight discrepancy in the name of keeping things simple.

Additional KO Purchase – How Not To Trade

KO Logo

KO Logo

One benefit of having commission free trades in my Brokerage account is that I need not worry about trading fees on small purchases.  With the current drift down in the prices of Coca Cola (KO) I decided to spend the cash I had on hand to build on the partial position of Coke I built earlier.  I was able to muster about $500 for additional Coke shares today.

This is still not enough to obtain my full desired holding, but since prices are down I thought I would dollar cost average down while I could. Unfortunately I ran into a small glitch with my Brokerage…it is a bit embarrassing, but I don’t mind looking foolish so I’ll share it!

The purchase order I placed was not permitted to proceed as the sum exceeded 95% of my available funds.  The reason why was not stated, but my best guess is they like to leave a little for any trading fees (not that this applies in my situation).

To resolve this issue I went back and decreased the share count by one, then resubmitted the order.  Alas, the buy order defaulted back to sell – so I actually ended up reducing my position instead of adding to it.

Word to the wise…never employ me as your broker!!

After this giant ‘doh’ moment I placed a limit purchase for 25 shares – including rebuying the 13 I unintentionally sold – this time correctly.  The order triggered and was executed shortly before the end of trading for the day.

Increased my initial position of 25 shares by 12 net new (13 sold, 25 purchased) shares of KO at $38.78 with dividend yield of 2.89% (almost 3%, but not quite!). I still have at least one KO purchase more to complete – when funds allow – to reach my target position of $2500.

Current position of 37.1729 shares of KO has a cost basis of $1441.56. Dividend yield is 2.89%. Dividend Reinvestment enabled. Annual dividend income for position is $41.63.

 

 

Purchase of WMT – Low Price Domination

CLX Logo

WMT Logo

Today my limit order for Walmart (WMT) was triggered as the share price fell below $74.00  I had chosen this value as my entry point based on Morningstar’s perceived “Fair Value” for the company.

While I wanted to add WMT to my portfolio, I did not want to overpay.  Purchasing at a fair price (admittedly only one research firms view) seemed a good place to start. Also, as a purely psychological bonus, the price dropping to this point puts the Dividend Yield on Walmart over the 2.5% barrier.

I have a high degree of confidence the WMT dividend is safe, as it has an unblemished history of 39 years of increasing dividends. The proportion of earnings paid out as dividends is under 40%, leaving plenty of buffer for lean profit years plus plenty of scope for future dividend increases. It also leaves plenty of cash flow to be used for the ongoing stock buybacks.

For the last 5 years dividend growth has been over 13% on average, while I would be delighted to see that continue that may prove difficult to maintain over the longer term. Based on past performance I expect annual dividend growth to easily average over 10% per year, which will rapidly increase my initial 2.53% dividend yield and produce impressive yields on cost in future.

Wal-Mart has been trending down the last few days – even dropping below their 200 day moving average, for those who are into charts – after some negative news on the earnings and revenue front.

Second quarter earnings only rose 1.3%, and same store sale comparisons were flat overall.  This news appears to have scared off some investors, but I am confident that Walmart will work through these issues with time.  Eventually the US economy will rebound and low income shoppers will increase their spending again.  The bad news is a buying opportunity for me.

With the addition of a full (i.e. roughly $2500) sized position in WMT to my portfolio, I have fulfilled my desire to have an ownership in a dominant retailer.  I’m optimistic the firm – with its emphasis on low prices – will remain best in class in its field, and should prove a lucrative investment. Assuming the Walton family doesn’t end up taking Walmart private (as their share of the company grows due to the ongoing share buybacks) I plan on keeping this investment for life.

Purchase of 34 shares of WMT at $74.20, for a cost basis of 2,522.95. Dividend yield at time of purchase is 2.53%. Dividend Reinvestment enabled. Initial dividend income $63.92 annually.