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Dividend growth investor

November 2017 dividend income report + new buys

I just received the final dividend for this month so here’s my dividend income report.

November 2017 dividend income:

  • Bristol-Myers Squibb: 4.52EUR
  • Colgate-Palmolive: 3.18EUR
  • Kinder Morgan: 3.85EUR
  • Omega Healthcare Investors: 8.12EUR
  • AB InBev: 41.44EUR

All figures are after taxes. In total it adds up to 61.11EUR, which makes it one of my lower dividend income months. Not a lot of my companies pay dividends in November or February, so those months are always a lot poorer than average.

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Dividend increases:

  • Nike: +11%
  • NVIDIA: +7%

Dividend cut:

  • General Electric: -50%

New buys:

  • Nike: Added more shares
  • Vestas: Doubled my position on the recent drop

Weight loss progress!

Four months ago, I briefly touched on my health and weight loss efforts. I revealed how I cut back my Coca Cola consumption. Since the start of the summer, I added regular exercise to my life and made various tweaks to my diet.

The result has been spectacular, to say the least.  For the first time in my life, I can now run 5 kilometers without a lot of effort. I still remember we had to do 5km runs in high school, I was always really slow and was barely able to finish the task. These days I can run 5km at a pace of about 10.5 kilometers per hour without getting the feeling that I’ve pushed myself to the max.

I think my initial goal was to live a healthier lifestyle and reduce my visceral fat. I went a lot further than that. Fast forward half a year or so and all the pants in my wardrobe are way too large. I’ve dropped about 16kg versus half a year ago and a little over 20kg in total. When I look in the mirror I get the feeling that I haven’t looked this good since I was 14 years old. Pretty amazing feeling and it surprises me how easy it was once I set my mind to it.

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October 2017 dividend income report

A really short post this time.

October 2017 dividend income:

  • Coca Cola: 9.34EUR
  • Diageo: 66.01EUR
  • PZ Cussons: 7.63EUR
  • Nike: 6.07EUR
  • South32: 1.86EUR
  • Philip Morris: 49.72EUR
  • GlaxoSmithKline: 22.43EUR
  • General Electric: 6.04EUR

In total, that’s 169.10EUR in after-taxes dividend income this month.

Dividend increases:

  • Omega Healthcare Investors: +1.56%
  • YUM! China: introduced a quarterly dividend of 10 cents per share

How was your month?

September 2017 dividend income report and a new buy

September marks the return of the months with dividend income in excess of 100EUR.

I received the following dividends in September 2017:

  • Unilever: 17.41EUR
  • Hershey’s: 5.49EUR
  • Royal Dutch Shell: 65.62EUR
  • McDonald’s: 4.65EUR
  • NVIDIA: 1.31EUR
  • BHP 12.65EUR
  • Gilead: 20.19EUR

In total that’s 127.32EUR in after-taxes dividend income for September 2017.

Dividend increases:

  • McDonald’s: +7.4%
  • Philip Morris: +2.9%

Nice increase from McDonald’s while the Philip Morris increase remains relatively tiny.

New buy

I initiated a position in United Technologies (UTX). This is a diversified industrial that makes aircraft engines, aerospace products, elevators and escalators, and climate control solutions.

The Little Book That Still Beats The Market – Joel Greenblatt

Earlier this month I finally finished reading Greenblatt’s magic formula book. I started reading it quite a while ago but put the book down as it didn’t really peak my interest. Perhaps a decent book for (younger) beginners who know absolutely nothing about investing but I don’t think it’s suitable for more experienced investors.

The book is geared towards young teens and primarily centers around how the stock market works and how you can beat the market by using Greenblatt’s magic formula. It’s short and cheesy, and feels too much like a promotional piece.

I didn’t enjoy this book and think you can probably learn more about magic formula investing by reading a couple of articles about this investing style. Wikipedia boils down the basics of the book’s magic formula in nine sentences:

Formula

  1. Establish a minimum market capitalization (usually greater than $50 million).
  2. Exclude utility and financial stocks.
  3. Exclude foreign companies (American Depositary Receipts).
  4. Determine company’s earnings yield = EBIT / enterprise value.
  5. Determine company’s return on capital = EBIT / (net fixed assets + working capital).
  6. Rank all companies above chosen market capitalization by highest earnings yield and highest return on capital (ranked as percentages).
  7. Invest in 20–30 highest ranked companies, accumulating 2–3 positions per month over a 12-month period.
  8. Re-balance portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark.
  9. Continue over a long-term (5–10+ year) period.

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Stocks for the Long Run – Jeremy Siegel

Another book I finally finished reading! This is another of the investing book classics, it was originally published in 1994 but the book has received several revisions over the years so it doesn’t feel dated.

This is a book I definitely recommend to beginners, it gives you perspective about the history of the stock market and what kind of returns you can expect in the long run. Data from this book is commonly cited and the book is full of interesting nuggets.

Don’t expect to learn any ground-breaking investment strategies or anything like that, the main message here is that stocks are something for the long run. This is basically the “buy and hold” bible and it can help a lot when you’re nervous about getting your feet wet in the stock market.

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How was your month? Lots of dividend income or some exciting new purchases?

Book review: The Outsiders – Eight Unconventional CEOs and Their Radically Rational Blueprint for Success

Since my last post I’ve read The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success. This is a book that explores the strategy of eight unconventional CEOs that significantly outperformed their peers and the S&P500 over long stretches of time. The Outsiders provides eight case studies of CEOs that operated (or still operate) in very different markets, including cable TV, newspapers, cinema, pet food, and the defense industry.

As a group, these eight exceptional CEOs stand out because they all made very rational and independent decisions, without giving in to peer pressure. They didn’t spend a lot of time on investor relations, rarely went to conferences and stayed out of the public spotlight. They ran very decentralized operations with low HQ headcounts and generally focused more on capital allocation decisions rather than day-to-day operations.

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The book argues that capital allocation is one of the areas where most CEOs are not good at and that this is exacerbated by an urge to look at what peers are doing or what Wall Street is prescribing. Capital allocation includes making decisions about reinvesting earnings in the business, acquiring companies, selling or spinning off assets, doing share buybacks, and issuing dividends.  The Outsiders offers evidence that mastery of capital allocation is what resulted in the big outperformance of the “Outsider” CEOs.

Each of these eight CEOs excelled at this game and usually did things completely different than their peers. They focused on creating long-term per-share value and largely ignored short-term metrics like quarterly revenue and earnings.

A general theme throughout the book is that many of these Outsider CEOs did not go with the flow but waited until the right time to make large and daring acquisitions. They also performed very large share buybacks, but they were not continuously buying back shares like a lot of companies are doing these days. Instead,  the Outsider CEOs waited until valuations were attractive enough to buy back huge amounts of shares.

Additionally, the Outsider CEO does not believe that bigger is better and is not afraid to sell a large part of his business for the right price. The book describes how most of these eight CEOs paid little dividends and often made no large moves for long stretches of time. But when an opportunity finally presented itself, they weren’t afraid to pounce very fast and with high determination. The manner in which these CEOs did acquisitions was interesting to read. There are several examples in the book of how these exceptional CEOs made huge deals, sometimes in mere hours or days, and with minimal help.

The Outsiders is a very interesting book as it provides a unique look at how these eight CEOs delivered outstanding performance for their shareholders by very smart allocation of the company’s capital. I wholeheartedly recommend this book to any investor.

August 2017 dividend income report and new buy

The end of another month of dividends has arrived so here’s a brief summary of my monthly dividend income:

August 2017 dividend income:

  • Bristol-Myers Squibb: 4.49EUR
  • YUM! Brands: 2.21EUR
  • Omega Healthcare Investors: 8.04EUR
  • Kinder Morgan: 3.89EUR
  • Colgate-Palmolive: 3.19EUR
  • Novo Nordisk: 29.15EUR

Overall that’s just 50.97EUR in after-taxes dividend income this month, making it one of my lowest dividend income months of the year.

Dividend increases:

  • BHP: +7.5% sequentially
  • Warehouses De Pauw: Increased its dividend target by another 1.12%
  • Diageo: +5.19%
  • Hershey: +6.15%
  • South32: +640% year-over-year (not a typo!)

New buys

There are still several companies I’d like to own a piece of but this month I added more shares of Gilead (GILD).

One Up On Wall Street – Peter Lych

So I finally finished my copy of One Up On Wall Street. I started reading this book about a year ago, it’s one of those investing books that’s often high on everyone’s recommendation list. Overall it offers some nice insights and tips but I’m not particularly fond of it. The first edition of this book was released in 1989 and it’s really showing its age.

It could really use an update as a lot of the examples and ideas he shares are now dated. I guess the fact that I didn’t read it in one go is a good indicator that I don’t think this is a must-read book. It’s too dated, too repetitive and I feel like most of the interesting things in this book can be condensed into an article of a few thousands of words.

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July 2017 dividend income report and new buys

This afternoon I received my last dividend for the month of July so it’s time for my montly report 🙂

July 2017 dividend income:

  • Coca Cola: 9.65EUR
  • Nike: 4.23EUR
  • Philip Morris: 49.85EUR
  • GlaxoSmithKline: 22.63EUR
  • General Electric: 6.09EUR

Those who regularly read this blog probably already know this but all earnings listed above are after all applicable taxes. In total, the July 2017 income adds up to 92.45EUR so this breaks my four-month streak of +100EUR reports.

Dividend increases:

  • Omega Healthcare Investors: +1.6%
  • PZ Cussons: +2.0%

Dividend promises from Kinder Morgan!
Kinder Morgan released its earnings this month and promised investors that it aims to significantly increase its dividend the coming years. Back in 2015, pipeline company received a lot of flack as its debt situation forced it to cut its dividend by a massive 75 percent. This was a hard pill to swallow for a lot of investors as many had bought the stock for the combination of a high starting yield and the promise of high dividend growth. Instead of 10 percent yearly dividend growth through 2020, the rapidly deteriorating market situation resulted in a dividend cut from $2.00 to $0.50 per share.

Reducing debt became a priority and the firm is now projecting net-debt-to-adjusted EBITDA of  ~5.2 by year-end. That’s still pretty high but Kinder Morgan deems this is low enough to boost its dividend. Kinder Morgan promises it will raise its dividend in Q1 2018 and targets a total dividend of $0.80 per share for 2018. If things go well, this should climb to $1.0 in 2019 and $1.25 in 2020.

2018 government budget to contain nice treat for Belgian DGIs?
The Belgian government is once again reviewing policy and trying to figure out next year’s budget. The last couple of years this was bad news for Belgian investors as our government gradually increased the dividend tax from 25 percent to 30 percent. They also introduced a tax on speculation but that silly tax has already been repealed as it actually hurt the budget (because people changed their behavior which resulted in lower stock market transaction tax).

Anyway, this year there are two investing-related fiscal measures on the table. Prime minister Michel (MR) thought he could get an easy deal by giving each of the four parties in our government a treat.

First up, the Christian democrats (CD&V) still want a “fair tax” trophy and our prime minister thought he could meet this demand by proposing a tax on stock market portfolios. From what has leaked to the press, the proposal called for a tax on portfolios with more than 200,000EUR in assets. The Flemish liberals (Open VLD) fear this tax (or future iterations of it) will hurt the middle class and the Flemish nationalists (N-VA) are also against it. As such, budget talks between the four parties that make up the Belgian government are once again very tough.

Now you can hardly make this stuff up, but Michel’s deal also includes a treat for investors. Belgian is a country of savers but very few people invest in stocks. Open VLD wants to change this by encouraging people to invest their savings. At the moment, interest income of up to 1880EUR a year from regulated savings accounts is not subject to taxes. The idea here is to expand this policy to other investments like stocks.

In the current low-interest environment, this would stimulate people to invest in dividend-paying stocks. My current 2018 net dividend income projection is around 1500EUR but this fiscal measure could take it over the 2000EUR mark. It’s too early to celebrate as it may not make it into the final 2018 budget, but if it does it would be a massive dividend increase for me!

New buys
Since my last dividend income report, I’ve expanded my position in drug maker Gilead (GILD) and initiated a position in Danish wind turbine maker Vestas Wind Systems (CPH:VWS). That marks my first dedicated investment in renewable energy.

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Which stocks did you buy this month?

Book stuff: How to Fail at Almost Everything and Still Win Big

So this is a post that I was preparing for my next dividend income report. After I hit the 500 word mark I decided it was a good idea to give these ramblings a dedicated blog post 🙂

Book stuff: How to Fail at Almost Everything and Still Win Big
A couple of days ago I finished reading How to Fail at Almost Everything and Still Win Big. This book was published in 2013 by Scott Adams. I don’t think he’s well known in Belgium (or Europe) but he’s the creator of the popular Dilbert comic. It’s part biography and part a self-help book. Adams basically explains how he failed himself to success.

I came across his blog about a year ago and was captivated by how he covered the 2016 US presidential election. Shortly after Donald Trump announced his presidential run, Adams was one of the first commentators that explained why, against all odds, Trump had a much better chance of winning the election than most people in the media would give him credit for.

Adams observed Trump is a “Master Persuader”, who acknowledges that voters are irrational and that facts don’t really matter if you can appeal to people’s emotion. I don’t think it worked out as great as Adams envisioned in 2015 as the US is still divided about Trump. But Adams’ unique line of thinking and his “persuasion filter” peaked my interest in his book as I wanted to learn more about his thought process and how he views the world. I mean, just the title of the book is already alluring. Who doesn’t want to know how you can fail and still come out ahead?

The book is a witty rollercoaster ride with lots of interesting tips on helping you to become more successful. Adams started out in the corporate world, where he “failed his way to promotions”, and he eventually used his experience to become a popular cartoonist and author.

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Goals versus systems
One of the central themes of this easy-to-read book is that goals are for losers and systems are for winners. The distinction between the two isn’t always that black and white but basically, if you set yourself a goal to lose 5kg you’re likely going to fail. By implementing a system, something you do on a regular basis, your odds of achieving something become much greater. Adams also provides some great nuggets on how to influence others and the final chapters of the book deal with diet and exercise. The author believes the two are critical to maximizing your personal energy and to get yourself on your way to achieving success. There’s also some great stuff about viewing your brain as a programmable, “moist computer”.

Adams also provides some great nuggets on how to influence others and the final chapters of the book deal with diet and exercise. The author believes these two are critical to maximizing your personal energy and to get yourself on your way to achieving success. There’s also some great stuff about viewing your brain as a programmable, “moist computer”.

I think the book also helps to explain why dividend growth investing is a good match for a lot of investors. It’s a system that helps you to get comfortable with the stock market, you pick up a habit of investing regularly and most companies send you quarterly “rewards” in the form of dividends.

Cutting down on Coca Cola
Some parts of the book relate to my personal life. In particular, in 2015 I decided it was time to cut back on my Coca Cola consumption. Mostly for health reasons but the potential to save money was also a good motivator. One liter of Coca Cola costs about 1.60EUR so on a yearly basis I was probably spending over 600EUR on Coca Cola.

Before my mid-teens I rarely consumed Coca Cola but eventually that grew to 1 liter per day. And after some hard physical work that sometimes ballooned to 1.5 liter or more. I identified one of the problems was that I bought Coca Cola in bottles. Once a bottle is opened it is hard to resist the urge to drink just one more glass. Additionally, you know the carbonation is slowly escaping from the bottle so your mind is pushing you to empty the bottle as quickly as possible because flat Coca Cola is awful.

So I decided to switch from bottles to cans. Initially, I consumed three 330ml cans of Coca Cola a day so overall it didn’t make a lot of difference to my diet but it helped to make the transition smooth. After some time I cut down to two cans a day, at first this took some will power but after a week or so the need to consume three cans a days dissipates rapidly.

That was around the time Coca Cola launched its Life version in Belgium. It got a bad reputation as many critics called Coca Cola Life a “greenwashing” product but I saw it as a good fit for me. I’ve never been a fan of the calorie-free versions of Coca Cola, they taste awful and they contain aspartame. Now I know that rationally speaking, aspartame is probably OK. There’s little to no scientific evidence that this artificial sweetener is bad for humans. But human beings aren’t rational and aspartame has a “burned” reputation. People drink Coca Cola because it tastes delicious and makes you feel good. I do not want to drink something that makes me want to second-guess it every time I grab a can out of the fridge. Like Scott Adams explains in his book, you need to maximize your personal energy so I don’t think Coca Cola Zero is a good match for me.

Coca Cola Life on the other hand sounded alluring to me. If I recall correctly, Coca Cola launched the product with the promise of a taste that comes very close to the original Coca Cola but with a lot less calories. The first version of Coca Cola had 40 percent less sugar than regular Coke. In terms of taste, it came close to the real thing so I decided to switch to one regular Coke and one Coke Life a day.

After that Coca Cola reformulated Coca Cola Life and the current product contains 45 percent less sugar than regular Coke. As an added bonus, I definitely prefer the taste of the reformulated version. I switched my daily Coke consumption entirely to Life. It has the same signature taste as regular Coke but there’s a little extra “kick” in the reformulated Life version that makes it a very enjoyable drink for me.

The next step came involuntarily. Sales of Coca Cola Life aren’t doing great and Coca Cola Belgium discontinued the 330ml version in favor of 250ml cans. I didn’t like this at first and it also stings that Coca Cola is charging the same price for 250ml cans as the old 330ml version. Anyway, the 250ml cans are starting to grow on me and the end result is that instead of 1l or more of Coca Cola with 106g of sugar and 420 calories I’m now down to 33.6g sugar and 136 calories with the Coca Cola Life.

It’s probably still too much but definitely a more manageable level than before. And besides the health benefits, it also results in annual savings of at least 155EUR a year.

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Reprogramming your moist computer can take some time and everything written above happened before I read How to Fail at Almost Everything and Still Win Big. But Scott’s book definitely made me realize the power of making small changes to what you do on a daily basis. At the moment, I’m trying to replicate the Coca Cola trick in other areas of what I do on a daily or weekly basis. Small and incremental changes without hurting personal energy levels.

The book also kickstarted my desire to exercise more. After reading about a third of How to Fail at Almost Everything and Still Win Big I decided to rearrange my daily routine to incorporate exercise in my workdays. I discovered that my wife’s treadmill and my tablet computer are a good combination. Gathering knowledge from books while working out is a win-win and feels pretty rewarding.

Anyway, this post is getting way too long. I wholeheartedly recommend How to Fail at Almost Everything and Still Win Big. It’s a great, practical, and very motivating book.