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The first quarter of 2013 is but a memory now, but before I can start writing more articles about what I'm doing monthly (or more frequently) to manage my growing IRA, I need to review what happened in the last three months since the 2012 End of Year report that I published here on Seeking Alpha.

Welcome to the Family, Phil!

To start with, there was some trading going on in my account during March that I wasn't able to write about until now. So to get you caught up, I decided to fund my IRA with a second quarter's worth of contributions a bit early so that I could take advantage of one of the downturns in the market that was taking place during March. In addition to the one quarter allotment of $1,625 from the $6,500 that I'm allowed to contribute to my IRA this year, I tacked on the $125 that I'd shorted myself at the beginning of Q1'13 when I made my initial contribution for this year. So in total I added $1,750 to the dividends that had been accumulating in my account since the last time I reported monthly activity to you, which left me with a nice chunk of change to work with.

I had decided after February's activity that one way to accelerate my existing positions towards reaching the parity percent allocation for them was to finally add a new position to the stable, bringing my total number of positions up to 29. This would represent a decrease in the parity percentage from 3.57% to 3.45%, and would (hopefully) cause a few "fence sitters" to pop over the parity level.

To pick which stock to add to my growing collection, I of course turned to the My Mad Method (MyMM) spreadsheet and the 11 stocks that I had left on my wishlist there. Continuing with the approach that I'd used last month for my wife's IRA of focusing on stocks that scored well in terms of their Chowder Dividend Rule (NYSE:CDR) number and which looked to be undervalued, I weighted the following four metrics out of the overall 17 metrics in my version of MyMM with a 30% weight percentage, which gave them all a weight multiplier of 5.10:

  1. Yield
  2. 5 Year Dividend CAGR
  3. P/E
  4. Price/Book

In addition, as I did with my wife's most recent purchases, I "turned off" the 17th metric, the BMW Return Factor, by setting its weight percentage to zero. That left the remaining 12 metrics with a weight multiplier of 1, and produced the following results (sorted alphabetically by ticker symbol):

Orig

Weighted

Delta

MyMM

MyMM

MyMM

Ratio

Rank

Avg

Rank

Company

Ticker

Reading

8

10.4

5

Cablevision Systems

(NYSE:CVC)

Stable

2

10.4

4

Chevron Corp

(NYSE:CVX)

Screaming!

9

11.6

7

Darden Restaurants, Inc.

(NYSE:DRI)

Falling

11

13.2

11

Omega Healthcare Investors, Inc.

(NYSE:OHI)

Screaming!

4

12.9

10

Procter & Gamble

(NYSE:PG)

Screaming!

3

10.0

3

Philip Morris International, Inc.

(NYSE:PM)

Too High

7

11.8

8

Rogers Communications

(NYSE:RCI)

Screaming!

5

11.8

9

Southern Company

(NYSE:SO)

Stable

6

8.7

1

Textainer Group Holdings Limited

(NYSE:TGH)

Too High

10

9.6

2

Universal Insurance Holdings, Inc.

(NYSE:UVE)

Screaming!

1

11.0

6

ExxonMobil Corp

(NYSE:XOM)

Too High

As I explained in the article about my wife's IRA in March, even though they scored the best (that is, had the lowest Weighted MyMM Rank), I was turned off by shipper TGH's exceptionally low TTM Cash Margin, and was still a bit nervous about jumping into small-time Florida insurance provider UVE. Looking at their Original MyMM Rankings, you can see that prior to being weighted, they both scored below the midpoint of this group of 11.

That left Philip Morris International, Inc. as the clear choice for me to select as position #29 in my IRA. Despite a "Too High" Delta Ratio Reading, its balanced results of a Rank of 3 in terms of both the Original MyMM Rank and the Weighted MyMM Rank, as well as its pedigree, gave me a warm, fuzzy feeling about adding it to my collection of stocks.

So I picked up as much as I could with the funds at my disposal which, unfortunately, left it well below the new parity number of 3.45%; but that just means I have something I can look forward to growing in the future. Fortunately, on the other hand, I purchased these shares on March 22nd, at a per share price of $91.62; PM closed at $95.26 as I'm writing this, which is a price I probably wouldn't have touched it at as an initial purchase had I waited until this month to make my second quarterly contribution to my nest egg.

Q1'13 Results

And now, on to the recap of the first quarter of 2013. To start with, let's see what I began the quarter holding in my IRA:

As Of:

Chwdr

Comb

MyMM

12/31/2012

Div

% Gain

Rank

Rank

Company

Ticker

Yield

Rule

or Loss

Alloc

?

19

22

Apple

(NASDAQ:AAPL)

1.99%

1.99%

39.78%

2.44%

3

1

AFLAC, Inc.

(NYSE:AFL)

2.64%

20.10%

22.09%

2.68%

9

7

American Capital Agency

(NASDAQ:AGNC)

17.30%

30.60%

-14.54%

4.37%

v

1

2

Alliance Resource Partners, L.P.

(NASDAQ:ARLP)

7.48%

21.04%

2.10%

5.32%

5

9

BreitBurn Energy Partners, LP

(NASDAQ:BBEP)

10.07%

21.96%

-2.79%

4.90%

v

2

4

BHP Billiton plc

(NYSE:BBL)

3.24%

26.16%

19.82%

5.80%

7

3

ConocoPhillips

(NYSE:COP)

4.55%

17.44%

1.73%

4.51%

17

21

Crescent Point Energy Corp

(CSCTF.PK)

7.30%

14.79%

-8.85%

3.98%

v

24

20

Exelon Corp

(NYSE:EXC)

7.09%

10.98%

-27.83%

2.71%

v

5

26

Freehold Royalties, Ltd.

(OTCPK:FRHLF)

7.46%

3.10%

17.34%

4.33%

24

19

France Telecom

(FTE)

9.14%

14.04%

-11.64%

2.02%

v

23

16

Hasbro, Inc.

(NASDAQ:HAS)

4.01%

24.65%

-4.63%

3.45%

v

9

12

Johnson & Johnson

(NYSE:JNJ)

3.48%

12.59%

6.36%

4.17%

12

23

Kimberly Clark Corp

(NYSE:KMB)

3.51%

11.03%

17.49%

3.09%

26

15

The Coca-Cola Company

(NYSE:KO)

2.81%

11.49%

-5.13%

3.32%

v

20

11

Linn Energy, LLC

(NASDAQ:LINE)

8.23%

15.67%

-14.45%

2.58%

v

8

17

Main Street Capital Corp

(NYSE:MAIN)

5.90%

5.90%

15.09%

4.75%

15

8

MV Oil Trust

(NYSE:MVO)

12.63%

29.63%

-30.01%

3.59%

v

28

25

National Grid, plc

(NYSE:NGG)

4%

14.10%

2.66%

2.63%

4

5

Annaly Capital Mgmt

(NYSE:NLY)

14.25%

53.46%

-15.84%

1.93%

^

21

24

Nokia Corporation

(NYSE:NOK)

4.56%

-24.44%

41.68%

1.45%

18

14

National Presto Industries

(NYSE:NPK)

9.41%

27.39%

-17.14%

3.29%

v

21

18

Prospect Capital Corporation

(NASDAQ:PSEC)

12.14%

9.97%

-4.01%

2.84%

v

9

28

SeaDrill, Ltd.

(NYSE:SDRL)

9.24%

9.24%

6.97%

4.55%

16

27

AT&T

(NYSE:T)

5.34%

10.62%

12.48%

3.24%

12

10

Vanguard Natural Resources

(NASDAQ:VNR)

9.35%

20.08%

-8.45%

4.76%

v

26

13

Vodafone Group, plc

(NASDAQ:VOD)

4.05%

11.70%

-12.95%

2.65%

v

12

5

Walgreen Company

(WAG)

2.97%

26.24%

1.31%

3.73%

The last column in the table above ("?") is an indicator that I have programmed into my spreadsheet with a simple "=IF" statement that is used to denote those positions that are showing a loss based on their current values vis-à-vis my cost basis, and the total amount of dividends that I have collected from each of those positions have either not offset this loss (denoted by "v"), or their total lifetime dividends collected in my account have offset this loss (denoted by "^").

During the course of January, February and March, 2013, I sold off the following stocks (in alphabetical order, not in the order I sold them):

  1. AAPL
  2. ARLP
  3. BBEP
  4. EXC
  5. FTE
  6. LINE
  7. MVO
  8. NOK
  9. VNR

And initiated new positions in the following stocks (in alphabetical order, not in the order I purchased them):

  1. General Dynamics Corporation (NYSE:GD)
  2. Harris Corporation (NYSE:HRS)
  3. Lockheed Martin Corporation (NYSE:LMT)
  4. Lorillard (NYSE:LO)
  5. Microsoft Corporation (NASDAQ:MSFT)
  6. New York Community Bancorp, Inc. (NYSE:NYCB)
  7. Philip Morris International, Inc.
  8. Resource Capital Corporation (NYSE:RSO)
  9. Two Harbors Investment Corporation (NYSE:TWO)
  10. Wisconsin Energy Corporation (NYSE:WEC)

And before someone chimes in with, "You're churning too much, you're losing all your profits to commissions!" please know that the trades I listed above cost me a whopping $37.75 using Interactive Brokers, most of which offset the monthly minimum fees. Also, when combined with the $62.12 in "Other" fees that I incurred, what I spent with IBKR this past quarter is still $51.18 less than I would have spent with a typical online broker at a $7.95 per trade flat fee (and I don't know if those other brokers have things like quarterly IRA maintenance fees, which would make the difference even better in my favor).

As a result of the above trades, my portfolio now looks like this:

As Of:

Chwdr

Comb

MyMM

3/29/2013

Div

% Gain

Rank

Rank

Company

Ticker

Yield

Rule

or Loss

% Alloc

?

6

4

AFLAC, Inc.

AFL

2.69%

13.59%

12.94%

3.57%

4

6

American Capital Agency

AGNC

15.25%

15.25%

-3.07%

4.37%

^

13

2

BHP Billiton plc

BBL

3.93%

22.93%

1.33%

3.05%

10

10

ConocoPhillips

COP

4.39%

17.49%

5.43%

4.12%

27

22

Crescent Point Energy Corp.

CSCTF.PK

7.30%

14.79%

-8.85%

3.51%

^

14

28

Freehold Royalties, Ltd.

FRHLF.PK

7.28%

2.92%

20.01%

3.45%

20

9

General Dynamics Corporation

GD

2.89%

15.59%

6.23%

3.70%

16

20

Hasbro, Inc.

HAS

3.28%

21.38%

16.61%

3.90%

28

8

Harris Corporation

HRS

3.19%

25.09%

-3.07%

2.43%

v

5

11

Johnson & Johnson

JNJ

2.99%

11.19%

23.25%

3.95%

21

26

Kimberly Clark Corporation

KMB

3.02%

10.02%

36.35%

3.16%

26

17

The Coca-Cola Company

KO

2.52%

10.92%

6.13%

3.75%

18

21

Lockheed Martin Corporation

LMT

4.77%

26.97%

9.25%

2.73%

6

5

Lorillard, Inc.

LO

5.13%

22.13%

1.74%

3.58%

3

15

Main Street Capital Corp

MAIN

5.61%

5.61%

18.64%

3.63%

11

1

Microsoft Corporation

MSFT

3.22%

16.40%

4.81%

3.58%

25

23

National Grid, plc

NGG

5.46%

15.56%

4.33%

3.04%

1

2

Annaly Capital Mgmt

NLY

11.33%

39.36%

0.46%

3.66%

22

19

National Presto Industries

NPK

8.07%

23.28%

-3.47%

3.38%

^

6

14

New York Community Bancorp, Inc.

NYCB

6.97%

6.97%

6.18%

3.71%

29

18

Philip Morris International, Inc.

PM

3.67%

16.47%

1.15%

1.87%

17

15

Prospect Capital Corporation

PSEC

12.10%

10.10%

-3.69%

3.30%

^

12

24

Resource Capital Corporation

RSO

12.10%

34.10%

7.88%

3.60%

15

27

SeaDrill, Ltd.

SDRL

9.03%

9.03%

8%

3.60%

18

29

AT&T

T

4.91%

9.31%

22.43%

3.11%

2

7

Two Harbors Investment Corp.

TWO

17.45%

17.45%

1%

3.46%

22

13

Vodafone Group, plc

VOD

5.28%

12.93%

-1.86%

2.64%

v

6

11

Walgreen Company

WAG

2.31%

26.01%

30.52%

4.23%

22

25

Wisconsin Energy Corporation

WEC

3.17%

22.01%

9.56%

3.81%

As you can see by comparing the "before" and "after" charts, the number of positions that are either no longer showing a loss or are still showing a loss but their total lifetimes dividends have offset that loss has improved considerably. I can't take credit for this, as it is Mr. Market's doing, but it's nice to see, nonetheless.

In addition, by adding PM to my portfolio I went from having 16 out of 28 positions at or above parity to 19 out of 29 positions being at or above parity, and those that are still below parity are now that much closer to reaching that level. Mission accomplished!

Summary

That's the gritty details. But what's the bottom line?

The bottom line for me is, are the dividends that I will be receiving from my portfolio growing compared to the previous quarter (or, in this case, the end of last year)? As a secondary benchmark, I also like to compare how I'm doing vs. how the S&P 500 (NYSEARCA:SPY) has done so far this year.

Let's break down these numbers: First off, the value of my portfolio (not including contributions made) has increased nicely so far this year, and, I'm happy to point out, at a rate that is currently beating the S&P 500. That could change by the end of this year, and I might "lose" to the S&P 500 again like I did last year, but that's not the most important metric above.

Highlighted in green, you will see that so far, through a combination of organic growth of dividends being increased by some of the companies I hold, the addition of new shares from the $3,250 in contributions and re-invested dividends so far, and (if I may take some credit) adjusting my portfolio to be even more Dividend Growth Investing (DGI)-oriented than it was at the start of the year, I have so far realized an increase in the annual dividends that I expect to have collected by the end of this year of 18.23% over what I collected in 2012.

Now, you can't really compare that number to last year's increase of 100.08%, since 2012 is the year that I completely re-tuned my portfolio to be the dividend-generating machine that it is now. Still, at this rate I will have given myself a better than 18% raise by the end of the year just by following a solid DGI strategy, which is much better than the raise I got from my employer (and I love my day job). Also, this "raise" in my dividend income certainly beats the current rate of inflation.

While Average Yield did go down slightly as a result of shedding some high-yielding MLPs from my IRA, my Average Yield On Cost ((YoC)) has only shrunk a paltry -0.01% since the end of last year, which is practically negligible. Also, considering that the value of my portfolio has gone up 11.91%, which should translate to lower yields for those companies that have seen their share prices improve since the end of last year, that actually bodes very well for the overall health of the yield and YoC of my account.

Conclusion

Q1'2013 turned out to be a busier quarter than I expected it to be in terms of the number of trades that I made. I generally don't expect to make as many trades in the current quarter. However, considering how much the market has gone up recently, I might take this as an opportunity to reap some of the profits from the current high returns of some of my positions with higher percentage allocations, trimming them down closer to parity and using those funds to bring other positions up closer to or hopefully above parity. I have not decided yet, and need to see how things unfold in the coming weeks.

I do agree there are times when one should let a running horse run, but I also have a few positions that are well above the current 3.45% parity level of allocation, and which have also returned nice gains over their costs, so booking some profits now and re-allocating those funds is something that could happen in the weeks ahead. If it does, I'll be sure to tell you all about it.

Disclosure: I am long AFL, AGNC, BBL, COP, CSCTF.PK, CVC, OTCPK:FRHLF, GD, HAS, HRS, JNJ, KMB, KO, LMT, LO, MAIN, MSFT, NGG, NLY, NPK, NYCB, PM, PSEC, RSO, SDRL, T, TWO, VOD, WAG, WEC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: I am not a professional investment advisor or financial analyst; I’m just a guy who likes to crunch numbers and can make an Excel spreadsheet do pretty much whatever I want it to do, and I’m doing my best to manage my own portfolio. This article is in no way an endorsement of any of the stocks discussed in it, and as always, you need to do your own research and due diligence before you decide to trade any securities or other products.

Source: My Mad Method: Q1 2013 Recap