When Seeking Alpha published my first article one year ago -- The Long Road To A Dividend Growth Strategy -- I was quite a rookie. I was patting myself on the back for having just purchased Intel (NASDAQ:INTC) at $28.43 per share. I included Harris Corporation (NYSE:HRS) on the list of companies I was itching to buy. And for some reason, I declined to check the Premium Article box, meaning I didn't even get paid for what I wrote.
A lot sure has changed since April 25, 2012. My wife and I own stock in 27 companies, up from five back then. Once dominated by mutual funds, our portfolio now has only three (two of which are in 401k plans). Our monthly dividend income, then $750, has almost doubled.
Despite some fits and starts -- as well as a few Chicken Little moments, from the re-election of a "socialist" president to the fiscal-cliff freakout to sequestration silliness -- the S&P 500 has climbed about 14% since I wrote that first article. So even though capital appreciation isn't our primary goal, our portfolio has appreciated nicely; I'm guessing most investors can say the same because we're all geniuses when the bull is running.
Here are the companies we own, in order of value in our portfolio:
Walgreen (WAG), Procter & Gamble (NYSE:PG), General Electric (NYSE:GE), Philip Morris (NYSE:PM), 3M (NYSE:MMM), Royal Dutch Shell (NYSE:RDS.A), Realty Income (NYSE:O), Waste Management (NYSE:WM), ConocoPhillips (NYSE:COP), Vodafone (NASDAQ:VOD), Intel, Enbridge Energy Management (NYSE:EEQ), Health Care REIT (NYSE:HCN), Coca-Cola (NYSE:KO), BCE (NYSE:BCE), GlaxoSmithKline (NYSE:GSK), Aflac (NYSE:AFL), Altria (NYSE:MO), Southern Company (NYSE:SO), National Retail Properties (NYSE:NNN), Omega Healthcare Investors (NYSE:OHI), Kinder Morgan Management (NYSE:KMR), Kinder Morgan Inc. (NYSE:KMI), National Health Investors (NYSE:NHI), AstraZeneca (NYSE:AZN), Bristol-Myers Squibb (NYSE:BMY), McDonald's (NYSE:MCD).
Stuff I've Learned
Analysts schmanalysts. It's usually smart to buy good companies on sale. Walgreen's had just been downgraded -- unnecessarily, I thought -- and the price plunged. I bought a full position at $30/share in June; it's now trading in the $50 range and our investment is up 70%. I also bought Waste Management and Bristol-Myers Squibb after analyst hits and have been rewarded handsomely.
There's no substitute for quality. I acquired Realty Income in three batches, and one could argue I "overpaid" each time. But we're up even on the most expensive purchase, and it's hard not to love the triple-net REIT's history of raising its monthly dividend payments. I also might have paid a tad too much for Coke, Philip Morris, Altria, Southern and McDonald's -- but if I hadn't, we wouldn't own them. Each is up considerably and each is a core holding I hope to never sell.
It's OK to bail if you're uncomfortable. Not long after buying two industrial stocks, Harris and General Dynamics (NYSE:GD), I sold them because their wild price swings drove me crazy. I almost purchased Seeking Alpha's two most-discussed mREITs, Annaly Capital (NYSE:NLY) and American Capital Agency (NASDAQ:AGNC), but canceled my orders after a restless night of sleep. Among my articles, my piece about that near-debt experience ranks second in both pageviews and comments.
Don't confuse inflexibility with discipline. I'm still bummed that fairly early in my DGI career, my limit orders for Johnson & Johnson (NYSE:JNJ) and Lockheed Martin (NYSE:LMT) missed by pennies. Others that regretfully "got away" included Hasbro (NASDAQ:HAS), Stanley Black & Decker (NYSE:SWK), Sysco (NYSE:SYY), Costco (NASDAQ:COST), Kimberly-Clark (NYSE:KMB), Duke Energy (NYSE:DUK) and Medtronic (NYSE:MDT). I learned the hard way that it's silly to quibble over nickels -- or even a percent or two -- for companies I plan to hold for years. Thankfully, even an old, cheap dog can learn new tricks; when Kinder Morgan Inc. got within 25 cents of my price and then started to rise, I grabbed some. My only regret is that I didn't buy more!
Be a DRIP. A running debate among DGI practitioners: Should we reinvest dividends back into the same companies or take cash payouts and invest in different stocks that are considered better values? While I respect both sides, I prefer the easy, cost-free compounding that takes place via my broker's DRIP feature. I like the companies I own and I want more shares of them. On this issue, I agree with the viewpoint of instablogger extraordinaire "chowder."
Leave the waffling to the politicians. Has this ever happened to you? You set a limit order but the market is sinking and you think, "Hmmm, I can get it even cheaper." So you adjust the order down a buck or two. Shortly after reaching your original price, the company you wanted stops retreating and then starts advancing. And your chance to get a good company at a good price is gone. Um ... no ... that hasn't happened to me, either. (Except for about a dozen times!)
Cash is cool. For many in the Seeking Alpha community, every dollar not invested represents "opportunity cost." If being fully invested works for you, great; I don't mind holding cash at all. Should the market rise, I simply look at our cash (about 35% of our portfolio right now) as a bond-like safety net and accept that our gains won't be as large. If the market corrects, our portfolio will not suffer as greatly and we will be able to go on a bargain-shopping spree.
To-Do List For The Next 12 Months
1. Be prepared ... but patient. Yes, I'm willing to pay a little extra for top-quality companies. But only a little. The market has been cooking on all burners for months now. When the inevitable pullback comes, I'll be ready to strike. Until then, I'm only adding a little of this, a little of that. My most recent purchase was a half-position in Canadian telcom BCE, our first holding from that country.
2. Craft an exit plan. I agree with Warren Buffett's first two rules: Never lose money; and never forget Rule No. 1. I am intrigued by the idea of automatic sell points and I am starting to consider rules that fit my portfolio and personality.
3. Plan for unfortunate events. My wife and I finally got her octogenarian father to write a will and to assign medical power of attorney. Now, it's our turn. Our will is so old that it includes guardians for our kids -- who are now 26 and 25. Time to start from scratch. While we're at it, I need to create a user-friendly plan to help my wife manage our finances in the event that I no longer can. Fellow contributor Bob Wells offers some great suggestions here.
4. Get the kids on board. Though saving isn't quite as fun as spending on trips, concerts and parties, it's still pretty cool to watch one's money grow from hundreds to thousands to, eventually, hundreds of thousands. The Roth IRA is the perfect investment vehicle for just about everybody, and I'm going to compel my kids to start driving that vehicle toward financial bliss.
5. Tee it up. Monitoring one's portfolio is good. Obsessing about it isn't. I need a few more hours on the golf course, a few less staring at my computer screen. I have to trust my research, my instincts and my limit orders. I also have to trust that I've become a little smarter over these last 12 months. For one thing, I've gotten paid for the 20 articles I've written since that freebie!
Disclosure: I am long O, PM, MO, KO, WM, MCD, WAG, AFL, INTC, NNN, GSK, AZN, HCN, OHI, BMY, NHI, MMM, PG, GE, COP, VOD, KMR, EEQ, RDS.A, KMI, BCE, SO. 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.