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I am a private investor who has invested in individual stocks for over a decade. I have a BBA from the University of Texas at Austin. I am retired and living off of dividends and distributions from a portfolio of BDCs, consumer staple stocks, MLPs, regional banks and REITs.
  • What I Have Invested In 19 comments
    Jun 7, 2014 8:26 AM

    My goal is to create a portfolio with a 4% yield that has a dividend CAGR (Compound Annual Growth Rate) of over 5%. My current portfolio has a yield under 4% due to some stocks having substantial share price appreciation so far in 2014.

    The spreadsheet that follows shows that amount invested, the current distribution and the current income produced by those stocks. These amounts are shown under the column year zero for the "projected income". Year one shows the projected income for next year. That calculation takes 1 plus the CAGR times the current number of shares and dividend rate. For example, a stock with a CAGR projection of 6% would have a projected yearly dividend payout of 1.06 times the current payout. Year 2 uses 1.06 times 1.06 times the current payout - and so on.

    I am slightly more conservative with my CAGR projections in this data than I am in the sector reports that I produce. In other words, there will be differences - and my CAGRs will be slightly lower. I have done this kind of projection for years. My income produced by my portfolio has tended to rise slightly more than projected.

    I do have approximately one third of my total investments in equity mutual funds. Those investments are not shown in this data.

    I am occasionally asked why I use a pseudonym for my Seeking Alpha articles. If I were using my real name, I could never post a message with this kind of disclosure. But I am still uncomfortable posting this data - and it will be here only for the week-end. (Data is most of the cells has now been replaced with an x.)

    Some readers also want to know if I practice what I preach. I have failed in selling some of my portfolio components that have falling or low CAGRs. Going by my stats by sector - I should not own CFR, CMLP, CLX and HME. But you can see that I already have a portfolio yield that is lower than my goal. Selling those four would lower my yield. So I am procrastinating on selling them for that reason.

    I believe I could improve my portfolio if I had more investments in Tech (adding ACN and QCOM); Industrial stocks (adding HON and UTX); adding two more in Health Care / Pharma; adding two rail road stocks; and adding more BDC baby bonds for yield. A portfolio is always a work in process.

    2014 'Portfolio CAGR' and Dividend Growth Dollars Expectation

      Current Dividend Current Projected LTM Div   Amount ------ Projected Income per Year ------
    Company /Quarter Yield CAGR Growth shares Invested Yr 0 Yr 1 Yr 2 Yr 3 Yr 4
    TCO 76.17 0.540 2.84 4.00% 8.00% x x x x x x x
    O 44.07 0.182 4.97 2.00% 0.88% x x x x x x x
    OFC 28.28 0.275 3.89 1.80% 0.00% x x x x x x x
    VNO 107.94 0.730 2.71 2.00% 0.00% x x x x x x x
    AVB 142.56 1.160 3.25 5.00% 8.41% x x x x x x x
    HME 62.38 0.730 4.68 3.00% 4.29% x x x x x x x
    UDR 28.02 0.260 3.71 3.50% 10.64% x x x x x x x
    LTC 40.71 0.170 5.01 3.50% 9.68% x x x x x x x
    OHI 37.84 0.500 5.29 4.00% 8.70% x x x x x x x
    VTR 65.38 0.725 4.44 6.00% 8.21% x x x x x x x
    ARP 19.66 0.580 11.80 3.00% 13.73% x x x x x x x
    CMLP 21.99 0.410 7.46 5.00% -19.61% x x x x x x x
    DPM 55.25 0.745 5.39 5.50% 6.43% x x x x x x x
    EPD 75.23 0.710 3.78 6.20% 5.97% x x x x x x x
    GEL 57.07 0.550 3.85 8.50% 10.55% x x x x x x x
    KMP 78.60 1.380 7.02 4.00% 6.15% x x x x x x x
    MMP 89.97 0.613 2.72 8.50% 20.69% x x x x x x x
    MWE 64.79 0.870 5.37 8.00% 4.82% x x x x x x x
    PAGP 28.87 0.170 2.36 17.00% 6.92% x x x x x x x
    TRGP 120.53 0.647 2.15 18.00% 30.81% x x x x x x x
    WES 74.41 0.625 3.36 8.00% 15.74% x x x x x x x
    WMB 47.73 0.425 3.56 14.00% 20.57% x x x x x x x
    BOKF 64.75 0.400 2.47 5.00% 5.26% x x x x x x x
    CFR 77.36 0.510 2.64 4.00% 2.00% x x x x x x x
    PB 60.34 0.240 1.59 8.00% 11.63% x x x x x x x
    USB 42.88 0.230 2.15 7.00% 0.00% x x x x x x x
    WFC 51.98 0.350 2.69 5.00% 16.67% x x x x x x x
    Cons Stpl
    CL 68.02 0.360 2.12 7.80% 5.88% x x x x x x x
    CLX 89.50 0.740 3.31 4.00% 4.23% x x x x x x x
    HRL 49.27 0.200 1.62 9.20% 17.65% x x x x x x x
    GIS 55.41 0.410 2.96 7.50% 24.24% x x x x x x x
    PEP 87.91 0.655 2.98 6.50% 15.42% x x x x x x x
    PG 80.03 0.644 3.22 7.50% 7.00% x x x x x x x
    SJM 105.69 0.580 2.20 8.20% 11.54% x x x x x x x
    Health Care
    ABC 72.50 0.235 1.30 10.00% 11.90% x x x x x x x
    ABT 40.05 0.220 2.20 9.00% 57.14% x x x x x x x
    AMGN 117.82 0.610 2.07 8.00% 29.79% x x x x x x x
    BAX 73.80 0.520 2.82 7.50% 6.12% x x x x x x x
    NVO 43.54 0.207 1.90 10.00% 30.19% x x x x x x x
    StJ 65.87 0.270 1.64 9.00% 8.00% x x x x x x x
    SYK 85.56 0.305 1.43 9.50% 15.09% x x x x x x x
    BBL 63.58 1.180 3.71 6.00% 3.51% x x x x x x x
    XOM 101.60 0.630 2.48 7.20% 10.53% x x x x x x x
    AAPL 645.57 3.290 2.04 10.00% 7.87% x x x x x x x
    IBM 186.37 1.100 2.36 8.50% 15.79% x x x x x x x
    INTC 28.17 0.225 3.19 5.00% 0.00% x x x x x x x
    AINV 8.39 0.200 9.54 0.50% 0.00% x x x x x x x
    ARCC 17.25 0.380 8.81 1.00% 0.00% x x x x x x x
    MAIN 31.75 0.165 6.24 5.00% 6.45% x x x x x x x
    PFLT 14.01 0.270 7.71 1.20% 2.86% x x x x x x x
    PNNT 11.17 0.280 10.03 0.50% 0.00% x x x x x x x
    Bond Fund
    HTGY 26.05 0.438 6.72 0.00% 0.00% x x x x x x x
    PHIGX 8.24 0.040 5.83 0.00% 0.00% x x x x x x x
    VKMMX 13.56 0.047 4.16 0.00% 0.00% x x x x x x x

    Total Income       x x x x x x

    Yield on original dollars         3.86 4.08 4.32 4.59 4.87

    Year over year Growth           5.80 5.94 6.10 6.26

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Comments (19)
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  • MLBerk
    , contributor
    Comments (20) | Send Message
    Fine looking portfolio. Nice to see where you have decided to place your nest egg.


    Thank you again for all the heavy data lifting you do to assess the future prospects of many of these investments.
    7 Jun 2014, 10:17 AM Reply Like
  • 1434361
    , contributor
    Comments (75) | Send Message
    Thanks for the article Factoids , I have followed and AGREE with your discipline on CAGR growth .
    7 Jun 2014, 10:20 AM Reply Like
  • Bholeyr
    , contributor
    Comments (8) | Send Message
    Thank you Factiod for sharing this.
    7 Jun 2014, 10:29 AM Reply Like
  • mbutler18
    , contributor
    Comments (15) | Send Message
    Thanks for sharing the results of your careful and thorough research.
    7 Jun 2014, 12:40 PM Reply Like
  • caperdory
    , contributor
    Comments (489) | Send Message
    Factoids...have you looked at STWD as a commercial mtg reit yielding 7.9%....just curious...
    7 Jun 2014, 12:45 PM Reply Like
  • Factoids
    , contributor
    Comments (1292) | Send Message
    Author’s reply » I don't even follow mortgage REITs. And since I do not follow them, I do not have the stats on which to base a well founded opinion. I only have a gut reaction. I believe they are too leveraged. I believe they are investments for market timers - and not for buy and hold investors.
    7 Jun 2014, 10:23 PM Reply Like
  • dp100
    , contributor
    Comments (5) | Send Message
    Thank you.
    7 Jun 2014, 01:27 PM Reply Like
  • bullsbearspigs
    , contributor
    Comments (918) | Send Message
    Bob, you dont own PSEC?




    great looking group. thanks for sharing...best of luck.


    7 Jun 2014, 02:38 PM Reply Like
  • maybenot
    , contributor
    Comments (6781) | Send Message
    Thank you for sharing this over the weekend.


    Gave me a few to go recheck on and make sure I don't have kinda unsubstantiated bias against them.


    Take care of yourself -- don't over do it for us schmucks. :)


    We get better, for free, as investors, because of your work.
    Thank you Factoids for all you do.
    7 Jun 2014, 08:40 PM Reply Like
  • User 12305251
    , contributor
    Comment (1) | Send Message
    Thank you for your hard work.
    8 Jun 2014, 03:34 AM Reply Like
  • cymbalta
    , contributor
    Comments (314) | Send Message
    I second the thoughts of "maybenot." Your work is much appreciated.
    8 Jun 2014, 11:51 AM Reply Like
  • research1234
    , contributor
    Comments (3) | Send Message
    Factoids, thanks for putting this out there. My portfolio is very similar, and probably shares about half of the companies in your portfolio. A few significant differences:


    1. MLP's are a much lower percentage of my port (about 20%)
    2. I do not own any bond funds, as I think the yields are too low given the risk of rate increases in the future.
    3. I have almost 10% invested in preferred stocks with an average yield of about 8%. I bought most of these during late 2008 to early 2009 at deep discounts, and all of are paying full stated dividends today.


    My net yield and expected CAGR is about the same as your 4%/5%. I would not argue that my approach is any better or worse than yours, simpky a different way to approach the same goal of sustainable retirement income that will keep pace with inflation.


    Thank you very much for all of the material you post. Its very helpful, and comforting at the same time.
    8 Jun 2014, 08:50 PM Reply Like
  • Factoids
    , contributor
    Comments (1292) | Send Message
    Author’s reply » I opted not to show the third of my portfolio in equity mutual funds. And I included three non-MLPs with the MLPs due to those investments being GPs of MLPs. So my actual MLP asset allocation is 23% (when making those two adjustments). But that kind of math (not counting the 1099 reporting GPs) is almost cheating. Counting those three investments, the allocation is 26.3%.


    I expect to buy some preferred shares along with more BDC baby bonds at the first of next year - while also selling some of the MLPs where my weighting has grown fairly high due to price appreciation. I expect to sell about 7% of my mutual funds while starting a 7% weighting in transportation sector stocks.


    Anyone generating a 4% yield with 5% dividend growth is doing things right.


    Let me end with a reminder that I hope is not needed --- I did not see a logical way to include RRR assessments inside this spreadsheet. Do not let that omission cause anyone to believe that metric is not important.
    8 Jun 2014, 09:32 PM Reply Like
  • Robin Heiderscheit
    , contributor
    Comments (3317) | Send Message
    Even with low single digit projected increases, your BDC portfolio numbers are too optimistic based on past history anyway. No BDC has ever grown its dividend over a full business cycle, although it doesn't mean it won't happen in the future of course.
    9 Jun 2014, 09:54 AM Reply Like
  • Factoids
    , contributor
    Comments (1292) | Send Message
    Author’s reply » Robin Heiderscheit wrote "Even with low single digit projected increases, your BDC portfolio numbers are too optimistic . . "


    Two of the projections are sub-single digit (AINV and PNNT), one is single digit (ARCC), one is just above single digit (PFLT at 1.2%) and then there is MAIN. My growth projection for MAIN is below trend for its historical dividend growth, below the current NAV growth trend, and below the NII trend and current forward projections. I do not see much optimism in those projections.
    One the other hand - I am not projecting any dividend cuts - and that may turn out to be too optimistic. But on the third hand, I have been quick on the trigger in selling BDCs. I expect to continue that behavior. I have sold five BDCs over the years -- the first three I sold too late, and the last two (MCC and TCAP) I have sold early.
    9 Jun 2014, 10:24 AM Reply Like
  • maybenot
    , contributor
    Comments (6781) | Send Message
    Factoids -- thanks for the update on your BDC thoughts and moves. Appreciate the transparency (or whatever the current buzz word is for 'honesty').
    9 Jun 2014, 11:08 AM Reply Like
  • Factoids
    , contributor
    Comments (1292) | Send Message
    Author’s reply » Maybenot wrote "thanks for the update on your BDC thoughts".


    I have not given BDCs much thought in 2014. I am sticking with the old recipes that have served me well - like:
    (1) Never buy an uncovered dividend
    (2) Be risk aware - and use "many inputs" to judge that risk
    (3) Never buy a falling NAV
    (4) Never buy a falling NII
    This will sound like I am bragging - but I do have a pretty good internal auto-pilot by doing the grunt work of doing the metrics - then listening to those metrics. Because I have set up a decent system, I do not have to do the labor of pondering things that deeply and consistently.
    BDC_Buzz may be worried about the falling yields on investment, but I was writing about that in 2013. So I may be in real danger of being overly complacent. Anyway . . .


    My recent BDC purchases (AINV and HTGC's baby bond HTGY) were not made because I liked those investments. They were purchased because I liked my new Health Care / Pharma portfolio and PAGP - which was a low yield group of new investments. I needed to add something to offset the lowering of my portfolio yield caused by adding investments that I really liked.


    I will add more to BDCs - or maybe a big bank preferred share investment or MLP E&P - when I do my start of the year 2014 changes. I expect to add one or two low yield Health Care and Tech stocks, and two or three low yield transportation stocks.
    9 Jun 2014, 11:46 AM Reply Like
  • cymbalta
    , contributor
    Comments (314) | Send Message
    Almost one year later.....much has changed. In the world of BDC's I still have PFLT, PNNT, ARCC, NMFC, TCPC,
    TCRD, SLRC and MCC. Sigh, I'm such an optimist thinking all will turn out well in the long run for MCC, SLRC, TCRD.


    MLPs evolved from KMP/KMR into KMI. Hanging on to PAA, ETP,ETE,EPD,EEP,DCP.


    Took profits in VTR, HCP, and O. Have CLDT on look out.


    Factoids...has your outlook changed?
    1 May 2015, 05:10 PM Reply Like
  • Factoids
    , contributor
    Comments (1292) | Send Message
    Author’s reply » Cymbalta asked had my outlook changed?


    Yes it has. One year ago, the energy outlook was completely different. That change even influenced BDCs with energy loans. My outlook is contained in the RRRs and CAGRs of every stock in my coverage universe. Lots of those assessments have changed.
    1 May 2015, 06:30 PM Reply Like
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