$48k Per Year With A Half A Million Portfolio

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Includes: AAPL, AGNC, APU, AWR, BAX, BDCL, CAT, CEFL, COP, DOV, DX, EHI, EMR, GE, HCP, ITW, JNJ, KMI, KO, LEG, MCD, MLPL, MMM, MORL, MTGE, NAD, NLY, O, PETS, PG, PM, PSEC, RCI, SPAN, STON, T, TCAP-OLD, TGH, TGT, TRTN, VER, VNR, WELL, WFC
by: Cash King

Summary

Portfolio value passed half a million and yearly dividends reaching $48k!

Portfolio weathered a tough quarter well!

Four straight quarters of 8%+ yield and yield on cost. 9%+ YoC target remains elusive.

Summary

At first glance or thought, it seemed this portfolio had a rough quarter. There were maybe only a few dividend increases and a few sizable dividend cuts. The stock market itself also has not really done anything terribly great over the last three months, either mostly trading up and down.

I created this portfolio almost two years ago now after consolidating many accounts into one and repurposing my goal for this money. I decided to endeavor on creating a high yield portfolio with medium risk. I started with roughly 30 stocks and it has grown to 44 positions. The intent was to have it composed of stable blue chip style dividend growers coupled with some high flying high yielders. I also set out to make sure there was representation among all the sectors as well to help further ensure diversity.

I've learned a lot and made a lot of modifications over the last two years and I'm proud of the portfolio and its performance. Like any good fund or portfolio the true test will be when we have a recession. The other thing to keep in mind is this is actively managed, not necessarily actively traded though. I intend to buy and hold when I purchase and try to sell on only a rare occasion.

Below is a snapshot of the portfolio post close on March 20.

2015, Quarter 1 Investment Portfolio

Company

#

Value

YOC

Weighted Goal

Dividends*

ConocoPhillips (NYSE:COP)

246

$15,704.64

4.44%

$15,000.00

$720.00

Kinder Morgan Energy Partners (NYSE:KMI)

446

$18,785.52

4.88%

$20,000.00

$802.80

Vanguard Natural Resources LLC (NYSE:VNR)

1214

$17,906.50

11.53%

$20,000.00

$2,610.00

General Electric (NYSE:GE)

577

$14,655.80

3.79%

$15,000.00

$529.20

3M (NYSE:MMM)

21

$3,496.29

3.49%

$15,000.00

$86.40

Coca-Cola (NYSE:KO)

150

$6,097.50

3.37%

$15,000.00

$198.00

Philip Morris (NYSE:PM)

187

$14,857.15

4.73%

$15,000.00

$748.80

Procter & Gamble (NYSE:PG)

79

$6,694.46

3.30%

$15,000.00

$201.60

Leggett & Platt Inc. (NYSE:LEG)

130

$6,034.60

4.26%

$15,000.00

$162.00

Triangle Capital (NYSE:TCAP-OLD)

1234

$28,209.24

9.03

$20,000.00

$2,664.00

Wells Fargo (NYSE:WFC)

240

$13,442.40

3.50%

$15,000.00

$334.80

American Capital Mortgage Investment (NASDAQ:MTGE)

1136

$20,663.84

13.68%

$20,000.00

$2,952.00

Annaly Capital Management, Inc (NYSE:NLY)

1965

$21,104.10

10.60%

$20,000.00

$2,358.00

American Capital Agency Corp. (NASDAQ:AGNC)

942

$20,526.18

11.69%

$20,000.00

$2,487.60

Dynex Capital Inc (NYSE:DX)

2735

$23,220.15

11.99%

$20,000.00

$2,736.00

Realty Income Corp (NYSE:O)

255

$13,680.75

5.40%

$20,000.00

$565.20

UBS ETRACS Monthly Pay 2x Leveraged Mortgage REIT ETN (NYSEARCA:MORL)

974

$20,376.08

25.01%

$20,000.00

$4,500.00

HCP, Inc (NYSE:HCP)

377

$15,999.88

5.77%

$20,000.00

$853.20

Healthcare REIT, Inc (HCN)

190

$15,034.70

5.41%

$20,000.00

$615.60

Johnson & Johnson (NYSE:JNJ)

57

$5,836.80

3.18%

$15,000.00

$158.40

Illinois Tool Works (NYSE:ITW)

15

$1,477.95

2.79%

$15,000.00

$28.80

Target Corporation (NYSE:TGT)

163

$13,253.53

3.44%

$15,000.00

$338.40

Textainer Group Holdings Limited (NYSE:TGH)

172

$5,268.36

5.44%

$10,000.00

$324.00

McDonald's Corporation (NYSE:MCD)

160

$15,528.00

3.68%

$15,000.00

$543.60

StoneMor Partners (NYSE:STON)

592

$16,777.28

10.26%

$20,000.00

$1,490.40

Emerson Electric Co (NYSE:EMR)

37

$2,097.53

3.32%

$15,000.00

$68.40

Apple (NASDAQ:AAPL)

70

$8,813.00

3.14%

$15,000.00

$133.20

AT&T Inc (NYSE:T)

451

$14,986.73

5.70%

$15,000.00

$849.60

American State Water Co (NYSE:AWR)

165

$6,831.00

3.09%

$15,000.00

$140.40

UBS ETRACS 2X Leveraged Long Wells Fargo Business Development Company ETN (NYSEARCA:BDCL)

1085

$24,152.10

16.10%

$20,000.00

$4,186.80

AmeriGas Partners LP (NYSE:APU)

383

$18,246.12

8.06%

$20,000.00

$1,346.40

Rogers Communications Inc. (NYSE:RCI)

396

$13,753.08

3.85%

$15,000.00

$601.20

Prospect Capital (NASDAQ:PSEC)

2355

$20,158.80

12.63%

$20,000.00

$2,869.20

PetMed Express Inc. (NASDAQ:PETS)

100

$1,589.00

4.35%

$10,000.00

$68.40

UBS ETRACS Monthly Pay 2x Leveraged Closed - End Fund ETN (NYSEARCA:CEFL)

893

$19,646.00

18.65%

$20,000.00

$4,010.40

Baxter International Inc. (NYSE:BAX)

73

$4,977.14

2.96%

$10,000.00

$151.20

UBS ETRACS 2x Leveraged Long Alerian MLP Infrastructure Index ETN (NYSEARCA:MLPL)

220

$10,729.40

10.96%

$10,000.00

$1,429.20

Span - America Medical Systems, Inc.(NASDAQ:SPAN)

536

$10,050.00

3.29%

$10,000.00

$320.40

Nuveen Investment Quality Municipal Fund (NQM)

275

$4,235.00

6.61%

$15,000.00

$270.00

American Realty Capital Properties Inc. (ARCP)

1570

$15,841.30

0.00%

$15,000.00

$0.00

Caterpillar Inc. (NYSE:CAT)

57

$4,627.83

3.18%

$5,000.00

$158.40

Dover Corp (NYSE:DOV)

70

$4,991.00

2.24%

$5,000.00

$111.60

TAL international Group (NYSE:TAL)

125

$5,272.50

7.06%

$5,000.00

$360.00

Western Asset Global High Income Fund (NYSE:EHI)

330

$3,649.80

3.48%

$5,000.00

$126.00

Total

 

$549,279.03

8.40%

$675,000.00

$46,209.60

           

*annual

         
           

Source: Cash King portfolio as of March 20, 2015

Here is a summary of some of the important metrics and things I track on a quarterly basis:

 

FY15Q1

FY14Q4

FY14Q3

FY14Q2

FY14Q1

Portfolio Value

$549,279.03 (+23.45%)

$444,941.77 (+40.18%)

$317,408.25 (+7.11%)

$296,343.21 (+13.5%)

$261,029.10 (+39.5%)

Yield (Goal: 8%)

8.41%

9.25%

8.07%

8.03%

7.58%

Yield on Cost (Goal: 9%)

8.40%

8.71%

8.33%

8.66%

7.95%

Forward Annualized Dividends

$46,209.60 (+12.23%)

41,173.20 (+60.81%)

25,603.20 (+7.56%)

$23,803.20 (+20.3%)

$19,784.40 (+23.3%)

Actual Qtr Dividends

$11,013.38

$7,033.89 (11.18%)

$6,326.44 (+22.96%)

$5,145.04 (+33.1%)

$3,866.81 (+31.8%)

Cash Inflows

$45,013.38

$200,050.49

$7,754.83

$23,028.46

$9,081.51

Deposits

$34,000.00

$191,292.07

$1,100.00

$13,669.42

$5,214.70

Dividends

$11,013.38

$7,033.89

$6,326.44

$5,145.04

$3,866.81

Sales

$0

$1,724.53

$328.39

$4,214.00

$0

Cash Outflows

$11,795.62

$2,132.16

$478.16 (+8.39%)

$441.16(+76.6%)

$249.83(+16.4%)

Withdrawals

$11,180.00

$1,635.00

$0

$0

$0

Other Expenses

$615.62

$497.16

$478.16

$441.16

$249.83

Net Cash Flow

$33,217.76

$197,918.33

$7,276.67

$22,587.30

$8,831.68

Source: Cash King portfolio/articles

Portfolio Performance

As the above chart shows, there has been a year over year increase in yield and yield on cost. There has also been extraordinary growth in the portfolio value largely, but not entirely, fueled thus far by deposits.

As the several different metrics show dividends from a portfolio perspective continue to grow and Net Cash has been and continues to remain positive.

Portfolio Purpose

I've mentioned this in past articles and speaking of Net Cash being positive I believe I need to point out the purpose for this portfolio. I am making monthly withdrawals of cash from this portfolio to help our living expenses. I've recently made a career change which has resulted in a greater than 66% pay reduction. Of course we decreased expenses where we could but in order to not significantly impact our standard of living I've decided to withdrawal some cash every month out of this portfolio in order to help our monthly living expenses.

Due to dividend growth and other reasons I've been able to reduce the withdrawal percent from 34% down to 24% of our total dividends. This has also allowed continued reinvestment back into the portfolio and naturally helped grow dividends as well.

Future Dividend Concerns

Three companies are currently on my watch list and no more shares will be bought until they can show dividend improvement. TGH, PETS and TAL have not raised their dividend in more than 4 quarters and thus turn into a hold for me. They would be an immediate sell if their yield wasn't as high as it is i.e. over 5%. If they cut their dividend or fail to raise it within the next few quarters they will likely be sold.

ARCP recently stopped their dividend but with bullish activity recently and the expectation a dividend will be paid I'll hold this until the dividend is announced. I was fortunate enough to pick it up at $7.89/share.

PSEC cut their dividend last quarter but their yield and my yield on cost is still decent so I'll watch and hold for now.

VNR cut their dividend but as with PSEC I'll hold and accumulate more at lower prices to continue to increase yield on cost. With VNR I believe it is somewhat short term as it was not caused by mismanagement but simply as oil unexpectedly came crashing down in price. I also believe oil can't and will not stay low forever.

MTGE cut their dividend. I will continue to hold.

DX also cut their dividend and I will continue to hold them as well.

A majority of my stock positions continue to show promise in the area of dividends. The key difference is the high yield positions in my portfolio are expected to have a little bit more variability in the dividend. My goal for them is to purchase when they are "down and out" so that way I'm getting rich when they pick up again. Every position that has thus far cut their dividend is considered a high yielder in my portfolio and therefore is given a pass for now.

Plan Ahead

I've adjusted how I look at my portfolio composition and have determined some areas of improvement and de-risking. As you can see, as many of those high yielders cut dividends I've bought more and thus quarter to quarter the high yield portion of my portfolio spiked upwards. This will change as I continue to focus towards the dividend growth companies.

With the adjusted look from # of positions to percent in sector composition I've identified areas where I can improve diversification which will be targeted going forward.

Previous Composition:

Dividend Growth: 49.3% (+5.8%)

Dividend High Yield: 50.7% (-5.8%)

BDCs: 9.0% (PSEC, BDCL, TCAP) (-0.8%)

MLPs: 10.4% (APU, MLPL, STON, VNR) (-3.7%)

REITs: 26.1% (AGNC, DX, MTGE, MORL, HCN, HCP, NLY, O) (-2.2%)

CEFs: 5.2% (CEFL, NQM) (+0.8%)

Leveraged ETN's: X.X% (CEFL, MORL, BDCL, MLPL) (X.X%)

Sector representation:

Basic Materials: 3

Conglomerates: 2

Consumer Goods: 4

Financial: 10

Healthcare: 4

Industrial Goods: 3 (+2)

Services: 5 (+1)

Technology: 4

Utilities: 2

Current Composition:

Dividend Growth: 39.89% (-9.41%)

Dividend High Yield: 60.11% (+9.41%)

BDCs: 13.20% (PSEC, BDCL, TCAP) (+4.2%)

MLPs: 11.59% (APU, MLPL, STON, VNR) (+1.19%)

REITs: 30.30% (AGNC, DX, MTGE, MORL, HCN, HCP, NLY, O, ARCP) (+4.2%)

CEFs: 5.01% (CEFL, NQM, EHI) (-0.19%)

Leveraged ETN's/ETF's: 13.64% (CEFL, MORL, BDCL, MLPL) (X.X%)

Sector representation:

Basic Materials: 9.54%

Conglomerates: 3.30%

Consumer Goods: 6.13%

Financial: 37.85%

Healthcare: 4.09%

Industrial Goods: 2.02%

Services: 10.21%

Technology: 7.22%

Utilities: 4.57%

Diversified: 15.07%

Conclusion

This is the first quarter summary for the portfolio. Though I thought it was a rough quarter the numbers thus far tell a somewhat different story. There is perhaps a chance the second quarter will show some signs of strain as the massive deposits I've been able to gather and put to work are starting to dry up and the reduce dividends show up fully.

Disclosure: The author is long COP, KMP, VNR, GE, MMM, KO, PM, PG, LEG, TCAP, WFC, MTGE, NLY, AGNC, DX, O, MORL, HCP, HCN, JNJ, ITW, TGT, TGH, MCD, STON, EMR, AAPL, T, AWR, BDCL, APU, RCI, PSEC, PETS, CEFL, XAA, BAX, SPAN, MLPL, CEFL, NQM, TAL, EHI, DOV, CAT, ARCP.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.