Freedom Fund Update - June 2015

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Includes: BBL, OHI, SOUHY, UNP
by: Jason Fieber

Well, the time has come to update the Freedom Fund once again as we start another month. The Freedom Fund is my portfolio, and I think it's aptly named. My portfolio is my way to freedom; freedom from a job I don't desire to purchase goods I don't need to impress neighbors I don't care about. This journey is all about freedom and flexibility. One day, the dividend income this portfolio generates will fully cover my expenses and my time will be completely my own. What could you possibly want to own more than your time?

I'm extremely fortunate that I'm able to post these updates every single month, which shows the power of monthly contributions to investments because of the high savings rate I maintain. It shows how a relatively large sum of money can be built through the power of time, patience and perseverance.

It's important to keep in mind that while updating the overall value of my portfolio is important for historical reference and for purposes of keeping track of total return, my main focus is on the rising dividend income stream the Fund provides.

May was just more of the same, more of what I've come to believe will unlock financial independence and freedom. More saving and more buying high-quality dividend growth stocks with the excess capital that comes from that saving. If consistency is my superpower, I try to leverage it as often as possible.

On the buying front, I remained as busy as I possibly could, bound less by imagination and opportunity as I was by capital. And most of that capital was exchanged for equity in great businesses fairly early in the month. As such, I've been more or less passively watching stocks since then.

Since the last update, I first added to my position in Omega Healthcare Investors Inc. (NYSE:OHI) after a slide of about 18% over the prior three months. The valuation, quality, yield, and growth prospects all seem incredibly appealing here. In fact, it's quite likely I'll add a bit more to OHI in June.

I then shortly thereafter initiated a position in Union Pacific Corporation (NYSE:UNP), which I subsequently added to a week later. The built-in competitive advantages for railroads are incredible, and UNP complements my position in Norfolk Southern Corp. (NYSE:NSC) very nicely, now giving me exposure to track on both sides of the country. UNP is another stock that I'll likely be buying more of over the coming weeks.

Just before the end of the month, I received shares in South32 Ltd. (OTCPK:SOUHY). SOUHV is a spin-off from BHP Billiton PLC (BBL), which I discussed a bit when I last averaged down on BBL. As such, I've accounted for the spin-off shares in the portfolio as a new position.

The current market value of the Freedom Fund stands at $195,305.61, which is a decrease of 0.7% since last month's published value of $196,596.75. The S&P 500 declined a bit since the last update, and my capital additions weren't enough to offset the broader declines across the portfolio. Nonetheless, I'm actually hopeful that we see greater declines in the market -- cheaper stocks means higher yields, which means my future capital would be more effective in terms of helping me achieve my short-term and long-term dividend income goals.

I remain exceedingly pleased with how the portfolio is shaping up. It's a collection of really wonderful businesses across all areas of the economy, selling products and/or services to billions of customers around the world. These products and/or services are mostly ubiquitous, and these companies, as a whole, have substantial competitive advantages that should ensure growing dividend income (on the back of growing profits) for years to come. Even better, I continue to add to the collection every month, increasing its quality, breadth, and diversification, while at the same time further limiting the risk of substantial dividend income loss as a percentage of total dividend income.

Looking forward, I expect to be quite busy in June. Quarterly estimated taxes have to be paid, so that'll constrain me a bit. But I think I'll still be able to make a few sizable purchases. I'm very excited about the possibilities for capital deployment over the coming month. I remain as aggressive as ever in regards to turning cash into cash flow. I still have a few free trades remaining in my Scottrade account, so I'll look for opportunities to use those even as I continue to build out the new TradeKing account.

The Fund has positions in 58 companies. This is an increase since last month. UNP is a new position that I initiated over the course of May. And the SOUHV spin-off shares are now a new position as well.

These updates are mainly designed to show the increase or decrease in the value of the underlying equities I'm invested in, but the main purpose of investing in dividend growth stocks is for the rising stream of dividends over time. Thus, I don't put too much emphasis on these monthly updates. I think it is a good idea, however, to keep track of the rising (or falling) value of one's securities and be aware of where they are in terms of the marketplace and whether or not certain stocks are attractively priced. It find it a helpful exercise to update the values monthly. It gives me fresh perspective on which equities are performing well and which aren't, and from there I can make educated decisions (based on further due diligence) on which stocks I'd like to add fresh capital to (while considering portfolio weight as well).

Full Disclosure: Long OHI, UNP, NSC, SOUHY, and BBL.