Wednesday, December 18, 2019

November Passive Income


Another month of passive income. This is income with zero amount of work. As I have said before, the work was done at the beginning, by working hard and making an earning, and then saving and investing. Now, I just sit there and watch the cash come in without lifting a finger.

Wednesday, December 11, 2019

Dividend Yield Theory - JNJ Example

Over the last couple of weeks, I have been playing with Python (which is a coding language and not a large snake). My first real job was programming 25 years ago, but I did it only for the first few years. After that I went through jobs dealing with product management, system engineering, solution architecture and some research work. So, I didn’t really get to code until now (with the exception of my research work which required some math modeling and C/C++ work). I decided to see if I can improve my previous work on Dividend Yield Theory that I implemented using google sheets.


According to “Dividends Still Don’t Lie” by Kelly Wright, Dividend Yield Theory has a cyclical aspect to dividend-yield patterns. High quality stocks with long histories of rising dividends generally fluctuate between repetitive extremes of high dividend yield and low dividend yield. Dividend-value strategy uses these recurring themes of yield to establish envelopes of undervalued (low) and overvalued (high) price levels.

Wednesday, November 6, 2019

October Passive Income

Another month has passed, and another month of passive income. This is income with zero amount of work. Of course, the work was done at the beginning, by working hard and making an earning, and then saving and investing. Now, I just sit there and watch the cash come in without lifting a finger.

Now that I am not working, this incoming cash flow is quite welcoming.

Here’s my passive income from October 2019.


Date Sec Div/Int Sum
401k
10/31/2019 MMkt 62.07
10/23/2019 JW A 34.00
10/18/2019 KDP 75.00
10/18/2019 MDT 24.30
10/15/2019 O 18.22
10/15/2019 CAH 50.52
10/11/2019 PM 93.60
10/11/2019 GSK -0.41
10/11/2019 BEN 78.00
10/10/2019 GSK 25.62
10/10/2019 MO 50.40
10/09/2019 ITW 53.50
10/08/2019 DEO -0.30
10/08/2019 DEO 62.66
10/08/2019 AMCR 48.96
10/02/2019 KMB 164.80
10/01/2019 KO 19.20
Subtotal 860.14

Friday, October 25, 2019

Risk Grade revisited



It has been almost a month in my semi retirement mode. After working for 25 years, I am finding the adjustment to my new life quite unnerving. My engineering mind is still running wild. I’ve been solving problems all my work life. At first, it was just solving coding problems. Then, project and people problems. So, I still feel that I want to “fix” some problems, even though there are no problems to fix.  No more new algorithms.

The change is good though. I’d been over worked and over stressed especially in the last few years. Sometimes, I felt my health deteriorating. So, this is definitely a welcome break.


Also, the speed of life has slowed down drastically. Taking walks with my wife has been very enjoyable. Spending valuable time with my son with his homework has quite fun, especially now that he is in middle school, and I can relate with my own childhood learning experiences.


For now, I will take this as a positive learning experience. I will definitely retire one day, if not now. Therefore, it’s good to take a peek regardless of going back to work.


On to today’s topic. I have blogged the idea of using the Risk Grade tool before.



Risk Grade

After playing around, I see that risk grade is essentially a volatility indicator for the underlying security.

As per investopedia:
"RiskGrades (RG) is a trademarked method for calculating the risk of an asset. RiskGrades is a standardized measure for evaluating the volatility of an asset across a variety of asset classes. The scale starts at zero which is the least risky rating. A rating of 1,000 equals the standard market risk of a diversified market-cap weighted global equity index. RiskGrades change over time to reflect not only the unsystematic risk of an investment but also increases in overall systematic risk in the market. RiskGrades are based on a variance-covariance approach that measures the volatility of assets or asset portfolios as the scaled standard deviations of the returns"

Wednesday, October 9, 2019

September Earnings



I went into semi retirement in September when I left my job. Luckily, I still have money coming in, so I am not in a hurry to look for another job. In fact, I don't really need to work, but there is still something inside me to continue.

Anyway, here is a summary my dividend / interest income for September.

Saturday, October 5, 2019

The recession is coming....


Now that I am in a semi retirement mode, I have more time to read and watch the news. Almost every other day, I read about the recession like a gathering storm. The news reporters/financial analysts show an economic indicator, and then talk about the market crashing. Obviously, this is an attempt to get more viewers and hits. Of course, I like to double check their facts.


Inverted Yield Curve

This indicator is simply based on the 2Yr Yield - 10 Yr Yield. Over the last few recession, it has predicted the upcoming recession. Note that there was a false alarm in 1998.
This indicator has been blasted in the news channel recently especially with a recent inversion a month ago.



Wednesday, September 18, 2019

Creating a screen using the CCC list

Another post!

When you are starting out, it's not always easy to screen for dividend stocks. There are so many companies to choose from. I've tried to summarize my methodology to screen out dividend companies for further research.

1) Use the CCC List (https://bit.ly/HistoricDividendChampions)

This list was originally maintained by David Fish, but after his passing, Justin Law took over. He is doing a wonderful job maintaining a list of companies that raise their dividends year over year.

2) Use the ALL CCC tab and then pick your criteria.


3) Then, you just use the EXCEL filter criteria to filter down the number of companies.

In this example, I used the following:

  • Dividend Growth Years > 15
  • Payout Ratio < 60
  • ROE > 20
  • P/E < 20


You can choose your own set of criteria.

This creates a shorter list.

AFLAC Inc. AFL
Albemarle Corp. ALB
Air Products & Chem. APD
BancFirst Corp. OK BANF
Best Buy Corp. BBY
Cardinal Health Inc. CAH
Caterpillar Inc. CAT
Cullen/Frost Bankers CFR
C.H. Robinson Worldwide CHRW
Canadian National Railway CNI
Dover Corp. DOV
First of Long Island Corp. FLIC
General Dynamics GD
Genuine Parts Co. GPC
W.W. Grainger Inc. GWW
International Business Machines IBM
Illinois Tool Works ITW
John Wiley & Sons Inc. JW-A
Lincoln Electric Holdings LECO
Lockheed Martin LMT
McGrath Rentcorp MGRC
MSC Industrial Direct Co. Inc. MSM
Bank OZK OZK
PepsiCo Inc. PEP
Parker-Hannifin Corp. PH
Polaris Industries PII
Republic Bancorp KY RBCAA
Robert Half International Inc. RHI
Sonoco Products Co. SON
1st Source Corp. SRCE
Sempra Energy SRE
Target Corp. TGT
Tiffany & Company TIF
T. Rowe Price Group TROW
VF Corp. VFC
Walgreens Boots Alliance Inc. WBA

4) Next, I copy this to my GOOGLE SHEETS where I can use the PAAY (Percent over Average Yield) which is an indicator from a guy called Part Time Investor on Seeking Alpha. Basically, it is an indication if a company's yield is below it's average. In my mind, it is a quick and dirty way to test for Yield Theory.

In GOOGLE SHEETS, you can use the following:

=index(importhtml("http://finance.yahoo.com/q/ks?s="&B1, "table",4),2,2)/index(importhtml("http://finance.yahoo.com/q/ks?s="&B1, "table",4),5,2)*100

B1 in this case is ticker symbol reference. I am using the 5 year average yield.

This filters the companies further. I just used a filter of >1.0 over average. Of course, you can raise this accordingly.


Albemarle Corp.ALB1.3478260871
BancFirst Corp. OKBANF1.1693121691
Best Buy Corp.BBY1.1836734691
Cardinal Health Inc.CAH1.5465116281
Caterpillar Inc.CAT1.019801981
Cullen/Frost BankersCFR1.1345454551
C.H. Robinson WorldwideCHRW1.0540540541
Canadian National RailwayCNI1.1329113921
First of Long Island Corp.FLIC1.13281251
General DynamicsGD1.1576086961
Genuine Parts Co.GPC1.1268115941
International Business MachinesIBM1.2357723581
Illinois Tool WorksITW1.2952380951
John Wiley & Sons Inc.JW-A1.2807017541
Lincoln Electric HoldingsLECO1.1853932581
MSC Industrial Direct Co. Inc.MSM1.7899159661
Bank OZKOZK1.8588235291
PepsiCo Inc.PEP1.0071174381
Parker-Hannifin Corp.PH1.0648648651
Polaris IndustriesPII1.2117117121
Robert Half International Inc.RHI1.2685714291
1st Source Corp.SRCE1.1794871791
Tiffany & CompanyTIF1.2139303481
Walgreens Boots Alliance Inc.WBA1.6213592231


Now, I have a list of companies that I can research and read up. (NOTE: Not final BUY LIST)

Anyway, this month, I added a position on ITW, Based on my other tools, it is mostly in the average range in terms of valuation. However, I am okay to let this one sit in my portfolio for years to come, and collect the ~2.8% yield. Also, I bought JW-A just last month.

This seems a lot of work, but it's really not that difficult. If you don't want to do this, just go with an index fund/ETF. (VFINX/VOO). Just invest regularly to avoid timing the market.

Have FUN!

Tuesday, August 27, 2019

Update

It has been 3 years since my last update.  I had decided to scale down on blogging and focused on generating additional income. The goal was to increase future passive income and reach financial independence.

After 3 years, my yearly passive income covers most of my expenses. 

Passive Income Breakdown:

Post Tax:
CDs & Others = $17.7k
Investing Account = $6.5k
Others = $2k

Pre Tax:
401k (1) = $15.5k
401k (2) = $6k
Rollover (1) = $3.5k
Rollover (2) = $1.5k

Basically, more than $50k passive income.

Now, I am at a crossroad. I can either go full blown FIRE or continue work. If I do work, it will definitely be on jobs that I want to do. I also notice that with FIRE, my strategy going forward must change. Now, I need to look into Safe Withdrawal rates and the import of Sequential Risk. 

While I think dividend growth investing is a pretty good strategy, I also realize that index investing can also work quite well. DGI works really well if you reinvest your dividends, but if you start using the dividends for your daily expenses, then the growth will be simply based on dividend growth and capital gain. Also, my experiment with a market wide index showed that my index fund had similar gain and sometimes outperformed my basket of DGI stocks. 

There are additional strategies such as leveraging/rebalancing taxable income so that you qualify for the subsidies of the Affordable Health Act. Moreover, to access pre-tax investments, there are tricks using Roth Conversion ladders since I have many years until 59 1/2, and my pre-tax pool is quite large.

Anyway, I'm done for today. Maybe a few more years until my next update!

Also, I fixed my spreadsheet tool.

https://docs.google.com/spreadsheets/d/1eIkxYAsQPJkWZmP-9bYKcsGnSLTzvFx8hUe4YvGJLS0/edit?usp=sharing