January Update

January started my year off strong. Strong and busy! Between work and planning for my upcoming wedding (and honeymoon!), I have barely had any time to work on my blog. It has been a heck of a ride though and I can’t wait for the big day (and honeymoon! ). January saw my first purchase of the year (TGT) and my first dividend increase of the year. It also marked my biggest month yet of dividend income as I surpassed $100 in dividends for the first time. The market finally gave us a bit of a pullback although I didn’t really take full advantage of it as I bought TGT a little too early. That’s ok though as I rectified the situation in February. On to the good stuff…

Track Every Dollar Spent

Perhaps my most important goal this year is to track every dollar coming in and going out. How else can I get a good picture of how much I am saving and how much income I will ultimately need to replace. It is also the most effective way to see where I am wasting my money.

I am extremely happy with this start to the year. Please note the negative values for Savings and Other Savings are money I ‘spent’ to add to savings so those amounts increased my savings. The distinction between the two categories is that Savings is what I am putting towards my investments and/or my house down-payment fund. Other Savings is adding to accounts that will likely be spent down over time rather than invested. However, as these accounts do well, it allows me to add more to my regular Savings in future months. My savings rate is based only on the ‘Savings’ Category and does not include Other Savings. A 34.1% savings rate is very strong for me and starts my year on track for my 30%+ savings rate goal for 2014.

Looking forward the next several months, I will likely have a decent amount of wedding expenses coming my way. Other Expenses included annual jewelry insurance and a dry cleaning bill for my comforter which someone got sick on. Entertainment was my Netflix account while ‘Eat & Drink’ is eating out and having drinks. This is a category where I bleed money at times but my fiancee and I love to eat and drink. My spending at ‘Work’ is an area where I am really trying to cut back this year. January looked to be a good start but I picked up a $30 parking ticket at work which caused January to spike higher than it otherwise would have. Going forward, I expect Auto and Groceries spending to increase while spending on Health should decrease.

Dividends

As can be seen in the section above, I had $112.34 in dividends for the month of January. This was my first time eclipsing $100 in a month and represented an 86.8% increase vs. the previous (October). A big part of the increase was the timing of my dividends from DLR and PEP which shift their dividend from December to January (1/3/6/9 cycle). Currently, my March dividend should be similar size and I am hoping for a dividend increase to push March to a higher level (DLR?). My forward 12 month dividend income increased to $877.54, thanks to the ARCP dividend increase and the TGT purchase. I am increasing my forward target to $1500 by end of year as I now believe $1200 to be too conservative and I want my goals to be difficult so I have to push myself to attempt to reach them.

Backlog

As I mentioned, things have been hectic with wedding/honeymoon planning and the like. We are also launching a new product at work which has led to longer workweeks. As a result, I have a bit of a backlog in articles I want to write, including the start of what I hope to be a series of articles. There is one article (or small set of articles) I want to get out in February. As a preview, I want to highlight the biggest threat to KO, as I see it (their recent agreement with GMCR changes how I was going to attack this article which was unfortunate timing as I was really excited to go at it from the original direction), and how PEP may respond to KO’s recent GMCR move (hint: it’s not the conventional thinking to pair up with SODA).

Raiding the Piggy Bank

With the recent pullback, I decided to move some money out of my emergency savings/house purchase/home furnishings account. Reviewing my finances, I felt like I could pull some money out of this account without harming my ability to have more than enough for a potential down payment on a house once my condo sells while have money left over for emergencies or furniture or repairs, etc. With the carnage of today, I think the market is likely to have a bit more follow through, at least, to the downside but I went ahead and made 2 purchases today, 2/3/2014, as I am seeing more value in the DGI space than I have seen since I started last summer. I do not consider myself a market timer and am not worried about trying to catch the bottom. I figure if I keep buying, some purchases will be near market bottoms and some near tops with many in between but my progress will be steady. Having decided that I could afford to release some savings reserves left me with only one difficulty? Deciding what to buy with my limited funds.

To add new positions or take advantage of a chance to average down? That was my first question. I decided I had enough for a normal size buy ($1500-$1600) and a smaller buy so I decided to average down with the small purchase and add a new position.

When looking at current positions, there were 3 positions I felt offered compelling opportunities to average down. These were MCD, PEP and PM. While I think all three are good values, it was an easy call. I added 15 shares of PM at $77.20 this (2/3/2014) morning. Really wished I had waited until the afternoon but who knew PM would fall nearly $2 more and approach a 5% yield. My previous purchase was at $83.50 so this was just over a 7.5% discount to my original purchase price and I was very happy with the first purchase. I am now overweight PM with 34 shares which is approximately 11% of my DGI portfolio. The purchase adds $56.40 to my forward annual dividend income.

With my PM purchase complete, I now turned towards making a new purchase for my DGI portfolio. I had quite a few positions that I was really liking and even looked closer at F as I think it is a downright steal at $14.50 but it isn’t DGI material, at least not yet. As they day went on, I focused on 4 companies and then 2. They were CVX, GIS, JNJ and KO. I want all of these in my portfolio and I am not sure which is the best deal at current prices. It seemed like I could not make a right or wrong decision and I hope all of these continue to remain at the same or better prices for as long as possible. Ultimately, I felt KO and JNJ were the most ‘must have’ positions and I set out to get the best possible price. I wanted KO at $37.30 but pulled the trigger on JNJ at $86.85 mere minutes before KO hit my price. I purchased 18 shares of JNJ at $86.85 this afternoon (2/3/2014) which adds $47.52 to my forward annual dividend income. JNJ has a 3.04% yield at $86.85 and I expect a dividend increase next quarter (June payout). Getting KO or JNJ at 3%+ yield is something I consider an attractive opportunity.

What do you like better here, JNJ or KO? Are you buying now or waiting for further downside?