Daily Dividend Investor Update
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Over the last few weeks I’ve done a bit of holiday shopping for the Daily Dividend Investor portfolio. While I wouldn’t say that I scored any real bargains, I added a few new positions to the portfolio that should really help increase my income stream in 2012 and beyond.
As I add positions to the DDI portfolio I’m not afraid to put some money at risk, buying what may be a smaller, unproven or just less stable company in return for higher yield and the possibility of capital gains down the road.
I do like to try and keep things balanced – so for every riskier stock purchased I try to add what I often refer to as a “Steady Eddie” – those less interesting companies that just pay a consistent, albeit smaller, dividend quarter after quarter, year after year.
A quick overview of my recent purchases is shown below:
- Ford Motor (ticker: F) – 15 shares
- Solar Senior Capital (ticker: SUNS) – 25 shares
- Microsoft (ticker: MSFT) – 10 shares
- Avon Products (ticker: AVP) – 5 shares
- Middlesex Water Co. (ticker: MSEX) – 20 shares
- Duke Energy (ticker: DUK) – 15 shares
- Vectren Corp (ticker: VVC) – 15 shares
- Teekay Tankers (ticker: TNK) – 15 shares
My Steady Eddie’s
I added Microsoft, Middlesex Water and Duke Energy to the DDI portfolio because these are companies that have near monopolies over the distribution of their products and I consider their dividend to be the safest of the bunch.
If you’re looking for the stealth investment for income, the company that probably gets overlooked the most is Microsoft. They have only been paying a dividend for a few years, but their income stream with Windows, Office and Xbox is very stable and with continuous raises, the yield on Microsoft has now exceeded 3% – not bad for a tech company!
Not a company many investors have heard of, Middlesex Water has also been a solid performer – it’s been paying a dividend for 39 years and the company has been around since 1897 – over 100 years. Knowing that I’ve placed “Steady Eddie” positions in the DDI portfolio like Microsoft and Middlesex allows me to sleep soundly at night, knowing that I’ve got a steady stream of reliable income.
The firecrackers are those holdings that give the portfolio a little more yield – but always have the possibility of having a blow-out, either because of reduced dividends or substantial share price drops. As I’ve mentioned before, the size of any new position is never larger than the current month’s income stream – so worst case if I buy something that really goes wrong, I’ve only lost 1 month’s income. In most cases I actually commit less than 1/2 of the current month income to any new holding.
I recently highlighted Solar Senior Capital (ticker: SUNS) in one of my dividend increase alerts. Shortly thereafter, I decided to add SUNS to the DDI portfolio. It is currently yielding 7.4% and I expect to continue to see monthly or quarterly increases as their business ramps up.
The tanker / shipping industry has been hit hard this year and share prices of many of the tanker companies are severely depressed. Even though Teekay Tankers (ticker: TNK) already had a position in the DDI portfolio, I decided to add a few more shares as one of my “Firecracker” plays. Many analysts and economists are less than optimistic about the shipping industry and it’s outlook presently. With an “accidental” yield of 16%, purchases of Teekay should be made cautiously – however, with a share prices hovering in the $4 range and a book value of over $8, the risk / reward appears to offer returns for those investors willing to take the risk.
That’s what happened to me with Avon Products (ticker: AVP). After doing some initial due diligence I on Avon, I decided that based on it’s yield and it’s product line, it would provide another angle of diversification for the Daily Dividend Investor portfolio – so with shares trading in the low $20 range I added shares. Shortly there after, the board of directors asked Andrea Jung, Avon’s CEO to step down and announced the search would begin for a new CEO who could re-invigorate the growth Avon was lacking. With the news of this change, Avon shares have dropped and are now trading in the $17-18 range – not to mention that the current dividend may be up for suspension as new leadership assumes control and reviews the company’s performance.
Even withstanding that, I will hold my shares for the long term. My total investment in Avon was less than $200 – and with the drop in share price, my loss is less than $30.
By continually diversifying across companies, industries – providers of both products and services, the DDI portfolio is well insulated from the misfortunes of any one company. Even in the case of Avon, I still expect the company to generate some amount of income over the next 6 months before any real transition begins.
I’m excited to see the current growth and performance of the DDI portfolio. I’m looking forward to finding more great companies to add to the portfolio in 2012 as it continues to mature and constantly increase the payouts.
If you are considering starting your own DDI portfolio then you’ll want to keep reading!
In January I’ll be presenting my “How To” series, where I will show you step-by-step how to build your own Daily Dividend Investor portfolio. I’ll walk you through the creation process from beginning to end, from choosing a broker, to choosing your holdings and setting goals both short and long term.
I’m really excited to share this information with you.
In the mean time, please take some time to enjoy the Holidays and I wish you all the best in 2012!