As I mentioned in my dividend retirement plan, I am an investor in the accumulation phase. I plan on being financially independent in a few years through my contributions of fresh capital into new or existing positions that are trading at attractive valuations. In addition, I also focus on strategic reinvestment of distributions into companies with whose stocks meet my entry criteria. While I do follow several strict criteria for initial screening, a large part of my asset allocation is invested based on qualitative characteristics and my own biases.
I also try to follow a strategy, where I stop contributing to an existing brokerage account, once my contributions reach $100,000. As I explained in an earlier article, the purpose behind this strategy is to ensure that I do not lose my whole nest egg if a broker fails and I have more than $500,000 invested there. I assume that over time, my $100,000 investment is going to produce capital gains that would eventually lead to my account balance exceeding $500,000. If stock prices rise by 7% annually in the future, I would likely exceed that account balance in over two decades from now.
I typically purchase somewhere between one to three investments each month. My lot size has increased over the past 3 years, as I no longer invest using brokers that offer free trades. As a result, it is much cheaper to spend $5 - $7/trade by investing $2000 at a time, rather than investing $1000 at a time. This means that if I purchase two securities on average every month, I might end up adding to an existing position approximately once an year, sometimes even less often. This is because my portfolio consists of over 45 individual stocks, although I find less than 30 or so to be worthy of my future investment dollars. The rest are holds either because they are overvalued right now ( Yum! Brands(YUM)), have slow or no dividend growth (Con Edison (ED)), or have an abnormally high weight in my portfolio (Phillip Morris International (PM)).
Over the past two months, I invested in the following companies:
Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. This dividend champion has managed to boost distributions by 8.80%/year over the past decade. Chevron has raised dividends for 25 years in a row. The stock trades a t8.80 times earnings and yields 3.40%. Check my analysis of the stock.
Aflac Incorporated (AFL), through its subsidiary, American Family Life Assurance Company of Columbus, provides supplemental health and life insurance. This dividend champion has managed to boost distributions by 20.40%/year over the past decade. Aflac has raised dividends for 30 years in a row. The stock trades at 8.90 times earnings and yields 2.60%. Check my analysis of the stock.
Unilever PLC (UL) operates as a fast-moving consumer goods company in Asia, Africa, Europe, and the Americas. This dividend achiever has managed to boost distributions by 9.90%/year over the past decade. Unilever has raised dividends for 12 years in a row. The stock trades at 20.80 times earnings and yields 3.30%. Check my analysis of the stock.
Air Products and Chemicals, Inc. (APD) provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. This dividend champion has managed to boost distributions by 11.10%/year over the past decade. Air Products and Chemicals has raised dividends for 30 years in a row. The stock trades at 15.30 times earnings and yields 3.10%. Check my analysis of the stock.
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. his dividend champion has managed to boost distributions by 8.70%/year over the past decade. Abbott Laboratories has raised dividends for 40 years in a row.The stock trades at 16.20 times earnings and yields 3.10%. Check my analysis of the stock.
McDonald’s Corporation (MCD) franchises and operates McDonald's restaurants in the global restaurant industry. This dividend champion has managed to boost distributions by 27.40%/year over the past decade. McDonald’s has raised dividends for 36 years in a row. The stock trades at 16.90 times earnings and yields 3.50%. Check my analysis of the stock.
Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals in the United States and internationally. This dividend achiever has managed to boost distributions by 7.60%/year over the past decade. Enterprise Products Partners has raised distributions for 15 years in a row and yields 5.20%. Check my analysis of this master limited partnership.
In order to add to new or existing positions, I tend to look at valuation, portfolio weight and my outlook for the enterprise over the next few years. I am sometimes willing to add to my position in a stock, even if doing so would result in an above average weight for a short period of time, if shares are trading at a relatively low valuation.
Full Disclosure: Long CVX, AFL, UL, APD, ABT, MCD, ED, YUM, PM
Relevant Articles:
- My Dividend Retirement Plan
- Reinvest Dividends Selectively
- Stress Testing Your Dividend Portfolio
- A dividend portfolio for the long-term