Mr Bogle Legacy

Dear Investors,

We recently lost one of the most prominent and well known investor of the 20th century. See below link for the summary of this visionary.

 

mr bogle

Mr Bogle legacy

R.I.P

Although I have not agreed with all his rational, most of his logic concerning passive investing through low cost ETF stands true over long periods of time just as basic mathematics will remain in place over centuries.

 

Bargains are still available

Dear Dividend investors,

10 years into this bull market, there are still bargains in the market. I wanted to share some of the names I already have in my Portfolio or intend to build a position in.

1st Target is Brookfield Property partners sticker BPY.

This is an entity of Brookfield asset management that spun off in 2014. At first you might think it’s 7% yield @ 17.59 Us$ is a trap. I believe it’s just one of those stocks the market just forgot to look at.

Brookfield increased the dividend at 6% annually, 9% of compound growth on cash flow from operations. The growth is here to stay for the next few years because this entity owns real estate primarily in commercial retail, industrial, hospitality sectors that it leases under long term contracts. there capacity to recycle capital by selling mature assets and buy new opportunity will profit the acceleration of income on those contracts. So the math is simple, you add 7 % yield + at least 6% dividend growth = 13 % total return in the long run….. I will take that any day given the nature of this stable business. This is the reason why I started a position and will build around 500 units within the next couple of weeks or months depending on the price.

bpy

 

2 nd target Exxon Mobil Corp

Yes I know it is not very original but this company is very well run and if you look at the current price level we are close to a 10 year low with a 4.55% dividend yield. You can certainly expect 4 to 5 % growth in any type of market. Again math is simple that is a close to 10 % total return, I will most likely add to my position shortly. I think the price is to low to ignore if you don’t have a position or want to add on to it.

xom

 

3rd target is MMM

Yes I know nothing very exciting about this old school Industrial but hey this large cap is so out of favor that the stock plunged from 252$ to 189$ in 1 year. So this gives you a 2.8% yield and a valuation that is much more reasonable, for a company that still has a strong moat and is well managed company. Dividend went from 63 cents a share in 2013 to a 1.36$ currently even if you are conservative you can expect 7-8% growth per year long term.

mmm.PNG

Pullbacks are necessary for efficient share buybacks.

When you see some of your holdings going through price pullbacks of 10-25 % in a short period of time on no particular fundamental reason, you tend to focus on the negative short term sentiment going through the market. One group of companies will benefits from price declines though, those with big share buyback programs.

The mechanism is quite simple when price are lower, the company can buy back a lot more shares and increase future earnings per share therefore increasing profitability.

Some of the biggest beneficiaries are:

Visa

Between 2008 & 2018 over 50 % of the float went away. Look at the price chart…

visa stock chart

 

Apple computers

between 2012-2018 around 31% of the float went away.

aapl

Granted, this is not the only factor providing price increases on stock, but anything helping a profits will push in the right direction. So embrace pullbacks they will make you richer in the long run.

 

 

Building a dividend House

 “A picture is worth a thousand words.“
I am sharing with you today the House dividend analogy.

PLEASE BE AWARE THAT I DO NOT ENDORSE ALL THE STOCKS THAT ARE QUOTED IN THIS PICTURE.

dividend house

This Picture respects the fundamentals of a 3 tier portfolio. In this house you don’t touch the foundations once it is in concrete state. ( 1st tier stocks)

The supporting walls are representing the 2nd tier stocks which you can change but not often, you don’t replace the roof every year, but most likely every 10-15 years.

Every stocks outside the house are the 3rd tier stocks, which are the return booster and capital gain solution to strengthen the house in the long run. Those are open to Market opportunities that can come your way at any time.

 

 

 

United Technologies is a buy

logo utx

 

This company could be a good ad on to your portfolio, if you are looking for a diversified and well managed company in the commercial aerospace sector.

What is the business about?

UTX 1UTX 2UTX3UTX 4

what about the investor metrics 

I like the dividend graph and so should you….

utx 6

 

Now let’s dig in the numbers

 

Sales are growing

sales growth utx

 

Net income and Earnings per share are less impressive but they have just announced an increased outlook for future quarters.

EPS 55

 

let’s look at the share outstanding, it is stable which is a neutral they don’t have a huge buyback to help future Earning per share results.

shares outstanding

What is the economic Moat?

  1. This company has been developing their expertise for decades with customers, suppliers, and the Brand name is well established.
  2. This area is very sophisticated and it is not easy to switch providers like deciding to buy a pair of jeans elsewhere = fairly low competition should help them maintain margins.

What about the price to earnings multiple?

As you can see below it’s not exactly cheap valuation historically, but it is hard to say when it will go back to 10…. and in a long time horizon it will not make a sizeable difference.

 

valuation utx.PNG

 

 

Overall this is a good company for the long run, you can easily get 10% annualized return on your investment over 10 to 20 years period.

 

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