Portfolio - Mar 2015

Time is running away with me. Not only that I barely find time to post new articles, but yet again the DAX hit another all-time record yesterday: 12,375!. With stock markets rushing from one record to the next, it has become the biggest challenge ever to find value in the market to deploy capital. I am curious how I will master this exercise in the coming months… 

Anyway, it's time to have a closer look on the current state of my portfolio. This is my portfolio per end of March 2015:

Appreciation of the USD against the EUR has led to strong capital gains in my portfolio: Market value is 21% above historical cost. Average portfolio yield has significantly improved to 6.32%.  At the time when I bought my US holdings the EUR was much stronger compared to the USD, so I was able to get those stocks at a cheaper price. As dividends are paid in USD I now benefit from the stronger USD which is pushing my overall yield well above the 6% level. In consideration of Seadrill’s recent dividend suspension (leading to 0% dividend yield) this is a good development.    

On a stock-by-stock basis, Deutsche Post has further increased in value and represents my top holding with +110%. In the past months, Realty Income has also noticeably gained in value and has increased by 65% compared to its acquisition price. Seadrill is by far my biggest loss-making position with -70%. I have spent some time thinking whether I should dispose of this investment, but I decided to keep it and wait for better times. I believe the company could achieve a turn-around story in 1 or 2-years time, although the stock might never be able to return past dividend levels. On top of that I also do not believe that the oil price will stay at the present low level in the mid-term. So all in all, there are some potential upsides and I believe it’s too early to write this investment off.

It is also worth mentioning that I have added a new position to my portfolio: Global Dream REIT, a Canada-based office REIT with full exposure to the German office market. The purchase took place in March and a brief description will follow soon in the stock section.

Until then, keep on investing!

Portfolio - Dividends in 2014

With some delay I hereby publish my year-end dividend report for 2014. Finally time to check the cashflows to see how my dividend tree has evolved!

To put it bluntly: 2014 dividends could be way higher if I had invested more aggressively in the past years. The funds were there, but I was expecting a deep plunge of the stock market and therefore missed some good buying opportunities to build out my portfolio and boost dividend income.

Anyway, I am still satisfied with the EUR 606 that were earned in 2014. It’s a 40% increase to 2013 (EUR 431). Keeping in mind that I am pursuing a more conservative investment approach - with the general rule that no more than 30% of my total assets should be invested into the stock market - the result is still promising.

As a consequence of my strategy, I am sitting on a remarkable cash balance that added another EUR 404 of cash interest income (“Tagesgeld”) to my capital income. Against the background of an unprecedented low interest environment in Germany, this is quite an achievement.

In total, with EUR 1,010 for the year 2014, my capital income has now surpassed a symbolic mark of EUR 1,000.

I do well observe that my dividend income has been growing in the 3-year time period shown in the chart above. That holds true not only in absolute, but also relative terms, meaning as a share of total capital income.

One of my investment principles has always been to consider the ECB low interest policy when following an investment strategy. As long as I was able to get an interest of 1-2% on my cash holdings I was fine with a lower share of stock investments in comparison to my total assets. But since the ECB has gradually reduced the base rate from 0.75% in 2012 to currently 0.05%, my portfolio needed to be expanded to maintain an average return of at least 2% on total assets.

You might be asking why I am already satisfied with such a low yield and following such a conservative strategy. The reason is that I am not so much looking after a maximum return, but mainly aim at preserving or slowly increasing the value of my money. I want to stay liquid and keep all options open for the future, just for private reasons. It might well be that my girl friend and I will be buying an apartment or a house in 2 years time. Until then I don’t want to pump all my capital into an inflated stock market which could well plummet in the near future...

Portfolio - Jul 2014

I am lagging in schedule for my semi-annual portfolio reporting so I am trying to catch up a bit today. I have been on vacation in July and there has been a change at work which required some more organizational work than usual. I was asked quite spontaneously to join our New York office to help out a bit for the next 2 months. I flew over last week and now live in a furnished apartment in Midtown Manhattan, not far away from Central Park where I will be able to enjoy summer and early spring in THE capital of the Western world. Life is treating me well at the moment!

Apart from the changes at work, this year has been rather quiet so far in terms of portfolio evolution and dividend investments. As I still believe in a more anti-cyclical investment approach, and not so much in a pure dollar cost-averaging (at all costs), I have been rather cautious so far. I missed the biggest part of the stock market rally, but also didn’t have that much funds to invest in 2011/12 since it’s not too long ago that I have just started my working life. 

The first half of the year went by very fast and there has been only P&G and Glaxo which were added to the portfolio in June and July respectively. This is my portfolio as per 31 July 2014:

The portfolio is doing pretty well at the moment and reached a gain in market value of ca. 15% before the recent correction. As per end of July, I’m 9% or EUR 1,058 ahead. On a stock-by-stock basis, Deutsche Post (+74%) is leading in terms of capital appreciation, followed by Royal Dutch Shell (+24%) and Realty (+11%).

Overall portfolio yield hasn’t changed much. It still stands at around 6% which represents my portfolio's target yield. I realized that I have accumulated quite a few positions which return more than 5.50% yield. In general, I believe this is a very attractive yield as entry price for a blue chip.

Since my last post in January, I reduced my position in E.on as the company is struggling a bit at the moment. I sold 30 stocks at a price of EUR 15 and incurred a negligible loss. It didn’t make sense to have my largest portfolio holding in E.on and that’s basically the only reason for that move.

Hopefully, the market correction will continue. This would allow me to buy into more positions. AT&T, HCP, and Capitamall are all stocks on my watchlist which are currently close to a 5.50% yield. Based on 2-3 more additions, I would be getting close to an estimated annual dividend income of EUR 800. Above that threshold, 25% German withholding tax will come into play and reduce dividend return.

Let’s see if more buying opportunities will arise in the coming weeks. 

Portfolio - Dividends in Q2 2014

Second quarter of the year 2014 is over and down below you find a summary of the dividends I received during the period.

The portfolio hasn’t changed much in comparison to Q1, but dividends in Q2 are still a bit higher. This is due to the one-time payments I received from the DAX companies Deutsche Post and E.on. As already explained earlier, German companies prefer to reward their shareholders on an annual basis. Therefore, Q2 is not comparable to other quarters of the year. Most investors prefer receiving dividends on a more frequent basis, but I actually don’t mind receiving annual distributions as long as my annual passive income is increasing year by year.

Total dividends received (net of taxes) add up to EUR 159 in Q2. The Deutsche Post dividend represents the largest distribution with EUR 64, translating into a 5.78% yield on cost.

I do hope that there are more buying opportunities in the second half of 2014. At the moment, I am struggling to find reasonably priced stocks and as a result there hasn’t been many investments in 2014 so far. This is a drag on the dividend growth potential of my portfolio and I wouldn't like to have such a situation for the rest of the year. 

Portfolio - Dividends in Q1 2014

The first quarter of the year 2014 is almost over and hence I am checking the cash dividends that entered my bank account during that period.

My portfolio is rather small in size and so are the dividend amounts that were deposited. But despite the small amount of invested capital, I am already taking note of the dividend compounding effect. This effect reminds me of a seedling which is slowly, but continuously growing out of fertile soil - that is my portfolio. :-)

I could quickly ramp up my portfolio in size just for the sake of generating more dividends, but I prefer to keep a cautious attitude towards the stock market and to act with prudence and care. History proves that market crashs occur frequently and are difficult to predict. Against this background, I prefer to build up my portfolio constantly throughout a longer investment horizon. At the same time, I am hoping for a stronger market correction within the next one or two years in order to expand more aggressively while reaching a higher yield on cost.

Many investors claim that market timing is a complete waste of time. But I am following my gut feeling here and I feel more comfortable with a sort of anti-cyclical investment approach. Although it could well be that I need to be patient for a much longer time than originally expected.

Let’s have a closer look at dividends received in Q1:

There has been total dividends (net of taxes) of EUR 133 in Q1. The annual coupon of Ekosem was by far the largest amount followed by distributions of Seadrill and TICC.

Based on EUR 133 in Q1, I might be able to add a whole new position to my portfolio at the end of the year: If I assume a EUR 133 per quarter this adds up to EUR 532. With more portfolio additions to come in the next months I might be able to exceed this amount and reach some EUR 700 which is an acceptable basis for initiating a new position.

As the DAX dividend season is approaching, I am thinking about adding a few more DAX companies to my portfolio. Based on my recent stock analysis, my favorites are BASF, Munich RE, and Allianz. Prices for the three companies rallied pretty much in the last trading days. Same holds true for Unilever and AT&T, which I consider as other suitable candidates…

Portfolio - Jan 2014

As already explained in my last post end of December, price losses and dividend cuts for K+S gave me quite some headache last year. The recent upward trend of the stock represented and opportunity to exit this investment. I sold 17 stocks at EUR 22.50 and reduced my exposure to EUR 1,000 already at the end of 2013. Right after that the price went further up to EUR 26.00 and therefore I decided to enter a stop loss order at EUR 25.00 to sell the remaining part. The order was executed on the same day so the remaining 30 K+S shares left my portfolio as well. 

Overall, the K+S investment resulted in a 28% loss and has cost me EUR 439, but I decided that it is better to cut losses and use the funds for other investments.

Intel was the other candidate which I considered selling in December. When the company reported its Q4 results on 16 January, many analysts were not really delighted about the results: For FY 2013, the company reported USD 52.7bn in sales (down 1% yoy) and a USD 9.6bn profit (down 13% yoy). Forecasts for 2014 show that management is basically expecting a flat 2014. Dividends for 2014 are also expected to be held constant at 2012/13 levels. Given these key data, Intel's stock price went down more than 4% within the same day from an interim high at EUR 19.74. Intel fights against declining PC sales, which used to be its core business segment, and still finds itself within a transitional phase to mobile devices. 

I decided to exit at EUR 18.74 and took a EUR 200 profit with me which compensated me for my K+S losses. In my view, it still remains to be seen if Intel's mobile play can come out to be a profitable venture and it can take much time until that happens. Given that Intel is a rather cyclical stock and the bullish market atmosphere which could also well change in the course of 2014, I thought it is better to exit and use the funds for other investments.

That said, I entered into two new positions: 20 stocks of Philip Morris International at price of EUR 61.33 and a yield of 4.5% and 32 stocks of Seadrill Ltd. at a price of EUR 28.68 and a yield of 9.7%. Basic investment considerations for entering into the positions will follow soon in the Stocks section.

New portfolio composition is shown below:

In comparison to December 2013, expected dividends for 2014 increased from EUR 539 to EUR 612 due to the higher portfolio yield of 6.20% in comparison to previous 5.48%. This particularly has to do with the replacement of low-yielding K+S by high-yielding Seadrill as total invested capital remains almost the same. Interestingly, despite the higher yield I feel more comfortable with the new composition of the portfolio. I do hope though that this is not only a feeling...

Portfolio - Dec 2013

We are coming close to year-end and like for every dividend blogger out there, it is also time for me to review my portfolio and draw some conclusions:

- Total collected dividends in 2013: EUR 406
- Expected dividends for 2014: EUR 539
- Current book value: EUR 9,842
- Current gain in market value (MV): EUR 539.

There have not been any changes to the portfolio in comparison to Jun 2013 except for some trading activity on part of K+S and Realty Income. Realty was added to the portfolio in early December and in my view, it was attractively priced at EUR 29 (see latest post). My K+S exposure was reduced yesterday as it represented the largest position of the portfolio and was simply over-weighted given its price collapse in 2013. I sold 17 stocks at a price of EUR 22.25 and incurred a loss of EUR 189.

One can always argue whether waiting for a full recovery is the better strategy, but I concluded that I do not have any clear insight into the fertilizer market and that the chances of the market to find back to its cartel-like structure are difficult to assess. The fact that the conflict between Uralkali (Russia) and Belaruskali (Belarus) has also a political dimension does not make this assessment easier. I am convinced that the current exposure of EUR 1,000 fits much better to my overall portfolio.

I can well imagine following the same approach for E.on as well, but at the moment I still see more potential for this one, even if it might take considerable time to unlock it.

Intel is another candidate which could be worth selling. Not only would I incur a profit of +17%, but I could also replace it with a more stable company with similar yield like Philip Morris for example.

Clear winner this year is Deutsche Post which almost doubled (+91%) in value since beginning of 2012. I expect the dividend to be raised from EUR 0.70 to EUR 0.75 which is well in line with the concept of dividend growth investing.

Overall portfolio yield stands at 5.48%, slightly lower compared to the 5.69% as per June 2013. This is mostly due to the forecasted reduction of the K+S dividend and the USD/SGD/GBP depreciation against the EUR which had some negative impact on dividend distributions of Intel, TICC, SingTel and Royal Dutch Shell.

What are my goals for 2014? This is simple:

1. Write more articles
2. Closely monitor the market situation
3. Further grow the portfolio by 3-5 investments
4. Be patient and wait for the right investments

Happy new year to everyone! :-)

Portfolio - Jun 2013

Today is the first day I will start to document my dividend-income investments. Since the end of 2011 I have been constantly saving money, watching the stock markets, and trying to find the right income stocks that would allow me to preserve the value of my money.

While I slowly and very cautiously entered the booming stock markets, the Fed and ECB set their base rates to historical lows of 0.25% and 0.50% respectively. In this low-interest environment and with real estate prices currently exploding, I very soon came to the conclusion that there are currently no better asset classes available than stocks. 

At the same time, at current market highs, there is the risk that new investors buy into the market at already high price levels. Therefore timing is everything. That is why I still have a very high cash reserve at hand to invest in case of any price drops. 

My investment strategy is to invest in mostly mature markets, with a particular focus on Germany as my core and home market, the US, and Singapore. 

As passive income in Germany is taxed by 25% above a certain threshold, my after-tax yield is lower than that of other investors. It is harder to gain in wealth and benefit from compound interest. Still, I consider dividend investing as the best instrument for building up a capital stock and withstanding the low-interest environment. 

As can be seen in the table, I am aiming a >5% pre-tax return. In order to maintain this return, I complement investment grade stocks with some high-yield instruments. Expected dividends for 2014 are EUR 522 in total. That is not much, but as the Brits say: "Many a mickle makes a muckle". Assuming I invested all cash reserves, my current monthly dividend would be EUR 150 on average. That sounds better.

Yet, I think market prices are too high. So I am waiting for further price drops to invest. Lets see what effect Bernanke's statement will have on the markets in the coming days.