My Investing Journey with Passive Income and Stock Market investing

Month: February 2020 Page 1 of 2

February Dividend Report

Ok, it is that time again. Time to look at my dividend returns for the month. Let me start off by saying I got 33.9% more dividend income this quarter than I did 3 quarters ago (same companies reporting). I went from $76. 32 to $102.19; I’m certainly pleased. Here are the six sources of income:

Putnam Municipal Income CEF $7.36

Eaton Vance $18.75

General Mills $14.70

Darden Restaurants $12.32

Ennis $28.13

Westrock $20.93

So my Total Dividend Income in my Brokerage Account was $102.19

Here you can see the progress of my Dividends. My dividends are not growing as fast as they initially were because I’m contributing less to my account monthly and I’m focusing more on growth/index funds at the moment. The RED line represents my IRA which had zero dividends this month, The BLUE line is my brokerage account and the yellow line is my TOTAL DIVIDENDS between both accounts.

I did buy some more Darden Restaurants and Westrock after the market correction, so I’ll be getting a little more dividend income next time from both of those companies!

Why I wouldn’t buy Walmart Stock

Wal-mart is one of those stocks that’s often recommended as a Recession-proof stock. It is also often recommended for a Dividend Stock portfolio. However, I’m going to go against the tide and say at this current price and valuation, I can’t recommend this stock.

Here are just a few reasons why:

First, let’s look at the Total Stockholder Equity over the last three years.

2017-77,798,000; 2018-77,869,000; 2019-72,496,000

As you can see, the trend is a decrease in TOTAL STOCKHOLDER EQUITY. This is not a good sign.

Debt is also another consideration when evaluating a stock. Debt is not necessarily a bad thing in of itself, especially at our current interest rates. However, looked at in the context of other things it can be revealing, is the debt creating growth? A brief look at the LONG-TERM DEBT reveals increasing numbers:

In 2017 it was 36,015,000 and now in 2019 it is 43,520,000

What about the ever-important Free Cash Flow? That has decreased every year for the last three years. It was 20,911,000 in 2017 and now it’s 13,889,00 in 2019. That is a 33.6% decrease in FREE CASH FLOW in just two years! Something is seriously amiss here.

Revenues are up but look at the cost of those revenues. It has increased every year. Wal-mart just came off of a miss on revenue expectations this past quarter. I don’t think that will be the last time we see that.

The stock is currently trading at a P/E of 23. The company is simply not putting out enough earnings nor positive signs of growth to warrant paying such a price. Year over Year EPS growth was only 1.63%. Why is it trading at 23 times?

Revenue growth in the last five years has only been 1.53%, The five year Cash Flow Growth rate is NEGATIVE 6.89%. These are not signs of a company that is growing, these are signs of a company that is SLOWING down. Not something that someone should pay 23 times for.

If dividends are your thing, this past year your annual dividend growth was only 1.92% (meanwhile Targets was 3.13%). So, it doesn’t really function well as a dividend stock either because it’s not growing its dividend at a rate higher than inflation. You’d be better off buying a less mature company who is growing its dividends at a quicker pace, preferably more than 6%.

Walmart’s earnings report today showed a miss in both revenue and earnings. I see no reason to choose Wal-mart over Target; or a plain old total market ETF if that is your thing. TGT has a better Return on Equity, better Cash Flow growth Rates, Higher projected growth, and currently trades at a better valuation. The dividend is growing above inflation as well.

DISCLAIMER-I don’t own Target or Wal-mart

Ebay-Side-Hustle

Side Hustle-Jan & Feb Sales

I think it’s time I give an update on my Ebay Toy and Board Game Side Hustle. These are just a few of the sales I made. I am getting better at the “business” due to more efficient listing methods as well as improved shipping methods that are reducing shipping costs by around 20%. The NET PROFIT listed is how much I made AFTER FEES/SHIPPING/ETC. While the smaller items don’t net me as many profits, they are SO much easier to deal with, just throw in a bubble mailer and be done with it.

1)First up we have Bakugan Brawlers

I only paid $2.00 for these things and total NET PROFIT was $25

2)Star Wars Metal Earth Toys. Total paid was $2.54. NET PROFIT was $9.05

3)UPS Die Cast Toy; total paid was 79 cents; net profit of $2.57

4)Lightening Plane Toy; total paid was 79 cents; net profit of $3.25

5)Pokemon Energy Cards; now I paid $3.50 for these cards but I also got a TON of cards plus a collectible tin as shown below. So these energy cards are only like 1/5th of the cards.

Before it’s over with I will easily make over $20. NET PROFIT on these energy cards is $3.34 so far

Imaginext Toys; now this came from a HUGE lot of toys I have $25 total in, Martian man netted me $5.45

From the same lot-Spiderman Imaginext Toys NET PROFIT of $5.65

So, I’ve already got a net profit of $18.92 from that lot of toys and still have TON left to sell.

3)Worst Case Scenario Board Game; price paid $1.24; net profit was $8.86

I am still learning and getting better at Ebay. I TRIED Facebook Marketplace with limited success. There are just way too many flakes, weirdos and the like. I would rather list on Ebay, be done with it and not have to deal with the type of people on Facebook.

The goal of this side business is to just bring me a little extra income which I can use to invest and pay expenses with. At the moment I have over 80 listings on Ebay and you just never know when an item will sell; it could take two days, it could take two months. I’m not increasing my inventory because honestly I already have enough stuff laying around to sell.

More updates later! Here is the corresponding YOUTUBE VIDEO:

Growth Stocks

Growth Stock Updates-Fortinet, Genpact, and Mimecast

I recently began supercharging my portfolio with more growth and tech stocks.

Fortinet had an earnings report today. How did it do? Fortinet beat earnings and revenue. A 21% increase in revenue year over year here. Earnings of .76 vs. .59 from this quarter a year ago. So, that is looking pretty awesome here. Gross margins expanded 78%. Forecasts for revenue and earnings are still looking strong as well.

Genpact had an earnings as well. It beat on Earnings, Revenue and had a nice forecast. However, the price dropped by over 5%. This provided a nice opportunity to purchase more shares. Especially considering three different analysts upped their price targets.

Earnings were .57 vs .52 quarter over quarter. 940 million in revenue vs. 835 million. Genpact is currently outperforming the market this year, let’s see if it can continue this trend. Forecasts are calling for a 10.5 to 12.5% revenue growth in 2020 so that’s looking good.

Mimecast is an email cybersecurity stock that I recently purchased after doing some growth/revenue screening. They just got an upgrade today and they are reporting earnings on the 10th. Hopefully, all goes well there.

Let’s look at some other stocks I own quickly:

Netflix is up over 13% YTD. Talk about some nice performance!

CMI-Cummins: I decided to SELL Cummins today. They are forecasting 10% less revenue this year and I just don’t see a lot of positives for it over the long-term. CMI was a very small part of my portfolio and part of my goal this year is to trim the fat and get rid of stocks that I feel will underperform or don’t meet my cash flow demands. The earnings report on the 4th came out with a NEGATIVE 45% growth from this time last year. I decided I didn’t want to stick around and see what happens. I did sell for a short-term 9% capital gain but I’d rather be safe than sorry at this point.

Medical Properties Trust, while not one of my growth stocks, it also had an earnings report today. The Funds from operation looked good and I’m staying long and strong with MPW. I think this will be a serious wealth creator over the next five years.

Schneider Trucking-It STILL has not met my price target of $24, but I’m ALMOST there. Once that is reached I plan on selling my final shares in SNDR. It too has had negative earnings at least three quarters now, trucking is basically in a recession and I will buy back into this company at some point in the future when things have changed for the trucking industry. Once again, I want to reduce positions that are not amping my portfolio.

My favorite Total Market ETF-ITOT

I think every portfolio should begin with a TOTAL MARKET ETF OR MUTUAL FUND. Why? It’s incredibly difficult to outperform the market, especially on longer time frames. The best way to ensure you are getting the market’s return is to own that market.

A broad ETF allows one to own companies such as Apple, Microsoft, Amazon, and JP Morgan fairly cheap, certainly A LOT cheaper than if you wanted to buy shares of each company individually.

The top Holdings of ITOT are as follows:

Microsoft 4.34%, Apple 4%, AMZN 2.68%, Facebook 1.55%, Google 1.36%, Berkshire Hathaway 1.33%, JPMorgan 1.3%, Johnson and Johnson 1.2%, Visa 1.07%.

Another great reason to own a total market ETF is that it saves you time in the long run. The amount of time required to buy and hold an ETF like ITOT is much less than researching and purchasing individual stocks. Regardless of how easy a portfolio of dividend stocks may seem, it IS, in fact, more time-consuming. You won’t have to bother with listening to an earnings report or reading if a company grew it’s revenue this quarter.

Lastly, your price movement volatility is less with the total market ETF than with individual stocks. You won’t have to endure specific company or sector risks like you will with individual stocks.

Why did I choose ITOT as the meat and potatoes of my portfolio?

1)An incredible low expense ratio of 0.03%. It doesn’t cost much to hold this over the course of many years. The expense ratio is, of course, low because it is not an actively managed fund, it’s a PASSIVE vehicle of investing.

2)Very large diversification; 3634 total holdings versus 1599 for VTI or 2397 for SCHB. So, you are getting a HUGE percentage of the US Stock market with this ETF.

3)You get a mixture of Large/Med/Small cap exposure. 77.43% is large-cap, 12.51% is medium and 6.44% is small caps. There is also less than 4% dedicated to micro-caps as well. Some will disagree but I want more than just the S&P 500 or large caps; I believe that the additional exposure to small caps will pay off over the long-term. Not to say past determines the future; however, there are ten year stretches where medium or small-caps outperform large caps.

4)ITOT is extremely tax efficient. Since its an ETF, you won’t see the typical capital gain distributions like you would a mutual fund. The only time you’ll pay taxes is on the quarterly distributions and if you sell. If you buy with the intention of holding a long time, then your taxes are slim year to year.

5)The distribution isn’t too bad. 1.88% currently versus 1.77% for VTI and 1.80% for SCHB. So, out of the 3 main large ETF’s the yield is more for ITOT than the others. This distribution is quarterly as well.

There are plenty of options when it comes to Total Market or broad market ETF’s. ITOT, VTI, and SCHB are all nice choices when it comes to trying to own a large portion of the market, I think it’s hard to go wrong with any of them. However, for my personal investing purposes I’m a big fan of ITOT.

Lastly, don’t forget, there is nothing that says you can’t both index invest and dividend invest or growth invest. Figure out your goals and the best way to reach them. For me, increasing my net worth is my big goal and a plain Jane Total Market ETF helps me reach that goal. While I do enjoy researching and buying stocks, I don’t want to depend on the small possibility I’ll choose all great stocks and outperform or perform close the market over the long haul.

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