2017 Dogs of the Dow Quarterly Update

Last December, I made a post about THE GREAT 2017 DOGS OF THE DOW EXPERIMENT. The purpose of the experiment was to test one of the most popular investment strategies that’s been floating around since it’s creation in 1991 by Michael B. O’Higgins, a money manager based out of Miami, FL.

The basic idea is to take the list of stocks in the Dow 500, sort them by highest dividend yield and the top 10 stocks will be the Dogs of the Dow. In this investment model, it means those 10 stocks are undervalued because their dividend yields are among the highest in the Dow. Does it work? Not Always, but it’s fun to see if it does this year.

During the week that I was working on the post, I purchased $500 in each of the 2017 Dogs.

3 shares of IBM @ 165.90 5 shares of CAT @ 92.80
9 shares of MRK @ 58.80 15 shares of PFE @ 32.50
6 shares of PG @ 84.05 3 shares of BA @ 155.78
17 shares of CSCO @ 30.20 10 shares of VZ @ 53.40
5 shares of XOM @ 90.40 4 shares of CVX @ 117.65

Let’s take a look and see how they have been doing for the last 3 months or so.

IBM

IBM has fared well in the last 3 months since I’ve purchased them. I’m currently up 5.75% and have received a $4.20 dividend payment already.

The first round of news came from their reported earnings beat on January 19th that started them on an uptrend to where they currently are located. They have since been upgraded by various stock firms.

CAT

CAT benefited from the initial surge when Donald Trump took office. It shot up towards $99 a share but has since dropped below my initial cost. It’s currently down -1.5% overall. I have received a single dividend of $3.85 and also made the mistake of DRIPing another share at it’s all time high price of 98.80.

CAT posted earnings towards the end of January where they beat EPS but missed on revenue (Source). Coupled with the weaker guidance from their conference call, CAT dipped hard. Pile on top of that allegations of tax fraud, we can see why they’ve been having a hard time lately.

MRK

MRK has been doing well for itself with shares up over 7.9% since I purchased them. I have also received a single dividend in the amount of $4.23.

They posted mostly middle of the road earnings where their EPS was inline but they missed revenue for the quarter. (Source)

PFE

Pfizer has been another positive return so far for the Dogs of the Dow. It’s currently up 5.48% since they were purchased and add on top of that the $4.80 dividend that they paid in March, it’s looking pretty healthy return-wise.

They reported some not-so-great earnings that saw them missing both EPS and revenue. (Source) In the beginning of February, they announced a $5B accelerated share buyback program. (Source) It seems like the market doesn’t care much as they have been on a tear since February.

PG

With a total return of 7.4% and a single dividend payment of $4.02, Proctor and Gamble is setting itself up to be the love of my life. I’ve always heard great things about PG and knew that they would always be part of my portfolio. With the Dogs of the Dow Experiment I was able to make that a reality. I’ve already DRIP’d one share and would love to add even more if it happens to ever dip again this year.

On the news side of things, PG released positive earnings in January. (Source) There was also news of Nelson Peltz’s Trian Fund taking a 3.5 billion stake in P&G which sent shares soaring. (Source)

BA

BA has been on fire ever since Donald Trump took office and are currently up 14% in total return plus the $4.26 dividend payment in March.

They posted positive earnings (Source) Even though they posted tepid guidance for the next year, the market has been full on bullish with the stock.

CSCO

This tech stock has so far given me a total return of 12.7%, plus a dividend payment of $4.42.

Cisco beat EPS and revenue but still found the stock sliding downward. (Source) It has crawled back up in share price and has been looking pretty healthy overall.

VZ

Verizon is one of the laggards of this experiment with a total return of -6%. 

If we look through their newsfeed, it looks like the decline started with missing EPS on earnings. (Source) There was also talks of a Verizon/Charter collaboration and in a more somewhat controversial subject, Verizon has decided to bring back unlimited data. Analysts are saying it will be bad for the entire sector as a whole. Of course, it will be great for consumers. Only time will tell what happens. I wouldn’t count VZ out quite yet. I don’t think they’re going anywhere.

XOM

Another disappointment in the Dogs has been XOM which is currently sitting at a total return of -8% since it was purchased.

A lot of it has to do with the turbulent nature of oil right now as it dipped below $50 and continues to go down. I’m not too familiar with the intricacies of oil but our reliance on fossil fuels isn’t going anywhere anytime soon. In other news, they also missed earnings. (Source)

CVX

The last one on the list is another underperformer. So far this year, CVX has a total return of -7.8%

The analyst is mostly the same as XOM above since they’re both oil energy stocks. They too missed earnings (Source) On the plus side, revenue is up 7.7% Y/Y so its not all doom and gloom.

Conclusion

Of course, we should go ahead and show the Dow Jones Year-To-Date returns for a fair comparison

dow_jones_2017_1qtr

(Source)

Looks like 6 of the 10 stocks from the experiment are beating the YTD for the Dow. Not terrible but not great. I’ll update everybody once again halfway through the year and see if our laggards can get their butt in gear and start making me some money!

 

Cheers!

Setting Up Robinhood Auto Deposit – Pay Yourself First

There’s a popular phrase in the finance world called Pay yourself first. Before you do anything like pay bills, pay loans or even buy food, your first payment should be auto deposited straight away into your account. This core benefit of pay yourself first is increasing your nest egg every month, which gives people a bigger incentive to continue doing it. Looking at your investment account grow every month is far better than watching your checking account get drained.  :mrgreen:

It also adds a layer of security in case any one time emergencies pop up and ensures that whatever happens, you have the financial means to take care of it. If your car breaks down, no worries, because you have the cash on hand to get it fixed. This alleviates a lot of the financial stress that people have when it comes to paying bills that need to be paid.

In order to combat that financial stress,you should set up your savings or investment account to automatically deposit funds from your main checking account.

So how do we set up auto-deposit on Robinhood? It’s easy.

Once you’re logged into your account:

1)Open up the Menu by pressing the top left icon
2)Press Banking

3)Automatic Deposits
4)Add Automatic Deposit


5)Select how often you would like it to deposit. (I get paid twice a month, so that’s what I do)


6)Input how much you would like to transfer
7) Review and Confirm

The Robinhood App makes it very easy to set up auto-deposit and I believe everybody should do it. Remember, Pay Yourself First!

 

Grocery Budget – January 2017

I believe it’s time to experiment with a new type of post. I’m not sure how well this will go over but I figure some people might find it interesting on how I spend my money when it comes to buying food. Now, I already talked about my budget and how much I allocate every month to food. I went shopping today and decided that I would post the receipts and talk about what I purchased.

In the past, we would just shop at Walmart for everything and when they introduced their Savings Catcher App, we thought we were just saving even more. I never really bothered with shopping around because I just thought I could afford it. And I can, but it’s not a smart way of getting the most out of our paychecks

I first start off by viewing the grocery stores weekly ads online. I believe almost every store does this now and a simple google search will show you what stores are near by. This trip I decided to stop at Piggly Wiggly and a discount food store named Save-A-Lot since they are right next to each other where I live. The weekly ads on their websites allow you to “Add” items to your shopping list and then email/print them out for use in the store. This makes a convenient way to make lists. You can view the ads for  Piggly Wiggly’s and Save-A-Lot if you feel so inclined.

To make it easier, I simply copy each item with the price into a program called Zim. I like this program cause I can easily add check boxes to each item which allows me to simply check them off as I find them at the store. Then I can just print it off like normal. You can do the same thing in notepad or just go off the emails if you want, the choice is up to you!

Here’s what I wanted to pick up from the weekly ads.

zimgroceries11717

 

I don’t usually go into the store with a plan on what meals to make, even though I probably should. I like to just pick up the things I know my family and I will eat and then go from there. The items on the bottom without checkboxes are just things that need to be picked up. When it comes to meat and vegetables, we just make meals based on whatever is on sale. There’s usually some form of chicken or beef on sale every week and thankfully no one in our family is a picky eater. Dark meat or white meat is just fine for us!

The first stop was Piggly Wiggly. Here’s the receipt with what got purchased.

pigwig_1_16_17
Click to Enlarge

The cheese was not on sale so I paid full price for it. Up next is Sunny D for a buck each. I decided to pick up two since my son loves to drink juice and I sometimes feel nostalgic for it. The banquet meals for $1 each are what I call “lazy meals.” It’s for when we don’t want to cook but want to eat something. I also use it whenever the wife and kid are gone and I want to eat something.

Up next are two huge bags of crinkle cut french fries for $1.50 each. Everybody loves french fries and this is way cheaper than getting them from Mcdonald’s. I also picked up some pop tarts for 3/$5. I’m not that big of a fan of them but my wife and son love them, so who am I to keep it from them.

The best deal comes from my meat purchases. I bought two packages of boneless chicken breasts for $1.49 a lb. One of the packages was frozen and went straight into the freezer. The other was put in the fridge to be used this week. It’s a great price for chicken breast though!

I also bought a five pound box of bacon for $10. I didn’t know what to expect from them but when we got them home, I was surprised that it’s just a big box of slices. And with bacon prices going up lately (single packages of bacon are going for $3-4), I figure this might be a gamble that pays off. We went ahead and broke the box down and put the bacon in a few freezer bags. Whenever we need bacon, we can just pull out one freezer bag for the week.

I originally went for Bounty paper towels for 9.99, but when getting there realized that their store brand was cheaper per sq ft. There’s a few things that I don’t want to skimp on, like toilet paper, but for paper towels, this is more than fine. I also didn’t pick up the T-bones because, quite frankly, they didn’t look so great.

For a total of $66.91. Not a bad haul from Piggly Wiggly.

Up next is the haul from Save-A-Lot, a local discount food store here in North Carolina.

save_a_lot1_16_17

I picked up quite a few cans of beans and diced tomatoes for some chili that I plan on making in the future. At 59 cents a can, you can’t really beat that. Some notable standouts was a 15-ct box of corndogs for $4.99 which, again, is mostly for that lazy meal that we find ourselves wanting to have. We’re also trying some store brand food with their Mac-n-cheese and their store cheese nips that are both $1.49 each. Also 2 for 88 cent Yoplait yogurt is a heck of a deal.

Again, for $58.72 this is a pretty decent haul. The weird oddity here is the Frozen Pork Tails for $9.78. Not sure why they came up as pig tails since I definitely picked up Ribeyes and I verified the package as well as the price per lb.

This grocery shopping day should last us through the month and put us under our $300 food budget by about $60 bucks. What I’ll do is go ahead and deposit the $60 bucks into my dividend portfolio next month to take advantage of the extra money.

Thanks for reading, I’ll try and do this again in 2 weeks for February!

 

Robinhood App Tutorial – Investing the Free Way

I’ve been meaning to sit down and write a Robinhood App Tutorial for awhile now. The Robinhood App is alluring to a lot of beginner investors due to it’s no-fee stock trades. If you have no idea what that means because you’re a complete Noob–don’t worry, we all were there at one time.

Almost every stock broker (Schwab, TradeKing, TDAmeritrade) charges a fee anytime you buy or sell a stock. The prices can differ between brokers, but it’s usually around $9.99+ per trade. When you’re just starting out, a lot of times you don’t have a lot of capital (money) and you end up taking a big chunk out of your money every time you buy/sell. Once you get rich and can start doing trades in increments of thousands, the price doesn’t effect you as much but when you’re just starting out, it hurts. That’s where the Robinhood App comes in:

First things first. You have to have a smartphone. The Robinhood App currently supports Iphone and Android devices. It currently doesn’t have a web app, so you’re going to have to do the ordering on your phone. There’s also some Account requirements below:

  • Be 18 years or older
  • Have a valid Social Security Number (not a Taxpayer Identification Number)
  • Have a legal U.S. residential address
  • Be a U.S. citizen, U.S. permanent resident, or have a valid U.S. visa*

You can read all the requirements here.

Step 1: Download the App – Yep, you should have known this was coming. Go ahead and open the Apple or Play Store on your phone and download the Robinhood – Free Stock Trading App.

Step 2: Follow the Steps and Enter Legal Information –  Enter a username or password to login with along with your real First, Last Name and phone number. From here, more secured answers will be asked such as your Social Security Number (tax purposes), Address, Citizenship and Employment information. There’s some additional questions you’ll have to fill out truthfully as well.

Step 3: Fund your Account – You’ll have to link either a checking or savings account in order to deposit/withdrawal funds to Robinhood. For instance, I hooked up my main savings account that I have from Capital One 360 (affiliate).  Before you can transfer money into your Robinhood account, they’re going to make two small deposits into your checking/savings account in order to verify the information is correct. This process takes a few days, so come back once that’s been done. Usually it’s a few cents for each of the two deposits. Confirm the amounts in the App and you’re good to go. Go ahead and make your first deposit in to your Robinhood account.

Question: How much should I deposit?  That’s entirely up to you but the rule of thumb is only invest the money that you’re willing to lose. While most of the stocks I talk about here on Dividend Noob are safe long term, nothing is guaranteed and stocks can go up and down for any reason. With that said, make sure you did your budget and have an emergency fund for those times when you need spare cash. There’s also making sure you fully fund your Roth IRA and contribute to your work 401k, where applicable, but that’s outside the scope of this post. For more details, check out my post on How much Money Do I Need to Get Started Investing.

Question: What should I buy first? Slow down partner. Go ahead and read up on the stocks that interest you and make sure they’re right for you. There’s a plethora of sources to pull information from. I will say this though: Make sure you do your own research before buying a stock. Don’t rely on some random internet person. Trust but Verify goes a long way. If you’re entirely new, read up on the Dividend Aristocrats, Champions and Challengers.

Question: Why is this scary? The idea of losing money is always scary. You’re not exactly paying for something tangible that you can hold in your hands. Our goal here is simple: Buy High Quality Dividend Stocks that not only make us money in growth over the years, but also pays out a healthy dividend to us each and every quarter. Double-dipping like an ice cream, twice the fun.


If you’re interested in Robinhood (affiliate link to support the site), give it go. Hopefully this was helpful. See you guys next week.


 

DRIP with Robinhood App – The Manual Way

money_jar

Does the Robinhood App allow investors a chance to DRIP? If you’re looking for the Robinhood App to provide a dividend reinvestment plan, you’re out of luck. At the time of this post, Robinhood does not provide any way to do it. They also don’t allow partial shares, so if they are going to implement it in the near future, they’ll have to radically change their overall design for Robinhood. Hopefully they’re working towards adding it in the future but until then, what do we plan on doing with our dividends from our high quality dividend growth stocks?

What I’m going to start doing is manually reinvesting the dividends back into the company. Yep, a manual DRIP so to speak. Every time I get a dividend from a stock in my portfolio, I’ll take that money and apply it to an additional share(s) in the company. While not quite the definition of DRIP, it’s the closest thing we can do with the Robinhood App. And considering it’s free trades, it sort of acts the same.

There’s a few cons to this approach, let’s go ahead and discuss them.

  1. No Partial Shares – With the Robinhood App not allowing partial shares, we’re going to have to provide the transaction with extra equity in order to round it up to a full share. While this is true, I always keep a percentage of cash in my account and I can cover the single share with no problem. I know this might not be the case for everybody, so the cash dividend will have to sit in your account until you accumulate enough to do a transaction.
  2. Not Automatic – The beauty of a DRIP is that it’s automatic. That means you can go about your life and not worry about the money that your stocks pay out to you. For those hands off investors, this is a god send. That just means we’re going to have to do a little extra work. This comes with some added benefit though–if we believe a stock is way overvalued, we can put their dividends to use in a separate stock that we feel is undervalued. Again, this might not be for everybody, but its something to think about.

While not perfect, I believe this is a decent way to get started with doing a Robinhood DRIP. Let me know in the comments if there’s a better way!

You can always check out my current portfolio here. You can also follow me on Twitter.