March Recap

I really, really, REALLY hope there is a correction soon.  I already have cash piling up plus I just did my tax return and will have a large deposit next month.  I'm basically down on my hands and knees begging at this point.  It's a tough market for value investors.

As always, I really don't care what my stocks are worth. I want income so I can retire!  Low entry prices juice yields and acts as jet fuel for long term investors.  I like paying low prices for my stocks and pretty much everything else I buy.  Other than market prices not cooperating with my plans, March was pretty darn good.  A very nice month for income coupled with solid dividend increases is always a welcome treat!

The trip to Thailand did not affect my finances.  It was part of my budget the past 9 months.  Planning ahead ftw!

DOW: 14,579 /// S&P 500: 1,569 /// 10-YR Bond: 1.85%

New Purchases:
1) 44 shares KMI at $36.63 - $65.12 annual income.
2) 29 shares BNS at $57.93 - $69.60
3) 2 shares EMB at $118.19 - $10
4) .628 shares SBSI - $.52 annual income (this was a dividend reinvestment)

Sales:
1) 70 shares UNS at $47.14 - ($121.80) annual income

Dividend Receiveds: $521.15
Conoco Phillips (COP) - $39.60
Intel (INTC) - $41.40
Southern Co (SO) - $14.21
iShares Emer Mkt Bnd (EMB) - $.86
Chevron (CVX) - $26.10
Emerson Electric (EMR) - $22.55
Lorillard (LO) - $46.20
Norfolk Southern (NSC) - $28.50
Johnson & Johnson (JNJ) - $36.60
Southside Bancshares (SBSI) - $13.36
Avista (AVA) - $47.87
Exchange Income Corp (EIFZF) - $17.49
McDonald's (MCD) - $43.12
Realty Income Series F (O-PF) - $6.76
UNS Energy (UNS) - $46.11
LTC Properties (LTC) - $26.06
Owens & Minor (OMI) - $21.36
Pepsi (PEP) - $43.00

Dividend Increases:
1) GIS: $.33 to $.38 per quarter.  $14.12 annual income
2) RTN: $.50 to $.55 per quarter. $11.40
3) APD: $.64 to $.71 per quarter. $4.48

New Deposits:
$1,000 to ROTH IRA

Lending Club:
No deposits this month.  I'm having trouble getting my money invested into new notes.  I don't know why, but my orders are expiring one after another.  I've been checking almost daily to get new money invested, nothing passes my screen anymore.  I'm starting to question the viability of LC.  It clearly cannot support a large investment based on my screen criteria.  Hmmm.....

Dividend Growth Stocks in Thailand

 

I recently took two weeks of leave in Thailand.  While on vacation I decided to spend a little time to see what my retirement plan is up to.  It's very interesting to observe the strategies my favorite dividend growth companies use internationally.  Even though the packaging is often in a different language, it is quite easy to spot familiar products.  Brands are powerful in the US and everywhere else around the world too. 

Coca-Cola

 



Is anyone really surprised that Coca-Cola penetrated the Thai market?  Coke is the dominant soda brand in Thailand, no doubt.  Go to any restaurant, bar, or convenience store and you'll find a cold Coke waiting to be consumed.  What I love is that they sell KO products in glass bottles.  Man I try not to drink too much soda, but I absolutely had to take advantage of this while I could.  Beyond soda, KO sells other products such as Minute Maid orange juice (made from different oranges, its sweeter) and bottled water under the NAMTHIP label.  An 8oz bottle of Coke was 10 Baht or about USD $.35.

Pepsi

 





 



 

  

  

  

  

  

 

Pepsi is a mixed bag in Thailand.  On one hand the snacks business is thriving, on the other they COMPLETELY dropped the ball in sodas.  It is very, very difficult to find Pepsi other than in a 7/11 or similar convenience store.  If you are interested in PEP, please click the link to read about management's failure in Thailand.  I tried EST, and yes it does taste like Pepsi.  Fail.

 

The snacks business is doing quite well.  Note the interesting flavors customized to suit the taste of Thai people.  I was not bold enough to try the "Lobster Hot Plate" or "Nori Seaweed" flavors (I don't like seafood or fish), but I did try the Sweet Basil and it was fantastic!  You can see Stax has different packaging.

 

 

Philip Morris

 

 

 

Philip Morris brands dominate the Thai cigarette market from what I saw.  Go to any convenience store and the two biggest brands are Marlboro and L&M, both PM products.  You can see that the warning labels are very graphic with the intent to deter smoking.  This strategy does not concern me as a PM shareholder, pictures won't stop me or anyone else from lighting up.  Sorry we all know smoking isn't healthy.  Captain Obvious.  What does concern me is plain packaging since brands are of utmost importance to cigarette companies.  A pack of smokes costs about $2.90 for Marlboro and about $2.25 for L&M.

 

 

McDonald's

 

 

I saw a number of McDonald's restaurants during my stay.  They are very similar to back home.  The food tastes the same, the stores are clean with updated decor, and the menu isn't much different either.  Everything you would expect from a McDonald's except the prices were very high.  Thai people eat Thai food, not hamburger and fries, these McDonald's stores are probably targeted towards tourists.  That could explain the high prices.  Thai people are generally very poor and do not have the means to pay $2.50 for a cheeseburger.  Unfortunately no dollar menu either.  I thought it was interesting that they call ketchup "tomato sauce."

 

YUM also has significant operations in Thailand.  I saw and ate at KFC & Pizza Hut.  I didn't see any Taco Bells.

 

 

Procter & Gamble

 

 

PG products are easy enough to find.  Familiar brands such as Head & Shoulders, Mach 3, and Pantene.  I didn't see any Crest products, it appears there is still room to grow.  Colgate and a brand I've never heard of seemed to be the leaders in oral care.  Perhaps P&G can utilize the distribution channel already in place to push other popular products?

 

Johnson & Johnson

 

I mostly saw J&J consumer products, I wasn't looking for pharmaceuticals or medical devices.  The same products are sold in Thailand as in the U.S.  I was going to buy some Acuvue contacts, but the store didn't have the right prescription.  An exam isn't necessary at all, you can just buy them.  Genius!

 

General Mills

I'm not sure exactly sure what General Mills is doing in Thailand.  It looks like they are simply exporting American products and placing them on store shelves.  The packaging is in English and Spanish (WTF!) and doesn't appear to have any Thai at all.  Strange.  I can tell you this: Thai people do not eat Betty Crocker cakes or Progresso soups.  I think these products are targeted towards ex-pats and tourists.  191 Baht for a can of soup is approximately $6.50.  Clearly very expensive.  At a military commissary, I can usually buy a can of Progresso for $.99.  No way in hell would I pay 6 bucks for soup! 

 

All the cereals are Kellog. 

 

I'm just not sure what GIS can do in Thailand, the diet is very different.  Maybe push ice cream?  Most Thais don't have a fridge/freezer/microwave.  I don't know.

 

Emerson Electric

 

 

This was taken in China not Thailand.  I was walking through the Beijing airport and noticed an EMR ad.  Who would have thought?  My China experience is limited to the airport, but I will report it was strange seeing a bunch a Chinese kids running around wearing Lakers and Yankees hats.  The world is becoming very Americanized.  Same story in S. Korea. 

 

Do they even know who the Atlanta Braves are?  Seriously...



New Purchase - BNS

I used the rest of the money raised from the UNS sale to fund a new position: Bank of Nova Scotia.  Those who have followed me the past year know I'm fond of Canadian banks as long term holdings.  I like conservative lending practices, sound government policies and no dividend cuts during the recent financial crisis.  The financial institutions that tend to grab my attention are mostly from Canada which isn't surprising since Canada is known as a banking safe haven. 

BNS has paid dividends since 1832.  I absolutely love storied dividend histories like this, BNS has it in spades.  The dividend is so ingrained in the culture at this point that I feel very confident the streak will continue.  I plan to still be shareholder in 2032 which will mark 200 years.

I like the international strategy Scotia Bank uses to grow the business.  This is truly an international company with operations in over 55 countries.  I believe focusing on emerging markets for growth while using the Canadian market as an anchor will reward shareholders handsomely over the long term.

My calculated fair value for BNS is $69 which leads me to believe I was able to purchase these shares at an undervalued price.  I used DDM, DCF, average p/e, and average yield in the calculations.  BNS is currently trading below its 5 year average p/e and above its 5 year average dividend yield.  Even though it's had a major run up since last summer's lows, I feel there is some value left.

Assuming a $1US to $1CAN exchange rate, I'm locking in a yield slightly over 4%.  As with the KMI purchase I will realize an immediate passive income boost which is expected to grow at a faster pace than what UNS provided.  In reality I don't know the exact dividend.  Exchange rates fluctuate which I've observed with my TD and EIFZF holdings.

I made a mistake and entered the wrong amount when I placed this limit order.  I actually meant to type $57.83.  Oh well it's only a $2.90 difference.  I quickly placed the order after a 17 hour work day, I usually pay close attention to details like that.  It won't happen again.

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New Purchase - SBSI

Southside Bancshares is the only stock I DRIP.  I do this because I want to increase my share count, but I don't want to throw new money at it.  I plan to keep the DRIP on for now.

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Recent Dividend Increases

 

General Mills: 15.2%  Wow I was not expecting an increase like this!  My yield on cost is already  4.1% after just two increases.  If I only I had bought more last year.... whoops!
 



Raytheon: 10.0%  Yet another stellar RTN dividend boost.  My RTN position has already ballooned to a 5.0% YOC after only 2 increases.  I think I had lucky timing with this one though.

Air Products: 10.9%  This is exactly why I snatched up APD shares last October.  Air Products & Chemicals is a dividend champion with a history of delivering above average dividend growth, 2013 adds to the evidence.  YOC is now 3.6%, will it go over 4% next year?

Here's some motivation courtesy of RTN:



Sold - UNS / New Purchase - KMI, EMB

I decided to liquidate 66% of my UNS Energy position.  I'm not happy with the dividend growth plus I feel the shares are approaching overvalued territory.  This was a difficult decision to make since I've been a loyal UNS shareholder for more than two years.  This company was a wonderful holding for me, I've enjoyed hundreds of dollars in dividends during this period.  In 2011, UNS did a 7.7% increase which made me happy as a clam.  2012 was disappointing with an anaemic 2.4% increase, while 2013 was even worse clocking in at 1.2%.  At $47/share I do not find UNS to be particularly attractive, it was time to take a significant portion of my stake off the table.

I still own 36 shares and will consider liquidating the remaining position in the future.  I have a hunch UNS will be able to provide better dividend growth going forward since they should be able to raise rates this year.  Being stuck in a prolonged rate freeze surely affected the dividend growth in 2012 & 2013.  Anyways I may end up selling the rest of these shares at some point, but haven't decided as of right now.

It was difficult to find a suitable replacement stock!  I wanted something with at least a 4% yield here with a replacement utility being the preference.  I'm sorry, but the utility sector does not offer much in the way of value at the moment.  The only utility I seriously considered was PPL.  I also looked closely at LMT and a few REITs.

I chose KMI as the replacement for half the proceeds.  With KMI I get increased income right off the bat, plus significantly higher expected dividend growth.  $36.63 is near the top end of what I'd be willing to pay, but I do feel it is one of the better options at the moment.   Considering the stock market is at all time highs, the price here is not so bad.

Proceeds from the other half of the UNS sale will be invested before March is over.  I'm still contemplating PPL plus a handful of stocks in other sectors.  I'd really like to purchase another utility if possible.

I also bought a couple shares of EMB to shore up my fixed income holdings.  These shares will increase my annual income by approximately $10.  The distributions are variable, this is only an estimate.  I lack foreign bonds and feel an ETF is best choice for me since I don't know how to purchase them individually.  I hold EMB for income and allocation purposes.