First quarter of the year is over and what a ride it was. First the markets were hitting all time hight valuations and then corona virus hit the global stock markets like a black swan on steroids. In retrospect quick adaptation by selling everything would have been the sensible choice but that doesn’t really fit into the DGI influenced strategy. Real impact on dividends will remain to be seen. Short term there will be a significant hit but there are also long term possibilities. Some of the strong companies should probably eliminate the whole dividend and invest the money wisely. Prime candidate for this would be Sampo Plc which could increase the stake on TopDanmark. For the main portfolio this quarter was quite bad with -37% drop in value. Impact on dividends is not visible on metrics until next quarter. Dividend income during Q1 was 1 302,58 USD and 101,40 EUR before taxes.
Overall this drop was not totally unexpected though it should be noted that exact timing and reason was unexpected to me. In retrospect it should have been quite obvious if one would have paid enough attention on the news coming in from China during January and February. Long term strategy has not been changed. I was always planning on buying at least for one turn of the economic cycle. Therefore I’ve naturally now moved back to normal buying mode. I’m quite well positioned for it unless of course if this economic turn hits my personal finances. Even that should be quite easily digestible event as I’ve prepared for the turn for quite some time now. This was mainly done by reducing the debt load to minimum. It’s quite easy to take this kind of hits without mortgage. This drop also opens the possibility to make some tax efficient moves by e.g. moving certain assets between providers.
Another eventful year has passed. Global economy had some major setbacks such as the trade war, approaching US presidential elections with the internal issues that comes with it, the ever ongoing BREXIT saga and loads of smaller issues which I’m sure the middle east region will provide us for many years to come. Then there’s the situation with central banks and interest rates. Considering all this it’s really mind blowing to think how well stocks have performed. Portfolio value is really a secondary metric for me but primary portfolio value increased about 28% this year. This is somewhat in-line with index performance but this being an income oriented portfolio, unrealised capital gains are secondary but nice to have of course.
During FY2019 I re-arranged my personal finances and paid of my mortgage. For me this constitutes as the first step of three in the path to financial independence as it reduces significantly the required income for mandatory monthly expenses. In retrospect I probably should’n have sold some of the stocks for this (looking at Apple Inc. especially which has rallied since then) but these investments are done for a purpose and those realised profits filled their purpose in bigger picture. No hard feelings there especially since I very well realised that this could be exactly the outcome even for the Apple share.
Dividend income for FY2019 increased quite nicely compared to previous year. This happened even though I was not buying as aggressively as in year before due to decreased leverage on the portfolio. There were some one time extra dividends (BHP Billiton) and some negative news for next year as some of key positions will decrease the dividends next year (Nordea, Sampo). For FY2020 I expect consistent cash injections and full dividend re-investments which should offset those negatives and keep dividend growth trend in same trajectory. For FY2019 the total dividend income before taxes and converted to euros was 6769 EUR.
In the spirit of traditional new year’s resolutions I’ve set following goals for 2020:
Personal savings rate of 70%
Second step on the path to financial independence: passive income covers base consumption
12 months without alcoholic beverages
Protecting effective tax rate (offset increased taxes with tax planning)
Third quarter is over and this time around it was a bit special one. I decided to restructure my overall finances and paid off my mortgage. This operation involved some stock sales as well since the main motivation was to trim things into a more defensive position (keeping the investment debt carried in portfolio in low end of the allowed range). In global economy main risks are still in place as I expected. Recession risk is real but then again political decisions can easily cause big shifts in a way or another. I might increase cash position in fourth quarter but that remains to be seen. I’m also considering splitting the main portfolio between Nordnet and Nordea. This could be achieved by making additional purchases in portfolio hosted in Nordea.
Third quarter was quite solid considering all the global challenges. Dividend income was 1 337,50 USD and main portfolio value increased 5,45% during the quarter.
Q2 is over and not much has changed. The very same problems in world economy are still in place. Markets are close to all time high valuations but there’s increasing discussion about recession or worse. I’ve successfully eliminated effectively all debt within the portfolio and the question remains: should I keep building cash reservers or look for investment opportunities? There are some interesting possibilities such as Wärtsilä corporation (dropped today on earnings but long term energy mega trend story is still there) or EPR properties (new REIT position with monthly and relatively high dividend). On the speculative growth side there’s the Second Sight Medical Products which I’ve been looking at as a speculative brain-machine-interfacing position.
Q2 results didn’t contain any major surprises. Dividend income was 3047 EUR before taxes which can be compared to 1824 EUR year before. Solid growth mostly fuelled by additional investments.
First quarter is now over and it can perhaps be best described as unexpectedly quick rebound from previous quarter. Main dividend portfolio value increased over 15% in value during the quarter. Received dividends totalled 1442,40 USD including one time extra dividend from BHP Billiton. Main problems are still in place as the trade war tensions between US and China have not been resolved and the brexit resolution was once again pushed forward. Main portfolio is currently in maintenance mode in order to deleverage while waiting for better opportunities and some kind of resolutions for the main problems in global economy. One extra ingredient in this are the local elections which might end up changing the local tax environment from quite bad to extremely bad. This remains to be seen.
Busy day today. Apple Inc. posted a revenue cut yesterday and dropped post market and today. I was tempted to add on it but decided to execute a swap with remaining Diageo shares. I sold all the remaining 30 shares for 138,53 USD per share. In retrospect I should have sold all of the shares back when I sold the first 20 shares but that’s not a big deal. I still consider the the valuation to be a bit stretched and yield is on the low side though growing. I deployed some of the money back to Sampo Plc and Apple Hospitality REIT – both equipped with seemingly much better valuations and yields. I bought additional 100 shares of Apple Hospitality REIT for 14,19 USD per share and 30 shares of Sampo Plc for 38,36 EUR per share.
Now that I’ve exited the whole Diageo position it’s time to check to results. I bought to original 50 shares for 5497,98 USD and sold the shares for the total of 7048,17 USD. Realized capital gains were therefore 1550,19 USD before taxes and commissions. Total dividends received came in at 435,01 USD before taxes. This is a result I’m very pleased with. I still like the company and it’s very likely that I’ll buy back these shares if the price comes down to 110 USD per share range.
Another year has passed and it’s time to take a look at the results. Sentiment really changed towards the end of the year and we saw quite dramatic volatility. The problems however are the same old ones: Trump presidency & trade war tensions, weak EU & brexit and possibly slowing global economy. There’s no doubt that we have been closer to the end of the cycle than to the start of it. Who knows when the real turn will happen – it could be happening already or it might still be years away. Looking back at the results, it’s clear that I got what I wanted and managed to follow the strategy I’ve set to myself.
Fourth quarter dividend income was 1 514,51 EUR (992,23 EUR during Q4/2017)
Dividend income for whole year was 5 373,07 EUR (4 450,93 EUR during FY2017)
Primary portfolio performance was -0,36% during the whole year
Debt ratio was maintained at or close to the planned 10% of the portfolio market value
What will happen in 2019 then? I don’t personally expect big changes going forward. We are likely to see even extreme volatility on index level but I don’t see strong reasons for changing the existing strategy. I will continue to buy and will aim to make at least one purchase per month for the main portfolio. For the secondary portfolio I’ll probably make one small purchase per month or one per quarter at the minimum. ETF portfolio will get a small buy each month and will be funded from the primary portfolio dividends.
I’ll keep an eye on few things: high yield companies with reasonable debt loads (as we might see mainly sideways movement for the next couple of years), quality companies with significant cash positions (which might be thrown overboard when the overall market tanks and which are in great position to deploy cash during a downturn) and advanced technologies such as brain-machine-interfacing, fuel cells & hydrogen economy. High yielding candidate could be e.g. Apple Hospitality REIT or Nordea Bank. Quality companies with significant cash positions would be the likes of Apple Inc. or Berkshire Hathaway. Advanced technologies will be much more difficult to cover. NEL is obvious candidate and it might be accompanied by PowerCell Sweden. Brain-machine-interfacing will require extensive analysis if I intend to find a suitable for addition for the secondary portfolio.
Another quarter passed with pleasing results. Dividends received consisted only of US dividends an totalled a nice 900,76 USD. Last year Q3 dividends were 680,11 USD in total. Primary portfolio value increased 9,65% during the quarter. Four purchases in three companies were made for the primary portfolio: Apple Hospitality, Telia Company and Europris. None of the existing equities were sold. Solid quarter even though the trade war is still very much in play and Euro zone problems are starting to raise their ugly heads once again.
Second quarter is over without any major new developments but ongoing issues are plenty to handle – trade war debate is going strong, European Union has plenty of political problems stemming from immigration issues and North Korea is still looming in the background. Given these issues the quarter was quite stable for both of my portfolios: roughly 6% capital gains in value (compared to previous quarter) and 1 824,24 EUR in pre-tax dividends.
First quarter was red one and surprisingly full of event as the trade war rhetoric increased towards the end of the quarter. Other than that there wasn’t really major changes in the portfolio – mainly unplanned Apple and Citycon purchases, exits from General Mills and Yara and move into portfolio maintenance mode. In general these events have been the long awaited for market correction – on personal level that is. Global economy will be hurt from such stupidity but it’s robust enough to survive the way it always has. Meanwhile we are getting closer to valuations triggering once again multiple purchases. Let’s see if we get there during the next quarter, until then I’ll remain in maintenance mode.
Dividend income increased quite nicely from 929,31 EUR to 1 224,73 EUR (before taxes). This consisted of new purchases but also from quite solid dividend increases from existing positions. This dividend income together with new capital has reduced the portfolio debt quite quickly. If there are no surprises I expected to eliminate portfolio debt during third quarter.