This is my 2018 semi-annual recap and June 2018 dividend income update on the FFJ Portfolio. This portfolio was created in January 2017 for the purpose of demonstrating how investing in well managed companies with competitive advantages can assist investors in reaching their long-term financial goals without the need to speculate or to chase dividend yield.
In early January 2017 I created the FFJ Portfolio by hiving off a portion of our investments I was prepared to publicly disclose. The purpose of creating this portfolio was to demonstrate how investing in ‘sleep well at night’ companies could generate a reasonable level of capital appreciation and dividend income…without having to chase dividend yield. I further wanted to demonstrate that there is no need to be actively trading stocks if you invest in well managed companies with the view of holding same for the long-term.
These are the investment criteria I laid out at the time I created the portfolio.
- invest in well-established companies. I have learned through experience that I sleep better at night owning these types of companies versus speculative entities. I, in fact, actually look forward to market downturns. My reasoning for this is that the companies in which we invest are usually the first to recover when conditions improve, and I prefer buying things when they are on sale (including the shares in wonderful companies).
- focus on companies with a long-term track record of paying an increasing stream of dividends. I have and will continue, however, to occasionally make an exception if I am confident the company will introduce an attractive dividend policy. Examples of such investments I have made include VISA (NYSE: V) which we acquired shortly after the IPO, and Broadridge Financial Solutions (NYSE: BR) and CDK Global (NASDAQ: CDK). We acquired shares when these two companies were spun off from ADP (NASDAQ: ADP). Shares in these 4 companies are held in other investment accounts and not in the FFJ Portfolio.
- shy away from companies in the broker/media limelight. I am always concerned when investor expectations are raised to excessive levels. The reasoning for this is that failure to live up to expectations can result in plunging stock prices and recovery may not occur.
- invest in companies within the 5 main economic sectors (Utilities, Finance, Consumer, Manufacturing and Industry, Resources and Commodities). My rationale for doing so is to avoid excessive exposure to a particular segment of the market and also to lessen portfolio volatility.
- do not purchase bonds or other fixed return investments. I would rather be an “owner” than a “lender”. Should interest rates ever return to 1980 – 1981 levels, however, I would revisit the possibility of investing in such instruments.
- I abhor paying unnecessary fees, and therefore, do not invest via mutual funds or ETFs (with the exception of a nominal amount held in an ISHARES Global Energy ETF).
- separate all investments from protection. What I mean by this is that I will not own any Universal Life Insurance policies where insurance and investments are combined into one product.
This is what the FFJ Portfolio looked like at the time of launch.
When I launched this portfolio I had set a FY2017 dividend income target of CDN $7,000 and US$11,000. During 2017, however, I made various additional investments and by the end of 2017 actual dividend income came in at CDN$12,289.89 and USD$12,965.33. Based on my 2017 actual results, I set a 2018 dividend income target of CDN$13,200 and USD$15,200.
In February 2018, I decided to segregate from the core portion of the portfolio some additional investments I intended to make. I, therefore, created some ‘side’ accounts and the FFJ Portfolio. As at the end of the first 6 months of 2018, YTD dividend income has reached CDN $6888.76 and USD $8,372.06 in the core portion of the portfolio and CDN $1,256.94 and USD $828.55 in the ‘side’ portion of the portfolio; total YTD dividend income is CDN $8,145.70 and USD $9,200.61.
June 2018 Activity and Holdings
In June, the holdings in the core segment of the FFJ Portfolio generated CDN $944.85 and USD $2,691.93 and the ‘side’ accounts received CDN $182.00 and USD $620.55 in dividend income.
The acquisition of additional equities for the FFJ Portfolio during June was kept to a minimum as I am of the opinion that the companies which appeal to me are excessively overvalued. The only addition to the FFJ Portfolio during the month was the acquisition of 50 FedEx (NYSE: FDX) shares.
On June 20th I wrote an analysis on the company in which I indicated that based on FY2019 guidance from management and a pullback from its recent high of >$265, I was interested in acquiring additional FDX shares. The shares have pulled back slightly subsequent to my purchase but I am confident FDX will be far more valuable several years into the future.
Revised 2019 Dividend Target
Based on YTD income for the first half of 2018 it is readily apparent my annual dividend income will exceed the targets I set at the beginning of the year; I do not anticipate any of the companies held in the FFJ Portfolio will cut their dividend. As a result, I am revising my annual dividend income target to CDN $17,500 and USD $19,000.
That’s my roundup for June. Here’s hoping you made progress on your journey to financial freedom!
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