#109 Portfolio Purchase

I thought Brexit was the 'big' thing that we'd live through for a while... well Covid-19 certainly tops that doesn't it.

Dividends are being cut left, right and centre. However, I am going to plough on in the hope that the companies I invest in remain solvent and return to earnings and dividends growth in a few short years.

Tomorrow I will invest the next £200 from my bonus 'dividend portfolio' cash. A new purchase will follow every 2 weeks until that money has used.

Focus remains on building the size of the portfolio, in terms of quantity of companies, until I have a minimum of 15 (currently 10 - although 1 of those is significantly smaller and purchased prior to all of this. So 9 in reality).

I've got 9 stocks on my watch list.

AHT  / BRBY / CPG / DCC / MGGT / MNDI / PRU / RB. / SMIN

6 of these are ruled out at the moment as I own companies within their sectors already

AHT, CPG, DCC = same sector as BNZL
RB. = same sector as BWY
PRU = same sector as LGEN
BRBY = same sector as ULVR

Obviously, some of these have a higher degree of overlap than others. However, for simplicity sake, and whilst I have other options, I am putting them to one side.

That leaves MGGT, MNDI and SMIN

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Meggit (MGGT). Aerospace and Defence sector, one where I hold no shares.

High performance engineering company supplying predominantly to aircrafts.

Obviously available (283p) at a massive discount to 52-week high (701p) with 196p the 52-low.

Market cap of £2.2bn means it's 98th on the FTSE100 rankings and a possible relegation looms.

Dividends

Potential yield at current price is 6%
Dividends paid since 2000 with 11 years of consecutive annual growth. Growing at over 4.9% per annum over the last 5 years.
Div Cover is a more than healthy 2.05

Financials:

I don't really know what I'm doing in this area. But lots of reading over the years has led me to focus on a couple of core things.

1. Are Earnings Per Share (EPS) consistently growing? YOY EPS growth 5+ year
1. Grown in 2 of the last 5 years. 👎
2. Are they paying out too much on dividends? Payout Ratio <60%
1. 56% 👍
3. Is the ratio of share price to earnings sufficiently low enough? PE ratio <18
1. 7.21 👍 
4. Is the Gross and Net Operating profit high enough? Gross 20%> Net 5%>
1. 👍Gross average is above 40%, Net above 14%
5. Debt levels? Current Ratio >1 & Debt:Equity <1
1. 1.8 and 0.49 respectively 👍

Conclusion:

A solid potential, ticking every box other than EPS growth. Perhaps the yield on offer would make this a worthwhile risk.

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Mondi (MNDI). In Forestry and Paper sector, where I currently have no shares. To be honest I wasn't aware this was a sector.

Manage forest and produce pulp, paper and plastic films.

Current price is 1,383p
52-high 1,861 and 52-low, 1,156

Market Cap of £6.71bn, 50th~ in the FTSE100


Dividends

Potential yield at current price is 5.4%
Dividend paid since 2008, 11 years of consecutive dividend growth. Growing at over 13% per annum.
Div Cover is a more than healthy 2.06

Financials:

I don't really know what I'm doing in this area. But lots of reading over the years has led me to focus on a couple of core things.

1. Are Earnings Per Share (EPS) consistently growing? YOY EPS growth 5+ year
1. Grown in 4 of the last 5 years. 👍
2. Are they paying out too much on dividends? Payout Ratio <60%
1. 40.8% 👍
3. Is the ratio of share price to earnings sufficiently low enough? PE ratio <18
1. 8.78 👍 
4. Is the Gross and Net Operating profit high enough? Gross 20%> Net 5%>
1. 👍Gross average is above 43%, Net above 14%
5. Debt levels? Current Ratio >1 & Debt:Equity <1
1. 1.05 and 0.37 respectively 👍

Conclusion:

Literally, MNDI tick every box on my screen and coupled with a 5.4% yield and a history of really impressing dividend growth, going to take something to beat this.

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Smiths (SMIN). General Industrials sector. I do not own.

Tech firm for Medical tech, Aerospace, Energy, General & Security.

Current price is 1,126. 52-high is 1778 and 52-Low is 790.

Market Cap of £4.86bn putting them 80th~ in the FTSE100

Dividends

Potential yield at current price is 3.76%
Dividend paid since 2000, 10 years of consecutive dividend growth. Growing at 2.6% per annum.
Div Cover is a 1.49

Financials:

I don't really know what I'm doing in this area. But lots of reading over the years has led me to focus on a couple of core things.

1. Are Earnings Per Share (EPS) consistently growing? YOY EPS growth 5+ year
1. Grown in 3 of the last 5 years. 👍
2. Are they paying out too much on dividends? Payout Ratio <60%
1. 55% 👍
3. Is the ratio of share price to earnings sufficiently low enough? PE ratio <18
1. 16.31 👍 
4. Is the Gross and Net Operating profit high enough? Gross 20%> Net 5%>
1. 👍Gross average is above 45%, Net above 15%
5. Debt levels? Current Ratio >1 & Debt:Equity <1
1. 2.94 and 0.64 respectively 👍

Conclusion:

I like SMIN. The EPS over the last five years, whilst grown 3 out of the 5, does appear to be trending down which is a cause for concern. Low dividend growth over the previous 5 years too coupled with a lower starting yield.


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Decision

Tomorrow morning I will purchase MNDI as my 10th main company for my dividend portfolio.

This graph of historical EPS growth across the 3 companies particularly impressed me.

*Update*

• 15 shares were purchased in MNDI for a total price of £208.41. 
• Average cost per share of £13.89.
• MNDI now make up 10% of my portfolio by holding value
• And add £10.95 in potential annual dividends, taking the portfolio annual expected dividend over £100 to £102.95

#108 Dividend Portfolio Updates

Aim is to have a portfolio of at least 15 companies, therefore reducing the weighting/risk on any individual company to below 10% of value of portfolio.

Therefore, given the size of my portfolio I will not be looking at topping up existing holdings, even though some prices look very tempting, but instead will add in 7 more holdings with the £1,400.

Let's rattle through what I've reviewed so far, and the shortlist...

First off, those big or often touted companies I am not currently going to invest in...

Why not? Average Payout Ratio Too High over last 5 years;
BAE Systems BA.
Vodafone VOD

Standard Life Aberdeen SLA

Centrica CNA

Imperal Brands IMB

Royal Dutsh Shell RDSB

BP BP.

GlaxoSmithKlein GSK

Why not? Broken Dividend Payments in previous years;
Persimmon PSN

So who am I considering..

Have looked into in detail and almost happy to proceed...
AHT - if yield is above 2.5%
JMAT
DCC
BATS - if I can get over investing in Tobacco and am happy with debt (current ratio)
HLMA - if yield is above 2.5% (unlikely)

Appear promising but haven't gone into enough detail...

BRBY
RMV - if yield is above 2.5% (unlikely)
SMIN
MGGT - if I am happy with EPS history
NXT
VCT
RB.
WPP
BT.A

Today I'll only focus on the one's I've looked into in detail, and so max I'll do is 5 investments out of the 7.

However, on todays prices both AHT (2.4%) and HLMA (0.89%) are below my minimum target yield of 2.5% and so the max is 3 out of 7 purchases.

BATS - yield of ~8.4%

High yield, great dividend history (20 years+ increasing dividends), low PE ratio, good Payout ratio, good EPS growth history, great operating margins... 2 fly's in the ointment 1) Tobacco is surely dying out and 2) current ratio debt is high.

However, I'm going to be a bit more risky than normal and proceed with this based on the fact that if it wasn't Tobacco this would be a sure-thing and I'll put faith in the size and scale of the business being able to adapt.

Purchased 8 shares for a cost (inc fees) price of £25.89 per share producing a yield on cost of 8.11% and adding £16.80 to my expected annual dividend, taking the total too £82.61.

DCC - yield of ~2.9%

Whilst it looks very good it is within the Support Services sector, of which I already own BNZL. I am not too precious about over-weighting this way, but I think it makes sense to spend more time reviewing this before proceeding.

No purchase.


JMAT - yield of ~4.5%

Operating in Chemicals sector. They break themselves down into 4 global areas; clean air, efficient natural resources, health and new markets.

Great dividend history (20 years+ increasing dividends), nice low payout ratio and PE, operating margins are lower than I'd like, but the have good dividend cover and low debt.

No real concerns about these guys, will purchase.

Purchased 11 shares for a cost (inc fees) price of £19.18 per share producing a yield on cost of 4.46% and adding £9.41 expected annual income to my portfolio, taking the total to £92.01.

Not far from £100 expected annual income. However, we'll see how Covid-19 decimates the dividends. Have to remember I am investing for the long game.

Getting closer to the 15> portfolio and have made great strides in March.

#107 Bonus Usage

The world is going through an immense battle with Covid and everywhere it is all I can see or hear. I fear for a lot of things, but truly believe we can come out of this better.

To distract myself - and I realise how fortunate we are to be considering this - I am reviewing my options for what to do with the annual bonus.

Luckily, I am right at the outset of my investing journey and so this is probably an opportunity to invest at a comparative bottom of the markets.

Tomorrow I will receive my bonus of £8,666.

£1k of that will be given to the wife for her to do with as she pleases.

£5k of that will be added to our emergency fund. Coupled with the £4.7k that was put aside for our summer holiday - no longer going to happen - that will take us to £14.7k cash in our emergency fund. Coupled with the fact that I've got a 3 month notice period which would be tax free.. any concerns about redundancy following the economic affects of all of this should be minimal now. Very lucky.

So what to do with the remaining £2,666....

My initial thought was to plow it all into my dividend portfolio. However, I do thoroughly believe that over time global index funds will be the best place for my long term investments. So I want to stick to at least 50% of my equity investments in that.

Currently I have a dividend portfolio worth £1,200~. It is entirely likely or possible I will not be in a position to add in any further cash over the next 12 months.

My Global Index fund currently has 0 invested, but a monthly direct debit of £200, with the 1st installment coming in April. Therefore in 12 months I expect to have invested £2,400.

So currently I am over-weight on my dividend portfolio, but expect to have twice as much within the Global Fund in 12 months time.

Maybe it's best to just split it in 2. £1,300 for the dividend portfolio and £1,300 to be drip fed into Global fund.

With my current approach of investing £200 per position in the Dividend portfolio, this would allow me to buy into 6 more companies, 7 if I took £1,400. That would take me 14 companies which is roughly what I am looking to get too (between 15-20) to spread the risk.

So £1,400 into dividend portfolio... and £1,200 into the Global Fund it is then....

I'll drip the £1,200 Global Fund money in 6 £200 installments every month, sandwiched between my current direct debit.

Now to decide on where and when to put that £1,400...

#106 New Company; ULVR

Shopping spree continues. I have £400 left from my unexpected expenses. This feels like I'm just splashing the cash on fun items, but it's certainly better to invest it this way rather than spending on headphones (my other idea) !

I quickly scanned 20~ companies and decided to do a deep-dive on Unilever, ULVR.

Info:
A stock I don't own in a sector (personal goods) I do not own.

It's brands include Dove, Magnum, Lipton, Hellmans.

The largest company on the FTSE100 by Market Cap. About 1/10 the size of Apple.

Sounds like a very defensive company and quarterly dividends sounds aligned to that.

Share price 52-week high is £53.33 per share. 52-Low is recent £40.21. Currently available just under £41.27.

Dividend Record: 

Over 20 years of consecutive dividend growth. Growing at over 5% per annum. Whist the Div Cover dropped below my threshold last year, it was above for the previous four.

Financials:

I don't really know what I'm doing in this area. But lots of reading over the years has led me to focus on a couple of core things.

1. Are Earnings Per Share (EPS) consistently growing? YOY EPS growth 5+ year
1. Grown in 4 of the last 5 years.
2. Are they paying out too much on dividends? Payout Ratio <60%
1. Was lowest in 2019 than for a long time, has in most prevoius years been jsut above 60%, which I wouldn't like. However, it does seem this is fairly normal for a defensive stock.
3. Is the ratio of share price to earnings sufficiently low enough? PE ratio <18
1. On the money, would prefer them to be cheaper, but 18.24 is within acceptable bounds. 
4. Is the Gross and Net Operating profit high enough? Gross 20%> Net 5%>
1. ✅Gross average is above 40%, Net above 16%

Conclusion:

The scale of the company and the position they are in, coupled with the consistency of their dividend track record makes me feel this one is a fairly low risk decision to BUY.

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So ULVR were added to my portfolio, bringing the total up to 5 decent companies.

5 shares were added for a cost including fees of £212.48, an average price per share of £42.50. A yield of 3.84%

This adds £8.15 expected annual dividends to my portfolio, taking the total annual expected dividends too £42.44.

ULVR now represent 20% of my portfolio based on Value and 19% based on income.

I'll receive dividends on a quarterly basis, starting in June.

FYI
I use this website for financial date review; http://financials.morningstar.com/ratios/r.html?t=xlon:ulvr
And this one for the historical dividend date review:  https://www.dividenddata.co.uk/dividend-history.py?epic=ULVR

#105 2 Additions to the Portfolio

Following my recent review and recommended BUY for BWY, BNZL and DGE and my subsequent purchase of BWY. I decided to put more money into my portfolio.

I have convinced myself that this is because the sooner I get my portfolio up to 10+ companies I'll have lowered the risk because it will reduce the weighting of any one company to circa ~10%~

In reality this is probably because a) I'm excited by increasing the size of my portfolio and b) because I had an extra £1k come to me from old work expenses which I had completely forgotten about :)

So I invested in the remaining two companies that I had decided I would BUY; BNZL and DGE.

Currently, based on the amount of available cash I have and expect to have going forward I'm starting with intitial purchases of £200~ per company.

Here's the data behind the deals and update to my portfolio.

I completed these two purchases on Monday 9th March - ie the day that the markets crashed due to the oil price and continued coronovirus.

BNZL 

Purchased 12 shares for £218.15 including fees. This averages out at a cost of £18.18 per share.

Pretty happy with this price. Their 52-week high is £25 and 52-week low is £17.48.

This adds £6.16 expected annual dividend to my portfolio. It'll be nice when these numbers are more significant. I have to accept I am at the very beginning of a long journey.

That expected £6.16 annual dividend equates to 18% of my expected portfolio annual income.

At the cost price and expected annual dividend this purchase provides a yield of 2.82%

I will first benefit from a dividend in July this year.

DGE

Purchased 7 shares for £189.18 including fees. This is an average cost of £27.03 per share.

Again this is far closer to the 52-week low (£25.69) than it is the 52-week high (£36.33) so happy with price.

 This adds £4.80 to my expected annual returns. Which equates to a 14% weighting within my portfolio expected annual returns.

At the cost price and expected annual dividend this purchase was at a yield of 2.54%

The first dividend I'll receive will be in October this year. Sadly I missed the ex-div for their April payment by a matter of weeks.


Overall Portfolio

I have now invested £1,035 in purchasing shares.

My RPC shares were sold for £190.32, crystallizing an £8.75 loss exc received dividends. This was because the company was taken over, disappointing but I'm sure I'll have bigger lows to come on this journey.

The remaining 41 shares I own are currently valued at £842.50. This is -£2.18 than I purchased them for.

My total expected annual dividend is £34.29. This equates to a yield on the portfolio purchase price of 3.31%

#104 March Dividend Portfolio Decision

Exciting times. I'm buying shares again!!

Last time out I reviewed BNZL, DGE and BWY.

All three ticked the box and were recommended to buy.

BNZL wins the dividend history.
BWY wins the best recent increases in EPS.
Dividend cover and payout ratios are all positive and drawn.
BWY wins with the lowest (almost half) for the Price to Earnings ratio.
DGE trumps the others with significantly the largest operation margins.

They all have HL Broker consensus of Buy.

In the end I'll probably purchase all three fairly soon. So it's a case of if the underlying businesses are buy-able, which one offers the best return now.

According to my spreadsheet, based on current yield and average dividend growth in the last 5 years BWY offers significantly higher returns over the next 10 years.

I have a slight concern that their market is UK property whereas the other two are global and more diversified. But that really isn't part of my screening and shouldn't cloud my judgement.

So BWY were purchased. 

I purchased 5 shares at a total cost, inclusive of charges, for £190.91. Working out at an average per share cost of £38.38.

This takes my forecast annual dividend payments from £15.83 up to £23.33.

#103 March Dividend Purchase Review

It seems rather grandiose of myself to say this, but if anyone reads this - this is for my own purposes, it is my own research, and frankly I have no idea what I'm doing. So please don't take this as financial advice or sue me when everything goes Pete Tong. 

3 stocks reviewed for my first dividend portfolio stock purchase since March 2018.

Bunzl - BNZL
Diageo - DGE
Bellway - BWY


#1 BNZL


Info:
A stock I don't own in a sector I do not own, hardly surprising though as I have a portfolio of 2 currently.

Support services sector. Global company. Products distributed include machinery & safety and hygiene equipment for food processors and chemicals, packaging and disposable tableware for caterers and retailers.

So sounds boring as hell. Delightful. Never previously reviewed.

Share price 52-week high is £25 per share. 52-Low is recent £19.80. Currently available just under £20.

Dividend Record: 

This is what drew me to them in the first place.

27 years of consistently paying and increasing their dividend. With an average annual growth of 7.7% over the last 5 years, although 2019 was their lowest with only a 2.19% growth.

A current yield of 2.6% is just above my guide of 2.5%. Overall 👍

Financials:

I don't really know what I'm doing in this area. But lots of reading over the years has led me to focus on a couple of core things.

1. Are Earnings Per Share (EPS) consistently growing? YOY EPS growth 5+ year
1. ✅ They've grown YOY for the last 7 years.
2. Do they have sufficient Dividend Cover? Div Cover 1.5>
1. ✅ 2.6
3. Are they paying out too much on dividends? Payout Ratio <60%
1. ✅ Averages 48% over last 7 years. Never been above 53%
4. Is the ratio of share price to earnings sufficiently low enough? PE ratio <18
1. ❌Share price has been a bit up and down lately, mainly due to Coronovirus probably. Unfortunately, currently sitting at 19. 
5. Is the Gross and Net Operating profit high enough? Gross 20%> Net 5%>
1. ✅Averages of 24% and 5.7% for the last 3 years. So not massively over, but ticks the box.

Conclusion:

Strong dividend history, no reason to expect this to change based on cover and payout ratio.
Financials all look good, if the margins are only just above the guide I've set myself. PE ratio slightly above too
But in the end a big 👍 for BNZL from me. This is a recommended BUY for me.


#2 DGE

Info:
A company I don't own within a sector (Beverages) I don't own.
A global alcoholic drinks company with brands such as Smirnoff, Johnnie Walker & Guinness.
Previously reviewed in March 2018 and marked as WATCH. I was aiming for higher yields back t✅✅✅hen.


Dividend Record:

Dividends have increased YOY since 1998, 22 years at present.

Over the last 5 years averaging an increase of 5.4% annually.

Price is currently £27.81 which is the lowest it's been for 14 months. 52 week high is £34.58

Current yield is 2.5% so meeting the guide in my screen.

Overall very positive. 👍


Financials:

1. Are Earnings Per Share (EPS) consistently growing? YOY EPS growth 5+ year.
1. ❌They've increased YOY for the last 4 years. 2015 saw a slight decline from 2014.
2. Do they have sufficient Dividend Cover? Div Cover 1.5>
1. ✅2019 was 1.91 but consistently above 1.5 for previous 5 years.
3. Are they paying out too much on dividends? Payout Ratio <60%
1. ✅In the last 2 years no. But they have in 2 of the previous 5 years paid out >60%. 62 and 66% so not hugely over.
4. Is the ratio of share price to earnings sufficiently low enough? PE ratio <18 
1. ❌ currently at 21.66
5. Is the Gross and Net Operating profit high enough? Gross 20%> Net 5%>
1. ✅This is where they trump BNZL. Gross is on average 60% over last five years. Net 30%.

Conclusion:

Really strong dividend history, which based on cover and payout ratio appears sustainable. Really good operating margins. EPS and PE ratio only negatives.
But in the end 👍 I'd be more than happy to invest here. Recommended a BUY for me.

#3 BWY

With 2 recommended buys can Bellway make it a hat-trick and make my decision even harder for where to invest next?

Info:
A company I do not own, in a sector I do not own. A UK residential property developer.
Previously reviewed by me in March 2018, with a BUY recommendation.

Dividend Record:

Dividends increased YOY for the last 12 years. However, they were reduced in 2008 and 2009. Unlike the DGE and BNZL.

YOY increases for the last 5 years has averaged nearly 25%. However, this has tailed off to only 5% in the previous year.

Share price is currently £36.77. 52 week high is £43.36 and 52 low is £26.56.

Current yield is the highest of the 3 reviewed today @ 4.1% nearly two thirds higher than the other two. Overall 👍


Financials:

1. Are Earnings Per Share (EPS) consistently growing? YOY EPS growth 5+ year
1. ✅ Increased YOY for last 10 years.
2. Do they have sufficient Dividend Cover? Div Cover 1.5>
1. ✅ Average is 2.9 over last three years.
3. Are they paying out too much on dividends? Payout Ratio <60%
1. ✅ Averages 30% over the last five years.
4. Is the ratio of share price to earnings sufficiently low enough? PE ratio <18 
1. ✅ Very low, 8.60
5. Is the Gross and Net Operating profit high enough? Gross 20%> Net 5%>
1. ✅Gross margin averages 25% for last 5 years. Operating margin around 21% 

Conclusion:

Somehow I've got a hat-trick it seems. Good dividend history and solid financials. The only one of the three companies to tick all 5 of my financial questions.
Decision: recommended a BUY. 👍

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So I end the review with 3 companies I'm recommending to buy. Great news I'm happy to invest. Now to decide where....

#102 February Spending & Money Update

February Income vs Spending

	Feb '20
Gross Income	£6,912.71
Total Tax and NI	£1,995.94
Total Variable Spending	£2,533.28
Total Fixed Spenging	£1,497.41
Total Short Debt Repayment	£0.00
Net Income pre Fixed Savings	£886.08
Savings Rate (%) pre Fixed Savings	13%
Fixed Savings	£941.38
Net Monthly Cash	-£55.30
Cash Savings Rate (%) Post Fixed Savings	-0.01

Commentary:

Variable spending slightly too high so need to keep an eye on that, especially with known increases for the monthly fixed savings due to start in March (Kids ISAs etc).

Income boosted by £85 in train compensation and company returns.

Tax and NI same as usual.

Variable spending of £2,533 was £282 over the average for the last 12 months (£2,251).

This seems mainly due to a number of bills landing and us spending about one big shop more than usual on groceries.

No cancel tax this month, or in March, so fixed spending down slightly.

February Wealth Update

• £341.38 paid by me into my workplace pension.
• Value dropped a bit with the markets, currently £48.8k
• £100 added into my SIPP
• Value also dropped a bit with markets, currently £2.1k
• £500 paid into my workplace sharesaves, of which £300 is ring-fenced for holidays.
• Currently values;
• £1.9k in equity investments
• £5k emergency cash savings
• £9.5k in rolling accounts for holiday spending for 2020,21,22 & 23