One man's journey to financial independence.
I submitted an article last week on seeking alpha regarding one of my methods of picking stocks that uses a 10-year Yield on Cost (YOC).
You can find the article here:
http://seekingalpha.com/article/457581-evaluating-dividend-yield-and-dividend-growth-rate-over-time
When I want to initiate a position in a company I like to split it up into a few purchases every 3 or 6 months to average the price in over time. This is my second purchase of Norfolk Southern Corp. (NSC). I purchased 16 shares at 65.36 this morning so my average cost is 67.22.
I wanted to add to my position for a few reasons:
I wanted to further increase my exposure to Transportation
They are a 22B market cap company with a dividend of 2.9%.
They have a 5-year CAGR of 19.08%
They have increased dividends yearly for 10 straight years. They actually have been increasing dividends about every 6 months.
I believe the loss of revenues from coal are already priced in and this provides for an attractive entry point.
Their earnings estimates for 2012-2015 are 5.81, 6.53, 7.26, 8.06 according to E-Trade.
Railroads provide the cheapest forms of transportation for many goods and this isn’t expected to change.
So one of my strategies is to buy stocks that I believe will have a YOC (Yield On Cost) of at least 10% after 10 years. See Mathematics tab if you want to know how to calculate this yourself.
For example: Let’s take a purchase I initiated earlier this year of NSC. It’s currently yielding 2.9%. It has a 5-Year DGR (Dividend Growth Rate) of 19.08%. If that continues then the 10 year YOC would be 16.63%, much higher than the 10% I look for. However, I don’t count on them keeping it quite this high. The 3-year DGR is 10.98%. Using this I would get a 10-year YOC of 8.22%. I would expect the DGR to be somewhere between those numbers.
I just purchased an additional 25 shares of Verizon Wireless (VZ) today.
This will be my first post and I just want to share some of my goals for this year.
I want to aggressively grow my portfolio this year to a point where my yearly dividend income will be $2000. I’m building a cash account to use as my “dry powder.” I will be watching a lot of dividend payers with long histories of increasing dividends. This list will typically be from the Champions, Contenders and Challengers list made courtesy of David Fish. The website is located here.
I will be posting any new additions or sells that I make and some reasoning. I currently use an options account for selling puts against some companies I’d like at a cheaper price. If any of these get assigned I will mention them also.