And the
buying process goes on. Last Friday I bought 25 shares of the business services
stock Automatic Data Processing (ADP). The purchase is the first one with a yield of less than 3%. As you might see, high quality stocks getting rare, especially when you look for high yielding growth picks with cheap fundamentals.
What Automatic Data Processing Makes
ADP provide
business outsourcing solutions. The company operates in three segments:
Employer Services, Professional Employer Organization (PEO) Services, and
Dealer Services. The Employer Services segment offers a range of human resource
(HR) information, payroll processing, time and labor management, and tax and
benefits administration solutions and services, including traditional and
Web-based outsourcing solutions
How Automatic Data Processing Affects The Dividend Yield Portfolio
The total
purchase amount was $1,546.25 and will give me roughly $40 in additional annual dividends for my Dividend Yield Passive Income Portfolio (DYPI). The full
income, estimated on a twelve-trailing months basis, amounts to $1,176.17.
The income results
from 22 stock holdings, each worth around $1,000 – $2,000. The total purchase
amount was $31,514.50. Now they have a market value of $33,298.70. The
remaining cash of $68,656 is still available for white elephants.
I plan to
hunt for real bargains, which are very rare for the time being. I also believe
that I don’t have big bargains in the DYPI-Portfolio because of the market
situation. We are in a time of monetary easing. As a result, financial assets
like stocks, gold or even bonds have a solid to fair valuation. Maybe they are overvalued if we
include all the downside risks from this dangerous quantitative federal policy.
I cannot tell you how it will end but it should have definitely a consequence
for the currency.
The
DYPI-Portfolio was funded virtual with $100k on October 03, 2012 and made a
return of 1.63% since the date of funding. The performance is so low compared
to the market because of the huge cash amount and the slow purchase process (I invest each week only 1-2% of the cash). Roughly 68% of the fund is not invested.
I ever told that this strategy of buying
each week a stock for 1-2% of its portfolio worth will lose performance if the
market goes strong up but my thoughts with this asset vehicle are different.
 |
| Dividend Yield Passive Income Portfolio Overview (Click to enlarge) |
 |
| Latest Portfolio Transactions (Click to enlarge) |
I don’t
like to show you how you can make fast money and get quick rich. I only like to
show you how long-term dividend growth investing works.
Over the recent decade, I made a six-figure gross gain with stock trading, mainly with dividend stocks - Dividends were responsible for nearly one-third of my overall performance. Now, I live off dividends.
What you need is a long-investment
horizon and patience with your philosophy. Values will not born overnight. They
will be created over years and decades. And the biggest value creators are
those stocks with a trustful and loyal management and a solid growing
environment.
The market conditions are very important if you want to realize a
return of 5% or 15%. In some industries, it is very hard to make money as a
small player. I think about highly regulated industries like the telecom
carriers or even utilities. I you invest your money in those stocks you can have the best
skipper but if the sea is rough and windy, you have a tough fight for your
return.
The Total Return Of The Dividend Yield Passive Income Portfolio
The stock holdings
of the portfolio alone generated a return of 4.63%. That’s in line with the
broad market gain especially when we consider the lower volatility and higher
dividends.
 |
| Dividend Yield Passive Income Portoflio Performance (Click to enlarge) |
What Current Yields Are Generated By The Portfolio?
The average
yield of the portfolio is now 2.53% because of the small capital gain. The
yield on cost, dividends calculated on purchase amounts, is 3.71%.
I believe
that its possible to boost the dividend income to a total value of 3,000 – 4,000
by the end of the year 2013. With $68k in cash I must buy stocks around the 3%
percent mark.
A Hard Fight For Stock Bargains With Good Dividend Yields
Good investments getting rare. Last week I thought about a
purchase of Coca Cola because of the high quality of the stock but I decided to
buy General Electric because of the higher yield. This was a false choice.
One
day, I must put KO shares into the portfolio - I hope for a better yield. ADP
was the first buy with a yield of less than 3% dividend yield. But I hope all
companies will increase their payments over the next twelve months. This would it make easier for me to realize the income aim.
Why Automatic Data Processing?
Automatic
Data Processing is valuated with a P/E of 22.10 and pays a yield of 2.82%. The
stock is a low beta stock (0.66 beta ratio) and has a solid, low cyclic and
well diversified business model. 85% of the annual sales come from Americans
nations and 12% from Europe. ADP is a Dividend Champion and hiked dividend
payments over 38 consecutive years.
 |
| ADP - Automatic Data Processing - Earnings and Dividends |
Interesting
is the low debt situation. As of Q2/2013, ADP had no significant long-term debt
but $1.4 billion in cash. The market capitalization was $30 billion. With this in
mind, the EV/EBITDA is at 11.7. Analysts predicting a growth in earnings for
the next years close to the double-digit mark. For me was this the reason to pull
the trigger.
Here is the
portfolio overview from the income perspective:
|
Sym
|
Name
|
P/E Ratio
|
Dividend Yield
|
|
Buy
|
# Shrs
|
Income
|
Value
|
|
TRI
|
12.27
|
4.2
|
|
28.90
|
50
|
$64.25
|
$1,524.00
|
|
|
LMT
|
Lockheed Martin C
|
10.53
|
4.89
|
|
92.72
|
20
|
$86.00
|
$1,763.40
|
|
INTC
|
Intel Corporation
|
9.8
|
4.24
|
|
21.27
|
50
|
$44.25
|
$1,051.50
|
|
MCD
|
McDonald's Corpor
|
17.89
|
3.07
|
|
87.33
|
15
|
$44.10
|
$1,435.20
|
|
WU
|
Western Union Com
|
8.3
|
3.03
|
|
11.95
|
100
|
$42.50
|
$1,426.00
|
|
PM
|
Philip Morris Int
|
17.75
|
3.57
|
|
85.42
|
20
|
$65.58
|
$1,828.80
|
|
JNJ
|
Johnson & Johnson
|
19.72
|
3.21
|
|
69.19
|
20
|
$48.80
|
$1,534.00
|
|
MO
|
Altria Group Inc
|
16.29
|
5.07
|
|
33.48
|
40
|
$68.00
|
$1,339.60
|
|
SYY
|
Sysco Corporation
|
17.67
|
3.39
|
|
31.65
|
40
|
$43.60
|
$1,299.20
|
|
DRI
|
Darden Restaurant
|
13.22
|
4.17
|
|
46.66
|
30
|
$57.90
|
$1,385.40
|
|
CA
|
CA Inc.
|
12.46
|
4.08
|
|
21.86
|
50
|
$50.00
|
$1,221.00
|
|
PG
|
Procter & Gamble
|
17.29
|
2.95
|
|
68.72
|
25
|
$56.20
|
$1,912.25
|
|
KRFT
|
Kraft Foods Group
|
17.63
|
4.12
|
|
44.41
|
40
|
$80.00
|
$1,942.80
|
|
MAT
|
Mattel Inc.
|
18.35
|
3.17
|
|
36.45
|
40
|
$51.60
|
$1,620.00
|
|
PEP
|
Pepsico Inc. Com
|
19.31
|
2.84
|
|
70.88
|
20
|
$43.00
|
$1,518.60
|
|
KMB
|
Kimberly-Clark Co
|
21.33
|
3.14
|
|
86.82
|
15
|
$44.40
|
$1,414.50
|
|
COP
|
ConocoPhillips Co
|
8.62
|
4.53
|
|
61.06
|
20
|
$52.80
|
$1,165.60
|
|
GIS
|
General Mills In
|
17.07
|
2.8
|
|
42.13
|
30
|
$38.85
|
$1,391.70
|
|
UL
|
Unilever PLC Comm
|
19.98
|
3.15
|
|
39.65
|
35
|
$43.89
|
$1,401.75
|
|
NSRGY
|
NESTLE SA REG SHR
|
19.67
|
3.01
|
|
68.69
|
30
|
$63.15
|
$2,074.80
|
|
GE
|
General Electric
|
17.97
|
3.1
|
|
23.39
|
65
|
$46.80
|
$1,507.35
|
|
ADP
|
Automatic Data Pr
|
21.4
|
2.64
|
|
61.65
|
25
|
$40.50
|
$1,541.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,176.17
|
$33,298.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Yield
|
3.53%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yield On Cost
|
3.71%
|