Kellogg Is The New Stock Holding In The Dividend Yield Passive Income Portfolio

On Friday 08, 2013 I put 25 shares of the processed & packaged goods company Kellogg into the Dividend Yield Passive Income Portfolio (DYPI). 

The total purchase amount was $1,543 at a stock price of $61.52. Kellogg represents now 1.47 percent of the full portfolio which was funded virtual with 100k on October 03, 2012.

Kellogg manufactures and markets ready-to-eat cereal and convenience food products primarily in North America, Europe, Latin America, and the Asia Pacific. It primarily produces snacks and frozen food, including cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles, and veggie foods. The company sells its products to grocery trade through its direct sales force, brokers, and distributors under the Kellogg's name.

The current dividend yield of Kellogg amounts to 2.86% and the P/E ratio has a value of 23.94. Growth is expected in earnings for the next years around the 7% percent mark. That’s solid in my view.

The new stake will hike my current dividend income by $44. The total gross income is now estimated at $1,221.97. I plan to boost the passive income to $3,000 – 4,000 by the end of the year. All I need to do is to invest the remaining capital of $67,127.40 into dividend stocks with a yield around the 3% mark.

Dividend Yield Passive Income Portfolio

Latest Portfolio Transactions

The Kellogg buy is the second stock purchase with a yield below the 3% yield. You can see that its getting hard to find stocks with a higher yield. If I have luck, the next hike can lift the current yield above the magic level.

For sure, high quality stocks have a high price and you must pay it or leave the battle field. In my view it is still a better choice to have high valuated stocks with a top long-term growth perspective as being invested in bonds with a longer duration. In times of rising interest rates and gaining inflation, your bond portfolio will definitely loose the ground. Dividend stocks like Kellogg force the inflation and get stronger with every recession.

Kellogg Earnings and Dividends

The full portfolio is up 2.2 percent since the date of funding. Major indices gained 3-6% during the same period. The lower performance is reasonable with a high cash amount and the slow purchase process. I buy only one stock a week for around 1-2 percent of the portfolio value. This strategy hedges me against falling markets and could give a better average price but will also lead to a worser performance if the markets go strong up. Unfortunately, this happened in the past. My stockholdings delivered a total return of 6.15%. That’s a pretty good ratio and in-line with the market.

Portfolio Performance

Here is the income perspective of the portfolio:

Sym	Name	P/E Ratio	Dividend Yield		Buy	# Shrs	Income	Value
TRI	Thomson Reuters C	12.34	4.18		28.90	50	$64.25	$1,536.00
LMT	Lockheed Martin C	10.62	4.84		92.72	20	$86.00	$1,799.80
INTC	Intel Corporation	10.28	4.04		21.27	50	$44.25	$1,079.00
MCD	McDonald's Corpor	18.11	3.03		87.33	15	$44.10	$1,480.65
WU	Western Union Com	8.52	2.95		11.95	100	$42.50	$1,463.00
PM	Philip Morris Int	17.76	3.57		85.42	20	$65.58	$1,822.20
JNJ	Johnson & Johnson	20.14	3.14		69.19	20	$48.80	$1,563.80
MO	Altria Group Inc	16.49	5.01		33.48	40	$68.00	$1,360.00
SYY	Sysco Corporation	17.95	3.34		31.65	40	$43.60	$1,330.80
DRI	Darden Restaurant	13.57	4.06		46.66	30	$57.90	$1,419.90
CA	CA Inc.	12.69	4		21.86	50	$50.00	$1,254.00
PG	Procter & Gamble	17.45	2.92		68.72	25	$56.20	$1,929.50
KRFT	Kraft Foods Group	17.83	4.02		44.41	40	$80.00	$1,988.40
MAT	Mattel Inc.	18.58	3.13		36.45	40	$51.60	$1,657.20
PEP	Pepsico Inc. Com	19.66	2.79		70.88	20	$43.00	$1,544.00
KMB	Kimberly-Clark Co	21.26	3.22		86.82	15	$45.45	$1,412.85
COP	ConocoPhillips Co	8.61	4.52		61.06	20	$52.80	$1,167.80
GIS	General Mills In	17.14	2.79		42.13	30	$38.85	$1,389.90
UL	Unilever PLC Comm	20.45	3.08		39.65	35	$43.89	$1,431.15
NSRGY	NESTLE SA REG SHR	19.97	2.96		68.69	30	$63.15	$2,125.80
GE	General Electric	18.33	3.04		23.39	65	$46.80	$1,545.05
ADP	Automatic Data Pr	22.09	2.62		61.65	25	$41.50	$1,583.75
K	Kellogg Company C	23.02	2.85		61.52	25	$43.75	$1,538.00
							$1,221.97	$35,422.55
							Average Yield	3.45%
							Yield On Cost	3.67%

New Stock For The Dividend Yield Passive Income Portfolio: Nestlé

I put last Friday 30 Nestlé shares into the Dividend Yield Passive Income Portfolio DYPI. Originally, I wanted to buy Heinz shares but Warren Buffett snaffled the stock via takeover at a 20 percent premium. I needed to look for global diversified alternatives. One stock that I don’t own for the DYPI-Portfolio was Nestlé.

I purchased the stock for the DYPI-Portfolio because it’s a long-term orientated approach and Nestlé is a must have asset for every dividend growth investor.

As a global leader in the food industry, Nestlé is not cheap. The current yield is around 3 percent at a P/E ratio of 20. The Enterprise Value to EBITDA ratio is at 11.8. That’s a fair ratio for low beta large caps from the beverage and food industry but not cheap if you want big returns. Interesting is the low leverage of around 1 compared to the EBITDA figure. Normally, it is possible for companies to hike the ratio at a level of 2-3. So, Nestlé could boost their debt in order to make acquisitions, increase share buybacks or to hike dividend payments.

Debt, Sales and EBITDA of Nestlé

The current position will give me around $63 in dividend income for the full year. The total amount of the dividend income is now at $1,052.83. I invested approximately $30,000 into 20 stocks, each position worth around $1,000 – $2,000. The portfolio becomes more and more diversified.

My strategy is to buy every Friday one company with solid dividend payments. I like to show how long-term stock investing works with focus on dividend growth stocks. By the end of the year 2013, the total number of stock holdings should rise to 50-70. As a result, the dividend income should increase to $3,000 - $4,000.

It's less the regular purchase time that matters. More important is to show that it makes sense to buy small positions over a long time because of the average cost ratio.

Well, the time is not optimal because stock market rose steadily over the recent years and we are close to ALL-Time-Highs. I buy in a growing market. That helps me to perform, but in markets which go strongly up, my strategy will underperform in the short-term.

I also expect well performing markets for the rest of the year. By the end of the year, the portfolio should be fully invested and could only make further investments with incoming dividends. If a stronger consolidation hits the market later, I shouldn't have enough fire power to hunt for white elephants. That's the disadvantage of the process. I personally would prefer it to buy into falling markets because with every trade i make, my average cost of the position is shrinking.

Portfolio Holdings (Click to enlarge)

Portfolio Transactions (Click to enlarge)

For the time being, I have still $71,703.15 in cash on my virtual funded portfolio. The current portfolio is up 4.3% since October 03, 2013 – the date of funding. The ratio is better than the performance of the Dow Jones, NASDAQ and S&P 500 for the same period.

Portfolio Performance (Click to enlarge)

Because of the slow purchase process (70 percent is cash), the full portfolio is only up 1.37 percent but has therefore a significant lower volatility.

Sym	Name	P/E Ratio	Dividend Yield		Buy	# Shrs	Income	Value
TRI	Thomson Reuters C	12.13	3.17		28.90	50	$48.00	$1,528.50
LMT	Lockheed Martin C	10.42	4.77		92.72	20	$83.00	$1,757.40
INTC	Intel Corporation	9.97	4.17		21.27	50	$44.25	$1,055.75
MCD	McDonald's Corpor	17.46	3.07		87.33	15	$43.05	$1,408.50
WU	Western Union Com	8.37	3.01		11.95	100	$42.50	$1,440.00
PM	Philip Morris Int	17.41	3.64		85.42	20	$65.58	$1,799.80
JNJ	Johnson & Johnson	19.64	3.17		69.19	20	$48.00	$1,523.20
MO	Altria Group Inc	16.57	4.98		33.48	40	$68.00	$1,375.20
SYY	Sysco Corporation	17.6	3.4		31.65	40	$43.60	$1,282.80
DRI	Darden Restaurant	13.01	4.24		46.66	30	$57.90	$1,354.50
CA	CA Inc.	12.81	2.98		21.86	50	$37.50	$1,252.50
PG	Procter & Gamble	17.43	2.93		68.72	25	$56.20	$1,913.50
KRFT	Kraft Foods Group	14.4	4.24		44.41	40	$80.00	$1,886.80
MAT	Mattel Inc.	18.53	3.01		36.45	40	$49.60	$1,633.96
PEP	Pepsico Inc. Com	19.25	2.94		70.88	20	$42.56	$1,473.60
KMB	Kimberly-Clark Co	20.41	3.28		86.82	15	$44.40	$1,368.00
COP	ConocoPhillips Co	8.62	4.63		61.06	20	$52.80	$1,140.40
GIS	General Mills In	16.35	2.92		42.13	30	$38.85	$1,337.70
UL	Unilever PLC Comm	20.13	3.12		39.65	35	$43.89	$1,392.65
NSRGY	NESTLE SA REG SHR	20.68	3.06		68.69	30	$63.15	$2,060.70
							$1,052.83	$29,985.46
							Average Yield	3.51%
							Yield On Cost	3.67%