Walmart: How I approach investing

As describe previously, I have held Walmart (WMT) for a very long time.  My Grampa was the real investor there, I simply held it as instructed.  After learning how to invest better ( with much to learn), it is time for my annual deep dive into WMT and I will describe the methods I use to look over my investments.  These posts will be a record as the years go on and will provide a snapshot for future reference!  Lets take a dive!


Walmart is the largest retailer in the United States. They have over 4000 stores in a variety of formats.  These stores have been historically large (Walmart, Super Walmart), but Walmart has been building smaller stores called Neighborhood Market (grocery) and even smaller stores called Express.  Walmart operates in three divisions: Walmart US, Walmart International and Sam’s Club.  Walmart operates in 26 countries around the world.

Walmart’s economies of scale enable it to provide goods at a lower cost than other retailers.   Generally, their stores are the largest of their type and can provide a large variety of goods.

The data below is provided from a combination of sources. Including Morningstar, Google Finance and the Walmart company report.

Story for ownership

There are certain items that people need.  Food, clothing and maintenance products.  These are largely recession proof items and WMT is the biggest seller of them in the US.

Is debt under control?

When I am analyzing a stock, I want to ensure that they can manage their debt.  I look at the following ratios:

Interest Coverage Ratio: 12
Current Ratio: .83
Quick Ratio: .22
Debt/Capital: ~40%
Is maturing debt spread out?: Yes

Walmart can easily handle it’s interest expenses, with an Interest Coverage Ratio of 12, it has it well under control.  Their interest expenses have remained consistent over the previous decade.

Normally, I like to see a current ratio above 1, which is a measure of a companies ability to handle short term expenses.  WMT has a Current Ratio of .83, which is low but WMT has been around .9 over the last decade.  WMT has a Quick Ratio of .22 (current ratio excluding inventories), which is terrible.  If WMT had issues with inventory turnover this value would concern me, but they don’t.

With a debt to capital ratio of 40%, I do not think that they hold a large amount of debt.  In fact, total debt has remained fairly steady over the last few years.  Looking at the maturity dates of various bonds, WMT has them well spread out and should be able to manage maturing debt and interest without concern (with respect to current debt).

How does WMT spend your(my) money?

  • Dividends:  WMT pays out approximately 62% of FCF as dividends (~35% of EPS). WMT currently has enough cash on the balance sheet to pay 4 quarters of dividends and is yielding 2.5% as of today.
  • Share Buy Backs: Over the last 10 years, WMT has bought approximately 2.5% per year.
  • Capex: WMT consistently spends about 50% of operating cash flow back into the business.

This is very shareholder friendly.  Revenues have been increasing each year which should make it possible for WMT to continue raising dividends.  EPS has been enhanced by both share buybacks and increasing revenues.

The only downside is that WMT currently spends more on these three items than they have Operating Cash Flow.  As a result, cash on hand went down and they issued debt in the most recent year.  This is not a concern to me, because it is not out of historical norms for them to do this and their level of debt remains in the same range as it has over the last few years.


I am still trying to determine what would be the best way to value a position.  The goal of buying high quality companies and holding for a significant window diminishes the need to place a precise value on it.  I currently look at historical metrics to determine if a position has deviated significantly from the mean.  At this time, WMT is trading at about it’s historical averages (PE, Price-to-sales).  With a dividend of 2.5, which is about 10% higher above average.


Walmart is in the process of building new stores in smaller formats.  I think these can be a potential driver of growth. These stores appear to be popular in my area, however a case study of one doesn’t prove anything.  The main concern will be if these don’t take off and WMT wastes money.

Walmart pulls a lot of its shoppers from the lower income brackets and they are very sensitive to price.  A massive bout of food/energy inflation could potentially hurt the sale of the higher margin add-on items in the store.  It’s hard to gauge inflation, but I think food and energy inflation is higher than the official estimates say.

Doug McMillon took over as the new CEO at the end of Fiscal 2013. He is a 22 year veteran and previously ran Sams and Walmart International.  I will need to watch over the next year to see how/if he changes strategies.

Recent Developments

Walmart recently raised their dividend.  It was a disappointing 2%, or a penny per share.  The raise came on the heels of a disappointing Q4.  The results were blamed on weather and reductions in government payouts.  Blaming the weather will be validated (or disproved) when the next quarters results are in.  Personally, I can see how people would make fewer trips and would not buy as many “why not” items.

Walmart announced a plan to begin buying used games.  I like this move, it will be interesting to see how that impacts sales.  The goal of this maneuver is to increase store traffic and to sell additional items.  Used games have higher margins than new games, but I don’t expect this to be significant.  I doubt that WMT will be able to create the same atmosphere that Gamestop (GME) can without having knowledgeable employees.


WMT in my opinion, based on my analysis, would be a good position to hold at this time.  I like the exposure WMT gives me to other businesses through variety and necessity of the products it sells.  WMT is a good defensive play, but I may not be adding to my position because WMT is currently 3.5% of my portfolio, its yield is on lower end and recent growth has been low.  At this time, I feel like I can find a higher yielding investment with more growth.  However, if the economy heads south I may look into adding to my position.

Disclaimer:  Long WMT.  The purpose of this article is to keep a record of information I find valuable, which will be used in the future to help me with my investing decisions

Interesting Metrics: Which payout ratio?

There are three payout ratios that are used most often with dividend investing: payout ratio, forward payout ratio, and free cash flow payout ratio.  What are they and which ones should I use?

A payout ratio is a way to attempt to show the safety and possible growth of a dividend.  The lower the payout ratio, the better potential dividend growth.  During times of economic stress, a low payout ratio can be used as one piece in the puzzle to help determine the safety of a dividend.  The other pieces being expenses, free cash flow and other fun metrics.

What are they?

There are several types of payout ratios I use.  They are:

  1. Payout Ratio: This payout ratio takes the current 12 month dividend and divides it by the trailing twelve months (TTM) of earnings per share (EPS).
  2. Forward Payout Ratio:  This payout ratio takes into account the current 12 month dividend and divides it by the projected EPS over the next twelve months.
  3. Free Cash Flow Payout Ratio:  Takes the amount paid in dividends over the previous twelve months and divides it by the Free Cash Flow (FCF) generated during the TTM.

The payout ratio that should be used depends on the industry.  Generally, I try to stay below a 60% payout ratio (this number is a matter of individual choice).  However, some sectors will have a higher payout ratio because there is only so much they can reinvest in the business.  Two sectors that come into mind are utilities and tobacco companies.

Issues with each

Payout Ratio

The main issue with the payout ratio is the fact that it uses earnings per share (EPS).  EPS can be affected by charges that are not necessarily accrued at one time or by charges that are merely an accounting requirement.  Take Starbucks (SBUX) for example.  According to SBUX 2013 annual report they earned $.01 per share. Or did they?  It turns out in Q4 2013 they finished arbitration with Kraft, which resulted in a $2.25 charge to earnings.  The claim was not paid in Q4 2013, but will be funded with cash and debt at a later date.

SBUX is currently paying .26 per quarter ($1.04 per year). So which do you use? .01 or 2.26? Or in terms of Payout Ratio 1.04 / .01 = 10400%? or 1.04/2.26 = 46%? This case is a drastic example, but suppose SBUX only had a charge of $1.  Then the payout ratio would be 1.04/1.26 = 82%, still high but not necessarily high enough to make you want look deeper.   For this kind of investment, one falls below my 60% rule and the others are well above.  It takes some due diligence to make sure that a charge off doesn’t skew your results, or you could miss out on a good investment opportunity.

After reading enough reports, you will see that charge offs are fairly common.  Generally, the bulk of what I have seen are a couple pennies. It is only in the rare case that one is much larger.  The SBUX write off is the largest I have personally seen.

Forward Payout Ratio

The Forward Payout Ratio has only one main issue that concerns me, that is the nature of telling the future.  This ratio uses earnings projections for the next year to determine what the payout ratio is today.  In order to use this number and be confident in it, you must understand the business and what is possible in terms of earnings growth.  Earnings growth can be affected by a large number of things.  The economy, share buybacks (almost artificial earnings growth), issuing shares, etc.

Free Cash Flow Payout Ratio

The Free Cash Flow payout ratio is my preferred ratio.  This divides the previous TTM dividend with the actual cash the was generated after paying expenses and capital expenditures.  I like this ratio the most because it uses money the company actually made as part of the ratio.  Like the payout ratio, I would like this to be below 60%.  If this ratio is above 100%, then that will require some additional digging to figure out why.

On the plus side, the free cash flow of a business is less affected by many of the same problems that arise when calculating EPS (charge offs, accounting gimmicks, etc).  It is the cold hard case that the company generated.  The main issue with this ratio is that it is a historical number.  It’s a measurement of what was done and as we all know in investing “past performance does not guarantee future results.”


Using a combination of the Payout Ratio, Forward Payout Ratio and Free Cash Flow ratios can be part of the process for helping to determine the safety, sustainability and growth potential of a dividend.  Each has their flaws, but provide insight into the overall picture.

 Disclaimer: None

Mortgage Recovery Portfolio

After living in an apartment for the last eight years, I have decided to buy a house.  When I first began looking, I was adamant about putting 20% down.  I was mostly interested in avoiding Private Mortgage Insurance (PMI) fee.  PMI is required when a borrower doesn’t have a 20% equity in the house. After the previous housing collapse, I assumed that lenders would require 20% at minimum.  It turns out that the lenders I have spoken with require 5% minimum down with PMI.  Once I discovered that 20% wasn’t required, I decided to look into building a portfolio with the remaining amount in my house fund.

The purpose of the portfolio will be to recover the difference in interest between putting down 10% and 20%.  I do not want to take an enormous amount of risk with the dividend payers I choose.  With an interest rate of 4.5%, it would be doable to invest in MLPs, REITs and Preferred shares to beat this number.  If I did that, than there wouldn’t be much to write about or numbers to crunch!  While 4.5% is a high dividend rate, historically this is very low for an individual to borrow funds.  From that perspective, I will be effectively borrowing at a low (relative) rate and investing in securities, that over time, will each yield more than 4.5%.

Using Leverage to make money

My largest position, Phillip Morris (PM), has been very active with this trick.  They are buying back their higher yielding stock and selling bonds that have lower yields.   The vast majority of their debt that matures after 2019 is under 4.5%. To show how this benefits a company, suppose PM sells 1 million in bonds at 3.5% and uses that to purchase 1 million worth of stock which currently yields 4.65%.  PM pockets the payout difference, pays a little extra interest and reduces outstanding share count.  This maneuver saves them a little more money every year (as long as they keep raising their dividend), while the bond interest is fixed for its duration.

Step 1: Avoiding PMI

I initially believed I was going to have to pay PMI.  I went to several lenders and got quotes which ranged from $50 to 85 per month.   After a little more digging, I found that some Credit Unions don’t require PMI.  I attempted to use my search skills to find out why this is the case, but I failed.  After investigating several Credit Unions and banks, I chose to go with a Credit Union due to the favorable tradeoff between closing costs, interest rates and lack of PMI.

If you are interesting in learning more about PMI, read on.

Step 2: How much interest will I pay

The first step to identifying a portfolio is to determine what the difference in payments will be when putting down 10% vs 20%.  The interest rate I will use is 4.625% for a 30 year mortgage, which is the rate I will be borrowing at. The following table is based on a house that costs $225,000.

Loan AmountDown PaymentInterest Initial Interest Payment

When I first did this calculation, I was surprised to see that the difference between 10 and 20% down was $19145. For some reason, I had thought that the difference would be much greater. This is a blessing due to the low interest rate environment that has persisted over the last 5 years.  Sadly, I think that will make this exercise less challenging.

Onward! The situation as presented is to attempt to recover 19k with dividends over a 30 year window. This amounts to approximately $638 dollars a year in dividends (19k/30). With a portfolio of size $27,000 (this is what will be left over after down payment plus closing costs), this will require a yield on cost of approximately 2.3%. Not very challenging at all, but inflation must be kept in mind. In 30 years time, 19k will not have the same buying power as it does today. In order to make the challenge a little more interesting, I will attempt to recover 19k in 2044 dollars assuming an inflation rate of 3%. This leads to a value of $46470. In order to collect this in 30 years, we will need to collect an average of 1549 dollars per year. This would require a yield on cost of 6.8%.   This number could be low or high; I can’t tell the future of inflation, but I think 3% is a good target.

A target has been set. Collect $46470 in 2014 money over the next 30 years with 27000 cash to invest.

Step 3: Estimating dividend return

The goal of the portfolio is to start with an initial value of 27000 and produce enough income over the next 30 years to earn the interest difference back.  As described above, this would require a current yield on cost of 6.8%.  There are plenty of investments (Reits, MLPs and Preferreds, Junk Bonds) that make this possible and I want to diversify the portfolio.  I will make up the difference over time with dividend increases.  The dividend increases will eventually raise my yield on cost above 6.8%.  After this crossover point, the portfolio would make up any lost ground over the first few years.   The purpose of this section is to determine what yield and dividend growth is required to realistically solve this problem.  If you read my previous post, a higher dividend growth will be more important over the course of the next 30 years.  I will attempt to achieve an initial yield of 3.5% and dividend growth rate of 8%.

The following table provides an abbreviated dividend return with an initial yield of 3.5%


 DividendsTotal DivsReinvested DivsReinvested Total

The table contains several important pieces of information.  First, it will take 21+ years without reinvesting dividends to pass the value of $46470, while 17+ years if we reinvest dividends.  This is an important point and can be examined with a much greater difference at year 30.  The “Reinvested Total” is more than twice as large as no-reinvestment total.  This is amazing and demonstrates the value of reinvesting your dividends as soon as possible.  This exercise was done compounding both the dividend growth and reinvestment being done annually at the end of each year.

My methodology for calculating reinvested dividends is as follows.

  1. Take the previous received dividends and multiply by .035. These are the dividends you will be paid from the income received.  Take year 20 as an example. 7840.61 * .035 = 274.42
  2. Add value calculated in 1 to the previous years total. (7840.61 + 274.42 = 8115)
  3. Assume dividend growth at end of year. (8115 * 1.08 = 8764.23).

Mathematically, this makes sense to me.  I have seen vastly different returns (higher) from the various calculators and was unable to determine what equations are being used.  Maybe my calculations are somewhat conservative, but I would rather be surprised, then left wanting.

Step 3.5 Wait! What about total return

I don’t want to make the claim that I am not interested in total return.  I like to see my portfolio higher than where I bought it.  The problem here is that I can’t tell the future.  The market could trade sideways for the next 30 years, but what I can do is invest in companies that have a history of raising dividends through good and hard times.  The first fourteen years of this century have tested many of the historically good dividend payers.  Some fell (GE and most banks), while some dividends flourished (MCD, KO).  As long as I select the proper companies, when their earnings go up, so will their price eventually!  Mr. Market is a fickle man.

Step 4: Building the portfolio and the future

There are many companies that can be selected for this portfolio.  In the coming months, I will begin to research and invest in these securities.  These companies will by and large be blue chips, but I will add some higher yielding securities to help with the overall return of the portfolio.  In a few days I will describe my process of stock company selection.  Since I have been on a Walmart kick lately, I will begin there.

See you in a few days!

Disclaimer: Long PM, WMT, PEP, KO, MCD

Interesting Metrics: Dividend Yield and Growth

This article is the first in the series of articles I will use to describe my investing method.  These are meant to be informational and contain information that will help me as I invest.  I have tendency to forget what a metric means.  The research in this series will provide the basic information and examples that will help me.  Many of these articles will be basic, but I have friends/family reading this that are new to investing. Hopefully it helps them and you too!

Now for Dividend Yield and Growth!


What is a dividend? A dividend is a payment that a company pays to its shareholders from profits. This is a way for the owners to share in the spoils of the business.  

What is a dividend yield?  The dividend yield is the market price of the stock divided by the total amount of dividends paid in a year.  For example, if ACME’s current market value is 100$ per share and they pay 2.5$ per year in dividends,  their yield is 2.5/100 = 2.5%.

What is a dividend growth rate? Percentage at which the dividend changes over a period of time. Commonly, you will see 5-year, 10 year and most recent growth rates.  These rates are calculated using the Compound Annual Growth Rate (CAGR).

How I use them:

When I look for dividend investments, I attempt to look for stocks with an entry yield higher than 2.5%.   When I use a stock screener, I usually set the lowest yield to 2.0.  While I may not purchase a stock below 2.5, I like to keep track of which stocks are near it and keep them on a watch list.  As the price of a stock fluctuates, individual securities move up or down around my dividend entry criteria.  Walmart, for example, has a tendency to stay in the 2.3 to 2.6 range.

Next, I attempt to find stocks with a minimum dividend growth.  It must be positive with no dividend cuts and three or more years of growth.   Three years isn’t enough to demonstrate to a potential shareholder the commitment to pay a dividend, but it can yield hidden gems that will potentially raise their dividends quicker. Most of my large positions will have dividend growth streaks over 10 years.  A fantastic resource for finding these types of dividend stocks  is the U.S. Dividend Champion spreadsheets created and maintained by Dave Fish.

Given a combination of growth and yield, I generally like to start with yields closer to 3 and 5 year growth of 8-10.  I do not mind having some strong dividend growers in the portfolio with lower yields.  There are plenty of high quality companies yielding more than 2.5 (KO, PEP and PM for example), this higher yield criteria is not hard to find.  On the flip side of the coin, I will have some stocks with larger yields and slower growth like AT&T(T) and Realty Income (O).  It’s a matter of balance.  A few higher yielding investments enable me to accumulate funds faster to buy securities that grow faster.

Illustration of dividend growth:

I will examine three scenarios, each with a different yield and growth rate. What do you think will perform the best? Higher growth/lower yield or higher yield/lower growth? Let’s see.

ScenarioRate (%)Dividend Growth (%)Years to reach $1549
High Growth3109
Realistic Growth3.589.1
Minimal Growth4610.5

Interesting!  The 3 and 3.5% scenarios are neck in neck to reach 1549 dividends per year, while the larger yield of 4%, but lower growth, is years behind.  This demonstrates the importance of dividend growth, even with portfolios that start at a higher yield.

Dividend Growth Investing
Comparison between different yields and growth.

The graph demonstrates how a low yield with high growth can overcome the initial gap between yields.  The scenarios I chose seem somewhat arbitrary, but I wanted to illustrate that getting the highest starting yield possible can be defeated by a strong consistent growth rate.  Dividend growth rates do not stay this constant and will vary over the years as companies go through peaks and troughs.

The next question that you may be asking yourself is, what is the difference in dividends earned per year and what are the overall dividends?

ScenarioDivs @ 30Total Divs @ 30Divs @ 30 reinvestTot. Divs reinvest
High Growth10,708111,03311,029114,344
Realistic Growth7,33789,2107,59492,305
Minimal Growth4,87671,1525,07173,962

As the years go on, the High Growth scenario destroys the other two.  At year 30, you would receive 10,708 in dividends per year (which is calculated by initial-divs * (1+ growth rate) ^ number of years).  Hopefully my math is right!  This value is more than double the highest yielding yet slowest growth.

The final two columns demonstrate the effects of reinvesting your interest.  As your investments pay you, you can either save the money or reinvest.  These columns demonstrate what happens if you reinvest those dividends at the start of the next year (compounded annually).  Basically, you get two raises.  The dividend growth that happens during the year and the reinvestment of the dividends.  The reinvestment numbers may be low because once you have accrued enough, you will reinvest the dividends instead of waiting until the end of the year (compound quarterly or monthly vs. annually).  This was merely for demonstration purposes and simplicity.

What if I just started with a higher yield? You definitely could have and there are yields with enough growth that would beat all the scenarios demonstrated above.  However, with great reward comes greater risks.  The goal is to keep risk as low as realistically possible, given the nature of these investments.  A high yielding dividend isn’t necessarily unsafe, but maintaining the dividend may be hard when a rough patch is hit.  Due diligence is key!

There is no fixed yield/growth rate that will work for everyone.  Depending on your circumstances, you may need more yield or growth.  I have a long time till I want to live off of the income, so I can make due with a lower starting yield and higher growth.  Over the years, my research has lead me to believe that the “realistic” scenario of 3.5% with 8 percent dividend growth is an achievable long term goal.  Only time will tell!


The provided examples make a strong case for dividend growth investing.  There is more to investing than pretty charts and stock prices.   These examples are illustrative of the potential of dividend growth investing, but unlike numbers the market doesn’t behave in a consistent fashion. Good investments go down and bad go up.  I feel this strategy will give me the best opportunity to reach my financial goals.

Thanks for reading!

Disclaimer: Long KO, O, PEP, PM,T,WMT

February Portfolio Highlights

February was a busy month!  Many companies issued earnings that were slightly below analysts estimates.  Personally, I like to see the overboard selling reactions to these reports for companies that are on my watch list and in my portfolio.  Taking a long term view and investing for the future.  In ten years will it matter if one of the companies missed a quarterly earnings release by a few pennies?

I took advantage of some of the craziness and added to several positions (WMT,KO,PEP).  I feel like all three of these companies are poised for growth going forward.  KO and PEP are continuing productivity initiatives and Walmart is going to increase it’s US capex.  I feel like these companies are being good stewards of the money they create and making choices to enhance shareholder value.

I initiated a position in TGT in late January.  The company continued to decline throughout most of February, so I took advantage and slowly added a small amount of cash at several points throughout the month.  This position is in my loyal3 account, this enabled me to trade commission free and add smaller portions at a time.   I feel like TGT got beaten down enough for the data breach and sales suffered after that was disclosed.  The unfortunate thing is that data breaches are going to continue to happen.  One must monitor their credit report diligently.

I received $229.32, which was an amazing improvement over last years total of $80.28. At this point last year I was in the process of transforming my portfolio from growth to dividend stocks. It took me over a year, but the results are starting to speak for themselves!

Dividend Increases
Seven companies raised their dividends for me:

  • CSCO : 11.7%
  • DPS    : 7.9
  • HAS    : 8
  • KO      : 8.9
  • LO      : 11.8
  • PEP    : 15.4
  • WMT  : 2.0

Strong raises across the board, with the exception of Walmart. They have been having a tough few quarters and I am not concerned with a small increase as long as they set themselves up for future growth (which they indicated they are by increasing capex this year).

New Positions
While I did not open any new positions, Vodaphone(VOD) paid me a dividend in the form of Verizon (VZ). VOD executed a 6:11 share split at the same time. Thus, my 65ish VOD shares turned into 35 VOD and 17 VZ. VOD pays the same dividend and VZ becomes a new income stream for me, adding $36 per year to my income. I look forward to the special cash dividend on March 4th, where it will be dripped back into VOD.

Added Positions
This month proved to be a relatively good month for adding to investments, the following positions were increased:

  • New Cash: COP, KO, MO, PEP, PM, TGT
  • Drip: ARCP, APD KMI, O, OHI, OKS, PG, T, VOD

All of my positions in my Roth are dripped and prior to the middle of February my taxable account was as well. In general, the taxable account will not be dripped going forward, but specific securities may be.

Dividend Decreases

None.  This is great and a stark contrast to the way it used to be.  One average, I probably sold one position per month, this resulted in a lot of portfolio churn and lost money in both commissions and invested capital.  I hope this continues to last a long time, although INTC is on the potential chopping block if they don’t start to turn around by the end of the year.

A great month, I hope these continue. The third month of each quarter is generally my largest, so I am hoping to break some more records next month!

Over the next twelve months I expect to receive at least $3767.10.

Disclaimer: Long all stocks mentioned.

Monthly Challenges

I have a tendency to go overboard with preparation. I started this blog quicker than I usually do. Normally, I will do a lot of research and learn everything I can. I would have read a book on WordPress, researched “How to write a blog”, in addition to the research for my subject matter, play around with various hosting sites, etc. Being prepared is a good thing, unless it causes you to become overwhelmed and not start the activity you are preparing for.

This time I jumped right in. I have been investing for years, so I have a good handle on the subject matter, but I still feel like a beginner. Writing? I don’t feel like I am good at it (can you tell?), so that aspect has been especially hard. I write for hours and feel like I only get one or two good paragraphs in! I haven’t planned out anything on this blog, my plan is to add a little bit at a time and figure out what I find most useful in building a successful dividend stream. I want this to be an archive to help me remember why I choose to make an investment and to document the journey. And at some point, I’ll need to decide how I want it to look instead of using this canned WordPress template.

What does all of this rambling have to do with “Monthly Challenges”? I am a very long term goal oriented person, which is good and bad. It is good because I will setup a system that helps me towards the desired result. This can be bad because I may start much more slowly because I feel I need to be more prepared(see above) or not start at all if the goal seems to unachievable (or I get overwhelmed when I initially start). Once I get started towards a goal, I have a good track record of achievement.

The purpose of “Monthly Challenges” is to encourage me to do something a little bit at a time. Ideally, the challenge is performed everyday, is small and easily traceable. These challenges can be anything you want. Have a bad habit you want to get ride of? Change it a little bit this month and then change it a little more next month.

These goals can be anything that is easy to track and achieve. Some examples include:

  • Don’t exercise? Plan to walk each day for 15 minutes at lunch.
  • Eat too much candy? Don’t buy any for a month
  • Want to drink less soda? Keep bottled water in the fridge
  • Want to brush your teeth twice a day? Challenge yourself to do it when you wake up and before you sleep

Once each month finishes, you can begin the next month of challenges. Some challenges will be one and done, others may be progressive. If you walked for 15 minutes the first month, then change one day to a 15 minute run.

My monthly challenges will be easy for me to follow and I will record the status of them on my Challenges page.

For the month of March, I will attempt the following monthly challenges.

  1. Write at least 5 blog posts. (Not just publish)
  2. Don’t miss any run workouts (I have been skipping out on the cold mornings)
  3. No soda. I drink way too much!
  4. Eat breakfast at home each day. Trying to save a few extra dollars and eat better

None of these challenges are hard. Each one will require me to do a little work each day (some more than others). The hardest part for me will be the first few days of each challenge. Once I have a “streak” going, I get stubborn enough to keep it up (10 days of no soda!).

The additional benefit of Monthly Challenges is that they only last a month. I may find that I really enjoyed having a soda and once I am done with my challenge, than I can continue on as usual, but I have completed the challenge successfully.

Alright. Time to start thinking of five posts to write next month! I will be doing a February portfolio review, but that won’t count towards my total!

Have a great day!

WMT: My first investment

So, it turns out I lied. My first foray into investing wasn’t with BWLD at the height of the market in 2007. It was with Walmart and believe it or not, I didn’t know what that was. I lived in the Pacific Northwest at the time and was told it was like Fred Meyer. Which is like Walmart if you’ve never been to a Fred Meyer, just smaller. A lot smaller.

About Walmart

Walmart is the largest retail chain in the US. Their strategy is to have the lowest prices, this initiative is called Every Day Low Price (EDLP). They achieve this through economies of scale and the shear amount of product they can purchase. This makes it advantageous for a supplier to sell to Walmart, since it gets their products in front of millions of customers. They have a variety of store formats including:

  1. Super Walmarts: groceries and goods
  2. Walmart: goods with some dry foods
  3. Neighborhood Markets: grocery stores
  4. Sam’s Club: Membership stores that sell in bulk at nearly cost
  5. E-Retail store

Additionally, Walmart has stores in 26 countries, which account for 30% of sales. They are continually improving and expanding stores. Walmart recently opened the 4000th US store.

An assist from Grampa

When I turned 15, my Grampa gave me $275 to invest in the company. He was a long term buy and hold dividend investor. I didn’t know anything about investing, so my Grampa had an account set up in my name and invested the money. Officially, I was now an owner of Walmart!

After a few weeks, I got my first statement! I had purchased 10.748 shares on December 30, 1996 at a price of 23.73 and paid a $20 commission. What! A twenty dollar commision was 7% of the invested money, thats one hell of a fee! Not an ideal situation, but thats what happens when you invest a small amount of money. Plus, I think that commissions where generally higher in the late 90s than they are today.

I followed the stock closely (i.e. watched the price) for a few months before I eventually got bored. I was in the midst of being a teenager and doing all that stuff. I would check the price from time to time and was pretty pleased with the overall performance(which meant it was going up). I never did any research and wouldn’t set foot in an actual Walmart for another few years.

Time marches on!

I purchased shares at a very opportune time; Walmart’s price grew rapidly through 98/99 and the stock split. I received my first dividend in March/April of 1997 for a whopping 73 cents and automatically purchased an additional .025 shares (post split). After the split in 1998, it traded in the 45-55 dollar range until late 2011. Since 2011, Walmart has been on a tear. It broke out of its prior trading range and entered a new one between 70 and 80, where it remains to this day.

Analysis of investment return

The following numbers are split adjusted. My initial purchase went from 10.748 to 21.496 after the split. I have reinvested the dividends for the last 17 years and have been paid a total of $304.50. As of June 6, 2013, I have been paid more than my initial investment. My yield on cost is currently sitting at 18.8% based on the most recent dividend increase.

Without Dividends Reinvested





Initial Purchase December 30, 1996




Value as of Feb 22, 2014



$1571.79 (1876.29, total)

CAGR (after 17 years, 2 months)



10.7% (11.8%)

*Including the commision in the initial value causes the CAGR for “Price” and “Value” to be different.

With Dividends Reinvested





Dividend per share

Initial Purchase December 30, 1996





Value as of Feb 22, 2014





CAGR (after 17 years, 2 months)





In this particular case, reinvesting dividends vs not, only resulted in a slightly different total return. This is largely due to the rapid growth in stock price and dividend payout climbing over time. See chart below.

Historical Data provided by Yahoo Finance.

For comparison,


Dec 30, 1996

Close Feb 22,2014






WMT, no reinvest




WMT, reinvest




Over the last 17 years, Walmart has beaten the S&P 500 by a large margin, which was largely due to a quadrupling of the price in 98/99. However, had an individual purchased Walmart before 2001, they would still be ahead of the market.


WMT has turned into my best investment. I did not originally choose the stock or spend much time following it. As I started investing myself, I had some growing pains going from strategy to strategy. Growth to really high yielders and back to dividends over a 7 year period. The financial crash of 2008 (when I started investing) gave me a gut check and taught me that I needed to find a strategy that matched my temperament. The entire time I was self investing, I had already been given a lesson from Grampa in the form of Walmart.

Would I have bought Walmart back then if I was choosing a stock? Considering I didn’t know what it was, probably not. However, with the economic climate at the time and a current 32 year dividend streak, it would have been on my radar assuming I was looking for long term dividend growth stocks. Unfortunately, I would probably have invested my money in “” or “” because when you’re young, you just want to be cool.

What was your first stock investment? Why did you make it?

I know it’s ugly right now…

but hopefully this blog will slowly get prettier! =) In the mean time, gaze upon this beautiful desert mountain that I took a picture of. It is near my family home.

I am tinkerer by nature. I have a background in software and will probably spend a good chunk of time learning WordPress and tweaking my blog as I learn about it. Hopefully, I will actually do some writing…

My User Interface skills are relatively poor, so if I should do something that makes your eyes bleed, do post a complaint =)

Thank you!


Hello World!

Welcome to my site. Do you recognize where “Hello World!” comes from? If you do, then you might have programmed a few. This type of program is used when someone first attempts a language, because it is easy and demonstrates basic features.

Why am I here? I don’t plan to write a blog on computer programming. It’s an enjoyable activity, but that’s really my day job. I plan on writing about investing on this blog. Specifically long term investing with assets that pay you for ownership. Besides, “” doesn’t have a programming feel to it!

My years of investing have been fraught with peril. I started working in 2006. Can you guess when I started investing?

Data provided by Yahoo Finance.

Data provided by Yahoo Finance.

If you guessed at the top in 2007, then you would have been right. Everyone was making money, I figured why not me? The media was telling me how it was the right time to jump into stocks, everyone had a great stock idea and no one was loosing! Naturally, I began my investing journey.

The first stock I purchased was Buffalo Wild Wings (BWLD). It seemed like a good stock. They were making money and were pretty popular; that was about the extent of my knowledge when it came to evaluating stocks and they were good enough reasons for me. After that initial purchase and the blood bath that followed into 2009, I continued to invest in growth stocks and continued to lose money until mid-2012.

Around that time, I spoke with my Grampa about investing. He was a life long investor/entrepreneur/serial schemer. The conversation went something like this,

Me: “Hey Grampa! Started investing, I bought Buffalo Wild Wings.”
Grampa: “What is that?”
Me: “A restaurant.”
Grampa: “Do they pay a dividend?
Me: “No.”
Grampa: “If they don’t pay a dividend they aren’t worth owning.”

Preposterous, I thought, but at some point I started reading about dividend stocks. As a younger and dumber man, I had failed to grasp the basic principle of compounding (ironic, considering I have a math degree). I looked at low yielding stocks with disdain, undeserving of my time and money. Somehow, the books I read didn’t mention dividend growth or only mentioned it in passing or I just missed it( ← probably). Despite this, I was intrigued by dividends, but was impatient and didn’t want to get a measly 2.5% yield. So, I went to my trusty stock screener to look for those high yielders.

Around the time I started this, the shippers and business development companies were paying out an absurd amount of money. I invested in American Capital LTD (ACAS) and Paragon Shipping (PRGN), with 8%+ and 12%+ yields, respectively. Coincidentally, I bought these stocks at a high and after dividend cuts and falling prices, I sold them at a steep loss, but not without investing even more money! The yields were even better! Buy High/Sell Low 2, me 0. Beware falling knives!

Fortunately for me, the market hit a bottom. I had continued investing and had recovered my losses through fresh capital injections (not the best way to “preserve” your investments) and the market recovery. I signed up for several investments services and started getting in the green. Still looking for the potential high flyers, I managed to find a few that doubled and one that even quadrupled! Even with the stock market generally rising, I was still finding too many bombers.

In mid 2012, I looked through my investments and noticed that my dividend paying investments were vastly outperforming my other choices (flyers + bombers). I had stumbled into a few Blue Chips (MSFT, KO and MCD). At this point, I realized that maybe there was something to the stocks that paid dividends.

From mid 2012 to now, I converted my portfolio into dividend growth stocks and have been pleased so far. I improved my analysis (still a lot of work to do) and have investments that I am comfortable with and have a tendency to forget. Plus, it is nice to see money appear in your account that you didn’t have to work for.

If you don’t understand just yet, don’t worry. This blog is meant to help me practice what they preached. Two men of modest means, who succeeded at investing and pretty much everything else in life.