Tuesday, July 31, 2018

Portfolio and Net Worth Update July 2018

The time has come for my monthly portfolio update. At the end of every month, I will update my portfolio and comment on any changes. I do that for accountability and also so you may glean some ideas on how I allocate my capital. You have the opportunity to learn from what I do well so you can do the same, as well as what I do poorly, so you will not have to repeat my mistakes.

Follow my real-time portfolio here. Below is a snapshot of my stocks and ETFs portfolio as of 7/31/18:

Options Update: July 2018

Welcome to my monthly options update!

Here, I shall write monthly options update articles to keep track of options trades in my portfolio. Each options update serves as a status report on the open options and the obligations I have. A running tally of all my options trades and income to date are found on the Options page.

Assigned Options

No option was assigned in July.

Expired Options

Two options expired worthless in July:

Tuesday, July 17, 2018

Watch Out for DSPP Fees!

I love Direct Stock Purchase Plans (DSPPs) that charge no fees and automatically deducts a fixed amount of money you specify from your bank account each month, which allows you to dollar cost average and own stocks directly. Unlike holding stocks in "street names" when you use a broker, DSPPs allow you to own stocks directly, and some companies may offer shareholder perks.

However, my love for DSPPs extends only to those that charge no fees, which are increasingly becoming a vanishingly small population of the total DSPPs out there. If you limit to investable stocks (i.e. those with quality earnings, balance sheets, and decent growth prospects), then your selection is even more limited.

Unfortunately, many companies that used to offer no fee DSPPs have begun to charge fees. I used to invest in Procter & Gamble (PG)'s DSPP when it charged no fees, but paused my monthly investment after the company decided to use Wells Fargo shareowneronline platform and started charging fees. Pepsico (PEP) did something similar and I stopped my monthly investment. These two companies had the decency to notify shareholders of the change in fees at least a month in advance.

Becton Dickinson (BDX), on the other hand, caught me totally in surprise. I have been enrolled in its DSPP since 2011 and have built up a position of almost $50,000, my biggest single stock holding, in fact. While not strictly no fee, it charged only 3 cents per $200 monthly investment, just 1.5 basis points, which is tolerable, as you can see from the screenshot below.

This remained true until just this month, when it caught me by surprise by the significantly increased fees it charged. See screenshot below. Total fees: $2.55. Whoa! That is now more than 1% of my transaction amount. The "check charge" used to be $0, but is now $2.50.

The recent dividend reinvestment from 6/29/18 was far worse. I got charged $5.05 (including a $5 "handling fee") to reinvest just $147.45 amount of dividend received, leaving me with just $142.40 to reinvest after fees. This was a whopping 355 basis points!!

I was totally caught off guard by this with no advanced warning whatsoever. I checked BD's plan brochure and apparently it had updated the new fee structure without even notifying existing shareholders of the major change. Not good.

Because of the high automatic investment and dividend reinvestment fees, I was left with no choice but to pause my monthly investment in BDX and elect to receive all dividends in cash (direct deposit to my bank account).

My revised monthly DSPP investment plan is now down to $3800/mo in 16 stocks:
TickerRatingDGIShiller PEYieldPayout RatioMonthly InvestSectorSector TotalSector Percent
Rating is based on Morningstar as follows:
A=Wide Moat; B=Narrow Moat; C=No Moat; D=Not rated by Morningstar
+=Exemplary; [blank]=Standard; -=Poor stewardship
1=Low; 2=Medium; 3=High; 4=Very High uncertainty
DGI (Dividend Growth Investing) as follows:
A=25+ years of higher dividends;
B=10-24 years of higher dividends;
C=5-9 years of higher dividends;
D= less than 5 years of higher dividends.

I made no other changes for now, but am looking into reducing the recurring monthly investment amounts in AFL and AYI, as both have become increasingly significant portions of my portfolio, at 3.0 and 1.2 percent, respectively. Right now, both are attractively valued so I'll wait till they become highly valued before making the contemplated move.

Moral of the story: Check your transactions carefully and don't be caught off guard by unexpected investment fees!!

Thanks for reading!