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:

Ticker	Rating	DGI	Shiller PE	Yield	Payout Ratio	Monthly Invest	Sector	Sector Total	Sector Percent
NVS	A1	D	18.50	3.79%	0.70	$200.00	Healthcare	$400.00	10.53%
SNY	A2	D	16.81	4.43%	0.75	$200.00
DPS	A2	C	43.03	2.41%	1.04	$200.00	Staples	$400.00	10.53%
GIS	A1	B	15.94	4.43%	0.71	$200.00
XOM	B+1	A	12.28	3.98%	0.49	$300.00	Energy	$300.00	7.89%
AFL	D	A	13.64	2.42%	0.33	$400.00	Financial	$800.00	21.05%
RLI	D	A	24.37	1.22%	0.30	$200.00
BMTC	D	C	29.13	1.88%	0.55	$200.00
EMR	A2	A	22.29	2.79%	0.62	$200.00	Industrial	$600.00	15.79%
UNP	A2	C	26.03	2.11%	0.55	$200.00
VMI	D	D	20.28	1.06%	0.22	$200.00
YORW	D	B	38.02	2.09%	0.79	$200.00	Utility	$200.00	5.26%
AYI	D	D	29.85	0.40%	0.12	$500.00	Discretionary	$700.00	18.42%
OMC	B2	C	17.45	3.40%	0.59	$200.00
BMS	B2	A	21.29	2.95%	0.63	$200.00	Material	$400.00	10.53%
SON	C2	A	23.43	3.09%	0.73	$200.00
Total			22.99	2.50%	0.57	$3,800.00		$3,800.00	100.00%
Rating	$	%			DGI	$	%
A	$1,000	26%			A	$1,500.00	39%
B	$900	24%			B	$400.00	11%
C	$200	5%			C	$800.00	21%
D	$1,700	45%			D	$1,100.00	29%
Total	$3,800	100%			Total	$3,800.00	100%
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!

Income & Expenses For June 2018

Since 2014, I have been tracking my monthly income and expenses. You can see a breakdown of every penny I earn and spend. For perspective, this budget is for a household of two in a small US city. By documenting my journey, I aim to demonstrate the feasibility of saving a significant portion of your income and provide some ideas and inspiration for your own budget.

Below are my income and expenses for June 2018. You can see all my monthly budgets here.

2018 Mid-Year Review

2017 is half-way through. Here is an update on my progress on the five goals I set at the start of 2018.

1. Reach a net worth of $1,400,000.

On schedule. My current net worth is $1,307,542.08, which is $92,457.92, or 9.2% short of target. My annual surplus is roughly $130k, or $65k for half a year. I would need a mild boost from the stock market, perhaps another 3% return through the end of the year, to push me to the goal. I would give this goal about 50% probability of success.

2. Beat the S&P500TR.

On schedule. My YTD return is 3.51%, slightly ahead of the S&P500TR of 2.65%. Since my performance and the market performance are volatile, anything can change for the remainder of the year. I would give this goal about 50% probability of success.

3. Receive $18,000 in dividends.

On schedule. My dividends received year-to-date is $9,084.14, which is 50.47%, just slightly over half, the target. Barring something drastic like dividend cuts, I would rate this goal as more like than not to be met, probably 70% probability of success.

4. Save 90% of my after-tax income.

Ahead of schedule. Currently, my after-tax savings rate has been well above 90%, even exceeding 97% since I bought a home with cash. My income is likely to stay the same or increase slightly the remainder of the year, while expenses are expected to remain low. I would give this goal about 95% probability of success.

5. Read 60 books.

Achieved! I have read 68 books so far, and it is only at half time! I have devoted more time for reading this year, and it also helped that nearly two-thirds of the books I have read this year were audiobooks that I listened to on the go. That helps a lot. 100% probability of success here.

6. Read the bible in one year.

On schedule. I am using a daily bible reading app to keep me on pace to read the bible in a year, which is doing a fantastic job. I have no trouble keeping it up only 10-20 minutes a day. I would give this goal about 95% probability of success.

Overall, I have already met 1 and am on pace to meet 5 of my 6 goals. Currently, the probability of reaching all six goals is about 16% (50%*50%*70%*95%*100%*95%). Goals 1 and 2 are the most challenging but also the ones least under my control. Staying diversified and close to 100% stock allocation, buying on dips, and continuing to save diligently should give me a fair shot.

Options Update: June 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

One option got assigned in June:
Trade #23: Sold call option on EXC strike 41 exp 06/15/18 for $63.91 income after fees.

The stock was trading close to strike and had a rally on the last day to close at 41.49, dealing me an assignment. An implied loss from this trade is $49, the amount of the option in the money times 100. Still net $63.91-$49.00 = $14.91. Unfortunately, EXC has continued to rally after that and the latest closing price is $42.60.

This is certainly not my best options trade and it illustrates the danger of selling call options for income by giving up much of the upside potential of a stock. Of course, hindsight is 20/20. Without the benefit of hindsight, I was happy to reduce my position in EXC, a high yield, low growth stock, in exchange for better opportunities elsewhere.

Expired Options

No options expired worthless in June.

Portfolio and Net Worth Update June 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 6/30/18:

Income & Expenses For May 2018

Since 2014, I have been tracking my monthly income and expenses. You can see a breakdown of every penny I earn and spend. For perspective, this budget is for a household of two in a small US city. By documenting my journey, I aim to demonstrate the feasibility of saving a significant portion of your income and provide some ideas and inspiration for your own budget.

Below are my income and expenses for May 2018. You can see all my monthly budgets here.

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Portfolio and Net Worth Update May 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 5/31/18:

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