By M

M is one half of T & M - the people behind There's Value

December 11, 2014

Annual Goals Progress Report 2014

Since it’s nearly the end of the year, I decided to do a progress report on my goals for this year. I know it’s typical to do this at the very end of the year, but I think I’m away around then so I may as well do it now.

The other reason for doing it now, is that I’ve already achieved all the goals I’d set! YESSSS!! I am really happy about this, as in the past, I had a bit of difficulty in setting financial goals, and then working towards them, let alone achieve any goals. What a complete turnaround to be in the situation where I have actually managed to achieve every single one of my financial goals! This pleases me greatly, to say the least! I think it’s also going to be helpful in planning and communication about finances with my husband, since we got into a little argument last night about planning and tracking expenses, which I’ve been discussing here with our good friend from Dividend Life. Yet, I’d bet my bottom dollar, that if I can show my spouse this progress report, he will be super pleased!

As a quick reminder, these are (were!) the goals:

Goals for 2014:

~~To earn at least £50 in dividend income (2013 was £26)~~ ACHIEVED 3rd DEC!! – CUTTING IT FINE, M!
~~To re-mortgage to a cheaper deal (currently on BBR+1.69%)~~
~~To save more per month and put into dividend shares (target to beat £100pm) managed £1615 as of August 25th 2014, and still have four months to go ’til the end of the year, yay!~~
~~To save money for Christmas by October (£175 for gifts, £200 for food and petrol to visit family)~~
~~To save 6+ months in emergency fund~~

I’m really so pleased about this (can you tell?!). I used to be really crap at setting financial goals, staying motivated, and achieving goals. I managed to formulate a plan to counteract this though, which this blog has actually helped me to keep up with, since it means I am regularly thinking about things, writing them down, tracking everything in more detail and so on.

So, I guess I might just go and adjust my goals for next year to push myself a bit more. Of course, sometimes things come up and you just can’t always save as much as you’d hoped. We save money into a “household fund”, which we use to pay for repairs and suchlike, so that goes some way to counterbalancing anything that we might need to suddenly shell out for. For example, a tree near our house sucked up all the groundwater during one of our frequent droughts, thus causing cracks in the East wall of our house, as it sent its roots further in the search for water. We had to have the tree cut down, the wall reinforced with metal bars, and the mortar re-pointed. That was around £1200 or something, but thankfully our household fund was able to cover most of that, with two future months’ household fund payments covering the rest. Because we did not want to touch our emergency fund, we waited a bit to do the work. We also had to do it when it was good weather, so there was some time between when the tree was cut down and when the wall was repaired and reinforced.

I am really looking forward to setting financial goals for 2015 after this year’s success. I am also hoping that I can do it jointly with my husband, as a nice exercise in planning. Hopefully this will give us lots of ‘little wins’ to look forward to over the coming months

How is everyone else doing against their annual goals? Are you going to be able to tick them all off, or have you managed to complete them already?! Let me know, leave a comment!

December 7, 2014

Royal Dutch – A High Yield Dividend Share

Most of you will probably have heard of Shell, or Royal Dutch Shell (RDSA and RDSB) as it is more properly known. BUT, did you know that this huge oil company, formed by the merger of a British and a Dutch business, started out as an antique shop in London? Bet you didn’t know that! From those humble beginnings, Mr. Marcus Samuel grew his business into an import/export enterprise which spanned the globe, as he added seashells from the Far East to his trade. Little did he know that this would lay the groundwork for future generations of the company to start importing oil and eventually become a company which employs about 92,000 people.

This is one of the reasons why I love investing in quality dividend-paying and growth companies. You can start off with something really small, and over many years it (hopefully!) will grow into a bigger and bigger return. Thus, Royal Dutch Shell is in fact, an extremely popular dividend share, held by masses of people in the UK. I’m pretty sure that the dividends received from this share are the cornerstone of many people’s portfolios, since Royal Dutch Shell is a very long-term high yield dividend share, and they pay quarterly. This quarterly, regular payment is important in smoothing out cashflow, and is something I’ve been thinking a lot about recently. It’s really important for retired people to have some sense of regularity in their income, particularly if they rely on investments.

Royal Dutch Shell are currently paying out 4.78% – that’s a seriously high yield dividend share if ever I saw one, and even better than BAE Systems, which traditionally is also a high yield dividend share. If you had enough invested in this one share, you could practically live off the income, which is probably what the Dutch royal family do, as they reputedly own at least 2% of this $174 billion company!

Now, the question is, can we trust that Royal Dutch Shell dividends will keep rising, especially since the price of oil has taken a right beating of late? I think we can. According to the London Telegraph, Royal Dutch Shell has been paying out increasing dividends ever since the end of the Second World War… now that history takes some beating! No wonder the now-abdicated Queen Beatrix of The Netherlands is a happy lady!

But more than that impressive history of increasing dividends, I am guessing that there have been some pretty rough times over the last 70 years. I am only old enough to remember from around the early 80s onwards, so I do remember the recent economic crash, the oil crisis in the early 2000s, and the crazy stuff that went on in the 80s stockmarket. I like to invest in quite boring companies, with a few small caps for extra excitement.

When I say boring, I mean a sound, necessary business, which doesn’t do anything too fancy or too unintelligible. If I don’t understand what they do, then I probably don’t want to invest in it. Royal Dutch Shell are in the oil business. Now, that is not too hard to understand, is it?

I’m thinking of gradually adding some more shares over the next, say 6 months or so. I feel that the price is pretty low right now, due to the oil prices having been whooped recently. It feels like a bargain to pick up RDSB at close to £20 a pop.

How about YOU, which high yield dividend shares are YOU investing in? Do you like Royal Dutch Shell? Let me know, pop a comment underneath.

Cheers!

December 5, 2014

JD Sports – A FTSE 350 Dividend Payer

Overview

JD Sports – You may not have heard of them if you are outside the UK, but most mid-to-large towns and cities probably have at least a small JD Sports shop. They sell good quality sports clothes at decent prices and always have a really nice set of selections e.g. mens’, womens’, and kids’ specific styles and sizes. They’ve been around for over 30 years now, and they are still as cool as they were when I was a teenager. This is probably because they tend not to sell the cheapo end of the market, but sell a lot of the higher-priced Nike and Adidas trainers… no wonder JD Sports are known as ‘The King of Trainers’.

Why Buy JD Sports?

Well, they are in the FTSE 350, close the bottom. This is important, because they are at the lower end of the top 350 UK listed companies, which means there is a sense of importance from being amongst the top 350 companies in the UK, but also there could be room for significant growth. I added some shares to my NISA portfolio in late July, and they’re up over 16% since then; what’s more, JD Sports have been paying out a growing dividend for at least 7 years. In September, we had some news updates on JD Sports:

Highlights

Record result for the half year with group profit before tax and exceptional items doubled
Positive momentum in the Sports fascias in all territories with like for like store sales growth across the combined European fascias of 13%
Continued progress in Outdoor with like for like store sales growth of 12%
Further management focus concentrated on Fashion fascias
Strong like for like comparatives in the Sports fascias in the second half
Interim dividend increased by 3.4% from 1.1125p to 1.1500p

I believe that JD Sports has huge growth potential, this is a nice addition to the strong dividend history. They took over Blacks and Millets – two struggling outdoor clothing and equipment companies, but JD Sports are turning things around. They have already managed to shrink those losses incurred from the purchase from over £8m to less than £7m and have been negotiating rents and closing down the most underperforming stores… including my local Millets (which was quite awful, I have to say).

Since I have probably bored you enough by now, why not check out this article on JD Sports from September which comes from iii.co.uk (a broker and forum host who I use for information).

Let me know what you think! Leave a comment about JD Sports or anything else!

December 1, 2014

Aberdeen Asset Management – Final Results

One of the shares I own, Aberdeen Asset Management (ADN on the London Stock Exchange), just released its final results for the year. And they were good. I sometimes doubt my value dividend growth strategy, as I tend to go for shares with a pretty low PE ratio. But they always seem to do pretty well in the long-run, and likewise with Aberdeen Investment Management’s latest results. This is great news, and somewhat of a relief, since shares in ADN have fallen in value since I bought them in the Summer. Now, I know that if the price falls, that just means that the yield is basically higher, but if it falls too much, that starts to sow seeds of doubt in my mind. And that is never a good thing. If you have worked out a good strategy, or just follow one that is proven to be a good, long-term approach, then you shouldn’t have to doubt your choices.

Luckily, it always seems to work out just fine over the long-haul, so I really should not allow these seeds of doubt to sprout and take root in my mind. Today’s figures show that my decisions were justified, I moved in the right direction. Take a look:

Aberdeen Asset Management’s:

revenue is up 4%;
assets under management are up 62%;
performance fees reduced by over 50%;
net revenue now stands at £1.12 billion;
dividend is thus being raised by a cosy 12.5% (YES!).

I like this. It seems as though ADN are also moving in the right direction. They recently completed their acquisition of Scottish Widows Investment Partnership (SWIP), and ADN are already seeing greater cost efficiency as a result – and this aspect is ahead of their expectations. This is on the back of many other acquisitions and new market ventures since their beginnings as a company in 1983 (it was a single trust prior to this, so the history actually goes back further). Part of these market expansions are in Asia, which had not returned great profits of late, but the overall company seems to be doing well in spite of this.

I bought Aberdeen Asset Management in late July. At the time of writing, ADN is up almost 4% on this news, but since the price had gone down since I bought them, this means my shares are up just above 1% overall. I have no plans to sell it whatsoever. This means I should get an income of around £9-10 from Aberdeen Asset Management for 2015. I know it’s only small, but I do not have huge amounts to invest right now, and I have to keep my pension investments separately for tax purposes.

What do YOU think about Aberdeen Asset Management? Is there a different share you prefer in this sector? Let me know your thoughts. Leave a comment below

November 27, 2014

Dividend Timing – The UK vs. the US

The US and the UK are Different

Well, it doesn’t take a genius to know that we are two countries separated by a common a language… here in the UK, we often make jokes about America and all the things we think are totally crazy about the country… and I know you guys ‘just dig those British accents’ and try to mimic us all the time.

But the differences do extend to many areas of life, and one of our favourite topics, divdends, is no exception. American shares tend to pay dividends every quarter, whereas UK shares usually pay every 6 months. Moreover, US dividends will be split equally throughout the 4 payments, whereas British companies tend to have an ‘interim’ vs. a ‘final’ payment, with the final payment typically being twice as much as the interim.

Why is this?

Well, I don’t actually know! And I even tried to research the answer, to no avail. However, these issues are something to think about if you are investing for income, as you may have quite a wonky inflow of payments if you invest solely in UK shares, due to the interim payment being a lot less than the final payment. There are, in fact, a few British companies that pay quarterly dividends, nine companies according to this article on motley fool.

However, in the ‘accumulation phase’ of investing, it does not matter that much when dividends are paid throughout the year, as it is your goal to accumulate shares, rather than to live off the income (from dividends) provided by shares at this stage.

A Plan

I am hopefully going to live off passive income in the future – preferably long before my state retirement age (currently 67, although I guess it will increase again before then!) arrives. I am planning to do this through earning a combination of active and passive income… with the latter hopefully taking over before the age of 50 (I have a touch over 15 years to go).

I have set a series of financial, as well as general, goals which I hope will help us to achieve financial independence, as a family, over the next 15+ years. At the moment, these are mostly being fulfilled by investing in dividend-paying shares, mostly British ones. Over time, I hope to add other sources of income, such as small businesses, rental properties, and maybe some IP or some other similar kind of recurring payment/royalty streams.

Cashflow

As I am currently accumulating, it doesn’t matter which month the dividends are paid, or that the UK shares pay a 35:65 split payment, especially since I am just going to reinvest the dividends in more shares anyway. But I have been wondering about maybe trying to look for more shares that pay quarterly dividends, and trying to balance them out a bit. If they’re really good ones, after all, I can always add in more shares regularly and then I have a more even cashflow throughout the year.

From a psychological perspective, I really like this, as it makes me feel as though things are running smoothly and I am in control of my money. Money is coming in regularly, and I am able to reinvest regularly. This is similar to my perspective on buying enough shares to get you at least one free share, come dividend payout time. Of course, this is another quirk of the UK vs. US systems, as I have not been able to find a UK broker who will let one accumulate fractional shares (if anyone knows of one, get in touch!).

From a value investing perspective however, this is kind of silly, because I want to buy shares based on whether they are good value, rather than whether they pay dividends in January for example. In the future, I will hopefully be reliant on these passive streams to provide me with a regular income, so perhaps another way of doing it would be to make sure that I set up some kind of ‘buffer account’ from which I pay myself a regular, monthy ‘salary’ so to speak. For example:

I pay annual spending amount from my investment account into a current account
I set up a monthly transfer of the annual amount divided by 12
That will be my ‘salary’

Anything above the annual required amount will get reinvested. If I do not have enough dividends or other passive income arriving, then I cannot do this method. This method is really for when the income exceeds my annual spending needs.

Over to You

Do get in touch and tell me if you have any ideas about smoothing out your cashflow from passive income!

Photo credit: iosphere/freedigitalphotos.net

November 17, 2014

Downshift Trials 2 – Save Money on Groceries, etc.

Last month, I introduced the concept of downshifting which I’ve been doing for several years. As I was a student from 2006 to 2014, I learnt to make do with a more simple lifestyle, and not to desire the luxury or high end versions of most things. This is a fantastic way to save money on groceries, as well as pretty much anything you buy. So basically, downshifting is swapping to a cheaper version of the same product, and seeing if it is good enough for your needs.

Now clearly, I am not going to buy bad quality items. Sometimes, downshifting means you realise that the cheaper item is not actually good value for money, because it doesn’t last long or it doesn’t taste that good. Yes, sometimes it is worth spending more because of better nutritional value or longevity, etc.

Clothes Shoes Maketh the Man (or Woman, I guess)

Take shoes for example. I would never buy a cheapo pair of shoes to wear every day to work. You need quality footwear to take the wear and tear of daily life and to support your feet adequately and healthily. Quality shoes cost £££ here in the UK. You could spend £55+ (on sale or discount price) for a very plain, good quality pair, up to £200 for a fancier pair of men’s all-leather brogues for example. However, these would last you for years and years. Compare that to one of my brothers, who always buys cheap shoes, £45 on average, but he has to buy new ones every 9 months. So roughly every 3 years, he buys 4 pairs of shoes, that’s £180 worth! That’s the same as £60 every year.

The Old Jamaican

Let us compare my brother’s expenditure on shoes to someone who bought quality. I knew an old Jamaican man called Ferdi who actually had the same pair of shoes since 1936, and he just died about 2 years ago… that’s 76 years using the same shoes!!! He just re-soled them whenever they needed it and waxed/polished them every week. He kept them really clean and tidy. I am guessing the shoes were pretty expensive, as they looked like a really thick and sturdy, quality leather and the sole was stitched. It looked solid.I guess a pair of men’s shoes like that nowadays would cost about £150. Based on the average wear my spouse has with shoes, I am guessing in today’s prices, about £10 every year in maintenance (cost of wax/polish plus re-heeling or re-soling every 2-3 years).

So, aim for value and longevity, because it saves you money in the long run!

Photo credit: sira Anamwong/freedigitalphotos.net

October 16, 2014

Sainsbury’s – Is it about to get decimated?!

I discussed and analysed Sainsbury’s recently, as the mighty retailer Tesco had announced a profit warning which affected the price in Sainsbury’s as well as other companies in the retail sector. As I mentioned previously, I buy shares once per month on a discount scheme, so I bought more Sainsbury’s shares at the end of last month (SBRY on the LSE); taking my shareholding from 52 to 95 shares.

I actually briefly worked for Sainsbury’s, but alas I got a scholarship so I left to study abroad. Otherwise, I would have participated in their sharesave scheme and saved the maximum amount. They were a great company to work for and they are a decent supermarket to shop at. The company is a great dividend payer too, with several years’ worth of increasing payments.These are some of the main reasons I like Sainsbury’s.

But right now, things are looking a bit scary, as profit warnings in the sector have really mangled it for Sainsbury’s of late… that is until today, when the price rose a whopping 5.65%!!!

This follows on from yesterday’s ‘bloodbath’, losing the company more than 3%. People around the message boards and forums on trading sites are saying that tomorrow’s update has already been priced in, so people have piled on to buy more shares at a good discount.

Unfortunately, I did not have any spare money to take advantage of yesterday’s fall, however we do not know what is about to happen tomorrow, as the profit results will be updated, and we are expecting bad news to affect the share price again.

HOWEVER! This is not necessarily a bad thing, as we can have the opportunity to pick up shares at a discount to today’s price. The problem is really about what we think of the grocery retail market and whether it is worth buying more shares in the first place or not.

I personally really like Sainsbury’s. Their food is better quality and the price of branded products is basically the same as everywhere else. Their own food is, in my opinion, far superior to Tesco’s or Asda’s offerings and the shopping experience in my local store is better… If you go after shares in companies that you like, trust, or admire, then this is who I would choose from the sector.

BUT WHAT IF… there’s a dividend cut come tomorrow? Well, some people who do DGI (dividend growth investing) would use that as an excuse to sell. However, I would not be so quick to sell, as the current dividend stands at well over 6% and if cut, it is likely to bring it down to 4%+, which is still massively higher than the FTSE 100 average dividend of just over 3%.

So, all in all, I think I will just sit there happily with my Sainsbury’s shares and not worry about them too much.

September 16, 2014

BAE Systems – A Good Value Defensive Stock?

This month, I am intending to buy more shares of BAE Systems (BA. on the LSE). It’s one of the largest companies in the UK and is a pretty solid dividend payer. I’ve already got 37 shares, so I am hoping to pick up another £100+ worth before it goes ex-div on 23rd October.

Why BAE?

First of all, who are they? From their website:

BAE Systems is a global defence, aerospace and security company, delivering a wide range of products and services for air, land and naval forces, as well as advanced electronics, security, information technology and support services. With some 84,600 ¹ employees in six continents, we work together with local partners to develop, engineer, manufacture and support the innovations that increase defence sovereignty, sustain economies and safeguard commercial interests.

¹ Including share of equity accounted investments

Nearly 85k employees. Woah. That’s a lot. But more importantly, from their website, we can find out:

they are a sound company in a necessary sector;
they have 12 years’ worth of increasing dividends;
If you look at their site, they have a great investor page which shows their dividend history back to the 90s. As you can see, it’s solid;
The yield is currently ca. 4.6% – pretty nice, if I do say so myself.

If you want more detailed information, their half-yearly report is available here on the London Stock Exchange website. It looks really good. Plenty of orders, stable income. Not too much debt.

Global Conflict Has Helped Share Price Increase

With geopolitical tensions in various parts of the world at a heightened state right now, the share price has appreciated at least 5% since I bought my existing 37 years earlier this year. Of course, this can go up and down, but the critical factor for me is not price but value.

What do you think? Is BAE Systems a good value share to buy right now?