2/16/2013

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. B
y 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%

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