Friday, October 20, 2017

My Dividend Paradise

In this blog post, I'm going to talk about my dividend paradise, which is built on high quality dividend paying stocks. I'll also shed some light on how I track and ensure high credit quality across all my stocks. Below is an illustration of my paradise with its foundation supported by dividend paying stocks.

Mr. ATM's Dividend Paradise
If you look closely in the picture above, you will see my entire stock portfolio laid out in a stepped order using a credit rating hierarchy. The highest quality (AAA) stocks are placed higher and to the left, whereas lowest quality (BBB-) stocks are laid lower to the right.

Those are piles of money at the bottom, paid to me as dividends by each set of stocks. I also like to make sure the bulk of my portfolio is made up of only the highest quality stocks and therefore, dividend piles are larger for those stocks than the relatively lower quality smaller positions on the right.

Knowing company's credit rating is extremely important as it makes a big difference between companies that go bankrupt and those who survive and even thrive during a downturn or a recession. A credit rating of a corporation is analogous to how a personal credit score works. The higher the rating or score the least risk to the creditors.

You can look up credit rating for any publicly traded company for free by using FINRA's website http://finra-markets.morningstar.com/BondCenter/Default.jsp. Just use the Search tab and enter the stock symbol. I personally use FastGraphs tool which includes credit rating.

Source: S&P
I track credit quality of every stock I own in my spreadsheet; however, I wanted a graphical way to see how my entire portfolios falls along the credit rating boundaries.

Unfortunately, Google Sheets' Org Chart function is extremely limited when it comes to customization. Well, it was designed to show people in the Org Chart and not stocks :)

It is a bit tricky to make it work with a stock portfolio without messing up or re-organizing my entire spreadsheet. I had to define hierarchy between different credit ratings in the spreadsheet correctly, and once I did that, the Google Sheets just spits out the Org Chart in the right order and hierarchy.

Zoomed view of a section of my stock Org Chart
The majority of my stocks fall under A, A-, and BBB+ S&P credit rating. Basically, BBB- and above is considered Investment Grade whereas anything below is consider a Junk or Speculative rated investment. I try to buy stocks that are at least a BBB+. I do own a few BBB- such as OHI, KSS, and HPT.

My full stock portfolio Org Chart
You may also run into stocks that are not rated by any credit agencies; these are usually stocks that either have no debt (no bond to rate) or their market cap is just too small to be of significance.

Added some paint to see what else I can make out of it
Added structural stuff, house, and helicopter
The top S&P rating is AAA. There are only two companies in the entire S&P 500 that are rated as AAA. These two companies are Microsoft and Johnson & Johnson. I own shares in both of them and they are my large positions.

Added piles of money and helicopter animation
On a side note, if you are wondering about Fitch and Moody, they are just two other credit rating companies similar to S&P. I like to track S&P as I believe it is the most important of the three, while other credit rating companies normally follow S&P's rating.

I needed to add a cruise ship in my dividend paradise as I can use a little vacation, every now and then. My helicopter would take me back and forth between the ship and my dividend paradise. BTW, I don't like big houses, so a small cabin or a modest home is sufficient for me. Though, I do have a penthouse suite on the ship.

Added ship, water, and the final animation
Final Thoughts

Build your own dividend paradise using only the strongest and highest quality stocks. That way, you would not have to worry about your dividend paradise crashing down, when the storm (recession) arrives. Also diversify across several industries and make sure you have an exit plan for your risky investments.

In case you are wondering, I had to create over 200 frames for the above animation and it was inspired by various video games I played or coded as a kid on my Sinclair ZX Spectrum and Commodore 64. That's why the picture and animation looks like an 80's video game.




Hope you enjoyed this post as much as I enjoyed creating it. As always, would love to hear what you think.

Disclosure: I am long all stocks that are mentioned or shown in this post.

Disclaimer: Author of this article is not a licensed/registered financial or investment adviser and does not provide investment advice. Any mention of stock names/tickers in this article or website is not a recommendation to buy or sell. Please do your own due diligence before buying any stocks. This article is for informational and entertainment purposes only. Full disclaimer can be read here: Full Disclaimer

16 comments:

  1. You're a fucking legend ATM. This is so damn cool.

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    1. Loved the reaction and glad you thought it was cool :)

      Thanks,
      Mr. ATM

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  2. Mr ATM, That is about the coolest graphic I have ever seen. Extremely creative. I see another Rockstar Finance feature in your future. Your point on credit quality is a good one. I don't look at it often enough so it is a good reminder. Inherently I think about similar characteristics as I look at the safety of my dividend stocks. Attesting to that, JNJ and MSFT are also a couple of my larger holdings. Tom

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    1. Thanks for the kind words Tom and glad you liked it.

      It's probably a bit over-the-top for Rockstar Finance. Though, I could be wrong. Sometimes, I just like to combine various passions of mine, such as 80's video games and investing, and see what comes out of it.

      I'm glad you also hold JNJ and MSFT. I always keep some cash on the side for the time when these two take a dip, so I can buy more.

      Mr. ATM

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  3. Man that is outstanding, thanks for detailing what went into putting that together. I loved the different sized money piles, very subtle but so damn creative!

    I own JNJ and T directly, and you have many more that are on my radar. CSCO might be the next purchase for me. I like the idea of owning companies that have stellar ratings.

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    1. Thank you much DS.

      CSCO is a good one and still under valued with double digit dividend growth.

      Mr. ATM

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  4. Always a big fan of your graphics. How you were able to design this one is amazing. Far beyond my creative skills. Think you are just trying to out do yourself with each graphic haha. Credit is important when valuating a stock. Makes sense to have your biggest positions in the most stable of companies. Keep these posts coming!

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    1. Thanks Daze. Yes, I also feel as if I'm trying to out do myself. I like working on graphics, so it is fun for me, besides I'm not a big fan of those stock photos.

      Take care,
      Mr.ATM

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  5. Fantastic post, Mr ATM! The animations are great, and the perspective on how you view your dividend portfolio is extremely helpful. It's definitely important to diversify and know the strength of your positions. I have monthly paying positions like REI.UN that I consider less stable and would only hold smaller positions, and I have positions that I plan on making the core of the portfolio. Thanks for sharing! I loved the long term builder approach.

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    1. Thanks Graham, I appreciate the comment.

      Mr. ATM

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  6. Mr. ATM, awesome graphics. And, despite the fun in the post, you also made some really great points about building your portfolio on a solid foundation. By the way, I didn't know that about JNJ and MSFT, so it's good to know.

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    1. Thank you DP.

      Yes, JNJ and MSFT are the only two companies left in the entire S&P 500 worthy of the best of the best credit rating AAA.

      XOM used to be the third AAA stock, but they got downgraded last year to AA+.

      Mr. ATM

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  7. This is a great way to visualise it! plus I love the helicopter haha

    Super-important to remember that the storm will come at some point!

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    1. Thank you Richest Man. Glad you liked the helicopter, it took quite a bit of time to make it fly.

      Thanks for stopping by.
      Mr. ATM

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  8. Dude I love the design, totally awesome! I do agree that credit rating and balance sheet strength in general is important when looking for long term investments.

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    1. Glad you liked it and thank you for stopping by :)

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