Uncategorized | Reinvested Wealth

The Coming Recession?

September 18, 2019 | Uncategorized | No Comments

There has been a lot of talk recently about a coming recession. It seems almost like a switch was flipped and not only has the mainstream legacy media been united on delivering this message, but everyone in our day to day lives seems to be thinking and talking about this as well. Where did all this talk come from? What should we ultimately do to prepare ourselves for it? Well it seems to me that some people are always preaching doom and gloom no matter the weather, and on the same note some people are better off not listened to. Those of you reading this will remember the Great Recession nearly a decade ago. You probably have memories of family and friends struggling as the economic world seemed to collapse around us all suddenly and unexpectedly. People panicked and there was a rapid selloff of the stock market to accompany this economic down turn.

Above we can see a stock chart showing the change in value of the S&P 500 in the years leading up to and following the great recession. There are three things about this chart that really stand out to me. The sudden and rapid drop of 2008 going into 2009, and the slower gradual recovery, and most importantly the return to existing price levels in ~5 years. Looking at these charts and even if we go back further we can see that after all the worst crashes of our history such as the Great Depression the market will eventually not only correct itself, but exceed to even higher valuation levels in time. So what is the best thing we can do while the world seems to be collapsing around us? Keep collecting those sweet, sweet dividends and hold out for sunny skies. If you have built up your emergency fund ideally you won’t have to touch any of your investment capital and can continue reinvesting all your dividends into further purchases which will now not only be cheaper but will start with a higher dividend yield leading to a great initial return on your investment.

Stay cool, calm, and collected and follow the plan. It’s easy to panic and follow the herd… but is that really such a great move?

Questions? Comments? Have something you would like to see featured? Please write to me @ Reinvested@yahoo.com.

By Reinvested

Company Analysis PepsiCo (PEP)

August 21, 2019 | Uncategorized | No Comments

PepsiCo (PEP) is headquartered in Harrison, NY. It was created in 1965 with the merger of two companies; Pepsi-Cola and Frito-Lay. Since this combination of two notably powerful companies in their own right, PepsiCo has gone on to acquire several more varied and great brands including Tropicana in 1998. Quaker Oats in 2001. Through Quaker Oats, PepsiCo would also acquire ownership of the Gatorade brand as well. Recently, PepsiCo purchased Sodastream at the end of 2018, which produces carbonation products that enable you to make fizzy drinks in your own home. PepsiCo is a major international player with sales in over 200 countries and territories all over the world. Hence, they have divided their business into six major entities; Frito-Lay North America (FLNA), Quaker Foods North America (QFNA) PepsiCo Beverages North America (PBNA), Latin America (LatAm), Europe and Sub-Saharran Africa (ESSA), and Asia, Middle-East, and North Africa (AMENA).

A number of factors increase the appeal of PEP to a dividend investor including their great array of brands, powerful international exposure, and long history of uninterrupted dividend growth. A large part of PepsiCo’s strength comes from its incredible number of strong performing brands. Some of the more famous brands include; Pepsi, Mountain Dew, Diet Pepsi, Pepsi Max, Mist Twist, Aquafina Water, Tropicana, Lipton Tea, Gatorade, Quaker products, Lay’s Potato Chips, Cheetos, Doritos, Ruffles, Tostitos, and Fritos. From this dominant product line PepsiCo is able to hit several distinct market segments primarily operating in the beverage and salty food sectors. Take note, although PepsiCo does own all these brands which are widely known in the United States there are a number of additional regional brands sold throughout the world which will be unfamilar to the average American investor such as Mirinda, a Spanish created orange drink. Another great benefit of PEP is their global market reach. According to the 2018 Annual report the U.S. market accounted for 57% of net revenue with the rest of the world accounting for the remaining 43%. So although the U.S. market is dominant as can be expected for an American centered corporation, they are still receiving a significant amount of their revenues from unrelated markets all over the world. Digging deeper into these numbers we can also see that food sales accounted for 54% of net revenue with beverages serving up the remaining 46%. What is the most valuable division of PepsiCo you ask? Although your first guess may be North American Beverages (PBNA), you would be incorrect. The correct answer is Frito-Lay (FLNA) which came in with a significant operating profit of 43% for the entire segment. This blows away the next closest North American Beverages out of the water with a still impressive 20%. Another key factor increasing PepsiCo’s allure to a dividend investor is the long history of dividend increases. As of 2018 it was the 46th year in a row, securing PepsiCo a spot at the table of dividend aristocrats. As of the time of the writing of this post PEP is currently paying a dividend of $3.82 yearly, which accounts for a healthy dividend yield of 3%.

We have been over some of the advantages PepsiCo possesses but what about some of the dangers facing them? There are a number of risks currently facing PEP. Changing consumer tastes, changing laws and regulations, unknown political changes and turmoil, risks and opportunities in emerging and developing markets, and any potential supply disruption. The first potential risk facing PEP is nothing new for any company operating in the consumer sphere. Simply put, peoples tastes change over time, and what once was popular with your grandparents may not be well received by millennials or members of generation Z. These trends will never abate but PEP is aware of them and working to bring forth new product lines to appeal to the tastes of the next generation of consumers. Another potential danger facing PEP is changing laws, regulations, and political climates. One section of this is naturally related to taxes. A change in the tax situation domestically or abroad would certainly impose some hardships on PepsiCo and their bottom line. Additionally, something to consider is laws in some cities and states such as Seattle, WA, and California which have banned single use plastic straws. Assuming that plastic straws are only the beginning, one can wonder how new laws could come into effect banning single servings bag of chips or bottles of PepsiCo beverages and the monetary and time cost to devise new and effective measures to counteract these changes. Thankfully for PepsiCo, this isn’t a current or necessarily a pressing problem but it is something to be aware of moving forward for the cautious investor. On the international front, PepsiCo as a truly global company operating in over 200 countries also takes on additional risks from shifting political whims and fortunes across the entire globe. How will the Brexit situation affect Pepsi-Co’s bottom line? What about variances in the exchange rate between currencies in emerging and developing markets such as Mexico, Russia, India, or China? These are complicated questions. Unfortunately I do not have a crystal ball and can not predict the future but it is still important that we consider these possibilities when reviewing any company. Finally, an additional threat facing PepsiCo is any potential disruption in supply of either raw materials or deliveries of finished products. PepsiCo as a large company producing a great variety of products, requires a large amount of raw materials such as water, juices, food products, plastics for packaging, and fuel for operating facilities and delivery vehicles. Some of these such as energy are cyclical markets with ebbs and flows which can benefit or bite any given corporation in any given year based on the going international rate. Others, such as water or food sources can come from limited sources and changing political situations in individual countries and localities. PepsiCo has been successfully navigating these potential risks for decades now and no foreseeable risk currently appears on the horizon, but once again it is necessary that we educate ourselves on potential downsides and disruptions to the businesses we are considering.

Authors note- I am invested and long PEP. I believe their proven business model and additions to their offerings will continue to perform over time and I look forward to collecting the growing dividend income along the way. The views and opinions expressed in this articles are the authors alone, and are offered for informative and discussion purposes only. Please do your own research and due diligence to decide if this is a company that makes sense for your personal portfolio.

Questions? Comments? Have something you would like to see featured? Please write to me @ Reinvested@yahoo.com.

By Reinvested

On personal finance

August 1, 2019 | Uncategorized | No Comments

They want you to be a slave. They want you to be dependent. They want you to consume beyond your means until you hit a point of being indebted, obese, lazy, and too stupid to protest let alone understand how you ended up in this situation. And why? It’s good for the bottom line. Capitalism CANNOT exist in a stasis. It needs to continually consume and expand like a growing fire or it will risk extinguishing itself and languishing in depression. That is the predicament we find ourselves in currently, and although we all seek to see economic growth further and further we must look after our own economies.

The word economy derives from a much older Greek word which meant household management. Thus, the earliest economies were of individual households. How many acres of land did the family have under the plow? How much wool had been harvested from the sheep? What would be the cost to purchase new plows to till the fields and what kind of yield could one expect? Nowadays it is easy to get caught up in large macro economic blocks such as the United States or the European Union, but it is important to remember where economics originated from and return our focus there. To put it frankly, we can’t control the larger economy and it would be futile to try as an individual investor or household. Instead, we should focus on what is in our immediate control: our own household budgets and balance sheets. How much do you earn a month after taxes? How much do you pay for all expenses? Take a moment and grab a piece of paper, and divide it into four squares. In the first put your income. In the next your monthly and yearly expenses. How does it all add up? Are you running a surplus or slowly slipping below? Then, in the next square jot down any assets you own which hold value or can bring in additional money such as ownership of a company, securities, bonds, or land. In the final square place any lasting debts you may hold, be they your mortgage, car note, student loans, or consumer debt. How does that picture look? Be honest, for the average American it is probably a scary picture, but we all have to start somewhere and honestly assessing our situation will enable us to plan accurately.

Why did I ask you to do this? Investing is great. My passion for it and a desire to help others starting on their path and seeking to learn more is what inspired me to start this blog. You know what else is great though? Becoming debt free (if you haven’t already) and living below your means ensures that you can personally not only survive any dips in the market or your personal life (and not have to worry about cashing out your portfolio to make ends meet), but you will have the potential to thrive when the economic world is crumbling around you. For that reason, I recommend everyone pay off all their personal debts in whatever forms they may be and then save an emergency fund of a couple months expenses before jumping into the market feet first. Why do I recommend this path? It is what I personally did for one, living far below my means for YEARS until I was able to pay off my debts and build up some savings. Beyond that, lets do some simple math. For example if you were putting $10,000 into the market and expecting a return of 7-9% you would have between $10,700- $10,900 by the end of the year. Not a bad return on your investment assuming everything goes well. Now lets assume you have some debt. The average American is carrying an interest rate of 15.32% on their credit card so only $5000 of credit card debt can quickly balloon to $5750 in a year if left untreated (obviously the numbers are more complex than this but for simplicity lets all play along). That debt of half the invested money would effectively wipe out all the gains your modest portfolio had earned ASSUMING you hit your goal of growth. What about in a bad year? You would have not only had a dip in your portfolio from a market downturn but would also now be in additional debt. Therefore, I contend that one of the best investments you can make is in yourself, and by freeing up your cash flow to move into a direction of your own choosing rather than continuously being vacuumed out of your pockets by your creditors is a smart move for anyone.

Put simply, debt is slavery, and they want you to be a slave. Those of us living deep in debt are quite literally staying in shakels of our own creation. If you find yourself in this position which most if not all of us have been at one point or another my advice to you is to shake violently until you destroy the chains holding you back. A prosperous nation will start with successful communities. Successful communities will arise from exceptional families. Exceptional families are built on the backs of incredible individuals. We are living as a nation in servitude and unless we can free ourselves as individuals and eventually as a collective the weight of our burdens will eventually drown us. Are you looking for additional resources to continue learning more on the topic of personal finance? Please check out our recommended readings , and purchase a book to support the blog and the author. For this particular topic the two books I would most recommend are “The Total Money Makeover” and “Rich Dad Poor Dad“.

Questions? Comments? Have something you would like to see featured? Please write to me @ Reinvested@yahoo.com.

By Reinvested

Company Analysis – Altria Group (MO)

July 15, 2019 | Uncategorized | No Comments

The Altria Group is a mainstay of many dividend investor’s portfolios. It has been around since 1985, when it emerged from a re-branding of the massive Phillip Morris Company, known primarily for their lines of Tobacco products. Their most recognizable brand is Marlboro. Beyond Marlboro, they do own a variety of other famous cigarette brands as well as smokeless tobacco alternatives such as Copenhagen and Skoal. Altria focuses on the domestic U.S. market as opposed to Phillip Morris PM, which oversees international sales and distribution. They are headquartered a brief drive out of Richmond, Virginia, an area which has been associated with tobacco growth and production since the earliest days of the republic and before. The company has also taken an interest in a number of emerging companies expanding their offerings such as Cronos Group focused on cannabinoids and based out of Toronto, Canada. Altria has purchased a whopping 45% stake for the price of 1.8 billion dollars. This purchase grants them access to the emerging and fast growing CBD marketplace as well as the increasingly shifting cannabis marketplace. Juul, based out of San Francisco, CA has seen Altria purchase a significant 35% stake to the tune of $12.8 Billion dollars, is the emerging vaping company with a dominant share of the vaping marketplace and they’re expected to continue their dominance. Finally, Anheuser-Busch Inbev based out of Leuven, Belgium, with a respectable 9.6% ownership stake. Anheuser-Busch Inbev owns hundreds of alcoholic brands throughout the world and mainstay brands such as Budweiser, Corona, and Stella Artois.

There are a number of factors about Altria Group which makes them highly attractive to a dividend income investor. The first and foremost is the exceptional dividend yield. Paying out $3.20 a year or $.80 a quarter for a dividend yield exceeding 6% is phenomenal for any major company, but when paired with Altria’s standing as a dividend aristocrat with 49 years of consecutive dividend increases, it is easy to find something here to love. As of the time of writing 7-25-2019 Altria has a P/E ratio of 15.17 making them about fairly priced in a generally overpriced market. Additionally, there are a number of newer investments and technologies coming into play for Altria showing how they plan to adjust to changing times and consumer tastes. The first of which is the IQOS vaping system. Designed by Phillip Morris initially for the international market this product was recently approved by the FDA for sale in the USA ( FDA approval). By offering a tobacco alternative which has already seen some international success for health conscious individuals, Altria will be sure to continue their dominance solidly in the tobacco sector throughout the foreseeable future. Another exciting addition was the 35% stake in Juul, the up and coming vaping company, which has already grabbed a vast majority of the US market share (Juul marketshare). By diversifying into this venue Altria is ensuring they not only remain relevant with the next generation of smokers but that they will be invested at the forefront of emerging trends in this segment. Yet another exciting acquisition by Altria was Cronos group. Now that Marijuana has been legalized in Canada and as the waves of legalization for both medical and recreational use cascade over the United States, it seems only a matter of time until this can become a dominant sector in the cigarette business. Also on this point, I like the fact that Altria has a long and successful history of lobbying giving them what I feel will be a great toolbox to roll out distribution for cannabinoid products once they eventually become fully legalized in the United States. Finally Altria maintains an interest in Anheuser-Busch Inbev giving them exposure to the related sin stock sector of alcohol. What is one of the most popular times to smoke? After a couple drinks on a night out! Although Altria maintains a minorty stake in Anheuser-Busch, I personally like this position as I feel it offers good synergies with their core focus areas while providing some diversity at the same time in their holdings.

Now, that all sounds well and good but what are some of the downsides for investing in this company or more broadly, this segment of the market? For starters, there is the general downturn in the number of cigarette smokers. This number is projected to increase year over year. I personally believe Altria is diversifying properly, it is certainly important to note and be aware of. Secondly, some investors may have ethical concerns about investing in a tobacco giant like Altria. I personally believe that one of the greatest things about the United States is the freedom that individual adults have to enjoy adult products in their private lives, on a night out or on a break from their work. I believe that will continue to be a mainstay for large segments of the population in one form or another and I encourage individuals to make their own informed decisions about which products they may or may not choose to partake in. Additionally, a potential danger for investors to take note of is the concentration in the US market space. Unlike Phillip Morris which has great international exposure Altria is essentially limited to the United States, placing them in potential risk of additional laws or regulations unilaterally damaging their bottom line. That being said, this is a company with significant branding and lobbying experience which has faced a negative onslaught from both regulators and the media for a long time and has continued to come out on top and reward their shareholders generously along the way.

Authors note- I am invested and long MO. I think their recent downward swing provides a good buying opportunity for the less squeamish investor. The views and opinions expressed in this articles are the authors alone, and are offered for informative and discussion purposes only. Please do your own research and due diligence to decide if this is a company that makes sense for your personal portfolio.

Questions? Comments? Have something you would like to see featured? Please write to me @ Reinvested@yahoo.com.

By Reinvested

Welcome all

July 14, 2019 | Uncategorized | No Comments

I created this site for two main groups of people. The first, those who already have an interest in dividend income and dividend growth investing and are seeking a supportive community and additional information on the subject. The second, those who are interested in beginning their journey but want to learn and gather information before they get started. This often seems a glossed over segment in the investing world with many people being drawn to the siren songs of day trading and speculation. Certainly, it is possible for one to make money in these endeavors and many do. This blog will speak to those who wish to take a more passive approach to their portfolios investing in high quality companies and collecting dividends while waiting for their continued accumulation of value.

This site is in no way, shape or form professional investing advice. I would encourage anyone and everyone to do their own research on the companies they are purchasing and only buy into companies they are not only comfortable with but more importantly that they understand. I, like many of you am a normal individual with some expendable income that I am looking to invest and use to grow passive income over time. This blog is for the discussion, analysis, and further education on a variety of companies and why they may or may not be attractive to a dividend income investor, as well as sharing valuable books and articles that can benefit us in that manner.

Cash flow is king! This sentence is my core philosophy. My goal, to create an alternative income by investing and then reinvesting all dividends over time, growing this income to a point I could eventually live off of it entirely. Through gaining control of our finances we can improve our own circumstances not only as individuals, but as families, communities, even as nations as a whole! That being said let’s get down to business because the marathon begins with the first steps.

Are you interested in profiles of companies both domestic (U.S.A.) as well as international? These will be a regular staple here and over time more and more will continue to be added. Are you interested in books to begin or further your personal education on that topic? Check out the recommended reading list for some books I have personally read that have helped me on my journey.

Do you have any questions? Comments? Have something you would like to see featured? Write to me at Reinvested@yahoo.com

By Reinvested

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