# Income Portfolio



## nomore4s

Due to this current market crash I will be starting a portfolio of dividend paying shares which I will be using to try to generate a long term income stream.

I will be using $50,000 start up capital with all dividends re-invested and I will try to invest another $5,000 each year for the next 5-10 years.

There will be basic fundamental requirements to be applied to each stock. Obviously paying a d/e, as well as low debt levels (due to current conditions), good earnings growth potential, a basic solid company history, I will also prefer a low d/e payout ratio.

I will also be filtering these stocks through tech analyse due to this being my preferred method of trading. I won't mind buying stocks in a trading range but won't be buying stocks in a solid downtrend unless there is a very good reason.

I won't be spending more than 10% on an individual stock to start with.

While these stocks will be purchased as long term holds I will not be bothered selling partial or full holdings of stocks if conditions require it.

I will be slowly drip feeding my capital into the market over the next 12-24 months as the current problems effect on company earnings becomes a bit clearer and we get a more accurate picture of d/e yields.


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## nomore4s

I have purchased the first stock.

MTS @ $4.20 x 600

Will look to buy another 400 or so if & when there is a solid weekly close above $4.50. A weekly close under $3.60 would have me seriously looking at exiting the stock.

Goes ex d/e on the 16.12.08 (I think) with a 10c d/e payment. Probably has a bit too much debt but posted fairly solid results so I will see what happens from here.


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## grace

MTS is my grocer holding, and it has held up pretty well amongst the turmoil!  I think I bought about 2 years ago for about what it is now, so it has held up really well.


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## Sean K

Nice blog thread. Look forward to seeing it develop.

I'm finding it hard to pick good long termers at this stage based on current pe's and dividends due to the uncertainty of their future earnings. 

I suppose after some decent research there will be some the stick out more than others.

Interesting that this is an 'income' portfolio, yet you are still going to trade in and out on some price variances on the stock.


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## nomore4s

Thanks Kennas.

This portfolio will take a while to get off the ground properly, no rush atm as I think we could see some even cheaper stocks and as I stated I want to see the effect on company earnings and dividends.

I won't really be trading the stocks as such but I will exit or unload some stocks if required but I don't think it will happen very often. It's just buy and hold no matter what doesn't really sit well with me.
If I can free carry a stock I will - then the free carried portion will pretty much become a buy and hold forever.

Also if I feel a stock is getting too far from fair value or the chart shows signs of weakness after a strong run up I will look to unload part of my holding and then maybe re-enter later if opportunities present. This is probably more about trying to take advantage of opportunities and to keep the portfolio balanced.

But the main goal of this portfolio is to generate a passive income so that in 10+ years I will have a solid income stream off of it.


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## MRC & Co

Good stuff nomore.  

Will be an interesting blog thread.


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## prawn_86

Nice work.

I too am buying a few long term stocks for yeild


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## nomore4s

Have purchased a couple more stocks this week.

MND x 400 @ $6.90
REF x 2500 @ $1.10

Both companies have low debt and a solid earnings history and strong balance sheets atm. Very good yields if D/E are maintained.
MND is actually in the middle of a share buy back, while most companies are issuing more shares to raise capital.

Will post more info up at a later date on these 2.


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## Garpal Gumnut

MTS is a good earner, a good choice mate.

gg


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## nomore4s

Current holdings for this portfolio

MTS @ $4.20 x 600

MND @ $6.90 x 400
Really like this company atm, hopefully its earings aren't hit too hard but has good contracts in place, low debt and is currently undergoing a share buy back which will help EPS, good yield atm as well.

REF @ $1.10 x 2500
Bit of a spec buy here, low debt, very high yield due to paying all its earnings out in D/E's. Close watch on this one.


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## nomore4s

New trade
WOW @ $26.75 x 100


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## nomore4s

Spreadsheet with current open trades for this portfolio.

I have already included the d/e that I have or will receive (jumped the gun a bit I know).


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## nomore4s

Purchased some WBC shares for this portfolio this morning.

WBC @ $16.90 x 150

Will now probably wait for the next leg down to buy any more shares.

Shares on the list to be purchased are -
Another 1/2 parcel of:
WOW
WBC
CBA

Full parcels at some point
WPL
WES
SUN/QBE
BHP


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## nomore4s

Obviously I'm more bullish than most at the moment so I thought I would put forward some analysis and reasons behind my current stance.

*Firstly the reasons behind my current stance*

- The bearish sentiment in the markets atm is huge, akin to the top of the bullmarket around Oct 07. History shows that this is the time to start looking for a reversal in the markets.

- IMO the share market has overshot the real economy to a certain extent especially in Australia. We have seen major falls in the Aussie stock market but the Aussie economy is standing up reasonably well - I realise we are seeing rising unemployment and are entering recession but we are yet to see anything near depression like problems, I just think the market has factored in more doom & gloom then what we have seen so far.

- Most of the sellers are now out of the market, everyone who wanted out are now out. Most of the excessive leverage in the stock markets has been unwound - think Storm, Opes Prime and margin loans in general. Meaning the path of least resistance is going to be up for the moment at least. IMO to see another major leg down we are first going to need to see a new leg up to introduce new sellers for the next wave down.

- From a T/A perspective, there is strong bullish divergence on both the weekly and daily charts. The thrusts down have slowed even though we are still getting a spate of bad news. Both these signs point to momentum to the downside slowing.

- A lot of companies are putting in basing patterns and are either breaking to the upside or looking to break to the upside. CBA, WBC, BHP, RIO, WES, WOR, WPL. All these companies went nowhere near their lows as the market was making new lows. 

- The stock market is normally a leading indicator and we will see the markets reverse or show a base before we see the same thing in the news and real economic data.

I have been seeing signs for awhile - posted on the 16/02/09. We've seen a retest of the lows and a slight probe lower, now the rally?


			
				nomore4s;398447 said:
			
		

> I actually think we are going to see some sort of rally shortly, back towards 4000 maybe as high as 4300 but we could see a retest of the lows first. But in saying that we could also break to the downside but atm I favour a break higher.




*Longer Term Outlook*
While my view is somewhat bullish I'm not expecting a new bullmarket or even a sustained trend just a very strong bearmarket rally to around the 4500-5000 area at best, maybe 3500-4000 at worst. After that a couple of scenarios could play out and I will need to reassess but at best we will trade sideways for a number of years at worst we will see new extreme lows. But I stress the major trend will still be down so the risks will remain to the downside.
It's also my view that we will trade sideways for a number of years above the ultimate low of this bearmarket - whether we see the ultimate low this year or not, who knows

This analysis is not about being right or wrong it is about trading for profit and my outlook will change as the market changes and hopefully my portfolio will change from long to short as the market changes.
I think market conditions are starting to change again and it will become easier for swing trading over the next few months. We will see some very good trading opportunities and I'm trying to position myself to take advantage of these opportunities.

The fact my trading portfolio has moved to long only positions over the last few weeks and has so far taken advantage of this little bit of strength currently in the market is a positive sign for my methods and I'm now well positioned to take advantage of any extended rally and my risks are very well controlled if I'm wrong.


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## Sean K

Took the words right out of my mouth.



Great short term opportunity here, then hard work again perhaps for a while, but we'll get tradeable selloffs and bounces along the way.


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## Iron Man

Well said......That's why I read this blog.


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## nomore4s

I have added quite a few stocks to this portfolio now. I will update the open trades list later today when I get the chance.

Today I took positions in 

NWH @ 50c x 5000
FLX @ $9.67 x 300

I think a couple of others I missed posting were

NHC @ $4.09 x 650 - 24/03/09
Added to MMS @ $2.50 x 750 - 25/03/09
Added to REF @ $0.70 x 4,000 - 20/03/09


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## Sean K

All going nicely at the moment. Great time to have some cash to invest. Those poor idiots still sitting on their hands might have missed a once in a lifetime opportunity. Or, will have shortly. 

Or, it's worse than the Great Depression and we still have 40% more to lose....lol


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## nomore4s

Yeah I agree Kennas. I have allocated another $10,000 for this portfolio and will add another $15,000 later this year.

Even if we see another probe lower by the general market I'm not too worried as that is where I will buy more. All the companies I've invested in have good earnings and pay a good d/e also most have low debt and gearing levels.

I don't think we will see anything like the great depression not unless things take a serious turn for the worse. I don't see any signs in the real world, most people still have jobs, most people are still living thier comfortable lives. Until this changes I think the falls in the stockmarket are over done, but we may just trade sideways for a while now.


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## nomore4s

Possible H&S pattern forming on the XAO on both the daily & weekly charts.

Would need to see a rejection of 3700-3800 this week and then support at somewhere around 3300-3400 (lower higher) and then a drive through resistance @ 3800. Target would be roughly around 4300.

Whether we have made the ultimate low or not I don't know. But I think we will see an extended period of sideways trading after the ultimate low along the lines of the 3rd attached chart. Please note I'm not comparing the 87 crash or economy to now just using the chart pattern as this is what I think the recovery will look like.

These are just possiblities to be proven or disproven by the markets and will no doubt change as the different possiblities play out.


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## Sean K

Yeah, looks like a possibility to me. I hope there's a right shoulder so I can put some more cash in...


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## nomore4s

Added OMH @ $1.29 x 2,000 to this portfolio today.


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## nomore4s

Current open trades for Income Portfolio.

The entry price on this sheet is the average price which includes the brokerage.

The second sheet is the paid d/e so far.

The remaining capital for this portfolio is now $17,621.05 with a few more d/e to be paid. Invested capital is $42,890.20


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## nomore4s

1 new position for this portfolio today

WBA x 3,850 @ $0.65


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## nomore4s

New position

CCP x 2500 @ $1.046 (average price)


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## nomore4s

Current holdings and d/e payments for the income portfolio.

All prices are average entry price including brokerage.


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## prawn_86

Nice work  

Does the Profti/Loss cell include what has been made from the divs?


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## nomore4s

> Does the Profti/Loss cell include what has been made from the divs?




No, it is only the P/L on the ave entry price.


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## nomore4s

Just posted this on the XAO thread - also putting it here just to keep track of it all.

For anyone who actually bothers to read my posts I've obviously been bullish for a little while now. I'm yet to see too much to change my outlook (for now anyway).

We have had option 1 play out from this chart I posted earlier in this thread. This was the most bullish outlook at the time and while I thought it was a chance I really didn't think it would play out like it has.

I would now like to see a push through 4000 and then some consolidation above 4000 before an attempt at minor resistance at 4300. I'm starting to think 4800 isn't out of the question.

A lot of charts have now broken out of very solid basing patterns and along with the current strength in the markets it has me thinking there aren't too many weak hands holding stocks atm. This means that there could be some sort of distribution phase if we are to retest the lows. This will probably happen when the majority become bullish again because atm most people are still bearish or sceptical about this rally. If we see a strong swing in sentiment but fail to push higher it will be a strong warning sign of a possible reversal.

If my other theory about a trading range is to play out, the range could be between 3500-4500/4800.


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## Kryzz

Hey nomore4s,
Nice blog. how do you draw your circles on incredible charts like that? Same with your captions (ie, without the box around them, and not only at the top)? Couldn't find anything in the settings.

Cheers,

Shaun


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## nomore4s

Hi Shaun,

Those charts have been edited through MS paint before I post them on here. Those additions aren't actually on the incredible chart platform.


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## Iron Man

What about XJO? isn't that the smart money ?


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## Sean K

> What about XJO? isn't that the smart money ?




I watch the XAO for market direction, so XJO must be the smart money one.


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## nomore4s

New trades for this portfolio

22.05.09 - IVC @ $5.45 x 750
27.05.09 - NAB @ $21.63 x 150
27.05.09 - WES @ $21.39 x 150


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## nomore4s

Current positions for the income portfolio as well as d/e payments.

Please Note: All prices are average entry prices including brokerage fees.


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## nomore4s

Current open positions and d/e payments so far.

All prices are average price including brokerage.


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## Sean K

Looking good, great time to be in the market!

Where's that phukin W5!!!!


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## nomore4s

SUN on open @ $6.41 x 500

Fully invested now - have actually had to add some money to it for this trade. But I will be adding another $15k for this portfolio next month (addition for new FY).


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## Sean K

I picked up a few @ 6.50 ish. 

Bought twice as much as I initially wanted though. Put in an order for 2K, but Etrade denied the trade awaiting approval because it's on a margin account. I tried to call ANZ to say 'what the f*ck!' as I have not actually drawn down on the account and have excess cash in it. No one at ANZ answers, so I go back into Etrade and cancel the trade. I then put in another trade for 2K and it is also held up. I shout at the screen, go and fetch a rum and sit down again. I wait a few minutes and check the order status and guess what? I now hold 4K of it. Arrrghhhhhh!!!

About the third time this has happened...


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## prawn_86

Surely you could get that reversed if you got angry at them Kennas


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## nomore4s

Etrade been having some problems this week. I use Mac Prime and it's platform cr@ps all over Etrade & Commsec imo.


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## Sean K

I was going to get very very angry, but it was late and I had one too many rums, so I left it. I was going to buy more if it broke up anyway, so I'll just sit on it. I'm going to write to explain the problem though so they might do something about it. Pretty ordinary.


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## nomore4s

Looking like a good stuff up at the moment - are you going to trade one of the parcels and maybe sit on the other one for a bit longer?


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## Sean K

I've got no idea really. This sits between a long term buy and a trade. Not sure which one it is. Will wait and see how it unfolds and what the market does in general. If 6.50 forms up as support I might add more.


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## nomore4s

Current open positions for the Income Portfolio.

Still have $14,107.10 for investment.

Going along nicely but will look at closing some positions in the next few months as companies report profits & d/e payouts.

*Please note - All prices are average entry price including entry fees. Current value & profit/loss does not include the d/e payments.


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## nomore4s

Current open positions for my Income Portfolio.

Still have yet to sell any stocks out of this portfolio but will be looking to exit WBA very shortly.

Due to the strength in the market and the performance of this portfolio to date I have had to re-adjust my goals and have split it into 2 sections - Income & Growth.

Income will be the original idea and Growth stocks will be more actively traded but with a long term trend following bias. I will update the blog when I have finalised the 2 portfolios.


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## Sean K

Some awesome gains there Nomore4s! Nice work.


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## MRC & Co

Go CCP!


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## Iron Man

Well done


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## nomore4s

Thanks guys, but it has more to do with the market then any great skill on my part.

A quick update on a few stocks.

NAB has SPP @ $21.50 and I will be putting in for the full amount @ $15,000 and hoping it doesn't get scaled back too much.

FLX has a takeover offer on the table @ $16.95 + $1.00 d/e. ATM the plan is to hold on for a bit to see if any better offers come but I doubt any will so I will look to exit that position shortly around the $17.95 area.


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## nomore4s

Sold OMH @ ave $1.661 the other day.

I have also been stopped out of all the trades except SSM in my trading portfolio so I will update all those results when I get time.


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## nomore4s

Current open positions for the income portfolio as well as the 1 closed trade & dividends received.

Sorry I forgot to add I received 202 NAB shares in the SPP @ $21.50 that are included in the results.


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## Sean K

NWH has been a champion.


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## nomore4s

Yeah it has and it's still going


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## nomore4s

Have closed some trades out before I went away to Canberra.

All closed on 04.09.09

WBA @ Ave of $0.535909

NAB x 152 @ $27.38

Also NHC declared a 4.5c d/e and a special 72.75c d/e today - bonus


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## nomore4s

FLX closed out on the close today @ $16.75


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## nomore4s

Income portfolio as of 10/10/09


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## nomore4s

Exited some stocks today.

REF @ $0.5748892
IVC @ $5.69

NWH x 2000 @ $1.755
CCP x 1000 @ $2.38
Both these stocks are now pretty much free held.


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## MRC & Co

Beautiful.


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## nomore4s

Quick update with this portfolio.

Due to the large open profits in this portfolio and what looks to be at least a medium term top I have decided to liquidate this portfolio.

I am using basic T/A to decide when & where to exit these stocks - a case by case basis will now be used to exit as the market tells me too.

Stocks exited today are

CBA @ $51.6641
NAB @ $29.06
SUN @ $8.60
MMS (x1000 only) @ $3.92619

Will post more info on my decision later when I have more time


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## Sean K

Could be a good move nomore4s. 

Even if there was a bounce from 4500 ish, there couldn't be too much more general upside. 

I'm not sure if we'll see a W shaped recovery here, or new lows as there is tooo much money still floating about in the system and it has to go somewhere eventually. I think if we do crash again significantly, even just to the low 4000s, interest rates will simply be lowered further and more money printed. Hopefully another buying opportunity.

After that, at some stage, inflaton _really_ kicks in, and we're in deep do-do.


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## nomore4s

Yeah Kennas I'm also looking at the next leg down to be a major buying opp and will probably re-enter most of these stocks. And I will have $20k more to spend.

Well that's the plan anyway.


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## nomore4s

Sorry for the delay but I have been busy with work and a bit lazy as I'm not doing much trading atm.

Here are some stocks I exited on 5/11/09

WOW @ $27.59
MTS @ $4.51
WES @ $25.98


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## nomore4s

More trades closed.

NHC @ $4.17
COH @ $61.21
WBC @ $23.20


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## nomore4s

The buy criteria for my income portfolio is pretty simple.
- Paying dividends of at least 3%
- Low dividend payout ratio
- Low debt levels
- Good earnings growth potential (IE potential to continually increase dividends year on year (this is the strength of this method)
- Solid company history
The only exceptions I have to this criteria is for the BIG 4 banks, purely because of their solid history of performing and increasing d/e year on year.

My sell criteria is even simpler.
- Company takes on excessive amounts of debt
- Earnings start to shrink
- Dividends are reduced (there are some exceptions to this as there are times a company might reduce dividends for a long term gain - IE share buy backs, reduce debt, expansion without debt)

Now due to not having a price based stop I'm taking on some risk of the share price having declined significantly by the time I sell, that unfortunately is a risk I have to wear but I try to work around it by buying small parcels and then accumulating more as the company grows and also controlling the overall balance of the portfolio.


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