I mentioned in my post about Loyal3 that I have added some positions in Microsoft (MSFT) and Kraft (KRFT).  I also have some small auto purchases being made, just $10 a month, into several stocks.  The purchases that occurred during September include Coca-Cola (KO), Walt Disney (DIS), Pepsico (PEP), Walmart (WMT), Unilever (UL), and McDonald’s (MCD).

The only positions that had subsistence really were the purchases of MSFT and KRFT.  Being that Loyal3 is fee free, I am able to put in just a few dollars at a time.  Also, the added bonus is this makes my financial planning easier as I now have 10 automatic purchases set up I will automatically earn interest in my checking account which is usually over $15.00 a month.  Now I don’t need to worry about the amount of times I use my debit card at the store and I can focus all of my purchases on reward credit cards while knowing I will be maximizing the return of my cash.

With that said, let’s go into a little detail about these stocks that I am purchasing.

Microsoft (MSFT)

I purchased 5.5581 shares for $250.00 in Microsoft and setup a monthly purchase of $10.00 for future months.  When this purchase was initiated, it would of added $6.23 in annual dividend income to my portfolio.  But since the purchase, Microsoft has already announced their dividend increase raising this to $0.31 a share quarterly, or $1.24 annually.  Thisis over a 10% increase from their previous dividend of $0.28 a share on a quarterly basis and will now yield $6.89 in annual dividend income.  The portfolio page still automatically reflects the old rate, possibly because it will not be updated until the new dividend is actually issued?  Not sure on when yahoo finance updates that information.

If you don’t know anything about Microsoft… well the biggest product is Microsoft windows operating system, which is pretty much that standard OS nationwide which provides a tremendous moat.  They also have other very popular products such as Microsoft office and the Xbox and related games that they create.  Other areas in which they have business in includes mobile phones and their operating systems.  I think key risks include how well they compete in cloud computing and particularly their lack of dominance in the mobile department.  Google with Android and Apple with iPhone are really kicking them down in this realm.  Who knows, there may even be more people using black berries than windows phones!

Kraft (KRFT)

I purchased 2.5675 shares of Kraft and also setup a monthly purchase plan of $10.00 with this stock.  This crafty purchase will added another $5.39 in annual dividend income.  Don’t hate on the small gains, every little bit helps towards building that passive income stream!

Kraft really isn’t the same as it used to be, they had split with Mondelez (MDLZ) and I considered grabbing a piece of both until I saw the dividend history where Mondelez had already cut from their dividend from the initial amount.  I already am experiencing a stock with cuts in Strum Ruger (RGR) and that was a bad decision… clearly the better choice would have been to stay away from that one and I intend to avoid a mistake here.  Anyways, I am a big fan of cheese and buy A LOT of kraft products.  But their lines don’t stop in the dairy, they also have big brands such as Maxwell house coffee, planter’s peanuts, and oscar meyer meats.  I do love bacon… but given my dad’s side of the family’s history with hearts clogging up, I think I am going to stay away from it for the most part…  And sadly it isn’t just my dad, my uncle, and my grandma had passed in her early 60’s.  See why I am motivated to retire early?  I might not get a retirement at the “traditional” age!

Coca-Cola (KO)

I purchased a whooping .2407 shares in Coca-Cola for $10.00 this month.  That beast of a purchase gets me another $0.29 in dividend income!  Best respect!

Another large household name type of brand, Coca-Cola is mostly known for their soft drink beverages (as us Michagander’s refer to as “pop”, don’t ask why cause I don’t know) that go by the same namesake.  They also have a line of sports drinks in their Powerade beverages, which I actually prefer over Gatorade.  They also have orange juice as well as bottled water.  So if you are thirsty and own KO, go for the knockout and boost your profits as well by sipping on one of their beverages!  But maybe stay away from Surge, I hear they are reintroducing that stuff and I am not a big fan over Mountain Dew or Mountain Dew-type-spinoffs.

Walt Disney (DIS)

Another massive purchase worth $10.00 for .1106 shares.  This being the lowest yielding stock on my portfolio…. puts out just $0.10 in annual dividend income.  Ok, I give you permission to laugh at that one if you want.  Go ahead, get it out.

Disney is mostly known for their movies, but they are great at turning their successes in the box office to successes in their cash box.  They do a great job with making sure their are kids toys for their movies, adding in the characters to their theme parks and maybe even rides.  Plus Pixar I think produces some very entertaining movies, doesn’t seem to matter what age you are!  It will be interesting to see if they are successful in monetizing their purchase of Lucas Film and Indiana Jones.  Even if they aren’t great at getting those implemented into future movies it sounds like they have plans to do so in theme parks.  That can still be a great revenue generator, get your geek on!

Pepsico (PEP)

I purchased .11 shares of Pepsico (PEP) for, you guess it, $10.00.  This company is on par with KO adding in another $0.29 in annual dividend income. I think I am out of semi-witty comments regarding these tiny purchases so I will leave it at that.

I would probably argue that Pepsi is more diversified than Coke.  Their soft drink line may be in at number two, but they are more dominant in other areas such as their sport drink line and their potato chip line.  Overall I think that they are a great company with great products, but the sad thing is my purchases are usually the third runner up in this market – Dr Pepper Snapple (DPS).  The reason is that RC Cola is consistently $1.00 at the store, so unless if Coke or Pepsi are on sale.. that is what I buy.  Plus the wifey likes Dr. Pepper and LOVES Cherry Dr. Pepper.  That said, I think Coke and Pepsi and better companies and for most customers can charge a premium.  I just thought that investing in all three was a BIT too much for the time being.

Walmart (WMT)

I purchased .1299 shares of Walmart for $10.00.  Walmart will add another $0.25 to the annual dividend total.

Walmart is the most dominant grocery chain in the United States and I really don’t see that changing any time soon.  I do find that they are often one of the best priced big box stores around.  Sure you can get a better price on some items at like Aldi, or Warehouse’s such as their own Sam’s Club or a Costco, but those stores are not as abundant as Walmart and they do have less variety.  The closest competitor that offer’s a similar style to them for me is a regional family owned chain called Meijer.  I usually shop there because it is 15 miles one way closer, but if I am going to be near a Walmart that weekend when shopping, it would be a bit foolish not to take in the savings.  With ad matching they are really hard to beat for consumers looking for the best deal.  They may not be my favorite place, but I don’t view them as bad now that I can at least benefit from the hassle of long lines.

Unilever (UL)

I purchased .2292 shares of Unilever for $10.00.  Based on the current dividend this will add $0.35 in annual dividends.

This was basically the only consumer products type company on Loyal3 and I figured it would be a solid pick to add.  Well AFTER I setup the initial purchase I was looking at their history a bit more (should have beforehand) and noticed how their dividend history is a bit sporadic.  It seems that their payout ratio is a bit high and they are probably just issuing their quarterly dividend based on cash flow.  To add to that, I thought I should check and see what types on Unilever products I have lying around.  Well… I have Colgate, Kimberly Clark, and Georgia Pacific products here, but I didn’t see any Unilever.  Maybe my wife has some of their stuff.  But it makes me wonder what kind of value are they offering their customers if I wasn’t already drawn to their products beforehand?  I think I will continue with this auto purchase until an entire share is owned and then move on to one of the other choices available on Loyal3 – possibly YUM, DPS, or HAS.

McDonald’s (MCD)

I purchased .1064 shares of McDonald’s for $10.00.  This will add another $0.34 in annual dividends!

McDonald’s is the largest fast food chain in the world.  I think I heard that YUM brands has more stores, but I don’t think they are higher on revenue and no single chain has covered the market as wide as McDonald’s has.  They sell a consistent product, that, well it works.  It isn’t my first choice, but if you are on the go and need something it sure beats gas station food.

Summary

The combined stock purchases will add a total of $13.90 in annual dividend income, after accounting for Microsoft’s dividend increase.  My forward dividend income has now broken $300 and is at $306.28!

Next month I expect to make $10 purchases to all of the stocks mentioned, plus Mattel (MAT) and Kellogg (K).  Also, it sounds like my wife’s ROTH is finally on the move out of Edward Jones once she calls the guy back to confirm we want to move that money.  That should provide an interesting month of purchases with almost $7,000 available in extra capital!

What about you, did you purchase any stocks this month?

Full Disclosure: Long MSFT, KRFT, KO, DIS, PEP, WMT, MCD.  Possibly long on UL and RGR.

Photo Credit: suphakit73 / FreeDigitalPhotos.net

 Disadvantages

Not Available for Retirement Accounts

Loyal3 is a brokerage service only.  Meaning you cannot stash money away in a tax advantaged manner.  So if you are looking to grow money tax free or tax deferred they currently cannot do anything about this.

The Brokerage Account Cannot be a Joint Account

This is more of a minor hassle for me.  For some people it is nice just to have all financial assets jointly owned between you and your spouse, this being one.  However, Loyal3 is only for an individual brokerage account so make sure your trust or will reflects that the ownership transfer to your spouse upon death if this applies to you.

Limited Selection

Loyal3 is a fairly new service and only has so many stocks available to invest in.  There are alot of big name companies in the list as they seem to focus on adding companies at IPO’s and to add in companies in which are popular.  Specifically they say they want customers to be able to “Invest in the brands they know and love”.  So it is unlikely that they will be adding in too many companies that the population is unfamiliar with.

Trades Are Not Instant

If you are looking to get in or out of a stock because of recent news or events that make you rethink your investment strategy, don’t expect it to be liquidated or added moments after you click “sell” or “buy”.  That is because Loyal3 does batch processing daily on both buying and selling shares.  This is fine for a long term investor, but you need to understand this limitation particularity when trying to exit a position.  In fact if you are buying with a debit or credit card there is a few day delay before the transactions are processed.

Advantages

No Fees!

The best part of Loyal3 is that there are no trading fees.  Part of how they do this is through agreements with the companies in which you invest with.  Another part of it is through the batch processing which is primarily how they can reduce costs by trading everyone’s shares only once or twice a day.

You can Invest as Little as $10 at a Time

This is a major advantage.  If you are looking for a way to invest that coffee money that you are saving then this can be a great place.  You can put in just $10 at a time to purchase a stock that you enjoy the business of.  You no longer have to hold onto that money until you get a substantial amount to invest with.  Just $10 can invest in a partial share of a company and create an account.  It is a great way to get started investing because of the low capital requirement and no fees.

Invest With a Credit or Debit Card

When I saw Retire Before Dad investing with a Credit Card earning cash back rewards with his purchases of stock I was sold.  I don’t know any other service that allows you to get an instant 1% (or more depending on your card) return on investing.  I had signed up for a new card with a $400 signup bonus and invested all $400 (free money) into two different stocks on Loyal3.  So not only will it help me achieve my bonus, I will also get $4.00 in general rewards for getting the stock in great companies!

What I am Using Loyal3 for

 Initial Purchases

Initially I purchased shares in Microsoft (MSFT) and Kraft (KRFT).  This will use my $400 credit card signup bonus.  I like these companies long term prospects, but I don’t have the time to go through a detailed stock analysis on these companies as the focus is on Loyal3.  Loyal3 only allows you to save one credit card information in at a time.  Now that my initial purchases are over I have switched my card information to my bank account at the credit union.  Anyways, once these trades are finalized I plan on writing about their affect on my forward dividend income.  But I still have two $50 KRFT trades pending before I can do that.

Monthly Purchases

Since I need 10 purchases a month to earn interest on my checking account… I have found an easy solution with Loyal3.  Investing $10 in 10 great companies will get me my required purchases so that I can place all other spending on rewards credit cards in the future.  Now you might think it isn’t worth the hoops to jump through, but I get 3% interest and with a balance of just $4,000 in my account that is $10 a month.  So getting $100 in stock will net me $10, or more, in interest.  Not a bad deal!  My monthly purchases will start later this month and include the following:

• Coca-Cola (KO)
• Walt Disney (DIS)
• Kraft (KRFT)
• Mattel (MAT)
• Microsoft (MSFT)
• Kellogg’s (K)
• Pepsico (PEP)
• Walmart (WMT)
• Unilever (UL)
• McDonald’s (MCD)

Other stocks I considered were Yum Brands (YUM), Dr Pepper Snapple Group (DPS), Target (TGT), Hasbro (HAS), and Mondelez (MDLZ).  I was trying to diversify between sectors so I compared them to the other stocks available in the same sector.  I plan to revisit these automatic purchases in the future as Loyal3 adds more stocks and as stock prices change others may become a better value.  Also if Intel (INTC) ever decides that they want to start raising their dividend I will put them into the considerations as well and I would maybe consider Apple (AAPL) in the future if they continue to grow as a dividend stock.

What about you, have you checked into using Loyal3?  If you use it, do you like it?

Full Disclosure: Long KO, DIS, KRFT, MAT, MSFT, K, PEP, WMT, UL, MCD

UPDATE: Loyal 3 recently announced that they will be discontinuing debit and credit card purchases of stocks.  I felt that this is important to note, because it was a significant advantage of Loyal 3 at the original time of writing, but is no longer available.

Photo Credit: Stuart Miles / Freedigitalphotos.net