Fortunately, we had some good news this month. Foremost, we earned a very pleasant raise from American Express (ticker AXP) , which raised it's dividend by slightly over 10%, from .29 cents per quarter to .32 cents per quarter, or $1.28 a year. This comes to an increase of $14 a year for the Model Portfolio - about .09%. The increase seems hardly worth noting when you simply look at the immediate cash in hand this dividend increase gives us, but becomes more exciting when you consider the effects of how this raise will compound over the next 20 years. Prior to the American Express dividend increase, the Model Portfolio expected roughly $1,004,807 in dividends to accrue over the next 20 years. But after the dividend increase, thanks to the impact of compounding and the slightly higher portfolio yield, the total expected dividends for the Model Portfolio surged to $1,006,536. That represents an increase of $1,729 over the next 20 years, and as long-term investors, the focus is on cumulative income and not simply the immediate increase of $14.
Alas, that good news is offset by a genuinely troubling development with Wells Fargo (ticker WFC). Over a period of years, the bank cheated customers, opening unauthorized accounts the customers never asked for or needed, simply to generate bonus awards for bankers who appears to have brought in more business. Worse, the bank attempted to obfuscate this fact, hiding it from shareholders and from the board of directors FOR YEARS. My general rule is this: I never do business with anyone I don't trust. I don't care whether the opportunity appears golden or not. The same rule applies when I buy or own stock. The shares could be trading at wildly cheap levels, and if it's shares of a company that lies to shareholders and cheats customers, I want nothing to do with it. I will not own or buy the shares at any price.
I have opted to liquidate our position in Wells Fargo bank, and to divide the proceeds among Extra Space Storage (ticker EXP), American States Water (ticker AWR), and a new position: AT&T (ticker T). As a result of these adjustments, the income sources of the Model Portfolio are now slightly more balanced, we've spread exposure from one line of business (banking) to three unrelated businesses (water, phones and storage space), and increased the income of the Model Portfolio to $14,678 per year - a gain of about $78 per year or roughly half a percent. The composition of the Model Portfolio is now thus:
Going forward, as dividends poor in at the end of the month, I'm going to simply put them into more shares of American Express, and will adjust the Model Portfolio accordingly. I will also look to retain approximately 60 cents, to buy myself an espresso at my favorite cafe where I do most of my investing work: The Cafe Brasilliero in the heart of the old section of Lisbon. Nothing beats doing the work you love in a space you love to be in.