Founder's Notes: Making the Same Money Work Harder

Hi partners — Max here!

Today I want to share some thoughts on plans for the family portfolio. As you already know, my idea is to diversify risk as much as possible, make as few moves as possible, stay focused on the long term, and invest in durable dividend businesses that continue paying and increasing dividends year after year.

There’s one additional element in this approach that I occasionally use, and today I want to talk about it.

A small example from my own portfolio: I owned Innotech Corp with around a 3% dividend yield when I bought it. Over the past year, the stock went up roughly 120%. I sold it and rotated that capital into Novo Nordisk (yielding 4.5% at the time I bought).

In simple terms, from an income perspective, I was making about $3 annually on every $100 invested. After the rotation, it became roughly ($100 + 120%) × 4.5% = about $10.

At the time of the switch, I felt both companies were in great shape fundamentally and technically — both solid businesses. So it wasn’t about moving into something weaker or riskier.

It was more like a small rotation where I converted part of the capital gains into dividend income and significantly boosted my cash flow without really taking on extra risk.

That’s how I sometimes look at these kinds of perfectly rational rotations. I kind of call them “reshuffles.”

So today I’m seeing another opportunity like this for the family portfolio and I’m slowly considering doing another small reshuffle.

About a year and a half ago I invested part of the family capital into Sato Shoji, viewing it as significantly undervalued by the market while also having an excellent dividend foundation. The company has been consistently paying dividends for more than 15 years without cuts and with a comfortable margin of safety.

As of today, Sato Shoji in my family portfolio has gained roughly +120%, and I’m seeing a potential option here.

Possibly doing a reshuffle and reallocating that accumulated capital into other companies with similar characteristics to the example I shared earlier.

The names currently on my radar are:

And I may look at a few more names as well.

What could this potentially do?

Right now Sato Shoji generates around $1,800 annually in dividends on roughly $75,000 of capital at current valuation, which equals around 2.4% annual dividend income.

By doing a reshuffle and reallocating that capital into G-Tekt / Nomura / Shoe Carnival, for example, I could potentially start around 4.5% annually, while owning companies that, based on the same criteria, are not inferior to Sato Shoji in any meaningful way, while also trading below book value and maintaining a comfortable margin of safety.

As a result, my annual dividend income in this case would increase to roughly $3,400, which is almost double from the same amount of capital without changing the overall risk profile.

That would add approximately +$140 per month in additional income.

With recent dividend increases from other companies as well, my family portfolio dividend income would move above $8,000 per month.

I’m still continuing to study this option, but I wanted to share it with you ahead of time.

I think it’s perfectly logical and appropriate to occasionally take advantage of obvious opportunities when they stand out and fit within long-term goals.

Take care,
Max
Founder of MaxDividends