Blast From the Past

A little unsure as to what I was researching when I ran across this ancient nugget from 2012.  I don’t recall having read it when it was fresh, but has some similarities to my investing style outside the world of Coke – particularly with the international bent.  I’ll also point out this predates the 21^st Century Beverage Partnership Model where Coke essentially attempted to become a marketing engine leaving the capital intensive bottling and distribution operations to a handful of larger (facilitated by mergers) bottlers.  For today, I’ll ignore the 32 (give or take a couple) family owned operations that are basically distributors – or bottlers in name only. These buy product from larger bottlers, warehouse it  and deliver to commercial customers. I suspect these little guys won’t be long for the world as they’ve lost any economies of scale.

The impetus for this piece came from the final comment from NeoContrarian where he asks (a year ago), “This is an excellent article:- What’s the current update 6 years on???” Given the author hasn’t published anything since 2016 and I now have a vested interest, I figured it apt to address this question – particularly with the change in the business model.

I have stakes in seven of these bottlers with a pending limit order for an eighth, so allow me to correct a mistake the author made.  The list of companies contains duplicates – either with a class of stock (AKO.A/B) or CCLAY/F. The former has greater economic interest (votes) but a lower dividend while the latter is the ADR versus in country OTC listing.  The ADR withholds taxes (net payout) while the F version is the gross payout leaving the investor having to deal with those details.

Subsequent to her piece, Coca-Cola Hellenic began trading on the LSE (not NYSE) and moved its’ HQ from Greece to Switzerland, Coca-Cola Enterprises ultimately morphed into Coca-Cola European Partners, HQ UK; and Mikuni Coca-Cola merged into Coca-Cola East, which merged with Coca-Cola West becoming Coca-Cola Japan.  Also, Coca-Cola İçecek.’s ADR program has been cancelled.

I tried to retain the structure she used but made a few modifications; removed dividend growth and comparison to KO’s and added % owned by KO.  Being primarily foreign companies, dividend growth is less telling than the US as the vast majority of payouts are based on a percentage of profits.  Perhaps a profitability growth rate should be included instead.

I will editorialize that it appears the results are mixed in KO’s move out of bottling.  They have succeeded, for the most part in the domestic market – at least in avoiding reporting consolidated results.  The failure has been in foreign markets as several remain owned – at least in the majority – by KO. These include Africa (68.3%), The Philippines and Bangladesh (100%).  KO also retains significant stakes of between 14 and 34% in nine of the publicly traded bottlers. This analysis excludes privately owned companies with the exception of Joint Ventures that include public companies.

a/o 8Dec2019

Yes it remains possible to muster a dividend yield piggybacking on KO’s marketing prowess.  There are risks, chiefly currency and political. For instance, Zimbabwe faces a hard currency shortage leaving Heineken unable to repatriate their profits.  The reason I have no intention of buying Hellenic or İçecek. Is their exposure to Russia and Turkey respectively. Future administrations may revert back to normal putting undue risk on the table.

The one aspect I didn’t anticipate was the consolidation of bottling operations into the larger operators leaving the smaller players as merely distributors.  That is one way to spread the capital intensiveness into manageable pieces and is probably one reason for their performance.

There are risks as well as potential rewards – perform your own due diligence.

Own: CCEP, KOF, AKO.B, CCLAY, SWRAY, KNBWY, COKE.  Open order: CCOJY

November 2019 Update

Alright, I do have a bias.  Generally I don’t pay much attention to Jim Cramer, but his recent attention grabbing headline did pull me in.  “Owning too many stocks and not enough cash can set you up for failure: Cramer” was the title.  As one who owns 200+ issues, I’m always on the lookout for alternative views.  My expectation was for the sage advice to be essentially “have a war chest and shopping list at the ready”.  But rather it was, “Limiting your holdings can be a great tool for investors who don’t have the time or the drive to do their homework for 20 or 30 different companies”.  The essential message being if you “own more than 10 stocks, you might want to consider paring back”. Say what? This recommendation doesn’t even provide exposure across all sectors. So what to do if like me you have an overabundance?  Sell, he says. “Sometimes, it can be as simple as selling some stocks and getting some cash on hand. Go sit on the sidelines — nothing wrong with that.” Very true if one has a knack for timing the markets. My methods aren’t for everyone either as my emphasis is on consolidation, typically M&A – which results in slightly higher mediocrity for this portion of my portfolio with the aspiration of getting a tape measure homer.  As they say, the devil is in the details. His view was apparently honed as a trader rather as a buy and hold type of investor as he states, “I would analyze every losing trade … I realized that good performance could be linked directly to having fewer positions”. Okey dokey, ‘nuff said ….

Certainly a long and roundabout way of saying the market was basically on an upward tear this month with only a few down days.  Try timing that movement! So the S&P rose a stellar 3.9% – the best since June while my portfolio – including the purchase spree I’ve been on – rose 9.84%.  Excluding the final round of purchases – even with no fresh money being used – the portfolio value rose by 2.43%, a tad below the index, probably due in part to buying at elevated levels.

PORTFOLIO UPDATES

• increased my PB position and lost LTXB (merger).  I’m now overweight PB as my position doubled which I’ll reduce in the next tax year.
• New Position – PBCT and lost UBNK (merger)
• increased my WFC position (replication strategy)
• New Position – KFC  (replication strategy)
• New Position – PG (replication strategy)
• increased my YUMC position basically as a rebellion against the President’s antics.  They derive 100% of their sales, all of their profits, no imports or exports (all domestic), and their entire supply chain is in China.  Yet they are incorporated in Delaware and pay a USD dividend. The major question is currency exchange on their P&L statement and the president’s delisting campaign.
• increased my TD position (IRA).  I’ll increase it further and sell my taxable account shares after the first of the year.
• New Position – KNBWY – another statement selection – message being , “Mr. President, play with tariffs all you like but there are Japanese companies other than car manufacturers employing thousands of Americans”.  Besides, I see their sales improving in 2020 with the Olympics being in Japan and it fits my bottler strategy.

DIVIDENDS

My primary focus resides on dividends with the goal being a rising flow on an annual basis.

• November delivered an increase of 15.51% Y/Y.
• Dividend increases averaged 10.11% with 68.72% of the portfolio delivering at least one increase (including 5 cuts). This is off last years’ pace and I believe a new personal record for dividend cuts in a single year since about 1980.
• 2019 Dividends received were 99.63% of 2018 total dividends putting me on target to exceed last year’s total on December 1st. The YTD run rate is 110.76% of 2018, slightly over my 110.0% goal. Point of reference, this is the first time since starting this blog that I didn’t exceed the prior year dividends before the end of October.

Note: I updated my Goals page to provide a visual of these numbers.  Based on Mr All Things Money’s instruction set with a conversion to percentages.  My code only updates when the monthly Y/Y number is exceeded.  Otherwise, the prior year actual is used.

AT A GLANCE

Inspired by Simple Dividend Growth‘s reporting

Key thing I’m looking at is the ratio between market action and purchase activity. This month was roughly 80/20. I suspect most months will be 95/5 as I rebuild the war chest. Another point of interest was the M&A cash exceeding my dividends. I can assure you this is a rare occurrence. It will be interesting to see what I track going forward.

SPINOFFs

On Oct 4, 2018 MSG filed a confidential Form 10 to spin the sports business which remains in progress.

MERGERS

VLY to acquire ORIT for 1.6 sh VLY to 1 ORIT. This merger will result in a slight dividend cut November forward as the rate will be normalized to VLY’s current rate. In my view, the other positives outweigh this negative.  Should close December 1st.

Spirit MTA REIT (SMTA) voted on Sept. 4th to approve the sale of most assets to HPT for cash. A second vote was held to liquidate the REIT. The first payment was received and am awaiting final settlement payout. Fully expecting a profitable outcome for one of my most speculative positions.

SCHW to acquire AMTD for 1.0837 sh SCHW to 1 AMTD.  My only surprise with AMTD being taken out was the suitor – I had expected TD.  Regardless, I have three concerns over this deal, 1) profit margin compression with the onset of $0 fee trades, 2) possible liquidation of a partial TD stake to reduce their ownership share from 13.4% to 9.9% (the same issue Buffet regularly faces) and 3) 10 year phase-out of AMTD/TD cash sweep account relationship.  The third one means TD has a low cost (albeit, decreasing) source of deposits for the foreseeable future. After the first of the year, I’ll probably cash in AMTD and increase TD a little further.  

Although XRX is officially off the list with their Fujifilm settlement, Icahn & Co. couldn’t wait for the ink to dry before stirring things up with HPQ.  As of now, I am considering exiting my XRX position.

SUMMARY

Overall, the only complaint being not exceeding last year’s dividend haul until December. The culprits being five dividend cuts and merger timings (a couple of completions were accelerated to avoid a payment). My cash position is close to zero, but with replicating the kids’ portfolio complete, I expect this to rapidly change to rebuild a stash for my next sizable purchases (unless market conditions warrant), expected in tax season.

Here’s hoping your month was successful!

The COPPA Impact?

The Children’s Online Privacy Protection Act of 1998 (COPPA) is a United States federal law, located at 15 U.S.C. §§ 6501–6506.

Wikipedia

The inspiration for this week came from a Facebook post:

COPPA is ruining everything. My youtube channel i watch for family friendly videos, has quit. My YouTube channel I rely on for toy unboxing and reviews, to buy gifts for my grandchildren, quit. My youtube channel that I rely on for gaming reviews, quit. The channels I subscribe to for Kids videos for my grandchildren, quit. People who don’t understand technology, have no business making the laws that govern, technology. So, now there will be no more child friendly videos on YouTube, so now if a child loads YouTube, their only option is adult content… WTG, congress, just when I thought you couldn’t be any more ignorant, you’ve proved me wrong… Idiots!!! ~END OF RANT

Point taken, but – knowing me – I now had to figure out the why.  Why has a law that’s been on the books for some nineteen years suddenly causing angst for the masses?  I mean, this was never an issue under prior administrations (Clinton, Bush II or Obama). So what gives?  Well in September, YouTube was fined $170 million by the FTC because they “illegally collected personal information from children without their parents’ consent”.  As part of the settlement, YouTube agreed to implement a system of checks and balances which puts much of the onus (and liability) on content creators.  Felix ‘PewDiePie’ Kjellbergd, a top ranked YouTuber puts it this way, “content creators can be sued for violating COPPA regulations. “What? Why? That makes no sense… control your children please” he said, clearly disappointed with the fact he can be punished for children viewing his content, and for his content being automatically flagged as child-friendly even if they aren’t.”

So my response was, “It’s probably more appropriate blaming the FTC, not Congress. COPPA has been the law for almost 20 years. In 2019, the FTC decided to step up the enforcement actions, resulting in your turmoil.”   This particular thread continued the rant blaming Congress or even Satan.

To be clear, the FTC consists of five members, three Republican and two Democratic – all appointed by President Trump and confirmed by the Senate in April 2018.  These are the Chair, Joe Simons (R), Christine Wilson (R), Noah Phillips (R), Rohit Chopra (D) and Rebecca Slaughter (D).  The FTC approved this action on a party line 3-2 vote.  The nays were not altruistic – they only wanted stiffer penalties.  As an aside, I don’t see ‘Satan’ being confirmed – unless as a euphemism for one (or both) of the parties.

The reality is that COPPA was effective April 21, 2000 almost five years prior to YouTube’s launch (February 14, 2005).  Other than by regulation (rulemaking), I was unable to find any amendment or act to address or update the law given the technological advances over the past two decades.  The most recent effort to update COPPA is S.748 introduced by Sen. Markey (D-MA) and co-sponsored by Sen. Hawley (R-MO). This bill remains in committee and unless amended, does not address this particular issue.  A classic tale of technology outpacing intelligent oversight.

As the FTC is notoriously underfunded, one has to wonder if part of the motivation is collection of the fines.  Regardless, to sew this up in a manner befitting a financial blog, this is not the first fine levied and probably won’t be the last.  Companies targeted include, Devumi, LLC (falsifying social media influencer clout – involving LinkedIn, YouTube and Twitter), iBackPack of Texas, LLC (fraudulent acts involving Kickstarter and Indigogo), TicTok (COPPA violation) and more.  Separately, EPIC (non-profit research center) conducts investigations and agitates for reform (includes the likes of Amazon, VTech, Mattel and others).  The same logic is applicable to gaming and vLogs.

Bottom line – the differentiation between child targeting and child attractive is littered with many shades of gray.  Possible examples being channels reviewing custodial accounts for minors or budgeting for children. Be prepared to lose advertising revenue if flagged as child appropriate or perhaps face consequences if classified improperly.  Maybe the best course of action is to follow YouTube’s advice, “Consult a lawyer”.

From an investor’s point of view, the financial impacts are likely negligible – particularly if the ongoing risks are offloaded to the creators.  The biggest downside I see are user discontent (evidenced by the Facebook post above) and headline risk if a content creator is fined by the FTC.

Any thoughts?

Reporting Style Update

On my “to-do” list was to refine my monthly results presentation to make it more relevant – particularly in light of the significant movements in my portfolio of late.  In search of ideas, I stumbled across the Simple Dividend Growth methodology. While not exactly what I had in mind, it covered probably 80% of which I could mix, match and modify to my hearts’ content.

His presentation covers Weekly actual and Forward Annual views, illustrated below.

XXX is text, $$$ currency

The largest differences are that I report monthly (as opposed to weekly), I convert actuals to percentages and I don’t use forward anything (except announced cuts) preferring to use trailing actuals.

The more subtle differences are twofold, I embrace stock dividends and M&A activity (one of his sell signals is a merger announcement).  So I’ve enhanced this template to serve my purposes as follows:

Actual as of 16 Nov 2019

The left column contains all ticker symbols – essentially a point of reference for portfolio activity.  The right column is the activity – as a percentage of portfolio value. The exception being the Dividends which are percentages of dividend activity.

I’ve segmented my new buys between the source of funds – the default being dividends accrued from prior months.  I don’t show my available cash as I reserve the right to spend it on my tax bill (like last April), take a trip or – in this case – replicate the granddaughter’s portfolio.  I may add a “new cash” line item in the event I hit the lottery or my living expenses decrease, otherwise I expect to continue funding purchases via excess funds generated by the portfolio.

I’m not sure how relevant the separate itemization of increases will be, but I’ll let it run for now.  In this example, BX increased their dividend but it doesn’t register as it amounts to 0.001962% – thereby rounding to 0.00%.  This becomes even more negligible when ORIT’s dividend cut is added. Likewise, the increase from stock dividends and DRIPs may also be too small to be meaningful.

The key point I wanted to visualize was the delta between market fluctuations and dividend growth.  Since my purchases are (generally) self funded by the portfolio, the fields: Increase from New Buys, Less Dividends, Less M&A cash and Incr/Decr from Market Action should equal 100%. 

The selfish reason?  After the four dividend cuts I experienced to start 2019, my assumption was the market was in for a rough year and I went into a little of a retrenchment mode.  My cash position rose and my purchases decreased. Now my dividend run rate is below normal – I might exceed 2018 dividends by month end which would be a month later than usual.  I’m used to coasting into the fourth quarter starting some positioning moves to get a head start for the new year. 

I’m thinking dividends deployed for purchases should be in the 3-5% range.  If I had used this method earlier in the year I probably would have realized faster how far I was lagging behind.

The term M&A Cash may be a little bit of a misnomer as a merger may be the trigger for multiple portfolio transactions which can be illustrated through this example.  The PB/LTXB merger was a cash and stock transaction and I owned both sides – PB in my IRA and LTXB in a taxable account. The cash was received this month.  I will sell PB in the IRA replacing it with TD and finally selling the TD in the taxable account. Excess cash in the IRA was used to create a TD starter position there. However, this daisy chain of events will occur over roughly two months to maximize the dividend payments.  The sales of the (current) overweight PB position and the soon to be overweight TD position will be classified as Positions Reduced.

Others present their results in a manner I found interesting including Dividend Driven and Wallet Squirrel.  Tom at Dividends Diversify had suggested creating an index. This solution is less complex but equally illustrative (I think).  I will probably track (perhaps on the side) the Buys to Dividends ratio as a correlation to market value (think “be greedy when others are fearful”) as this presentation may reflect increased buys when the market drops (or failure to do so).

So I’ll lay it out here for ideas, thoughts and discussion and intend to use it starting with my November review.

The Defunct Kid Portfolio

This week saw the completion of the rebuild of my granddaughter’s portfolio.  Basically an effort that spanned six weeks and navigated some tricky waters – earnings season, trade news, Fed meeting … Yep, we had them all.  So, I figured it was only fitting to share the whys and wherefores of this little expedition since it pertains to the market.

Background

Since coming to live with us, the kid has been given an annual present of a stock holding and as such has accumulated a nice – but not quite fully diversified portfolio.  Over the years she has been proud of this and one year participated in a ‘mock’ stock contest at school which was (I believe) sponsored by FinViz taking eighth place in the state.  So it was a sad day for her when she was advised that the majority of college aid programs (Grants, Scholarships, etc.) would be discounted by 25% of her net worth. This includes savings, portfolio …  There goes the incentive for planning ahead. End result being upon graduation, her nest egg would be 0. My wife and I are not her parents – the legal status is guardian – so at least our net worth is not considered. So the game plan evolved to maximizing the available assistance.

Liquidation

The rules are similar between 529 plans and custodial accounts, except when liquidated.  With 529s, there is a penalty and possible tax restatements. With Custodial accounts there is the obligation of the custodian to prove the liquidation benefit was on behalf of the minor.  As these accounts were Custodial, I’m now tracking application fees, ACT/SAT testing fees and much more, so if necessary I can respond to an IRS audit.

My Decision

She’s aware that I chose to replicate her portfolio as a slice of one of my M1 pies.  So I laid the groundwork to ensure no dividends were lost in this migration. Fortunately I’d been holding much of my previously paid dividends in cash just waiting for an opportunity to present itself.  As the checks arrived, I moved an equivalent sum to M1. What I haven’t shared is my intention to gift it back to her upon graduation from college.

The Process

I created a spreadsheet with the sale price and the repurchase price to determine if I made or lost money (outside of fees).  I will say that I don’t have the nerve to try to time the market for a living. On the subject of fees, company plans managed by Computershare, Broadridge and Equiniti downright suck on fees when transferring or cashing out.  To be fair, that’s an aspect that’s not at the forefront of most DGIs who buy and hold for the long term. The fees ranged from a little over $25 (BR, CMSQY) to $0 (SCHW) with EQN.L in between at $15 and change. With today’s free trading schemes, the incentive for using traditional DRIPs will likely wane as I noted in one of my infrequent comments on Seeking Alpha.

Once started, I was blindsided by some events.  WFC named a new CEO, TXN provided weak earnings guidance and KHC had an earnings beat.  For the most part, I was able to better her sale price when I did my purchase as illustrated below.

Cur price as of November 8, 2019

Takeaways

While I didn’t enjoy this exercise, had I realized in 2010 what rules would be in place in2019 I’m not sure I would have done anything differently as the kid gained an appreciation for investing and the power of compounding.  Besides, Administrations come and go, rules and policies are ever changing. The key is adjusting to whatever is most beneficial at a point in time.

Going Forward

I will be hoarding most of my dividends once again until tax time as my wife took a part time job this year.  For the first time in a couple of years I’ll be able to make an IRA contribution. 2020 portfolio reporting will likely be a little strange – at least from my view of normalcy, as I tend to like consistency rather than one-off events.  (I know … first world problems …) My concerns lie more in highlighting dividend growth performance rather than portfolio growth via cash infusions – regardless of whether it’s new cash or self generated by reported dividends. This I’m sure will become clear as we progress into the new year.

As always, thoughts and comments are welcome!

October 2019 Update

On the 1.9% Q3 GDP growth rate, “The Greatest Economy in American History!” as contrasted with the 1.9% Q1 2012 growth rate under the prior administration, “Q1 GDP has just been revised down to 1.9%. The economy is in deep trouble.“

As tweeted Oct 30, 2019 and May 31, 2012 by the now president, Donald Trump

With renewed optimism for a China trade deal (again), generally good earnings reports (though there were a few snags) and additional rate cuts in this Great Economy – perhaps to spur growth to the promised sustained 4%+ envisioned with the tax cuts (doubtful) – the markets did achieve new records. In spite of all this noise, the S&P rose 2.0% and my portfolio – sans purchases – rose 2.0%. I did deploy funds that were previously generated by the portfolio, accounted for in my reports , but then stashed in an interest bearing account. When incorporating these funds (repeat – no fresh money was used), the portfolio value rose by 8.65%. So, yes, purchases can have an impact on the portfolio. Imagine the potential results if it was “new money” and I had some years to let it run.

PORTFOLIO UPDATES

• increased my LTXB position going into the PB merger
• increased my JNJ position on weakness
• Performed a partial rebalance resulting in slight increases to AROW, BANF, BKSC, BRKL, CVLY, FMBH, LSBK, NWBI, TMP, UMBF and WFC
• New Position – GIS
• New Position – WMT
• New Position – UNP
• New Position – RDS.B
• New Position – HSY
• New Position – TXN
• New Position – ATO
• New Position – T

DIVIDENDS

My primary focus resides on dividends with the goal being a rising flow on an annual basis.

• October delivered an increase of 7.49% Y/Y.
• Dividend increases averaged 10.27% with 66.52% of the portfolio delivering at least one increase (including 4 cuts). This is off last years’ pace and I believe a new personal record for dividend cuts in a single year since about 1980.
• 2019 Dividends received were 93.01% of 2018 total dividends putting me on target to exceed last year’s total in mid-November. The YTD run rate is 108.77% of 2018, slightly under my 110.0% goal – but still recoverable. Point of reference, this the first time since starting this blog that I didn’t exceed the prior year dividends before the end of October.

Note: I updated my Goals page to provide a visual of these numbers.  Based on Mr All Things Money’s instruction set with a conversion to percentages.  My code only updates when the monthly Y/Y number is exceeded.  Otherwise, the prior year actual is used.

SPINOFFs

On Oct 4, 2018 MSG filed a confidential Form 10 to spin the sports business which remains in progress.

MERGERS

XRX merger with Fujifilm cancelled (still being litigated). The expected settlement was disallowed by the judge September 13th.

PB acquired LTXB for 0.528 shares and $6.28 cash for each LTXB share which completed November 1st. I plan to pocket the cash and sell the old shares – retaining the new PB shares.

VLY to acquire ORIT for 1.6 sh VLY to 1 ORIT. This merger will result in a slight dividend cut November forward as the rate will be normalized to VLY’s current rate. In my view, the other positives outweigh this negative.

PBCT acquired UBNK for .875 sh PBCT to 1 UBNK – completed November 1st. I plan to hold this one as I wouldn’t be surprised if PBCT gets taken out at some point.

Spirit MTA REIT (SMTA) voted on Sept. 4th to approve the sale of most assets to HPT for cash. A second vote was held to liquidate the REIT. The first payment was received and am awaiting final settlement payout. Fully expecting a profitable outcome for one of my most speculative positions.

SUMMARY

Overall, no complaints. The initial quote can also bear reference to the growth rate of my portfolio this month – which is why I presented the results in two ways. Although accurate, I do not care to be viewed as tilting the scales in favor of one narrative over another. My cash position will hover close to zero while replicating the kids’ portfolio but expect the dividend growth to accelerate into the first half of 2020 with this strategy.

Here’s hoping your month was successful!

Earnings Season and more …

Earnings season is in full force with its peak next week.  I’m always a little amused by the commentary as the bulk is based against analyst estimates.  My preference is to view the results against prior actuals. Estimates can be fudged or modified more easily than actuals.  One reason Factset was a recent addition to my portfolio was for their analytics in this regard. Their recent report noted that the Y/Y revenue growth is about 2.8% which if held would, “mark the lowest revenue growth rate for the index since Q3 2016 (2.7%)”.  Which would indicate many companies are relying on cost cutting – and perhaps efficiencies – to boost their profits – which without corresponding capex may not be sustainable. This being one of many indicators I keep my eye on. I do agree with Stalflare’s view, “I am not sure about (a) recession to be honest … but I am pretty sure that the downturn has already started.”

The Blog Directory is still undergoing its review for dead or inactive blogs.  As I will be rotating some of my prime blogs – ones I consider my ‘regular reads’, I figured a grocery list of needs, wants and desires was in order, so following are my criteria.

• Regular (at least monthly) posts
• Content in addition to status reports
• Minimal/Irregular guest posts (I want to read the author’s views, not an interlopers’)
• Minimal advertising (I know the rage is about ‘monetizing blogs’ but the sheer volume of some detracts and is annoying).
• Thought provoking (I don’t have to agree with the message, only that it spurs analysis)
• Has posts that invite comments and interaction along with thoughtful discourse

Just some of the things I look for when elevating to (or demoting from) the dozen highlighted on my Blogroll (not to be confused with the couple hundred in the directory).  Once the review is complete, I’ll do a post on my decisions. Blog posts that engaged me this week include:

My Journey to Millions – Reviewing my Dividend Investment Account for Sell Opportunities

Pollies Dividend – What is my Yield on Cost (YOC)? – 2019

I’m still contemplating the first, while my comment on the second awaits moderation.

For the first time in awhile, I was a little flummoxed on how to report a payment.  My broker obviously was as well as there was a two day delay on the credit to the account.  Spirit MTA REIT (SMTA) is undergoing a voluntary liquidation in two (perhaps more) phases. The regular quarterly dividend payment wound up being an $8.00 per share initial liquidation return.  My broker ultimately classified it as an ‘Account Credit’. Now I don’t have that level of sophistication in the tools I use, so this payment went into the dividend bucket. The shares will be cancelled, delisted and transferred to a liquidating trust.  I will classify the further payment(s) as sale proceeds. My dividend calendar will retain SMTA solely as a memory jogger. I am now slightly positive on this investment (gamble?) with the profits coming with the subsequent payments.

With my granddaughter’s portfolio replication in full swing (her final stock (PG) was sold post ex-div last week), I’ve recreated about two thirds within one of my brokers.  Although feeling a little like a market timer in this exercise (which I find a little stressful), it will illustrate one of the issues I have with other DGI reports – namely isolating pure portfolio performance versus additional capital.  For example, Stockles says, “Naturally, before the compounding effect has really done its thing, most of the increase is due to increased portfolio value (i.o. additions to portfolio in terms of investments).”  In my view (which could be too literal) his claim of a year to year return of 19.53% could be distorted by cash additions.  In my case, I’m purchasing thousands of dollars of new stock holdings from cash that was previously reported on my monthly reports.  So, should accumulated, non-reinvested dividends or previously reported cash received in M&A activity be treated differently than “new cash” is the quandary I’m dealing with.  Perhaps just footnote the daylights out of it …

So goes my thought processes for the week. Any ideas on the reporting?