Jan 2016 Update

The worst month in recent memory has come to a close with the BOJ saving the day at month end. With the S&P down by 5%, I feel fortunate being down 1.6% particularly since I’m a little heavy in financials – one of the month’s under-performers.   And I’ve decided to make a few changes in my monthly updates.  No longer will I have a pure dividend post – as this data and more is under the 2016 Dividend Menu Item – but I will highlight my progress.

Blog Updates

  • Incorporated a full year spreadsheet for dividends
  • Eliminated dormant blogs from the directory
  • Added a Goals menu item with a progress meter (thanks Dividend Meter for the step-by-step instructions).

Portfolio Updates

  • Added to AMC, AAPL, LTXB  and YUM on weakness
  • Opened a new position in NJR


  • January delivered a 46.4% increase over Jan 2015.  With the odd cycle/semi-annual payers excluded, this is primarily in line with y/y dividend increases.
  • January also provided a boost of 36% over the prior quarter, when normalized – in line.

6 Degree Investing

Six degrees of separation is the theory that everything is six or fewer steps …
“Invest in what you know (coupled with serious fundamental stock research)” attributed to Peter Lynch
“Own What You Love” Loyal3 slogan
These are common themes used widely among investors. Presuming due diligence has been performed and ones minimum requirements are attained it makes perfect sense. One example is my granddaughter’s portfolio. Each Christmas she receives a stock that she can relate to and one with a company sponsored DRIP. Her first was General Mills as she liked Lucky Charms. When she studied US history it was Washington Gas Light (WGL) as they keep the Capitol lit. Over the years her portfolio has grown to also include Hershey, Walmart, Procter & Gamble, Union Pacific, Disney and Kraft-Heinz. This year’s addition was Texas Instruments since she applied – and was accepted – to a high school sponsored in part by them. It is a moderately diverse portfolio, but more important is the fact that she can identify with it.  Although none are owned through Loyal3, it is a kind of Own What You Love portfolio.

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Recent Buy – NJR

I was looking for a utility to replace PNY when it gets sold via its merger with DUK.  I was leaning towards one out west but some questions were raised regarding the regulatory climate that I need to investigate further.  So meanwhile, I opened a position for NJR in my Wells Fargo DRIP account.

Generally I don’t DRIP much anymore, but this is one holding that provides a discount to market at NJR’s discretion.  So a decent company with the possibility of 2-5% discounts on reinvested dividends makes this one a buy now and one I’ll likely add to once PNY’s merger is complete.


Ticker: NJR

Acquired: 1/15/2016

Cost basis: $33.295

Current Portfolio Status: Hold

Dividend Reinvestment: Y

Dividends paid quarterly in Jan, Apr, Jul, Oct

Shares held on account at Wells Fargo

New Jersey Resources Corporation, an energy services holding company, provides regulated gas distribution, and retail and wholesale energy services. The company operates through Natural Gas Distribution, Energy Services, Clean Energy Ventures, Midstream, and Home Services and Other segments. The Natural Gas Distribution segment offers regulated retail natural gas services to approximately 512,300 residential and commercial customers in central and northern New Jersey; provides storage management services; and participates in the off-system sales and capacity release markets. The Energy Services segment provides unregulated wholesale energy management services to other energy companies and natural gas producers, as well as maintains and transacts a portfolio of physical assets consisting of natural gas storage and transportation contracts in the United States and Canada. The Clean Energy Ventures segment invests in, owns, and operates distributed power projects, including commercial and residential solar projects located in New Jersey; and onshore wind projects in Montana, Iowa, and Kansas. The Midstream segment invests in natural gas transportation and storage facilities. The Home Services and Other segment offers heating, ventilation, and cooling services; holds and develops commercial real estate properties; and provides solar equipment installation, and plumbing repair and installation services. This segment is also involved in water appliance sales, installation, and servicing activities. The company was founded in 1922 and is based in Wall, New Jersey.


Crisis Management

Not to belabor a beaten down topic, but as we all know the story – and in many instances rehashed – versions of the Kinder Morgan fiasco and the subsequent fallout.  A perspective I haven’t seen addressed is human nature.  In a previous life, a role I held was to design and create contingency plans for telecom networks  – and subsequently data centers – in the event of a major outage.  The obvious corollary being a massive dividend cut (i.e., catastrophic failure).

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Getting the Year Started

The worst kept secret is now official, Baxalta (BXLT) is being acquired by Shire (SHPG) in a stock and cash transaction valued (10 Jan 2016) at $45.57 per share of BXLT.  I was late to the Baxter party, buying into it just prior to the Baxalta spinoff due to valuation concerns.  These were confirmed shortly after spinoff with Baxter now a resident of my penalty box following the delivery of my very first (and currently only) dividend cut.


Having persevered, we are now being justly rewarded.  To break out the benefits – it’s a cash and stock transaction:

  • .1482 sh of SHPG and $18 for every BXLT share.

This represents a 13.8% premium over Friday’s close and a 22.5% premium over cost.  Not too shabby a return for six months.  Then reality sets in.  The negatives are many:

  • Has a formal ruling been received regarding tax consequences due to the spinoff
  • Impact of Shire’s impending move from Ireland to the UK on taxes
  • Shires’ dividend rate (currently ~.3%) on an interim/final schedule

Although I like the combination and the pipeline, this deal calls for a longer term view than I’m willing to provide.  Therefore, I anticipate selling prior to or shortly following the merger depending on valuation (i.e., is the $18 premium effectively priced in).

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My Goals for 2016

  1. Exceed the performance of the S&P 500

This has been one of my goals since 1980 and achieved 31 times.

  1. Re-establish portfolio balance per the strategy

This most likely a two year goal since my largest strides will have to take place following the completion of the PNY/DUK merger

  1. Minimize portfolio sales (ideally none)

Holdings are maintained separate from my published portfolio to supplement my income via a covered call strategy in an attempt to avoid unplanned sales. Dividend Growth Investor covers this nicely with a glaring exception: Major medical expenses.

  1. Complete the acquisition process with about 160 total stocks

Other than a handful of companies to fill a few gaps, I want to add a final round to my Regional Bank strategy

  1. Increase my Canadian holdings to 3-5% of the portfolio

No new holdings are expected, only additions to existing positions. I figure to add while the US dollar is strong with the expectation that – at some point – the situation will be reversed.

  1. Maintain my walking regimen

Weather permitting average 20 miles per week

  1. Improve blog functionality

There remain some sections that don’t work quite right

  1. Write 52 posts

We’ll find out just how much I have to say

  1. Reduce mortgage balance to 30% LTV
  2. Volunteer 50 community service hours

Motivated by Well Rounded Investor’s goals