May 2018 Update

The month was fairly normal until the final week with Italy followed by Trump’s tariff rollout.  In between we saw the on again – off again negotiating style with North Korea and China.  Other than a couple of down days it appears the market is learning to ignore the noise.  Again I used the dips to my advantage and stayed the course.  May saw a rise in the S&P of 2.16% while my portfolio outperformed the index by registering a rise of 2.24%.  YTD I still lag the S&P by 0.35%.

Portfolio Updates:

  • Added to CMCSA (making another round lot)
  • Added to my ETF group (CUT, EWA, EWW, JPMV, VGK)
  • Added to GE (on the rail spin (WAB) news)
  • Added SMTA (via SRC spin)
  • Added to BKSC (via 10% stock dividend)
  • Added to DGX on news of UNH strategic partnership

DIVIDENDS

This is where my main focus resides.  Market gyrations are to be expected but my goal is to see a rising flow of dividends on an annual basis.  I’m placing less emphasis on the quarterly numbers as the number of semi-annual, interim/final and annual cycles have been steadily increasing in my portfolio.

  • May delivered an increase of 12.97% Y/Y fueled by dividend increases.
  • May delivered a 15.98% increase over last quarter (February).
  • Dividend increases averaged 12.14% with 55.98% of the portfolio delivering at least one increase (including 1 cut (GE).
  • 2018 Dividends received were 46.53% of 2017 total dividends putting us on pace to exceed last year in early November.

Notes: the Q/Q shows an increasing trend line due only to timing of dividend payouts (pay date shifts).  Y/Y is only on par with dividend increases as dividends received were used to purchase next quarter (rather than current quarter) dividends.

Spinoffs:

GE‘s rail unit to spin then merge with WEB

Mergers:

XRX merger with Fujifilm cancelled.

SHPG to merge into TKPYY

Summary

Any month with increasing dividends and beating the S&P has to be considered a good one.

Hope all of you had a good month as well.

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4 thoughts on “May 2018 Update

  1. SR, 2 questions.
    Are you seeing above average dividend increases this year vs. past trend? If so, any further thoughts on why? We have debated the tax cut as a possible cause in the past.

    I see you have a cookie notice on screen. How did you do that, or do you have a resource you can point me to?
    Tom

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  2. 1a) Short answer is no. My average increases (company level – not portfolio level) were: 2016 – 12.30%, 2017 – 10.95% (3 cuts) and so far in 2018 – 12.14% (1 cut).

    1b) There were four benefits anticipated with the tax bill: M&A, Buybacks & Dividends, Capital Investment and Wages/Hiring. Buybacks and M&A have been the news story. Dividends and Employees tend to be lagging indicators (e.g., Buybacks benefit future profits all else being equal). My opinion is Capital Expenditures is the unreported story. ARD’s conference call was the first I’ve seen articulated where they said their US capex was showing a ROI of 0.65 years. Unreported was this automation was funded by tax reform and an additional profit was gleaned from a line closure in NY costing US jobs. End result being a probable special dividend next year. Pre-tax reform, a 1-2 year ROI was considered a no-brainer investment.

    2) WordPress now has an option to assist in compliance with the EU’s GDPR regulation. As some of my readers are non-US I figured it’s best to operate with a margin of safety particularly when operating at the whims of WordPress’ ‘free’ plan.

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  3. Thanks for the feedback on all issues. I read the Wall Street Journal regularly. They had several feature articles earlier this year on the impact of the tax cut and higher capex. Nothing scientific but interesting and I think supportive of what you say. Tom

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    • I get the expense vs depreciation argument and spent the majority of my career in creating efficiencies (job cuts) primarily through technological improvements (automation). With one exception (about a 2,000 employee layoff as a merger by-product), I always retrained/reskilled existing employees as part of the process. Which is why I’m flummoxed by the notion of capex being a job creator. Indirectly, perhaps. But unless ARD’s smaller competitors (US based) are investing in like fashion, they run the risk of being out maneuvered by a foreign firm thanks to immediate expensing. But I still think we’re 6-8 months away from obtaining that answer.

      Thanks for letting me vent a little! By the way, you need a correction on O ‘Canada. Paragraph 8, boarder should be border. 🙂

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