July 2018 Update

The markets generally shook off potential tariff impacts, choosing instead to focus on earnings and GDP.  Any future concerns being tabled by investors to essentially celebrate the present.   Being a contrarian by nature brings out the caution signs when the market ignores some warning signals.  Tariff advocates Alcoa and Whirlpool took hits when they acknowledged the benefits anticipated were not materializing as expected.  Signs of profiteering are beginning to emerge.  The list of companies indirectly impacted continues to grow.  Technology had issues due in part to China exposure.  Perhaps I can be forgiven for seeing the glass half empty rather than half full.  This month had me on the sidelines with only one transaction to report.  July saw a rise in the S&P of 3.6% while my portfolio outperformed by registering an increase of 5.36%.  YTD I’m now ahead of the S&P by 1.06%.

Portfolio Updates:

Performed a rebalance on a portion of the portfolio.  I reduced the overage in DGX created in May and added shares to the others in this group (ABM, AMT, ARD, BLL, CASY, CHCO, KOF, CCE, CTBI, CCI, AKO.B, HOMB, IRM, LAMR, OUT, NWFL, OCFC, ONB, PLD, QCOM, SRC, SMTA, BATRA, UNIT, VALU, VER).  My DGX holdings remain higher than they were in May and the increase in dividends on this rebalance is negligible.

DIVIDENDS

My main focus resides on dividends.  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.

  • July delivered an increase of 29.76% Y/Y, the biggest impact being a June dividend paid in July.   Pro-forma was 19%.
  • July delivered a 3.29% decrease over last quarter (April) due to an interim/final cycle (and would’ve been greater without the dividend move).
  • Dividend increases averaged 14.39% with 66.51% of the portfolio delivering at least one increase (including 1 cut (GE).
  • 2018 Dividends received were 70.19% of 2017 total dividends putting us on pace to exceed last year in early November.

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:

GE‘s rail unit to spin then merge with WEB

GE to spin 80% of the health business

Mergers:

XRX merger with Fujifilm cancelled (now being litigated).

SHPG to merge into TKPYY

GBNK to merge into IBTX

COBZ to merge into BOKF

GNBC to merge into VBTX (semi-reverse)

Summary

All in all a good month but it appears my continuing financial overweight is literally reaping dividends.  This probably needs to be addressed in 2019.

Hope all of you had a good month as well.

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6 thoughts on “July 2018 Update

  1. Solid double digit year over year gains. Congrats! It will be interesting to see how the incredible shrinking GE will look in a year or two from now. I’m still holding on to my shares but I can understand those looking to dump. Looks like 2018 will easily surpass your 2017 totals. Keep up the good work.

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    • Thank you sir! From a dividend standpoint, yes 2018 could be a banner year – but my dependence on banks as the driver is probably coming to an end. From a valuation perspective, I suspect the S&P and I will be going neck-to-neck through year end.

      I think GE is intriguing if you have the stomach for it. My main interest is in the rail and health care spins and may increase my holdings depending on the spin ratios. (Easily done by diverting dividends when a holding is less than 1% of the portfolio). The only other interest I have is the wind turbine segment which if they sell/spin that, I’ll be probably be gone.

      Thanks for the comment and good luck on your GE holding!

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  2. I continue to be amazed at the resilience of the market on it’s consistent upward trend. The value investor in me says sell the index as it’s looking incredibly expensive, but the other part of me says it’s impossible to know when the upward march will end!

    Regardless, I’ll stick to my focus on a combination of value based investing and Fully Franked dividends….

    Will be interested to see your strategy for 2019!

    Cheers, Frankie

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  3. I know what you mean. With the US remaining in the driver’s seat, just when the earnings juice from the tax cuts begins to subside then another artificial boost arrives in the form of tariffs. Stir in a little uncertainty from the emerging markets making us the perceived ‘safe haven’ moves any likely return to norms to at least after the elections (November). Your strategy is (imho) diverse enough to at least weather the storms though the wild card is your economy being largely commodity based (similar to Canada’s).

    In fact, I missed this week’s post because I was working on the strategy and began the implementation process. It’s a three pronged approach with an emphasis on necessary consumer staples, more US than international. I should publish part one this week.

    Appreciate the visit 🙂

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  4. Thanks Bert! I caught a little unexpected tailwind on the rebalance as news subsequently came out benefiting some of them and hurting DGX. Some of the others are caught in the tariff fiasco resulting in an average down play.

    Looks like some of the community banks are coming back into favor 🙂 and appreciate the visit!

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