It’s the time of year when winter is but a memory (for most of us), taxes have been filed and proxies are filling our mailboxes. As I review the filings and determine how to cast my votes, I’m struck with one of these off-the-wall thoughts that hit me every now and again. I wondered how much was earned – and the margins derived – via the annual proxy season. I didn’t delve into the number of trees sacrificed though I’ll wager it’s fewer than before electronic transmissions.
Generally I refrain from back-to-back posts with similar topics but decided to make an exception this week as the moving parts have kicked into high gear. My post last week addressed my uneasiness with cryptocurrency as well as my interest in the underlying blockchain technology. It appears that my view has some support as two blockchain ETFs debuted on January 17th (BLOK and BLCN) and one January 25th (LEGR). This should be followed by KOIN next week. Horizons and Harvest (HBLK) also have ETF applications pending. Grenadier penned a piece on Seeking Alpha that did some analysis on the first two. Four of LEGR’s top five holdings are included in either one or both of the originals so it will probably be similar. David Snowball highlights this sentiment in his piece There’s no idea so dumb that it won’t attract a dozen ETFs stating, “…there are no publicly traded companies that specialize in blockchain; there are mostly companies with a dozen other lines of business that have some sort of efforts going into blockchain.” This is 100% correct.
The general upward trend continued in July with major indices again hitting new highs. With my strategy shift in place, I did deploy new capital but only in a positioning move ahead of a spin. The S&P ended the month up 1.93% while my portfolio trailed with a gain of 1.77% largely due to the financial sector lagging the market. For the year, I’m ahead of the index by 4.86%.
Headlines impacting my portfolio (bold are owned):
- 7/5 – YUMC indicates reviewing possible dividend payout
- 7/7 – MET acquires FIG’s asset management business
- 7/10 – CM acquires Geneva Advisors
- 7/11 –BR acquires Spence Johnson Ltd
- 7/12 – ABM acquires GCA Services
- 7/12 – AAPL adds PYPL as appstore pymt option
- 7/13 – MFC reportedly reviewing sale or IPO of John Hancock
- 7/17 – CHD to buy waterpik
- 7/17 – China places restrictions on loans to Wanda (AMC)
- 7/18 – MKC to buy RBGPF’s food business
- 7/18 – CCI acquires Lightower
- 7/19 – HRNNF (H.TO) to acquire AVA
- 7/20 – SRC considering spinoff of Shopko properties
- 7/21 – BX and CVC Capital offer $3.7B for Paysafe (PAYS.L)
- 7/26 – SHPG rumored to be takeover target
- 7/27 – Ackman discloses stake in ADP
- 7/28 – IRM acquires Mag Datacenters LLC
- 7/31 – BX (w/ ETP 50.1%) buys 49.9% of holding co. that owns 65% of Rover pipeline
Note: my comment of July 21st on AMC (Dividend Diplomats) remains prescient in light of their warning on August 1st. I believe now is a viable entry point if cognizant of possible risk to the dividend particularly as related to lender covenants. EPR may have a slight risk as well.
- Added to MET (spinoff positioning)
- July delivered an increase of 2.14% Y/Y with the vast majority of the increase being attributable dividend increases.
- July delivered a decrease of 8.85% over last quarter (Apr) with TIS (dividend suspension) and foreign cycles (interim/final) being the culprits.
- Declared dividend increases averaged 10.81% with 61.02% of the portfolio delivering at least one increase (including 2 cuts and 1 suspension)
- YTD dividends received were 69.81% of total 2016 dividends which if the current run rate is maintained would exceed last years’ total in early November
MET has declared their spinoff – Brighthouse Financial (BHF) – effective August 4th. Holders as of July 19th will be entitled to 1 share for each 11 MET shares owned.
AGU/POT (Nutrien), SGBK/HOMB remain pending
Overall another positive month with the only disappointment being the Q/Q dividend decline – which was expected. The primary metric (annual dividend increase) remains on target and well ahead of inflation.
March brought us the longest DOW losing streak in five and a half years on the heels of the first legislative defeat of the Trump administration. The talking heads then moved their focus to the “end of the earnings recession”. Frankly, I think as long as the US dollar remains strong, earnings will continue to suffer – except for domestically focused companies. As a leading indicator to this thesis, I would point to the slowing growth in dividend increases as a proxy. Regardless, the S&P closed the month down .04% while my portfolio rebounded ending the month up 3.3%. At the end of the first quarter, I lead the S&P by 1.35%.
Headlines impacting my portfolio:
- 3/1 – SQ buys OrderAhead (pvt)
- 3/6 – FMBI acquires Premier Asset Mgmt, LLC
- 3/9 – BR acquires Message Automation, Ltd.
- 3/13 – BUSE acquiring MDLM
- 3/16 – MMM acquiring Scott Safety from JCI
- 3/16 – Fed lowers barriers for <$100B bank mergers
- 3/20 – UL reviewing sale of spreads line
- 3/23 – BLK buys 5% stake in NTDOY
- 3/27 – BLL sells paint can line to BWAY Holding
- 3/27 – DST buys remaining UK JVs from STT
- 3/27 – SGBK to merge with HOMB
- 3/28 – KO and KOF close on AdeS line purchase from UL
- 3/29 – MA acquires NuData Security
- 3/30 – CM increases offer for PVTB
- Added to BCE
- Added to SQ
- Added to KO
- Added to TD
- Initiated position in AKO.B
- March delivered an increase of 9.15% over March 2016. 2.24% of this increase is attributable to purchases with the remaining 97.76% a result of dividend increases. The Y/Y comparison is a little distorted as four companies shifted pay dates and one special dividend did not reoccur.
- March had an increase of 6.44% over the prior quarter. This was primarily due to a pay date shift as a result of a merger.
- Declared dividend increases averaged 7.75% with 36.42% of my portfolio delivering at least one raise (1 cut – YUM).
- YTD Dividends received were 27.1% of total 2016 dividends. If the current run rate is maintained would exceed 2016 around October 15th – particularly with most of my semi-annual or interim/final cycles paying during the next quarter.
The MET spin (Brighthouse Financial – BHF) remains pending.
Agrium/POT, JNS/HGG.L and SGBK.HOMB remain pending
Today I went on a quest, spurred by an article I encountered a few days ago over at the StreetAuthority, titled Reinvest Stocks At Discounted Rates With This Strategy. OK, I’m a sucker for a bargain. And this is a technique I’ve previously used. So what’s different? One comment in the article caught my eye. “there are a number of companies that offer DRIPs with a discount. They are just really hard to find”. I thought “Oh really. How hard could it be? Well, let me tell you …
I started with Amstock. They (and their sister company CST) are privately held and owned by Pacific Equity Partners out of Australia. I had to do some cutting, pasting and sorting but I came up with a list of 18 companies:
ACFN, AFG, BXMT, BRT, CECE, EFSI, ETP, HT, MEG, MNR, NNN, OLP, SBTB, SSW, SSS, SUBK, UMH, YORW
Can’t say I’d be buying many of these myself , but a good start to my journey.
So I then went to the big one – Computershare. Since I just bought some of their stock, I figured to get answers. Wrong. They do provide the information on their website, but it’s two additional clicks to get the answer. With the thousands of plans they manage, there just had to be a file to download. Nope. Well I’m not that bored (at least today) to go to that effort. So strike one.
Next up was Wells Fargo. They managed Piedmont’s plan (which had a discount). They manage about 160 plans and as a stockholder, maybe they’d cut me a little slack. Strike two. They’re even worse. You go to the list on their site, click on the company, then click on the document so you can read each and every prospectus to see if a discount is offered.
While I still had a strike left I gave up without checking Broadridge or DST. These are smaller – Broadridge has Disney as a client and I know no discount is offered there. At least it provided a semi-productive way to spend a rainy day.
With apologies to Tom Cochrane (Life is a Highway), been humming his tune today after completing two purchases. The first took three weeks and an assist from my broker. My limit order finally hit (and went below) but the Aussies didn’t execute it until getting a call from the states. So now I’m the proud owner of Computershare. I then submitted an order for Broadridge which executed prior to the close. With my current Wells Fargo stake, one could say I man one of the toll booths on the dividend investing highway.
Alright, I’ll elaborate. All three companies are Transfer Agents. Meaning companies hire them to pay out dividends, manage ownership records, run the DRIPs (if the companies have one), and so on. These three companies control close to 60% of the market with private companies splitting the remainder. Of the 35 most popular DGI owned stocks, 30 use these three companies.
At today’s close, BR’s yield is 2.27%, WFC is at 2.81% (both quarterly) and CMSQY sits near 3.3% (twice per year). And as the popularity of dividend investing continues to rise, I have all of you to thank – because without you as an investor there would be no need for Transfer Agents.