January 2020 Update

What a way to start the new year.  Beginning with the reshuffling of my portfolio and continuing right into earnings season and the inevitable debate over the Coronavirus impact on the economy … all I can say is yep it’s a lot to digest – and it’s only January.  With the gyrations in the market, all but two of my low-ball limit orders executed, probably the most controversial being MTR Corporation – the Hong Kong high speed rail line recently at the forefront of the protests. Anyway, I added two Canadian companies (Fortis and TMX Group – (Toronto stock exchange)) and starting the long rumored whittling of some of the non-core holdings (XRX and MSGN).  Most of the other action was moving Canadian companies from my taxable accounts to the IRA – some of which were done as a rebalance to minimize fees (hence the slight additions to the other holdings). Also selling part of the PB stock (which went overweight due to a merger) to fund these movements. As I indicated last week, this is the first of a multi-month transition. Obviously my timing was decent (this time, anyway) as the S&P lost 0.16% for the month while my portfolio gained 1.81%.

PORTFOLIO UPDATES

DIVIDENDS

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

  • January delivered an increase of 22.73% Y/Y primarily the result of last years’ dividend cuts rolling off.
  • Dividend increases averaged 11.48% with 8.5% of the portfolio delivering an increase.
  • 2020 Dividends received were 1.86% of 2019 total dividends putting me on target to exceed last year’s total in November. The YTD run rate is under my 110.0% goal but I anticipate this will normalize as my portfolio movement becomes clearer and the current year begins to distinguish itself from the last. 

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 Growths reporting

The relationship between market action and purchase activity was roughly 95/5.  As I’m generally playing with ‘house money’ (proceeds from sales, M&A activity and dividends), I doubt there will be a significant variance until I fund my 2019 IRA contribution.  The Net Purchase Expense being less than 1 or 2% illustrates the ‘house money’ concept. Timing did play a part as I sold early in the month (before the drop) and most of the purchases were in the latter part of the month. 

SPINOFFs

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

MERGERS

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 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.  

SUMMARY

Overall, the only complaint is the sluggish start to the year. Minus the drag from last years’ dividend cuts I figure this will be short lived.  On my goals, progress was made as follows:

  • Scenario 1 – TD is now confirmed
  • Scenario 2 – Half complete, awaiting timing issues for the sell part
  • Scenario 3 – Determination of maximum contribution amount complete
  • Scenario 4 – 2020 RMD amounts identified

Here’s hoping your month was successful!

2019 Year End Report

Looking back at last years’ End Of Year post, the concerns raised at that point all remain valid.  I have to admit that even with the evils of tariffs, rising deficits and US dollar strength the economy remained surprisingly strong.  I did nail one right – the administration’s claim that GDP growth can outpace the deficit was wrong. If it can’t be done when the economy is hitting on all cylinders – the question becomes ‘when can it?’

For the month, the S&P index rose 2.73% and my portfolio (excluding October and November purchases) rose 4.26%.  When those purchases are included, the monthly increase was 10.51%. Yes my gain would have been larger had I re-invested the dividends throughout the year but at least I was fully in the market during the last quarter run-up.  For the year the S&P rose 30.43% (depending on how it’s calculated) the best year since 2013. My Portfolio rose 34.54% allowing me to extend my claim of the 34th year (of 39) that I’ve beaten the index.

Dividend cuts were the big obstacle for the year as I endured five in total.  Frankly, it wasn’t until December that my Dividend Goal (10% annual increase) was in the bag.  This is typically attained in late October or early November. 

I have only three new companies on my watch list with limit orders in place on two.  All are foreign with Canada, Hong Kong and Japan tagged. I have a few I’m willing to shed with a couple more needing repositioning due to mergers.  For the first time in probably five years I’m in a position to reduce my holdings while beefing up my Anchor and Core positions.

Thirteen countries were represented in my portfolio (18.5% of my dividends), losing Ireland but gaining Japan via a merger.  The top countries were Canada (9.77%), UK (2.61%), Singapore (1.21%) and Sweden (1.02%). I’m continuing the migration of Canadian companies from my taxable accounts to my IRA to take advantage of the tax treaty (no Canadian tax withholding for most issues).

Continuing with the Monthly Recap in its newest iteration, I’m still finding pieces that require some elaboration in order to rationalize it.

For instance, the net purchase expense threshold is not a pure indicator of my cash position.  I’m thinking it’s in the 2-3% range as my cash position increased last month despite the purchases.  The Incr/Decr from the market — yes, 99.2% of the increase in portfolio value was due to the market.  A slight disappointment is the Dividend Raises. They weren’t enough to even round up to 0.01% (more a reflection of portfolio size than wimpy raises).

Dividends:

  • December delivered an increase of 40.87% Y/Y with most of the increase attributable to the Oct/Nov purchases, the OMI fiasco of last year aging off and a weaker US dollar (finally).
  • Dividend increases averaged 10.11% with 68.28% of the portfolio delivering at least one increase (including 5 cuts.  Basically a lackluster performance.
  • 2019 Dividends received were 13.78% greater than 2018 dividends and exceeded last years’ total on December 1st.  It would have been over 15% had there been no cuts.

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:

Spirit MTA REIT (SMTA) voted on Sept. 4th, 2019 to approve the liquidation of the REIT. I am awaiting the final settlement payout and as of December 31, this issue was delisted. I fully expect 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.

Splits and Stock Dividends

Although splits are agnostic, I consider them a positive with reverse splits a negative.  Two of my companies split this year – PWOD and FFIN with no reverse splits to report.

Five companies showered me with shares of stock ranging from 3% to 5%.  I do love stock dividends and this year the benefactors were: CBSH (5%), HWBK (4%), LARK (5%), AROW (3%) and CVLY (5%).

Summary

As we slide into tax season, we’ll see if my readjustments panned out.  My goal was to achieve the 0-10% tax bracket by taking a one year tax hit.  The first part was completed so the results will be evident in the next month or so.  Overall, not one of my better years but I did attain (at least) my minimum objectives.   

Hopefully your year was great or at least in line with the market. 

Dec 2018 Update and Year End Review

he fourth quarter swoon continued in earnest this month resulting in an annual loss for the markets.  While the final trading day closed higher (DJIA up 265, NASDAQ up 51 and the S&P up 21) it was nowhere near close enough to avoid the worst December since 1931.  Though surprised by the resiliency of the US dollar, last year’s intent to migrate further into foreign equities was largely preempted by tariff uncertainty. My other 2018 concern of rising federal deficits stifling the economy did not manifest itself as yet – though I remain skeptical of  administration claims that growth can outpace the deficit. For the month, the S&P index dropped by 9.18% while my portfolio dropped by ‘only’ 8.44%. For the year the S&P posted an unusual loss of 6.65% while my overall loss was 3.57%. In an otherwise ugly ending to the year, my primary goal of exceeding the S&P’s return was attained marking the 33rd year (of 38) that I’ve been able to make this claim.

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Where’s Santa?

What a start to the final month of the year.  At least there is a little something for everyone.  First the CME tripped the first wave of circuit breakers in the futures market.  Then the chartists found the S&P closed the week in a death cross.  Then there’s news of a possible yield curve inversion.  Lest we not forget, the most recent China issue which may or may not even be legal.  While the Huawei issue is unfolding, Lighthizer continues to stir the pot by saying he considers March 1 “a hard deadline” otherwise the delayed tariffs will be imposed.  Hmm … kind of like bringing a gun to a knife fight – or – perhaps the administration really believes that “free and fair trade” is an outgrowth of convoluted negotiations.

If week one is any indication, the traditional “Santa Claus Rally” will be delivering a lump of coal this year.  Being the eternal optimist, I’ll argue Christmas isn’t here yet so I had to take advantage of the sell-off to do a little buying:

  • First, I added to my ETF group.  I accomplished two things with this:
    • As the majority of these are foreign, they are underwater.  Therefore, an ‘average down’ scenario.
    • These all pay December dividends (one quarterly, three semi-annual and one annual) all yet undeclared.  All are now captured.
  • Second I executed a rebalance on a small portion of the portfolio.  I chose a ‘rebalance’ as the fees were lower than the alternatives.  End result being:
    • Sale of BOKF.  I had this issue in two accounts due to a merger, now it’s only in one, with the proceeds and accumulated dividends:
    • Added to ADP, MMM, KIM, FAF as these are underweight target holdings
    • Added to AVNS as they may have received a good price for the division sold to OMI
    • Added to LARK and CASS – missing the ex-date for the stock dividends
    • Added to BR, CNDT, CDK, FHN, JHG, KSU, PJT, WU, XRX – capturing WU’s December dividend

I still have another rebalance queued pending completion of a merger (might be into the new year) and then we return to normal operations.

I also will be selling my OMI – perhaps later in the month to see if Santa really exists!

Ho-Ho-Ho …

For Your Reading Pleasure

Every so often I update my directory omitting inactive or defunct blogs and generally get a feel for what the temperature is in the worlds I frequent less often.  This exercise was all the more telling in the general mood within the community.  One example being Young Dividend‘s monthly recap in which he notes, “Although the portfolio value fell, it is interesting to see that the dividend growth graph of my portfolio continues to climb upwards.“.  In a nutshell that is the reason we choose DGI.  Another analysis on staying the course comes from Time In The Market.  Points I like to keep in mind when the markets are volatile.  My friend Tom over at Dividends Diversify scooped my original thought for the week with his Can You Save Money at a Farmer’s Market piece.  My focus was on the Community Kitchens used by many of these vendors.  That concept will be fleshed out  further and arrive at some future point in time.

All good reads which I encourage you to partake.


Not to beat a dead horse, but I’ll  touch a bit more on Bank OZK which was one of last week’s topics.  Turns out The Dividend Guy featured this stock on his podcast the day before its precipitous drop.  To his credit he published a mea culpa on which the Seeking Alpha version received mixed reviews.  In my view, his laser focus on the dividend growth blinded his peripheral vision.  Not looking a little harder under the hood, so to speak.  Wolf Richter‘s  piece on the potential asset bubble in Commercial Real Estate (CRE) can highlight reasons a broader view is warranted at times.


Since I mentioned Wolf Street, a couple of additional articles grabbing my attention (including the comments) were, Why I think the Ugly October in Stocks Is Just a Preamble with a compelling argument and What Truckers & Railroads Are Saying About the US Economy.

Full disclosure: Long CASS whose data is the basis for his article.

As we come into the final week of the month, though my portfolio is down my dividends are up for the month, quarter and year.  The only suspense being the magnitude of increase!

 

Dec 2017 Update and Year End Review

The upward trend continued this month with catalysts being the tax plan and holiday sales.  My guess remains that the first half of 2018 will be good for corporations (i.e., dividends and buybacks) with a shift in focus later with deficits and mid-term elections playing a leading role.  I remain convinced the yearlong weakness in the US Dollar will continue and expect to allocate more cash into foreign equities during the first half 2018.  I will review this plan as my personal tax implications become clearer.  For the month,   the S&P index increased by .98% while my portfolio increased by 3.29% largely fueled by Financials (again).  For the year the S&P increased by a stellar 16.26% while I came in at +20.58%! The S&P return with all dividends reinvested adds about 2.41% which my hybrid approach still beat.

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