Feb 2018 Update

The theme for the month was volatility.  A couple of ETNs cratered as a result of the high volatility causing investors to lose significantly when using these levered products.   “We sincerely apologize for causing significant difficulties to investors,” Nomura said.  Credit Suisse stated “investors who held shares of XIV had bet against at volatility at their own risk.  It worked well for a long time until it didn’t, which is generally what happens in markets”.   Caveat emptor.

During the month, the S&P index dipped into correction territory before rallying to close the month down 3.89%.  My portfolio sympathized with the index closing down 5.53%.  I never hit correction so my peak drop was less but I also failed to recover as quickly.  Probably an area to perform a root cause analysis on at some point.  Following back-to-back monthly losses against the S&P, I’m down 3.44%  to start the year. Continue reading


Jan 2018 Update

The market came out of the chutes and barely looked back this month, the catalysts being the realization of the tax plan’s impact on corporate earnings and few earnings reports being significant disappointments.  The lower tax rates started trickling  into paychecks (average about 3.5%) but the average gas price nationwide increased by roughly 5% primarily due to the weakness in the US dollar  (caused in part by the prospects of increased deficits from the tax plan that haven’t been offset by jobs, productivity or GDP gains yet).  At least we can watch commercials touting unrealized benefits even though it is way too early for any tangible impact to  be realized.  Kind of makes me wonder a little.  For the month, the S&P index increased by 5.62%% while my portfolio value increased by merely 3.81% putting me behind by 1.81% to start the year. Continue reading

Let The Spend Begin

Curious minds have pondered the meaning of the Great Tax Reform Act of 2017, properly known as the Tax Cuts and Jobs Act of 2017.  The debate has centered on whether repatriation or employee salaries or buybacks or dividend increases or debt repayment or capital investment.  Until Walmart, announcements have centered on bonuses or hiring pledges.  Not wages.  Not anything, really, that is a truly lasting benefit to the working stiff.


And this week is no different.  In a nod to the roughly 50% of population that own stock, Thursday, DST Systems announced they were being acquired by SS&C Technologies Holdings in an all cash deal valued at $84 per share.  While M&A activity is not an unexpected byproduct of the tax bill, there were two noteworthy items in the release.  The first being SSNC’s deal financing being a combination of debt and equity.  Current SSNC shareholders will be facing some level of dilution.  The second item is that the “significant leverage” will be attenuated through “cost synergies to stem from data center consolidation and reductions in corporate overhead”.    This sounds like code words for force and facility reductionAre there that many data centers on the company books?

Not being a SSNC shareholder (current or apparently future) appears to be a blessing in this merger.  As a DST shareholder I will be happy to tender my shares (and vote my proxy in favor of) the deal.  My only regrets are two: 1) Kansas City (for which I have a fondness) losing another company’s headquarters , and 2) that I didn’t own more shares.

My shares were purchased in four tranches with an average (post split) basis of $62.71.  Total gain will be $21.29 per share or 25.3% total gain (annualized average gain would be about 11.7% depending on when it closes).  Not too shabby a return and a good start towards equaling last years’ results.  The merger is expected to close in the third quarter.

The only other negative is the (new) tax impact with these gains likely locking me into the higher bracket I was attempting to avoid.  My philosophical observation being unless you’re extremely wealthy, the best way to avoid taxes is to make no money.  A theory to which I don’t subscribe!

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.

Continue reading

Baseball and Screeners

This is one of the times that another blogger’s post has triggered my (loosely defined) creative juices.  The post in question was Lanny’s (Dividend Diplomats)  Waste Management analysis.  Now I have no disagreement with his conclusion, in fact you could compare the DD Screener to delivering a fastball right down the middle.  The only alternatives to a strike are whether the pitch is high or in the dirt.

Personally, I like a little more strategy – the brush back before throwing a curve that nicks the corner.  Questions like EPA regulations or NIMBY impact on landfills.  Or the number of municipal contracts that are competitive versus monopolistic.  Issues obscured by a strict reading of batting and earned run averages.

The jewel in his analysis was:

I was driving around my neighborhood and was surrounded by a few waste disposal service trucks …

Aha!  A twist on the old kitchen cupboard investing strategy.  You know the drill … identify the companies behind the products you use.  I’m not sure of the absolute merits of this strategy, but there is comfort in investing in companies whose products and/or brands are familiar.  And it is one I use (to a degree) as well.  My assumption being, why not have my spending subsidized by companies I do business with through dividends?

I think I stated earlier I thrive in the obscurities, case in point being that last week I required a new prescription.  My meds generally delivered by mail from Humana (HUM).  One-off situations are handled by a local pharmacy.  In this case I chose Tom Thumb grocery as they accepted Humana insurance and I could wait at the Starbucks (SBUX) nearby.  I noticed on my paperwork that Argus Health was used for claim processing.  Argus is owned by one of my companies, DST.

There we have it.  Humana paid Tom Thumb which paid a processing fee to DST while I paid Starbucks while waiting.  Of which HUM, DST and SBUX all will provide a rebate (dividend) to me.  Although a topic I’ve mused on before, it is also one I feel never gets old.  One can always posit that this level of detail is irrelevant and perhaps it is.  But I feel it provides a broader snapshot of the business when inter-relationships are recognized.


May 2017 Update

May was generally quiet with the market trending generally higher.  With few pullback opportunities, I barely deployed new dividends so my cash position increased again.  At least the turmoil I experienced moving from Loyal3 subsided and I could resume a more moderate pace.  An upcoming election in the UK may present a buying opportunity on weakness in the GBP versus the US dollar.  The S&P ended the month up 1.16% while my portfolio recorded a gain of 1.37%.  For the year (so far), I’m ahead of the index by 4.07%

Headlines impacting my portfolio (bold are owned):

  • 5/1 – DRE sells medical office portfolio to HTA
  • 5/1 – TIS suspends dividend
  • 5/4 – FHN to acquire CBF
  • 5/30 – JNS/HGG.L merger completed (becoming JHG)
  • 5/31 – KEY acquires HelloWallet from MORN

Portfolio Updates:

  • Initiated position in SGAPY
  • Added to IVZ
  • Added to PWCDF (proceeds from sale of TIS)
  • Added to DST
  • Added to PLD


  • May delivered an increase of 51.44% over May 2016 with the vast majority of this attributable to foreign dividend cycles not held last year.
  • May delivered an increase of 38.94% over last quarter (Feb) for the same reason.
  • Declared dividend increases averaged 8.89% with 48.02% of my portfolio delivering at least one increase (2 cuts – XRX and YUM; 1 suspension – TIS)
  • YTD dividends received were 47.11% of total 2016 dividends which if the current run rate is maintained would exceed last year’s total in early November.

Note: with 14.6% of current dividends paid by foreign sources, the weakening US dollar is providing a tailwind with exchange rates i.e., increasing my return.


The MET spin (Brighthouse Financial – BHF) remains in regulatory review.


Agrium/POT, SGBK/HOMB remain pending

March 2017 Update

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

Portfolio Updates:

  • 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