Oct 2016 Update

October was basically a quiet month with OPEC failing – once again – to shore up their hold on the oil markets.  Chevron announced a small increase in their dividend maintaining their status as a Champion.  Several small positions were added at month end as the market began a pullback (continuing into November) enabling me to start redeploying funds received from PNY’s merger with DUK.  This month The S&P dropped 1.94%.  My portfolio was basically flat, ending down 0.1%.  Note: I normalized these numbers to consider the impact of cash infusion from the merger.  My ‘pure’ equity positions decreased by 4.15%.  The need for this normalization should end as my excess cash is used.  This increases my lead for the year to 11.5% with two months to go.

Headlines impacting my portfolio:

  • 10/3 – JNS to merge w/ Henderson
  • 10/11 – SRCE gains FRB approval for Sarasota, FL branch
  • 10/19 – C finalist to be designated as clearing firm for Renminbi trades

Blog Updates:

I’m a little behind again this month but the portfolio data has been compiled and will be posted in the next couple of days with the goals update later in the week.  The Unabridged portfolio should be next week as per normal.

Portfolio Updates:

  • Closed PNY due to merger
  • Added to BMO
  • Added to CVLY prior to ex-div for the stock dividend
  • Added to JNS (weakness on currency exposure)
  • New position – ABM
  • New position – AMT (Jan)
  • New position -BLL
  • New position -CASY
  • New position -CHCO
  • New position -KOF (Mex. peso exposure)
  • New position -COKE
  • New position -CCE (UK exposure)
  • New position -CSAL
  • New position -CTBI (Jan)
  • New position -CCI
  • New position -HUM (Jan)
  • New position -LAMR
  • New position -NWFL
  • New position -OCFC
  • New position -ONB
  • New position -OUT
  • New position -PLD
  • New position -QCOM
  • New position -DGX (Jan)
  • New position -SRC (Jan)
  • New position – SGBK (Cuba exosure)
  • New position – BATRA
  • New position – VALU
  • New position  – VER (Jan)
  • New position  – YUMC (YUM spin-off)

Dividends:

  • October delivered an increase of 28.9% over October 2015.  This was due about evenly between dividend increases (Y/Y) and late 2015 funding.
  • October was down 10.68% from the prior quarter due to special and semi-annual payments in July.
  • Announced dividend increases currently average 12.59% with 67.11% of my portfolio having at least one raise so far this year.
  • Through October, dividends received exceeded total 2015 dividends by 7.2%.

Roughly half of the PNY/DUK proceeds have been redeployed with an additional 3 orders pending for January payers.   I’ve filled some of the hole I’ll face in January, so I plan on maintaining a small cash position through the election before making further decisions.

Spinoffs:

The XRX spin (Conduent) is on track to complete by year end.  MetLife has filed for a spin of their Brighthouse Financial unit under the ticker BHF.

Mergers:

Proxies were received and voted for both the LSBG/BHB and AGU/POT mergers.

Recent Buy – NJR

I was looking for a utility to replace PNY when it gets sold via its merger with DUK.  I was leaning towards one out west but some questions were raised regarding the regulatory climate that I need to investigate further.  So meanwhile, I opened a position for NJR in my Wells Fargo DRIP account.

Generally I don’t DRIP much anymore, but this is one holding that provides a discount to market at NJR’s discretion.  So a decent company with the possibility of 2-5% discounts on reinvested dividends makes this one a buy now and one I’ll likely add to once PNY’s merger is complete.

njr

Ticker: NJR

Acquired: 1/15/2016

Cost basis: $33.295

Current Portfolio Status: Hold

Dividend Reinvestment: Y

Dividends paid quarterly in Jan, Apr, Jul, Oct

Shares held on account at Wells Fargo

New Jersey Resources Corporation, an energy services holding company, provides regulated gas distribution, and retail and wholesale energy services. The company operates through Natural Gas Distribution, Energy Services, Clean Energy Ventures, Midstream, and Home Services and Other segments. The Natural Gas Distribution segment offers regulated retail natural gas services to approximately 512,300 residential and commercial customers in central and northern New Jersey; provides storage management services; and participates in the off-system sales and capacity release markets. The Energy Services segment provides unregulated wholesale energy management services to other energy companies and natural gas producers, as well as maintains and transacts a portfolio of physical assets consisting of natural gas storage and transportation contracts in the United States and Canada. The Clean Energy Ventures segment invests in, owns, and operates distributed power projects, including commercial and residential solar projects located in New Jersey; and onshore wind projects in Montana, Iowa, and Kansas. The Midstream segment invests in natural gas transportation and storage facilities. The Home Services and Other segment offers heating, ventilation, and cooling services; holds and develops commercial real estate properties; and provides solar equipment installation, and plumbing repair and installation services. This segment is also involved in water appliance sales, installation, and servicing activities. The company was founded in 1922 and is based in Wall, New Jersey.

 

My Goals for 2016

  1. Exceed the performance of the S&P 500

This has been one of my goals since 1980 and achieved 31 times.

  1. Re-establish portfolio balance per the strategy

This most likely a two year goal since my largest strides will have to take place following the completion of the PNY/DUK merger

  1. Minimize portfolio sales (ideally none)

Holdings are maintained separate from my published portfolio to supplement my income via a covered call strategy in an attempt to avoid unplanned sales. Dividend Growth Investor covers this nicely with a glaring exception: Major medical expenses.

  1. Complete the acquisition process with about 160 total stocks

Other than a handful of companies to fill a few gaps, I want to add a final round to my Regional Bank strategy

  1. Increase my Canadian holdings to 3-5% of the portfolio

No new holdings are expected, only additions to existing positions. I figure to add while the US dollar is strong with the expectation that – at some point – the situation will be reversed.

  1. Maintain my walking regimen

Weather permitting average 20 miles per week

  1. Improve blog functionality

There remain some sections that don’t work quite right

  1. Write 52 posts

We’ll find out just how much I have to say

  1. Reduce mortgage balance to 30% LTV
  2. Volunteer 50 community service hours

Motivated by Well Rounded Investor’s goals

What a morning …

Today, I turned on the TV to the news that Duke Energy (DUK) was acquiring Piedmont Natural Gas (PNY) in what appears to be an all cash transaction.  Needless to say, this news changed my morning’s agenda to one of research.  I first purchased PNY in February 2009 and shortly thereafter enrolled in their DRIP.  On price dips I continued to add a little here and there.  Last year I came to the realization that their ownership interest in the Constitution and Atlantic Coast pipelines were probably undervalued and increasing my position to 3.17% of the portfolio.  Today’s news validated my thought process and opened for trading with about a 39% pop – meaning the market is pricing in a high likelihood of the deal completing 2H 2016.

Next Steps

  1. Verify the terms of the deal.  If it is indeed $60 per share cash, then (verified 27 Oct)
  2. Turn off dividend reinvestment.  There is no sense in adding to a fully valued position with minimal upside potential (changed 28 Oct – PNY currently purchases shares in a DRIP at a discount to market.  As long as this continues, a slight upside potential is provided)
  3. Collect the dividends while waiting for the deal to close,
  4. Remove PNY as a Core portfolio position
  5. Upgrade FLIC from Satellite to Core
  6. Add FMBI as a new Satellite position
  7. Investigate and add a new utility (leading contender is PNW) to my portfolio
  8. Redeploy the cash received at the deal’s closing.