Trump’s first budget was unveiled this week and in its wake left much to dislike. The talking heads are parsing the details and if enacted as is (which is certainly debatable) will result in probably the largest transfer of wealth between classes that I have ever seen. The obvious campaign promises (wall, security, etc.), the social welfare programs (which are garnering the headlines) and calculation errors (double counting on both sides of the ledger) will be the news. But as I prefer the more obscure, my questions are more aligned to the question of impact on investments. To this end, my focus is on two areas – farmland and healthcare REITs.
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
June was a roller coaster month starting with lackluster jobs numbers and ending with Brexit. In between was the Fed leaving rates unchanged yet again. The sleeper story being the CCAR results being released (partial results here). Notably, Citi received approval to increase their dividend by 220%. Although the DOW lost 871 points over two days, it recovered at month end while the S&P was flat for the month.
Bank of the Ozarks has been a part of my portfolio for a couple of years. I felt it was overpriced when I initially bought it and feel the same today. However, since I bought it has appreciated about 60%. Plus increased their dividend quarterly.
OZRK was not top of the list today but when it dropped 4% midday I decided to pounce, particularly since its’ size in my portfolio had dropped to about 1% and my target weighting is 3%. So my order was executed at $49.85 and should be eligible for January’s dividend.
Top on my list were FLIC and FMBI since they are more underweight – but their prices held. I also looked at KMI and was a little surprised that it was up. Good assets, questionable management and up on the news of a dividend cut? Perhaps it’s short covering. Well I can always initiate a new position – or not.
Final note on OZRK – historically they perform a stock split between $50 and $60 so a s.plit in 2016 wouldn’t surprise me.
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.
- Verify the terms of the deal. If it is indeed $60 per share cash, then (verified 27 Oct)
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)
- Collect the dividends while waiting for the deal to close,
- Remove PNY as a Core portfolio position
- Upgrade FLIC from Satellite to Core
- Add FMBI as a new Satellite position
- Investigate and add a new utility (leading contender is PNW) to my portfolio
- Redeploy the cash received at the deal’s closing.
Whimsical Dividends recently wrote a piece on monthly dividends – posing some good and thoughtful questions. So rather than answer in a lengthy response, I figured this would be a good starting point for my weekly (or thereabouts) post.
When I first started investing one of my goals was to build a monthly paying portfolio. This goal was achieved many years ago. But when I retired, I guess I had too much time on my hands so I wondered if it was possible to build a weekly paying portfolio. To this end I have pretty much succeeded.
My research began with Dave Fish’s CCC list. A wonderful repository of data. I also used articles by Dividend House as a resource. Although she’s a recent convert to DGI, and I’m not at all in full agreement with some selections, her style and illustrations make her a must read.
My end result is I have placed 26 companies (of about 105 in my portfolio) into three categories, segmented by quarter, with two payees per week. The result is (almost) weekly payments.
(updated 26 Oct due to PNY merger)
|1||A||Kimberly-Clark||KMB||1||C||PNC Financial||PNC||1||A||WEC Energy||WEC|
|3||C||Sysco||SYY||3||C||Legacy Texas||LTXB||3||C||Home Depot||HD|
|4||C||Bnk of The Ozarks||OZRK||4||C||Starbucks||SBUX||4||C||Blackrock||BLK|
|2||C||First Long Island||FLIC||2||S||Apple||AAPL||1||S||Southside Banc.||SBSI|
|4||S||Lake Sunapee Bnk||LSBG||4||S||Webster Financial||WBS||3||S||Norfolk Southern||NSC|
|2||S||First Midwest||FMBI||4||S||Flushing Financial||FFIC|