Initially, this week’s installment was intended to place a spotlight on the ongoing stream of dividend cuts and suspensions facing DGI aficionados – particularly with earnings season ramping up. Headlines such as, “For investors banking on dividends, the ‘pain has just begun’” are making an appearance with some empirical evidence pointing to 10-16% overall reductions for 2020. Between Simply Safe Dividends’ running tally and the onslaught of Seeking Alpha notices, it’s become increasingly difficult to deny the brevity of the situation. In fact, I was handed another this week.
I was beginning to perform some analysis to identify commonalities other than the two biggies – the Oil War and Covid-19. With my background, I like to dig in the weeds a little to determine the path forward, whether double-down, stay the course or to sell. I chose the first on AMC (wrong – now sold), the second on CBRL (jury’s out) and probably the third on CVA.
What I am finding is the understandable (oil exposure, retail closures), the secondary exposure (companies dependent on retail), the idiots (use of leverage resulting in margin calls) and the coattail riders. I put Covanta in this category as I think they are using the current environment to their advantage – unless some of their municipal customers are experiencing cash flow issues with Covid-19.
Through the ages, many in the DGI camp have laid bare their rules in dealing with dividend cuts or even lack of growth. My preference has always been to address these on a case-by-case basis as generally, any loss is already reflected in the price providing time to perform additional confirmation. Nowadays, my view is any decision must reflect a corporation’s ongoing viability – which is all the more difficult when there is no consensus on what the ‘new normal’ really is.
While an atomistic view, one can also take an holistic approach as Mr Free at 33 is doing. While I’m sure he has attained a level of freedom and solace, I prefer an attempt at damage mitigation. Perhaps if a section of my portfolio wasn’t allocated to a higher degree of speculation I could have greater agreement with his sentiment. And this just may just come to pass as well – as the following hit my inbox:
Fri, Apr 17
Since 2012, we’ve worked to give everyday investors access to cutting edge investment products. First, I want to thank you for all your support in taking Motif to where it is today. We’ve come a long way since we started this journey together and there is a lot for us to be proud of.
At this time, we’ve made the decision to cease operations and transfer your account to Folio Investing. We’ve selected Folio to give you access to leading investment tools in a similar experience to what you’ve enjoyed at Motif.
Your account transfer will start after market close on Wednesday, May 20, 2020, and your new Folio Investing account will be ready for you to use on Thursday, May 21, 2020. Unless you choose to opt-out, there is no action required on your part …
Needless to say, I’ll be in the opt-out category. Motif holds (held?) most of my speculative ideas. Some panned out, others did not, but it was my playground area. My Canadian stocks were incubated in Motif until I got them structured as I wanted and migrated them to my primary broker earlier this year. I had started unloading some of the ideas destined for probable failure (thanks to the pandemic) already. It appears I will need to be a little more aggressive as my timeline is now compressed. Not a major surprise as the advent of free took its toll. The ones I keep will be moved primarily to Schwab with a handful possibly to M1 (depending on their answer to two questions on Monday).
My primary point being – all strategies will be tested at some point in time. My banking strategy – after a six year run – has been torpedoed by low interest rates. My Experiential strategy has been blown away by Social Distancing. Oil transport by the Oil War, Discretionary spending by the job (and protection) uncertainty, M&A by the uncertain future. I for one, remain willing to sell when circumstances have changed and the path forward is fog bound. Surprisingly, all of my spec plays are in positive territory ranging from a low of 0.1% gain to a high of 2,103.15%. Until clarity reappears, I will remain a selective buyer – particularly of my three portfolio anchors (WEC, KMB and CLX) which are all up for the year.
In a year such as this, hunkering down with the tried and true is the primary game plan for yours truly.