Generally I refrain from back-to-back posts with similar topics but decided to make an exception this week as the moving parts have kicked into high gear. My post last week addressed my uneasiness with cryptocurrency as well as my interest in the underlying blockchain technology. It appears that my view has some support as two blockchain ETFs debuted on January 17th (BLOK and BLCN) and one January 25th (LEGR). This should be followed by KOIN next week. Horizons and Harvest (HBLK) also have ETF applications pending. Grenadier penned a piece on Seeking Alpha that did some analysis on the first two. Four of LEGR’s top five holdings are included in either one or both of the originals so it will probably be similar. David Snowball highlights this sentiment in his piece There’s no idea so dumb that it won’t attract a dozen ETFs stating, “…there are no publicly traded companies that specialize in blockchain; there are mostly companies with a dozen other lines of business that have some sort of efforts going into blockchain.” This is 100% correct.
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.
The upward trend continued this month fueled by the progress on the tax plan. If finalized, my guess is that the first half of 2018 will be good for corporations (i.e., dividends) with reality setting in later in the year that the average consumer received a raw deal and has less disposable income than advertised. That is unless trickle down really works. The wild card being the government (or lack thereof) as a second felony plea was accepted with individuals tied to the campaign or administration. The S&P index increased by 2.81% while my portfolio increased by 3.22% largely fueled by Financials. For the year I’m still ahead of the index by 3.12%.
Headlines impacting my portfolio (bold are owned):
- 11/1 – OMI buys HYH‘s Surgical and Infection Prevention (S&IP) business
- 11/2 – SBUX sells Tazo line to UL
- 11/6 – AVGO bids to acquire QCOM at $60 cash & $10 stock per share
- 11/6 – BCE acquiring ARFCF
- 11/9 – AAPL acquires InVisage Technologies
- 11/13 – GE cuts dividend by 50%
- 11/13 – AMT buys Idea/VOD Cellular towers in India
- 11/13 – VER selling Cole Capital to CIM Group
- 11/14 – Baupost Group initiates 3,565,361 sh position (abt 6.25%) in AMC
- 11/14 – MSG to sell WNBA team (Liberty)
- 11/15 – SQ launches ability to buy and sell Bitcoin
- 11/16 – PYPL sells $5.8B loan package to SYF
- 11/16 – IRM buys China assets from SFG.CO
- 11/20 – MSG acquires Obscura Digital
- 11/27 – PNC acquires The Trout Group, LLC
- 11/28 – BLK to acquire C‘s Mexican asset management business
- increased position in existing DRE holding
- November delivered an increase of 18.3% Y/Y with the about 60% of the increase being attributable dividend increases and the remainder purchases.
- November delivered a 1.0% decrease over last quarter (August) due to two payouts being moved to December.
- Declared dividend increases averaged 11.9% with 71.75% of the portfolio delivering at least one increase (including 2 cuts (XRX and YUM) and and 1 suspension (TIS)). Note: GE’s announced cut is counted as 2018.
- YTD dividends received were 109.86% of total 2016 dividends which exceeded last years’ total on October 25th.
Spirit Realty Capital (SRC) – Nov 21, Form 10 was filed confidentially with spin completion targeted for 1H 2018.
AGU/POT (Nutrien) remains pending with the US being the only approval pending.
My 2018 strategy is forming with the focus turning towards Consumer Staples and Utilities (existing holdings). I expect to incorporate a side strategy on lower yielding but faster growing companies which I’ll publish in the next week or two. Of course I will continue to also pursue opportunities as they arise.
And how was your month?
Each year I establish a basic plan to govern my investing activity based on sectors, segments or locales able to deliver a little alpha to my portfolio. The past couple of years had a focus on the Financial industry with the outcome being rewarded with mergers (small banks) and outsized dividend increases (money center banks). I also began increasing my Canadian allocation in 2015 from 2.5% of my dividends to the current 8.6%. Since the election, I was accelerating the increase in my other foreign holdings to the current 13.6% on two theories, 1) gridlock in Congress would persist as the Republican majority would be too narrow to push through sweeping changes, and 2) this inaction would result in a weaker dollar. It appears I was correct on both counts as the US dollar is now at an eight month low.
With my alpha agendas now too pricey (at least for slam dunk results), a re-prioritization is in order. With the Fed Chairs’ testimony this week indicating that GDP growth of 3% would be difficult, the Trump agenda which projects a higher growth rate is likely in peril – even ignoring the self-inflicted wounds. Without an improvement in the GDP, deficit hawks will be circling. It is likely the last half of the year will present some opportunities, but my view these will be predicated on external events. My eyes will remain open to the USD exchange rate – on strength I may buy foreign issues.
My portfolio allocation between holdings labeled Anchor, Core and Satellite have been imbalanced for a year or two primarily due to merger activity and the acceleration of adding foreign issues. Now that the major mergers have completed, the last this past January, and other alternatives are slim, I figure it’s time to get back to basics.
My going forward strategy can be summarized as follows:
- Non-US equities when secured at a favorable exchange rate
a)I have 2 Japanese, 2 Swiss, 1 UK and 1 Swedish company on my watch list in the event an attractive price presents itself
- Assess corporate actions (spins, splits, mergers) for opportunities
a) Generally I’m agnostic to splits except when the result would be a weird fractional. I can easily manage tenths or hundredths of shares. Smaller sizes are troublesome so I avoid when possible.
b) Spins (and mergers) are assessed to prevent (if possible) weird fractionals. For instance, I added to my MET position earlier this month as their spin will be at a ratio of 11:1 which would have otherwise delivered a weird fractional.
- Assess portfolio for average down and other opportunities
a) An example of this was last months’ purchase of KSU. To this end, I recently updated my Dividends (Div Dates) Google sheet to flag when the current price is lower than my cost basis.
b) An example of “Other Opportunities” would be BCBP which is resident in my Penalty Box due to dilution. The dilution (secondary) might be explained (now) with their announced acquisition of the troubled IA Bancorp. If the regulators provide their seal of approval, it may be time to remove BCBP from Penalty status and perhaps add to this 3.5% yielder.
- Add to holdings that are below target weighting
a) This is where I expect most of my second half activity to reside.
Of my 26 stocks labeled Anchor, Core or Satellite; 5 can be considered at their target weight (within .5% of the target) and 4 I consider to be overweight. The remaining 17 will receive most of my attention. As most of these rarely go on sale, I’ll likely ignore price and place a higher priority on yield and events – at least until I’ve exceeded last years’ total dividends.
The following table highlights this portion of my portfolio:
|First of Long Island/FLIC||C-(3%)||0.85%|
|Bank of the Ozarks/OZRK||C-(3%)||0.67%|
|NOTE: Not all payment schedules coincide completely|
|PNC Financial Services/PNC||C-(3%)||0.30%|
|Legacy Texas Financial/LTXB||C-(3%)||1.48%|
|NOTE: Not all payment schedules coincide completely|
|Flushing Financial Corp/FFIC||S-(1.5%)||0.99%|
|NOTE: Not all payment schedules coincide completely|
I will provide the caveat that this plan is subject to not only the whims of the market but of my own as well. In addition, this plan may be changed if/when a better idea comes along.
I just couldn’t let March go by without making a purchase. With the market generally up for the month, financials were the laggards. So on March 24th I added to my existing PNC position at $84.08. By averaging down, I effectively reduced my cost basis by about $.50.
Although I consider PNC a core position I haven’t been aggressive in getting it to my 3% target weight, primarily due to the 2.4% yield. I’m still lacking in this regard but am considering this purchase a down payment.
- Benefits: Poised to benefit with a continuation of interest rate increases
- Negatives – economic slowdown will disproportionately impact
I believe any downsides are mitigated through their 20% ownership of Blackrock.
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|