Mar 2018 Update

A few days late since Easter got in the way with the markets being closed March 30th and dividends not being posted in a timely manner.  FX transactions were also delayed impacting my final accounting for the month and quarter.  This month the DOWs first quarterly loss since 2015 grabbed the headlines while the news getting my attention was the rising Libor particularly with its potential impact on adjustable rate mortgages and business loans.  March saw the S&P drop 2.69% and for the first time this year my portfolio outperformed the index by registering a drop of 0.06%!  YTD I still lag the S&P by 0.81%.

Portfolio Updates:

  • Added to PWOD, WU and ABB
  • Initiated a position in VLVLY

DIVIDENDS

This is where my main focus resides.  Market gyrations are to be expected but my goal is to see a rising flow of dividends on an annual basis.  I’m placing less emphasis on the quarterly numbers as the amount of semi-annual, interim/final and annual cycles have been steadily increasing.

  • March delivered an increase of 39.79% Y/Y fueled by dividend increases and purchases.  In particular, my December buys were almost exclusively March payers.
  • March delivered a 11.44% increase over last quarter (December).
  • Dividend increases averaged 11.25% with 40.3% of the portfolio delivering at least one increase (including 1 cut (GE) and 1 suspension (DST see M&A).
  • 2018 Dividends received were 29.3% of 2017 total dividends putting us on pace to exceed last year in early November.

Spinoffs:

Spirit Realty Capital (SRC) – Mar 6, Form 10 was filed publicly with spin completion targeted for 1H 2018.

Mergers:

Jan 13 – DST announced it was merging with SS&C for $84 cash per share.  As part of the merger agreement, the dividend has been suspended – the merger received shareholder approval on March 28th.   I expect the deal to complete in April or May.

Jan 31 – XRX announced a merger with Fujifilm for stock and $9.80 in cash.

A few others are rumored to be in play including Humana and Shire.

Summary

With my March call being spot on (… it appears we’re getting a preview of March Madness in the form of a Trump induced possible trade war.) the Paychex jobs data (small business) released this morning is keeping me in a cautious mood.  Yes it is only a one month view showing fewer jobs – but small businesses are supposed to be the economic driver in Trump World.  Perhaps it’s an aberration – but one to keep an eye on.  Overall a good month in spite of tariff uncertainty.

Hope all of you had a good month as well.

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Bank Strategy 2015 Review

Back in 2014, with a portion of my portfolio I embarked on a strategy of buying Regional Banks and collecting a dividend (although typically a little smaller) while waiting for a potential merger to occur.  In early 2015, this strategy was validated by Lanny (Dividend Diplomats) with his CZNC purchase.  At that time I had 41 positions with a 6-1-2  result.  Meaning, I had a 21.9% success ratio of picking merger candidates, with 2 being reverse mergers (I get screwed on the premium), and one (2.3%) with a full premium.

Now I can’t say that I was overly thrilled with the outcome of the first year, but Lanny thought it was decent.  So I did a little research and stretched into some smaller banks.  I bought a group and couldn’t  decide between SUSQ and MNRK as the final candidate.  I chose MNRK only to see BBT later pick up SUSQ.  Six months later I placed an order to buy NPBC only to see the price spike in pre-market trading.  I switched my order to PWOD only to find BBT beat me again.  But it did validate the theory that I’m getting closer to the ‘sweet spot’.

So the results for 2015 are in and my 49 positions produced a 16-3-0 result.  Meaning my selection of merger candidates improved to 38.7% but more important is receiving the premium on 3 (6.1%).  So now we’re seeing some results closer to my expectations!

I’m not certain how long this strategy will work and I’m under no illusions otherwise.  But I do expect it to continue through 2016 and will finalize this years entries probably around tax time.