Dec 2017 Update and Year End Review

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.

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November 2017 Update

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

Portfolio Updates:

  • increased position in existing DRE holding

Dividends:

  • 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.

Spinoffs:

Spirit Realty Capital (SRC) – Nov 21, Form 10 was filed confidentially with spin completion targeted for 1H 2018.

Mergers:

AGU/POT (Nutrien) remains pending with the US being the only approval pending.

Summary

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?

July 2017 Update

The general upward trend continued in July with major indices again hitting new highs.  With my strategy shift in place, I did deploy new capital but only in a positioning move ahead of a spin. The S&P ended the month up 1.93% while my portfolio trailed with a gain of 1.77% largely due to the financial sector lagging the market.  For the year, I’m ahead of the index by 4.86%.

Headlines impacting my portfolio (bold are owned):

  • 7/5 – YUMC indicates reviewing possible dividend payout
  • 7/7 – MET acquires FIG’s asset management business
  • 7/10 – CM acquires Geneva Advisors
  • 7/11 –BR acquires Spence Johnson Ltd
  • 7/12 – ABM acquires GCA Services
  • 7/12 – AAPL adds PYPL as appstore pymt option
  • 7/13 – MFC reportedly reviewing sale or IPO of John Hancock
  • 7/17 – CHD to buy waterpik
  • 7/17 – China places restrictions on loans to Wanda (AMC)
  • 7/18 – MKC to buy RBGPF’s food business
  • 7/18 – CCI acquires Lightower
  • 7/19 – HRNNF (H.TO) to acquire AVA
  • 7/20 – SRC considering spinoff of Shopko properties
  • 7/21 – BX and CVC Capital offer $3.7B for Paysafe (PAYS.L)
  • 7/26 – SHPG rumored to be takeover target
  • 7/27 – Ackman discloses stake in ADP
  • 7/28 – IRM acquires Mag Datacenters LLC
  • 7/31 – BX (w/ ETP 50.1%) buys 49.9% of holding co. that owns 65% of Rover pipeline

 Note: my comment of July 21st on AMC (Dividend Diplomats) remains prescient in light of their warning on August 1st.  I believe now is a viable entry point if cognizant of possible risk to the dividend particularly as related to lender covenants.  EPR may have a slight risk as well.

Portfolio Updates:

  • Added to MET (spinoff positioning)

Dividends:

  • July delivered an increase of 2.14% Y/Y with the vast majority of the increase being attributable dividend increases.
  • July delivered a decrease of 8.85% over last quarter (Apr) with TIS (dividend suspension) and foreign cycles (interim/final) being the culprits.
  • Declared dividend increases averaged 10.81% with 61.02% of the portfolio delivering at least one increase (including 2 cuts and 1 suspension)
  • YTD dividends received were 69.81% of total 2016 dividends which if the current run rate is maintained would exceed last years’ total in early November

Spinoffs:

MET has declared their spinoff – Brighthouse Financial (BHF) – effective August 4th.  Holders as of July 19th will be entitled to 1 share for each 11 MET shares owned.

Mergers:

AGU/POT (Nutrien), SGBK/HOMB remain pending

Summary

Overall another positive month with the only disappointment being the Q/Q dividend decline – which was expected.  The primary metric (annual dividend increase) remains on target and well ahead of inflation.

May 2017 Update

May was generally quiet with the market trending generally higher.  With few pullback opportunities, I barely deployed new dividends so my cash position increased again.  At least the turmoil I experienced moving from Loyal3 subsided and I could resume a more moderate pace.  An upcoming election in the UK may present a buying opportunity on weakness in the GBP versus the US dollar.  The S&P ended the month up 1.16% while my portfolio recorded a gain of 1.37%.  For the year (so far), I’m ahead of the index by 4.07%

Headlines impacting my portfolio (bold are owned):

  • 5/1 – DRE sells medical office portfolio to HTA
  • 5/1 – TIS suspends dividend
  • 5/4 – FHN to acquire CBF
  • 5/30 – JNS/HGG.L merger completed (becoming JHG)
  • 5/31 – KEY acquires HelloWallet from MORN

Portfolio Updates:

  • Initiated position in SGAPY
  • Added to IVZ
  • Added to PWCDF (proceeds from sale of TIS)
  • Added to DST
  • Added to PLD

Dividends:

  • May delivered an increase of 51.44% over May 2016 with the vast majority of this attributable to foreign dividend cycles not held last year.
  • May delivered an increase of 38.94% over last quarter (Feb) for the same reason.
  • Declared dividend increases averaged 8.89% with 48.02% of my portfolio delivering at least one increase (2 cuts – XRX and YUM; 1 suspension – TIS)
  • YTD dividends received were 47.11% of total 2016 dividends which if the current run rate is maintained would exceed last year’s total in early November.

Note: with 14.6% of current dividends paid by foreign sources, the weakening US dollar is providing a tailwind with exchange rates i.e., increasing my return.

Spinoffs:

The MET spin (Brighthouse Financial – BHF) remains in regulatory review.

Mergers:

Agrium/POT, SGBK/HOMB remain pending

Recent Sell – TIS

It appears to be a busier month than normal.  Today I exited a position that I’ve held since 2013.  Orchids Paper announced this week the suspension of their dividend.  I can’t say this was a total surprise as I’ve had them in my penalty box for a while.  In fact, the comment I made when Investment Hunting sold his position seems eerily prescient:

Yes I still own it but it has never been a DG stock. With a
stagnant dividend, a high payout ratio, previous management’s penchant
for diluting current owners and the frequent misses on earnings I’m at
about break even on this one. This one is a gamble on current
management, their strategy (expansion), and their execution of their
plan with the wild card being stable pulp pricing.
(June 12, 2016)

Since then, the South Carolina expansion has encountered delays, their Mexican venture has had difficulties, they’ve decided to spend money moving the headquarters to Tennessee and finally go hat in hand to their lenders (led by US Bank) for waivers to their loan covenants (which was the likely cause of the suspension).  As this holding was in my IRA, I have no room for a non-dividend payer in that account.

In searching my database, it appears in addition to IH, Broke Dividend Investor sold in September and I think Dividend Pursuit sold around year end.   Meanwhile, Weekly Investment, Passive Income Mavericks, Mr Free at 33 and A Frugal Family’s Journey are contemplating their options.

So an $80 loss is booked which includes the offset by dividends received.

Ode to the Mantra

It would appear that another fixture in the DGI community has bitten the dust.  I don’t know the full story – and I doubt many do – but whether it was greed, misrepresentation, miscalculation, lack of understanding, or a combination of these Dividend Mantra is no more.  Long Live The Dividend Mantra Team?

Reviled by some, but revered by many, through his knowledge and hard work successfully monetized his passion.  From media  interviews to authoring a book, he built the Dividend Mantra brand from nothing to something.  But his most lasting accomplishment is the number of people that became investors through his inspiration.

This is not to say I agreed with all of his decisions, I didn’t.  Orchids Paper is not a DGI stock.  It’s yield chasing.  I was surprised when he added it.  Yes I own it – but I’ve been to their Oklahoma plant.  And I reduced my holdings prior to their secondary.  He and I also disagreed on his decision to sell Sysco.  So it’s dividend wasn’t growing fast enough?  Well when you buy into a company just after the ex-div date and sell it prior to an ex-div date you’ve artificially reduced your return. He had a extreme dislike for the YoC metric, I tend to favor it.  His doubling into BBL is questionable, particularly with their exposure to Materials and China.  It could wind up being very profitable but their loss of a dam at their Brazilian mine last week doesn’t help.

His overall success has been well documented, which makes this latest chapter all the more perplexing.  Previously he stated a desire to offload the work required with his blog’s popularity.  He obviously was a willing seller and he located an obviously willing buyer.  My guess is after the contracts were signed, DM realized he gave up editorial control, evidenced by his post that some blog sections would no longer be published.  Likewise, the buyers have come to realize (belatedly) that a blog’s popularity is a reflection of its creator – not the owner.

Is it now too late to recover?  Well the jury’s still out.  I fear that DM the man will be late to realize he has lost – perhaps destroyed – the orchestra.  It is unfortunate the benefits he enjoyed will be diminished as well.  And DM the team is obviously late to recognize they bought the music but not the conductor.  Meanwhile the patrons are fleeing to the exits.  Any hope for recovery is reduced by the day.