Recent Sell – GE

I decided to publish this as my weekly post as time is of the essence for any of my readers contemplating a similar decision.

Since the most recent dividend cut, I’ve been holding my GE stock – and almost pulled the trigger to buy more – for one reason: the potential value of the proposed spinoffs. The healthcare unit being a crown jewel and the rail unit being an interesting one.

Word on the street is that the healthcare IPO may not be as lucrative to GE investors as previously thought as GE may monetize a greater share (probably good for the company, though). This I was willing to overlook until the terms were actually released.

My decision to sell was reached when the revised terms of the rail unit were released. Last week it was announced that GE would monetize more of the deal – basically to shore up the balance sheet a little with cash and by shifting the tax liability to shareholders. End result is each share of GE will receive approximately .005403 shares of WAB. You read that right – owners of 100 shares will receive about a half of a share of WAB. As no fractional shares are to be issued, cash in lieu of shares is to be expected.

I’m willing to take a slight loss (as I previously averaged down). What I am unwilling to take is a possible tax liability as well. Frankly, my faith in this company no longer extends that far.

The record date has been set for February 14th with the spin and merger occurring February 25th. If so inclined, I’ll buy WAB at a later date. I am willing to buy into the healthcare unit at (or post) IPO depending on the structure.

I have to acknowledge that the days of playing the contrarian are probably over for this stock. My prior strategy – which was profitable – had been to buy companies which had purchased units that GE was offloading. Under this CEO – and for the first time in many years – this plan is no longer viable.

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May 2018 Update

The month was fairly normal until the final week with Italy followed by Trump’s tariff rollout.  In between we saw the on again – off again negotiating style with North Korea and China.  Other than a couple of down days it appears the market is learning to ignore the noise.  Again I used the dips to my advantage and stayed the course.  May saw a rise in the S&P of 2.16% while my portfolio outperformed the index by registering a rise of 2.24%.  YTD I still lag the S&P by 0.35%.

Portfolio Updates:

  • Added to CMCSA (making another round lot)
  • Added to my ETF group (CUT, EWA, EWW, JPMV, VGK)
  • Added to GE (on the rail spin (WAB) news)
  • Added SMTA (via SRC spin)
  • Added to BKSC (via 10% stock dividend)
  • Added to DGX on news of UNH strategic partnership

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 number of semi-annual, interim/final and annual cycles have been steadily increasing in my portfolio.

  • May delivered an increase of 12.97% Y/Y fueled by dividend increases.
  • May delivered a 15.98% increase over last quarter (February).
  • Dividend increases averaged 12.14% with 55.98% of the portfolio delivering at least one increase (including 1 cut (GE).
  • 2018 Dividends received were 46.53% of 2017 total dividends putting us on pace to exceed last year in early November.

Notes: the Q/Q shows an increasing trend line due only to timing of dividend payouts (pay date shifts).  Y/Y is only on par with dividend increases as dividends received were used to purchase next quarter (rather than current quarter) dividends.

Spinoffs:

GE‘s rail unit to spin then merge with WEB

Mergers:

XRX merger with Fujifilm cancelled.

SHPG to merge into TKPYY

Summary

Any month with increasing dividends and beating the S&P has to be considered a good one.

Hope all of you had a good month as well.