he fourth quarter swoon continued in earnest this month resulting in an annual loss for the markets. While the final trading day closed higher (DJIA up 265, NASDAQ up 51 and the S&P up 21) it was nowhere near close enough to avoid the worst December since 1931. Though surprised by the resiliency of the US dollar, last year’s intent to migrate further into foreign equities was largely preempted by tariff uncertainty. My other 2018 concern of rising federal deficits stifling the economy did not manifest itself as yet – though I remain skeptical of administration claims that growth can outpace the deficit. For the month, the S&P index dropped by 9.18% while my portfolio dropped by ‘only’ 8.44%. For the year the S&P posted an unusual loss of 6.65% while my overall loss was 3.57%. In an otherwise ugly ending to the year, my primary goal of exceeding the S&P’s return was attained marking the 33rd year (of 38) that I’ve been able to make this claim.
The markets took comfort by rising on a possible trade deal with Mexico with hopes of Canada being a slam dunk being dashed (until possibly next month) by the president’s own words (albeit off-record) that shot the negotiations down. Kind of have to wonder about the art of that deal :). Anyway, earnings were generally good with only a few surprises although several companies guided lower on tariff concerns and the inability to maintain the run rate that was accelerated by the tax plan. I did come off the sidelines a little this month with mostly repositioning moves on the few dips. August saw a rise in the S&P of 3.03% while my portfolio lagged a little by registering an increase of 3.02%. YTD I’m ahead of the S&P by 1.06%.
- Initiated GNBC (hedge on VBTX merger)
- added to LUV on weakness
- added to CHD (repositioning move – now overweight through the dividend)
- Initiated MSCI on weakness (capturing their 52.63% dividend increase)
- added to JNJ (repositioning move – now overweight through the dividend)
- added to COBZ (merger approved by regulators)
My main focus resides on dividends. 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.
- August delivered an increase of 53.11% Y/Y, the impacts being a Sep dividend paid in Aug (10%), last month’s rebalance (5%), dividend increases (5%), interim/final cycle (5%), purchases (1%) and the remainder being dividend reinvestment.
- August delivered a 17.93% increase over last quarter (May) due to an interim/final cycle.
- Dividend increases averaged 14.83% with 69.16% of the portfolio delivering at least one increase (including 1 cut (GE).
- 2018 Dividends received were 77.59% of 2017 total dividends putting us on pace to exceed last year in early November.
Note: I updated my Goals page to provide a visual of these numbers. Based on Mr All Things Money’s instruction set with a conversion to percentages. My code only updates when the monthly Y/Y number is exceeded. Otherwise, the prior year actual is used.
GE‘s rail unit to spin then merge with WEB
GE to spin 80% of the health business
NVS proposed spin of Alcon scheduled for shareholder approval Feb 2019
XRX merger with Fujifilm cancelled (now being litigated).
SHPG to merge into TKPYY
GBNK to merge into IBTX
COBZ to merge into BOKF
GNBC to merge into VBTX (semi-reverse)
The Y/Y dividend result is a great illustration of the power of reinvestment – particularly in light of the fact that “fresh” money investment is minimal. Next week will be the continuation of the 3Rs series which will highlight some of the moves I’m making going into 2019. You might guess at a couple of them based on my portfolio additions.
Hope all of you had a good month as well.