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?
June was an interesting month in that the Tech sector hit a rough patch, some IPOs had trouble getting out the door and financials had a second wind. Frankly I think a lot of the action had more to do with repositioning as some funds/traders’ positions didn’t perform as anticipated and are now playing ‘catch up’ during the last half of the year. The S&P ended the month up 0.48% while my portfolio recorded a gain of 1.44% largely on the heels of the bank CCAR results. For the first half of the year, I’m ahead of the index by 5.02%.
Headlines impacting my portfolio (bold are owned):
- 6/12 – HYH explores sale of surgical line (infection prevention)
- 6/12 – SBSI acquires Diboll Bancshares
- 6/14 – OUT acquires Dynamic Outdoor
- 6/23 – IBTX sells 9 Colorado branches to TBK
- 6/23 – CM completes PVTB merger
- 6/23 – Upon merger, POT/AGU to be renamed Nutrien
- 6/27 – V takes stake in Klarna
- 6/27 – XRX sells France research center to NHNCF
- 6/29 – MET spin finalized
- 6/30 – OCFC to acquire SNBC
- Added to KSU
- Added to CLX
- June delivered an increase of 31.84% Y/Y with, once again, the vast majority of the increase being attributable to foreign dividend cycles (larger, although less frequent). With one exception this should now be normalized.
- June delivered an increase of 12.4% over last quarter (Mar). The breakdown of the increase is:
- 37.4% replacement for TIS (which paid in April (late) and suspended the div)
- 36.2% April purchase for tax reduction
- 14.8% foreign cycle
- 11.3% purchases from dividends/dividend increases
- For the second month in a row, no new cash invested
- Declared dividend increases averaged 10.82% with 56.5% of the portfolio delivering at least one increase (including 2 cuts and 1 suspension)
- YTD dividends received were 59.58% of total 2016 dividends which if the current run rate is maintained would exceed last years’ total in early November
Note: My portfolio additions have begun migrating back to US equities as the weakness in the US dollar has been faster than I forecast. Unless geopolitical events occur to reverse this trend I suspect fewer foreign issues will be acquired.
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.
AGU/POT (Nutrien), SGBK/HOMB remain pending
In the wake of the spinoff of Conduent (CNDT) and in a move that was not unexpected, Xerox (XRX) cut its’ dividend from $0.075 cents to $0.0625 per share (-19.3%) effective with the April 28th payment.
Although this cut was in line with the spin ratio, I’ll place XRX in the penalty box as CNDT has no immediate plans to initiate a dividend. CNDT being the jewel in the spin is worthy of a speculative portfolio position as a hold. XRX will be retained for the time being as a possible takeover play. Perhaps RR Donnelley (or one of its’ recent spins) will rekindle talks in the future that were spurned last summer.
After going over a year without a cut, I now have two so far in 2017 (the other being YUM). The only solace being the common denominator is they are both the result of spin offs. The impact will be negligible as this position made up less than 1% of my portfolio dividends.
November was a wild month with a downward trend leading into the US elections and what is being referred to as the ‘Trump Rally’ following the widely unexpected result. All major indexes achieved record highs on November 21st. Fortunately I was able to redeploy the majority of the merger funds prior to the election. This month The S&P gained 3.42%. My portfolio recorded a gain of 11.49% (no normalization) largely reflecting my overweight position in the Financial sector. This increases my lead over the S&P for the year to 17.74% with one month to go.
Headlines impacting my portfolio:
- 11/2 – EPR acquires CLLY properties in liquidation
- 11/8 – XRX spin (CNDT) set for 12/31/16, ratio 1:5
- 11/14 – Maine is final approval for the BHB/LSBG merger. Closing expected Jan 2017.
- 11/15 – BMO designated as Canadian clearing firm for renminbi trades
- 11/16 – AMC gets EU approval to for Odeon & UCI merger
I chose not to do an October portfolio update due to all the activity which distorted the results a little, especially the XIRR column. The November data has been compiled and should be posted in the next couple of days with the goals update later in the week. The Unabridged portfolio should be next week as per normal.
- Added to DIS
- Added to UL
- Added to PEP
- Added to TD
- Added to KMB
- Added to NJR
- New position – IRM
- Added to TRP
- Added to KOF
- Added to CCE
- Added to FLIC (they chose to round up fractionals on a split)
- November delivered an increase of 29.1% over November 2015. This was due about evenly between dividend increases (Y/Y) and late 2015 funding.
- November had a 2.1% increase over the prior quarter.
- Announced dividend increases currently average 12.5% with 71.81% of my portfolio having at least one raise so far this year.
- Through November, dividends received exceeded total 2015 dividends by 13.8%.
The XRX spin (Conduent – CNDT) is on track to complete 12/31/2016.
LSBG/BHB expected to close in January 2017.
October was basically a quiet month with OPEC failing – once again – to shore up their hold on the oil markets. Chevron announced a small increase in their dividend maintaining their status as a Champion. Several small positions were added at month end as the market began a pullback (continuing into November) enabling me to start redeploying funds received from PNY’s merger with DUK. This month The S&P dropped 1.94%. My portfolio was basically flat, ending down 0.1%. Note: I normalized these numbers to consider the impact of cash infusion from the merger. My ‘pure’ equity positions decreased by 4.15%. The need for this normalization should end as my excess cash is used. This increases my lead for the year to 11.5% with two months to go.
Headlines impacting my portfolio:
- 10/3 – JNS to merge w/ Henderson
- 10/11 – SRCE gains FRB approval for Sarasota, FL branch
- 10/19 – C finalist to be designated as clearing firm for Renminbi trades
I’m a little behind again this month but the portfolio data has been compiled and will be posted in the next couple of days with the goals update later in the week. The Unabridged portfolio should be next week as per normal.
- Closed PNY due to merger
- Added to BMO
- Added to CVLY prior to ex-div for the stock dividend
- Added to JNS (weakness on currency exposure)
- New position – ABM
- New position – AMT (Jan)
- New position -BLL
- New position -CASY
- New position -CHCO
- New position -KOF (Mex. peso exposure)
- New position -COKE
- New position -CCE (UK exposure)
- New position -CSAL
- New position -CTBI (Jan)
- New position -CCI
- New position -HUM (Jan)
- New position -LAMR
- New position -NWFL
- New position -OCFC
- New position -ONB
- New position -OUT
- New position -PLD
- New position -QCOM
- New position -DGX (Jan)
- New position -SRC (Jan)
- New position – SGBK (Cuba exosure)
- New position – BATRA
- New position – VALU
- New position – VER (Jan)
- New position – YUMC (YUM spin-off)
- October delivered an increase of 28.9% over October 2015. This was due about evenly between dividend increases (Y/Y) and late 2015 funding.
- October was down 10.68% from the prior quarter due to special and semi-annual payments in July.
- Announced dividend increases currently average 12.59% with 67.11% of my portfolio having at least one raise so far this year.
- Through October, dividends received exceeded total 2015 dividends by 7.2%.
Roughly half of the PNY/DUK proceeds have been redeployed with an additional 3 orders pending for January payers. I’ve filled some of the hole I’ll face in January, so I plan on maintaining a small cash position through the election before making further decisions.
The XRX spin (Conduent) is on track to complete by year end. MetLife has filed for a spin of their Brighthouse Financial unit under the ticker BHF.
Proxies were received and voted for both the LSBG/BHB and AGU/POT mergers.
Last month saw the commencement of the Congressional take on the ‘bully pulpit’ with first Heather Bresch (Mylan (MYL)/EpiPen) then John Stumpf (WFC) called on the carpet. One would think Heather would have been smart enough to avoid taking the same path blazed so brilliantly by Martin Shkreli (Turing/Valeant (VRX) fame). Her show was overshadowed by the even greedier Wells Fargo with John either portrayed as ‘asleep at the wheel’ or a criminal mastermind. Wouldn’t life be interesting if Congress actually did anything other than use hearings to frame media sound bites? The S&P was basically flat for the month ending down 0.12%. My portfolio was basically flat as well, ending up 0.04%. This increases my lead for the year to 11.88% with one quarter left to go.
Headlines impacting my portfolio:
- 9/1 – CHD 2:1 stock split
- 9/2 – Ireland to appeal EU anti-AAPL tax ruling
- 9/6 – ENB to acquire SE
- 9/12 – AGU/POT reach merger agreement
- 9/19 – REITs officially become their own sector
- 9/26 – YUM spin set at 1:1 YUMC for 10/31
- 9/29 – Supreme Court agrees to hear credit card surcharge case
- – PNY/DUK merger approved, closing set for 10/3
I’m a little behind this month but the portfolio data has been compiled and will be posted in the next couple of days with the goals update later in the week. The Unabridged portfolio should be next week as per normal.
- FMBH replaced FCLF due to merger
- Added to TOWN – this ‘makes whole’ this holding following my sale of MNRK prior to the merger. (didn’t want to hold TOWN across two accounts)
- Added to AROW prior to ex-div for the stock dividend (shares added Sept 29)
- Added to SBUX
All were funded by dividends with no ‘new cash’ deployed. New cash was deployed for the annual funding of the trust I manage (skip generation). The trust is excluded from my DGI portfolio and WFC is this year’s addition. This is only the second time I’ve duplicated one of my holdings – the other being DIS. The other trust holdings are GIS, HSY, PG, WMT, WGL, UNP, KHC and TXN.
- September delivered an increase of 24.7% over September 2015. This was due about evenly between dividend increases (Y/Y) and late 2015 funding.
- September was up 4.4% from the prior quarter.
- Announced dividend increases currently average 12.91% with 63.09% of my portfolio having at least one raise so far this year.
- Through September, dividends received were equal to 95.7% of all 2015 dividends, keeping me on pace to exceed last year’s total -now estimated to be October 4th (as compared to 2015 being Sept. 9th).
With the cash from PNY/DUK, I’ll be looking to redeploy primarily into existing Jan/Apr/Jul/Oct payers within my portfolio with no new positions expected. Losing PNY and the expected loss of LSBG (another merger) will leave about a 5.07% hole in my January dividend receipts unless I act now.
The YUM spin has been set for Oct 31st with YUMC to begin trading Nov 1st. I don’t think the XRX spin date and ratio have been set.