OK, My Turn

[Dividend Watcher]

Added a starter position in PG to my wife's portfolio today. That cash sitting there earning nothing was bugging me. She has less time to retirement than I and needed to get the compounding machine rolling. Bought at a little over $79 with commission yielding 3.25%. Last 4 quarter's GAAP earnings gave a P/E just under 20 (my limit). If it corrects further, I'll just reinvest at a higher yield and, if cash is available, add another small block.

Also added to KRFT in the beginning of June. KRFT is starting to behave like GIS -- up a few points and then sit there for a long while. In the meantime, a yield over 3.5% and reinvesting. Not a fast grower but I think management has a plan to grow earnings and is working it from the advertising and new products coming out that I've seen.

[Jimbo]

(07-01-2014, 01:36 AM)Dividend Watcher Wrote: Added a starter position in PG to my wife's portfolio today. That cash sitting there earning nothing was bugging me. She has less time to retirement than I and needed to get the compounding machine rolling. Bought at a little over $79 with commission yielding 3.25%. Last 4 quarter's GAAP earnings gave a P/E just under 20 (my limit). If it corrects further, I'll just reinvest at a higher yield and, if cash is available, add another small block.

Also added to KRFT in the beginning of June. KRFT is starting to behave like GIS -- up a few points and then sit there for a long while. In the meantime, a yield over 3.5% and reinvesting. Not a fast grower but I think management has a plan to grow earnings and is working it from the advertising and new products coming out that I've seen.

I sold the Mutual that I was talking about and started a position in PG also at just over $79. Heck if your buying it, I musta learned somethin.
Jim

[Kerim]

(07-01-2014, 01:36 AM)Dividend Watcher Wrote: Also added to KRFT in the beginning of June. KRFT is starting to behave like GIS -- up a few points and then sit there for a long while. In the meantime, a yield over 3.5% and reinvesting. Not a fast grower but I think management has a plan to grow earnings and is working it from the advertising and new products coming out that I've seen.

Haven't looked closely at KRFT in a long time. Will have to dust that one off. Thanks for the update.

[Dividend Watcher]

Started a 1/3 position in AVA in my portfolio yesterday after the last little dip. Too much cash sitting on the sidelines not earning anything and, since I intend it to be a long-term holding, didn't mind paying a little more than I wanted to. I like their fuel mix and the regional economy is pretty stable right now. They've sold Ecova, their non-regulated energy management business, and are still integrating the Alaskan ute they purchased last year. Maybe when interest rates rise I'll be able to lower my average price. In the meantime, a close to 4% yield works for me.

Trimming INTC is in my plans along with ditching LO when it gets back closer to the buyout price. Think I will move some of that money to MO or PM or a combination of both.

These 3 day corrections are driving me up a wall.

[Dividend Watcher]

Added a small opening position in Ensco plc (ESV) in my wife's portfolio yesterday. A P/E of 9 vs. 10 year average of around 11, their investment in new deepwater rigs, debt/equity of about 35% and a payout ratio in the low 40's after a couple huge increases over the last couple years augurs well. They've not been big dividend growers in the past but I think management is changing their attitude. Their fleet is fairly new. They are willing to invest in the business on spec and seem to have a plan going forward focussing on deeper water operations. At 5.6% yield and the P/E, I'm looking at it more as a value play with a dividend kicker. If they keep bumping up the dividend at a reasonable rate, it may be a longer term holding.

[Dividend Watcher]

Well, I've neglected updating this thread for a while. Shame on me. Thought I'd dust it off and see where we're at.

In our last episode, I started a position in Ensco, plc (ESV) in my wife's portfolio. Well, that was perfect timing. We've now ridden it down to a 20% loss. Earnings went kaput but if you dig a little deeper into the 10Q, the reason EPS went negative was a very large impairment charge, a non-cash transaction, because of their older rigs and loss of use & revenue due to the slowdown in drilling across the industry. Revenue was still up a little and they paid down some long-term debt. Once we get a little bigger pile of cash, we'll probably add a second tranch and average down. I believe that the company is conservatively managed and using their cash wisely in upgrading the fleet. If the bottom of the market falls out, then we'll use the cash to build JNJ and PG to full positions.

In August, I started a small position in BHP Billiton (BBL) in my portfolio. This after a little burp when they announced the divestiture of a small part of their business. From what I can tell, it would only affect about 5% or 6% of revenues and they said it wasn't very profitable so maybe it was a wise decision. In the meantime, the bottom has fallen out of the iron ore market and with it, the price of all the ore producers. So once again, I've ridden another one down. BBL is large enough and has enough revenue streams from different raw materials that I think they'll weather the cycle although dividend growth may slow.

So, if you're thinking of shorting or selling anything, check with me first and see what I'm planning on buying so you can be on the opposite side of the trade.

In August, I also added a second tranch of AVA. a 4% yield with a little growth seems like a good idea. I think their Alaskan ute recently purchased has some potential for streamlining and boosting efficiency. I like their current fuel mix (mostly renewable energy) for the electricity supply. They also put in rate requests at all their subsidiaries, IIRC.

Today I finally sold LO when it got above $60. I was tired of waiting for the price to get closer to the buyout price with all the delays by regulators. There may not be another dividend after the latest depending on how it all turns out so I took the 44% gain over 18 months. I wasn't interested in getting some RAI shares in exchange. PM or MO are targets for a portion of the proceeds along with adding to some of the smaller holdings but right now I'm not excited about the prices or yields of any of them. I'll just watch & hold for a little bit. I'm also doing some research on a couple companies I'm thinking of adding to my target list -- Ingredion (INGR) and Tupperware (TUP). They're not priced with enough margin of safety for me right now but may be in the future. Any thoughts on those?

I guess that pretty much wraps up all the happenings in this week's program. Stay tuned for further excitement on the "Dividend Watcher Comedy of Errors Hour".

[Jimbo]

You win a few, you lose a few. Just keep your chin up and your sniffer & radars workin and I'm sure you will be ok.
Some of us are just destined to work the rest of our natural life.

[EricL]

Dividend Watcher,

Thanks for sharing your trades and thoughts. I've been having similar results with a few recent buys of GE, T, and MAT. I think that goes with the territory of value/dividend investing. We tend to buy the beaten down stocks who are providing unusually high yields so while the results may not be immediate, once the company turns things around gets the business growing again, the share prices will rebound and our returns will look much better.

In the meantime, take solace in the fact you are compounding the dividends at discount prices...well, if you are reinvesting the shares anyways...

[Dividend Watcher]

Jimbo: I'm not sure I really do want to retire. I have some things I want to do that I have no leisure time to do now but I enjoy doing something challenging especially when there's a paycheck involved with it.

Eric: I feel your pain with MAT. I think that's going to be at least a couple year turnaround as I don't see management getting a fire lit yet. Funny you should mention reinvesting. I recently turned off reinvestment on all the companies that are over their allocation in my spreadsheet with an eye to build up the under-allocated stocks when the price is right. Decided I've done enough trimming for now. But yes, it is nice to watch those reinvestments when the price takes a hit.

To add to the excitement, with today's blip in the market and talking heads wringing their hands in panic, I've added a third tranch of AVA when my standing limit order hit just pennies above the low for the day. That brings AVA up to 3/4 of my desired holding. I've averaged down with each purchase and brought my blended current yield over 4%.

Likewise, another limit order filled for BBL bringing me just short of 2% of my portfolio, my desired allocation. I'll let reinvested dividends do the rest of the work. If next year's projected earnings are close to the 32% drop expected, the payout ratio will be about 65% -- still manageable although dividend growth may slow. In the meantime, I'll enjoy the 4.1% yield.

Still setting on about 5% cash and have a couple very lowball limit orders. Now if only Mr. Market would cooperate.

[Dividend Watcher]

Added a small opening position in PM today. I had to replace my LO with at least a partial tobacco holding. I wasn't interested in RAI or BAT as I think, with attitudes changing around the world, I wanted to stick with the market leader(s). LO owned the menthol market and had significant penetration into the e-cig market but merging with RAI would've diluted those attributes. MO was too highly priced right now. S&P is projecting high single digits EPS growth over the next several years, P/E is around 16 with a 4.8% yield. I believe currency fluctuations will vex them at times but, with leading brands, PM will weather it for at least the next decade or two.

[EricL]

I don't think you can go wrong with any of those stocks. I like PM and MO the most of the bunch, PM for the potential growth in emerging markets and MO for the stability of diversification with the SAB Miller stake and a few smaller side businesses.

I think PM could see a bit slower dividend growth in the next year or two due to the strong dollar, but long term I think its a great company.

[Dividend Watcher]

Well, my lowball limit order for BBL finally hit today. Now I'm a little over-allocated to BBL but at close to 5% yield, I'll use the dividend money someplace. Too bad the dividend is only semi-annual. I hate waiting.