08-17-2013, 01:14 PM
I think most of you guys are familiar with PSX or own it.
I was considering selling my shares of PSX. I accumulated them from the spinoff and a couple of small buys around $30 and $60. PSX is 2.8% of my portfolio. I’d use the proceeds to up my stake in TGT and WMT.
PSX hasn’t been a lot of fun to own the last few months, but the share price probably needed to settle down a little. So while I was happier when it was $65-$70, it’s still up 65% so who could complain? It just trades like the 2.0 beta stock that it is.
The dividend yield is 2.22% and they’ve raised the dividend from $0.80>>>$1.00>>>$1.25. The payout ratio is only 17%.
If (and I mean if) PSX becomes an annual dividend raiser and bumps the dividend up 20% for a while, I’m not so sure I want to sell a stock doing that. Five years of raises like that give it over a $3.00 a share dividend.
I know, a couple of “ifs” and pretty high expectations, but a $3.00 dividend would probably put it well over $100, and I’d end up with a 5.35% yield on cost at today’s price of $56. In other words, I can buy a future $3.00 dividend today for $56, but it’s an adjustable rate type thing that works in my favor with each dividend increase. All I have to give up is some initial yield. Who wouldn’t want to do that?
Well, an investor who demands maximum income NOW wouldn’t because he can’t wait 5 years for that to happen because he can’t accept the lower initial yield. Investors who don’t like higher beta stocks wouldn’t either. Or people who just hate anything to do with oil.
So I remind myself of what I’m supposed to be doing. While I could sell PSX and buy some higher yield for more current income, I’m still investing for the future and if anything, PSX might deserve more weight in the portfolio, not less. Just like I think TGT and WMT do.
What are the chances PSX can pull off some serious dividend growth? I don’t know but they appear pretty shareholder friendly and the parent COP is shareholder friendly. 17% payout ratio, PE under 8, PEG 0.8. EPS estimates have declined a little, probably already baked in the price.
If the economy ever gets moving I’d have to think the chances are reasonably good they could achieve dividend performance like that if that’s how their dividend policy shakes out. A couple more "ifs", but not really an unreasonable take on it. Or is it?
I'm going to think about that for a while. For now if I want more TGT and WMT, I’ll have to find something else to sell.
I was considering selling my shares of PSX. I accumulated them from the spinoff and a couple of small buys around $30 and $60. PSX is 2.8% of my portfolio. I’d use the proceeds to up my stake in TGT and WMT.
PSX hasn’t been a lot of fun to own the last few months, but the share price probably needed to settle down a little. So while I was happier when it was $65-$70, it’s still up 65% so who could complain? It just trades like the 2.0 beta stock that it is.
The dividend yield is 2.22% and they’ve raised the dividend from $0.80>>>$1.00>>>$1.25. The payout ratio is only 17%.
If (and I mean if) PSX becomes an annual dividend raiser and bumps the dividend up 20% for a while, I’m not so sure I want to sell a stock doing that. Five years of raises like that give it over a $3.00 a share dividend.
I know, a couple of “ifs” and pretty high expectations, but a $3.00 dividend would probably put it well over $100, and I’d end up with a 5.35% yield on cost at today’s price of $56. In other words, I can buy a future $3.00 dividend today for $56, but it’s an adjustable rate type thing that works in my favor with each dividend increase. All I have to give up is some initial yield. Who wouldn’t want to do that?
Well, an investor who demands maximum income NOW wouldn’t because he can’t wait 5 years for that to happen because he can’t accept the lower initial yield. Investors who don’t like higher beta stocks wouldn’t either. Or people who just hate anything to do with oil.
So I remind myself of what I’m supposed to be doing. While I could sell PSX and buy some higher yield for more current income, I’m still investing for the future and if anything, PSX might deserve more weight in the portfolio, not less. Just like I think TGT and WMT do.
What are the chances PSX can pull off some serious dividend growth? I don’t know but they appear pretty shareholder friendly and the parent COP is shareholder friendly. 17% payout ratio, PE under 8, PEG 0.8. EPS estimates have declined a little, probably already baked in the price.
If the economy ever gets moving I’d have to think the chances are reasonably good they could achieve dividend performance like that if that’s how their dividend policy shakes out. A couple more "ifs", but not really an unreasonable take on it. Or is it?
I'm going to think about that for a while. For now if I want more TGT and WMT, I’ll have to find something else to sell.