Since I'm using this forum and this thread to keep my thoughts straight, I thought it was time to update where I stand and what we've done. Can't believe I haven't done this since last August. I'll start with my portfolio.
In August 2015 I used the GE proceeds to initiate positions in ETN and EMR as mentioned earlier. Also sold my BAX position and took that and some of my collected dividends to add to W.P.Carey (WPC) to give the income stream another kick in the pants.
In September 2015 I finally sold Baxalta (BXLT) since I didn't know where the Shire buyout was going and the dividend was still a paltry amount. Made a nice gain with which I added to my new EMR holdings as the price kept dropping. I also added to my HP holding at about half my cost basis. I know, the oil patch was a big question mark then, as it is now, but HP still had the dividend covered and were still the technological leader in horizontal drilling. They've been around a long time and made it through the last oil swoon in the late 80s/early 90s so was willing to take an
gamble educated guess. I also upped the ante in ETN as it too kept dropping in price. I was feeling more comfortable with both EMR and ETN with the P/E dropping below both of their 5 year averages and the yield bumping up to 4%.
In October, ETN was taking a bigger beating than EMR so added a little more to ETN as well as adding to my CSX holdings which was priced about even with my cost basis from 2 years earlier. The ETN add has about reversed my previous 60% EMR/40% ETN split from the GE proceeds. Thought I'd take advantage of Mr. Market's perception of ETN being the weaker player and collect those dividends where they come. I have no concerns for ETN's future or the dividend coverage.
CSX seems to be the black sheep of the railroad survivors but with the midwest and northeast blanketed and some routes south, felt they had room to improve operations and had their fingers in a lot of the "industrial pie". Anecdotally, around Chistmas, I had seen a CSX train with a ton of UPS tractors & their trailers loaded on their intermodal flatbed cars ready to drive off at their destination. I didn't count the number of cars but it did take a while (read: minutes) for the whole train to pass. Hometown knowledge also confirmed that CSX was making major track expansions near the Albany, NY crossroads to improve east-west and southbound capacity.
In November, with the market on the mend from August's burp, the only exciting thing (besides all those wonderful dividend reinvestments) that happened was a big chunk of my Aflac (AFL) was called away from me at $65. I originally thought I'd be selling cash-secured puts to get back in but, with premiums so low at the price I wanted it, I thought I'd let it bubble in my small mind a little longer. This is the most cash I've had laying around in my account in a while. After all, I still had a good chunk of AFL sitting in the account and the yield was low enough that I wasn't missing a huge amount of income.
December made me quickly decide against going all back in with AFL. I'd been staring at OHI's yield and decided I couldn't resist adding a little chunk more to that gusher. Royal Bank (RY) was also crying for some attention and, at about 4.5% yield, thought I'd add to the starter position I already had. MAIN had taken a big enough hit that I thought I should probably add some more there too. So, at about a 20% discount to my cost basis, I added enough to bring it to the position I had allocated in my planning spreadsheet.
I had written about Compass Minerals (CMP) on SA a while back but never was a serious purchaser because of valuation up until December. The early mild winter and the general dislike of basic materials stocks drove the price down to the low-70s and a P/E closer to 12. The yield was hovering around 3.5% and they had announced the purchase of an Argentinian plant nutrition company adding to their sulfate of potash (SOP) and specialty fertilizer products and away from reliance on winter de-icing products. As best as I can tell, the SOP specialty crop market is quite different from Potash's and Agrium's agricultural markets that they have a lot less competition. I'm thinking this could help even out CMP's revenue stream over the year despite the de-icing market still being the largest revenue stream. With that in mind, I opened a half position in CMP.
GILD was once again below $100 and with that I added another small chunk. I've written before about their headwinds with Solvadi/Harvoni and much of their pipeline being in new fields. They were/are still collecting a heck of a lot of cash with their entire outstanding debt being covered by cash in the bank. Sometime in the future they may come out with another blockbuster or find a company/drug line to purchase they think is not overpriced. Until then, I'll be patient as they keep collecting cash and sharing some of that with me. If the price keeps dropping, at what point does some large drug manufacturer decide that they're getting a cash machine for next to nothing and decide to purchase it?
By Christmas I had used up a big part of the AFL proceeds but still had a little left to watch for bargains.
In January, the market opened the new year in the dumper and it seemed everyone was panicking. As the year progressed, I still hadn't found anything that was a steal that I was looking at. I was tired of listening to the headlines crying about how weak the market was yet no one was giving me what I wanted at fire sale prices. This led me to bitch about it
here.
Despite that, I still added little chunks to RY, WPC and CSX. All were priced at levels I felt comfortable with. I also bought back enough of AFL to get it to a position size I was comfortable living with for a few years since I didn't see any great bargains being thrown at me of companies I was interested in. Despite my whining, I finished up January with a little cash and a portfolio I felt quite comfortable holding through the next recession.
February didn't change my thought process much. I added another small chunk of GILD when it was in the low-80s averaging down once more and also added enough of CMP to bring it to about 90% of my allocated percentage of the portfolio. I'll let the dividends do the rest of the work. I don't want basic materials being too big a component of my portfolio; especially after the BBL fiasco (see below).
Here it is March and I once again have about 0.4% in cash in the account. The market has zoomed back up to a point where my portfolio value and the expected income are at all time highs. About half my holdings are not being reinvested due to either oversized positions or gross overvaluation. I'll let it collect and hope that when the next bargain shows up I'll have enough to take a meaningful position.
BBL's cut their dividend -- just as expected. I'm not selling and booking an 80% loss at this time. It's the largest mining company in the world and, with so many moving parts (including oil), I think they'll be able to weather this. I'm sure, as in any big company, there's room to cut more to ensure their survival. Sure, I may have to wait 5 to 10 years but with the rest of the portfolio throwing off all that income, I can be patient. If we get an actual bear market (>20% drop) in companies that interest me, I may be tempted to take the loss and move what's left into something that's as close to a sure thing as you can get in the market. My projected income stream is still above my early retirement projections so there's no screaming need to make drastic changes.
EMR's last dividend increase was a pittance. I didn't like it but I also work with/on lots of EMR's products in my new job. The company keeps buying replacement parts and new machines for the old ones that get destroyed in a heavy manufacturing environment so it's not like there's no market for them. Once oil or the crazy forex issues get straightened out, EMR will have more breathing room and things should hopefully get better.
I'm still happy with my GE for EMR/ETN trade mentioned above despite GE zooming up in price. The income stream is where my focus is and I have a YOC on both issues just above 4%. I'm content to just keep having them plop those reinvested dividends in my account for the time being.
I will probably trim my Harris Corp (HRS) sometime in the near future. Yield is pretty low, they're going to spend the next year or so digesting the purchase of Exelis and I really would like to add a little to ES and XEL. I'll worry about it when the prices are where I want them to be. Utes are ridiculously priced right now for the most part.
Am I worried about being fully invested if a recession or bear market should arise? Nope. I'm satisfied with how things are progressing. I've surprisingly become indifferent to prices on what I hold and spend more time keeping track of the dividends and refining my retirement projections. (Thanks for the weekly update, R2R! Saves me time hunting them all down.) I update my spreadsheet every so often but five minutes after I'm done I probably couldn't tell you what anything was priced at. If something is grossly over- or undervalued, that might stick out in my mind but, since I don't have a ton of cash on the sidelines, I'm content focusing on other things in my life right now.
Here's how the portfolio looked like as of last Friday, the 18th of March (I think it's self-explanatory.):
My top 4 income producers are ABBV, CVX, PEP & T. Will CVX cut the dividend? Maybe. In the meantime, those are my ATM's that are building up the bulk of my cash reserves. I've thought about trimming some of my ABBV and moving it into JNJ to spread it around but I'm in no hurry to lose out on that 4% yield from ABBV and JNJ is just a tad high for me right now. No, I'm not so concerned with the Humira patent issue nor the black box warnings on Viekira Pak.
Sector allocations:
I'll work on my wife's portfolio next when I can take a breather from watching a movie and eating bon-bons.
