Kerim's Portfolio

[Kerim]

I've been building my DG portfolio since late 2008. I currently own shares in:

MO, PFE, JNJ, INTC, PG, T, MCD, AAPL, COP, FTR, NLY, PSX, PM, F, AFL, LMT, WAG, ARCP.

[Kerim]

Inspired by ronn’s recent posting of his holdings, here is a more detailed look at my portfolio. First column is ticker symbol, of course. Second column is the company’s value as a percentage of my dividend growth portfolio. Third column is the company’s percentage of the total income stream from this portfolio.

Obviously, I was not kidding when I said that oversized positions do not worry me at this point in the development of my portfolio. And clearly I love me some tobacco stocks. Feedback welcome!

Ticker---Value---Income
JNJ------12.4%-----9.2%
MO------10.2%-----13.8%
INTC-----9.4%-----8.8%
PM-------9.1%-----9.7%
COP------8.7%-----8.4%
LMT------6.7%-----6.0%
AAPL-----6.3%-----3.9%
MCD-----5.2%-----4.2%
PG-------4.3%-----3.3%
T---------3.9%-----5.1%
AFL------3.3%-----1.8%
PFE------3.2%-----2.7%
WAG-----2.9%-----1.6%
NLY------2.9%-----8.3%
FTR------2.5%-----5.7%
WFC-----2.2%-----1.5%
F---------1.8%-----1.1%
PSX------1.5%-----0.8%
KO-------1.5%-----1.1%
ARCP ----1.3%-----2.4%
TGT------0.8%-----0.6%

(Ugh. Sorry that is so ugly. I tried to format it, but apparently I need to install a plugin of some kind to allow tables in posts. I'll look into that when I can find a few minutes.)

[ChadR]

Very similar to my portfolio. You have LMT, WAG, and TGT that I want to add to my portfolio. I will get around to posting my portfolio too, but it will have to be after Oct 15. Last major deadline of the year and I'm ready to get past it and slow down at work.

[fiveoh]

Nice portfolio. I own a lot of those names. I also had a high allocation to INTC but sold off half my position after they failed to increase the dividend.

[ronn38]

LOTS of tickers there on my watch list :-) The percentage of income is an intersting addition. Different ways of looking at/assessing your portfolio can be enlightening.

Ronn

[Kerim]

So here is an update of my portfolio. No major changes since last time, except that I've reduced my INTC (as discussed elsewhere) and initiated a small position in DE.

Tickers in red indicate that the current share price is below my average price per share. This does not worry me with PM and TGT. I am a little more nervous with the REITs (NLY and ARCP).

Thoughts appreciated.

   

[EricL]

I own ARCP and am not too worried about the recent pullback as it seems to be a sector wide issue with REITs and fear of rising interest rates.

I don't know much about NLY other than I don't really understand mREIT's so I don't invest in them.

Also long PM, TGT and DE and agree that long term they should be just fine.

[hendi_alex]

MREITs like NLY make most of their money from the spread between borrowing and lending. They generally borrow short term against bundled long term mortgages that they hold. There is very little that they can do about rising short term rates. They can go longer on their borrowings, but that hurts margins. They generally employ various hedges, but that cost also hurts margins. Some of their underlying securities will be ARMs. While those do reset every six months or so, after an initial fixed period, they still reset slower than short term rates rise. So even the ARMs holding get hurt when short term rates rise.

While rising short term rates will almost always hurt the existing portfolio, they may not hurt new underwritings if LT rates rise faster. As the spread, not the absolute rate is the key factor. Still, as rates reach a certain point, activity will slow and that obviously hurts business.

I've come to the conclusion that mREITs only represent fair weather holdings, to be accumulated near the top of a rising rate cycle and then to be held during the other side when the companies are almost printing money. As it has turned out, NLY, which is often consider the most conservative and BOB, could have been held for many years and turned an overall profit, however it would have been a much better play when purchased in tune with the fed cycle.

Many other MREITs simply went bust during the unfavorable periods. That is where NLY's strategy of only dealing in agency paper (government backed loans) paid off, as the agency paper continued to be liquid even in the downdraft. NLY has also made good management decisions at times, by hibernating during the most unfavorable periods.

I've not looked at MREITs in a long time, but find it interesting that that the sub-sector is doing so poorly during this period of historically low ST rates. I guess there are two main factors at work. First, although rates are very low, the spread are very narrow as well. Secondly, agency paper is in high demand, so buying bundles of agency loans is very competitive and the resulting high price hurts their spreads as well.

This is just a tiny overview of MREITs as I understand them. They are very complicated and I don't begin to understand the details, especially as relates to hedging, short term borrowing, leverage employed, loan covenants, prepay penalties and effect of prepays,.........

[Be Here Now]

How did you manage to format that table?

[hendi_alex]

Here is one thing that puzzles me about the DG model. When accumulating relatively slow growth stocks which only yield 2%-3% on the average, when does additional accumulation no longer make sense? I mean, it will take a 2.5% yielding stock about 8 years at 10% annual dividend growth rate to yield 5% against investment. During that period inflation will erode a significant portion of the purchasing power of those dividends. So counting inflation the yield is perhaps at best 3.5%-4% in inflation adjusted dollars. Who could survive on the paltry cash flow that results when using a safe withdrawal rate from those earnings? It would seem to me that a typical dividend growth investor would need to switch to higher yielding income stocks at some point, or would have achieve a huge portfolio in order to replace 50%-70% of current income. So going back to my original assertion, wouldn't one need to switch away from 2%-3% yielding stocks at least 12-15 years prior to retirement.

At 9 years into retirement and at age 63, I don't consider any buy to hold dividend stock that currently yields less than 5%. All lower yielding stocks are held in my IRA and are used strictly as covered call plays where they usually generate 10%-15% per year. I expect the portfolio to kick out at least 6%-8% in cash flow per year! but am actually striving for 10%-12%.

[Kerim]

(02-15-2014, 11:25 AM)Be Here Now Wrote: How did you manage to format that table?

Got it just how I wanted it in Excel, then took a screenshot of the relevant portion of the screen. The screenshot saves as an image, which can be uploaded using the instructions you saw in the "housekeeping" area.

[Be Here Now]

Thanks, when I get a change I'll give it a try. Any particular type of image?