Saturday, March 16, 2013
Sold - UNS / New Purchase - KMI, EMB
I decided to liquidate 66% of my UNS Energy position. I'm not happy with the dividend growth plus I feel the shares are approaching overvalued territory. This was a difficult decision to make since I've been a loyal UNS shareholder for more than two years. This company was a wonderful holding for me, I've enjoyed hundreds of dollars in dividends during this period. In 2011, UNS did a 7.7% increase which made me happy as a clam. 2012 was disappointing with an anaemic 2.4% increase, while 2013 was even worse clocking in at 1.2%. At $47/share I do not find UNS to be particularly attractive, it was time to take a significant portion of my stake off the table.
I still own 36 shares and will consider liquidating the remaining position in the future. I have a hunch UNS will be able to provide better dividend growth going forward since they should be able to raise rates this year. Being stuck in a prolonged rate freeze surely affected the dividend growth in 2012 & 2013. Anyways I may end up selling the rest of these shares at some point, but haven't decided as of right now.
It was difficult to find a suitable replacement stock! I wanted something with at least a 4% yield here with a replacement utility being the preference. I'm sorry, but the utility sector does not offer much in the way of value at the moment. The only utility I seriously considered was PPL. I also looked closely at LMT and a few REITs.
I chose KMI as the replacement for half the proceeds. With KMI I get increased income right off the bat, plus significantly higher expected dividend growth. $36.63 is near the top end of what I'd be willing to pay, but I do feel it is one of the better options at the moment. Considering the stock market is at all time highs, the price here is not so bad.
Proceeds from the other half of the UNS sale will be invested before March is over. I'm still contemplating PPL plus a handful of stocks in other sectors. I'd really like to purchase another utility if possible.
I also bought a couple shares of EMB to shore up my fixed income holdings. These shares will increase my annual income by approximately $10. The distributions are variable, this is only an estimate. I lack foreign bonds and feel an ETF is best choice for me since I don't know how to purchase them individually. I hold EMB for income and allocation purposes.