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.
I used to own KMP but I sold it due to me not liking partnership stocks. KMI seems nice too but the high P/E does scare me.
ReplyDeleteI agree that the p/e of KMI is scary. However the forward p/e is 23 and the price/cash flow is only 18. KMI looks very expensive at first glance, but there is more to the story.
DeleteNice buy with KMI. I started following this company a few months ago as I noticed it's quite popular among the blogging community. I like its dividend growth and future prospects.
ReplyDeleteThank you. Yes I think this one will be a cash machine for myself and many other dividend investors.
DeleteCI - I have had my finger poised over the "Buy" button for KMI for my wife's account for the last few days. I like the div yield and increase profile, just not sure about valuation. Will likely pull the trigger, but not without some degree of hesitation...
ReplyDeleteI hear you! KMI is difficult to value. I think a 4% yield is good starting point considering the expected dividend growth. If Kinder Morgan can meet the published dividend objectives, I will be a very happy shareholder. They have virtually every year in the past decade which gives me great confidence.
DeleteCI,
ReplyDeleteGreat buy here. I don't blame you for selling UNS, being a recent seller myself.
KMI looks pretty solid here. Hasn't followed the market in the run-up. I actually meant to purchase shares in KMI on Friday after the slight dip, but my fund transfer didn't go through in time. Will likely make a move next week.
Best wishes!
I see that you did!
DeleteSorry for getting back to everybody a little late here. I have been working 16-18 hour days, every single day, since I came back from leave. I'm part of the excercise that N. Korea was making threats about. It has been a longgggg 2 weeks and I haven't really had time to keep up with blogs.
Recently picked up shares of KMI myself; I think they have strong dividend growth potential, especially over the next few years. Great buy all the way around!
ReplyDeleteExcellent! I'll check out your site tonight, finally have a little free time.
DeleteHighly еnergetic post, I loνed that bit.
ReplyDeleteWіll there be a ρart 2?
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