Tuesday, August 6, 2013

Sold BWP - New Purchase O & SO

BWP was sold as a limit order, it appears two separate orders were needed to fully execute.  Makes no difference since I was charged just one commission.

I decided it was the right time to part ways with Boardwalk Pipeline Partners (BWP).  The distribution was frozen a while back and I think it is likely to stay frozen for quite a while.  That was my main motivation for seeking other opportunities.  Right now the distribution coverage is thin making it impractical to boost payouts.  BWP must pay Loews (the general partner) hefty incentive distributions rights from this point forward again making increases unlikely.  Boardwalk has a number of expansion projects in the works, but nothing seems to be a catalyst short term.  Also I didn't get the feeling BWP management wants to increase payouts at the moment.  They refused to even discuss it on the recent conference call.  Time to move on.

Overall I booked a small capital gain with Boardwalk, but did enjoy massive distributions.  It's kind of sad to see this one go since it's one of my oldest positions and also a reliable payer.  Selling these units meant I had the daunting task of replacing $257.72 worth of annual income.  That's a serious chunk of my passive income stream!

With the proceeds from the BWP sale, plus some additional capital, I chose to start a position with Realty Income Corporation and increase my stake in the Southern Company.  These two purchases combined keeps my passive stream intact.  I'm not too concerned about portfolio worth, but will not tolerate an income decline if I can help it.  That was the overarching goal that needed to be addressed here. 

Both O & SO are very shareholder friendly and extremely high quality.  Investors can expect regular dividend increases with both companies, although typically small.  Realty Income calls itself "The Monthly Dividend Company", it's pretty obvious where their loyalty lies.  I also love me some monthly dividends which is a rare treat among US dividend stocks.  SO can also be counted on in the income department and is one of the highest quality utilities around. 

I think both these stocks are trading around fair value at the moment.  Neither is especially attractive from the value angle.  On the other hand equities are basically at all times highs.  I'll accept fair value considering what I have to work with.  I believe both Southern and Realty Income will make nice long term holdings.  Hopefully I will never have to sell.

I'm likely finished purchasing REITs for the time being, but may reconsider if prices sour.  I would be interested in purchasing additional shares of SO however, hopefully I'll get an opportunity to average down.

Chances are I'll do one more purchase this month since I still have plenty of cash collecting dust.  Top candidates are currently Coca-Cola and Chevron.


  1. Compounding Income,

    Great buys there! I have been a huge fan of The Monthly Dividend Company! Had it originally for an excellent price and started buying again in low to mid 30's. Thomas Lewis definitely knows what he is doing there! There annual reports are usually colorful and fun to read too!

    I also like your SO pick but never owned it, maybe in the future I will join you!

    1. Nice job picking up O in the 30's. That was a fruitful decision, especially because you were there for the hefty 20% boost! I decided to go with preferred shares last year, clearly the common would have been better.

      Check out SO if you are into utility stocks.

      Thanks for the comment!

    2. Thanks I originally had O in the $18 area I believe some years ago but sold it for profit and bought other good stocks. Wish I held on through the whole time and compounded them monthly dividends. I got a penny dividend for many months for awhile. Anyway Hindsight is always 20/20, but great company and glad to be co-owners with so many great dividend investors.

      ARCP seems to be following a similar pattern to O and COLE just went public and had record results and 11% increase dividend! I have quite a few small positions in different REIT's.

      Thanks for the response! Keep compounding that income!

  2. Hi CI,

    Nice buys. I noticed the stock price of O as well as DLR have dropped considerably and they have my attention. A REIT would make a great addition to my portfolio as I do not have many high yielders. Always a pleasure to read what you're up to.

    1. Yes they dropped considerably. On the other hand they definitely were in nose bleed territory a few months ago. I think REITs are back to where they should be. I keep hearing about DLR, I may have to look into it one of these days. A lot of smart investors are scooping up shares at the moment. I do not know much about DLR right now.

      Hope you had a great vacation!


  3. I do not know SO, but with Realty Income, I think you will not be disappointed. It is a very good stock targeted for dividend income investors. I believe that no matter what happens, the management will always do their best to bring regular monthly income to investors. What other company you can say has this as their own motto?

    1. Agreed. Not many companies are as committed to dividends as O.

  4. Nice purchases. I'm not currently considering any utilities for my portfolio, so I haven't looked at SO in any detail. I would like to add O to my portfolio to give me some exposure to real estate, although I'd prefer to buy it below $40. It's a well-run company, though, and likely to be a good long-term investment.

    1. I hear you with O, but I look at utilities a bit differently I think. Anyways the main reason for these transactions was to rid my portfolio of a company that stalled out.

      The way I see it: I gained stocks which are fairly valued, lost a MLP that is fairly valued; kept my income stream exactly the same; picked up names with improved dividend growth (you have to remember BWP is as frozen as the ice age); rid my portfolio of an MLP (I no longer want to go that direction); lessoned my weighting in the energy sector freeing up room for CVX, XOM, KMI, etc.; and dramatically increased the quality of portfolio.

      Who knows where prices are heading, but I that is why I did it. Perhaps I should have explained my reasoning in greater detail. I felt the post was long enough and didn't want to write a novel. Nobody wants to read that, including me :)