Sunday, March 30, 2014

Catching up on February Transactions

Last month I did some pretty serious buying and selling in an attempt to increase the quality of my portfolio and position myself for higher dividend growth moving forward.  I had to go to S. Korea for three weeks and didn't have access to blogger while out of country.  If I can't log into blogger, I can't update my little site.  These trades are in books and were actually already posted in my February recap.  However I never did a proper post on these transactions due to time constraints.  It's just too dang nice outside!

Now I might not be the greatest investor, and I know my blog is nothing special, but I do take pride in disclosing all my moves for the world to see via screen shots.  I've been doing this for quite a while now (over a year now). Nothing to hide here.

SALES (February 2014)
-100 shares LNCO, ($289.92) annual income
-129 shares EIFZF,  ($210.20)

LNCO and EIFZF had to go.

Both of these companies offer juicy yields and both of these companies are fraught with risk as far as I'm concerned.  Seeing Boardwalk Pipeline Partners, LP (a MLP I used to own) cut its distribution by 80% was a wake up call.  I simply cannot trust high yield/high risk companies as retirement income sources.  The whole point of dividend growth investing is to build a reliable income stream growing faster than inflation which is detached from daily price gyrations.

EIFZF and LNCO dividends are detached from the stock market.  I doubt either will actually cut dividends short term.  But dividends from these companies aren't growing, and they certainly aren't reliable.  Both have extremely high payout ratios meaning one little misstep could have dire consequences.  LNCO is paying out 99% the last time I checked.  Pretty hard to fund a larger dividend payment when it is already stretched so thin.  I thought the Berry acquisition would provide Linn an opportunity to raise payouts, or at least add a little breathing room to the dividend coverage.  Nope.  Apparently Linn paid too much.  Exchange Income last raised dividends about a year and a half ago and seems to have set itself up to only maintain that rate.  Its cash flow statement is ugly showing negative operating cash flow last year.  Yuck.  It had been doing very well with its cell phone tower business until it started receiving too many orders.  I have been following this one for a while and learned something new.  Too much growth can actually be a bad thing.  EIF couldn't keep up with all the orders from AT&T, so they had to hire an outside consultant to get their systems up to speed.  That ended up really hurting cash flows and the bottom line for a company as small as this one.  Small caps...

At the end of the day I lost a couple hundred bucks with LINE/LNCO and made a decent return with EIFZF.  I'll chalk it up as a cheap lesson.

PURCHASES (February 2014)
Commission free trades
91 shares MO, $174.72 annual income
47 shares OHI, $92.12
32 shares TD, ~$51.20
9 shares TGT, $15.48
18 shares COP, $49.68
9 shares DE, $18.36
8 shares PEP, $20.96

As you can see I replaced the two high yielders with a gang of replacement stocks.  I had to use cash reserves to try to keep my income stream whole.  All together I used an extra $3,500 plus the 4 previous Feb. purchases and still couldn't match the combined annual income I lost with LNCO and EIFZF.  In the end I fell about $30 (annualized income) short!

What I gained was quality, dividend growth, and most importantly peace of mind.

MO:  At the time I felt the market was offering a nice opportunity.  MO has a nice yield and solid dividend growth.  I like how it's very diversified for a tobacco stock.  In addition to cigarettes it sells smokeless tobacco, wine, and owns part of Miller beer.  Still trying to figure out why Altria is listed as a dividend champion, yet Abbott Labs is not.  One standard please...

OHI:  I was forced to go temporarily overweight REITs, which will work itself out over time.  Again nice yield and solid dividend growth.  I tried to take advantage of a price dip with OHI last month.  I'm especially excited about the dividend growth and OHI's excellent management.

TD:  Canadian stocks (still) look undervalued.  TD is an excellent dividend growth stock that has been paying dividends for over a hundred years.  Jesus!  Anyways right after I bought shares it raised dividends by 9%.  Unfortunately dividend payments fluctuate with exchange rates for US investors.

TGT:  It was beaten up at the time because the credit card breach and failed efforts in Canada.  Those developments seemed short term in nature so I bought.  Solid dividend champion other than that.

COP:  I haven't added COP in a few years.  It seemed undervalued and had a nice yield.  So far Conoco has been an excellent investment.

DE:  The most undervalued of the bunch, but its BOD decided to freeze the dividend right after I bought it.  I'm going to give Deere some extra time and have no plans to unload these shares.  High quality company and I needed an industrial stock.

PEP:  Another company I haven't bought in a long time.  It had just raised its dividend by 15% when I did the purchase.  I'm a fan of the food side of the business more than the soft drinks.  Have you tried Stacy's pita chips and Sabra hummus?  What a combination!

Again these transactions are all from February when I didn't have the luxury of updating my blog.


  1. Some great companies that you reinvested the proceeds into. I wouldn't sell DE here but I was quite disappointed by the freeze since I had been looking at buying some shares there. I added PEP in Feb as well and I'm looking at OHI and maybe TD as well. TD just to get a secondary holding in the Canadian banks, I only own shares of BNS right now.

    Side note: My wife loves the Stacy's/Sabra combo.

    1. I didn't even realize Stacy's was a Pepsi product until recently. The chips are now thinner which makes them even tastier. Pepsi is definitely on to something there, need to test out the other varieties :)

      You might be able to catch OHI on a dip. It seems to bounce around a lot just like the other REITs. Then again you might snatch up a rental property. How cool would that be?

  2. Nice trades CI. I've been looking at PEP for some time now but as yet have not made the jump. Keep up the great work!

    1. Appreciate it! I'll be stopping by your neck of the woods in just a minute!

  3. Great post, I appreciate you and I would like to read your next post.Thanks for creating this informative post about different types of financial services.

    independent pension advice Bristol & Pension Adviser Bristol