This month's update for the Team Alpha Retirement Portfolio is unique. Not because the month was wonderful, actually the gains were minor, but because for the month of April, we made no major changes to the portfolio aside from swapping PFF for WFC. When all was said and done, the portfolio continues to show impressive gains.
The Team Alpha portfolio consists of Ford (F) Chevron (CVX) Apple (AAPL), McDonald's (MCD), Exxon Mobil (XOM), Johnson & Johnson (JNJ), AT&T (T), General Electric (GE), BlackRock Kelso Capital (BKCC), KKR Financial (KFN), Procter & Gamble (PG), CSX Corp. (CSX), Realty Income (O), Coca-Cola (KO), Annaly Capital (NLY), Cisco (CSCO), Bristol-Myers Squibb (BMY), Healthcare Select Sector SPDR (XLV), and Wells Fargo (WFC).
I wrote this article, in which I stated that there are times when doing absolutely nothing was a wonderful strategy. "As prudent dividend seeking investors, we do NOT have to react all of the time. We should, however, monitor our stocks as well as any policies that could impact core holdings going forward. For now however, we will be sitting tight and collecting our wonderful dividends."
That is precisely what we have done. Virtually nothing. Oh, we monitored our investments of course, traded PFF for WFC, but that was it, and I hope each of you has done the same. With earnings season in full bloom, we were actually able to sit back and watch how our investments performed from January-March.
We were very rarely disappointed.
For the month itself, the portfolio gained just about 1.1% in total value which eked out a small gain over the S&P 500 for the month (the S&P was up by about .80%). I will chalk up the gains to the $488 in dividend income that was added in, but even so, a gain is a gain. Especially when everyone has been waiting for a correction that simply never seems to show up.
Actually, there were corrections in various stocks, like GE, PG, and XOM, but the share prices snapped back for the most part. Perhaps this is an economic environment that has corrections one stock at a time. I still call it rotation, but the stocks did bounce back.
With a total value of $140,737, the Team Alpha Portfolio has increased by nearly 41% since we began back in November of 2011. At the time, the S&P 500 was 1162 and as of today, it stands at 1582. That reflects an increase of about 36% during the same time frame.
Beating the S&P by 500 basis points, or roughly 15% is admirable to say the least. Far too many fund managers seem to consistently come up short of these numbers, so give the individual investors a round of applause!
This performance is not the really big story however.
Dividend Increases Have Been Amazing So Far
It is not unusual that dividend winning stocks announce increased payouts during this time of the year. I was impressed however, by the breadth, the amount, as well as several new entries into the circle of dividend winners.
Here is the complete list:
As you can see, 12 of our 19 core holdings have announced dividend increases that average out to a 6.94% increase in our income thus far. We still are waiting for MCD, F, NLY, and T to join in the fun, but when was the last time anyone got a 7% raise? I love dividends.
The impact on the total portfolio is quite impressive as well. Prior to all of the dividend hikes, our yield on cost (the original $100k invested) was at 4.71%. As of today, the yield on cost is 4.96%.
With AAPL and WFC announcing dividend increases, I feel that these 2 stocks are headed for dividend winner status, and I do not see the other winners ending their run either. It is my opinion that we have not seen the end of dividend hikes for 2013.
As the economy heals, and corporate earnings improve, I am looking forward to even more dividend hikes, even in several of the ones that already announced hikes. GE, WFC, and AAPL, are high on my "watch" list for more dividend hikes, simply based on each of the companies' cash position, and/or ongoing performance. I can be wrong, but even if I am, the portfolio will continue to do just fine.
Actions To Take In May
There are a few issues that I will be addressing this month. The dividend performance of XLV has been disappointing, and I will be looking for alternatives, or increasing our cash position. The other issue is that some of our core holdings have had serious capital appreciation.
The two stocks that I am considering a reduction of shares in, is O and T. Realty Income has increased by roughly 60% and AT&T has increased by 40%. If I decide to reduce the number of shares in either of these (or both) stocks, it will be to raise cash to redeploy into other dividend opportunities.
Here is how I would do it; If the call options have decent premiums, I will sell 1/2 of the positions of each stock by selling a tight (close to the money, and only for one month) call option. If the orders do not fill, I will just do the same thing in the following month.
Using a covered call strategy to reduce exposure in some stocks, is a good way to add a few bucks to our cash reserves with the premium, as well as having the flexibility to keep doing it if the options expire.
Based on the Team Alpha holdings, I would sell 1 contract of both T and O if the prices are right. Taking profits is not a sin folks, even though we are focused on dividend income. There are times when we should give ourselves a little bonus for all of our hard work!
I will let everyone know when I decide to make these moves. For now, we will not be going away in May.