In both of our portfolios, Team Alpha Retirement Portfolio and Team Alpha Growth And Income, this is the time of year that I like to rebalance my allocations and/or move away from some stocks, to free up cash to add a few better stocks.
I have written about several stocks that have been added to both portfolios, and I believe it is prudent for my readers to know what has been done to affect these changes.
Moving Away From Under Performers
I am relatively happy with the allocation in each of the stocks we have in our two portfolios, so I have made the decision to sell some shares of weaker stocks to add new ones that offer us less risk as well as solid dividends.
BlackRock Kelso Capital
This stock has not moved very much (if at all) from when we first purchased it. The share price has remained flat and while that is not a bad thing when also delivering dividend opportunity yields, the entire market has move up steadily and this stock has stalled.
I believe that business development companies like BKCC tend to flourish in stronger economic climates, and while our economy has been on the mend, it is anything but "strong". For that reason I feel it is wise to lower our exposure to this stock. I will not be dropping the entire position right away, but I will take the funds from selling some shares and redeploy them into the new stocks I have researched and written about.
As of now I have sold 200 shares of BKCC freeing up roughly $2,000 while reducing our allocation from 5% down to about 3%.
I am not a gold bug but the reason I purchased this stock was to have a small position a dividend paying gold stock. That being said, the yield has dipped from the original 5% down to its current 2.9% and the share price has dropped.
Not only have we lost capital, but the dividends are not heading in the right direction. That to me is a lose-lose scenario and I was wrong to have bought the stock in the first place. Hindsight is always 20/20 I suppose. Looking forward, the interest rate environment changes from minute to minute these days, and I simply do not see gold prices increasing anytime soon. Even if interest rates spike, which I believe they will, it is my opinion that there will be a flight to stocks, not gold.
If my opinion pans out, then NEM can face rockier roads ahead and the dividends could slip further. We can do better than that.
As of now I have sold 100 shares of NEM freeing up about $2,700 while reducing our allocation by 50%. The available funds will be redeployed into the two stocks I feel will give us greater dividend stability and even some growth along the way.
Adding Several Dividend Winners
While I have not dropped the stocks completely, as I find better opportunities my goal is to move away from both BKCC and NEM completely. I will take advantage of up days to sell additional shares when I find stocks I feel good about.
For now, allocation reduction is the prudent way to go from my standpoint.
I have previously decided to add two positions to our portfolios, Franklin Street Properties (FSP), and Omega Healthcare Investments, Inc. (OHI). I feel that the dividends that both of these stocks offer right now are more stable and headed in the right direction; up.
Franklin Street Properties
This REIT makes investments in commercial real estate. It owns and leases its space at premium, yet affordable prices. The company also sells properties as they increase in value, so I consider this a hybrid of sorts.
Being that the stock is a REIT, it is IRS mandated to pay out at least 90% of income earned to shareholders as dividends.
I have outlined the fundamentals in my previous article which can be reviewed here but I especially like the fact that the company has had steady dividend payouts even though they have not been increased yet. I also like the fact that the sector the stock does business in, commercial real estate, has the potential to grow even though the share price has remained in a virtual trading range.
As of the last quarter, the occupancy rate of FSP properties is at 94%. Low volatility, low beta, and a reliable dividend should help us maintain our dividend income seeking focus moving into 2014.
I have added 200 shares of FSP, at a share price of about $13.00, to both of our retirement portfolios to reap the benefits of a 5.5% dividend yield and share price stability.
Omega Healthcare Investments, Inc.
Frankly, I should have been in this stock well before now. Truth be told, the portfolio did have a position in OHI but I felt the share price had become too frothy. Now that the share price has dipped, I felt the timing was appropriate to jump back into this REIT.
While you can review an in-depth review of the fundamentals in this article, I believe the following chart tells the most important metric that dividend seeking investors should know:
Impressive, is it not? The stock has a 6.1% yield and I feel should be included in just about every DGI portfolio at this point. The share price pullback has given us an opportunity to begin building a position.
As noted in my previous article, I will wind up owning 300 shares of OHI as I redeploy funds from our sold shares. As of now, I have purchased 100 shares for each portfolio at a price of roughly $31.40 ( to be rounded down to $31 for expedience sake).
Our Up To Date Allocations
I have been asked to show our current allocation percentages in each stock for each portfolio. While not perfect, I am satisfied that we are well balanced as we head into the final 6 weeks of the year, and into 2014.
Team Alpha Retirement Portfolio
The Team Alpha Retirement Portfolio consists of Apple (AAPL), AT&T (T), BlackRock Kelso Capital (BKCC), Cisco (CSCO), CSX Corp. (CSX), Chevron (CVX), Exxon Mobil (XOM), Ford (F), General Electric (GE), Johnson & Johnson (JNJ), Coca-Cola (KO), McDonald's (MCD), Newmont Mining (NEM), Procter & Gamble (PG), Realty Income (O), Wells Fargo (WFC), Franklin Street Properties , and Omega Healthcare Investments, Inc. .
Team Alpha Growth And Income Portfolio
The brand new Team Alpha Growth And Income Portfolio consists of Apple (AAPL), Ambarella (AMBA), Cisco (CSCO), CSX Corp. (CSX), Chevron (CVX), Ford (F), Facebook (FB), Galena (GALE), General Electric (GE), Altria (MO), Johnson & Johnson (JNJ), Coca-Cola (KO), McDonald's (MCD), Realty Income (O), Procter & Gamble (PG), AT&T (T), Wells Fargo (WFC), Exxon Mobil (XOM), Yahoo (YHOO), Mid-America Apartments (MAA) Franklin Street Properties , and Omega Healthcare Investments, Inc. .
Actions To Be Taken
Moving out, or away from under-performers and into better potential stocks is prudent portfolio management in my opinion. If you have been following these portfolios, I would urge you to consider doing the same.
In your own portfolios that might vary from the two I manage here, I would also suggest that now is a good time for you to review your holdings and consider similar moves.
The intent of our retirement portfolios is to create a reliable dividend stream of income, as well as some capital appreciation. Capital preservation is vital and it does take regular monitoring to make certain that our goals are intact.
While the market appears "toppy" it by no means suggests that our ultimate goal of a more secure financial future will be derailed anytime soon.
Disclaimer: The opinions of this author is not a recommendation to buy or sell any security. Please remember to do your own research prior to making any investment decisions.