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Value, long-term horizon, dividend investing, portfolio strategy
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This is my 3 month update for my High Yield portfolio. It is still being constructed as I'm now in the process of adding my wife's IRA into the portfolio. Once my wife's IRA is added this portfolio will mostly be constructed but it will still receive monthly contributions as well as the dividends being reinvested. The last three months have seen mREITs get hammered with prices and dividends dropping. Since I'm long term focused I've taken this opportunity to accumulate more in my mREIT positions at relatively low prices. For those not familiar, my eventual portfolio goal is to get the Yield on Cost above and maintain it above 9% and to get the current yield above 8%. These are longer term goals and I realize they will not be met immediately. On this note, when the portfolio was initially constructed in July and August of this year the portfolio yield was 6.95% and the Yield on Cost was 6.88%. Let's see where it stands now.

My Portfolio (as of 25 Nov.)





Weighted Goal


ConocoPhillips (COP)






Kinder Morgan Energy Partners (KMP)






Vanguard Natural Resources LLC (VNR)






General Electric (GE)






3M (MMM)






Coca-Cola (KO)






Philip Morris (PM)






Procter & Gamble (PG)






Leggett & Platt Inc. (LEG)






Triangle Capital (TCAP)






Wells Fargo (WFC)






American Capital Mortgage Investment Corp (MTGE)






Annaly Capital Management, Inc (NLY)






American Capital Agency Corp (AGNC)






Dynex Capital Inc (DX)






Realty Income Corp (O)






UBS ETRACS Monthly Pay 2x Leveraged Mortgage REIT (MORL)






HCP, Inc (HCP)






Healthcare REIT, Inc (HCN)






Johnson & Johnson (JNJ)






Illinois Tool Works (ITW)






Target Corporation (TGT)






Textainer Group Holdings Limited (TGH)






McDonald's Corporation (MCD)






StoneMor Partners (STON)






Emerson Electric Co (EMR)






NTT DoCoMo, Inc (DCM)






Apple (AAPL)






AT&T Inc (T)






American State Water Co (AWR)






UBS ETRACS 2X Leveraged Long Wells Fargo Business Development Company ETN (BDCL)






AmeriGas Partners LP (APU)
















Position Changes

I'm not going to list out all the position changes in the last three months. My first article can be viewed to determine exact position changes. There have been numerous changes due to the rollover of my IRA and currently my wife's IRA.

I will discuss some conceptual changes with how I manage and execute position changes in my portfolio. First, I will admit a mistake I've been making that I quickly realized was not the smartest way to execute. For most of my orders up to this point I've been using market orders. These are orders to basically pay whatever the market is charging you. Though not necessarily bad, market orders aren't the most efficient way to manage the price you purchase or sell shares at.

Most recently and going forward, instead of utilizing market orders I'll be using two options. First, if I have the shares/money then I will sell put options and call options. This allows me to basically sell or buy shares at a predetermined price that I'm happy with if they are executed. If not, I get paid without any commitment to sell or buy. In many cases this lets me buy shares of companies I like at a cost basis below or at a predetermined level I want. Here is an example:

SELL GE 27 PUT 20 Dec 13 @ 0.65

That is giving the buyer the option to force me to buy 100 shares of GE @ $27/share. The cost basis however is $26.35/share. So, if I was targeting a price below $26.50 this might be a good idea. If the buyer executed this then I'd buy 100 shares of GE at $26.35/share below my $26.50/share target. If the price never goes below $27 or the buyer doesn't execute the contract then I've just made the premium ($0.65) times the 100 shares for $65.

The downfall is I could be forced to buy at a higher price than market if the price drops. Arguably, I would have done this anyways if I'm looking to buy outright. Another downfall is each option is in 100 share increments so expensive stocks are out of the question for now.

The second option I have and use if I don't have enough shares or cash is to use Good till Canceled (GTC) Limit orders. This also lets me set a price I'm willing to buy or sell at and it is automatically executed when that price is hit. Both of these options help allow me to more efficiently manage my money and the price I pay or receive.

Along with the above conceptual changes, I recently also released an article about some stocks, mainly big blue chip dividend stocks that I believe are overvalued. Since I don't like cash sitting around if it doesn't need to be and I have some stocks that are fairly or undervalued I've been purchasing them and in a couple of cases I'm close to being overweight in them. I'm only a little overweight as compared to my goals so it shouldn't "unbalance" my portfolio too much. Meanwhile, I can take the cash that I'm receiving for them and wait for the overvalued stocks to come down in price.

Dividend Changes

Following is a list of all dividend changes declared/paid for the portfolio between August 15, 2013 and November 25, 2013:

AGNC Oct 28, 2013 $0.80/share decrease of 24%

COP Sep 3, 2013 $0.69/share increase of 4.5%

DX Oct 31, 2013 $0.27/share decrease of 6.9%

EMR 10 Dec 13 $0.43/share increase of 4.9%

GE expecting dividend increase the end of December

ITW Oct 8, 2013 $0.42/share increase of 10%

KMP Nov 14, 2013 $1.35/share increase of 2.3%

expecting a further increase next year per guidance

MTGE Oct 28, 2013 $0.70/share decrease of 12.5%

NLY Oct 31, 2013 $0.35/share decrease of 12.5%

O Oct 15, 2013 $0.181854/share increase of .17%

PM Oct 11, 2013 $0.94/share increase of 10.6%

STON Aug 15, 2013 $0.60/share increase of 1%

VNR Sep 13, 2013 $0.2075/share increase of 1.2%

There have been numerous dividend changes. They have been mixed with dividend cuts (mostly expected) and dividend raises. Hopefully, the number of cuts decreases in the next quarterly update and the increases get better.

Future Concerns/Challenges

The huge white elephant in the room for the whole stock market is interest rates and what is the Fed going to do. I believe inevitably QE will end and interest rates will rise. The timing of this is another question. I believe early next year QE might start to taper. It'll still be awhile for it to be completely shut off. Then I don't expect the fed to raise rates until sometime after QE stops. We're looking at 2016 at the earliest. How the stock market handles the rumors and the truths will be a wild ride. The above coupled with a potential government shutdown could cause a lot of volatility over the next six months. I will use the dips as an opportunity to buy otherwise good stocks at a discount.

Portfolio Performance

Due to the huge rollover in my IRA and my wife's IRA plus contributions and other things it is hard right now to determine the actual increase/decrease in value from gains/losses. I can tell you from my brokerage account that my unrealized gains/losses as of 2 December are right at about a $1k loss. That is not considering the dividends which have totaled over $1k so far in the roughly three months. So, portfolio performance in the traditional sense is hard to measure at the moment though overall it would be positive. I will measure this and report this down the road when there are less moving parts.

I will compare several metrics I deem more important anyways when it comes to performance. First, monthly dividend income went from $511.80 to $1,049.40 which is an increase of 105% with only an 81.7% increase in assets. Current Yield has gone from 6.95% to 7.84% just shy of my goal of 8%. Yield on Cost has gone from 6.88% to 7.61% shy of my goal of 9%. The beta of the portfolio is maintaining stable at 0.67 below my goal of 0.75. I will continue watching these metrics especially as I'm making additional investments down the road to try and improve them. I expect current yield should rise above 8% hopefully by next update. Yield on Cost will take longer as we need to wait for the consistent year over year dividend increases that roughly 50% to 60% of my portfolio should do.


Despite the roller coaster, or short term more like a cliff dive, that the mREITs have been facing my portfolio has performed decent over the last three months. Interest rates and what the Fed plans in the future are a risk to my portfolio and the economy as a whole. Despite the risks and recent performance of some aspects of my portfolio I'm thrilled with the performance of the portfolio as a whole. I think it continues to show promise and it will continue to improve. Even since the data in my table was compiled I have put a few more orders in that should continue to increase the performance of the portfolio. I plan on having my next and all future updates for the near future every three months. Look for the next installment around February.

Source: High Yield Portfolio 1st Full Quarter A Roaring Success