Seeking Alpha
Long-term horizon, research analyst, dividend growth investing
Profile| Send Message|
( followers)  

No, I haven't taken any more profits since I last wrote about "what next to buy, and why?", but I did receive some nice dividend payments at the end of January and the beginning of this month, and since I didn't have any plans to make a contribution to my IRA (yet) or take more profits from any of my other existing positions anytime soon, I decided to go ahead and invest those collected dividends back into something that I already own.

Of course, in order to determine where I should invest the accumulated cash, I consulted my My Mad Method [MyMM] spreadsheet and the stocks that were below my current 'parity' figure of a 2.94% Allocation of the total of my portfolio, and which I still wanted to re-invest in.

To help me make the decision as to which stock might be the best target for this activity, I weighted the stocks on this list by setting the Yield Rank and the 5 Year Dividend CAGR Rank to 25%, and the % Allocation in my portfolio Rank to 50%. A 25% weighting for the Yield and 5 Year Dividend CAGR caused their Weight Multiplier to go from the base value of 1 to a value of 4, while the 50% weighting of the % Allocation meant that the Ranks of that metric would be multiplied by 8. All of the Ranks of the remaining 13 metrics that I'm currently using in MyMM remained at a multiplier of 1.

By weighting the Yield and 5 Year Dividend CAGR Ranks by the same amount, I effectively weighted the stocks on my "What Next To Buy More Of?" list by their Chowder Dividend Rule [CDR] number.

In previous lists of what to add to next I had excluded the mortgage Real Estate Investment Trusts [mREITs] that I held in my portfolio, as it appeared that they were being pummeled by the market as a result of a number of factors, not the least of which were the actions of the Federal Reserve Bank during the latter half of 2013 (or at least the perceptions of the market as to what the Fed might or might not be doing); I didn't feel like adding any more to them during this time as they continued to sink lower and lower in price. However, after monitoring their prices for a number of weeks, and backed up by some recent articles by fellow Seeking Alpha Contributor Regarded Solutions, I decided to add American Capital Agency (NASDAQ:AGNC) and Annaly Capital Management (NYSE:NLY) back onto my "What Next To Buy More Of?" list.

Here is that resulting list, ordered by their Weighted MyMM Ranks:

Orig

Weighted

MyMM

MyMM

MyMM

%

Rank

Avg

Rank

Company

Ticker

CDR

Alloc

1

5.3

1

Annaly Capital Mgmt

NLY

38.9%

2.29%

2

8.9

2

Textainer Group Holdings Ltd.

(NYSE:TGH)

20.8%

2.62%

5

9.3

3

Omega Healthcare Investors, Inc.

(NYSE:OHI)

15.5%

2.48%

4

10.3

4

American Capital Agency

AGNC

11.9%

2.63%

7

10.3

4

AT&T

(NYSE:T)

8.1%

2.46%

6

10.5

6

Altria Group, Inc.

(NYSE:MO)

14.8%

2.49%

3

11.2

7

BHP Billiton plc

(NYSE:BBL)

14.7%

2.74%

10

11.6

8

Digital Realty Trust, Inc.

(NYSE:DLR)

26.3%

2.66%

8

12.0

9

National Presto Industries

(NYSE:NPK)

24.0%

2.80%

9

12.2

10

Resource Capital Corp

(NYSE:RSO)

35.6%

2.90%

Not surprisingly, NLY came out on top of the weighted list, due in no small part to its great CDR number and the hit that its price and, consequently, the % Allocation had taken. Interestingly enough, NLY held the #1 unweighted Original MyMM Rank, as well, and its Weighted MyMM Average value far outpaced #2 TGH and #3 OHI.

Since its % Allocation was by far the least of all of my positions that were below my current 2.94% parity target, and based on my belief that the worst was over for mREITs (at least for the foreseeable future), I went ahead and added 17.5% more shares to NLY with my accumulated dividends, bringing its % Allocation up to a respectable 2.69%. This had the added benefit of boosting the total amount of dividends that I expect to receive throughout 2014 by healthy amount as well.

I'm scheduled to receive another decent round of dividend payments by February 21st, and then there will be a gap of about two weeks before any more dividends of consequence in my portfolio start getting paid, so I will likely be looking at this list again at that time to see where to allocate those funds to help bring another position up closer to parity.

Of course, while I implied in my last article that I wasn't likely to be taking any more profits any time soon, I didn't promise that I wouldn't be doing so again, and there have been some interesting developments in my portfolio, as well as a few positions that I've been looking to get out of completely for a variety of reasons. However, those decisions will have to wait until I see what the rest of the Q4'13 quarterly results reveal.

Until then, best of luck managing your own portfolios, and please feel free to leave a comment below.

Source: My Mad Method: What Next To Buy, And Why? - February, 2014

Additional disclosure: Disclaimer: I am not a professional investment advisor or financial analyst; I’m just a guy who likes to crunch numbers and can make an Excel spreadsheet do pretty much whatever I want it to do, and I’m doing my best to manage my own portfolio. This article is in no way an endorsement of any of the stocks discussed in it, and as always, you need to do your own research and due diligence before you decide to trade any securities or other products.