6 Month Portfolio Update: Good News, Double-Digit Increase In Both Income And Value

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Includes: AAPL, ABBV, ADP, AMGN, ARCC, ARI, BA, BDX, CAH, CAT, CCP, CL, CLDT, CLX, CMI, CNP, COP, CSCO, CVS, CVX, D, DEO, DLR, DNP, FE, GIS, GPC, GWW, HAS, HCN, HCP, HD, HOG, HSY, HTGC, JNJ, KHC, KMB, KMI, KO, LADR, LMT, LNT, LXP, MA, MAIN, MAT, MCD, MDLZ, MET, MGEE, MMM, MO, NEWT, NHI, NKE, NRZ, NSC, O, OHI, OXY, PEP, PG, PM, PNNT, SBUX, SNR, SO, STAG, STWD, T, TGT, TROW, UBA, UL, UNP, V, VFC, VLO, VTR, VZ, WEC, WFC, WPC, WPG, XEL, XOM
by: RoseNose

Summary

Portfolio Yield Quarter 2 is down a bit to 3.65%, but still close to Q1 of 3.7% -- pretty steady as it goes.

Portfolio YOC (Yield on Cost) is now 4.5%, a bit down from 4.6% -- I discuss my thoughts on why.

I show performance with and without dividends for the 6 months and the separate quarters.

I review sector holdings by values and income using % and discuss the changes.

Everyone, I hope knows, when price goes up, yield goes down. It is hard, if not impossible, to have them both higher together. These are great times and I am happier seeing INCOME and the portfolio VALUE UP, even though the overall portfolio yield is down.

What I love about dividend growth investing is that the portfolio value can go down and the income can still go up. A nice occurrence, but these times are better with both being up. 2015 had my portfolio value yielding closer to 4% almost regularly. I prefer the portfolio value up while allowing the yield to recede. It is now down to 3.65%. It was closer to 3.7% in Q1. The energy stocks have lead value up as well as utilities, telecoms and consumer defense stocks. Hopefully you had many of these defensive stocks in your portfolio.

My article here explains the 74 stocks I owned at that time in Q1. I did own 80 stocks last time I wrote here, just last week. So, as should be noted, my portfolio is not really static and some of these newly reported numbers would not be expected to remain the same as last quarter. I remain active in the portfolio and I watch, but many days lately I am stuck in neutral.

YOC (Yield On COST)

The YOC went down to 4.5% from 4.6%, not bad considering trimming and adding to positions is something I admit that I do. I add whenever I get extra cash, and this most definitely will effect YOC. It gets lower when I trade up in price for additions. Many older stocks have much lower prices than now and I do add to them now and then when valuations are low. I do get lucky now and then when I can add with lower cost, but those seem to be mostly for the newer choices. Those are real happy times. This has been an unusual quarter for trimming many over priced equity REIT (eREIT) stocks. I did so for (NYSE:O), (NYSE:DLR), along with the BDC (NYSE:MAIN). This type action helps to increase YOC.

The only trim I made this year where I lost on price was (NYSE:HCP). I used those proceeds to add to (NYSE:OHI) Omega at a lower price and get (NYSE:CCP), Care Capital which did change portfolio cost values. I did get the income back and then some, but I am content with this small decrease in YOC.

I also recently added some more lower yielding growth stocks, CVS, CAH and BDX. I did, however, add some mREITs and BDCs -- not much -- but I am being cautious while I learn about these rate sensitive investing instruments. As they are new, the YOC is new and can't be judged in any effective manner for some time for the total portfolio.

If you would want to learn too, here are my main teachers, there are others, but these are My Elite Choices:

-- Brad Thomas is starting to cover mREITs. I bought after learning about Starwood (NYSE:STWD) Here, and more recently bought Ladder (NYSE:LADR) which he recently wrote about here.

-- The Fortune Teller is also an influence and his A-Team articles are a must read: He has much more than just Starwood here and Ladder here. He has 10 A-team members including some BDCs and I now own many of them now.

Now, both of these investments are hybrid eREITs-mREITs, and I would not have ventured down this investing path without these contributors' excellent coverage.

INCOME... is UP

The good news is income rose by 13.5% for the first 6 months.

The chart below shows the portfolio changes for Value and INCOME: this is all inclusive of the 80 holdings and includes cash in the figures. The only cash inflows have been dividends.

Quarter 1 is December 31 2015 /Jan1 to end of March 2016. Quarter 2 is April 1 to June 30th.

6 months is a separate calculation for January 1 to July 1 to get an average.

Remember my portfolio is far from static and I can not just add up the results, and I am not an accountant by my stretch of the imagination. I also show the portfolio changes with dividends (w div) included and without them (-w/o div).

% Change w div -w/o Div
2015-12-31
Quarter 1 6.32% 8.85%
Quarter 2 7.51% 6.70%
6 months 13.35% 14.96%
Income % Change
2015-12-31
Quarter 1 11.67%
Quarter 2 4.10%
6 months 13.52%
Click to enlarge

It would appear I got fewer dividend raises in Q2 than in Q1.

I believe I read from David Fish recently that more dividend raises occur at the end of the year. Now that is something to look forward to as well.

SECTORS by Value and Income Comparison

I did make a note of some I sold and others that are new in the sector % column.

I retained IBM, CLX, HSY, and others under income % as I did get some from them in Q1 & Q2.

Sector-Stock Ticker- Name % Value Sector % % INCOME % P InC
CONSUMEER-DEFENSIVE/Staples (14) 20.61% 15.90%
(NYSE:KO) Coca-Cola 2.58% 2.1%
(NYSE:PG) Procter-Gamble 1.32% 1.2%
(NYSE:GIS) General-Mills 2.61% 1.8%
(NYSE:TGT) Target 1.82% 1.4%
(NYSE:KMB) Kimberly Clark 1.54% 1.1%
(NASDAQ:MDLZ) Mondelez 0.78% 0.3%
(NYSE:CVS) CVS Corp 1.54% new 0.5%
(NYSE:CLX) Clorox 0.00% sold 0.2%
(NYSE:PEP) Pepsico 0.61% 0.4%
(NYSE:DEO) Diageo 1.28% 0.8%
(NYSE:HSY) Hershey 0.00% sold 0.1%
(NYSE:CL) Colgate 0.51% 0.3%
(NYSE:UL) Unilever 0.64% 0.4%
(NYSE:PM) Phillip Morris 2.77% 3.0%
(NYSE:MO) Altria 2.15% 2.0%
(NASDAQ:KHC) Kraft-Heinz 0.47% 0.3%
CONSUMER-CYCL/Discretionary (8) 6.01% 3.72%
(NYSE:GPC) Genuine Parts 0.70% 0.5%
(NASDAQ:MAT) Mattel 0.45% 0.8%
(NYSE:MCD) McDonald's 1.12% 0.9%
(NASDAQ:HAS) Hasbro 0.68% 0.5%
(NYSE:HOG) Harley Davidson 0.00% sold 0.0%
(NYSE:HD) Home Depot 0.61% new 0.2%
(NYSE:NKE) Nike 0.98% 0.2%
(NYSE:VFC) VF Corp 0.43% 0.3%
(NASDAQ:SBUX) Starbucks 1.04% 0.4%
ENERGY (4) 7.20% 7.81%
(NYSE:XOM) Exxon 2.15% 2.4%
(NYSE:CVX) Chevron 1.94% 2.4%
(NYSE:OXY) Occidental Pet 2.10% 2.2%
(NYSE:VLO) Valero 1.02% new 0.9%
FINANCIAL (7) 4.55% 3.06%
(NYSE:ARI) Apollo 0.29% new 0.4%
(NYSE:NRZ) New Residential 0.59% new 0.8%
(NYSE:MA) Mastercard 1.23% 0.3%
(NASDAQ:TROW) T Rowe Price 0.84% 0.8%
(NYSE:V) Visa 0.89% 0.2%
(NYSE:WFC) Wells Fargo 0.56% 0.5%
(NYSE:MET) Met-Life 0.14% 0.1%
HEALTHCARE (5) 6.87% 4.69%
(NYSE:JNJ) Johnson & J 3.62% 2.5%
(NYSE:ABBV) AbbVie 1.00% 1.2%
(NASDAQ:AMGN) Amgen 1.11% 0.7%
(NYSE:BDX) Becton-Dickinson 0.40% new 0.1%
(NYSE:CAH) Cardinal Health 0.75% new 0.2%
HEALTHCARE REITs (6) 7.59% 10.26%
(NYSE:NHI) Nat Health 0.87% 1.0%
Care Capital 0.62% new 0.7%
(NYSE:HCN) Welltower 1.21% 1.3%
HCP 0.51% 1.3%
(NYSE:VTR) Ventas 1.63% 1.8%
Omega 2.74% 4.2%
INDUSTRIAL (8)-MATERIAL (0) 5.57% 4.40%
(NYSE:BA) Boeing 1.65% 1.3%
(NYSE:UNP) Union Pacific 0.85% 0.7%
(NYSE:CAT) Caterpillar 0.37% 0.4%
(NYSE:MMM) 3M 0.82% 0.6%
(NYSE:CMI) Cummins 0.81% 0.7%
(NYSE:GWW) WW Grainger 0.52% 0.3%
(NYSE:NSC) Norfolk Southern 0.21% 0.1%
(NYSE:LMT) Lockheed Martin 0.35% 0.2%
TECHNOLOGY (3) 3.90% 2.51%
(NASDAQ:AAPL) Apple 2.01% 1.2%
(NASDAQ:ADP) Automatic Data 1.08% 0.6%
(NASDAQ:CSCO) Cisco 0.81% new 0.4%
IBM sold 0.3%
TELE-COM (2) 7.80% 8.85%
(NYSE:T) ATT 3.88% 5.1%
(NYSE:VZ) Verizon 3.92% 3.8%
UTILITIES (9) 15.60% 15.40%
(NYSE:SO) Southern Co 4.12% 4.7%
(NASDAQ:MGEE) Madison G&E 2.06% 1.1%
(NYSE:XEL) Xcel 2.28% 1.9%
(NYSE:WEC) 1.45% 1.3%
(NYSE:D) Dominion 3.16% 2.7%
(NYSE:DNP) Duff N Phelps 1.10% 2.2%
(NYSE:CNP) Centerpoint 0.54% 0.7%
(NYSE:LNT) Alliant 0.71% 0.6%
(NYSE:FE) First Energy 0.19% 0.2%
REIT (10) 10.30% 12.59%
Digital Realty 1.69% 1.7%
(NYSE:WPC) WP Carey 3.47% 4.6%
Realty O 1.58% 1.7%
(NYSE:LXP) Lexington 0.57% 0.8%
(NYSE:CLDT) Chatham 0.96% 0.9%
(NYSE:SNR) New Senior 0.21% new 0.3%
(NYSE:UBA) Urstadt Biddle 0.23% 0.1%
(NYSE:WPG) WP Glimcher 0.00% sold 0.5%
(NYSE:STAG) Stag Industrl 0.83% 1.2%
Starwood 0.76% new 0.9%
BDC (5) 4.00% 10.80%
Main Street 0.90% 2.9%
(NASDAQ:PNNT) Pennant Park 0.82% 3.3%
(NYSE:HTGC) Hercules 0.57% 1.5%
(NASDAQ:ARCC) Ares 1.29% new 2.6%
(NASDAQ:NEWT) Newtek 0.42% new 0.6%
Total all Companies 100.00% 100.00% 100.00% 100.0%
Click to enlarge

DEFENSIVE SECTOR Holdings by VALUE

My last review I included all Consumer stocks, staples and discretionary, as Defensive -- I am now changing that metric. I am removing consumer discretionary as defensive. I am adding healthcare, which will include the equity REITs. The portfolio value is now at 59.2 % in those defensive holdings in Q1 and 58.3% in Q2.

Sector Q1-VALUE New-Q1 end Q2
Consumer-D 22.2 22.2 20.6
Consumer- 3.9
Ute 15.4 15.4 15.4
Telecom 8.1 8.1 7.8
total 49.6 45.7 43.8
Healthcare 7 7 6.9
HC-REIT 6.5 6.5 7.6
total 59.2 58.3
Click to enlarge

My goal is to have greater than 50% of the portfolio in value from those defensive holdings and I have done it, even if the REITs are removed.

I will continue to build all of these defensive stocks especially in the healthcare holdings, except the healthcare eREITs.

I would love to add to Consumer defensive, but they are over priced right now, at least to me, so I will just have to wait with them.

DEFENSIVE SECTOR Holdings by INCOME

Sector Q1-INCOME New-Q1 end Q2
Consumer-D 16.8 16.8 15.9
Consumer- 1.9
Ute 15.2 15.2 15.4
Telecom 9.4 9.4 8.9
total 44.3 42.4 40.2
Healthcare 4.9 4.9 4.7
HC-REIT 10.3 10.3 10.3
total 57.6 55.2
Click to enlarge

I have a win here too with 55.2% Income from the defensive holdings.

But just wait a minute. The healthcare REIT sector income is significant @ 10.3%. Without it I wouldn't meet my goal of 50% income from other defensive holdings, it would be 44.9%.

Because of this, I will be searching for a good healthcare stock that provides better income.

I do like my new choices of CAH, CVS and BDX, however low the yield, and they will stay.

DIVERSIFY

My message is for you to diversify. How you do that is up to you and have a plan of quality for your holdings.

I want to reiterate I have survived selling (NYSE:KMI) Kinder Morgan, which was both a portfolio value loss and income loss in 2015. Conoco-Phillips' (NYSE:COP) sale was an income loss and a smaller value loss, but still a loss. When owning a diversified portfolio these losses are not as significant and almost go unnoticed. I noticed it as my ego was initially hurt. I soon noted the portfolio barely felt a thing and I found other great holdings to replace them. It's just business as usual now, and all is well, I am HAPPY to make that Report. I also did not include quality ratings and other statistics, you can find that in other articles if you care to check them.

This is a KISS (Keep it Simple Smarty) review for all my investing friends.

I want to recommend an excellent read from richjoy403. He honored my request for him to post his portfolio. He is doing it in parts on my last article in the commentary. Part one is there now, with part 2 and 3 to follow and end on Saturday. Rich is a very successful investor and I learn everyday from just following his commentary. Enjoy his post, he worked hard on it and it really should stand alone as an article on its own merits.

I welcome your excellent commentary.

As always, Happy Investing.

Disclosure: I am/we are long 80 STOCK PORTFOLIO SHOWN.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.