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Editor's Note: This article has been updated to reflect new data that was originally calculated incorrectly.

September is finally over (already?), and with it so is the third quarter of 2012. I've written quite a bit during this past July, August and September about what's been taking place in my portfolio and how My Mad Method (MyMM) has guided me in those changes. As I did at the end of Q2 2012, this article will summarize the activities that took place during the last three months to bring you all up to speed on what's currently in my portfolio.

Baseline

To start with, let's take a look at what I had in my portfolio at the end of Q2 2012:

Comb

MyMM

Rank

Rank

Company

Ticker

Yield

10

23

Apple

(AAPL)

1.82%

10

18

Abbott Laboratories

(ABT)

2.98%

21

8

Arch Coal

(ACI)

1.74%

27

11

Alamos Gold

(AGIGF.PK)

1.17%

5

4

Alliance Resource Partners, L.P.

(ARLP)

7.34%

26

30

Central Fund of Canada

(CEF)

0.05%

23

22

Crescent Point Energy Corp

(CSCTF.PK)

7.42%

8

18

Duet Group

(OTCPK:DUETF)

8.21%

15

9

Exelon Corp

(EXC)

5.13%

24

26

Endeavour Silver Corp

(EXK)

0.00%

29

25

Ford Motor Company

(F)

2.09%

16

20

Freehold Royalties, Ltd.

(OTCPK:FRHLF)

9.87%

16

21

France Telecom

(FTE)

10.87%

18

2

Corning, Inc.

(GLW)

2.32%

14

10

Johnson & Johnson

(JNJ)

2.71%

20

28

Kimberly Clark Corp

(KMB)

3.34%

3

13

Keppel Corp

(OTCPK:KPELF)

4.10%

18

6

Main Street Capital Corp

(MAIN)

6.94%

13

3

Medtronic

(MDT)

2.50%

2

1

Microsoft

(MSFT)

2.62%

1

7

MV Oil Trust

(MVO)

12.10%

5

14

Annaly Capital Mgmt

(NLY)

13.11%

28

15

Nokia

(NOK)

8.70%

22

16

National Presto Industries

(NPK)

8.60%

7

17

SeaDrill, Ltd.

(SDRL)

9.01%

3

12

StoneMor Partners, L.P.

(STON)

9.03%

9

24

AT&T

(T)

4.94%

12

27

Telstra Corp

(OTCPK:TTRAF)

7.42%

24

29

United Parcel Service

(UPS)

2.89%

Avg>

5.48%

The MyMM Rank is the rank each position held just within my portfolio, not the "superlist" that combines my watchlist with my portfolio. The "Comb Rank" is the overall rank of each position in my portfolio factoring in the MyMM Rank, the rank based on % increase/decline in value, and the rank of the projected annual dividends of each position.

The Sold Ones

As I mentioned, this was a very busy quarter for me in terms of trading stocks. For one thing, I solidified my personal goals and objectives for my IRA portfolio around a personally-tailored form of Dividend Growth Investing (DGI), wherein I am now aiming to acquire solid, stable Dividend Champions, Contenders and Challengers (CCCs), but also mixing in some high yielding positions such as mREITs and MLPs in order to juice my returns while I'm still in the Accumulation Phase of my investing lifetime.

So I focused on a number of tactics to help liberate capital so that I could improve the composition of my portfolio, including:

  1. Shedding very low yielding companies (below 3.00%) that were also underperforming in terms of price, and which were not showing signs of improving any time soon.
  2. Getting out of investments in precious metals (they tend to be very low-yielders, if they provide a dividend at all).
  3. Reaping capital gains from some high fliers.
  4. Consolidating my capital from two IRAs at two different brokerages into my new IRA at Interactive Brokers (IB).

As a result, I sold the following positions between July 1 and September 28 of this year:

Comb

MyMM

Rank

Rank

Company

Ticker

Yield

18

26

Apple, Inc.*

AAPL

1.76%

8

12

Abbott Laboratories

ABT

3.09%

28

16

Arch Coal

ACI

1.69%

29

9

Alamos Gold

AGIGF

0.63%

29

33

Central Fund of Canada

CEF

0.05%

10

27

Duet Group

DUETF

7.25%

15

16

Endeavour Silver Corp

EXK

0.00%

31

15

Ford Motor Company

F

2.15%

28

7

Corning, Inc.

GLW

2.61%

2

18

Keppel Corp

KPELF

3.75%

7

3

Medtronic, Inc.

MDT

2.60%

7

5

Microsoft Corporation

MSFT

2.61%

12

1

Patriot Coal

PCXCQ

0.00%

18

17

StoneMor Partners, L.P.

STON

10.01%

12

26

Telstra Corp

TTRAF

7.10%

28

25

United Parcel Service

UPS

3.10%

Avg/Tot>

3.02%

* = Partial Sale

Some of the stocks above met several of the tactical criteria I set forth above, such as Ford and Corning (1 and 3) and Alamos Gold, Central Fund of Canada, and Endeavour Silver Corp (1, 2 and 3). Others are notable exceptions, such as Apple, which can hardly be called "underperforming," but which does have a low (albeit new) yield, and has appreciated nicely. Another exception is UPS, the yield for which is above the 3.00% threshold I set, but which has been moving sideways ever since I picked it up last October, and the prospects for which didn't seem to be improving, at least by my way of thinking.

The selling of Duet Group, Telstra Corp and Keppel Corp corresponded to objective #4 above, and allowed me to close my IRA account at my former brokerage firm.

Then there were some real head-scratchers, like Patriot Coal, which represented a momentary dalliance with speculation that went horribly awry; and StoneMor Partners, a former Dividend Monster in my portfolio, the management for which came under such intense scrutiny and criticism during the quarter that I became uncomfortable holding it any longer.

Of course, these sales were not all made at the same time, but came about as the quarter unfolded. Looking back, it seems that I did quite a bit of "housecleaning."

The New Ones

Of course, with all those sales came recycled capital with which to focus on my new, primary goal of building a solid DGI portfolio. Utilizing (and evolving) the MyMM during the quarter, I settled on purchasing more shares in the following existing positions in my IRA's portfolio:

Comb

MyMM

Rank

Rank

Company

Ticker

Yield

9

20

Crescent Point Energy Corp

CSCTF.PK

6.25%

14

10

Johnson & Johnson

JNJ

3.54%

11

18

Main Street Capital Corp

MAIN

6.10%

1

10

MV Oil Trust

MVO

10.60%

Avg>

6.62%

But that was just scratching the surface. The real spending spree (again, spread out over the course of the quarter) was in new positions, some of which will be very familiar to the DGI-savvy investor, and some of which represent pure, unadulterated yield-chasing on my part:

Comb

MyMM

Rank

Rank

Company

Ticker

Yield

5

2

AFLAC, Inc.

(AFL)

2.76%

7

8

American Capital Agency

(AGNC)

14.45%

4

8

BreitBurn Energy Partners, LP

(BBEP)

9.47%

10

5

BHP Billiton plc

(BBL)

3.65%

17

7

ConocoPhillips

(COP)

4.62%

20

17

Hasbro, Inc.

(HAS)

3.77%

25

15

The Coca-Cola Company

(KO)

2.69%

22

13

Linn Energy, LLC

(LINE)

7.03%

18

3

Staples, Inc.

(SPLS)

3.82%

2

1

Vanguard Natural Resources

(VNR)

8.19%

18

15

Vodafone Group, plc

(VOD)

6.95%

15

6

Walgreen Company

(WAG)

3.02%

Avg>

5.87%

(Please note that due to timing issues, I wrote about purchasing new positions in Hasbro, Linn Energy, Vodafone and Walgreen, and adding to my positions in Main Street Capital and once more in BreitBurn Energy Partners, in the article "What Next To Buy, And Why? - October, 2012", which came out this past Monday, but I actually made these purchases on September 27. From my point of view, these were "October's" purchases for all intents and purposes, but technically they happened at the very end of Q3 2012, so they get included in this recap and will not count towards any Q4 2012 activity.)

Summary

So what were the results of all of this trading activity from July through September? As I don't yet have a full year's worth of summaries to compare against, I can't use a "Chowder Index" whereby I would be comparing this year's Q3 net results against last year's Q3. So in that regard, the best I can offer by way of measuring whether my portfolio is improving or not is to compare the end of Q3 to my own end of Q2 and end of 2011 results, and also to compare my year-to-date (YTD) percentage increase in the value of my portfolio to the percentage increase of the S&P500 (SPY).

As you can see, while I’ve made up some (very little) ground on the S&P500 in terms of growth for the year, that’s not my highest priority. Despite all the selling and buying I did, I gained a fractional amount over my Q2 ending numbers vis-à-vis SPY, but more importantly to me, the projected annual dividends that I should be receiving from all of this reshuffling of my portfolio has increased over where I was at the end of 2011 (the number highlighted in green). I’ve increased the dividend dollars that I can expect to receive on an annual basis by over 9% from where I was just three months ago. I don’t expect to see the same kind of quarterly increase in expected annual dividends at the end of Q4, 2012, as I won’t have the resources to make the kinds of changes in my portfolio that I did July through September, but I do expect the increase in dividends compared to the end of 2011 to be as good or better by the end of this year.

I'm also pleased with the increase in my average yield over the quarter, moving from 5.48% at the end of Q2 to 6.58%, and increasing versus the end of 2011 by 1.62%. That bodes well for my portfolio's ability to continue to grow at a rate that beats inflation, and my ability to continue to grow the value and dividend-producing power of my portfolio while I'm still in this Accumulation Phase of my investing life.

Finally, I've listed the commissions that I paid to Interactive Brokers for the trades I made during Q2 and Q3. Not surprisingly, this number has increased by 136.36% in Q3 over what I was charged in Q2, but I wanted to display these relatively low numbers in order to dispel any concerns any of you might have that the high volume of trading I've been doing might have eroded away the total value of my portfolio. While any trade will incur some commissions, I can assure you that the amounts I paid in commissions during Q2 and Q3 2012 pale in comparison to the commissions I was paying at my former brokerage house. To put things in perspective, I paid less in total commissions in Q3 2012 with Interactive Brokers than I would have on just two trades (one sell and one buy) at my former brokerage firm.

Current Portfolio

To wrap things up, below is a look at the current positions in my IRA's portfolio, and their respective ranks, yields and percentage allocations of my portfolio's total value:

Comb

MyMM

Rank

Rank

Company

Ticker

Yield

% Alloc

22

24

Apple

AAPL

1.59%

2.96%

4

2

AFLAC, Inc.

AFL

2.76%

2.34%

6

8

American Capital Agency

AGNC

14.45%

5.07%

1

4

Alliance Resource Partners, L.P.

ARLP

7.09%

5.32%

3

8

BreitBurn Energy Partners, LP

BBEP

9.47%

5.00%

9

5

BHP Billiton plc

BBL

3.65%

4.99%

16

7

ConocoPhillips

COP

4.62%

4.32%

8

20

Crescent Point Energy Corp

CSCTF

6.25%

4.51%

25

22

Exelon Corp

EXC

5.90%

3.16%

10

25

Freehold Royalties, Ltd.

FRHLF

8.36%

3.75%

19

19

France Telecom

FTE

10.19%

2.17%

19

17

Hasbro, Inc.

HAS

3.77%

2.88%

12

10

Johnson & Johnson

JNJ

3.54%

3.98%

15

23

Kimberly Clark Corp

KMB

3.45%

3.05%

24

15

The Coca-Cola Company

KO

2.69%

2.36%

21

13

Linn Energy, LLC

LINE

7.03%

2.93%

10

18

Main Street Capital Corp

MAIN

6.10%

4.46%

0

10

MV Oil Trust

MVO

10.60%

5.25%

5

12

Annaly Capital Mgmt

NLY

13.06%

4.49%

26

21

Nokia Corporation

NOK

9.69%

0.92%

23

14

National Presto Industries

NPK

8.23%

3.37%

7

27

SeaDrill, Ltd.

SDRL

8.57%

4.70%

17

3

Staples, Inc.

SPLS

3.82%

3.32%

12

26

AT&T

T

4.67%

3.52%

1

1

Vanguard Natural Resources

VNR

8.19%

5.14%

17

15

Vodafone Group, plc

VOD

6.95%

2.91%

14

6

Walgreen Company

WAG

3.02%

2.91%

Avg>

6.58%

3.70%

This leaves me with 27 positions currently, some of which are slightly above the 5.00% threshold I like to maintain for any one position's allocation so as to not be too exposed to any issues that might arise, such as a stock's ability to maintain and grow its dividend. Correspondingly, some are below the 3.70% "average" percentage allocation that any one position would ideally have in order for me to have an equal level of "risk" in any one position's dividend policy going counter to my goals.

I would like to increase the number of positions I hold in my IRA to up to 50 so that, equally balanced, any one position only represents a 2% level of "risk" of taking a hit to its dividend. However, for the time being, I will be content to spend the dividends that I will be accumulating on a monthly basis from the above portfolio on increasing some of these "below average" allocations, such as Aflac, Hasbro, Coca-Cola, Vodafone, Walgreen and others, so that they get closer to the current 3.70% average. I still have time to increase the number of positions to meet my 50 position goal by the time I retire.

That's all for this quarter's recap. I hope you found it useful and informative. I will do a Q4 and Year End recap in three months, and from then on, we will be able to compare the performance of my portfolio against itself on a quarter-by-quarter basis, using the "Chowder Index" method (although I will probably still include a comparison to the S&P500, just to satisfy my own curiosity on that score).

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.

Source: My Mad Method: Q3 2012 Recap