I'm most attracted to stocks that are equal parts growth/value/income. I have always viewed ETN primarily as a growth stock. Because it is in the industrial sector, it trades like a cyclical stock. (I think the same is true for EMR, by the way.) ETN was, and is, a gem because it has growing earnings and a growing dividend. When the broader market was undervalued, and ETN was in the 30s, it appeared to be a value stock. It was an "accidental high yielder." When the market pushed its price up rapidly (along with many others), I saw it as a time to harvest some of the gains. In years past I was too hasty to completely close out a position in a stock that appreciated rapidly, but now I'm more focused on trading around a core position and not completely closing out a position. For me, "taking a break" means lightening up the position, not saying "goodbye" to it. When the inevitable corrections and bear markets return, I believe ETN will do well and I'll be a buyer again when the yield reaches 3% or more. In October, 2011, I bought ETN at $35.65 when the yield was 3.8%. That was sweet!. I love a good sale!
Jamie, thanks for a good article and for sharing your experience and research. I'm long ETN, which is a core holding in my retirement income portfolio. It currently is my lowest yielder, but one of the highest growers. When it traded in the $30s and $40s in 2011 and 2012, it became overweighted in the portfolio, and I trimmed some shares as it moved through the $50s and $60s. My current "buy more" target is $55.56 (which would be a 3% yield), and my current "sell a few shares" target is $70.00 (which would be a 2.4% yield).
I agree with you about Eaton's fast price appreciation in 2013, and Rdunn's comparison with EMR may indicate how undervalued ETN was prior to 2013. It may still be "catching up." Its highest trailing PE ratio during the past five years was 19, and it has moved beyond that now to 20.
ETN is now 2.8% of my portfolio, and if it continues to move higher, I may trim it to 2.5%, which I would view as my minimum holding for this great company. I'm long Genuine Parts (GPC) and Johnson & Johnson (JNJ) and I've trimmed them in like fashion. I consider them core holdings and plan to hold what I have left. ETN is almost in the "don't sell any more shares" category for me.
Realty Income Is Simply A Great REIT And Nowhere Close To A Bubble [View article]
Thanks for another excellent article, Brad. Thanks also for sharing your recommendation to buy O at $50 or less. I think that's a good entry point for a first purchase (giving a yield of 4.34%). Since O already comprises 3.6% of my retirement income portfolio, my "add to" target price is a bit lower--$46.17 (4.7%). I just updated my targets yesterday and I've set a "buy more shares" price for O, NNN and WPC to equal 4.7% and a "sell a few shares" target for each at 3.8%. Of these three, at the moment, NNN (yielding 4.0%) is closest to the "sell a few" target and WPC (yielding 4.5%) is closest to the "buy more" target. O is right in the middle (yielding 4.3%). I realize yield is just one variable among many, but it has been interesting to watch the swings of these three REITs relative to each other, each of which I consider long-term, core holdings.
BTW, I enjoy your website. Your email outlining your upcoming newsletter arrived this morning. The table of contents is indeed "robust." Thanks for all you're doing! Long NNN, O, WPC.
Follow The 'Smart Money' And Buy Johnson & Johnson In The Next Pullback [View article]
Thanks, Hawk. Good article. You helped me update my buy price from $78.81 to $82.50. I don't think I had adjusted it since the dividend increase from $2.44 to $2.64. I'm long JNJ but I've been trimming as it appreciated. I'm down to my minimum for JNJ, so now I'll wait with you for a pullback.
On April 8, in "Time to Build a Shopping List," I suggested a target yield of 5% for NNN, O, and WPC, which would be: $31.60 for NNN, $43.40 for O, and $65.60 for WPC. We're still well above those levels.
Now I'm asking myself if I would "nibble" if the yield on any of these three reached 4.8%, which would be $32.92 for NNN, $45.21 for O, and $68.33 for WPC.
These three triple-nets are solidly in the "hold" range, but the mREITs in my universe have dipped into my "buy" range.
The article set a 7% yield target for STWD, which has raised its dividend since the article to $1.84 annually. Thus I raised the target price for STWD to $26.29. On this morning's selloff, STWD dropped to $25.52, for a 7.2% yield. I haven't bought any more STWD today, but I'm watching it.
I'm also watching NLY. I like the triple-nets best and I like STWD's business model better than NLY's. The article set a 12.5% yield target for NLY, or $14.40. On this morning's selloff, NLY dropped to $14.05, for a 12.8% yield.
Was this morning's swoon a bump in the road or is this the first wave of renewed volatility?
I'm long NNN, O, WPC, STWD, and NLY. This week I initiated a position in Chambers Street Properties (CSG).
Brad--Pdog has raised a good question. It's tough to quickly track down FFO or AFFO for REITs. Your website/newsletter would do a great service by making a chart with those comparisons. I realize that EPS isn't always a reliable number for businesses in other sectors, but at least there are some GAP standards that make EPS a valid data point for investors and it is easy to find. Obviously, FFO or AFFO is much more relevant for REIT investors, but I need some help tracking that down and I'm sure I'm not alone. Thanks!
Optimizing Triple Net Lease REIT Investment: Time To Sell Realty Income [View article]
Thanks for your thoughtful article. Realty Income seems to have a bit more "beta" than some of the other REITs.
Through the years I've bought it during downdrafts and sold it when it seems overheated. In June 2012, I completely sold my position. I decided it was a mistake to completely eliminate the position because it is a great company and their merger with American Realty Capital changed the landscape. In February 2013, I found a new entry point at $44.40. Now I view O as a core holding, and I've set some "minimum" and "maximum" parameters based on yield--generally keeping it between 3% and 4% of the portfolio. It has appreciated 20.4% since that February purchase (at the current $53.47), so I have trimmed it a bit.
"I sold it in June, 2012 when it reached $37.80. The yield at that time was 4.6%, but by comparison the yield of National Retail Properties (NNN) was 5.9% and I thought O was a little ahead of itself. ...
"Last fall, Realty Income announced a merger with American Realty Capital Trust, Inc. As a result of the merger, in January, 2013, Realty Income announced a 19.2% increase in its monthly dividend, from $.15175 to $.1809167. This raised the annual dividend from $1.821 per share to $2.171. It also brought Realty Income's dividend yield back into the 5% range. As of February 21, NNN's yield was 4.7% and O's yield was 4.9%."
Even Though Ben Graham Would Not Buy This REIT Today, I Would [View article]
Well said. Everything took a hit in '08-'09, but your salient reminder is that the dividend never stopped growing. In retrospect, I would have rented a larger truck to back up to the loading dock for more shares of O at $15. (Long O.)
Opportunity Costs For Dividend Investors [View article]
Thanks, DGI. Good article as always. I believe the distilled wisdom you're sharing is, "Be reluctant to sell a stock with a growing dividend." As you indicate, however, sometimes pruning is appropriate and it is more art than science: "This is why a black and white approach is dangerous, while a more nuanced and selective approach is superior."
This was well said. The limitation of "black and white" rules was illustrated in the 1984 Ghostbusters movie:
Dana Barrett (Sigourney Weaver) is possessed by the paranormal Zuul, who tries to seduce Dr. Peter Venkman (Bill Murray). Venkman says "I make it a rule never to get involved with possessed people." After she lays a passionate kiss on him he says, "Actually, it's more of a guideline than a rule."
Time To Take A Break From Eaton [View article]
Time To Take A Break From Eaton [View article]
I agree with you about Eaton's fast price appreciation in 2013, and Rdunn's comparison with EMR may indicate how undervalued ETN was prior to 2013. It may still be "catching up." Its highest trailing PE ratio during the past five years was 19, and it has moved beyond that now to 20.
ETN is now 2.8% of my portfolio, and if it continues to move higher, I may trim it to 2.5%, which I would view as my minimum holding for this great company. I'm long Genuine Parts (GPC) and Johnson & Johnson (JNJ) and I've trimmed them in like fashion. I consider them core holdings and plan to hold what I have left. ETN is almost in the "don't sell any more shares" category for me.
All the best!
Realty Income Is Simply A Great REIT And Nowhere Close To A Bubble [View article]
Realty Income Is Simply A Great REIT And Nowhere Close To A Bubble [View article]
BTW, I enjoy your website. Your email outlining your upcoming newsletter arrived this morning. The table of contents is indeed "robust." Thanks for all you're doing! Long NNN, O, WPC.
Follow The 'Smart Money' And Buy Johnson & Johnson In The Next Pullback [View article]
Are We In A REIT Bubble? [View article]
On April 8, in "Time to Build a Shopping List," I suggested a target yield of 5% for NNN, O, and WPC, which would be: $31.60 for NNN, $43.40 for O, and $65.60 for WPC. We're still well above those levels.
Now I'm asking myself if I would "nibble" if the yield on any of these three reached 4.8%, which would be $32.92 for NNN, $45.21 for O, and $68.33 for WPC.
These three triple-nets are solidly in the "hold" range, but the mREITs in my universe have dipped into my "buy" range.
The article set a 7% yield target for STWD, which has raised its dividend since the article to $1.84 annually. Thus I raised the target price for STWD to $26.29. On this morning's selloff, STWD dropped to $25.52, for a 7.2% yield. I haven't bought any more STWD today, but I'm watching it.
I'm also watching NLY. I like the triple-nets best and I like STWD's business model better than NLY's. The article set a 12.5% yield target for NLY, or $14.40. On this morning's selloff, NLY dropped to $14.05, for a 12.8% yield.
Was this morning's swoon a bump in the road or is this the first wave of renewed volatility?
I'm long NNN, O, WPC, STWD, and NLY. This week I initiated a position in Chambers Street Properties (CSG).
Retail REITs Look Awfully Sweet [View article]
Retail REITs Look Awfully Sweet [View article]
Optimizing Triple Net Lease REIT Investment: Time To Sell Realty Income [View article]
Through the years I've bought it during downdrafts and sold it when it seems overheated. In June 2012, I completely sold my position. I decided it was a mistake to completely eliminate the position because it is a great company and their merger with American Realty Capital changed the landscape. In February 2013, I found a new entry point at $44.40. Now I view O as a core holding, and I've set some "minimum" and "maximum" parameters based on yield--generally keeping it between 3% and 4% of the portfolio. It has appreciated 20.4% since that February purchase (at the current $53.47), so I have trimmed it a bit.
My February 22, 2013 blog describes the process (http://bit.ly/15Jqcok):
"I sold it in June, 2012 when it reached $37.80. The yield at that time was 4.6%, but by comparison the yield of National Retail Properties (NNN) was 5.9% and I thought O was a little ahead of itself. ...
"Last fall, Realty Income announced a merger with American Realty Capital Trust, Inc. As a result of the merger, in January, 2013, Realty Income announced a 19.2% increase in its monthly dividend, from $.15175 to $.1809167. This raised the annual dividend from $1.821 per share to $2.171. It also brought Realty Income's dividend yield back into the 5% range. As of February 21, NNN's yield was 4.7% and O's yield was 4.9%."
Long O and NNN.
Use Linn Energy To Build Income Now [View article]
Even Though Ben Graham Would Not Buy This REIT Today, I Would [View article]
Waiting Patiently For A Blue Chip REIT Pullback [View article]
Opportunity Costs For Dividend Investors [View article]
This was well said. The limitation of "black and white" rules was illustrated in the 1984 Ghostbusters movie:
Dana Barrett (Sigourney Weaver) is possessed by the paranormal Zuul, who tries to seduce Dr. Peter Venkman (Bill Murray). Venkman says "I make it a rule never to get involved with possessed people." After she lays a passionate kiss on him he says, "Actually, it's more of a guideline than a rule."
How Star Trek Shaped My Retirement Perspective [View article]
What Is Mr. Market's Mood Today? [View article]