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Norman Tweed
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Retiree interested in stocks and financial instruments, especially dividend producing stocks. In the 20th century, I was an electrical engineer with Dominion Resources. I use a dividend growth investment style. Quick rules of thumb for complex questions, like fair value p/e using the Gordon... More
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  • Millennial Market Philosophy

    A major shift in the economy started in 2013 with the first Millennial (born 1977-1995) turned 36 years old. At the same time the last Baby Boomer (1943-1960) became 53. These two generations are dominant having greater numbers than the two recessive generations (X & Zippy). Both dominant generations like paper assets (stocks & bonds) and are not as interested in commodities (like oil, metals, and agricultural products). Of the two dominant generations, Baby Boomers are retiring and are less interested in things other than health care. Therefore, the growing demand for goods will come from the Millennials.

    Millennials were born in the age of the computer and have watched the Internet grow with the addition of mobile and smart phones. We are embarking on the Internet of things and other technological innovations which are pushing the growth of stocks like Apple (NASDAQ:AAPL) as well as a financial revolution of payments through scanned smart phones in place of swiped credit cards. The entertainment industry is consolidating with movies, television and on-line streaming coming together under large conglomerates like Comcast (NASDAQ:CMCSA). One other industry is prospering-- defense.

    A distinct market trend of continuous growth in favored sectors is the result of this shift. The entire health care sector (NYSEARCA:VHT) are growing at a rapid pace:

    (click to enlarge)

    The demand for health care will continue to grow rapidly from 2012-2021 as the first wave of the Baby Boomers reach 60 and begin to encounter health problems. The government is helping them to access this health care with Obama care and taxes on the wealthy to pay for it.

    Technology, especially consumer products like smart phones and wearables will make Apple (AAPL) a strong and growing buy:

    (click to enlarge)

    This stock took off in 2010 and has accelerated ever since. The dip in late 2012 was due to uncertainty over the company's future, but that appears to have been resolved. The first wave of Millennials have started buying and should continue through 2023. This company has started a growing dividend and may become a dividend growth stock after it gets 2 more years of dividend growth under its belt.

    CMCSA and DIS should both prosper from the Millennial spending growth through at least 2023:

    (click to enlarge)

    (click to enlarge)

    Finally, Raytheon (NYSE:RTN) is my pick in the defense industry for the next 9 years-with all the turmoil in the world.

    (click to enlarge)

    Millennials are similar to the GI generation in their temperament and the times will be similar to the late 1940s - 1960. There should be much global demand for defense products, like there was in the 1950s missile race.

    After the economy picks up from purchases in these sectors, other supporting sectors will begin to grow similar to growth in the 1960s. However, the largest acceleration will be now through the next 9 years.

    Mar 21 9:17 AM | Link | 10 Comments
  • Which Is The Better BDC: TCAP Or PSEC?

    Having contributed to Prospect Capital (NASDAQ:PSEC) for a year, and watching the price fall and the dividend cut I now ask myself would a Dividend Challenger such as Triangle Capital (NYSE:TCAP) be a better buy or at least a good diversifying selection for the financials sector portion of my portfolio? TCAP is an 8 year Dividend Challenger with a 5-yr dividend growth rate of 6.9%, a dividend yield of 9.13% and a P/E ratio of 14.17. The Tweed Factor (P/E-(yield + 5yr dividend growth) is 5.6. PSEC has a dividend yield of 11.59% although the recent dividend cut significantly reduced that yield. The P/E ratio is 8.99. My initial reason for purchasing PSEC was the high yield and Dividend Challenger status. The low P/E made it a buy and total return over the previous 5 years had been a double (100% gain with dividends reinvested).

    (click to enlarge)

    As can be seen from the chart, TCAP gradually rose in price over the 5yr period, while PSEC fell slightly. However if the PSEC chart is extended back before the Great Recession, a glimmer of hope can be gleaned.

    (click to enlarge)

    Much of Prospects problem has been the drop in the price of oil and their 5% exposure to that commodity. Prospect is more highly leveraged with a debt/equity ratio of .77 compared to TCAP with a .7 debt/equity ratio. Prospect has a market cap of 3.09B while TCAP has a market cap of 778M. With financial stocks, a larger market cap provides some margin for error in risky lending. Both stocks call for an earnings per share growth over the next 5 years of 5%.

    (click to enlarge)

    I ran a dividend growth study for TCAP to see how the total return worked out with $10k invested and dividends reinvested over 6 years.

    Date of reinvestDiv Rate# SharesDividendDrip price# Shares purTotal ValueCurrent Yield
            
      1,978.87$17,820.21 902.71  
    12/08/14$0.591,921.63$1,133.76$19.8157.23$39,201.3511.91%
    09/08/14$0.591,880.63$1,109.57$27.0641.00$51,999.438.72%
    06/09/14$0.541,843.12$995.28$26.5337.52$49,893.138.14%
    03/10/14$0.541,806.87$975.71$26.9236.24$49,616.668.02%
    12/09/13$0.541,773.55$957.72$28.7433.32$51,929.457.52%
    09/09/13$0.541,741.47$940.40$29.3232.07$52,000.397.37%
    06/10/13$0.541,709.20$922.97$28.6032.27$49,806.147.55%
    03/11/13$0.541,678.26$906.26$29.2930.94$50,062.527.37%
    12/10/12$0.531,643.15$870.87$24.8035.12$41,620.878.55%
    09/10/12$0.521,609.35$836.86$24.7633.80$40,684.278.40%
    06/11/12$0.501,571.53$785.77$20.7837.81$33,442.229.62%
    03/12/12$0.471,534.62$721.27$19.5436.91$30,707.759.62%
    12/12/11$0.471,496.48$703.34$18.4438.14$28,298.4010.20%
    09/12/11$0.441,458.08$641.56$16.7138.39$25,006.1410.53%
    06/13/11$0.441,423.79$626.47$18.2734.29$26,639.209.63%
    03/14/11$0.421,391.05$584.24$17.8432.75$25,400.509.42%
    12/13/10$0.421,361.46$571.81$19.3329.58$26,888.928.69%
    09/03/10$0.411,327.59$544.31$16.0733.87$21,878.7310.21%
    06/11/10$0.411,327.59$544.31$14.0838.66$19,236.8211.65%
    03/23/10$0.411,290.54$529.12$14.2837.05$18,958.0211.48%
    12/18/09$0.411,248.14$511.74$12.0742.40$15,576.8113.59%
    10/06/09$0.411,207.62$495.13$12.2240.52$15,252.2913.42%
    07/07/09$0.401,164.53$465.81$10.8143.09$13,054.4214.80%
    03/23/09$0.401,114.82$445.93$8.9749.71$10,445.8617.84%

    I have graphed the results for easier viewing:

    (click to enlarge)

    It should be noted that the yield stays around 10% which is my cutoff for a high yield investment. However, this stock, too appears to be cyclical in line with the energy cycle.

    Conclusion: At present with the dividend recently cut in PSEC, the management is hearing calls for reduced fees for them. I believe they will try their level best to maintain the dividend and grow the price of the stock in order not to take a pay cut. It appears that TCAP performed twice as good as PSEC with dividends reinvested over the 6 years and 2 ½ times for much of that time. My main purpose for having a high yield BDC is monthly cash flow. PSEC provides monthly payments, while TCAP pays quarterly. I do not reinvest directly in the high yield stock that paid the dividend, but look at all investments in the portfolio to see which one provides the best fit at the time the dividend is paid. At present I am under-invested in financial sector stocks and use dividends to purchase PSEC. I could diversify into TCAP as my position gets filled and will be looking into doing that by next year.

    With high-yield investments, there is more risk and volatility. However, if one is careful and remains diversified throughout the SPY sectors it can be rewarding, especially during these times of low yields. One must know why they are investing in a stock in addition to high-yield and growth. Thorough study is prerequisite to a secure portfolio.

    Feb 28 8:58 AM | Link | 6 Comments
  • Does J M Smucker's Pet Food Purchase Make It A Buy?

    J. M. Smucker (NYSE:SJM) has recently purchased Big Heart Pet brands company to diversify it's product line. In my opinion, this maintains the growth aspect of Smucker just as it was becoming a dividend growth stock. This is positive news and should allow Smucker to maintain the high P/E ratio of 20/1 that shareholders have come to expect from this consumer staples stock. This stock has appreciated 18.7% per year since 2009.

    (click to enlarge)

    The Tweed Factor is -4.2, however the five year dividend growth rate is 12.2% and with the upcoming dividend growth, the current 2% yield should be increased. I especially like the product diversification:

    This is a long term growth holding in the consumer staples sector, and is a core holding of mine.

    The consistent cash flow from this sector makes SJM a good stock for dripping, which I have done for years and the stock has grown into a core holding for me. I rate this stock as relatively safe for dividend growth and asset appreciation.

    One should know what they are buying and their risk tolerance before making any purchase of an equity security.

    Feb 04 3:19 PM | Link | Comment!
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  • I had a limit order in for $CMCSA at $52. It is on a tear and I raised it to $59.47. Dollar cost averaging into the position.
    Feb 15, 2015
  • Agnc dividend received. Placed limit order for $PSEC @ $8.33 for 12% yield. Dollar cost averaging into position.
    Feb 7, 2015
  • Dividends posted T & VZ. Placed limit order $CMCSA--dollar cost averaging into a doubled position. Tweed Factor 16.71.
    Feb 2, 2015
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