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I am an electrical engineer currently employed in the defense industry. I have been a minor partner in a local business for the past eleven years, where I keep the books. I have followed and studied the stock market for over 20 years, developing a trading style which suits my personality. My... More
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  • Dividend Portfolio Rebalancing Smarty-Style 3 comments
    Jan 26, 2014 11:43 AM | about stocks: AFL, BMY, NSC, NUE, ARLP, MSFT

    2014 is underway and I sat down to look over my Dividend Growth portfolio to see how things were going.

    As an engineer, I can't seem to leave anything alone if there appears to be a way to make it a little 'better', so it's not unusual for me to make some changes. Truth be told, I could probably make no changes and watch things turn out just fine, but my engineer gene often gets in the way.

    My portfolio is meant to generate and grow income, so that's what I try to optimize.

    After a quick review of my holdings and some possible replacement stocks, I decided to sell some of my lower yielding / slower growing / cyclical stocks and replace them with higher paying / faster growing DGI stocks.

    Here's what I finally settled on:

    Sold Shares Value Income 1 Yr DGR %
    AFL 50 $3,114.50 $74.00 6.0
    BMY 30 $1,528.20 $43.20 2.9
    NSC 50 $4,480.50 $108.00 5.2
    NUE 50 $2,438.00 $74.00 0.7
    Totals   $11,561.20 $299.20  
    Bought Shares Value Income 1 Yr DGR %
    ARLP 40 $3,080.00 $188.00 9.7
    MSFT 80 $2,940.00 $89.60 16.9
    RCI 70 $2,965.00 $114.80 9.5
    WEC 70 $2,900.00 $109.20 20.4
    Totals   $11,885.00 $501.60  

    As you can see I will have to add roughly $325 in order to complete these transactions and pay taxes on my capital gains in the original shares. In return, I will increase the total income generated by about $200 annually (~80%) and the rate of growth of that income should also increase going forward.

    In a strict dollars and cents analysis, I am paying $325 (plus taxes) now to receive $200 per year forever. That seems like a reasonable deal to me. The faster growth of those payments is icing on the cake.

    Disclosure: I am long AFL, BMY, NSC, NUE.

    Additional disclosure: I will be initiating positions in ARLP, MSFT, RCI WEC shortly. I am not an investment advisor. Do your own due diligence before buying or selling any stocks. You are responsible for your own holdings and I am not.

    Stocks: AFL, BMY, NSC, NUE, ARLP, MSFT
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Comments (3)
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  • maybenot
    , contributor
    Comments (6760) | Send Message
    Thanks Smarty! -- I just saw your link in your comment today. Your comments seem to have good thoughts and info each time.


    I like your moves. Never been a fan of AFL. Now, as for ARLP...not too sure about its product and future...but they sure do provide great dividends and growth.


    Thanks again for sharing your moves and thoughts.
    17 Feb 2014, 01:50 PM Reply Like
  • kolpin
    , contributor
    Comments (1383) | Send Message
    thanks for sharing, smarty. I'm long 5 of your 8, but considering selling RCI and BMY at some point in the future. In fact, I keep on meaning to sell BMY, but it just goes up and up--and it now seems to trade more like a growth/biotech company than a big pharma stock.


    did you simply trim your holdings or did you sell your entire position?
    17 Feb 2014, 11:55 PM Reply Like
  • Smarty_Pants
    , contributor
    Comments (3253) | Send Message
    Author’s reply » The positions sold were my entire stake in those companies. I've been watching BMY keep marching higher too, but their dividend growth was abysmal so I decided it was time to gather my gains and redistribute them elsewhere. The price was going up a lot faster than the underlying income growth should support so eventually there was going to be a limit to that.
    18 Feb 2014, 08:10 AM Reply Like
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