April Portfolio Results
The last few weeks have seen more than 60% of S&P 500 companies report first quarter earnings. A large portion of our portfolio has already reported and, as there usually is around earnings season, there were some good and bad reports. Gilead (NASDAQ:GILD) and Apple (NASDAQ:AAPL) were hit especially hard after reporting earnings, with both companies down more than 11% in one week! This one-week loss puts both companies with year-to-date losses in the double digits. Ouch!
Microsoft (NASDAQ:MSFT) also had a rough week, losing almost 4% after reporting earnings. For the year, the company is down more than 11%. Rounding out our top five laggards for the year, Boeing (NYSE:BA) and Starbucks (NASDAQ:SBUX) are down 6.77% and 6.33%, respectively. Do sharp losses in a short amount of time provide a buying opportunity? Stay tuned!
On the flip side, some of our holdings reported good or not as bad earnings and have seen their share prices rise since the first trading day of the year. Aflac (NYSE:AFL), which we bought more of just last month, is up more than 15% for the year. Realty Income (NYSE:O) continues its strong year, rewarding us with a 14.66% gain. Oil giants Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) have both gained more than 13% this year, helped in part by the rise in the price of oil. AT&T (NYSE:T) has been a top performer all year and continues to maintain a position in our top five leader board, rising 12.82% so far this year.
Overall, our portfolio dipped slightly in April and we are now up 5.88% for the year including dividends. The S&P 500 is up just over 1%. While I'm most concerned with dividend income, it is nice to see that our portfolio is beating the broad general market.
April Stock Purchases
As previously stated, we have made an adjustment to our stock purchasing criteria. In addition to using Morningstar's fair value and S&P Capital's twelve-month price target and fair value, we are now including F.A.S.T Graphs in our analysis. I will compare the company's current price to earnings ratio to its five-year average to see how overvalued or undervalued shares currently are.
In a previous article, which you can read here, I discussed what to do when a company's share price has a sharp decline because their quarterly earnings were not as good as expected. In that article, I gave a price target for Microsoft of $50. After reporting earnings, the stock was hammered and dipped below my price target. I was able to scoop up shares at $49.79. I aim to keep each position to 5% or less of the total portfolio. At 4.67% of the total portfolio, Microsoft is very close to being a full position and I will most likely not add more shares to the holdings. After this purchase, Microsoft is now the fifth largest holding in our portfolio.
The portfolio of my wife and I consists of the following companies:
3M (NYSE:MMM), AbbVie (NYSE:ABBV), Aflac, Altria (NYSE:MO), Apple, AT&T, Boeing, Chevron, Cisco (NASDAQ:CSCO), Coca-Cola (NYSE:KO), ConocoPhillips (NYSE:COP), CVS Health (NYSE:CVS), Exxon Mobil, General Electric (NYSE:GE), General Mills (NYSE:GIS), Gilead, Johnson & Johnson (NYSE:JNJ), JPMorgan (NYSE:JPM), MasterCard (NYSE:MA), Microsoft, Pepsi (NYSE:PEP), Philip Morris (NYSE:PM), Procter & Gamble (NYSE:PG), Realty Income, Southwest Airlines (NYSE:LUV), Starbucks, Target, Ventas (NYSE:VTR), Verizon (NYSE:VZ) and Visa (NYSE:V).
We don't own a lot of companies that pay dividends this month, but April has historically been very good to us in terms of the amount of income we receive from our holdings. In fact, this month has been our second best month ever in terms of dividends received. Our dividend growth for the month is up 9.31% and 47.06% compared to the same time period in 2015 and 2014, respectively. The dividend growth has slowed slightly, but that was expected. Previous month's year-over-year dividend growth was astronomical and couldn't be sustained forever. For the year, dividend growth is up 28.48% and 74.36% when compared to 2015 and 2014.
Companies that paid us dividends for the month of March are: Coke, Altria, Philip Morris, Realty Income, General Electric, Cisco and JPMorgan.
Many of the companies in the portfolio have had a rough earnings season. This has caused many companies to have sharp drops in share price. This has provided buying opportunities and we were able to add to our Microsoft position. Since the company still has long term growth ahead of it as well provides a steadily increasing source of income, the price decline gave us a chance to add a quality company at a reasonable valuation. Having a price target helps take the emotion out of large price drop.
Dividend growth continues to power higher. This is important because these dividends will provide the income needed to cover our expenses in retirement. April was our second best month ever. The snowball effect of a steadily rising income stream shows that we are on the right path towards retirement.
Disclosure: I am/we are long ABBV, AFL, COP, CVX, GILD, GIS, JPM, KO, XOM, MA, MMM, MO, MSFT, PG, PM, T, TGT, V, VTR, AAPL, BA, CSCO, CVS, GE, JNJ, LUV, O, PEP, SBUX, VS.
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.
Additional disclosure: We are not investment professionals. Please do your own research before making an investment decision