November was another hard month for bargain-focused investors and my 1.5% return for the month lagged the 3.0% return of the S&P 500. However, my 5% annualized yield significantly outpaced the 1.8% annualized dividend yield of the S&P 500. Volatility has been virtually non-existent (until Mueller related moves on Dec 1) and all seems to be going well with the US and global economy.
While I am not ready to abandon my conservative approach to generating gains through a value and dividend tilt, I am having some serious FOMO this year as I watch the steady gains in my portfolio eclipsed by the spectacular run that the broader market has had… that feeling is even worse when I consider the potential returns I would have had if I had liquidated my entire portfolio and put it all in Bitcoin!
However, I am adapting to the momentum of the market with (slightly) lower yield buys where I still believe that my long-term thesis of solid dividends plus low valuations will ultimately reward me. I have also been looking more intently at foreign stocks recently as the markets seem to be waking up to the low valuations to be had there. To me, having a strategy doesn’t mean being static in your approach to the markets. It means that you adapt to strong market signals and I don’t mind accepting a higher beta in my portfolio in this ‘rising tides’ market that we have been in for over a year.
November 2017 Review
As discussed, November 2017 was a tough one for my portfolio as I returned a 1.5% versus the strong 3.0% return for the S&P 500. My YTD return is now 5.7%, which is in my target growth goal of 5-15% per year, but still badly lagging the ‘risk-on’ 20.5% return of the S&P 500.
Despite this, I believe in mean reversion and that value plays will be in vogue again sometime (and I will be there to capitalize when their time comes). Last year at this time I was beating the S&P 500 YTD, so I remain confident in my strategy. In the meantime, I will keep cashing my dividends because at its core my portfolio isn’t about paper gains, it is about cash payments.
November was a solid payments month for me this year as my realized dividends were $910 for Nov 2017 (versus $905 in 2016). My YoY dividends are up over 7%! For the 12 months ending Nov 2017, my portfolio delivered $10,971 in cash to me (a realized yield of 4.5% for my full portfolio including cash reserves). I remain confident that I will exceed my $13,000 2017 goal, even with my sizable cash and short positions. Fear and greed are hard to balance, but I am happy with where I am overall. My yield-focused strategy still makes the most sense to me as paper gains may come and go but cash is forever!!
Since I write for Seeking Alpha primarily to improve my own investment portfolio, I think it is important that you know my objectives. Please consider this context when you look at any advice I give and form your own opinions based on your needs and desires.
- GOAL: Attractive, risk-adjusted, absolute returns (5-15% annually) over a long-term time frame while minimizing capital loss and extreme drawdowns.
- STRATEGY: 'Enhanced' dividend growth or DGI strategy that focuses on a core of diversified holdings (ETFs and individual companies - my general screening criteria: growing companies (YoY EPS growth >0%) with attractive valuations (PEG <1.5 and P/E <20) and strong and safe dividends (yield >4%, payout <90%, and market cap >$500MM)… no tobacco stocks or micro caps), supplemented with return enhancing tools like hedges (derivatives and shorts), commodity exposure, etc., as well as some crazy picks.
- BALANCE: Blend of ETFs (domestic and international) and individual companies (where there is a compelling reason to own). Seek to not overweight any one sector unless there is a compelling reason to do so (although the nature of these investments leads me to be overweight in traditional dividend-paying sectors like financials, REITs, and energy).
Note: I violate these guidelines constantly, so please call me out on it!
Portfolio Composition as of November 30, 2017
|Security||Type||Div Yield||Market Value||Last Month Value||Gain/Loss(%)|
|Schwab U.S. Dividend Equity ETF (SCHD)||ETF||2.9%||$15,159||$14,547||4.2%|
|SPDR S&P 500 High Dividend ETF (SPYD)||ETF||4.5%||$15,115||$14,466||4.5%|
|SPDR S&P Emerging Markets Dividend ETF (EDIV)||ETF||3.3%||$9,402||$9,250||1.6%|
|SPDR S&P International Dividend ETF (DWX)||ETF||5.0%||$8,415||$8,279||1.6%|
|Fst Tst Dow Jns Glbl Sel Dvd Idx ETF (FGD)||ETF||4.0%||$7,794||$7,710||1.1%|
|Global X SuperDividend REIT ETF (SRET)||ETF||7.4%||$6,208||$6,132||1.2%|
|Global X SuperDividend U.S. ETF (DIV)||ETF||6.2%||$5,113||$5,040||1.4%|
|Vanguard Energy Index Fund ETF Shares (VDE)||ETF||3.1%||$4,725||$4,629||2.1%|
|iShares MSCI Australia ETF (EWA)||ETF||4.5%||$4,554||$4,540||0.3%|
|SPDR Russell 1000 Yield ETF (ONEY)||ETF||2.9%||$3,705||$3,572||3.7%|
|Oppenheimer Ultra Dividend Revenue ETF (RDIV)||ETF||4.2%||$3,624||$3,420||6.0%|
|Pacer Global Cash Cows Dividend ETF (GCOW)||ETF||2.9%||$3,111||$3,038||2.4%|
|Global X NASDAQ China Technology ETF (QQQC)||ETF||3.3%||$3,021||$3,055||-1.1%|
|iShares Global REIT ETF (REET)||ETF||4.9%||$2,603||$2,531||2.8%|
|iShares MSCI China Small Cap ETF (ECNS)||ETF||3.3%||$2,476||$2,503||-1.1%|
|Eaton Vance Buy-Write Opportunities Fund (ETW)||CEF||9.3%||$2,364||$2,364||0.0%|
|Market Vectors Gold Miners ETF (GDX)||ETF||0.2%||$2,247||$2,248||0.0%|
|Omega Healthcare Investors (OHI)||REIT||9.7%||$18,795||$19,860||-5.4%|
|Royal Dutch Shell (NYSE:RDS.B)||Company||5.7%||$9,891||$9,804||0.9%|
|Blackstone Mortgage Trust (BXMT)||REIT||7.6%||$9,816||$9,549||2.8%|
|New Residential Investment (NRZ)||REIT||11.3%||$9,093||$9,062||0.3%|
|Tanger Factory Outlet REIT (SKT)||REIT||5.5%||$7,512||$6,825||10.1%|
|Sabra Healthcare REIT (SBRA)||REIT||9.3%||$6,465||$6,693||-3.4%|
|Ford Motors (F)||Company||4.8%||$5,008||$4,908||2.0%|
|Teva Pharmaceutical Industries (TEVA)||Company||2.3%||$4,446||$4,140||7.4%|
|Iron Mountain (IRM)||REIT||5.8%||$4,087||$4,000||2.2%|
|Kinder Morgan (KMI)||Company||3.0%||$3,170||$3,332||-4.9%|
|Store Capital (STOR)||REIT||4.8%||$2,582||$2,469||4.6%|
|KKR Real Estate Finance Trust (KREF)||REIT||7.2%||$2,050||$2,005||2.2%|
|VARIOUS POSITIONS OF <$1,000 VALUE||VARIOUS||2.0%||$2,619||$2,453||6.8%|
|FIXED INCOME TOTAL||5.2%||$29,397||$29,824||-1.4%|
|PowerShares Variable Rate Preferred ETF (VRP)||ETF||4.8%||$5,148||$5,190||-0.8%|
|Bank of America Corporation (BAC) - Pref L (BML+L)||Pref||4.5%||$4,592||$4,714||-2.6%|
|Goldman Sachs (GS) - Pref A (GS+A)||Pref||4.2%||$4,500||$4,580||-1.7%|
|BlackRock Limited Duration Fund (BLW)||ETF||6.0%||$3,182||$3,210||-0.9%|
|T. Rowe Price Emerging Markets Bond Fund (PREMX)||Fund||6.3%||$3,052||$3,079||-0.9%|
|WisdomTree BofA Mrl Lynch HYBd ZrDr ETF (HYZD)||ETF||5.2%||$2,412||$2,419||-0.3%|
|Nuveen Floating Rate ETF (JRO)||CEF||7.9%||$2,162||$2,290||-5.6%|
|Goldman Sachs (GS) - Pref D (GS+D)||Pref||4.5%||$2,268||$2,277||-0.4%|
|WisdomTree BofA Mrl Lynch HYBd NgtDr ETF (HYND)||ETF||5.0%||$2,081||$2,065||0.8%|
|ProShares Short S&P 500 (SH)||ETF||0.0%||$7,638||$7,860||-2.8%|
|ProShares Short Real Estate (REK)||ETF||0.0%||$3,160||$3,252||-2.8%|
|ProShares UltraPro Short S&P 500 (SPXU-OLD)||ETF||0.0%||$1,180||$1,287||-8.3%|
|T-Mobile US (TMUS)||Company||0.0%||($4,275)||($4,184)||-2.1%|
|SCHWAB ROBO-ADVISOR TOTAL||2.0%||$12,511||$12,282||1.9%|
|TOTAL + CASH||$16,558||4.7%||$287,545||$290,610||1.5%|
Portfolio Moves in November 2017
SHARE BUY – iShares MSCI China Small Cap ETF (ECNS): Bought 50 shares of this China Small Cap ETF at $50.05 on Nov 28.
- Reasoning: I was looking to add to my China exposure and this ETF boasts a yield over 3%.
SHARE BUY – KKR Real Estate Finance Trust (KREF): Bought 100 shares of this sponsored REIT at $20.05 on Nov 3.
- Reasoning: I had such a good experience with BXMT that I thought I would also get KKR’s version.
SHARE BUY – Omega Healthcare Investors (OHI): Bought an additional 200 shares of this medical REIT at $27.15 on Nov 15.
- Reasoning: Like a batter that can’t lay off the curve ball… I just can’t seem to get enough of this beaten down REIT (hopefully, one day, it will be able to turn things around).
SHARE BUY – Global X Nasdaq China Technology ETF (QQQC): Bought 100 shares of this China Technology ETF at $30.55 on Nov 7.
- Reasoning: I was looking to add to my China exposure and this ETF boasts a yield over 3%.
SHARE SALE– PowerShares Europe Currency Hedged Low Vol (FXEU): Sold all 100 shares of this European ETF at $23.85 on Nov 16.
- Reasoning: While I still love this ETF, apparently, I was the only person and they shut it down.
SHARE SALE– SPDR S&P Global Dividend ETF (WDIV): Sold all 50 shares of this international ETF at $68.55 on Nov 16.
- Reasoning: This ETF’s fees were too high versus its alternatives.
Hopefully, the equity train will keep up its momentum into 2018. I am going to remain heavily invested in this rally (but will continue to preference unloved sectors and stocks where I think momentum has not gotten valuations as inflated). However, I won’t abandon all my hedges and cash positions just yet as heartbreak generally follows investments this late in the cycle.
Disclosure: I am/we are long ALL STOCKS AS MENTIONED.
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: The author is an amateur who has a history of getting calls both right and wrong with zero predictive power. Trade at your own risk and never rely solely on this author's opinion. Also, as I have no knowledge of your circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.