Sand In My Shoes - February Update

Summary

• February was a tough month for equities and the Sand In Shoes portfolio was not immune to the market forces.
• The total value of my portfolio was down over 3% for the month of February.
• However, that was offset with the largest month, dividend-wise, I have had to date.

My IRA portfolio lost over $8,000 (3.1%) in value in the month of February, shaving off what I gained in January and then some. However, given that the S&P 500 lost 3.9% I am somewhat pleased by my decision to allocate a fair amount of my retirement money to fixed income instruments.

I made one addition to the portfolio during the month (Friday, Feb. 2) which has already rewarded me with a dividend. If you read my January update, you will know that I had planned on re-balancing because the fixed income funds had dropped well below my targets, and that was mostly caused by the fantastic month January was for equities. Well just as I was preparing to do that (on that next Monday the 5th), the Dow decided to plunge 1,175 points, or 4.6%, in that single day and caused me to take a step back and re-evaluate my desire to adjust my allocations. So I did not make any asset allocation moves, just purchased the lone stock and collected some dividends. Below I will detail them.

February Dividends

As I mentioned, February was a new record for my IRA portfolio, as I collected $215 for the month.

February Performance

A bit of a kick in the pants. All of my gains from January were erased in the very next month. ALL of the stocks I held on January 31 were down with the exception of two. Bank of America Corporation (BAC) was basically flat (up 0.3%) and Cisco Systems, Inc. (CSCO) was up 7.8% for the month after they reported excellent earnings, raised guidance, hiked their dividend, and announced further stock buy-backs. Everyone else was down 1% or more, with four stocks experiencing double digit pull-backs since January 31.

Below are the details of the portfolio's performance including the promised new YTD column.

Individual Stocks

Below is my updated list of stocks as of close of business on February 28th.

After this month and the thrashing that Omega Healthcare Investors, Inc. (OHI) took, their yield is up to almost 10%. And they announced a dividend freeze, which irks me greatly, but then again the yield is almost 10%. So what to do...?

Some stocks have come back down to earth after the beating they took in February, like Genuine Parts Company (GPC) and Magellan Midstream Partners, L.P. (MMP). Both were down more than 10% for the month and both look attractive again. I also said I would consider doubling my position in Realty Income Corporation (O) if it dropped below $50, which it has. Lots of interesting things to look at for March.

Projected Dividends

Projected dividends for the quarter now exceed $450.

That is not an error, PepsiCo Inc. (PEP) does pay a dividend in both January and March, but do not (or at least historically do not) pay a dividend in December. I think this will be the final number for Q1, as I believe all dividends have been declared.

Dividend Increases were announced for Home Depot, Inc. (HD) - 16%, GPC - 6.7%, and CSCO - 14%, though we'll only see the Home Depot dividend increase this quarter. GPC and CSCO will begin paying at their new rate in April. I'm very excited about all three increases.

Sector Diversification

With the addition of Apple Inc. (AAPL) my tech sector exposure is now where I want it at right around 10%. The materials and the industrial sector are still very underrepresented and I need to fix that. With the sell-off in February, there are actually a couple of names in those sectors that are of interest to me now and I might put some limit orders in and see if they get hit.

Consumer Discretionary	11.4%
Consumer Staples	8.5%
Energy	6.2%
Financials	22.5%
Health	13.0%
Industrials	3.7%
Materials	0.0%
REIT	10.0%
Technology	10.2%
Telecom	7.2%
Utilities	6.8%
Cash	0.3%
	100.0%

Click to enlarge

Asset Allocation of the Portfolio

So as I noted I did not make any attempt to re-adjust my asset allocation after the tremendous drop in the equity markets in early February.

IYY data by YCharts

You can see that the Dow Jones Industrial Average did recover somewhat from its 1,175 point drop, but even so my portfolio's allocation is just a hair away from me being uncomfortable. A slight rise in equity prices in March or a decline in fixed income instruments and I'll likely adjust the allocation in March.

Sales and Purchases in February

In order to purchase the shares of AAPL I had to sell a few more shares of my S&P 500 Index ETF. I still hold over $59,000 in that ETF, so there will be many more stock purchases, and as my dividend income grows I will have to sell less and less of it in order to make my purchases.

I received just over $1,400 on the sale of the S&P ETF shares and used the cash built up from my AT&T (T) dividend and a distribution from one of my fixed income funds to purchase 10 shares of AAPL for $1,639.95 ($163.50 per share). I definitely didn't catch the bottom, but AAPL was one of the few stocks I own that was up for the month.

Final Thoughts

When I simply consider the value of my overall portfolio I can't help but think that February was a tough month. Certainly just about anyone invested in common stocks will not be happy when they open their February statements.

However, when considering the dividends that I am receiving and expect to receive going forward it is still a little bit hard to not get excited about the progress. I am going to be close to $500 in dividends received in the first quarter of the year. Compare that to less than $150 in the first quarter of last year before I started this journey and you can see why I'm pretty happy.

As always, thank you for reading this and best of luck!

Analyst’s Disclosure: I am/we are long AAPL, AIG, AMGN, BAC, BLK, C, CSCO, CVS, GPC, HD, HRL, MMM, MMP, O, OHI, PEP, SO, T. 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.