Dividend Sensei's Portfolio Update 25: Invest Against The Crowd If You Want To Get Rich

Summary

• Another hard week for high-yield stocks especially: REITs, MLPs, and utilities created even more amazing buying opportunities.
• I discovered that one of my Canadian utilities was not in fact covering the dividend and so sold at a modest loss to head off a likely dividend cut.
• The capital went into filling out the rest of my Main Street Capital position and starting one in W.P Carey. Both were trading near 52-week lows.
• Pattern Energy and EPR Properties' post earning crashes also offered a chance to add to both at mouth-watering prices.
• This week there are 28 quality high-yield stocks to buy that are trading near 52-week lows (ultra value list).

Source: imgflip

First, let me be very clear that this is my personal portfolio tailored to my specific financial situation, risk profile, time horizon, and personality traits. I am not recommending anyone mirror this portfolio, which is merely designed to show my unique, rule-based, methodical approach to value-focused, long-term, dividend growth investing.

My situation is unique, as though only 31, I'm already retired (medical retirement from the Army), thus making this portfolio an income-focused retirement portfolio (though in a taxable account). I'm also working full time (self-employed) and thus have an external source of income to continually add to this portfolio. I do not plan to actually tap the portfolio's income stream for 20-25 years, when I plan to move my family (and help support my parents) to the promised land of my people (retired dividend investors): Sarasota, Florida.

What this portfolio can be used for is investing ideas; however, this portfolio includes high-, low-, as well as medium-risk stocks, so it's up to each individual to do their own individual research and decide which, if any, of my holdings are right for you.

For a detailed explanation of my methodology, please read my introductory article to the EDDGE 3.0 portfolio. However, keep in mind that the portfolio is not static, and both it and the underlying investment strategy will evolve and adapt over time. This is because a changing world, new knowledge, and more experience will cause me to fine tune it over coming years and decades to maximize my income and total returns.

Also to make it easier to digest, I've decided to try separating my weekly investment lesson/commentary from the actual portfolio update. This week's market commentary explains why, though terrible, a trade war isn't likely to kill the economy, or the bull market.

What Happened This Week

It was another bad week for high-yield stocks, a great one for my long-term contrarian value-focused strategy.

First off I should explain why I no longer believe in the safety of Crius Energy Trust’s (OTC:CRIUF) dividend after carefully examining the work of short Hindenburg Research. Yes, this article is a short attack, and some of the claims it makes are ad hominem attacks that have not been proven and thus bear no merit on my decision.

However, the accounting work this author does indicates to me that the dividend is potentially not safe but destructive return of capital. In addition after further investigation, I've determined that Crius's heavy exposure to the brutal merchant power business is not for me. It's too much like Just Energy Group (JE), another Canadian utility that enjoyed years of strong dividend growth, but then went on to cut numerous times.

Some people will harangue me for "falling for a short's lies" but in the past, I've found short articles to be highly useful. In fact, several have caused me to exit a position long before a dividend cut that sent the price cratering (like StoneMor Partners (STON) and Teva Pharmaceutical (TEVA)).

The sale freed up a lot of cash that I put too much better use, in low/medium-risk stocks. For one thing I finished off my full position in Main Street Capital (MAIN), which was fortunately still at 52-week lows. I had $600 left over to get started on the next new ultra value stock, W.P Carey (WPC).

Then at the end of the week, Pattern Energy Group (PEGI) and EPR Properties (EPR) announced earnings that I thought were solid, but the market disagreed. Both fell about 10% the next day, and I used the overreactions to add $500 to each.

Pattern's freezing of the dividend at current levels probably spooked the market. However, management hit its guidance of 100% CAFD payout ratio in 2017. More importantly, CAFD growth is expected to accelerate in 2018 (up 14% mid-range guidance), which should bring the payout ratio down to 90% to 100% (95% midrange).

That's on track for management's long-term plan to bring the payout low enough (80% to 85%) so that strong dividend growth can resume. I don't expect any growth for at least the next two to three years, but at a 10% yield, I don't need one to buy at these fire sale prices.

EPR Properties' drop was even more surprising, and caused by a lowering of 2018 AFFO/share guidance. The REIT finished the year with 98% occupancy, an average tenant EBITDAR/rent coverage ratio of 1.7 (strong tenants), and 4% AFFO/share growth. It recently raised the dividend for the 8th consecutive year (6%).

Next year even with very conservative guidance, (nearly no net investment), AFFO/share is expected to rise about 5.6%. And since management has a policy of keeping the payout ratio at 80%, this likely means we'll get a 5% dividend hike in 2018 (for 2019).

The bottom line is that both stocks suffered major market knee-jerk reactions. Precisely the kind that value investors like me enjoy taking advantage of.

Buys/Sells This Week

• Sold $3,600 Crius Energy Trust - 16% loss (0.4% of capital)

• Bought $3,000 Main Street Capital

• Bought $600 W.P. Carey

• Bought $500 Pattern Energy Group

• Bought $500 EPR Properties

Note that in order to take advantage of EPR and PEGI's drops, I had to borrow $1,000 against next week's incoming cash. I have no plans to continue doing that since earnings season is now largely over, and so don't expect more such opportunities to arise.

Tentative Plan Going Forward

Recently, I highlighted my new simplified weekly buying strategy. Basically, each week I take the cash coming in (from my high savings rate of about 85% post tax income) and then buy what's most on sale.

Since diversification is my goal right now, that means buying the highest-yielding ultra value stock (see list at end of article) that I don't yet have a full position in.

Due to borrowing against the cash I have coming in this week, I'll only be able to buy $1,250 in stocks this week. I've decided that in addition to diversifying via the ultra value list, I'll also be taking advantage of the dips in stocks I already own.

I plan to do that if a stock I own is down 10% or more, and I haven't recently added to it. Looking at my bottom 10 performers PEGI is the worst off, but I just added to it. So next on the list is Enbridge Inc. (ENB), so that's what gets this week's top off.

The new ultra value I'm adding to the portfolio is $750 into Chatham Lodging Trust (CLDT), which has jumped ahead of WPC this week. I've looked at the earnings and consider the recent crash overblown and I like the long-term growth prospects.

Chatham represents my 37th stock position and my first hotel REIT. While it doesn't provide sector diversification, it's nice to add yet another REIT industry to my portfolio. I now own REITs with exposure to: retail, infrastructure, data centers, storage, offices, industrial, and hotels.

Q1 Dividend Increases

• EPD +0.6% increase = + $1 per year

• CRIUF +3.2% increase = + $22 per year

• OHI +1.5% increase = + $6 per year

• O +3.1% increase = + $4 per year

• EQGP +7.0% increase = + $6 per year

• EQM + 4.6% increase = +$9 per year

• CNXM +3.6% increase = + $11 per year

• MPLX + 3.4% increase = + $9 per year

• D + 10% increase = + $8 per year

• SPG + 5.4% increase = + $8 per year

• BPY + 6.8% increase = + $13 per year

• BIP + 8.1% increase = + $11 per year

• MPW + 4.2% increase = + $15 per year

• QTS + 5.1% increase = + $7 per year

• CM + 2.9% increase = + $3 per year

Total Dividend Increases: $133 more per year

Portfolio's Trailing 12-Month Organic Dividend Growth: +8.3%

Dip Recommendation List

This list represents quality blue chip dividend stocks that are worth owning, but whose yields are just a tad under my target yield. However, a combination of company-specific dip plus a dividend increase could cause them to reach my target yield which would mean that I would snatch them up (get in while the getting is good). Bolded stocks are currently at or above their target yields.

1. STAG Industrial (STAG) - medium risk (unproven in recession), target 6% yield, current yield 6.2% (ultra value)

2. Bank Of Nova Scotia (BNS) - low risk, 4% target yield, current yield 4.2%.

3. Altria (MO) - low risk, target yield 4.0%, current yield 4.5%.

4. Crown Castle (CCI) - low risk, target yield 4.0%, current yield 4.0%.

5. NextEra Energy Partners (NEP)- low risk, target yield 4.0%, current yield 4.0%.

6. Pfizer (PFE) - low risk, target yield 4.0%, current yield 3.8%.

7. NextEra Energy (NEE) - low risk, target yield 3.0%, current yield 2.9%.

8. AbbVie (ABBV) - low risk (fast growing dividend aristocrat), target 3.5% yield, current yield 3.3%.

9. Royal Bank of Canada (RY) - low risk, 4% target yield, current yield 3.8%.

Correction Recommendation List

The correction list is the top five quality dividend stocks I want to own, that would likely require a broader correction before I can buy them. Bolded stocks are currently at or above their target yields.

1. Main Street Capital (MAIN) - low risk, target yield 7%, current yield 7.9%

2. Kimco Realty (KIM): - low risk, target yield 7%, current yield 7.3%.

3. W.P. Carey (WPC) - low risk, target 6% yield, current yield 6.7% (ultra value).

4. National Retail Properties (NNN) - low risk, target yield 5.0%, current yield 5.0%.

5. National Storage Affiliates Trust (NSA) - medium risk (unproven in recession), target yield 4.0%, current yield 4.5%.

Because corrections usually only last one to three months, I have decided that I will only maintain a list of five correction buy list stocks. Everything that doesn't make the correction list is thus shifted to the bear market/crash list.

Bear Market/Crash Recommendation List

Stocks whose yields are all 20+% away from my target yields.

Bear markets (20% to 39.9% declines from all-time highs) and crashes (40+% decline from all-time high) usually only occur during recessions and last from one to three years. Thus, they offer longer and stronger chances to load up on Grade A blue chips and dividend aristocrats/kings that are currently at frothy valuations.

My goal during a bull market is to buy stocks yielding only 4% or higher. This might sound counterintuitive, but it's actually not. That's because there is always something of quality on sale in some beaten down industry, such as retail REITs, or pipeline MLPs. Only during a market crash, will I allow myself to go as low as (but no lower than) a 3% yield.

That will allow me to pick up some truly high-quality and legendary dividend growth stocks - those in other sectors that are now closed to me due to high market valuations and low yields.

My current crash list is:

1. Public Storage (PSA) - low risk, target yield 4%, current yield 4.1%.

2. Exxon Mobil (XOM) - low risk (dividend king), 4% target yield, current yield 4.1%, Ultra Value (near 52-week low).

3. Chevron (CVX) - low risk (dividend king), 4% target yield, current yield 4.0%.

4. Genuine Parts Company (GPC) - low risk (dividend king), 3% target yield, current yield 3.2%.

5. Extra Space Storage (EXR) - low risk, 4% target yield, current yield 3.7%.

6. Boeing (BA) - low risk, 3% target yield, current yield 2.0%.

7. Johnson & Johnson (JNJ) - low risk, 3% target yield, current yield 2.6%.

8. 3M (MMM) - low risk, 3% target yield, current yield 2.4%.

9. Home Depot (HD) - low risk, 3% target yield, current yield 2.3%.

10. Microsoft (MSFT) - low risk, 3% target yield, current yield 1.8%.

11. Apple (AAPL) - low risk, 3% target yield, current yield 1.4%.

12. Amgen (AMGN) - low risk, 4% target yield, current yield 2.9%.

13. Toronto-Dominion Bank (TD) - low risk, target yield 4.0%, current yield 3.2%.

14. Digital Realty Trust (DLR): - low risk, 4% target yield, current yield 3.6%, (ultra value)

15. Target (TGT) - low risk, target 5% yield, current yield 3.3%.

16. Texas Instruments (TXN) - low risk, 3% target yield, current yield 2.3%.

17. Leggett & Platt (LEG) -low risk (dividend aristocrat), 4% target yield, current yield 3.4%.

18. Visa (V) - low risk, 1.0% target yield, current yield 0.7%

This list is now almost full (I'm capping it at 25 names).

The Portfolio Today

Source: Morningstar

Dividend Risk Ratings

• Low risk: High dividend safety and predictable growth for 5+ years, max portfolio size 10% (core holding, SWAN candidate).

• Medium risk: Dividend safe and potentially growing for next two to three years, max portfolio size 5%.

• High risk: Dividend safe and predictable for one year, max portfolio size 1.0%.

• Ultra High Risk: Dividend Cut is Likely in the next year or two (like WPG), max portfolio size 1%. Note that I personally do not invest in ultra high risk dividend stocks.

Safety Outlooks:

• Negative outlook: Fundamentals of industry and/or company are deteriorating, rising risk of safety downgrade. If turnaround story, turnaround unlikely to succeed

• Stable outlook: Fundamentals are stable, or if in turnaround management plan seems likely to work, risk of safety downgrade low.

• Positive outlook: Fundamentals are strong and rising

High-Risk Stocks

• Uniti Group (UNIT) - negative outlook (turnaround not likely to succeed)

• New Residential Investment Corp. (NRZ) - positive outlook.

• Omega Healthcare Investors (OHI): Due to ongoing downturn in SNF industry - stable outlook (confidence in turnaround plan).

Medium-Risk Stocks

• Pattern Energy Group (PEGI): Will be upgraded when payout ratio declines under 85% - positive outlook.

• QTS Realty (QTS): Stable outlook

• Tallgrass Energy Partners (TEP): Due to short-term (3 year) nature of contracts - stable outlook.

• Tallgrass Energy GP (TEGP): Stable outlook.

• Medical Properties Trust (MPW): Due to long-term uncertainty surrounding medical REITs - positive outlook.

• EPR Properties (EPR): Due to exposure to cinemas (declining over time) - positive outlook

• Chatham Lodging Trust (CLD): due to volatility of hotel cash flow - stable outlook

Low-Risk Stocks

• Enterprise Products Partners (EPD) - stable outlook

• MPLX (MPLX) - stable outlook

• AT&T (T) - stable outlook

• Tanger Factory Outlet Centers (SKT) - negative outlook

• EQT Midstream Partners (EQM) - stable outlook

• Brookfield Property Partners (BPY) - stable outlook

• TransAlta Renewables (OTC:TRSWF) - stable outlook

• Simon Property Group (SPG) - stable outlook

• Enbridge (ENB) - stable outlook

• Realty Income (O) - stable outlook

• EQT GP Holdings (EQGP) - stable outlook

• Brookfield Infrastructure Partners (BIP) - positive outlook

• Dominion Energy (D) - stable outlook

• STORE Capital (STOR) - stable outlook

• Canadian Imperial Bank of Commerce (CM) - stable outlook

• Telus (TU) - stable outlook

• Ventas (VTR) - stable outlook

• Iron Mountain (IRM) - stable outlook

• CNX Midstream Partners (CNXM) - stable outlook

• Antero Midstream Partners (AM) - stable outlook

• Antero Midstream GP (AMGP) - stable outlook

• Spectra Energy Partners (SEP) - stable outlook

• W.P. Carey (WPC) - stable outlook

Back to deleveraging mode, as I wait for the potential correction retracement. My focus is on more diversification to crash-proof my portfolio against the next recession.

My portfolio began with five stocks, all medium to high risk, in two sectors. Right now, I'm up to 36 stocks, mostly low-to-medium risk, in six sectors. By next week, I'll be up to 37 holdings in six sectors. The goal by year-end is 45 to 50 stocks in six to seven sectors.

The Morningstar holdings graphic is capable of showing my top 50 positions. However, my long-term goal is 200 stocks, which I estimate will take about 10 years to accomplish (barring a bear market).

Top 10 Dividend Sources

1. Tallgrass Energy Partners: 6.6%

2. Pattern Energy Group: 5.8%

3. Uniti Group: 5.5%

4. EPR Properties: 4.4%

5. Omega Healthcare Investors: 4.4%

6. New Residential Investment Corp: 4.2%

7. Enterprise Product Partners: 4.2%

8. Medical Properties Trust: 4.2%

9. CNX Midstream Partners: 3.6%

10. Brookfield Real Estate Services: 3.6%

11. Everything Else: 53.5%

The ultimate goal is to diversify enough to ensure no stock represents more than 5% of my income. That's to ensure that in a worst-case scenario in which one of my holdings' investment thesis breaks, my overall dividend income will be minimally affected.

However, because I weight by yield, this may take a few months before I can grow and diversify the portfolio enough to accomplish this.

I've decided to lower my dividend risk caps on high risk stocks to 1%. That means that I won't be adding to UNIT, NRZ, or OHI going forward. At least not until I can grow the portfolio sufficiently to get them down to 0.75% each.

Source: Morningstar

The portfolio has become far more diversified by stock style, especially compared to the early days when it was pretty much 100% small cap value.

Over time, I plan to use Trapping Value, the Canadian high-yield guru, as a source for lots of Canadian high-yield investments. Combined with some quality Canadian banks, I will have plenty of exposure to non-US holdings. Of course, the overall international exposure will be rather limited because I only own stocks with a history of stable or rising dividends. The variable pay nature of most foreign dividend stocks means they don't fit my needs.

Fortunately, over time, owning many blue chip multinationals will still mean I'm benefiting from an international dividend empire. For example, CM has large overseas and emerging market exposure. Meanwhile, future dividend aristocrat additions like MMM and MDT also do a lot of business overseas, as does BA.

Once we experience a market crash, I'll be able to further diversify by style and market cap when I add numerous growth stocks and blue chips to the portfolio.

Source: Morningstar

My portfolio is made up of three core sectors, all currently highly rate sensitive (I'm okay with that since rate sensitivity is a short-term phenomenon):

• 42% REITs

• 32% Pipeline MLPs

• 13% Utilities

Utilities will eventually increase a bit as I plan to add several more including NEP, NEE, BEP, EMRAF, and TERP. These are the only utilities I plan to own because most stocks in that sector have insufficient growth rates for my goals.

I'll have to wait until the next market crash (whenever that is) to add most of my remaining sectors. That's because I can't use margin until a correction starts, and even then I am going to be very conservative with taking on leverage.

That's not just to avoid overleveraging the portfolio to dangerous levels but also because IBKR margin rates are pegged to the Fed Funds rate, which is steadily rising. My goal for every dollar borrowed is to have a minimum net yield spread (yield minus margin rate) of 1%.

Since a correction is likely to strike when rates are high, this means I will be limited to buying a modest number of high-yield stocks during that time. Only during the next recession will margin rates drop low enough to make it profitable to buy lower-yielding (3%) blue chips and growth stocks.

Source: Simply Safe Dividends

Projected Portfolio Dividends Over Time

Time Frame	Inflation Adjusted Total Annual Portfolio Net Dividends
5 Years	$9,995
10 Years	$12,757
15 Years	$16,282
20 Years	$20,780
25 Years	$26,521
30 Years	$33,849
40 Years	$55,137
50 Years	$89,812
100 Years	$1,029,917

Click to enlarge

Sources: Simply Safe Dividends, Dave Ramsey Investment Calculator, Morningstar

Keep in mind that this table only takes into account organic (stock level) dividend growth. It doesn't consider fresh savings I'm adding over time, nor that I reinvest my dividends. In fact, at my current savings rate, I estimate that within 13 years, I'll hit $100,000 per year in net dividends.

Still, it's an impressive thing to see just how powerful compounding can be, especially since these figures are in today's purchasing power (inflation-adjusted). I use a 7% long-term dividend growth estimate and a 2.0% inflation estimate.

Over time, as I diversify my portfolio, the long-term growth rate will likely fall to about 7% to 8%. This is my long-term goal representing 4.5% to 5.5% inflation adjusted income growth. Ultimately, the goal is to build a highly diversified, low risk 5% yielding portfolio with a 7% dividend growth rate that should generate about 12% unlevered total returns (9.5% inflation adjusted total returns).

In perspective, the S&P 500's 20-year median annual dividend growth rate has been 6.2%. So, the goal is to about triple the market's yield, with about 1% faster dividend growth. Since 1871, the S&P 500 has generated annual total returns of 9.1%. The market's historical inflation adjusted total returns has been 7.0%

Thus, the idea is to prove that a high-yield dividend growth portfolio can easily beat the market over time. That is if the individual holdings are all above average or excellent quality.

Portfolio Stats

• Holdings: 36

• Portfolio Size: $123,300

• Equity: $93,477

• Remaining Margin Buying Power: $223,006

• Margin Used: $30,005

• Debt/Equity: 0.32

• Dividends/Interest Ratio: 9.9

• Distance To Margin Call: 59.9%

• Current Margin Rate: 2.92%

• Yield: 7.1%

• Yield On Cost: 6.7%

• Yield On Equity Cost (net yield on cash I have invested): 7.8%

• Cumulative Total Return Since Inception (Since September 8th, 2017): -9.3%

• Cumulative Unlevered Total Return Since Inception: -5.9%

• Year To Date Unlevered Total Return: -10.0%

• Annualized Unlevered Total Return (YTD 2018): -48%

• Unrealized Capital Gains (Current Holdings): $-6,361 (-5.1%)

• Cumulative Dividends Received (including accrued dividends): $6,355

• Annual Dividends: $8,708

• Annual Interest: $876

• Annual Net Dividends: $7,832

• Monthly Average Net Dividends: $653

• Daily Average Net Dividends (my business empire never sleeps): $21.46

Source: Simply Safe Dividends

• Portfolio Beta (volatility relative to S&P 500): 0.69

• Projected Long-Term Dividend Growth: 7.0%

• Projected Annual Unlevered Total Return: 13.7%

• Projected Net Levered Annual Total Return: 17.2%

10 Worst-Performing Positions

Stock	Loss	Cost Basis
PEGI	-16.2%	$20.39
ENB	-16.1%	$37.53
AMGP	-15.9%	$21.98
IRM	-14.9%	$37.09
AM	-13.5%	$30.41
HASI	-13.3%	$20.80
AQN	-10.8%	$11.10
D	-10.3%	$72.50
TRSWF	-9.9%	$13.00
UNIT	-9.1%	$16.19

Click to enlarge

Source: Interactive Brokers

Another rough week for high-yield stocks. However, it does appear as if we've finally bottomed, at least where REITs are concerned. REITs interest rate sensitivity seems to be abating and they are now going up even on down market days.

10 Best-Performing Positions

Stock	Gain	Cost Basis
CNXM	9.7%	$16.42
BREUF	9.4%	$16.50
T	7.7%	$33.71
MPW	3.1%	$12.31
EPD	2.7%	$24.49
NRZ	0.8%	$16.36
SKT	0.3%	$22.64
MPLX	-0.1%	$34.60
SPG	-0.20%	$155.79
WPC	-0.3%	$60.31

Click to enlarge

Source: Interactive Brokers

Pretty impressed with how BREUF has held up during a time when all high-yield stocks have suffered. Brookfield does good work, so I thank Trapping Value for bringing this gem to my attention.

Ultra Value Stocks Worth Buying Right Now

While I may be tapped out of additional buying power, that doesn't mean I'm not always on the hunt for quality, undervalued dividend growth stocks.

So, here are the ones I recommend you check out. They are all near 52-week lows, and I would buy them (if I had the capital) at this time because I am confident they can generate long-term 10+% (unlevered) total returns.

Note: Buy indicates I believe a stock is a good investment right now, while Strong Buy means I consider the company to be a Grade A industry leader (and a safer company) trading at particularly excellent levels.

I also include the dividend risk ratings for each stock:

• Ultra-low risk: (Limited to ETFs with proven histories of steadily growing dividends over time), max portfolio size 15% (core holding).

• Low risk: High dividend safety and predictable growth for 5+ years, max portfolio size 10% (core holding).

• Medium risk: Dividend safe and potentially growing for next two to three years, max portfolio size 5%.

• High risk: Dividend safe and predictable for one year, max portfolio size 2.5%.

Note also that I only include low to medium risk stocks on the UV list.

The stocks are in order of highest to lowest yield:

• Tallgrass Energy Partners GP (TEGP): 9.1% forward yield (Q2 2018), owns Tallgrass Energy Partners (TEP) IDRs, rumors of it buying out its MLP have sent it down to mouthwatering levels, 33% payout increase planned over next 2 quarters, medium risk, buy

• Spectra Energy Partners (SEP): 7.6% yield, one of the lowest risk business models in the industry (zero commodity exposure), world class management team (from Enbridge), low risk, strong buy

• Iron Mountain (IRM): 7.5% yield, dominant industry leader that's diversifying into data centers. Excellent low risk business model and solid 4% to 5% dividend growth potential, low risk, strong buy

• Chatham Lodging Trust (CLDT): 7.3% yield, monthly payer, top quality hotel REIT that's been beaten down something fierce since earnings in which guidance disappointed the street, medium risk, buy

• W.P. Carey (WPC): 6.7% yield, world class diversified triple net lease REIT. Excellent management team, major growth catalysts in next few years to drive dividend growth, low risk, strong buy

• Enbridge (ENB): 6.6% yield, the Berkshire of midstream, excellent management team, set to become a dividend aristocrat in 2020, with 10% dividend growth until then, low risk, strong buy

• EQT Midstream Partners (EQM): 6.5% yield, excellent payout coverage, one of the lowest leverage ratios in the industry, and excellent long-term growth prospects, low risk, strong buy

• Ventas (NYSE:VTR): 6.3% yield, SWAN blue chip, best in class management, low risk, Strong Buy.

• STAG Industrial (STAG): 6.2% yield, monthly payer, fast growing industrial REIT with a profitable niche focus, medium risk, buy

• Brookfield Property Partners: 6.2% yield, this real estate LP is run by Brookfield Asset Management, the world's top name in hard assets. Concerns over potentially overpaying for GGP have caused it to fall to 52-week lows. However, with 5% to 8% long-term dividend growth (guidance), today is a great time to take a contrarian approach and pick up this low risk, Strong Buy

• LTC Properties (LTC): 6.0% yield, paid monthly, very well run SNF/Senior Housing REIT, (55% private payer). 5% long-term dividend growth potential, 10% total return potential, medium risk, buy

• Magellan Midstream Partners (MMP): 5.8%, premier blue chip MLP, proven management team, industry-leading balance sheet, strong payout coverage, low risk, strong buy

• CareTrust REIT (CTRE): 5.6% yield, spin off of Ensign Group (ENSG) Group SNFs. Super strong tenant coverage, excellent growth, and 62% FAD payout ratio means one of the top SNF REITs in America, medium risk, buy

• Antero Midstream Partners (AM): 5.6% yield, fastest growing high-yield stock in America. Excellent coverage, fortress balance sheet, 30% payout growth guidance, low risk, strong buy

• Summit Hotel Properties (INN): 5.6% yield, small but high-quality select service hotel REIT. Strong balance sheet and one of the lowest payout ratios in the industry make for a secure dividend. - medium risk, buy

• Shell Midstream Partners (SHLX): 5.4% yield, Shell's (NYSE:RDS.A) (NYSE:RDS.B) midstream MLP, enormous long-term growth potential, medium risk, buy.

• Valero Energy Partners (VLP): 5.2% yield, Valero's MLP, 25% growth in 2017, and guidance for 20% in 2018, medium risk, buy.

• Simon Property Group (SPG): 5.0% yield, gold standard of Class A malls, excellent 2017 results, strong 2018 guidance, 5% to 6% long-term dividend growth potential, low risk, strong buy

• Dominion Midstream Partners (DM): 5.0% Dominion Energy's (D) MLP, 20% payout growth through 2020, low risk, strong buy

• Monmouth Real Estate (MNR): 4.8% yield, fast growing industrial REIT with a proven track record of over 50 year. - medium risk, buy

• Dominion Energy: 4.6% yield, second fastest regulated utility in America, 10% dividend growth through 2020, 5% after that, low risk, strong buy

• Mid-America Apartment Communities (MAA): 4.3% yield, top quality Apartment REIT with proven track record of dividend safety (maintained payout during financial crisis). Strong balance sheet (BBB+), very low payout ratio (64%) and recent large scale acquisitions means safe and steadily growing payout, low risk, strong buy

• EQT GP Holdings (EGQP): 4.2% yield, EQT Midstream's sponsor, beaten down over concerns about the pending (accretive) acquisition of Rice Midstream. - low risk, strong buy

• Exxon Mobil (XOM): 4.1% yield, dividend aristocrat and gold standard of integrated oil giants, low risk, strong buy

• Digital Realty Trust (DLR): 3.8% yield, solid blue chip SWAN of a data center REIT, excellent growth catalysts, low risk, strong buy

• AvalonBay Communities (AVB): 3.8% yield, one of the best apartment REITs in America, finally on sale. - low risk, strong buy.

• Procter & Gamble (PG): 3.5% yield, low risk dividend king, undergoing second phase of major turnaround to restore it to stronger growth. Analyst estimate is for 7.6% dividend growth over the next decade, but I'd be happy with 7% as it would hit my 10% total return target, low risk, strong buy

• Essex Property Trust (ESS): 3.1% yield, one of America's best run, and fastest growing apartment REITs. Proven dividend track record (becomes a dividend aristocrat in 2019). - low risk, strong buy

Bottom Line: Don't Curse The Market For Falling Stocks, Rejoice In The Buying Opportunities

Some readers truly don't believe me when I say that I'm not looking for short-term profits. That's fine, it's why I do these updates, as a real time investment journal to show not just my weekly buys/sells but my overall approach.

It's certainly been a painful six months, at least from the perspective of most REIT-heavy portfolios. However, having invested through three crashes in my lifetime, I am comfortable with enduring a 12 to 24 months of pain, for the rich long-term gains that I know are coming.

Heck during the oil crash, I spent 18 months piling into blue chip MLPs like EPD, MMP, and SEP. Oil prices crashing 76%, interest rates rising 1%, and the first correction in four years all came together for a perfect storm of falling prices.

However, I happily kept buying throughout, never wavering in dedicating to contrarian value investing. Today that portfolio (I lost it in my divorce) would have generated 29.1% annualized total returns compared to the S&P 500's 9.1%. That's over a period of 40 months. So you see this investment strategy works fabulously IF you have the patience, discipline, and sheer grit to gut it out during sector downturns.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I am/we are long EPD, TEP, PEGI, CNXM, MPW, MPLX, BREUF, EQM, AM, OHI, T, O, TRSWF, IRM, SKT, BPY, VTR, STOR, BIP, SPG, UNIT, ENB, NRZ, EQGP, TU, CM, AQN, D, AMGP, SEP, TEGP, QTS, EPR, CLDT, WPC. 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.

Comments

[MTB60]

I wonder why you don’t buy a low cost ETF unless you do this for fun. I hope you are using a no cost broker for your trades. Don’t get me wrong I do similar and have a portfolio of nearly 200 stocks, but I am a bit of a stock geek. Some of my positions have grown to more than 5% cause I haven’t wanted to sell. I like being able to managed taxes more selectively by holding individual stocks.
Happy investing , you seem to have a sensible strategy!

[Dividend Sensei]

Indeed I'm a total stock geek. It's about the system for me, not the indivual stocks.

I savor the methodology, which is why I spend about 3.5 to 4 hours each week doing my portfolio updates.

It's my investing journal. That way I can always go back to see what I was thinking at the time, in case I should forget.

[Mike,]

I would like to say this again there are so many MLPs out there that are undervalued the whole sector is don’t rush pick a good one with a management you can trust there’s no reason to take such risk etp is overcharging for risk 8n the MLPs sector

[Dividend Sensei]

Well I don't necessarily agree in regards to ETP. Then again I no longer own it and my sector caps won't allow me to repurchase it.

It will take me several months of utes/other sector buying before I can buy another MLP. MMP would be my pick. Assuming its still at 52 week lows.

[Mike,]

You should thank god that you can’t buy etp

[Dividend Sensei]

I tend to get lucky that way. Something bad happens and it seems terrible but ends up being for the best.

Like the tax shock that forced me to de-leverage...right before the correction struck.

Now the FERC ruling forcing me to diversify and also likely locking me out of margin until next recession.

You need to be both smart and lucky. I am both.

[Mike,]

Dividends also force management to be slightly more responsible and conservative with money as people now start examining payout ratio which makes things easier for most my start fo an ok div stock is below 85% payout with above 5% div with a modest growth each of these variables change based on the others for ex I’m more then happy to buy certain stocks with 10% div with little or almost no growth but generally if your not growing your dying

[Dividend Sensei]

Indeed that is the case. You can't make crazy gambles when you are famous for the dividend.

[Mike,]

I mean a very visible 10 pe

[Dividend Sensei]

I hear you. It's what I like about pass throughs. Business models are so simple, relative to some other industries.

Biotech? Talk about a black box of complexity!

And then there's tech. So hard to model that. Some high growers fall off a cliff. Others like MSFT pivot and suddenly take off.

It's why I like dividends. At the very least as long as I'm getting paid, and the dividend grows at 10% a year over time, then management can do what it likes.

[Mike,]

Nflx will have so much competition that it cannot possibly continue growth at that rate besides it gets to the point of market saturation but their own content does help however appl may very well get the appl users because of premium placement and amzn will get prime some will pay for all because of certain conten but then we have Disney fox nbc all vying for that nflx should at a pe of around 50 also more competition will make margins less and other companies such as appl are really doing it to get you do buy the phone and not to profit kind of like amazon marketplace so don’t believe that growth will continue for 10 yrs but they have great management

[Dividend Sensei]

Yes and no.

It depends on whether they can recreate their success in other countries.

If NFLX can end up in 33% of the world's households? Then it will eventually make today's share price seem like a bargain.

[Mike,]

Really, come on even amazon has ha4d time replicating success in other countries home field advantage

[Dividend Sensei]

True, NFLX has done well in Europe but I doubt they will be able to replicate the US everywhere.

SBUX is killing it in China, but in most of the world? They are struggling.

[Mike,]

Ok I just really have to believe a 10 pe is in sight not really a specific time table depends how much I like the stock and one years growth can be very different then another I’m long mtch which has 28 pe but I’ve been long for a yr when pe were lower and price was 17 it’s my biggest winner unfortunately I have equal losers but that’s because sometimes I enjoy speculating but now try to keep that a minimum at my portfolio as my earnings go higher and speculations remain the same it becomes smaller %

[Dividend Sensei]

Interestingly enough I just read an article on NFLX that projects $30 PE in 2017.

So that's 11 times earnings in 10 years. That's how overvalued NFLX is right now.

TTM PE of 255. Up 80% YTD after rising 55% last year.

I love the service, management, and the potential.

But NFLX today is CSCO in April 2000.

[Mike,]

One of the ways I like to think of stocks is when will they be a pe of 10 on price I bought it for. Example a company with pe of 20 growing at 30% will be 10 in 3 yrs or even stocks that will be a pe of 10 in 5-7 years as long as I see a visible path there like last yr I bought mtch and have my eye on bofi wich is now trading 18 pe but growing around 20% a yr possibly lc but I think that one is very speculative as there will be more and more competition and hard to judge market saturation another is if div is over 5% and payout ratio is lower then 85% then it is considered for me a conservative buy such as T and bep also see if I believe companies with higher risk can bring it down to 65% in visible future without any raise I hate when companies up dividends more then nesscary to prove they’re stable though had ohi froze their dividend a yr ago I would have jumped on the stock dividends are not meant to prop stock price and sometimes cause you to overpay for stock

[Dividend Sensei]

That is a very interesting approach. As you say if the growth trajectory is predictable enough than even modestly high PE stocks can be good buys.

Benjamin Graham had a rule of thumb for PE.

Growth rate X 2 + 8.5 = fair value PE

So something growthing at 10% a year would be worth 28.5 PE.

Growth rate is for next 7 to 10 years.

So theoretically if a stock could grow 100% annually for a decade then it's worth buying at a PE of 208.5 or less.

Amazon? Priced for about 113% annual growth over the next decade.

So that's a bubble.

But 20% growth? Well than the father of value investing would say that 48.5 PE is ok.

[jhod58]

DS, thoughts on PRU?

[Dividend Sensei]

A fine company. Good yield, 24% undervalued, and safe and fast growing dividend.

If it hits my UV list I will certainly consider buying it, assuming there's nothing better yielding ahead of it that I don't yet own.

[jhod58]

Do you think SPG can weather the ecommerce storm?

[Dividend Sensei]

I do indeed. Wouldn't own them if I didn't have confidence in management.

Unlike SKT they appear to continue growing strongly and have double digit lease spreads. Can that hold up over time? Maybe, maybe not. It's something I watch closely.

Strong economy should put the wind at their tenants backs though.

[Dabqs]

Dividend Sensei,

Why is there a 15% withholding on the dividend distribution if BEP is held in a taxable account and the account holder is an American citizen?

Other MLPs, such as pipeline MLP's do not withhold a percentage of the dividend distribution if held in a taxable account of an American citizen.

What is the difference with BEP?

And is there a way to (hopefully easily) get the 15% that was withheld from the dividend distribution returned to the account holder? If so, how?

And why is BEP LP safe to hold in an IRA of a US citizen but pipeline MLP's are not due to the UBTI income?

Thanks again for your clarification.

Dabqs

[Dividend Sensei]

Not sure, but I imagine it's to do with the unique structure of BEP.

It's an LP whose assets are themselves LPs.

And since BAM is Canadian I assume that explains the 15% withholding.

Not ideal, but still worth owning.

[Dabqs]

Dividend Sensei,

I'm interested in Brookfield Renewable Partners LP (stock symbol BEP), and assume that the K-1 and Withholding, if any, would be identical to the two Brookfield LP's that you own.

Dabqs

[Dividend Sensei]

Yup same rules apply.

Taxable = 15% withholding and K1.

Retirement = no withholding and K1 but that becomes irrelavant until you sell.

[Dabqs]

Dividend Sensei,

Are you an American citizen? My question pertains to your two Brookfield LP's and the K-1's you receive and whether Brookfield or your American brokerage firm WITHHOLDS a portion/percentage of your dividend distribution from these two LP's if you are an American/US citizen? Brookfield is based in Bermuda but it is a Canadian company. And are these LP's safe to hold in IRA's as I think Brookfield states or is there the risk of UBTI income that can make for a problem to hold in an IRA for a US citizen?

Thanks for your input and clarification.

Dabqs

[Mike,]

Of course he’s a us citizen he served our country

[Dividend Sensei]

Indeed I am.

If you hold in IRA then you don't get any distribution withheld.

[Dividend Sensei]

Nationalized on October 13th, 1997.

[User 29329365]

As a novice investor I'am interested in investing with MLP's but concerned about accounting problems and should they be in retirement accounts or non retirement.

[Dividend Sensei]

Non retirement.

[Vandooman]

Have to say your investments look like a junk bond portfolio. I have some of your stocks but follow Warren Buffet's maxim that is it is better to pay a fair price for a great company. Very few of your investments are great companies. Some I wouldn't touch with a barge pole. I consign the high yield stuff to 30% max and REITs to 20%. Some of the stocks in your crash list are great companies and some are certainly not, with narrow moats. Over time great companies will prevail. A few will decline and you dump them.

Some great companies: HD, PPG, MMM, MSFT, SNA, ITW, BA, HON, ADP, UPS, NEE, CSCO, DIS, DOV, FB, INTC, SYY, V, MA, and TXN. Toss in AAPL, AMZN and GOOG for speculation. Back up the truck after any crash.

Good luck in any case. I have perhaps 50 times the amount at risk that you do so that changes the perspective but I didn't get there the way you plan to, other than having a high savings rate. Looks more like wild speculation than investing.

[Mike,]

He didn’t say you should buy non premium company just out of favor even buffet said he picked up apple in the minor correction were the stock went down to 150

[Dividend Sensei]

I agree your crash list is very nice. Mine has many of the same names and I'll be adding more over time.

Time will tell if I'm gambling or investing.

I've certainly become a lot more conservative as the months have gone on.

Far more risk focused.

[Dividend Sensei]

Buffett and BRK are an interesting duck.

On one hand I like that Todd and Tedd have broadened his horizons beyond his traditional comfort zone.

Apple is a great cash rich blue chip, with enough cash to keep raising dividend 10% a year, likely for decades.

And buying on the recent dip was smart.

But many other recent purchases are head scratchers. Teva and SIRI? Definately not traditional Buffett stocks.

Then again Todd and Tedd now run $25 billion for BRK and apparently have proven themselves so Buffett is giving them more resources and a longer and longer leash.

That's what I like about him. Doesn't micromanage people.

Finds the best minds, let's them do their thing.

[Mike,]

Wouldn’t encourage people to do that never borrow money at 20% to invest unless your wages will cover it next month and you see an extremely good deal and even then think twice and be ready to lose your bet

[Dividend Sensei]

I'm assuming he got an intro offer at super low rate.

Back in the day you could get 0% for up to 2 years.

My dad used that when MMA was 4%.

Borrow $20K, still in MMA, earn $1600 in free money.

Golden age when rates were "high" by today's standards.

I've heard tell of MMA at 8% back in the 80's.

[Mike,]

Still could with chase slate but still don’t think it’s ever worth borrowing on credit cards unless you have a clear plan to pay it back that does not include the stock market as two yrs pass in short time and that interest on cards compound way to fast

[Dividend Sensei]

Agree 100%. Credit cards are for convenience, never for credit.

I always pay mine off each month in full.

The problem is that even 0% intro offers are a variable rate loan.

After 18 months they go to 22%. That means that you have to have perfect timing and a lot of luck to pull that off.

If you buy the perfect stock, at the perfect price, but it still goes down? Well then you can end up losing a lot of money.

It's why I also avoid speculating in options (such as buying puts or calls for leveraged bets on short-term price action).

In the short-term the market has no need to be rational. Only in the long-term does Wall Street make sense.

[Mike,]

Best is stocks that market haven’t touched either way and are not indexed so they won’t crash with index long BX

[Dividend Sensei]

Actually the best are the ones that are down a lot already and not heavily indexed. That way if market crashes they fall less (in a crash most stocks will still fall) but without index connection they fall less.

My beta is about .7. That held up during correction.

Now we're seemingly trading sideways so not movement either way. Up 4 days in a row, not huge gains, but a little each day.

Meaningless of course, but I love a good winning streak and so hope it continues. As long as I have something cheap to buy (and I always will) I can't lose in the long-term.

[Mike,]

Granted but that’s reared unless there’s a real reason for fear and markets sometimes tend to be vindicated as opposed to things that have good reason why market can’t touch them ie bx cannot be held with most hedge funds because they want to be known as tax friendly and can’t be owned by almost every index beside Alerian and in a crash they will buyback their stock at a super fast pace as even now if they wished they can buyback 2% a yr with cash after dividends if stock goes down it will only propel in the long turn and I believe there’s a limit to selling things not in indexes and generous cash flow will keep stock up even in crash which is great if you’re buying on margin the stocks I buy on margin have slightly different criteria the base stock currently I am still testing a margin portfolio with ibkr

[Dividend Sensei]

I have the same approach. I have different rules and criteria for buying stocks on margin vs with cash.

Besides the timing (leverage up only in a broad market downturn), I don't buy low yielding stocks on margin.

One day I'll own plenty of low yielding fast growing stocks. But even when I buy in a crash it will be with cash.

Or if things get crazy enough, then I'll buy something like V, MA, TJX, ROST on margin, and then pay it off ASAP.

Even if margin rates plummet to 1.75% in the next recession you can't get a positive net yield spread if you borrow to buy a 1% yielding stock.

[Gerard Kaman]

Enjoyed the article. I started out investing using the cash available on my credit cards. As the portfolio grew and constantly reinvesting I started selling off parts of my portfolio to buy new holdings. The past 20 years I use only my dividends or money from stock sales to buy new shares. Reinvesting adds new shares every month. Dividends for 2017 = $12629.

[Dividend Sensei]

That's the approach my friend took too. He borrowed $150K at 0% interest for 18 months.

Invested it into deep value dividend portfolio.

I wish him the best of luck. He's been at it for about 14 months and has 4 more to go.

Was up about $75K at one point, then correction + interest rate spike clobbered him, now back to break even.

Risky, risky move. His plan is to cash out at end of June, pay off CCs, and then be 100% cash basis after that.

I'm rooting for him, since he's my friend and my portfolio is similar to his.

[Mike,]

I wish everyone luck doesn’t mean though you shouldn’t reprimand him for his stupidity maybe he should put it in 1 yr gov bond or high interest saving though I understand it’s not as exciting

[Dividend Sensei]

I have done so. Not brow beating him of course, but I pointed out the high risk nature of the strategy and have been warning him frequently.

Ironically enough his overall portfolio is highly conservative and his experience has made me a lot more conservative in my own approach.

As the saying goes, "the best approach is to learn from the mistakes of others".

Far less costly that way.

[devlau20]

I understand your goal, but not how you plan on achieving it. You look for increased dividends in stable companies, but where you indicate dividend increases, in many cases it's only because the price of the stock has dropped. Why would anyone buy REITs in today's environment of projected rate increases for at least the next 2 years? They are VERY RATE SENSITIVE. Sure the dividends looks more & more enticing, but the dividends are continuously negated by the precipitous drop in price. REITs are in the process of bottoming out. The cycle will last for the foreseeable future. More of a concern is that most REITs have been returning capital as part of the dividend. In order to artificially maintain the dividend, they have nowhere else to go. The tax consequences are gargantuan. You invest already taxed income. A portion of your own money is returned to you (hidden in the dividend) as "income other than dividends" and you are taxed a second time at your full tax rate, not the lower dividend rate. Then third, another bite is taken out by the IRS on the dividend itself. Do the math. REITs that do this show a hefty dividend, but after taxes you're lucky to make 2%. The tariff trade war insanity will also now force even more inflationary pressures and more rate increases (or at least greater ones than were projected just a month ago). This spells big trouble for all REITs. Why are you suggesting anyone buy a REIT earlier than 2020?

[petektf]

I own a little bit myself, for the sake of diversification. I also reduced my holdings...planning on getting rid of 1 more.

[Dividend Sensei]

1. rate sensitivity is cyclical and mean reverting.

That means that, even in the QE era, it comes and goes. Sometimes REITs are very rate senstivite and other times beta to yield goes negative (it cycles between -0.5 and 0.5).

2. I don't try to guess when bottoms come. If the valuation is right (good margin of safety) then I'll buy. If it falls some more I'll add some more as long as fundamentals hold.

3. Dividend increases are not from falling prices. Once you buy a stock your YOC is fixed. At least until the dividend increases.

Note all the dividend raises I've been getting. That's my focus, at least the long-term 7% goal.

I want to achieve 5% yield with 7% long-term dividend growth.

So far I'm at 6.7% and 8.3% on those variables. Ahead of target but of course I still have a lot more diversifying to do.

Counting on the UV approach (buy what's most on sale) to keep my yield up and let me add some faster growers over time.

[Dividend Sensei]

Which individual REITs do you own? Which 1 do you plan to sell?

[rlp2451]

Re: PEGI, you state:"PEGI being the perfect example, headline screams "MISS!" but if you actually read deeper, you see production is up, forcast for coming years is way up, debt expense is coming down, new projects are high margin, hugh dividend is safe and low PE caused by depreciation write down.."

One thing you missed about also being up is the share count, increasing 15% every year and almost doubling since the IPO, without corresponding increasing FCF to pay the dividends on the new shares (let alone the existing ones.) "Safe dividend?" hardly. Interest expense has been increasing $1MM every quarter.

[Dividend Sensei]

Sure debt is rising, because that's part of the business model.

If PEGI grows 10X they'll likely have 10X as much debt.

They issued a lot of stock to pay for Pattern 2.0. In 2017 they also raised equity.

That's the yieldCo way, as it is with REITs, MLPs, and LPs.

What matters is that CAFD/share rises. This year it's expected to do so by about 5%.

As long as that keeps up then they will get to the 80% payout ratio target and can then start growing dividend at same pace as CAFD/share.

[c21vintage]

I have used the recent pullback to increase my NRZ holdings by 50% and to double my PEGI stake. Seems so easy to buy low, sell high but 70% do it backwards. Why? Because the herd mentality is all about momentum instead of thinking it through. Buy low? That's when a stock is mis-priced because of hysteria caused by reading a headline and not looking deeper. PEGI being the perfect example, headline screams "MISS!" but if you actually read deeper, you see production is up, forcast for coming years is way up, debt expense is coming down, new projects are high margin, hugh dividend is safe and low PE caused by depreciation write down. It's called an overlooked gift horse in my world. Sell HIGH. That means recognizing when a stock's momentum (the herd) has gotten ahead of itself, leaving the fundies behind. Best of luck to all, it's always a gamble, there's always someone betting against you when you trade, that's just how it works. The trick, and it's not easy, is to find a stock that is mis-priced by the herd, PEGI and NRZ fit that mold today.

[Dividend Sensei]

Human nature. Loss aversion means it hurts twice as much to lose money as gain it.

If you are dropping then the natural instinct is to stop the bleeding and sell, and then buy what's going up.

http://bit.ly/2G7xtU0

In today's DS.com exclusive I highlighted CSCO and O back in tech bubble.

CSCO was the darling of Wall Street, hit a high of $80 and a market cap of $550 billion (biggest company in the world).

PE of 244.

KO PE was 71

S&P 500 had 44

O had a P/AFFO (REIT equivalent of PE ratio) of 7.6 and a 10.1% yield.

S&P 500 proceeded to fall 42%, CSCO 82% (AMZN 95%), and O? Up 127%.

If I had been running this portfolio in March 2000 I'd be loading up on O, ignoring the raging tech stocks and red hot S&P 500.

I'd likely be down (as I am now) and some would call me a loser (as they did Buffett for ignoring tech too at the time).

Then 3 years later things would look very different.

But of course I wouldn't be buying O or REITs all the time.

When growth is hot (like now) you buy value.

When value is hot (like during 2000-2003 crash) you buy growth dividend stocks (like V, MA, MSFT, TXN, AAPL and maybe if it falls enough NVDA).

Something is ALWAYS on sale. No exception, I buy ultra values. And diversify, a lot.

My trust isn't in individual stock picking (though that's a big part of the fun) but rather in the process itself.

If I can build a 200 stock portfolio, with above average quality, with everything bought at a great price (such as at 52 week lows after sector already crushed) then I will end up doing great.

It might take time to prove itself, but I've spent enough time researching the history of markets, sectors, and companies to know that it will work in the end.

[jerryki]

DS: re EPR, their biggest revenue source 50%??? is AMC theatres, went from 34 to 15 in 9 months ending Aug 17 and it's still about 15. Also, given the trend in moviegoing (admissions, not revenues so much), I'm cautious on EPR. I also sort of remember that AMC is a little dangerous with a lot of leverage. I own the EPR convertible preferred, which yields 5.9% and moves somewhat with the stock. If EPR goes up, the convertible feature move the preferred up, and if EPR goes down, there's some protection on the downside by owning the preferred vs. the stock. Also, you can hedge and boost your return a bit (I'm doing this) by owning the preferred and selling EPR calls, so this is sort of like selling covered calls on the preferreds.

[Dividend Sensei]

Not worried about the price of AMC stock.

What I'm watching is the rent coverage. I'll have to see if they break it out by tenant or industry.

But 1.7 portfolio wide tenant rent coverage tells me there isn't much to worry about, at least not yet.

Still, theater exposure is why it's medium risk.