June was a relatively boring month for the markets with a gradual swell and drawback resulting in a modest less than 1% gain for the markets (and for me). However, Trump's trade tirade has the markets on edge (though I personally believe, as with most things Trump, that the rhetoric will be far louder than the results). Of course, a persuasive counter-point is that one of these days, the 'Teflon Don' will finally have one of his establishment attacks land with real consequences (and it likely won't be pretty in the markets). Baseless speculation is, of course, part of human nature (and sells airtime and newsletters), but I believe that trying not to get 'activated' and just stick to a proven and diversified strategy will see individual investors through this period of mostly solid growth and rising corporate profits with solid returns.
June also marks the halfway point of the year and is a good time to reassess goals and progress. Personally, I am about on par with the S&P 500 this year in terms of capital gains (~+2%), but in sideways markets, my dividend yields that are 3x the wimpy sub-2% payouts from the S&P 500 have me solidly in the winning camp. However, this was not a linear ride for me as different parts of my portfolio each pulled their weight at different times, especially my REITs, energy, and deep-value picks that each had a turn in the sun. In my mind, this only reinforces the need for diversification. Occasionally commenters question how many different positions that I have (~50), but my experience has been that it is impossible to know which individual ticker will be the winner in any given time period - so it makes sense to own a basket of securities that each have the potential to shine. In gambling parlance, my goal is to 'bet on the house' instead of 'Black 26'. With the benefit of hindsight, it is clearly nice to enjoy the 35x payout of Black 26…but in reality, you mostly just lose. I would far prefer the slower, but steady house edge (2-10%). After all, casino owners tend to get far richer than the gamblers inside!
June 2018 Review
June 2018 was marginally positive for both me (+0.6%) and the S&P 500 (+0.5%); though my 4.8% dividend yield on invested capital crushed the 1.8% yield of the broader index. While only a slight 'win' this month, this was my 4th consecutive month of beating the broader market.
June 2018 also rewarded me with realized dividends of $1,436 (versus $1,434 in 2017)…only a 0.1% increase, but any increase is good! Furthermore, for the 12 months ending June 2018, my portfolio delivered $13,817 in cash to me (an increase of 6.6% from 2017). One consequence of the strong returns of the past few years is that my realized yield is down to 4.4% for my full portfolio including cash reserves, but I'm not stressed because I now the good times will not last forever and my yields will be back above 5%. My 2018 goal was to increase dividends by ~5% to $13,500 for the year, but I feel good that I am on track to beat this goal. 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 June 30, 2018
|Security||Type||Div Yield||Market Value||Last Month Value||Gain/Loss(%)|
|SPDR S&P 500 High Dividend ETF (NYSEARCA:SPYD)||ETF||3.9%||$14,916||$14,696||1.5%|
|Fst Tst Dow Jns Glbl Sel Dvd Idx ETF (NYSEARCA:FGD)||ETF||4.1%||$12,365||$12,730||-2.9%|
|Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD)||ETF||2.6%||$9,858||$9,870||-0.1%|
|SPDR S&P Emerging Markets Dividend ETF (NYSEARCA:EDIV)||ETF||3.2%||$9,323||$10,008||-6.8%|
|iShares MSCI Australia ETF (NYSEARCA:EWA)||ETF||4.5%||$9,044||$9,028||0.2%|
|SPDR S&P International Dividend ETF (NYSEARCA:DWX)||ETF||4.1%||$7,855||$8,035||-2.2%|
|Oppenheimer Ultra Dividend Revenue ETF (NYSEARCA:RDIV)||ETF||4.1%||$7,646||$7,518||1.7%|
|ProShares S&P 500 Dividend Aristocrat ETF (BATS:NOBL)||ETF||1.9%||$6,234||$6,222||0.2%|
|iShares Nasdaq Biotechnology ETF (NASDAQ:IBB)||ETF||0.2%||$5,491||$5,423||1.3%|
|UBS ETRACS 2x US High Div, Low Vol ETN (NYSEARCA:HDLV)||ETN||12.5%||$5,314||$4,912||8.2%|
|Global X SuperDividend U.S. ETF (NYSEARCA:DIV)||ETF||6.0%||$5,016||$4,948||1.4%|
|iShares Asia/Pacific Dividend ETF (NYSEARCA:DVYA)||ETF||5.1%||$4,477||$4,650||-3.7%|
|PowerShares S&P 500 High Div Low Volatility ETF (NYSEARCA:SPHD)||ETF||3.6%||$4,104||$4,021||2.1%|
|iShares MSCI Malaysia ETF (NYSEARCA:EWM)||ETF||5.6%||$3,118||$3,266||-4.5%|
|Global X NASDAQ China Technology ETF (QQQC)||ETF||2.2%||$2,959||$3,039||-2.6%|
|WisdomTree Dynamic Currency Hedged Japan ETF (BATS:DDJP)||ETF||3.6%||$2,857||$2,901||-1.5%|
|iShares MSCI China Small Cap ETF (NYSEARCA:ECNS)||ETF||2.9%||$2,521||$2,754||-8.4%|
|Franklin LibertyQ International Hedged ETF (NYSEARCA:FLQH)||ETF||5.2%||$2,492||$2,488||0.2%|
|iShares Evolved U.S. Innovative Healthcare ETF (BATS:IEIH)||ETF||2.0%||$2,465||$2,413||2.2%|
|Horizons NASDAQ 100 Covered Call ETF (NASDAQ:QYLD)||ETF||9.6%||$2,404||$2,457||-2.2%|
|Market Vectors Gold Miners ETF (NYSEARCA:GDX)||ETF||0.8%||$2,231||$2,234||-0.1%|
|Omega Healthcare Investors (NYSE:OHI)||REIT||8.5%||$18,600||$18,390||1.1%|
|Royal Dutch Shell (RDSB)||Company||5.2%||$10,898||$10,850||0.4%|
|Blackstone Mortgage Trust (NYSE:BXMT)||REIT||7.9%||$9,429||$9,477||-0.5%|
|New Residential Investment (NYSE:NRZ)||REIT||11.4%||$8,990||$9,190||-2.2%|
|Ventas REIT (NYSE:VTR)||REIT||5.6%||$8,543||$8,199||4.2%|
|Sabra Health Care REIT (NASDAQ:SBRA)||REIT||8.3%||$7,301||$6,965||4.8%|
|Tanger Factory Outlet REIT (NYSE:SKT)||REIT||6.0%||$7,047||$6,447||9.3%|
|Iron Mountain (NYSE:IRM)||REIT||6.7%||$7,002||$6,658||5.2%|
|Ford Motors (NYSE:F)||Company||5.4%||$4,428||$4,620||-4.2%|
|Kinder Morgan (NYSE:KMI)||Company||4.5%||$3,251||$3,069||5.9%|
|Teva Pharmaceutical Industries (NYSE:TEVA)||Company||0.0%||$2,432||$2,150||13.1%|
|KKR Real Estate Finance Trust (NYSE:KREF)||REIT||8.7%||$1,978||$2,035||-2.8%|
|VARIOUS POSITIONS OF <$1,000 VALUE||VARIOUS||2.0%||$2,532||$2,591||-2.3%|
|FIXED INCOME TOTAL||4.3%||$16,240||$15,862||2.4%|
|Bank of America Corporation (NYSE:BAC) - Pref L (BML+L)||Pref||4.3%||$4,748||$4,580||3.7%|
|Goldman Sachs (NYSE:GS) - Pref A (GS+A)||Pref||4.1%||$4,676||$4,498||3.9%|
|WisdomTree BofA Mrl Lynch HYBd ZrDr ETF (NASDAQ:HYZD)||ETF||4.8%||$2,392||$2,398||-0.3%|
|Goldman Sachs (GS) - Pref D (GS+D)||Pref||4.2%||$2,326||$2,275||2.2%|
|WisdomTree BofA Mrl Lynch HYBd NgtDr ETF (NASDAQ:HYND)||ETF||4.8%||$2,098||$2,111||-0.6%|
|ProShares Short S&P500 (NYSEARCA:SH)||ETF||0.0%||$7,333||$7,385||-0.7%|
|ProShares Short Real Estate (REK)||ETF||0.0%||$3,116||$3,246||-4.0%|
|SCHWAB ROBO-ADVISOR TOTAL||2.0%||$12,688||$12,759||-0.6%|
|TOTAL + CASH||$24,327||4.4%||$308,968||$304,649||0.6%|
Portfolio Moves in June 2018
SHARE BUY - Franklin LibertyQ International Hedged ETF (FLQH): Bought 100 shares of this international dividend ETF at $24.83 on June 19.
- Reasoning: Maybe I am too soon in this trade (as with some of my other international plays), but I like the relative valuation of foreign markets right now. (and I love the 5.2% dividend yield of FLQH)
SHARE SALE- Archer-Daniels-Midland (ADM): Sold my small holding of just 100 shares of this agribusiness conglomerate at $44.55 on June 6.
- Reasoning: After a 10% return (and 4% dividend yield for year), I rang the cash register to focus on consolidating into better opportunities in my portfolio. (but I would buy ADM again if it goes on sale)
My diversified holdings have again notched another Alpha win versus the S&P 500. Sideways markets with moderate volatility will likely see my winning streak continue. I think 2018 will continue to be choppy, but the overall strength of the U.S. and global economy is solidly in Goldilocks territory (not too hot, not t oo cold). So I'm ignoring the doomsday predictors (and even looking for international opportunities where Trump trade war talk is likely overblown). Where do you see attractive areas for value, dividend investments? (Specific tickers are always appreciated)
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, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.