Seeking Alpha

My 20/20 Vision For The Year 2020, Update 1

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Includes: BBDC, BDJ, BKCC, BKEPP, BKT, DODIX, HASI, HRZN, PTY, XOM
by: Looking For Diogenes
Looking For Diogenes
Biotech, mid-cap, research analyst, dividend investing
Summary

I will update the model portfolio for the month of December 2019.

For those stocks having events - special dividends, news events - I will commit with the details of the event.

Not only will I present the good news from the month, I will add my comments for factors that could impact the overall market in the near term.

I will share a link for what I call the Hewlett-Packard/Carly Fiorina Fiasco - as a learning tool related to what has inflated the market results in recent years.

With my previous article – My 20/20 Vision for the Year 2020 – I outlined my plans for 2020 and the structure of a fictive portfolio using dividend-paying stocks I hold in my personal stock accounts. The 2020 portfolio is based on allocating $10,000.00 to each of the 10 positions, resulting in the portfolio starting with a balance of $100,000.00. For new readers, I would suggest you visit the original SA article for foundational issues and the structural creation for my model portfolio. I’m not suggesting that any reader duplicate any of my holdings in their personal accounts. I point out that many of my holdings are based on multi-decades for holding a stock, so investors should use their personal due diligence in deciding other stocks might currently be a better choice to build your future dividend-paying portfolio. The point, and hope, is that at the end of 2020, I can see that my strategy for investing in dividend-paying stocks and holding them long term can be a rewarding proposition versus trading in and out of stocks. One thing for sure - stockbrokers don’t like my type accounts!

We now have the results of the first month - December 2019. The result for this initial time period has shown nice surprises with special dividends, along with the regularly scheduled monthly payouts to shareholders. As we move into 2020, I need to see the performance continue for the dividend positions that I’m relying on to improve my net asset valuation. The real surprise has been that eight (8) of the ten (10) stocks in the portfolio has a net capital gain, excluding the dividend income. The dividend aspect of the portfolio looks stable, but in the three (3) days of trading in the New Year, the market has been up-down in very volatile trading activity not only related to internal issues, but the new specter of unrest in the Middle East. The level of uncertainty and hostile bantering between the US and the involved countries is never a harbinger of stability in the markets. With such crosswinds and internal issues, having eight (8) out of ten (10) positions continuing unabated in increased pricing of the shares, the portfolio results probably will not show the same ratios of gains to declines in the portfolio. What I’m hoping for is stability in the share pricing based on the certainty of dividends supporting the idea of defensive positioning where I see storm clouds on the horizon. History is very clear - stocks never move upwards for elongated periods of times without corrections taking place. Later in the article I will address issues and concerns that give me pause for what I expect is a correction coming for the stock market. 2008 is always a reminder for what can happen with over-valued stocks in what can be described as a New York Minute time period.

During December, the portfolio had various stocks issuing special dividends that now have run the course in the near term for such payments. In the accompanying charts I have lumped the special dividends and regular dividends together; however, the following is a breakout for the stocks that had both types of dividends during the month. Also, please note in the charts I have rounded the dollar amounts into even dollars for simplicity in keeping score for the cumulative gains and losses.

The PTY December dividend was the regular $0.13 monthly payments and a special $0.03 dividend making the total payout for the month - $0.16.

The DODIX dividend was a regular $0.10, a $0.035 special short-term capital gain, and a $0.047 special long-term capital gain payout making the total month’s payout - $0.182.

The BDJ dividend was $0.141 regular from what had been a $0.05 monthly payout and a special dividend of $0.08 creating the total payout of $0.221 for the shareholders. In my personal account the monthly payout was $2,750.00. Therefore, over the decades I’ve held this stock, as it has been very rewarding. My Starbucks (NASDAQ:SBUX) coffee runs are now nearly covered for the whole of 2020 - nearly!

Monthly Cumulative Update Chart Results:

Readers can see the December results created a net capital gain from the original $100,000.00 to now being $103,327.00. The net dividends for the month totaled $852.00. The overall portfolio increased by 3.32%. It would be nice to see such monthly gains for every month of 2020, but that would be an unrealistic expectation. However, it should be noted that four (4) of the (10) stocks had no dividend payouts during the month. Some will have regular dividends payout this month, and all will have payouts by the end of the 1 st-Q, 2020. Readers should note that six (6) of the stocks pay quarterly - BBDC, BKCC, BKEPP, HASI, XOM and DODIX - the other four (4) pay monthly.

Dividend Tracking Chart Based on $10,000.00 Invested in Each Stock:(11/29/19)

PRICE

Valuation

Shares

Dividend

$Value

NetValue

(BBDC)

11/29/2019

$10.41

961

$10,000.00

12/31/2019

$10.28

$9,879.00

$0.15

$144.15

$10,023.00

1/31/2020

2/29/2020

3/31/2020

4/30/2020

5/31/2020

6/30/2020

7/31/2020

8/31/2020

9/30/2020

10/31/2020

11/30/2020

12/31/2020

(BKCC)

11/29/2019

$4.95

2020

$10,000.00

12/31/2019

$4.97

$10,039.00

$10,039.00

1/31/2020

2/29/2020

3/31/2020

4/30/2020

5/31/2020

6/30/2020

7/31/2020

8/31/2020

9/30/2020

10/31/2020

11/30/2020

12/31/2020

(BKEPP)

11/29/2019

$5.18

1930

$10,000.00

12/31/2019

$5.39

$10,402.00

$10,402.00

1/31/2020

2/29/2020

3/31/2020

4/30/2020

5/31/2020

6/30/2020

7/31/2020

8/31/2020

9/30/2020

10/31/2020

11/30/2020

12/31/2020

(BKT)

11/29/2019

$6.02

1661

$10,000.00

12/31/2019

$6.05

$10,049.00

$0.03

$56.47

$10,105.00

1/31/2020

2/29/2020

3/31/2020

4/30/2020

5/31/2020

6/30/2020

7/31/2020

8/31/2020

9/30/2020

10/31/2020

11/30/2020

12/31/2020

(BDJ)

11/29/2019

$9.61

1041

$10,000.00

12/31/2019

$9.92

$10,326.00

*$0.221

$230.00

$10,556.00

1/31/2020

2/29/2020

3/31/2020

4/30/2020

5/31/2020

6/30/2020

7/31/2020

8/31/2020

9/30/2020

10/31/2020

11/30/2020

12/31/2020

(DODIX)

11/29/2019

$14.17

710

$10,000.00

12/31/2019

$14.03

$9,961.00

*$0.182

$129.22

$10,090.00

1/31/2020

2/29/2020

3/31/2020

4/30/2020

5/31/2020

6/30/2020

7/31/2020

8/31/2020

9/30/2020

10/31/2020

11/30/2020

12/31/2020

(HASI)

11/29/2019

$29.36

341

$10,000.00

12/31/2020

$32.18

$10,977.00

$10,973.00

1/31/2020

2/29/2020

3/31/2020

4/30/2020

5/31/2020

6/30/2020

7/31/2020

8/31/2020

9/30/2020

10/31/2020

11/30/2020

12/31/2020

(HRZN)

11/29/2019

$12.49

801

$10,000.00

12/31/2019

$12.93

$10,356.00

$0.10

$80.10

$10,436.00

1/31/2020

2/29/2020

3/31/2020

4/30/2020

5/31/2020

6/30/2020

7/31/2020

8/31/2020

9/30/2020

10/31/2020

11/30/2020

12/31/2020

(PTY)

11/29/2019

$18.55

539

$10,000.00

12/31/2020

$19.00

$10,241.00

*$0.16

$86.24

$10,327.00

1/31/2020

2/29/2020

3/31/2020

4/30/2020

5/31/2020

6/30/2020

7/31/2020

8/31/2020

9/30/2020

10/31/2020

11/30/2020

12/31/2020

(XOM)

11/29/2019

$68.13

147

$10,000.00

12/31/2020

$69.78

$10,257.00

$0.87

$127.89

$10,384.00

1/31/2020

2/29/2020

3/31/2020

4/30/2020

5/31/2020

6/30/2020

7/31/2020

8/31/2020

9/30/2020

10/31/2020

11/30/2020

12/31/2020

12/31/2019

NetCap.

$103,327.00

NeTDiv.

$852.00

%+/-

3.32%

Odds and Ends Comments:

  • PTY: With the share price closing at the $19.00 level for the month, this represents a new 52-week high, a level not seen since 2013. As stated in my original article, PTY has been in my personal portfolio for well over a decade, with the largest purchase occurring during the 2008 swoon when I bought shares below the $8.00 price level. The constant 8% dividend with the stability and the usual yearly special dividend it offers for long-term investors is why I continue holding these shares. Will the $19.00 price level hold in the near term? I don’t have a clue but using a long-term view I think my granddaughters will be happy with their inheritance funds.
  • HRZN: Horizon had a nice run in 2019, starting the year at the $10.00 level. It spiked to the $13.40 price in March, and then retraced to the $11.50 range. The stock ended the year by returning to the $13.00 pricing, apparently being elevated by the performance from their investment portfolio in the medical technology arena. The annual $1.20 dividend payment, or 9.2% rate, appears to be stable and doable for 2020.
  • XOM: Weakness in Exxon’s chemical and refining segments for the 4th-Q results has led some analysts to reduce quarterly earnings results to around $0.50, much less than the previously projected $0.71 results. With the current dividend rate being $0.87 a quarter, this means the dividend isn’t being covered by current earnings. All isn’t lost with this issue, because Exxon is expected to net $3.6 billion from the asset disposal from their Norway operations. This $3.6 billion infusion hasn’t been included in the newly projected $0.50 earnings rate. Exxon has further planned for disposal of certain current assets, with nearly $13 billion being projected for this total planned action. But going forward, Exxon must invest wisely and generate new revenue streams to justify their lofty dividend outlay to shareholders. I have confidence this will be the case from Exxon’s management team where we are already seeing new directions for the company. For example, their West Texas operation facilities are using renewable power sources to generate the electricity to power their company needs. Now that is the ultimate example of irony - a fossil fuel producer utilizing a renewable fuel to source the fuel to generate energy for combustion engines.
  • HASI: Hannon has already declared and approved a $0.335 dividend payable on January 10th, for shareholders of record on December 26th, 2019. The current dividend has been steady over the last four years. I hope and expect to see increases in the dividend in the near term, as over the recent year Hannon has been active and successful in adding to their portfolio of investment in renewable energy projects. What better example of a trend is what Exxon apparently sees for their future?

There has been no major news impacting the balance of the stocks in the portfolio as of this article’s creation on January 4th, 2020.

Issues Impacting the Financial Markets:

Being on the brink of an all-out war in the Middle East isn’t the most calming way to start the New Year. Add this issue into the mix where the overall market is touching all-time highs in most scorecard data points, what could go wrong? Friday’s swoon could be a harbinger of how the market might react as we move into the first week of full trading, and major data points continue to wave caution flags to those who watch such mundane things as market-moving issues.

As reported in the initial article, the Institute for Supply Management revealed a continuing drop in the manufacturing sector of our economy. The latest number released on Friday, January 3rd, shows the decline continues by showing the number dropped to 47.2, the lowest reading since 2009, and the fifth straight month with this number contracting. Any reading below 50 indicates the lack of growth in this key component of the economy. This issue is critical as it relates to the employment numbers. In my opinion, these unemployment numbers aren’t reflecting the vital aspect of our economy where a worker isn’t making an adequate income to support a family’s monetary need. A lot is riding on the reported agreement reached by the US and China related to the trade/tariff war that has gone on for nearly two years, with China not blinking or throwing in the towel on this impasse. It has been reported that a deal signing event will happen by January 15th, but as of today, there have been no details outlined as for what is contained in the agreement. Stay tuned!

We now have a new factor coming into play and related to manufacturing in the US. The recent announcement that Boeing has halted all procurement of vital parts for constructing their 737 MAX planes will have a ripple impact on the critical GDP numbers in the coming month’s data. Our national economy has been built on our ability for creating, manufacturing and marketing our products on a worldwide basis. A protracted impasse with China and the erosion of goodwill with what has been a wide array of foreign nations working together as allies, must be re-established – As Soon As Possible! With the Boeing (NYSE:BA) fiasco we have seen Airbus (OTCPK:EADSF) (OTCPK:EADSY) now taking over the leadership position in manufacturing airplanes. The cost and maintenance of commercial aircraft are based on long-term relationships between the involved airlines and their customer base. For Boeing to re-establish their historical leadership role, based on the nature of the demise of this leadership position, Boeing has a real task before them - however, it now seems that each new day brings only more issues to be resolved.

On January 1st, the Association of American Medical Colleges released a report indicating that researchers of Chinese descent made up half of the work force in American research laboratories. I don’t want to suggest any racial overtones or bias with this comment - I follow and research the biotech and overall medical industry looking for investment opportunities. In reviewing such companies, I have noticed a trend that seems to be growing by leaps and bounds over the recent two decades. Top management and key researchers reflected in their key personnel listings for the corporation, these individuals aren’t named Smith or Jones. Other major thing I’ve noticed and is related to this issue, I currently take five medications (four generic and one patented) and all of them are manufactured in foreign countries. In my original article I pointed out I was cutting back on my biotech holdings, with one exception being a Swiss-based company - Idorsia (OTCPK:IDRSF) (IDIA.SW). Their stock increased by 82% in 2019. This simply supports my contention that we as a nation must rethink and rekindle our historic leadership role in key and vital industries. Manufacturing jobs spread a corporation’s wealth down from the top executives to the people making the product! We can’t all settle for our grandkids flipping hamburgers for a living!

In a report issued by Reuters on December 30th, 2019 – The Decade of Debt – they point out the following:

  • Corporate bonds issued by American companies exceeded $1 trillion in each year of the decade.
  • Total corporate bond debt will soon top $10 trillion, where during the previous decade the number stood at $6 trillion.
  • The largest US corporations (S&P 500 Members) account for 70% of this $10 trillion in debt by corporations.
  • In the first year of the last decade, companies spent about $60 billion more on dividends and buying back their stock than what they spent on new facilities, equipment and technology. By the end of 2018, this spread in how corporate money was being spent had grown to more than $600 billion. And the final year of the decade is on track to further widen the gap.
  • The simple realization that investors must understand - the booming stock market has been inflated simply by buying back shares and not investing in the future growth. There is an uncomplicated reason why our nation’s infrastructure is crumbling before our eyes – no money being dedicated to this issue!
  • I’m sure there will be some of my readers who will disagree with some of my opinions - and that is fine! Just don’t forget that I openly admit I’m retired and use my investments to support my lifestyle. 2019 was a fantastic year for me where I generated a six-digit return for my investments. Were all my investments winners? No! But for those that did well, they more than made up for those mistakes. In this article I’m simply opting to share my method of securing long-term returns with dividend-paying stocks based on a buy and hold game plan. I’m not promoting my individual stocks for anyone placing them in their personal portfolio. Simply use my list as a starting point for identifying where to start your own due diligence process. Remember, my portfolio was based mainly on decades of ownership and all types of markets. The likes of 2008 should leave investors with a better appreciation for what can happen in the market, especially for those who think they can be day traders - and win against the house! For those who wish to ignore the fact that US corporations are simply buying back their stock and not planning to grow the company through research and development, you might find what I call the Hewlett-Packard/Carly Fiorina Fiasco a sobering wake-up call – A Special Reuters Investigates Report—The Cannibalized Company!

Good luck with your future investing decisions and hope 2020 gives us good returns with our portfolios!

Disclosure: I am/we are long ALL STOCKS 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.