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The Next Candidates Are Evaluated -Who Is In And Who Is Out?


The next batch of candidates are evaluated.

If we select a position, will it be full or 1/2?

One candidate selected is one I have never owned.

The next candidates are PRU/AVA/HD/ENB/DLR/CCI/AMGN/ABBV/OMC/MDP.

All candidates were assigned to one of our members to report on using our format. One person has come up with a worksheet or template we are using to make our reports. I hope to be able to share it here but have not yet tried copying and pasting into one of these blogs. We shall see!

Prudential an insurance company, was a new one to me. It is the second largest insurance co of its kind in the USA. Yield 4.45%. DSS of 61.Beta 1.16. Dividend growth last 5 years 16%. My investment advisor for my fixed income just bought a preferred for my fixed income. It did cut the dividend in 08 but raised it every year for the last 10 yrs. It passed muster with all present and we voted to invest and make it a 1/2 position. S&P of A I think?

AVA was next. A utility in the Pacific Northwest that I once owned but sold when it was being taken over by a Canadian utility. The merger was nixed by the State of Washington. It has a lot of hydro power and bought out an Alaskan utility. Seems stable with a 4 % average dividend increase. Yield 3.8% and safety score of 61. 16 yrs of dividend growth. VL safety rating of 2. Payout ratio of 78%. It seemed to us to be a good candidate and we decided to make it a 1/2 position.

HD is known to most DYIer's  It recently raised the dividend 30%~ and gave us a 3% yield. Dividend safety of 90, with growth of over 20% last 20 years. Dividends paid for 25 years with one year of freeze in the GR. It was easy to conclude to buy and make a full position.

MDP was evaluated with a 4.01 % yield. Safety score of 61 Dividends paid 28 years with 25 years of dividend raises a Dividend Champion. 5 yr DGI 6%. VL safety 3. Fairly valued. One of the oldest and largest media companies and publishers. Payout ratio reasonable at 69%. It owns several TV stations and  a lot of the most well known magazines. It was rejected as print media seems to be going the way of the doo doo bird. I plan to put it on my watch list. It seems to be prospering in spite of the marketplace it competes in.

AMGN: Health Care biotech. VL financial strength A++, financial strength 1 , s&P rating A. DDS score of 87 trading at a 3% yield. Payout ratio 40.66% DGR for 5 years of 22.9 and 1 yr of 14.8.  Good strong growing 3%' er. Dividend growth of 7 years. We decided to waive the 10 year of DIV growth and buy a full position. It's in.

CNP: Large utility headquartered in Houston TX. 3.81 % yield with div growth of about 4-6% VL safety 3 and strength B++ ( the minimum) . It recently bought out Vectren in a 6 billion dollar deal. Narrow moat *** from Morningstar. I hold a full position in my portfolios but it was rejected. Looking at dividend growth of others made CNP pale by comparison. I like it better at the 4% yield point and would add at the place. Rejected! Perhaps we will reconsider down the line.

OMC: **** from Morningstar, Financial strength VL B++ safety 3. Payout 40.18%. Yield 3.4%, low beta, narrow moat by  Morningstar. Safety score 90. Large provider of advertising and marketing. I thought this would be a strong candidate. I don't own it but is at the top of my watch list. Dividends paid for 30 years with growth over the last 9 years of 10-14%. Rejected. To me with all the political adds running all the time, just seems like a winner winner chicken dinner? 

ABBV:Yield 5.44 %. Heavy reliance on Humira but a good looking pipeline of new drugs. Dividend growth of 7 years, spun off from Abbot Labs. DSS of 65. Question will they transition from Humira to new drugs applications to take up the slack? I thought it was a good possibility for a 1/2 position. Narrow moat, VL financial strength of A. Trading at a discount. We debated it. Unanimous buy, but majority wanted to go for a full position. This will have to be monitored. Payout ratio 48% seems good. Bought!

DLR: REIT with DSS of 91. Data center REIT and one of the largest. Yield 3.63%. Dividend growth for 14 years in high single digits and or low double digits. Seems to be in an industry that is here to stay. FFO payout ratios is 69%. Price a bit rich perhaps but in line with the 5 year hx. No questions, bought a full position. I believe the S&P is A. Doing business all over the world. I own it in one portfolio.

CCI:Tower REIT with DSS of 61. Largest provider of wireless infrastructure in the world. Dividends just paid for 4 years, DGI 10%. This is one we felt we could get in on early (prior to a 10 year streak) I like to see at least 5. Due to it's industry we made another exception. Yield 3.59%. Bought and made a full position.

ENB: Enbridge , Canadian Pipeline CO. DSS 64.Yield 5.74%. Nearly a dividend Champ with 23 years of dividend growth , BBB+ rated. Payout is 61% and it is a C corp so no K1. Brian did a recent update that was convincing in spite of the pipe line expansion being held up that will hold up dividend growth perhaps after 2020 but it is expected to eventually go through, the line 3 replacement. We saw this as a good company ,our first Canadian company and decided on a full position.

UTG: This CEF has been discussed for several sessions. We did not vote on it till now. Monthly payer held by many in the DGI community. It looked good with some dividend growth. It was formed in 2003. It invests mostly in debt instruments and utility stocks that pay a dividend. It employs about 20 % leverage which I understand is reasonable. It is our first fund and we bought a 1/2 position to help buoy our yield. After these buys our yield dropped just below 4% at 3.99%. Will be on the lookout for some higher yielding supporting positions as we move forward.

So there you have it 8 in and 2 out. 

NEXT meeting we will analyze BPR and the Brookfield family of companies, HP,NEE,NHI, PFE, HSY, Main, LEG, and TROW.

The one thing I am happy about is that our Dividend growth of this portfolio over the last 5 years has been over 7%!

We have 10 sectors covered. Consumer staples 16%, Utilities 15%, Reits 15%,Health care 13%. No company brings in more than 5% of our income. The portfolio is defensive with a beta of .73.

Next time we hopefully can get our yield back over 4%. We have three  high yielders to evaluate for the next time around.  We welcome your comments. We have had to bend our rules a bit given what the market is giving us but we are doing our best for our couple. 

 We have done our next buys but I have not written about them yet. We are now at 4.01% yield. Invested capital: $325,000, Income $12,873. DG of 7.8%. I am really happy with our progress. We have some position that will require closer monitoring, T, ABBV, PRU, but so far seems like a SWAN portfolio. We meet next Thursday. I intend to post the next buys before then.  We have $175k to achieve income of $7,127. Will the market come back to us? We would like to have O and NNN but valuations are high. Do we buy at least 1/2 positions so we have them in the fold? Will we select any more funds? Let's see what happens. 

Disclosure: I am/we are long ENB.

Additional disclosure: For tickers I own myself see my profile for a fairly current list of holdings. This is a hypothetical portfolio for learning purposes but several in our group have bought positions in the stocks mentioned. Some tickers tat we felt were in value when purchased may not be now. Do your own due diligence.