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Decisions, Decisions, Decisions


The next batch of Candidates are evaluated.

Three Dividend Champs Considered.

Can we maintain yield and quality?

One equity I missed in the last post was Main (Main Street Capital). Main yields 6.4% and is a BDC. (Business Development Company). It is the best of the best in this sector. (BDC's) The only one I have considered for my personal portfolio. It has paid a dividend for 11 years and raised the dividend for 8 years. Rated BBB, and pays monthly. BDC's loan to businesses and entities that cannot get loans at normal banks and lending institutions, a middle market lender. BDC's service about 1/3 of the economy. Main is one of the oldest. Main is one of the few internally managed BDC's. they have never cut dividends even during the financial crisis. They have outstanding management. They have been paying a supplemental dividend 2 x's per year but plan to roll that up into their regular dividend which I take as a sign of strength. Leverage is controlled by law. I follow Scott Kennedy who goes into a deep dive on Main (and other BDC's) each quarter. We bought a 1/2 position, and tow of us own the stock. I hold it as a full position in my portfolio.

Leg (Leggett and Platt) Makers of furniture and inner workings, springs etc, also mattresses. Just bought a company that makes foam and foam mattresses. DSS 73, BBB rated, with VL safety 2 and financial strength 2 (B++). Dividend Champion with 47 years of div growth. Dividend growth last 5 years of 5-6%. Payout is 60%, not bad since they made a recent acquisition. 3.65% yield. Small cap industrial with 1.07 beta. Patented the first steel coil spring! Should be a steady eddy in our portfolio, bringing stability and reasonable growth. Bought a full position.

NEE (old Florida power and light.) A growth utility (almost an oxymoron). ** by Morningstar and slightly overvalued. Yield 2.56 with DSS of 97. Large producer of renewable energy and a new Dividend Champion in the making with 23 years of dividend growth. VL ratings 1 and A+. Dividend growth 11% last 5 years. We felt with a low beta it would be a good anchor. It is almost always overvalued, but the dividend growth will be good for the portfolio. We bought a full position. PE is high at 23 but debt levels good. Payout only 60%, not bad for a utility. S&p rating of A-

NHI (National Health Investors):  NR by s&p. DSS 62, yield 5.1%. One of Americas' oldest health care REITS. Has 220 properties across the US and spun off it's senior housing in 1991. Operates as a triple net with built in escalators. Dividend growth last 5 years 7%. Has paid dividends 17 years and raised the dividend 9 yrs. The payout is falling (though that has affected the dividend increases) but puts NHI in a good position to handle financial difficulty. This position will require closer monitoring due being a health care REIT but one of the most conservative with great management. We decided to buy and make it a 1/2 sized position. 

TROW: (T. Row Price): Dividend growth streak of  32 years. VL safety 1 and financial strength A+. No debt. Dividend increases 5 yr =13%. DSS 98. Asset manager and a custody bank. One of the world's largest. Makes money by charging management fees. It has in excess of 991 billion under mgmt. (AUM). Their performance against their benchmarks is very high. 2/3 of their funds are retirement assess which are very sticky. Bear markets are a risk as people pull their money out of the market in down times. Dividend champ with decent staring yield over 3%(3.02) and great growth of the dividend made it appealing and we bought a full position. I held one of their midcap funds in my retirement portfolio for many years , that did real well for me.

HP: Heimlich and Payne: Dividend champ with over 40 years of dividend growth, paying over 5%, what's not to like? BBB+ rated by S&P with safety rating of VL of 3 and financial strength 2 B++. Gee all the boxes are getting marked off! DSS score 42? Dividend raised last year 1%? What gives. This is an old drilling co. Headquartered in Tulsa Ok. Payout ratio 515%! Next year to drop to 162% Forward PE is 31. The dividend looks dangerous. Debt levels are ok but if the dividend gets cut we stand to loose much of our capital. We decided to pass. Hard to say goodbye to a 5% Dividend Champ!

Hershey the king of Chocolate. We had the Western Plant in out community for decades. They hired exclusively through my agency and I knew the co well. DSS 94. Yield 2.6 (when we bought). Controlled by the Hershey Trust so it cannot be taken over. This company is marked by stability. Beta.07, never saw one that low. Dividends paid for 30 years and growth streak of 9 years. Five year growth streak is 9%. Froze one year in the great recession. If I had known I would have eaten a few more kisses to help them out. They were a great employer and good in the community. A great stable company to own. We bought a full position. Payout ratio about 50%. Get some. Vl safety 2 rated B++ with Morningstar ***'s. Large cap company that can help anchor our portfolio.

Washington Trust Bancorp  (WASH) a small regional bank with about 1billion cap. DDS 59. Traditional bank that does commercial loans, real estate loans,consumer loans, as well as industrial. Yield 3.86%, dividend growth last 5 years of 11%. They have paid dividends over 26 years and raised it 8 years. They had a dividend freeze in 2008 a minor blimp given the great recession and how it affected financial institutions. Over the last 20 years it has raised the dividend 8%. The payout ration at 59% is on the high side per SSD. Not rated or covered by Morningstar or VL. It first came to my attention by Ian Bezek, one of the best young writes on Seeking Alpha. At least in my opinion. Brian at SSD feels the leverage is a little on the high side. I owned once, a small position, but sold it to buy something else. I have kept it on my watch list. I thought it might be a good supporting stock but the group decided to buy a full position.

BPR: This is a new REIT with the same holdings as BPY (an LLC). So you have to look at BPY for much info. Yield 6.59% with Div safety of 42. It is a holding of the gigantic Brookfield Company. This is a very complicated company. Dividend Sleuth first brought it to my attention and holds or held it if memory serves. The Brookfield Family of companies is highly regarded. BPR was formed to avoid the K-1 of BPY. They own self storage, triple net retail, premier office, multifamily, student housing, and industrials. Dividends 5 years (our very minimum) growing at the rate of 15%. BBB rated. I have never owned a Brookfield entity. We intend to look at their utility company as well. Brookfield has been compared to Berkshire, and seems to be highly rated. We bought a 1/2 supporting position. This is kind of an all in one type REIT.

With the additions of these positions we have a YOC of 4.02%, 35 holdings with dividend growth of 7.8%, 28 full positions of 10k invested and 7 positions with 5k invested. Ten sectors represented, Consumer Staples = 16% / Utilities 15%/ Health care= 16%/  Real Estate =15% Energy=10%. Financial 9%/ Communications 7%/ Consumer Discretionary= 6%. Industrials+65/ Info tech 4%. I would like to have one in materials, thinking APD, and no more than 10-11% in finance. Next time we will look at two more regional banks that are Dividend Champs, as I recall. Income $12,873. We have gained 2.8% or $8,763. Beta:.73. We are on track. Can we keep it up? Any suggestions are welcomed. We are combing the CCC list and using my general knowledge of the universe of stocks along with the screener at SSD. This task would be ten times harder without SSD in my opinion!  We have found some great companies at fair prices with good financial strength and some higher yielding positions that are perhaps not as strong but we have kept to 1% of the portfolio to protect our capital along with strong diversification. We meet Thursday and will have some more picks soon I assume. 

Disclosure: I am/we are long sevearl of these stocks.

Additional disclosure: See my bio for a fairly updated list of stocks owned. Please do your own due diligence.