Patience? We Don' Need No Stinkin' Patience! Selling BHC, Buying MO.
Seeking Alpha Analyst Since 2017
NOTE: For those looking for the DGI Chit Chat Blog here's the link: https://seekingalpha.com/instablog/48196727-cemanuel/5208606-dgi-chit-chat-successor
I recently sold a bunch of real estate (first purchase was in 1986 when I was 23) and am investing in stocks - have gone with mutual funds for a couple of decades and formerly traded grain commodities but opened my accounts to trade individual stocks on March 8, 2017. The longer I have been in the market the more convinced I have become that Dividend Growth Investing (DGI) is the best method for building income.
I am retired, effective 12/31/21.
I have three accounts; a Taxable Account, a Roth IRA, and a Traditional IRA. I also have a small HSA I can invest with but have index ETFs in it and don't discuss it on SA.
I am managing my separate accounts as follows:
Taxable: Main purpose - to live off in retirement. Most of this will come from dividend income which will be about 70% of what I need. Beyond occasional sales to make up my dividend income gap I will do little trading in this account.
IRAs: Total return. I like dividends but as I don't expect to need to withdraw from these until RMD time I will look for more rapid dividend growth and non-dividend payers are not automatically excluded. I take dividends as cash to buy more stocks with. I will likely be more active in these accounts though I never expect to be a frequent trader.
Buying for the IRA began on 2/22/22 and was completed on 3/7/22. I am doing Roth conversions, trying to be close to the 24% tax bracket limit each year. The first was on 6/17/22.
I ended my accumulation phase of investing on 7/1/21 to build cash for retirement.
Here are my current holdings, last updated 3/2/23:
- Taxable Account: ABBV, BBY, BLK, CVS, GD, ITW, LMT, LYB, MO, MSFT, NEE, PM, T, TROW, UNH, WHR, WSM
- Roth: AAPL, ABBV, AMD, AMZN, BBY, BMO, CHWY, CM, CRM, DG, GOOGL, KLAC, LCID, LOW, LRCX, META, MSFT, MU, NVDA, PYPL, QSR, SBUX, TGT, TSLA, WSM
- TIRA: AAPL, ABBV, ADBE, AMAT, ANTM, AOS, BBY, BMO, CM, CMI, DG, DT, F, FAF, GM, GOOGL, KLAC, LOW, LRCX, MU, PYPL, QSR, RY, SHW, TD, TGT, TROW, TSCO, TXRH, UNH, WMS, WSM
2017 Total Return: 16.2%.
2018 Total Return: 1.58%.
2019 Total Return: 31.63%
2020 Total Return: 13.57%
2021 Total Return: 32.63%
2 year/24 month return on 3/8/19 - 18.87%
3 year/36 month return on 3/8/20 - 39.61%
4 year/48 month return on 3/8/21 - 78.02%
5 year/60 month return on 3/8/22 - 113.39%*
I calculate the returns after subtracting new money added into the account however I do count reinvested dividends. For example, if I have an account worth $100,000 at the start of the year, I add $10,000 in new money and the 12/31 balance is $112,000 my return would be 2%, not 12%. With withdrawals, conversions, taxes, etc., tracking returns for 2022 and beyond is enough of a headache that I've quit doing it. Things seem to be holding up well for funding my retirement.
*Does not include the IRA
- When an Old Man Loses Discipline.
- Selling BHC to buy MO.
When Discipline Sucks
If you've been following my blog for a while you'll know I've been extolling the virtues of patience. For the most part this comes down to, "Make a plan, execute the plan." I've been doing reasonably well on this, though not perfect, with my taxable account. Yesterday - 9/16 - I broke with the plan.
And I am not ashamed.
Selling BHC to buy MO
I've held Bausch Health (BHC) for a long time. It and New Residential (NRZ) are the two stocks I still own that I bought on March 7, 2017, the day I opened my accounts. It's been a good stock for me. I bought a pile of it from then through August of that year at prices from $9.19 to $14 a share. I've sold some as it has gone up, partly to take profits but more to get it down to a full position, 5% of my portfolio, based on the amount I have in it. My latest sale, until yesterday, was on January 2, 2018 at $21.74. This was to give me enough money to put in my Roth for a new year.
I won't go into details of either stock here. BHC is loaded with debt but in much better shape than when I first bought it. It has finally returned to growing though very slowly. I look at things like earnings and cash flows and think it could trade at $50 with its debt situation down a little more in a year or two, and at least at $40 without much trouble if the market starts to trust it more. But it hasn't done this. Since January, 2018 it has basically trod water with some pops to as high as $28 and dips to under $20.
So then we have Altria Group (MO). Its latest ER was a beat. It increased earnings, margins, and has just raised the dividend by 5%. I first bought it last December and have made a few more buys at anywhere from $52.53 to $44.64. Based on the CCC Lists it has now increased its dividend for 50 consecutive years - other lists only date this from the Philip Morris (PM) split. The payout ratio is a little higher than I prefer.
As its price has dropped it has become more and more appealing. Yesterday I said screw it. I sold a little BHC at $23.39 and bought MO at $41.36.
This does not feel like a wrong move. I did not wait for my BHC price - I was thinking of trimming at $25 - but at 8.3% yield I can't look at buying MO and feel bad about it. I didn't sell much as I had most of what I needed from accumulated dividends but in a way I capitulated on BHC.
And if MO drops further while BHC holds at roughly this level, I could do this again. I have a half position in MO. I could double it by selling roughly half my BHC. This would raise my dividend income by about $3500 a year. Is this a bad thing?
But it's not patient.
Analyst's Disclosure: I am/we are long BHC, MO, NRZ.
I am not a professional investor and do not offer investing advice. I have a college degree in Animal Science and used to train horses for a living. Would you really want to tell a loved one you invested based on something an ex-horse trainer/animal scientist wrote? I didn't think so. Please perform your own due diligence when making investing decisions.
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