My March 2021 Quarterly Screen
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, TROW, UNH, WHR, WSM
- Roth: AAPL, ABBV, AMD, AMZN, BBY, BMO, 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
Summary
- Introduction and data sources.
- The chart.
- Thoughts and summary.
Introduction
Every three months or so I run the companies I own and those on my watch list through my screen and update my target prices. Once I do this it isn't much more work to load the chart here - more time is spent adding parentheses around stock symbols than anything.
Keep in mind this is only a screen. It gives me some numbers which tell me if I want to look more closely at a company. Before buying something for the first time I do what I call my "deep dive." This takes much longer for each company, at least an hour and often more.
My target prices are set using P/E ratios. These vary from 10 to 20 depending on company characteristics, particularly earnings and dividend growth rates, and sector. And as with everything, just because I set a price doesn't mean I won't buy at above it but I want to think long and hard before I do.
I have not run the full screen since December, 2019. The last one on the list below from March of last year was a truncated, COVID-adjusted screen. COVID presented some difficulties with this one as well. You will see some crazy 5-year eps growth numbers. Let's face it - NextEra Energy (NEE) does NOT have a 5-year eps growth rate of -57%. I'm not going to check NEE - I've owned it a while and know that's way off.
However for other companies I did check. The way I checked was that my final review to set target prices was to have a split screen with my December 2019 spreadsheet and this one displayed. I could check the next full-year projected eps against the 12/19 projection. In many cases that projection was higher than the prior one so I knew not to give a negative figure a lot of weight. Hopefully the COVID impacts will ease off but I expect some funny numbers for a while yet.
I took Friday off and ran some numbers during the day so the stock prices are either as of when I pulled them Friday, or as of 3/12/21 market close.
Here are previous versions:
Data sources:
- Fidelity - 5-yr dividend growth, 5-yr eps growth, beta, market cap
- NASDAQ - next year eps
- Wall Street Journal - debt to ebitda
- Seeking Alpha - Payout ratio
- CCC Lists - Consecutive years raising the dividend
The Chart as of 3/13/21.
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Summary
International Paper (IP) showed some notable COVID impacts that has it in my "no" column. It managed to maintain the dividend and even provided a marginal increase but its payout ratio rose and the debt to ebitda went from 2.46 to 4.72 since December, 2019. Now this seems a bit extreme and if I were at all interested in buying I'd dig into it. But combined with the fact that in 2007-2009 it slashed the dividend it's one I'm staying away from.
I WILL be checking LyondellBasell (LYB). Its 12/19 debt:ebitda was 1.21. Increasing to 4.63 also seems excessive but unlike IP, I own a decent amount of it, about a half position. I'll be checking the two ARs and doing some math of my own. I don't want to have to design an exit strategy but I will if I need to.
A company that showed some encouraging signs - not the only one but this one struck me - is Kellogg (K). It lowered debt - still high - from a 3.72 debt:ebitda to 3.31 and shows some solid signs of growth. I'm not buying yet but I'll keep an eye on it as things look promising.
There are three companies I'm going to dig into; KMB, HII and WHR. I'm fairly familiar with KMB so that one won't take long but the others are interesting.
If you are less interested in yield, two other companies I really like the look of at current prices are LHX and BAH. I also like SNA and FAST but prices need to drop on those.
For the short term I won't be nibbling but will build cash in case one of those three companies becomes one I really want. I won't do my deep dive today though. It'll be April before I have $5k cash to make a new purchase and I'm tired of staring at a computer.
So that's my screen. I'm not sure if anyone else will find it useful but it is helpful for me and since I did it, I decided to share.
Happy Investing Everyone!
I am long: AAPL, ABBV, ADM, AOS, ARCC, BBY, BMY, CVS, DUK, GD, GILD, GOOGL, ITW, JNJ, LMT, LYB, MO, MSFT, MSM, NEE, NEWT, OGE, PFE, PM, PNW, T, UNH, VZ, WSM, XEL, XOM.
Analyst's Disclosure: I am/we are long everything listed at the end of this post.
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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