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Wandering Down Wall Street - My Portfolio Changes For October 18

|About: International Paper Co. (IP), WY

I woke up this morning and decided it was time for a change.

A couple of dividend stocks that I like have really fallen in price to attractive levels.

I'll discuss what I did about that and why.

I'll also introduce my portfolio briefly and what I'm trying to do with it.

Many here on Seeking Alpha don't have the investing issue that I do.  They are still working and adding money into their portfolios.  When they see a stock decline to an attractive price, they simply divert some of that new money to buy it.

I don't have the ability to do this.  My wife and I are retired now; four years for me and two years for her.  No more money is going into my portfolio.  In fact, the flow of money is going the other direction now.  Every quarter I move accumulated dividends to a money market account for eventual spending.  Annually or so I selectively sell appreciated shares to fund travel expenses for the next year or so.

So if I see a stock selling for an attractive price, I need to sell something in the portfolio so I have the cash to buy it.

What did I want to do on October 18?

Two of my existing stocks had their stock price drop to what I think are attractive levels.  I decided I wanted to have more of each.

International Paper (IP) has recently been selling down around $42 per share.  This price is a whopping 37% off it's 52 week high of $66.94.  The yield at this level is a nice fat 4.8%, taking into account the recent dividend increase of 5.2% to 50 cents per share quarterly.  I'm expecting the dividend to continue to grow 5% per year for the foreseeable future.

Weyerhaeuser (WY) has traded down to about $28 per share.  As recently as one month ago it was trading at nearly $34 per share.  It's 52 week high is $38.39.  At current prices, the yield is 4.9%, after taking into account the recent dividend increase of 6.25% to 34 cents per share quarterly.  I expect the dividend to continue to grow at 6% per year.

I use Value Line to look at projections for dividend growth and total returns.  They do a projection of annual total returns for 3-5 years out.  The total return projections for these stocks (adjusted for current prices) are:

International Paper:  23-35% per year

Weyerhauser         :  16-27% per year

OK.  Sometimes Value Line gets a bit optimistic with these 3-5 year projections; at least that's my experience with them, especially when they are projecting big annual gains.  They seem to do better when projecting lower total return levels.  But even if I'm only able to get half of these projected annual gains, I'm going to be a happy camper.

Basically, I think these stocks have traded down more than they should have due to fears about increasing input costs and tariff impacts.

How did I fund the purchases?

I sold 2/3 of my stake in Nordstrom (JWN).  My wife and I had attended the Nordstrom annual shareholders meeting in downtown Seattle in May, 2017.  After the meeting we went to lunch and I looked up the stock price to find it had dropped to about $40.  I pushed the buy button right there at lunch.  It's now selling close to $60 per share.  A nice tidy profit.  Fifty percent in 1 1/2 years.

Why 2/3 of the shares?  I know it's silly, but I enjoy going to the Nordstrom annual meetings.  Rubbing shoulders with the Nordstrom brothers.  Eating the really delicious macarons they serve.  Also, I think they are doing some great things with the franchise, increasing online sales, doing well with Nordstrom Rack.  Basically, I've taken out the dollars I originally invested and left in the capital gain.  

Next, I sold my stake in Citigroup preferred shares, series K (C/PRK).  I probably shouldn't have bought this in the first place, but I basically broke even on it.  It's a fixed to floating rate preferred.  The coupon will likely be reset to higher than the current coupon in 2023.  This will probably trigger a call, which would result in about a 10% capital loss from current levels.  I basically parked money there because I didn't have anything better to do with it at the time.  It was yielding 6.3% on a current yield basis.

Summary of the Trades

Sold 2/3 of Nordstrom stake at $59.92 per share

Sold 100% of Citigroup preferred series K at $27.16

Bought International Paper at $41.72 per share, increasing my stake by 57%

Bought Weyerhaeuser at $27.73 per share, increasing my stake by 27%

I had a bit of money left over after all this.  I used it as follows:

Bought Kimco Realty (KIM) at $15.14 per share, increasing my stake by 29%

What did I Accomplish with All This?

I will achieve higher dividend income with IP, WY, and KIM than I had with JWN and C/PRK.  IP yields 4.8%, WY 4.9% and KIM 7.4%

I will have higher dividend growth, as neither JWN nor C/PRK were raising distributions recently (the preferred won't through at least 2023).

I have increased stakes in three stocks that I think could provide hefty total returns over the next 3-5 years.

Are These Typical Stocks for Me to Own?

No, not really.  Most of my portfolio is invested in Growth and Income type stocks.  DGI stocks with an emphasis on the "G".  My top 10 holdings ordered by size are:

Microsoft (MSFT)

Starbucks (SBUX)

Amgen (AMGN)

Cisco (CSCO)

Pfizer (PFE)

Abbvie (ABBV)

Visa (V)

Prudential (PRU)

Weyerhaeuser (WY)

Johnson & Johnson (JNJ

I'll spend more time discussing my portfolio and my objectives for it in my next blog entry.


I hope you found this blog entry interesting.  I'd welcome any comments you have.

I'm not a financial professional.  That will likely show through as you read my blogs.  So don't interpret any of this as investment advice.  Feel free to steal my ideas, but do your own research, please.

Disclosure: I am/we are long All stocks mentioned, except Citigroup preferred Series K.