Friday, October 14, 2016

Quarterly Review, Q3-2016

Quarterly reports summarize the actions I've taken during the preceding quarter. I provide a summary of dividend income, dividend adjustments, and portfolio performance. I also create charts to review the performance of individual stocks. If stocks start to perform poorly, I want to be aware of that so I can decide if any actions are warranted.

In the third quarter of 2016, I worked hard to prepare DivGro for options trading. I closed several positions to raise cash so I could round out the number of shares of other positions to 100 shares or multiples of 100 shares. This process will continue into the fourth quarter, and I'm hoping to complete this preparation by year's end.

Meanwhile, I've executed several options trades this quarter. While I'm reporting the total options income received in this article, most of those options are still open. This means that I have not yet secured the options income. In my monthly options update articles, I keep a running tally of the total amount received in options income, as well as the total secured so far. See my September 2016 update for the latest tally.

Dividend Income

The following chart illustrates DivGro's dividend income by quarter:

Dividend income in Q3-2016 totaled $2,900, an increase of 5.8% over last quarter's dividends of $2,741. This quarter's dividend total is 68.8% higher than the dividends received in the year-ago quarter (Q3-2015).

DivGro's average percentage payback is 9.89%, up from 8.54% at the end of Q2-2016. Percentage payback relates total dividend income to the total amount of capital invested.


This quarter I deposited $6,000 in new capital, $1,049 in passive income, and $2,563 in options income.

Speaking of options, most of my actions this quarter were focused on preparing DivGro for options trading. In order to write covered calls, I need positions of 100 shares or multiples of 100 shares each. Consequently, in Q3-2015, I closed several positions and rounded out other positions accordingly.

Here is a summary of my buys this quarter, with one new position highlighted:

PennantPark Investment
 18 Jul
 added 785 shares at $7.22 per share 
Reynolds American, Inc
 18 Jul
 added 15 shares at $53.29 per share
Gilead Sciences, Inc
 18 Jul
 added 50 shares at $87.07 per share 
AbbVie Inc
 18 Jul
 added 20 shares at $64.00 per share 
Kimberly-Clark Corporation
 9 Aug
 added 72 shares at $129.81 per share 
Dominion Resources, Inc
 9 Aug
 added 64 shares at $74.75 per share 
The Coca-Cola Company
  9 Aug
 added 35 shares at $43.48 per share 
Cisco Systems, Inc
 19 Aug
 bought 300 shares at $31.00 per share 
Omega Healthcare Investors, Inc
  6 Sep
 added 160 shares at $37.46 per share 
Union Pacific Corporation
 26 Sep
 added 44 shares at $94.24 per share 
Eaton Vance Tax-Managed
 Global Diversified Equity Income Fund
 30 Sep
 added 112 shares at $8.73 per share 

To fund these buys, I closed several positions and reduced the number of shares in one position:

Avista Corporation
 5 Jul
 sold 40 shares for $76.84 per share 
Realty Income Corporation
 5 Jul
 removed 40 shares for $71.28 per share 
Nippon Telegraph and Telephone
 5 Jul
 sold 40 shares for $47.90 per share 
Avista Corporation
 8 Jul
 sold 75 shares for $43.86 per share 
WP Carey, Inc
 8 Jul
 sold 40 shares at $68.52 per share
Toronto-Dominion Bank
 8 Jul
 sold 50 shares at $42.38 per share 
Meredith Corporation
 12 Jul
 sold 55 shares at $55.28 per share 
Starwood Property Trust, Inc
 12 Jul
 sold 250 shares at $21.02 per share 
Chevron Corporation
 12 Jul
 sold 50 shares at $106.46 per share 
Philip Morris International, Inc
  12 Jul
 sold 65 shares at $103.68 per share 
Macquarie Infrastructure Corp
 9 Aug
 sold 70 shares at $78.53 per share 
Omega Healthcare Investors, Inc
  9 Aug
 sold 165 shares at $38.83 per share 
Dr Pepper Snapple Group, Inc
  9 Aug
 sold 70 shares at $95.86 per share 
Deere & Company
 22 Aug
 sold 30 shares at $87.65 per share 
Digital Realty Trust, Inc
 26 Aug
 sold 48 shares at $99.24 per share 
Texas Instruments Inc
 26 Sep
 sold 60 shares at $68.41 per share 

DivGro now contains 52 different holdings, including 49 stocks and three closed-end funds (CEFs). These holdings are distributed by sector as follows:

Dividend Adjustments

Last quarter, I reported projected annual dividend income (PADI) of $11,576 on investments totaling $274,380, for a projected annual yield of 4.22%. This quarter, PADI decreased by 2.32% to $11,307 and total investments increased by 2.33% to $280,764. Projected annual yield dropped to 4.03%.

The following table shows the stocks in my DivGro portfolio that announced dividend increases in Q3-2016. I'm including the new annual dividend and yield on cost (YoC).

Increase Annual
Lockheed Martin
Reynolds American, Inc
Microsoft Corporation
Altria Group, Inc
Cummins Inc
Walgreens Boots Alliance, Inc
Omega Healthcare Investors, Inc
Main Street Capital
Realty Income Corporation

It is really great to see YoC creep up steadily – that's what dividend growth investing is all about! DivGro's average YoC is 4.35%, up a little from the 4.34% reported at the end of Q2-2016.

Unfortunately, 2 of my holdings paid reduced dividends this quarter:

• BHP Billiton plc (BBL)– A reduction of 6.67% to 56¢ annually (YoC: 1.04%)
• Nuveen AMT Free Quality Municipal Income Fund (NEA) – A reduction of 7.64% to 79.8¢ (YoC: 5.76%)

DivGro's PADI increased by $85 due to these dividend changes.

I received dividends from 60 different stocks this month, for a total of $2,900 in dividend income:
  1. Apple Inc (AAPL) – $57.00
  2. AbbVie Inc (ABBV) – $45.60
  3. AFLAC Incorporated (AFL) – $20.50
  4. BHP Billiton plc (BBL) – $28.00
  5. Caterpillar Inc (CAT) – $46.20
  6. Chubb Limited (CB) – $16.56
  7. Cummins Inc (CMI) – $45.10
  8. Dominion Resources, Inc (D) – $70.00
  9. Deere & Company (DE) – $18.00
  10. The Walt Disney Company (DIS) $90.17
  11. Dr Pepper Snapple Group, Inc (DPS) – $37.10
  12. Eversource Energy (ES) – $26.70
  13. Eaton Vance Tax-Managed Global Diversified Equity Income Fund (EXG) – $149.28
  14. Ford Motor Company (F) – $90.00
  15. General Dynamics Corporation (GD) – $26.60
  16. Gilead Sciences, Inc (GILD) – $47.00
  17. The Gap, Inc (GPS) – $37.95
  18. HCP Inc (HCP) – $94.88
  19. Helmerich & Payne Inc. (HP) – $49.00
  20. International Business Machines Corporation (IBM) – $42.00
  21. Intel Corporation (INTC) – $57.20
  22. Johnson & Johnson (JNJ) – $43.20
  23. Kimberly-Clark Corporation (KMB) – $25.76
  24. The Coca-Cola Company (KO) – $22.75
  25. Lockheed Martin (LMT) – $23.10
  26. Main Street Capital Corp. (MAIN) – $124.20
  27. McDonald's Corp. (MCD) – $24.03
  28. Macquarie Infrastructure Company LLC (MIC) – $87.50
  29. 3M Company (MMM) – $17.76
  30. Altria Group Inc (MO) – $42.38
  31. Microsoft Corp. (MSFT) – $28.80
  32. AGIC Equity&Convertible Income Fund (NIE) – $112.48
  33. Northrop Grumman Corporation (NOC) – $14.40
  34. Nuveen Premium Income Municipal Fund 2 (NPM) – $69.84
  35. Nippon Telegraph and Telephone Corporation (NTT) – $64.01
  36. Realty Income Corp (O) – $39.96
  37. Omega Healthcare Investors, Inc (OHI) – $84.00
  38. Pfizer Inc (PFE) – $30.00
  39. The Procter & Gamble Company (PG) – $21.42
  40. Philip Morris International (PM) – $66.30
  41. PennantPark Investment (PNNT) – $60.20
  42. Qualcomm Inc (QCOM) – $53.00
  43. Reynolds American, Inc (RAI) – $77.70
  44. Raytheon Company (RTN) – $17.58
  45. STAG Industrial Inc (STAG) – $83.40
  46. Starwood Property Trust, Inc (STWD) – $120.00
  47. AT&T Inc (T) – $72.00
  48. Toronto-Dominion Bank (TD) – $25.25
  49. Target Corporation (TGT) – $24.00
  50. T. Rowe Price Group, Inc (TROW) – $35.10
  51. The Travelers Companies, Inc (TRV) – $19.43
  52. Texas Instruments Inc (TXN) – $22.80
  53. Union Pacific Corporation (UNP) – $30.80
  54. United Parcel Service, Inc (UPS) – $19.50
  55. Valero Energy Corporation (VLO) – $43.20
  56. Walgreens Boots Alliance, Inc (WBA) – $16.50
  57. Wells Fargo & Co (WFC) – $20.52
  58. Wal-Mart Stores, Inc (WMT) – $34.50
  59. WP Carey Inc (WPC) – $39.20
  60. ExxonMobil Corporation (XOM) – $48.75

Market Value

At the end of Q3-2016, DivGro's market value of $334,849 represented a simple gain of 19.3% on $280,764 invested. Of course, this does not take into account the timing and size of cash deposits. DivGro's internal rate of return since inception is 11.16%.

I've started using the analysis and visualization tools available at Simply Wall St, a Sydney based startup that gives investors access to institutional quality data and analysis reports presented visually.

One really cool tool allows me to visualize various aspects of my DivGro portfolio. The Portfolio Snowflake represents Value, Future, Past, Health and Dividend scores calculated from the weighted average scores of companies in my portfolio:

In the screen grab above, I included DivGro's average income score, according to Simply Wall St's analysis. Similar scores are calculated for each of the other snowflake axes.

What I like about the snowflake infographic is that gives an immediate sense of the quality of the underlying portfolio or stock. For example, here are snowflakes of several of my DivGro stocks, sorted by total snowflake scores:

GD, ABBV, NKE, TGT, and KMB top the list. Interestingly (and not shown), the stocks with the lowest scores include BBL, HP, PNNT, and CAT – all stocks that I'm considering removing from my portfolio!

I'll be using these infographics in more of my articles in future.

Longterm Positions

Every quarter, I create charts for stocks I've owned for longer than one year. It is important to monitor the performance of longterm stocks, because changes that could affect the stock's performance can easily "hide" behind solid longterm results. I'd rather not be surprised by such changes.

To compare the performance of longterm stocks, it is appropriate to consider annualized total returns: 

GD, MO, RAI, and NOC have annualized total returns of more than 30%. Not far behind are O, MAIN, MSFT and INTC.

BBL still is my worst performer, although the stock has made up some ground over the last few months. TROW, GPS, WMT, DIS, F, and IBM all have negative annualized total returns.

As mentioned in my previous quarterly report, I'm looking for a suitable exit point for BBL. I'm also considering getting rid of GPS and PNNT. Perhaps I'll do so at the end of December to limit capital gains taxes.

Looking at a similar chart, but this time considering each stock's total returns over the past year, we can see GPS, TGT, DIS, F, and WBA are the worst performers:

Another exciting chart to study is YoC. Two business development companies continue to top my YoC chart: PNNT and MAIN. In September, MAIN became my sixth home run stock! Unfortunately, PNNT has not performed so well and the company froze its dividend shortly after I bought my shares. In July this year, I bought 785 additional PNNT shares in an attempt to recover losses. So far, the trade has worked out well, but I'm under no illusions that this might still end badly!


Finally, here is a chart showing the year-over-year dividend increases of my longterm positions. I prefer to see increases of at least 7%, so I'm happy to see that 13 of these longterm positions have experienced increases of more than 7% in the last year:

Four companies have not increased their dividend payments in more than a year:
  • The Gap, Inc (GPS)
  • Ford Motor Company (F)
  • PennantPark Investment Corporation (PNNT)
  • Caterpillar Inc (CAT)
As a dividend growth investor, I like to see regular dividend increases. GPS and PNNT are already on my "chopping block". I'm hoping that CAT will increase its dividend soon, but I'll need to monitor the stock carefully and take action if the dividend is frozen. My F shares have a YoC of 4.64% and are great for options trading, so I'm happy to retain my F position even if the dividend is frozen.

Outlook For Q4-2016

In Q4-2016, I want to complete the process of preparing DivGro for options trading. The next step will be to transfer several of my DivGro positions to another trading account in which I can trade options. Currently, I hold a fairly large percentage of my portfolio in an account that does not permit options trading. While I do trade options in my Scottrade account, I'm looking for another brokerage offering lower commissions. I'm considering Interactive Brokers.

Thanks for reading and take care everybody! 


  1. Things are really looking good, FerdiS. Congrats on the moves and that portfolio is looking solid as ever. The snowflake from Simply Wall St really gives a great mile high view of overall looks of a company and how the portfolio is positioned strategically.

    Thanks for sharing and keep up the great work. Wishing you the best heading into the end of the year.

    1. Thanks R2R -- I've really come to appreciate the snowflake graphic, which is color-coded by total score and shaped to give an immediate impression of scores on 5 different axes. I've only recently started using Simply Wall St, so there is lots yet to learn.

      All the best to you too for the last quarter!

  2. Gogogogogogo! I love reading updates from my blogger friends who are closing in on FIRE.

    1. Thanks for your support, Financial Velociraptor!

  3. Ferdi,

    Love seeing all those charts and even better when they're heading in the right direction. It looks like you're absolutely crushing it and Q4 is going to round out a great year for you. Interestingly enough I'm also considering IB for many of the same reasons.

    1. Thanks PIP! Things are going great now and I'm hoping it will continue into Q4 and next year!

      About IB: I'm already a customer. I have a smallish account with them in which I traded options several years ago. The trading system takes getting used to. It is certainly not as clean and intuitive as my other online brokerages at Scottrade and FolioInvesting. Also, I don't think they provide electronic documents for filing taxes. Someone mentioned they use Gainskeeper to track transactions/cost bases for that reason. I'm planning to check it out. Having said that, nothing beats IB's commissions for the variety of things that you can trade!

  4. Thanks for sharing the Simply Wall Street info. They reached out to me about a free account, but I haven't tried it out yet. It looks really cool. I'm emailing them now about my free account.

    1. There's some nice features on Simply Wall St. I like the way you can quickly glance at the snowflake infographic to get a sense of a stock's qualities. I'm still learning about all the features, though -- I'm certainly not yet a power user!

  5. Great report FerdiS. Love the quarterly graph and I do that also for myself. I also really like the graph on company dividend increases. I am going to create one like that for myself.

    Bravo and congrats on the successful portfolio.

    1. Thanks, Mike! As you know, I love to present information in charts. And if you set them up right, you can easily just hit the "update button" and get a new version with recent data added.

      Thanks for commenting and take care!


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