Friday, August 9, 2019

Home Run Number 19

More than a year has passed since I last celebrated a home run.

Recall that I use the term home run to identify a stock in my portfolio that crosses the 100% mark in total returns.

My last home run was Apple (AAPL), which became the first $1T publicly-traded company shortly after it became my eighteenth home run stock.

This article presents my 19th home run stock, a list of previous home runs, and shortlist of home run contenders.

Previous Home Runs


Here is a list of DivGro's previous home runs with updated total returns (and annualized total returns):
  • Home run #1: General Dynamics (GD) — up 111% (31% annualized)
  • Home run #2: Nippon Telegraph & Telephone (NTT) — closed for 125% gain (37% annualized)
  • Home run #3: Digital Realty Trust (DLR) — closed for 102% gain (44% annualized)
  • Home run #4: Altria Group (MO) — up 8% (3% annualized)
  • Home run #5: Reynolds American (RAI) — closed for 180% gain (53% annualized)
  • Home run #6: Main Street Capital (MAIN) — up 155% (26% annualized)
  • Home run #7: Microsoft (MSFT) — up 211% (57% annualized)
  • Home run #8: UnitedHealth Group (UNH) — up 47% (23% annualized)
  • Home run #9: Northrop Grumman (NOC) — closed for 132% gain (46% annualized)
  • Home run #10: McDonald's (MCD) — up 153% (31% annualized)
  • Home run #11: AbbView (ABBV) — up 21% (7% annualized)
  • Home run #12: Lockheed Martin (LMT) — up 126% (29% annualized)
  • Home run #13: Raytheon (RTN) — up 34% (22% annualized)
  • Home run #14: Netflix (NFLX) — up 54% (38% annualized)
  • Home run #15: Intel (INTC) — up 86% (21% annualized)
  • Home run #16: Valero Energy (VLO) — up 38% (13% annualized)
  • Home run #17: Aflac (AFL) — up 132% (34% annualized)
  • Home run #18: Apple (AAPL) — up 102% (28% annualized)
Once a position reaches home run status, it retains that status even if the stock price drops and the total returns dip below the 100% mark. Furthermore, if I buy additional shares of a home run stock at a higher cost basis, the calculated total returns could drop below 100% as well.

I reopened a position in DLR, which has returned 11% in about ten months. The new position will have to produce total returns of 100% in order to earn home run status, just like any other stock in my portfolio.

Home Run #19


My 19th home run stock is Xcel Energy (XEL), a public utility founded in 1909 and based in Minneapolis, Minnesota. XEL generates, transmits, and distributes electricity; and transports, stores, and distributes natural gas.

XEL is a Dividend Contender with a streak of 16 consecutive years of higher dividend payments. I own 65 shares of XEL, which should deliver dividends totaling about $105 in the next year.

Here is a table showing the buy dates, number of shares, and cost basis of each lot of XEL shares:



The average cost basis of my 65 shares is $34.31. With XEL trading at about $61.59 per share, the stock yields 2.63% but my yield on cost is 4.73%.

Although XEL's share price is not yet double my average cost basis, I've collected about $444 in dividends since September 2009 when I bought my first 26 shares. This pushes total returns above the 100% mark.

Here is a price chart of XEL indicating my buys since 9 September 2009:


Home Run Contenders


Cisco Systems (CSCO) has returned 75% (or 34% annualized) and Realty Income (O) has returned 72% (or 18% annualized). Both stocks have some ways to go before reaching home run status. In third place is Starbucks (SBUX) with total returns of 65% (or 30% annualized).



Although SBUX is in third place right now, it looks like it has the momentum to become home run #20. But it seems like it'll be a while before I can announce DivGro's next home run.

Concluding Remarks


With total returns just above 100%, XEL is the latest home run stock in my DivGro portfolio.

The stock's current dividend yield of 2.63% is 20% below its 5-year average of 3.29%. This means that XEL is trading at overvalued levels. Consider also XEL's forward P/E ratio of 22.9, which is well above its 5-year average P/E ratio of 18.7, and the fact that XEL is trading near its 52-week high.


Source: Simply Safe Dividends


It is pretty clear that XEL is trading at a premium price compared to how the market has valued it in recent years. And I'm happy to be a beneficiary of XEL's excellent performance!

On the other hand, it would be irresponsible to add shares at these levels. So, I'll just have to enjoy the ride and hope that XEL will continue to increase its dividend at a healthy pace.

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2 comments :

  1. DivGro -

    Keep hitting dingers sir!!

    -Lanny

    ReplyDelete
    Replies
    1. I hope to, Lanny! Thanks for commenting and all the best with your portfolio!

      Delete

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