Friday, April 10, 2020

I Now Own Raytheon Technologies

On Monday, 30 March 2020, Raytheon (RTN) and United Technologies (UTX) announced that they've received the necessary regulatory approvals for their all-stock merger of equals.

The merger closed prior to the opening of trading on Friday, 3 April 2020, and United Technologies was renamed Raytheon Technologies (RTX).

The last full day of trading in the shares of RTN was Thursday, 2 April 2020, after which each share of RTN was converted into 2.3348 RTX shares. The first day of trading for RTX shares was Friday, 3 April 2020.

This article provides a summary of the conversion and details of my first RTX trade.

Generally, I avoid stocks of companies that plan to merge. While such deals usually happen to leverage synergies, I don't like dealing with the aftermath. This article does precisely that... it deals with the aftermath of the RTN and UTX merger.

The other reason I don't like mergers is that it somewhat wipes out the dividend histories of the merging companies. Post-merger, will the new company continue to pay and increase dividends? Will shareholders receive at least the same projected annual dividend income (PADI) as before the merger? Will the new board change the dividend policy? We just don't know, yet!

There seems to be no standard way to treat dividend histories. RTN is a Dividend Contender with a track record of 15 consecutive years of higher dividend payments. In contrast, UTX is a Dividend Champion with 26 consecutive years of higher dividend payments.

If RTX decides to pay at least an equivalent dividend, does it deserve to inherit the dividend history of either RTN or UTX? Does RTX deserve to be labeled a Dividend Champion just because "United Technologies was renamed Raytheon Technologies"?

I don't know the answers, though these questions would become moot if RTX ended up paying a smaller dividend than those of its constituents. From my perspective, I'd like to see the same or a higher PADI than before the merger!

RTN Trade Summary


I first bought 11 shares of RTN in January 2014, adding more shares in two additional batches in 2016 and 2019. Here is a summary of the three buys and the dividends I've received, along with an analysis of unrealized gains as of the last day that RTN traded:

2014-01-03
Bought 11 shares of RTN at $89.35 per share:
$
982.88
2014-05-01Dividend on 11 shares at 60.5¢ per share:$6.66
2014-08-07Dividend on 11 shares at 60.5¢ per share:$6.65
2014-10-30Dividend on 11 shares at 60.5¢ per share:$6.66
2015-02-05Dividend on 11 shares at 60.5¢ per share:$6.65
2015-04-30Dividend on 11 shares at 67.0¢ per share:$7.37
2015-08-06Dividend on 11 shares at 67.0¢ per share:$7.37
2015-11-12Dividend on 11 shares at 67.0¢ per share:$7.37
2016-02-04Dividend on 11 shares at 67.0¢ per share:$7.37
2016-02-19
Bought 13 shares of RTN at $122.73 per share:
$
1,595.49
2016-05-12
 Dividend on 24 shares at 73.25¢ per share:
 $
17.58
2016-08-04
 Dividend on 24 shares at 73.25¢ per share:
 $
17.58
2016-11-10
 Dividend on 24 shares at 73.25¢ per share:
 $
17.58
2017-02-02
 Dividend on 24 shares at 73.25¢ per share:
 $
17.58
2017-05-11
 Dividend on 24 shares at 79.75¢ per share:
 $
19.14
2017-08-03
 Dividend on 24 shares at 79.75¢ per share:
 $
19.14
2017-11-09
 Dividend on 24 shares at 79.75¢ per share:
 $
19.14
2018-02-01
 Dividend on 24 shares at 79.75¢ per share:
 $
19.14
2018-05-10
 Dividend on 24 shares at 86.75¢ per share:
 $
20.62
2018-08-02
 Dividend on 24 shares at 86.75¢ per share:
 $
20.62
2018-11-08
 Dividend on 24 shares at 86.75¢ per share:
 $
20.62
2019-01-31
 Dividend on 24 shares at 86.75¢ per share:
 $
20.62
2019-05-09
 Dividend on 24 shares at 86.75¢ per share:
 $
20.62
2019-08-01
 Dividend on 24 shares at 86.75¢ per share:
 $
20.62
2019-08-02
Bought 26 shares of RTN at $179.19 per share:
$
4,658.94
2019-11-07
 Dividend on 50 shares at 94.25¢ per share:
 $
47.13
2020-01-30
 Dividend on 50 shares at 94.25¢ per share:
 $
47.12
2020-04-02Exchange Out 24 shares of RTN at $116.96 per share:$2,807.04
2020-04-02Exchange Out 26 shares of RTN at $116.96 per share:$3,040.96
                                               
               

Capital Loss:
$
1,389.31

Dividends Received:
$
425.75

Commissions/Fees/Taxes:
$
1.00
Net Unrealized Loss: $964.56

My investment in RTN has an unrealized loss of about 13% or 6% on an annualized basis.

RTX Trade Summary


On 3 April, I received 60.7048 RTX shares for 26 RTN shares in an account that does not allow partial shares. Immediately, 0.7048 RTX shares were sold, so effectively, I received only 60 RTX shares. Additionally, it appears the conversion left me short $45.16, which I'm labeling as a fee of the transaction.

Also on 3 April, I received 56.0352 RTX shares for 24 RTN shares in an account that accommodates partial shares. I decided to round this position out to 60 RTX shares as well, so I bought 3.9648 shares on Wednesday, 8 April.

These transactions are summarized below:

2020-04-02
Exchange In 60.0000 shares of RTX at $49.93 per share:
$
2,995.80
2020-04-02
Exchange In 56.0352 shares of RTX at $50.09 per share:
$
2,807.04
2020-04-08
Bought 3.9648 shares of RTX at $63.25 per share:
$
250.77
2020-04-08Own 120 shares of RTX at $62.62 per share:$7.514.40
                                               
               

Unrealized Capital Gain:
$
1,460.79

Dividends Received:
$
0.00

Commissions/Fees/Taxes:
$
45.16
Net Unrealized Gain: $1,415.63

I'm happy to see that RTX's share price has already increased quite a bit!

Concluding Remarks


Rather than close my RTN position, I decided to hold it through the merger with UTX. I'm happy to see that, less than one week later, RTX has generated enough gains to cover my loss with RTN. Of course, the market's overall action has much to do with this state of affairs.

I'm removing $188.50 from DivGro's PADI. When it is clear what RTX will be paying dividend-wise, I'll add the appropriate PADI back to the tally.

Let's see what the future holds for RTX!

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2 comments :

  1. You may want to update your PADI as RTX declared a quarterly dividend of $0.475 per share https://www.prnewswire.com/news-releases/raytheon-technologies-board-of-directors-declares-quarterly-cash-dividend-301047802.html?utm_source=Master+List&utm_campaign=f35c3ee24b-EMAIL_CAMPAIGN_2019_04_07_04_19_COPY_01&utm_medium=email&utm_term=0_a4a8931bab-f35c3ee24b-282883721&mc_cid=f35c3ee24b&mc_eid=eada5e2381

    ReplyDelete
    Replies
    1. Thanks for letting me know! I'll certainly update my PADI !

      Delete

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