2019 January Dividend Summary

Other than collecting dividends in the month, all other investment activity has been on pause for longer than usual.  However, the many purchases that occurred in 2018 resulting in the additional of fresh capital infused into the PIV portfolio and reinvestment of dividends set up 2019 to see a nice YoY gain of 91% despite one particular dividend cut from a very unloved, and understandably so, company.  Take look below for the details of last months dividend income.

As I alluded to above, General Electric cut its dividend by 92% going into 2019, leaving a quarterly payment of $0.01 to be distributed to shareholders for the foreseeable future. As most know, rather than eliminate the entire dividend, companies usually leave a marginal amount to be paid so that mutual funds/ETFs and others are not forced to sell shares as would be the case if the dividend would have been completely eliminated.  Another company I own, NOV, took the same action when the price of crude oil came crashing down a few years ago.  Those who have been following the markets closely, likely noticed that GE's price reached a 52 week low in December 2018 and was trading well below $7/sh., which tempted me to purchase additional shares from a mere speculative point of view, but I held off.  Since then the stock outperformed the market and after the company announced a revenue beat earlier this week, the stock jumped over 10% to close above $10/sh.  I along with many others are looking forward to seeing how management develops and executes a plan to bring the enterprise off the operating table, which will no doubt be a great task that they, along with the employees at large, can hopefully pull off. Time will tell.

Despite GE's cut, the net impact to YoY rate variance remained positive, +1%, due to offsetting rate increases in the past year by CSCO, NGG, DIS, and WPC.

Furthermore, despite the loss of income from GE's dividend cut (nearly 10% of dividend income received in January 2018), the portfolio experienced a 91% increase in dividend income - and practically all of it came via an increase in the volume of shares owned, whether in existing or new positions, compared to last year.  PPL Corporation and Kimberly Clark Co. were both new positions to the portfolio in 2018 and came with relatively high current yields at the time of purchase which have also continued to increase in the months since.  Leggett & Platt Inc. and Cardinal Health, Inc. were also new positions that were initiated in towards the end of 2018 and are also adding a nice dividend stream to the portfolio.  Positions in Campbell and Kimco were increased through the previous year and also come with generous yields and very reasonable valuations.  

Campbell has not increased their dividend within the past year and recently came to terms with an activist investor to avoid an ugly proxy fight. The company has hired a new CEO who is expected to help the company divest of some under performing assets and deleverage the balance sheet.  I remain a fan of CPB at current valuation and believe this a company fit the description Warren Buffett has uttered in past years - "I try to invest in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.” I believe CPB fit that description [wonderful business] and the valuation has reflected it [was run by an idiot who apparently followed the institutional imperative - growth at any cost].  This remains my thesis as I wait for a much more experienced CEO to correct the mistakes of his predecessor and which I believe will ultimately lead to earnings growth and expansion of the market multiple Wall Street is willing to pay for CPB shares.  But stay tuned, maybe time will reveal that it was I who was the idiot for investing in this company 😖.

Looking Forward
With market valuation quickly recovering in January, I am not very anxious to deploy capital and will likely be tepid in my approach in coming weeks unless we see a quick and sudden decline in market valuations.  With that being said, I do have my eye on a few existing positions that I believe are trading below their intrinsic value at the time of this writing, such as: BAYRY, KHC, CAH, T, GIS, IBM, and QCOM.  Although these are not listed in any particular order, BAYRY remains a priority for additional capital as the company currently trades at market capitalization that equates to what they paid for Monsanto last year - which seems completely irrational IMHO.