Sunday, August 9, 2015

Lock in Gains and move to high yield?

Lock in gains and move the capital to higher yielding stocks. 

In this post I write about the 2011 Dividend Machine Portfolio.  

 The 2011 portfolio has done well by all my measures.

Several stocks have appreciated significantly and their yields are less than I require for income that comes from stocks.  These are obviously good stocks but I would not buy them today if I used only my Dividend Machine criteria.  Now it is time to determine what to do with the winners…Buy, Sell, Hold, Hedge with a call?

Buy, Sell, Hold or Hedge with a call.

Let’s cut to the chase.  Listed below and in the table below are the stocks from the 2011 Dividend Machine Portfolio that I would buy, sell or hold.   The stocks I analyzed have a gain of 60% and a yield of less than 3%.   I have not included any “spin off” stocks such as ABBV or PSX. 

Sell ATO due to an anemic dividend growth rate of 3.28%.   With a yield of 2.82% you need to supplement your income by about 1% per year by selling covered calls.  ATO calls are available but not plentiful.  These two income facts justify a sell on ATO.

Sell CAG anemic yield, anemic dividend growth and no calls to make up the difference.  Take your gains.

Hold ITW, dividend growth is good at 5.13%.   Yield is weak at 2.1% but calls are available to boost that yield.  ITW is a hold.

Hold MSA, good dividend growth at 5.6% but not stellar.  No calls to make up for 2.48% dividend yield.  Hold but watch the dividend growth.

Hold NOC, No calls to make up for a really weak dividend of 1.85% yet you cannot ignore a dividend growth of 14.04%.  NOC is a hold

Hold RPM no calls to make up for a yield of 2.22% the marginal dividend increases over five years of 5.36% make RPM a tepid hold.   Follow the dividend increases.

Hold TRV this stock is a solid hold.  Calls are available to augment the 2.30% yield but the dividend appreciation rate of 13.88% make TRV as solid hold.   You would have to invest in another stock that grows your income by nearly 14% per year to make it worthwhile to take gains.

Sell UTMD.  This is an overpriced stock with a low yield, a low dividend growth rate, and no calls.   Take the money.

Hold WSO is a hold it has no calls and yield is 2.18% but in a tax move, WSO pre-paid five years of dividends so the yield should continue to improve as the 6.9% dividend growth rate suggests.

My Buy Sell and Hold stocks are in the table below.