Showing posts with label PBI. Show all posts
Showing posts with label PBI. Show all posts

Sunday, March 31, 2019

Ten Dividend Failures over 8 years

Thinking as an income investor, would you be happy if ninety percent of your stocks increased their dividend since you bought them?

I have the luxury of being able to go through the stock picks I published  over the past 8 years and report on their dividend growth.

  • Dividend Growth is critical to income investors who no longer work
  • We expect 90% of our stock picks to deliver safe dividends and dividends that grow
  • Overall portfolio performance is positive when using dividend machine criteria to select dividend stocks


The rule of 90 and 10 is similar to the my rule of threes.

*Rule of threes: When two similar, unexpected  events happen, look out for the third.   I just went through this scenario with the sprinkler system in my condo building.    Rule of 90/10: I always believed in picking stocks that meet my dividend machine criteria and over all, 90 to 10, I will be able to count on a safe and increasing income.  You can find the criteria I used to pick stocks by clicking here:   www.themoneymadam.com/p/dividend-stock-criteria.html

BUY and HOLD


I started publishing my annual portfolios after I retired from managing other people's money.  These portfolios are buy and hold only portfolios.  If a stock is bought out, we took the money. If there was a merger, that is reflected as are spin offs.

Cash from buyouts is held in the portfolio as cash.  One could think of it as an emergency fund.    Retirees who bought these stocks in a qualified retirement plan, could use this cash as a cushion or to fund part of the required minimum distribution.   The savvy investor will buy short term rolling certificates of deposit.

DIVIDEND INCREASES


The table below presents the dividend increase data from my 2011 - 2018 portfolios.  Note that in 2016 I published only a covered call portfolio which I sold in February 2017; that portfolio is not included in this analysis.



2014 was the worst portfolio, on every level.  Not only did 4 of 18 stocks reduce their dividend, 2014 stocks have not appreciated as much as the other portfolios.  When you look at all seven portfolios, you can see in 5 of the 7 years, less than 10% of stocks picked reduced their dividend.  If you consider all the stocks which number nearly 100 names, you will see only 9 have reduced the dividend, pretty close to 90 and 10.

DIVIDEND REDUCTIONS


One stock, Conoco Phillips, symbol COP, affected four portfolios.  In COP's defense, in the 2011 and 2012 portfolios investors received 50 shares of Phillips 66, symbol PSX, when combined the dividend stayed about the same until COP made a huge dividend cut in 2016.  Since then, the dividend increases have resumed but are not yet back up to the pre split amount.  The PSX spin off has been very good with dividend increases averaging 23% per year.

MHLD, Maiden Holdings, is a re-insurer that got pummeled with the natural disasters of recent years and with their alliance with another insurer with questionable fundamentals.  MHLD reduced the dividend in September, 2018 and have since suspended the dividend.  Moreover, I fear that MHLD will be the first stock of these portfolios to go "belly up."

WPZ, Williams Partners, was a master limited partnership bought by its master.  Holders of WPZ stock received 1.494 shares of WMB for each share of WPZ.  Fractional shares were paid in cash.  Even with that increase in shares the dividend reduction is about 33%.

PBI, a stock with a good history when it was purchased just could not keep up with modern technology.  A bad pick on my part which shows you might want to use more than just my minimal criteria when picking a stock.

NTR, Nutrien, is the new company made from the merger of Agrium and Potash.  The dividend increase since the merger is a substantial 72% over the past 6 quarters but still not up the dividend paid by POT (Potash.)

JCS is a very small ethernet and communications equipment company with no debt but declining and revenues and negative earnings per share, ARLP, a coal provider split the stock early but could not keep up with the pressure of reducing coal production.  Then there is SJR, a communications company who pays their dividend every month rather than quarterly, but the dividend is down slightly recently.  DBD, Diebold is now Diebold Nixdof , it still trades under DBD, has negative earnings.  The last dividend DBD paid was February of 2018.  Finally WDR, Waddell and Reed, has suffered mightily due to the competition from low cost wealth managers.  Their mutual funds just do not cut it anymore.

10 stocks out of the 100 symbols picked over time is a pretty good track record.   We don't yet know what will happen to the 2017 and 2018 portfolios over time.  Hopefully, I learned how to pick better than earlier and these stocks will do even better than 90/10.

OVER ALL PORTFOLIO PERFORMANCE


Over all, these portfolios all are doing pretty well.  Again, 2014 is a relative laggard.  Duration of time is important with the early portfolios 2011 and 2012 doing better than the others.  That could be that the market was low when I started publishing my picks.


You can click to go to the portfolios tab to see the holdings of each portfolio.   http://www.themoneymadam.com/p/blog-page_11.html    The table below is a summary of these portfolios.   If you were building up to retirement and invested regularly over time, you would probably reinvest the dividend and you might have been tempted to sell some of the dividend losers as I did.   For the sake of ease of reporting.  These portfolios are long only with no active management.


REVENUES

Over time, I added a review of revenues to my stock picking screen.  I thought that perhaps if I paid a little more attention to revenue growth, I would have a better chance of avoiding the stocks with shaky dividends.    I took a look back at these ten stock and see their revenue trends are revealing.



The final table shows the change in revenue over the past three years.  Provided that a stock meets all the other criteria for a quality dividend stocks, this metric will determine what to do with the stock.

Symbol Current Rev Revenue 3 years ago Change from 3 years ago
DBD $4,578 $2,419 89.25%
COP $36,417 $29,456 23.63%
WPZ/WB $8,686 $7,360 18.02%
PBI $3,522 $3,578 -1.57%
SJR $5,239 $5,488 -4.54%
ARLP $2,002 $2,273 -11.92%
WDR $1,153 $1,516 -23.94%
JCS $65,762 $107,669 -38.92%
MHLD $2,164 $5,488 -60.57%

In reality, what did I do:  what should we do?  In summary, I have one buy, and one hold, and the rest avoid.

In my personal portfolio I can move in and out of stocks.  Listed below are the actions I took with these losers as well as my current recommendation.

Conoco Phillips, symbol COP - Buy

I sold COP but bought it back and continue to sell calls against my position.  I like the revenue growth and I like the return of dividend growth.  But, because the yield is so low, I don't care if my shares are assigned to a call buyer.  I can find someplace else to put the money.

I call this a Buy - except for the puny yield, their dividend machine fundamentals are solid.

3/29/2019
COP E.P.S. Dividend Yield 3 Yr Div Growth D/E Ratio
$66.74 $5.32 $1.22 1.83% 7.33% 0.47

WIlliams Companies WPZ/WMB - Hold

I sold when the merger occurred.  Looking at recent revenue growth and a yield of 5.4% makes WMB a hold for sure and with more investigation perhaps a buy.  However, E.P.S. is less than the dividend.

3/29/2019
WMB E.P.S. Dividend Yield 3 Yr Div Growth D/E Ratio
$28.72 -$0.16 $1.52 5.29% 8.89% 1.53

Pitney Bowes PBI

Dividend cuts are hard to take and when they reduced the dividend I sold.  Revenue is holding its own lately but not worth the effort to own this company that is trying to get up to date

JCS Communications

Sold when dividend was cut.  Not worth the effort.

ARLP Partnership

Sold when dividend was cut.  Only for non qualified money as the tax complications make holding in an IRA not recommended.

Nutrien NTR

I suffered through the Potash merger and did not like having my income reduced.  I was able to sell calls on all shares and sold through being assigned at a profit.   Too much drama for a conservative investor's portfolio.  

Shaw Communications SJR

The monthly payout was nice but once they cut the dividend, the weakness of their business was exposed.  Stick with larger, solid stocks.

Maiden Holdings MHLD

Most painful buy here. I chased yield and got hurt.  I did sell after cashing their juicy dividend and selling some calls.  All in all I am even.  They still have a business but their entire structure is a mess.  Stay away.

Waddell and Reed WDR

My very first investment was in a WDR fund that my collage roommate's dad sold me.  They are no longer relevant.  Again I chased yield.  Sold. In that field, I still like Westwood Holdings which has been hammered but is solid.

Diebold/Nixdorf

This is the strangest stock of the group.  Diebold is into security and one would think that would have been a foolproof area of business.  Through partnerships Diebold is international.  I sold this shortly after I bought it because it seemed to have little direction.  They no longer pay a dividend, but among these stocks it is only one of three with dividend growth over the past 3 years.


SUMMARY


My conclusion is I remain comfortable picking stocks using the dividend machine basic criteria. I will stick with larger stocks to provide income from dividends.  I will stick with a mix of higher yielding stocks and those with more modest yields but on which covered call income is available. 

Readers of my blog know I do more active managing of my money.  These portfolios are buy and hold so I could measure the results easily and quickly.  In my own portfolios, I tend to sell calls on stocks with price momentum and therefore, have some stocks called away.  I use those gains to buy other dividend stocks.  This works out for me.

I hope the analysis of the past 8 years will help you become a better income investor.  You can use a disciplined income investing approach and expect 90% of your picks to continue to pay and grow your dividend income.

M* MoneyMadam

*Rule of Threes is a writing principle

Disclosure:  Long XOM, T, NHI, CM, MO, ETN, LVS,WDC, WY, MIC, HCI, CVS, WHG, INTC, BBT, CAT, COP, CVX, MHLD, QCOM, XEL, AXN, BCE, PG
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Sunday, August 14, 2016

Dividend dog PBI yields 4%

Pitney Bowes declares $0.1875 dividend http://seekingalpha.com/currents/post/3200762?source=ansh-d $PBI
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Monday, October 5, 2015

Dividend Machine Dividend Cuts

I was going to write an article on dividend cuts in my model portfolios but I could find only two:  PBI, Pitney Bowes and LDR, Landauer.  





I picked each of these stocks as I compiled the 2011 portfolio.  I have compiled 5 portfolios so far that include 95 stocks.  Two out of 95 symbols profiled so far with a dividend cut makes for a boring article.  I will look next at dividend growth rates but for the purpose of reviewing failures, let's take a look at PBI and LDR.

Pitney Bowes, symbol PBI

Since my model portfolios are long only so that I can measure this strategy, I cannot "sell" PBI.  I do not reinvest dividends as these portfolios are designed to deliver income that you spend.  I don't include the dividend income in the gain because the income is for spending.  I follow the capital gains and losses as well as dividend yield and dividend growth. 

It is of some interest to look at our failures especially when you have to hold them.   Here are the Dividend Fundamentals of this failed pick. 


















I am encouraged by the fact that earnings per share (EPS) exceed dividends paid out.  I am discouraged by the debt to equity ratio (D/E.)  One can see that while PBI cut the dividend in half, and took on a lot of debt to survive, PBI continued to pay something. 

Since the dividends paid out are only 35% of earnings, one could conclude that PBI is trying to pay off their massive debt.  

The 2011 portfolio holds a very shaky but improving stock in PBI.

Landauer, symbol LDR

Landauer's Dividend Machine fundamentals are so similar to PBI except for one very big measure and that is earnings per share.  LDR's earnings are struggling and not even keeping up with the dividend payout.  With a D/E (debt to equity) ratio of 11+, I would be very worried about this stock.  But Landauer's turn around is more recent than PBI's and perhaps it will survive and return to Dividend Machine status.



 

Lessons from History of PBI and LDR


I look back at these two stocks picked for the 2011 Dividend Machine portfolio and I see that PBI had a strong history of good Dividend Machine fundamentals.   They earned more than they paid out.  Their dividend growth was vigorous and their debt under control until 2012 when everything fell apart as the result of a change in their industry and a challenge to share holder control.  They could be considered a modern metaphor of the "buggy whip company." Yet, PBI has found a way to regroup and enter the "enterprise" space.  I think they have a chance to return to being a good Dividend Machine.  I do not think enough of PBI to buy it.

Like PBI, Landauer had a strong history of earnings greater than dividends and dividend growth but a look back makes me think I used wrong information to evaluate their balance sheet.   D/E ratio was higher than I would accept today and then something happened in 2013 and 2014 that resulted in a major hit to earnings and an increase in debt. 

The other 93 stocks are paying out at quite a nice clip and I will look at them more carefully in future articles.

In summary, when you are trying to invest in stocks that will pay dividends over time without fail, I would suggest that the four criteria I use for Dividend Machines works about 97.95% of the time.

TheMoneyMadam


Disclosure: No positions

 
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Wednesday, June 12, 2013

DIVIDENDS Eleven stocks to buy now.

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Income investors should always have a wish list of stocks they want to buy.  I use the universe of stocks I already have identified as dividend machines to start my search. 


In this post, I perused my 2011 dividend machines list to come up with a list of stocks that I may want to add to the income producing portion of my portfolio.



Should you buy 2011 Dividend Machines?


You should not buy all the 2011 dividend machines today.   For instance, Pitney Bowes, symbol PBI, currently pays over a five percent dividend but it no longer qualifies as a dividend machine because it has added a huge amount of debt and it cut the dividend in half.   AT&T, symbol T, no longer earns more than it pays out in dividends so it too is no longer a dividend machine although their greater than five percent yield might tempt you.



You should consider buying those stocks that are still dividend machines.  This means the stock pays a dividend of at least three percent, the company earns more than it pays out, the dividend has increased every year for at least five years and the company’s debt to equity ratio is one or less or equal to the industry standard.



Eleven stocks to consider buying for income now!



I found eleven stocks that I will consider adding to my income portfolio.  Since I am always concerned about my income going up over time, I will look for the stock that has increased the dividend the most over time.   All eleven companies have stock prices that are at least ten percent less than their fifty-two week high.



Review the data in the table below.   Do your own research, and then make your trade.



Symbol
2003 Qtr Div/shr
2013 Qtr Div/shr
% Div Inc.
High stock price
Current stock Price
Percent Change
ATO
0.3
0.35
17%
45.12
40.74
10%
BCE
0.2
0.5825
191%
48.06
43.05
10%
DUK
0.275
0.765
178%
75.47
66.59
12%
ED
0.56
0.615
10%
65.98
56.77
14%
ESP
0.075
0.25
233%
31
25.25
19%
HAS
0.06
0.4
567%
48.97
43.81
11%
INTC
0.02
0.225
1025%
27.75
24.46
12%
NHI
0.4
0.695
74%
72.99
59.62
18%
SCG
0.345
0.5075
47%
54.41
48.57
11%
SO
0.5075
1.22
140%
48.74
43.92
10%
TU
0.15
0.3295
120%
37.48
32.98
12%


TheMoneyMadam

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