Deep Value Dividend Growth Index Week 10 Update: Oh The Excitement!

Posted On January 29, 2017 1:07 am

Click here to read up on the intro to this portfolio, the theory behind it, and its methodology.

Gotta love earnings season! A time of missed earnings, disappointing guidance, analyst downgrades, and short seller attacks, all of which are meaningless in the long-term, but make for excellent buying opportunities. 8Point3 Energy Partners (CAFD), Macquarie Infrastructure Copr (MIC), GasLog Partners (GLOP), and Colgate-Palmolive (CL), all had secondary additions…on Friday alone!

Then of course there was Qualcomm’s shellacking due to the news that regulators were suing them, followed by Apple, TWICE! Of course we took advantage of that overreaction in a big way.

Other freakout buying opportunities included British Telecom, which plunged 20% in a single day (double position addition on that one), as well as Robert Half International.

We’re getting close to filling out the portfolio, all 200 spots, which not just makes for solid diversification, (and proves a point I made earlier), but also provides near daily dividend liquidity to keep our elephant gun loaded.

The other exciting news of course was Friday’s GDP estimate, which came in at a disappointing 1.9%, well below the 2.4% expectation. BUT I would point out one bit of good news. Between Q1 of 2015 and Q2 of 2016 we had 5 straight quarters of decelerating GDP growth. And while 1.9% may not be a number to strip naked and dance on rooftops over, it does represent 2 quarters of accelerating growth. Better yet Q1 and Q2 are expected to be 2.2% and 2.3%, which would make 4 straight quarters of acceleration.

And that’s before any Trump stimulus takes effect. All of which means that, while it may take another four of five quarters to achieve economic greatness, (3+% GDP growth, 3.5+% wage growth, 6+% dividend growth, and 7+% earnings growth), we are making progress towards that goal.

Portfolio Stats:

Portfolio Holdings: 189 (180 last week)

Yield: 3.56% (S&P yield 1.99%)

Lowest Yielding Holdings:
MercadoLibre (MELI): 0.33%
Shire PLC (SHPG): 0.49%
NVIDIA (NVDA): 0.50%
MarketAccess Holdings (MKTX): 0.62%
Dr. Reddy’s Laboratories (RDY): 0.67%
Ball Corp (BLL): 0.68%
Perrigo (PRGO): 0.78%

Highest Yielding Holdings:
Seaspan (SSW): 14.84%
Ladder Capital (LADR): 13.41%
Dynagas LNG Partners (DLNG): 10.11%
Icahn Enterprises (IEP): 9.82%
Golar LNG Partners (GMLP): 9.38%
KNOT Offshore Partners (KNOT): 9.27%
Starwood Property Trust (STWD): 8.59%

PE: 16.01 (14% below S&P 500)

FCF Margin: 17.19% (vs S&P 500’s 5.05%)

Return on Assets: 7.33% (12% above S&P 500 average)

Return on Equity: 55.38% (161% above S&P 500 average)

Market Cap: $15.9 billion (80% below S&P 500 average)

Smallest Market Cap Holdings:
Jernigan Capital (JCAP): $178.4 million
Farmland Partners (FPI): $201.7 million
Medequities Realty Trust (MRT): $358.1 million
PennantPark Floating Rate Capital (PFLT): $377.1 million
Westwood Holdings Group (WHG): $495.8 million
Dynagas LNG Partners (DLNG): $587.4 million
Sprague Resources (SRLP): $600.2 million

Largest Market Cap Holdings:
Apple (AAPL): $641.2 billion
JPMorgan Chase (JPM): $311.7 billion
Wells Fargo (WFC): $280.9 billion
AT&T (T): $259.5 billion
Bank Of America (BAC): $234.0 billion
Procter & Gamble (PG): $222.0 billion
Verizon Communications (VZ): $204.2 billion

Projected 5 Year EPS growth: 9.0% (2% above S&P 500 average)

Projected Annual Total Return: 12.6% (38% above the market’s historic CAGR since 1871)

Portfolio Composition: 

REIT:                                     16.47%
Consumer Cyclical:         16.01%
Industrial:                           13.46%
Healthcare:                         10.91%
Consumer Defensive:    10.81%
Energy:                                 10.04%
Finance:                                 7.54%
Tech:                                        6.77%
Utilities:                                  2.77%
Basic Materials:                   2.65%
Telecom:                                 2.57%

Smallest Holdings
Marathon Petroleum (MPC): 0.31%
Prologis (PLD): 0.31%
Delta Airlines (DAL): 0.31%
Kimco Realty (KIM): 0.32%
Gildan Activewear (GIL): 0.32%
Anheuser-Bush InBev (BUD): 0.33%
Prudential Financial (PRU): 0.34%

Largest Holdings:
Teva Pharmaceuticals (TEVA): 1.96%
Lockheed Martin (LMT: 1.60%
Qualcomm (QCOM): 1.54%
Perrigo (PRGO): 1.40%
British Telecom (BT): 1.23%
Icahn Enterprises (IEP): 1.15%
Shire PLC (SHPG): 1.04%

Worst Performers:
L Brands (LB): -8.16%
DineEquity (DIN): -7.39%
Helmerich & Payne (HP): -7.36%
VF Corp (VFC): -7.33%
Robert Half International (RHI): -7.27%
Invesco (IVZ): -7.0
HollyFrontier (HFC): -6.41%

Best Performers:

Phillips 66 Partners (PSXP): 29.17%
Holly Energy Partners (HEP): 24.68%
Valero Energy Partners (VLP): 24.18%
NVIDIA (NVDA): 22.60%
Magellan Midstream Partners (MMP): 20.75%
Broadcom (AVGO): 20.63%
EQT GP Holdings (EQGP): 19.80%

Portfolio Performance:

Portfolio Annualized Total Return: 7.80%
S&P 500: 5.51%
Outperformance (Alpha): 2.29% (10 straight weeks of beating market,  by 42% so far)

What I’m Watching Next Week

On the economic front there are a couple key reports to watch. Most notable are personal income and personal spending (monday), consumer confidence (Tuesday), ADP’s employment estimate (Wednesday), and most important of all, official jobs report on Friday.

As always I’m most interested in labor participation rate and wage growth, because if those continue rising then so will consumer purchasing power, confidence, and spending. That in turn will hopefully push GDP growth and earnings growth in the right direction. In addition, it might let the Fed raise rates thrice this year, which would help drive REIT and Utility prices lower, opening up buying opportunities for us.

In earnings news the Q4 and full year 2016 results are coming fast and furious: Note that not all of these are in the portfolio, rather they are on my watchlist and I’m eager for a potential buying opportunity.

EPD (Mon)
AAPL (Tues)
XOM (Tues)
PNR (Tues)
PFE (Tues)
SPG (Tues)
MO (Wed)
ADP (Wed)
AMP (Wed)
ANTM (Wed)
AVB (Wed)
BIP (Wed)
D (Wed)
MPLX (Wed)
WEC (Wed)
AMGN (Thur)
BLL (Thur)
DLPH (Thur)
EQGP (Thur)
EQM (Thur)
EL (Thur)
HBI (Thur)
KIM (Thur)
LAZ (Thur)
OTEX (Thur)
PM (Thur)
VLP (Thur)
V (Thur)
CLX (Fri)
PSX (Fri)
PSXP (Fri)


About author

Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I currently write for both Seeking Alpha, Simply Safe Dividends, and DividendSensei.com My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams, and enrich their lives. With 22 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams. I'm currently on an epic quest to build a broadly diversified, high-quality, high-yield dividend growth portfolio that: 1. Pays a 5% yield 2. Offers 7% annual dividend growth 3. Pays dividends AT LEAST on a weekly, but preferably, daily basis

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