Deep Value Dividend Growth Index Week 13 Update: Boring Is Good

Posted On February 20, 2017 10:45 pm

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

With the portfolio now full, we only get to add in the event that a stock drops. And since 80% of company’s this quarter have beaten earnings expectations, there isn’t that much in terms of buying opportunities, with the notable exception of Gilead Sciences, and DineEquity.

On the economic front things continue to improve, with most economic reports beating expectations. In fact, the New York Fed’s real time GDP growth tracker is now predicting Q1 economic growth of 3.1%. In fact, the inflation indicators are starting to show signs of consistent growth, with inflation now up 2.5% (1.7% by the Fed’s preferred metric). This increases teh chance that we might indeed get 3 rate hikes this year instead of just the two the markets are currently anticipating.

Meanwhile the markets continue to surge higher, courtesy of ongoing optimism about President’s Trump’s soon to be released tax reform plan. While the specifics are still not known, it’s generally believed that the plan will involve a cutting of Corporate taxes from 35% to 20%, a 10% repatriation holiday, and the allowing of 100% capital expenditure deduction in year 1. In other words, plenty to drive fantastic EPS growth in the coming two years, as well as boost economic growth even further.

Portfolio Stats:

Portfolio Holdings: 200

Yield: 3.53% (S&P yield 1.94%)

Lowest Yielding Holdings:
MercadoLibre (MELI): 0.30%
Shire PLC (SHPG): 0.44%
NVIDIA (NVDA): 0.52%
MarketAccess Holdings (MKTX): 0.57%
Dr. Reddy’s Laboratories (RDY): 0.69%
Perrigo (PRGO): 0.69%
Ball Corp (BLL): 0.71%
McKesson Corp (MKC): 0.75%
Charles Schwab (SCHD): 0.77%
Dominoes Pizza (DPZ): 0.81%

Highest Yielding Holdings:
Ladder Capital (LADR): 13.29%
Icahn Enterprises (IEP): 10.72%
Dynagas LNG Partners (DLNG): 10.46%
Golar LNG Partners (GMLP): 9.76%
KNOT Offshore Partners (KNOT): 9.41%
Sprague Resources (SRLP): 8.48%
Starwood Property Trust (STWD): 8.39%
PennantPark Floating Rate Capital (PFLT): 8.34%
GasLog Partners (GLOP): 8.20%
Sunoco Logistics Partners (SXL): 8.09%

Valuation Metrics

PE: 15.87 (15% below S&P 500)

FCF Margin: 17.56% (vs S&P 500’s 17.96%)

Return on Assets: 7.55% (14% above S&P 500 average)

Return on Equity: 49.83% (133% above S&P 500 average)

Market Cap: $15.7 billion (81% below S&P 500 average)

Smallest Market Cap Holdings:
Jernigan Capital (JCAP): $186.1 million
Farmland Partners (FPI): $349.0 million
Medequities Realty Trust (MRT): $349.2 million
PennantPark Floating Rate Capital (PFLT): $364.9 million
Westwood Holdings Group (WHG): $513.4 million
Dynagas LNG Partners (DLNG): $570.0 million
Sprague Resources (SRLP): $579.7 million
Easterly Government Properties (DEA): $723.1 million
KNOT Offshore Partners (KNOP): $779.8 million
GasLog Partners (GLOP): $913.6 million

Largest Market Cap Holdings:
Apple (AAPL): $714.0 billion
JPMorgan Chase (JPM): $321.8 billion
Wells Fargo (WFC): $291.2 billion
General Electric (GE): $268.0 billion
AT&T (T): $256.2 billion
Bank Of America (BAC): $245.9 billion
Procter & Gamble (PG): $233.6 billion
Anheuser-Bush InBev (BUD): $210.5 billion
Pfizer (PFE): $204.0 billion
Verizon Communications (VZ): $203.6 billion

Projected 5 Year EPS growth: 8.5% (10% above S&P 500 average)

Projected Annual Total Return: 12.1% (33% above the market’s historic CAGR since 1871)

Portfolio Composition: 

Consumer Cyclical:         19.49%
REIT:                                     14.15%
Healthcare:                         13.67%
Industrials:                          13.30%
Consumer Defensive:      9.62%
Energy:                                   9.24%
Finance:                                 6.97%
Tech:                                        5.71%
Basic Materials:                   2.93%
Utilities:                                  2.84%
Telecom:                                 2.08%

Smallest Holdings
Marathon Petroleum (MPC): 0.25%
Prologis (PLD): 0.25%
Kimco Realty (KIM): 0.25%
Delta Airlines (DAL): 0.26%
Booz Allen Hamilton (BAH): 0.26%
Spirit Realty (SRC): 0.27%
PacWest Bancorp (PACW): 0.28%
Great Plains Energy (GXP): 0.28%
Anheuser-Bush InBev (BUD): 0.28%
Sprague Resources (SRLP): 0.28%

Largest Holdings:
DineEquity (DIN): 3.04%
Teva Pharmaceuticals (TEVA): 2.94%
Gilead Sciences (GILD): 1.59%
Hanesbrands (HBI): 1.55%
Lockheed Martin (LMT): 1.34%
L Brands (LB): 1.32%
Qualcomm (QCOM): 1.29%
Perrigo (PRGO): 1.28%
VF Corp (VFC): 1.20%
HollyFrontier (HFC): 1.14%

Worst Performers:
Helmerich & Payne (HP): -7.22%
DineEquity (DIN): -6.92
L Brands (LB): -6.70%
Phillips 66 (PSX): -6.33%
Toyota Motor (TM): -6.18%
Dr. Reddy’s Laboratories (RDY): -6.11%
Kimco Realty (KIM): -5.10%
Air Products & Chemicals (APD): –4.91%
Macerich (MAC): -3.6%
KNOT Offshore Partners (KNOP): -3.53%

Best Performers:
NetEase (NTES): 36.47%
Phillips 66 Partners (PSXP): 29.43%
Valero Energy Partners (VLP): 26.35%
MercadoLibre (MELI): 25.73%
MarketAxess Holdings (MKTX): 25.65%
Skyworks Solutions (SWKS): 25.37%
Broadcom (AVGO): 23.39%
Bank Of America (BAC): 22.58%
Hasbro (HAS): 22.12%
Unilever (UL): 21.97%

Portfolio Performance:

Portfolio Annualized Total Return: 11.40%
S&P 500: 8.31%
Outperformance (Alpha): 3.09% (13 straight weeks of beating market,  by 37% so far)

What I’m Watching Next Week

In terms of economic reports it’s a quiete week, with nothing major other than natural gas and oil inventories and the consumer sentiment index.

In terms of earnings only Home Depot and L Brands reports next week.


About author

Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I'm a proud co-founder of Wide Moat Research, Dividend Kings, and the Intelligent Dividend Investor. My work can be found on Seeking Alpha, Dividend Kings, iREIT, and the Intelligent Dividend Investor. 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 24 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 and achieving long-term financial goals.

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