Deep Value Dividend Growth Index Week 22 Update: Potentially Crazy Week Ahead

Posted On April 24, 2017 12:33 am

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

So in economic news it was a generally good week. Trucking data, mortgage delinquiencies, and industrial production all came in strong, and the New York Fed’s GDP Nowcast (generally more reliable than the Atlanta Fed’s GDPnow) is predicting 2.7% growth in Q1. This was backed by strong readings from the Philly Fed index, existing home sales, and a continued strong job market.

Portfolio wise it was a pretty quiet week. Not much buying on our part, other than the flash crash on NRZ which plunged 13% on a large sale from someone on no news. Of course we took advantage of that.

The coming week is going to be very hot, with tons of news, opportunities and risks, including: market reaction to the French Presidential primary (Marcon and Le Pen are the projected winners, which is what the market was hoping for), Q1 GDP figures (intial reading), Wed’s release of Trump’s tax reform plan, 2 statements from leading Fed members, and 190 major earnings reports.

Could be a volatile week ahead, which of course is great for us as it means hopefully lots of buying opportunities.

Portfolio Stats:

Portfolio Holdings: 200

Yield: 3.72% (S&P yield 1.97%)
Yield on Cost: 3.81%

Lowest Yielding Holdings:
MercadoLibre (MELI): 0.27%
Shire PLC (SHPG): 0.53%
NVIDIA (NVDA): 0.55%
MarketAccess Holdings (MKTX): 0.60%
Ball Corp (BLL): 0.71%
Dr. Reddy’s Laboratories (RDY): 0.74%
McKesson Corp (MKC): 0.82%
Charles Schwab (SCHD): 0.83%
Expedia (EXPE): 0.85%
Cintas (CTAS): 0.85%

Highest Yielding Holdings:
New Residential Investment Corp (NRZ): 11.75%
Golar LNG Partners (GMLP): 10.28%
Dynagas LNG Partners (DLNG): 9.80%
KNOT Offshore Partners (KNOT): 8.98%
Sunoco Logistics Partners (SXL): 8.83%
Sprague Resources (SRLP): 8.67%
Starwood Property Trust (STWD): 8.48%
8Point3 Energy Partners (CAFD): 8.42%
PennantPark Floating Rate Capital (PFLT): 8.30%
GasLog Partnes (GLOP): 8.24%

Valuation Metrics

PE: 14.70 (25% below S&P 500)

Price/Fair Value: 0.86

FCF Margin: 15.03% (vs S&P 500’s 17.14%)

Return on Assets: 8.02% (12% above S&P 500 average)

Return on Equity: 24.62% (16% above S&P 500 average)

Average Market Cap: $11.9 billion (86% below S&P 500 average)

Projected 5 Year Dividend Growth: 8.65% (47% above S&P 500 20 year median)

Projected Annual Total Return: 12.5% (38% above the market’s historic CAGR since 1871)

Potential Annual Total Return: 16.6% (83% above market’s historical return)

Smallest Market Cap Holdings:
Global Medical REIT (GMRE): $176.9 million
Jernigan Capital (JCAP): $216.7  million
Farmland Partners (FPI): $356.2 million
PennantPark Floating Rate Capital (PFLT): $368.3 million
Medequities Realty Trust (MRT): $375.5 million
City Office REIT (CIO): $379.8 million
Westwood Holdings Group (WHG): $476.6 million
Sprague Resources (SRLP): $563.2 million
Dynagas LNG Partners (DLNG): $611.9 million
Easterly Government Properties (DEA): $765.0 million

Largest Market Cap Holdings:
Apple (AAPL): $745.5 billion
JPMorgan Chase (JPM): $297.1 billion
Wells Fargo (WFC): $262.4 billion
AT&T (T): $242.6 billion
Procter & Gamble (PG): $224.8 billion
Bank Of America (BAC): $223.0 billion
Pfizer (PFE): $199.7 billion
Verizon Communications (VZ): $188.2 billion
Oracle (ORCL): $182.4 billion
Walt Disney(DIS): $180.4 billion
Anheuser-Busche InBev (BUD): $173.7 billion

Portfolio Composition: 

Consumer Cyclical:         32.95%
Healthcare:                         16.65%
REIT:                                        9.53%
Energy:                                     7.81%
Consumer Defensive:        7.27%
Industrials:                             7.18%
Finance:                                   5.97%
Basic Materials:                     5.59%
Tech:                                          4.04%
Utilities:                                    2.12%
Telecom:                                  0.88%


Largest Holdings:
L Brands (LB): 7.95%
DineEquity (DIN): 6.08%
Perrigo (PRGO): 3.30%
Teva Pharmaceuticals (TEVA): 2.53%
Thor Industries (THO): 2.38%
McKesson (MCK): 2.20%
VF Corp (VFC): 2.12%
TerraNitrogen (TNH): 2.09%
HollyFrontier (HFC): 1.81%
CVS Health (CVS): 1.72%

Top 10 Holdings: 32.18%

Worst Performers:
Teva Pharmaceuticals (TEVA): -6.98%
Qualcomm (QCOM): -6.75%
Perrigo (PRG): -6.66%
McKesson (MCK): -6.35%
General Motors (GM): -5.36%
Target (TGT): -4.59%
Charles Schwab (SCHW): -4.58%
Helmerich & Payne (HP): -4.55%
Delta Airlines (DAL): -4.49%
Tesoro (TSO): -4.36%

Best Performers:
Skyworks Solutions (SWKS): 32.21%
Jernigan Capital (JCAP): 29.49%
KLA-Tencor (KLAC): 29.43%
NextEra Energy Partners (NEP): 28.04%
Broadcom (AVGO): 27.64%
Apple (AAPL): 27.25%
Digital Realty Trust (DLR): 26.65%
Vail Resorts (VAIL): 22.21%
MarketAxxess Holdings (MKTX): 20.13%
ONEOK Partners (OKS): 19.89%

Portfolio Performance:

Portfolio Annualized Total Return: 10.85%
S&P 500: 8.54%
Outperformance (Alpha): 2.31% (22 straight weeks of beating market,  by 27% so far)

What I’m Watching This Week

In economic news by far the most important news is the first estimate of Q1 GDP growth on Friday. It will set the tone of the market from here on out, including what interest rates will do, which could have huge ramifications for yield favorites such as MLPs, REITs, BDCs, and YieldCos.

In addition other important reports include: initial jobless claims, and 2 consumer confidence reports

Then of course there’s the flood of earnings we’ll get, 190 or so reports including:

Mon: Canadian National Railway

Tuesday: 3M, AT&T, Catepillar, Coke, Realty Income, Texas Instruments, Kimberly Clark

Wed: Amgen, General Dynamics, Boeing, Public Storage

Thur: Abbvie, Union Pacific, Ford, Union Pacific, Microsoft, Starbucks,

Fri: GM, Phillips 66

Note that we don’t own all of these stocks, but whether or not they are able to achieve solid sales, and earnings growth this quarter (with no help from fiscal stimulus) is going to be very important in terms of whether or not the bull market can continue.


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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