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Deep Value Dividend Growth Index Week 24 Update: Taking Advantage of REIT and Energy Stock Crashes

Posted On May 7, 2017 11:30 pm
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Click here to read up on the intro to this portfolio, the theory behind it, and its methodology.

What an awesome week! REITs and Energy fell off a cliff on Wed and Thur, allowing us to pile into tons of already undervalued, high-yield, quality dividend growth names! Friday was a big recovery, but of course I’m always in favor of market panics so we can continue growing our yield on cost and boosting long-term total returns.

Meanwhile the economic news for very solid. Not just do corporate earnings continue to grow nicely (75% of companies are beating expecations and S&P 500 earnings are growing at 9.8% YoY), but Friday’s jobs report was excellent. With 211,000 jobs created, unemployment falling to 4.4% (lowest level since May of 2007), and wages still growing at 2.5% (room for improvement), the labor market continues to offer the promise of rising wages pushing up consumer spending, and driving improved economic growth; even if tax reform doesn’t pass until next year.

In addition, US rail transport volumes increased 8.5%, tax revenue continues to surge, and the ISM non-manufacturing index rose 2.3 in march.

Meanwhile while the ISM manufacturing index was weaker than expected, it still points to much stronger economic growth, 3.6% for the quarter, and 4.1% for the year.

In other words, it appears that Q1 GDP report may have been a fluke after all, though we’ll need to wait for the next report to find out for sure.

Portfolio Stats:

Portfolio Holdings: 200

Yield: 3.77% (S&P yield 1.93%)
Yield on Cost: 3.87%

Lowest Yielding Holdings:
MercadoLibre (MELI): 0.22%
Ball Corp (BLL): 0.50%
Shire PLC (SHPG): 0.50%
NVIDIA (NVDA): 0.54%
MarketAccess Holdings (MKTX): 0.70%
Dr. Reddy’s Laboratories (RDY): 0.73%
McKesson Corp (MKC): 0.79%
Expedia (EXPE): 0.80%
Charles Schwab (SCHD): 0.80%
FedEx (FDX): 0.83%

Highest Yielding Holdings:
New Residential Investment Corp (NRZ): 11.48%
Golar LNG Partners (GMLP): 10.75%
Dynagas LNG Partners (DLNG): 10.46%
New Senior Investment Group (SNR): 10.42%
Energy Transfer Partners (ETP): 9.42%
Sprague Resources (SRLP): 9.24%
KNOT Offshore Partners (KNOT): 9.12%
Starwood Property Trust (STWD): 8.63%
Global Medical REIT (GMRE): 8.50%
GasLog Partnes (GLOP): 8.44%

Valuation Metrics

PE: 14.95 (24% below S&P 500)

Price/Fair Value: 0.85

FCF Margin: 16.36% (vs S&P 500’s 20.18%)

Return on Assets: 7.49% (4% above S&P 500 average)

Return on Equity: 24.0% (13% above S&P 500 average)

Average Market Cap: $12.3 billion (86% below S&P 500 average)

Projected 5 Year Dividend Growth: 8.68% (47% above S&P 500 20 year median)

Projected Annual Total Return: 12.6% (39% above the market’s historic CAGR since 1871)

Potential Annual Total Return: 16.5% (82% above market’s historical return)

Smallest Market Cap Holdings:
Global Medical REIT (GMRE): $164.3 million
Jernigan Capital (JCAP): $214.2  million
Farmland Partners (FPI): $350.66 million
PennantPark Floating Rate Capital (PFLT): $369.9 million
Medequities Realty Trust (MRT): $379.6 million
City Office REIT (CIO): $385.3 million
Westwood Holdings Group (WHG): $490.0 million
Sprague Resources (SRLP): $563.1 million
Dynagas LNG Partners (DLNG): $593.8 million
Easterly Government Properties (DEA): $748.3 million

Largest Market Cap Holdings:
Apple (AAPL): $789.5 billion
JPMorgan Chase (JPM): $308.7 billion
Wells Fargo (WFC): $272.1 billion
AT&T (T): $240.5 billion
Bank Of America (BAC): $235.2 billion
Procter & Gamble (PG): $222.7 billion
Pfizer (PFE): $201.2 billion
Verizon Communications (VZ): $187.2 billion
Oracle (ORCL): $185.4 billion
Novartis (NVS): $182.0 billion

Portfolio Composition: 

Consumer Cyclical:    30.29%
Healthcare:                     17.53%
REIT:                                 10.54%
Energy:                             10.27%
Industrials:                      7.35%
Consumer Defensive: 6.35%
Finance:                            5.45%
Basic Materials:              5.44%
Tech:                                   4.47%
Utilities:                             1.63%
Telecom:                           0.65%

Largest Holdings:
L Brands (LB): 7.53%
DineEquity (DIN): 4.24%
Perrigo (PRGO): 3.25%
Teva Pharmaceuticals (TEVA): 2.94%
McKesson (MCK): 2.39%
Expedia (EXPE): 2.37%
Helmerich & Payne (HP): 2.11%
VF Corp (VFC): 1.94%
HollyFrontier (HFC): 1.85%
Thor Industries (THO): 1.80%
CVS Health (CVS): 1.77%

Top 10 Holdings: 29.25%

Worst Performers:
DDR Corp (DDR): -6.99%
Life Storage (LSI): -6.77%
Ramco-Gershenson Properties (RPT): -6.50%
Kimco Realty (KIM): -5.99%
Nielson Holdings (NLSN): -5.75%
Simon Property Group (SPG): -5.25%
Energy Transfer Partners (ETP): -4.92%
Verizon (VZ): -4.80%
General Motors(GM): -4.63%
HollyFrontier (HFC): -4.56%

Best Performers:
MercadoLibre (MELI): 45.03%
Delphi Automotive (DLPH): 37.03%
NextEra Energy Partners (NEP): 33.87%
Apple (AAPL): 33.24%
Broadcom (AVGO): 32.79%
Digital Realty Trust (DLR): 27.69%
Vail Resorts (VAIL): 27.16%
Novo Nordisk (NVO): 24.66%
Hasbro (HAS): 24.05%
Unilever (UL): 23.08%

Portfolio Performance:

Portfolio Annualized Total Return: 12.20%
S&P 500: 10.92%
Outperformance (Alpha): 1.28% (24 straight weeks of beating market, by 12% so far)

What I’m Watching This Week

In terms of economic reports the most important are: The Michigan Sentiment Survey, Retail Sales, and inital jobless claims, as well as the JOLTS jobs report, which will reveal more about where, and in what sectors jobs openings are present.

We also have the PPI and CPI inflation reports, which the Fed is watching to help determine whether or not to raise rates in June (80% probability right now).

 

In corporate earnings its another busy week including:

Mon:
Tues: DIS, NVDA
Wed: SEP
Thur: ENB
Fri:

About author

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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