My Investing Journey with Passive Income, Stocks, and Cryptocurrencies!

Month: March 2020

Will Dividend Investing Protect you more?

I will preface this article by stating I do a good bit of “Dividend Investing.” At the same time, it is not all I do.

One common argument by dividend investors is that by focusing on Dividends, you are more protected during a market correction, recession or bear market.

How has that technique faired in this Coronavirus Correction? Let’s take a look at some major ETF’s.

ITOT (Total Stock Market ETF containing 3633 holdings): It pays a distribution of 2.05% and is currently down 22.11% YTD.

NOBL (A Basket of 65 S&P Dividend Aristocrats): It pays a distribution of 2.13% and is currently down 24.54% YTD

DGRO (A basket of 477 Dividend Growers): It pays a distribution of 2.48% and is currently down 22.76% YTD.

If we do some quick math here and add back in the dividends we get a total return of the following, all numbers NEGATIVE (Yes, I realize that doesn’t take into account some factors over the next year but we have to work with knowable here)

ITOT 20.06%, NOBL 22.41%, DGRO 20.28%.

If you look at those numbers; NOBL is the worst performer, even taking into account the dividend. ITOT and DGRO are very close; DGRO paying a greater dividend.

ITOT holds the largest number of companies, followed by DGRO, followed by NOBL. I believe the greater diversification is part of the protection equation.

SECTOR exposure plays a big part here:

ITOT is 8.45% tech, 5.33% IT services

NOBL is 9.41% chemicals, 7.86% Household products

DGRO is 12.06% banks, 9.13% Pharmaceuticals

The lack of TECH exposure within NOBL is part of the reason it doesn’t perform as well poorer. DGRO has 4% Software and 3% Tech storage/hardware exposure and notice the better performance.

It turns out over the last 4 weeks, DGRO has fared slightly better than ITOT; NOBL is still behind. It remains to be seen how each will do over the next month or so.

Some other considerations when focusing on dividends:

LOTS of Dividends have been slashed during this Coronvirus Crash:

Here are just a few:

  • Macy’s
  • Occidental Petroleum
  • Ford
  • Darden Restaurants
  • Nordstrom
  • L Brands
  • GAP
  • Texas Roadhouse
  • FCX
  • Cracker Barrell
  • Delta
  • Boeing
  • Marriot
  • AMC

There are many on that list that NO ONE would have predicted would have to cut their dividend. For example, if you just looked at Delta’s payout ratio, you wouldn’t have thought it was at risk? Some of those companies have been paying dividends for DECADES.

Please keep this in mind: The risk of a DIVIDEND stock is compounded by the possibility of its dividend being cut/reduced. When the dividend is cut, it sells-off, causing the price to crash further. You not only lose the dividend but you lose the total return as well.

Furthermore, something that MANY Dividend Investors don’t realize. When that dividend is cut, a dividend-focused ETF has to remove it from it’s holding. Thus, there is more selling of the stock. Yet, another reason that even a dividend-focused ETF could present more risks. At the moment, I don’t know if any Dividend Aristocrats have had their dividends slashed or not.

I think before this is over, the Corona crash will prove that Dividend Investing is NOT innately safer. It has risks just like everything else. I say this as someone who has already had TWO dividend cuts (Darden Restaurants and Ryman Hospitality Properties). There is NOTHING wrong with Dividend Investing; however, I don’t think to focus solely on it or even heavily making that your deciding factor when investing is a smart idea, even during bear markets.

11 Stocks to Fight the Coronavirus Crash

Lots of crazy happenings here in the world due to this Global Pandemic. Here in Atlanta, GA most businesses are closed, some cities even have curfews. People are rushing to stock up on essentials such as food, toilet paper, and hand sanitizer. On the other hand, traffic at our local parks has increased greatly; people are all cooped up inside and want to get outside. I’m not so sure walking in the park around big crowds is the smart thing to do. Anyways, onwards to the STOCK PICKS.

How did I pick these stocks? What were my main selecting factors?

1)Debt to Equity ratios. Companies that are highly leveraged right now are being priced to fail. Even if there is a smaller chance of that happening, they are being punished. This makes sense because investors are even dumping MUNICIPAL BONDS, due to fear that cities’ revenues will be cut and unable to pay obligations. Think about all of the sports events that were canceled; that is a TON of income for cities. Less business = fewer taxes paid.

2)Cash on hand. Companies that have a good portion of cash can weather this storm than those that don’t. Many companies will have to take out loans to meet their obligations.

So I’ll give you the list and then break each of them down

  • Ennis
  • Fortinet
  • Mcgrath Rent Corp
  • Akamai
  • Eaton Vance
  • Schneider Trucking
  • Marten Transport
  • Cisco
  • Intel
  • Stanley Black and Decker
  • Kforce

Ennis is one of my favorite DIVIDEND STOCKS. It’s a smaller-cap stock, not much of a capital appreciator but the dividend is safe and will protect your portfolio in the event of a worse market crash. They make paper products/forms for businesses.

It currently has a Debt to Equity ratio of only 6.87%. Its cash on hand is 88.4 million. Current liabilities per quarter are around 31 million. Free cash flow last quarter was 55.3 million. So, given that the Free Cash flow PAYOUT ratio is around 42%. This company has plenty of room to keep paying dividends.

Fortinet is one of my top 3 growth stocks; I LOVE this company. It has an impeccable balance sheet. The Debt to Equity is only 3.5%. Cash on hand is 1.2 BILLION, wow! Revenue increased by 21% last quarter. This company is in the cybersecurity business. Even if the world slows down, companies will still need their networks protected and I think it’s somewhat insulated from some of the issues in other sectors.

Mcgrath Rent Corp is another small-cap company. They produce storage and modular buildings. This is a more capital intensive business but their books look good as well. 47% Debt/Equity and a Free Cash Flow payout of only around 20%. Currently, the Dividend is 3.44%. MCGR is also a growth play, it’s earnings has increased dramatically every year.

Akamai is also one of my top growth stocks. AKAM does cybersecurity and content delivery. The more video games people play online the more they benefit and right now TONS of people are online. This stock has held up INCREDIBLY during the Coronavirus Crash. Some days it is green while the rest of the market is red. Akamai has 1.54 Billion in cash and a 73% Debt/Equity ratio. The Debt ratio is higher than others on this list; however, I believe they are built to weather the storm given their business and cash. Free Cash Flow, Revenues and EPS growth as been fantastic with this company over the last year. I’m buying anywhere 85 and under.

Eaton Vance is an asset management company. They will, of course, be hit hard in the event of a stock market crash. However, look at 2009 as an example of how fast they bounce back. EV is a dividend aristocrat that’s increased its dividend over 37 years. With a Free Cash Flow payout of only around 33%, the dividend is SUPER safe here. Not only are you getting a great dividend, (currently 5.22% yield ) you are getting EARNINGS as well. Revenue and Earnings is up incredibly on EV over the last year. This is one of the most undervalued stocks in the market in my opinion. They currently have 606 million in cash on hand with current liabilities running around 385 million a quarter.

Schneider Trucking and Marten Transport I am going to combine. These are both trucking companies. First and foremost, trucking has already been in a recession for the last year. These things were already priced to fail so they didn’t far to fall. I’ve noticed the little SNDR that I still own has held up a lot better than the majority of my other stocks. You could argue this is the value factor at play. I think trucking stocks, defying logic, will be one of the gems of this crash to buy. SNDR only has a debt to equity of 19.85%. Its dividend is only 1.44% but is super safe with less than a 30% payout ratio. If this puppy hits 15 bucks and some change I’m buying back in. Marten transports was on my radar before the virus, but the price was too high. Now that it’s corrected, I’m watching it closely. It has a Debt to Equity of an INSANE 0.2%; however, its not much of a dividend play at a .67% yield.

Cisco has of course been around for a long-time. The dividend yield is 3.82% but a payout ratio of 54%, so that dividend is definitely safe here. Debt to Equity of 48% and 11.8 Billion in cash on hand. Looks good to me to beat the virus. Not to mention it’s a play on online learning and web conferencing as well.

Intel has a very low Debt/Equity ratio of 38%. The dividend is currently 2.88% with a payout ratio of only 26.75%. Cash on hand is a whopping 13 billion. Intel is VERY well suited to weather the storm here. Valuations look sound as well.

Stanley Black and Decker is, of course, the toolmaker. They make everything from drills and saws, to big fasteners used on automobiles. They also have a small play on security and healthcare equipment. The current dividend is 3.47% with a payout ratio of only 42.5%. They have a Debt/Equity ratio of 44.78% with 297.7 million in cash on hand. This stock is currently getting DESTROYED day in and out, I just had to buy some at these prices.

Kforce is a small-cap temp service, mostly in the tech fields but many others as well. It has a 52% Debt/Equity ratio. The dividend yield is currently 3.18% with a free cash flow payout ratio of only 29.5%. This company is taking charge and reducing its debts quickly, they have their eyes focused on being debt-free over the next few years. Last year this thing had a 32% Return on Equity, so they are doing a great job of managing their money and investments. Of course, we will have to see how the job market goes and lays off here. The business will be hurt; however, I will also say, companies are more inclined temps to do work, so they don’t have to pay them benefits. This helps Kforce’s business indirectly.

Week of March 16th-New Positions and Thoughts

While I said I was working on REDUCING positions, I managed to INCREASE positions. I guess the deals got too good.

I started a small position in HOME DEPOT. I do feel it can go a little lower here but Home Depot will be fine long-term and I thought it was a good chance to get in on a company that has very little competition. I personally would rather shop at Lowes but Home Depot’s margins and bond ratings a little better here to me than Lowes.

I also bought a few shares of Stanley Black & Decker. This is another home improvement play. This companies share price has been getting destroyed. I don’t like the recent acquisition that has exposure to Boeing (amongst all of its problems) but I’ll overlook it at this level.

Smuckers-I still think this one is a bit overvalued but as we head into lockdown and a potential recession I think I’d like to increase my exposure to Consumer Staples. Especially considering how great General Mills has been to me. The Dividend is currently 3.26%

Chewy’s-Here is a riskier play but one I’ve been on the fence about for a while. With the Coronavirus, people are pent up in their house for a bit and the pets still have to eat. We use Chewy’s service for our two cats (Sid and Ellie) and are pleased with the service and price. So just a few shares of Chewy’s at this level.

Akamai-As usual, I’m still loading up on Akamai, I want it to be one of my top 4 positions.

What am I avoiding?

Ryman Hospitality Properties has just completely fallen apart. Nobody could have seen this coming. All I can do at this point is hold tight, hope they don’t cut the dividend and worse, hope they don’t go bankrupt. This is a MESS. The risk is very high at this point and I can’t buy any more.

Darden Restaurants is in a similar mess. No one will be sitting down at a meal at Olive Garden for a while. The price is nose-diving bad. I simply can’t buy any more here.

Corona Correction Saga Continues!

The Coronavirus continues to tear through the world. The stock market briefly entered bear market territory yesterday; however, after Trump’s National emergency speech, it flew up over 9%. This was all during the last twenty mins of today’s market. Wowzers, who would have thought.

What have I recently bought?

I did start buying a bit again. Here are just a few companies.

Hyatt-Despite all of the bad news in the hospitality industry, I just had to buy some more Hyatt at these levels. I was down about 20% so this lowered my cost basis considerably. Also, Hyatt has held up well considering everything.

Fortinet-The books are SOLID on this cyber security stock. They also seem to be stealing market share from competitors. Very low debt, good cash flow. I will continue buying anywhere below 90.

Hooker Furniture Company-This is one I haven’t bought in FOREVER. I am currently down in this stock over 30% but it’s not a large position really. These are historically low levels for this company. My original thesis hasn’t changed, this is a value stock and this company is extremely well managed. I may have to hold a while but I will.

Akamai-What can I say? Akamai has held up better than any stock in my portfolio besides General Mills. This thing is a beast. I will continue to buy anywhere 85 and under.

Eaton Vance-This is my favorite DIVIDEND ARISTOCRAT. The dividend is over 4.3%, with a low payout ratio. This things earnings are growing like a weed as well. I know in the event of a market crash they will get destroyed but if you look at 2009, they bounced back EXTREMELY fast. Given the nature of this correction (not bank/financially related so much) I think they will bounce back faster.

Darden Restaurants-This has been a hard one to watch just collapse. I bought pretty high and am down over 32%. I expect the restaurant industry will be punished BAD during the virus scare. However, I still believe in Darden management long-term. I will simply lower my cost basis and collect dividends at this level.

Westrock-The Dividend YIELD on this one is getting INSANE. With around a 50% payout ratio, I believe it will be safe, even at 7-8%. Westrock does carry a decent amount of debt but they have been paying it down. Today, this stock blasted up SEVENTEEN PERCENT. Talk about putting a smile on my face 🙂

Worst Performer

My worst performer right now is Ryman Hospitality Properties. It came out and said they will lose 40 million dollars in revenue this quarter due to cancellations. The stock is down over 30% in less than a month. I remain positive because the company just had a great earnings report. However, I don’t have the stomach to buy more at this time. I am going to wait until the virus peaks here in the states or I get more information about the cancellations. Too much risk here to lose more money in my IRA.

Did I sell anything?
Boy did I ever. I sold PMM, Putnam Municipal Bond Closed-End Fund. I sold it JUST in the nick of time as well. It went down 3% and I sold, I knew that was a sign of things to come, seeing as how it’s not a volatile investment. After I sold completely out, it fell 10% the next day and then some more. There was a Municipal Bond sell-off due to people panicking and worries of city revenues being hurt I suppose. At the same time, I have every intention of buying right back in, hahaa. It’s trading at a 14% discount to NAV right now at 7 bucks a share. I’m looking for anything under 7 dollars to re-enter. PMM is a monthly payer, free from Federal taxes, it’s a no brainer for me.

What are my next moves? What am I looking to buy?

First and foremost, I’m sticking with my original thesis of buying the market at 2500 on the S&P. So anytime I get that or near there I will start dollar-cost averaging into ITOT. Around the same mark, I will also be buying QQQ.

As far as individual stocks? What is on my radar?

  1. I’d love to increase my position of AKAM further
  2. Home Depot or Lowes
  3. Microsoft at 115-120; this is not something I’ve ever thought about buying but at that level I’d pick up some.
  4. General Mills is a tank and I’d love to get up to 4% of my portfolio in that.
  5. Zoetis if it EVER comes down, I’m not sure it will

Coronavirus, Correction and Buys

The Coronavirus is wreaking havoc on the stock markets. A possible Bernie Sanders nomination played into things here in the US as well.

The market has seen some of its fastest losses ever as well as its fastest gains. I believe we are in for a volatile market over the next few months.

What have I done? What am I doing to navigate these rough waters? Here you go:

First and Foremost, I did sell a portion of FFNOX in my Traditional IRA before the market turmoil. I did this after the Coronavirus announcement; I feared it would be worse than assumed at that time. Turns out I got lucky and was right. With that 20% I moved to cash I saved myself about -10%. I do plan on getting back in within the next month.

On the other hand, my portfolio is still down and in the red on the year here because so many of my stocks have been getting pummeled.

What have I bought?

I bought more AKAMAI #AKAM, this is my favorite growth stock. It’s a cybersecurity and content delivery company that I believe is pretty shielded from the virus and somewhat recession-proof.

I bought Westrock #WRK. The dividend is now almost 6%, and with a payout ratio of only around 50%; I believe the dividend is quite safe. The company does carry a good bit of debt; however, they are paying it off gradually each quarter.

I also bought a few shares of Darden Restaurants. Darden is down over 20% in the last month; it’s hard to not want to buy at these levels. The dividend is now 4%. Darden owns Longhorn Steakhouse and The Olive Garden. I fully expect the Coronavirus to harm the restaurant business; however, I AM investing for the long-term here. I don’t expect the coronavirus to be an issue a year from now.

I bought two shares of Mimecast to increase my position. Unfortunately, MIME has not had a good month either. The stock is looking a bit pitiful; however, I do remain hopeful. MIME is an email cybersecurity stock that I think is well-positioned in its field.

What did I sell?

I sold just a small portion of my Putnam Municipal CEF, I did this because it was getting near highs and I wanted to build up cash to buy stocks after they fall lower.

I sold almost all of my SIX FLAGS at a loss. I’m currently using it to tax loss harvest. I’m glad I sold 75% of it after earnings because all it has done is go down more and more. I chalk this up as a SERIOUS MISTAKE and hope I’ve learned from it. I knew it was a risky play; hence why it only made up about .3% of my portfolio.

What am I going to buy?

First and foremost, I’m looking for a nice entry point on ITOT (Ishares Total Stock Market ETF). I will take the 20% cash funds in my retirement account and dump them there over time.

In my brokerage account, I’m looking to buy more QQQ. Once again, allocating more towards simple ETF’s.

One of my top 5 holdings in my IRA is Ryman Hospitality Properties #RHP. It is down over 30% in the last month due to the virus and being exposed not only to the hotel industry but the entertainment/concert industry as well. This company just had an INCREDIBLE earnings report and is growing like a week. If it goes below 50 I’m buying a lot of RHP. It currently has a 6% dividend at this price.

I’d like to pick up some more Fortinet under $95 dollars. It is still overvalued if you ask me. Many tech stocks still haven’t taken THAT much of a hit in this correction. Still waiting patiently.

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