Trades

What do the following numbers have in common? 139, 496, 51, 62. Give up? One hundred and thirty-nine years ago, in 1883(!), Pittsburgh Plate Glass was founded by Captain John B. Ford and John Pitcairn in Pittsburgh, Pennsylvania. In 1898, it began a streak of paying quarterly dividends that persists to this day, 496 quarters later. With their dividend increase in 1971, it began a streak of increasing the dividend payout annually. On July 21, 2022, they announced a three-cent increase to their 62 cents per share quarterly dividend, marking the 51st consecutive year of increasing their dividend.

Now known as PPG Industries, Inc [PPG], it is the largest paint and coatings company in the world, with 240+ manufacturing facilities in 59 countries and operations in 75 countries. The global headquarters is still in Pittsburgh. I missed the first 50 years of this streak, but I think it’s time to get in on the action.

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My market order to purchase 7 shares of ABBV executed at market open today for the price of $138.04, unchanged from Friday’s closing price. I updated the portfolio which includes a summary by sector. Also, check out the portfolio’s performance to date. These exhibits will be updated periodically and will have more meaning as the portfolio grows.

This week’s Dividend King is a bit of a surprise. It spent the first three months of 2022 ignoring the rest of the market and soared from $135 to $175. Eventually, the market got to it. The market considered the last two quarterly earnings announcements to be underwhelming, and the price has come nearly all the way back down. I’m very excited about this. Last week I mentioned that the Utility sector was overpriced on the whole, but I found one utility out of six that was attractively priced, Black Hills Corporation [BKH]. The same can be said of the Health Care sector. There are four Dividend Kings in the Health Care sector as of the time of this writing. Three of them seem to be a bit above their fair value. This isn’t a surprise.

When inflation runs hot and money gets tight, people think twice about pulling the trigger on getting a new mattress or taking a vacation. But the demand for certain services is inelastic. Consumer staples, utilities, and health care services are must-haves. Investors migrate to companies in these sectors as the economy slows down or enters a recession. It’s the smart thing to do. The Dividend King of the Week is really more of a Prince. It is the offspring of another Dividend King, Abbott Laboratories [ABT]. So, get your knees oiled, get your waist oiled – you’re going to be doing an awful lot of bowing . . . to Abbvie Inc [ABBV].

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My market order to purchase 13 shares of BKH executed at market open today for the price of $77.00. I updated the portfolio which includes a summary by sector. The portfolio’s performance to date can be found here. These exhibits will be updated periodically and will have more meaning as the portfolio grows.

There are six Dividend Kings in the Utility sector as of the time of this writing. On the whole, the Utilities are a bit overpriced. This is partly due to the fact that they are Dividend Kings, which tend to trade at a premium to their fair value. The other reason is that with inflation at its highest level in 40 years, the markets have moved towards defensive and inflation-protected sectors such as Consumer Staples, Health Care and Utilities.

When money is tight, people can put off discretionary items such as a new car, new furniture, or the latest iPhone. However, groceries, medical care, heat, and electricity are essential. Thus, utilities have very reliable revenue streams, and this allows them to pay consistent dividends. It is no surprise then, that we have six utilities among the 45 Dividend Kings. But only one is attractively priced right now: Black Hills Corporation [BKH].

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My market order to purchase 10 shares of FRT went through at market open today for the price of $102.83. I updated the portfolio which includes a summary by sector. Obviously, these exhibits will have more meaning as the portfolio grows. These exhibits will be updated periodically.

This week’s selection is the only Dividend King representing the Real Estate sector. In fact, it is a Real Estate Investment Trust (REIT). If you have ever thought owning real estate might be a good investment but either a) don’t have the assets to acquire another property, or b) aren’t interested in the management of rentals, REITs are a great way to get in on the action. Congress legislated REITs into existence in 1960. REITs allow investors like you and I to own shares in commercial real estate portfolios – portfolios containing buildings and properties we wouldn’t be allowed to walk into, let alone acquire.

There are private REITs, public non-listed REITs, and public exchange-listed REITs. Among the last category, we have equity REITs, mortgage REITs, and equity/mortgage hybrid REITs. Equity trusts own and manage income-producing real estate. Mortgage trusts borrow money on a low rate, short-term basis and turn around and lend that money to real estate owners on a high(er) rate, long-term basis. They expect to profit from the interest rate spread and thus are highly sensitive to interest rates. Hybrids do a little of both. Why do we care?

Aside from other requirements, a REIT must pay out at least 90% of its taxable income in the form of dividends. That’s right, if they make money, they have to pass on nearly all of it to the shareholders. And Federal Realty Investment Trust has been doing it since the beginning.

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My limit order to purchase 1 share of FMCB for $925.00 went through at market open today. Here is a glimpse of the portfolio. Obviously, this exhibit will have more meaning as the portfolio grows. Ditto for the summary by sector that I have added on the same page. I will update these Dividend King exhibits as needed. In the meantime, enjoy the rock steady price action of FMCB.

I have set up an account with TD Ameritrade for the purpose of holding this portfolio of stocks. My entry into a new position will be $1,000. Of course, this amount is perfectly scalable so long as one builds evenly. After a few weeks we want to have an equally weighted portfolio of 10 or 11 stocks. In case you couldn’t guess from the title of this post, the first Dividend King for this portfolio will be Farmers & Merchants Bancorp [FMCB].

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