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].
…If someone puts their money in an index fund or similarly, a target retirement date fund, they are passive investors. If someone purchases stocks and bonds directly, they’re considered active investors. But people can buy and sell stocks willy-nilly. Maybe because Jim Cramer is hyping a stock. Maybe because they like the product made by a certain company. Perhaps they have FOMO on some new fad. That’s not real investing. That’s more speculative in nature or just trading.
Someone might argue “Hey, Warren Buffett owns Coca-Cola [K], why is it investing if he does it, and speculating if I do it.” Comparing yourself to Buffett huh? Listen, I suppose it isn’t about the stock, but the person. If you bought K because Warren Buffett has it, then you just might be a speculator. Stock ideas come to us from all over and honestly, I’m not judging. Speculation has its place, as does options trading, etc. I enjoy both. There are many approaches to making money in the stock markets, but in every case, one must be a risk manager and exercise some discipline, or the approach will falter over the long haul. Discipline and risk management are a topic for another day. Back to investing: if you really want to be an active investor and feel engaged, you should do at least two things.
…On April 7, 2003, the Syracuse Orangemen defeated the favored Kansas Jayhawks 81-78 to claim the Division I Men’s College Basketball championship. Certainly, future NBA Hall of Famer Carmelo Anthony, did his part putting up 20 points and collecting 10 rebounds, but it was the freshman Gerry McNamara that made the difference for SU that day. He hit 6 of 8 three pointers in the first half putting Syracuse up 53-42 at the break. Kansas played catch-up the rest of the game and couldn’t quite get there. Of course, making only 12 of 30 free throws is a surefire way to lose most ball games, let alone a championship against a talented team.
How unlikely was G-Mac’s first half performance? Well, it stands as the record for threes made in a half of a championship game. G-Mac was able to hit 6 or more threes in a game a total of 9 times in 135 games. I do not believe he ever hit 6 in a single half before or after the game against Kansas. So that’s once in 270 halves. In fact, the odds of making exactly 6 of 8 threes for a player whose ultimate success rate turned out to be 400 of 1,131 (35.4%) is 2.3%. That means if you turned G-Mac loose into 135 games and he took exactly 8 threes in every half, you’d expect him to hit 6 in a half a total of 6 times.
That first half was unlikely.
…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].
…I was kicking around on Yahoo! Finance, trying to tie back to their calculation of Beta for one of my holdings, Federal Realty Investment Trust [FRT], when I stumbled across a free article by Motley Fool on FRT. It was published on July 23rd, just a few hours before my own post where I stated my intent to acquire some shares of FRT. It’s always nice, when a respected institution confirms your thoughts on a matter. We’re on the same page with FRT.
Come back this weekend to find out which Dividend King I’ll be acquiring this coming Monday.
Probably not. I mean let’s settle down here and assume that no dividend streak could go on forever. Even if a company were to perpetually stay in business, some adverse event out of their control, is sure to happen. Something that throws their profitability so off-kilter that it is in their best interest to freeze, reduce or even suspend the dividend. There are companies that have been around in one form or another for over a hundred years. Even a few hundred years. Suppose for a moment, there is a publicly traded company who has increased their dividend every year for 50 years. What would be a realistic expectation of how many more years they could keep the streak alive? If you knew nothing about the company’s past and absolutely zero insight into the future, what would your best guess be? Might it be another 50 years?
That seems as good a guess as any. After all, if a company just raised their dividend for the 50th year in a row, it says they’re capable of a 50-year streak. Who better to go another 50 years? It would seem a bit ridiculous to make that same guess if they were just coming off a 5-year streak. It might even seem equally ludicrous to suggest that they’re only good for another 5 years. Have I convinced you that, barring any other information, going another 50 years is the best, most realistic estimate one could make?
…This past weekend, using Sure Dividend’s, Sure Analysis Research Database, I stumbled across a company with a 50-year streak of annual dividend increases whose name I did not recognize. I am pretty familiar with the complete list of Dividend Kings, and I knew this one wasn’t on the list. I contacted Sure Dividend about the inconsistency and their founder and CEO, Ben Reynolds, responded in less than 12 hours. He confirmed that it would be added to the list and surmised that it was the first non-U.S. Dividend King.
The universe of Dividend Kings is growing, and I am keeping my eye on a dozen or so that, barring any unforeseen circumstances, will make the list in the next two years. Nevertheless, it is always a pleasure to see another company make this exclusive list.
All hail Canadian Utilities Limited!
…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.
