Saturday, December 11, 2021

Week in Review

Overall good week for the Dividend Town portfolio, despite some mistakes along the way. 

Bad news: I tried to get cute trying to time a dip with an SPY put, wiping out $1.1K in the process and most of the options gains since the start of the portfolio. Lesson learned. 

Good news: Despite the misstep, the portfolio was up 3.14% week over week, compared to DJIA at 3.9% and NASDAQ at 3.6%. For a dividend growth based portfolio with a beta ~.85, I'll take it.  

Dividend income this week was solid at $271, bringing the MTD total to $569. I expect $776 for the remainder of the month. Total portfolio yield on cost is back where it started at 2.98% in October, however there has been some trades to higher quality since then giving the overall portfolio a better forward opportunity for growth appreciation in stock price and future dividend growth.

For options there was little but impactful activity as I closed out the SPY $455P in June from last week for a disastrous loss, and also sold a put for WLK at $95 for 12/17 expiration for $134 premium. This is an attempt to shore up the Materials sector which needs a revamp.

Current open contracts

Trading activity was minimal this week. I sold the position in NEU for the WLK put. On the DT Screener, NewMarket receives a grade of 17 vs. Westlake of 21. I'll continue to shift the portfolio slowly to higher graded stocks based on the weekly iterations of the screener. 

I added 10 more shares of Merck at $72.95 basis. The healthcare sector continues to look undervalued. To determine the fair value in my screener, I use a combination of 6 different fair value calculations from various sources, throw out the high and the low, then average the rest. Based on the DT Grade (which is assigned based on growth, strength, dividend safety and economic moat), I assign a premium or discount to the average. 

In the last 5 years, Merck has reduced their outstanding shares from 2.79B to 2.54B, increased sales from $39.8B to $52.6B, EPS from $3.78 to $5.78, decreased their payout ratio and increased their operating margin from 25% to 34%. They're trading at near a 52-week low as well, with a 3.8% dividend yield which is the high end over the last 5 years and 11 year dividend growth. I'll be very happy to own some more.

What's on the agenda in the next week? I'll be watching the expiring options next week for any intervention, but will likely hold to expiration. I'll be doing some more research to scale up parts of the portfolio where needed, but I honestly think it's in a okay spot. Not 100% optimized, but okay.  

At this point I do not feel the need to do anything in a hurry as changes can now be made gradually as we seek to optimize dividend growth and quality. Time to take a breath and appreciate the effort. 

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