Time for Another Performance Check

For some background on the idea behind the Performance Check, and the XIRR function used for the calculations, please see my first post in this series.

The series continues with a look at another dividend-paying stock from my Portfolio (now the 13th overall).  My last Performance Check was nearly 6 months ago when I reviewed my performance for Gentex (GNTX).  That’s a big time gap, so this post is overdue.

This time around I’ll be checking my performance of Qualcomm (QCOM), a stock in the Information Technology sector, and the Semiconductor industry.  QCOM is one of the top stocks in my Portfolio in terms of value.  We’ll see how it has held up with respect to performance.

From the company’s website, Qualcomm states… we invent breakthrough technologies that transform how the world connects, computes, and communicates.

More specifically, Qualcomm designs, develops, manufactures, and markets digital communication products around the globe, operating through 3 segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI).

The QCT segment develops and supplies integrated circuits and system software for use in wireless voice and data communications, networking, etc.

The QTL segment grants licenses or provides rights to use pieces of its intellectual property portfolio.  This includes patent rights for the manufacture and sale of wireless products.  For instance, Apple (AAPL) licenses some of QCOM’s technology for its iPhone products.

Lastly, the QSI segment focuses on opening new or expanding opportunities for its technologies by investing in early-stage companies in various industries, including artificial intelligence, automotive, and digital healthcare.

Qualcomm was founded in 1985 and is headquartered in San Diego, California.

The company is primarily in the news these days for its innovation with 5G, or the 5th generation mobile network.  Qualcomm provides the following description for 5G… “designed to connect virtually everyone and everything together including machines, objects, and devices.  5G wireless technology is meant to deliver higher multi-Gbps peak data speeds, ultra low latency, more reliability, massive network capacity, increased availability, and a more uniform user experience to more users.  Higher performance and improved efficiency empower new user experiences and connects new industries.”

QCOM has underperformed the Nasdaq year-to-date, with the COVID-19 pandemic being a significant backdrop.  However, the times have underscored the importance of QCOM’s business when it comes to broadband connectivity and facilitating such things as remote work, education, entertainment, telemedicine, etc.

Over the past few years, QCOM has been embroiled in significant litigation over its licensing practices/rights.  This has been a headwind for the company and its stock.  I believe the dividend growth has been impacted by this as well.

Now let’s check out the historical dividend growth for QCOM…

 

 

Dividend growth has been good over the 5-year and 10-year periods, but has faded in recent years.  Growth was smoking coming out of the Great Recession, but growth really slowed down over the past couple of years.

From early 2018 to early 2020, Qualcomm kept its dividend static.  Surprisingly, QCOM announced its first dividend raise in a couple of years this past March (4.84%), just as the market turbulence started.  Despite the hold on dividend growth in recent years, QCOM still has a streak of 9 consecutive years of dividend growth, which should become 10 years if QCOM can maintain the current dividend through the end of the year.

 

My Personal Performance for QCOM

Below is a capture of the spreadsheet I keep with my QCOM cash flows, and the calculated XIRR.  Compared to my five legacy Portfolio holdings, the table for QCOM is small, due to its shorter holding period and small number of transactions.  With QCOM being a relatively new Portfolio position (only a few years), I don’t have a large amount of data/time to factor into the return calculated in this Performance Check.  Therefore, as I move forward in the near-term, large price changes can have a significant impact on my annualized return.

Here’s a note with regard to the possible ‘Type’ column entries: EOY Value = End Of Year Value, Dividend = a dividend that was not reinvested (a cash outflow)

The duplicate EOY Value entries at the end of each year (one negative, one positive) do not affect the cash flow, and can be thought of as boundary markers, allowing me to make the individual yearly return, and the annualized total return calculations.

 

 

My transaction history with QCOM has been pretty quiet.  However, I’ve had two stints holding the stock.  Prior to starting my dividend Portfolio, I bought 100 shares that I held for only about 1.5 months in mid 2013.  I can’t recall why I sold at that time, but I was a little more of a trader back then.

Then, once I started my dividend Portfolio in 2015, you’ll see I re-initiated a position.  I bought 60 shares at that time.  That was followed by a couple more 60 share purchases in early and mid 2017.  Since then, I’ve just been holding and watching… and reinvesting my dividends, of course.

My current position sits at nearly 206 shares, indicating that I’ve added just about 26 shares thanks to dividend reinvestment since I began my 2nd QCOM investment in 2015.

 

The following price chart is also helpful to see.  It shows the stock price change since my initial purchase on 6/24/2015.

As you can see, the price for QCOM has been choppy to say the least, but the long-term trend is moving higher.  QCOM is down 7.75% for the year (including dividends), recovering nicely from the market lows in March.

 

 

While QCOM is a very large company that’s fairly well known, and pays a generous dividend, I don’t see it in too many DGI portfolios.  That could be due to the stock’s presence in the technology sector, and thus the expected volatility.  The current dividend yield for QCOM is 3.23%, which is slightly ahead of my Portfolio average of 3.07%.

QCOM currently has a high value weighting in my Portfolio at 4.39% – my 2nd largest position (out of 50 stocks).  However, its dividend weighting is also significant at 4.62%, which is behind only Abbvie (ABBV) in my Portfolio.

All QCOM dividend payments I’ve received since my position was started have been reinvested.

My current investment in QCOM is $10,284.99.  My cost basis, which includes $1,624.71 in reinvested dividends, is $11,909.70.

Meanwhile, the current value is $16,581.10, which reflects a potential capital gain of $4,671.40.  The annualized total return ends up being 13.44%, covering my initial purchase on 6/24/2015, through 5/10/2020.  That’s a nice compound annual return given that it doesn’t look like the stock moved much. That return was helped by my purchases in 2017, which were both just under $53/sh – close to the lows of my holding period.

 

Summary

QCOM has certainly earned its keep in my Portfolio given that better than 13% compound annual growth rate.  Thus, I have every intention of holding my position at this time.  Despite the healthy returns, I don’t see adding to my QCOM position, as it’s already a significant Portfolio position for me in terms of weighting and dividend weighting.  The position doesn’t need to get bigger with any help from me.

With the 5G rollout coming, the future prospects for QCOM look encouraging.  So, I have confidence that QCOM can continue to deliver similar returns moving forward.

 

Bringing the returns for my other Performance Check stocks (PG, RPM, AFL, PEP, JNJ, AL, GILD, TROW, FAST, WPC, O & GNTX) up-to-date allows for the comparison below.

Note that rightmost column shows the year of my initial purchase for each stock, just to provide some detail with regard to how many years are part of the annualized return.

 

 

QCOM had a nice debut in the above table, ranking 3rd in terms of annualized return for the Portfolio stocks I’ve reviewed thus far.

With the market turmoil of the past couple of months, I would have expected most, if not all, of the annualized returns to show a decent decline since my last Performance Check.

However, a few stocks managed to add to their previous returns.  Those stocks included Johnson & Johnson (JNJ), Gilead Sciences (GILD) and Fastenal (FAST).  While the returns for all the other stocks dropped, those of RPM International (RPM) and Pepsico (PEP) didn’t fall much.

GILD has been my poorest performer since it debuted in the list.  However, it was able to climb out of the bottom return spot thanks to its recent performance.  Air Lease (AL) sank into last after a stock price decline brought about by being in the wrong business for the pandemic.  During my last Performance Check, AL had an annualized return over 10%, but that fell quickly after a price drop of about 42% since last November.  That said, I’m looking to AL to rebound in the coming months at air travel hopefully ramps up.

REITs W.P. Carey (WPC) and Realty Income (O) both registered return declines compared to my last check, but since I started trimming their positions at the start of 2020, their dec;lines were less than they otherwise would have been.

Overall, the performance of the group looks good.  Only 3 of the 13 stocks are showing compound annual growth rates south of 9%.  I think that’s fairly impressive given the recent market pullback is factored in.

On deck for my next Performance Check is Exxon Mobil (XOM).  Unless something unexpected occurs, I fully expect to have XOM show up with a negative annualized return, putting it at the bottom of my performance list.

 

Have you been monitoring the performance of your portfolio stocks?  If so, has it revealed anything interesting or alarming to you?  I look forward to your comments!