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 (this is now the 15th overall). My last Performance Check was just last week, when I examined my performance for Exxon Mobil (XOM), which wasn’t pretty. Anyway, to remove that bitter taste from my mouth, I figured I’d check out another stock, which I’m sure will have provided better results.
In this post, I’ll be checking my performance for Skyworks Solutions (SWKS), one of my stocks in the Information Technology sector. SWKS is in the semiconductor industry.
SWKS designs, manufactures and markets proprietary semiconductor products. It also licenses its intellectual property. Its product portfolio includes a wide variety of analog solutions, including amplifiers, attenuators, detectors, and filters among many others.
Their products help connect people, places, and things. They have applications existing within the automotive, broadband, cellular infrastructure, connected home and smartphone markets, to name a few.
SWKS operates throughout the world with engineering, manufacturing, sales and service facilities throughout Asia, Europe and North America. The company was founded in 1962 and is headquartered in Irvine, California.
Many investors are looking at SWKS as a bet on the upcoming ramp in 5G technology. Part of that exposure comes through Apple (AAPL) and their iPhones, as SWKS is a major supplier to AAPL. SWKS also has a presence in the Internet of Things (IoT) space.
Impressively, the company is debt free. This is an enviable position in any market, but especially the current one that finds many companies struggling to service their debt.
SWKS has provided me with healthy price appreciation and a quickly growing dividend. That’s a combination I love to see. SWKS has been moving up my Portfolio value rankings recently and currently sits at the #4 position.
I’ll shortly be examining my performance since owning SWKS, but first let’s check out the historical dividend growth for the stock…
As you can see, SWKS is a relatively new dividend payer, issuing their first dividend payment in 2014. So far, they have raised that dividend every year. The streak should reach 6 years after the company announced a 13.64% raise last month.
Dividend growth has been in the mid-teens the past few years, and I look forward to that continuing in the near-term. The forward payout ratio is roughly 35%, so there’s certainly room for future increases.
I don’t come across SWKS in many dividend portfolios. It could be that fact that the stock is in the Technology sector and its more volatile than the average S&P 500 stock (Beta = 1.29). However, I suspect it’s the lower yield that turns dividend investors off. The current yield is 1.37%, but it has typically ranged from 1%-2% over the past 5 years. I absolutely don’t mind the lower yield if the price appreciates faster than the index and it provides double digit dividend growth.
My Personal Performance for SWKS
Below is a capture of the spreadsheet I keep with my SWKS cash flows, and the calculated XIRR. Compared to my five legacy Portfolio holdings (PG, RPM, AFL, PEP & JNJ), the table for SWKS is small, due to its shorter holding period and small number of transactions. With SWKS being a relatively new Portfolio position (about 5 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), Options = income from writing options against the shares (another 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.
I started my SWKS position back in August of 2015 with 50 shares at a price north of $86. I then averaged down twice over the following 16 months (at roughly $78 and $67) with equivalent 50-share purchases. At that point, my position was getting relatively large in my Portfolio. So, when the price recovered a bit in early 2017, I sold my original 50 shares for a tiny profit. I’ve been rolling with the remaining 100 shares ever since.
The price of SWKS climbed higher later in 2017, eclipsing $110. However, by the end of 2018, the stock price had declined all the way down to $67. That’s a wild ride, for sure. If I recall, the market didn’t like SWKS having such a large percentage of it’s revenue coming of AAPL. (Note – SWKS has been working to diversify its revenue stream over the past couple of years). There was also concern about slowing iPhone sales. Then in 2019 there was all the concern over a possible trade war with China.
Since my lone sale, I’ve been holding my shares and reinvesting my dividends. I’ve added over 18 shares through dividend reinvestment, and my position currently stands at 118.235 shares.
The following price chart is also helpful to see. It shows the stock price change since my initial purchase on 8/4/2015.
As you can see, the price for SWKS had been up and down over my holding period. However, around October of 2019, the price started moving higher rather quickly, overcoming the setback in March of this year, too. As you know, the big drop at the start of 2020 was fallout from the arrival of the pandemic.
SWKS is up strongly year-to-date for me, rising about 21.7% for the year (including dividends). However, this pales in comparison to 2019’s return of almost 84%.
I’m glad I was patient with this holding and chose to ride through all the ups and downs, as the majority of my SWKS returns have been generated in the past 15 months.
Due to all the recent price appreciation, the yield for SWKS has been falling and currently stands at 1.37%. This is well below my average Portfolio yield of 2.57%. However, by purchasing at lower prices, and receiving some significant dividend raises along the way, my yield on cost is 2.68%.
The stock currently has a value weighting in my Portfolio of 3.99% – my 4th largest position (as noted earlier) out of 48 stocks. The dividend weighting is much lower though, sitting at 2.13%.
All SWKS dividend payments I’ve received since my position was started have been reinvested. In addition, I added $50 of income from writing an option against my shares.
My current investment in SWKS is $8,091.40. My cost basis, which includes $729.39 in reinvested dividends, is $8,820.79.
Meanwhile, the current value is $17,272.95, which reflects a stout potential capital gain of $8,452.16. The annualized total return ends up being 16.51%, covering my initial purchase on 8/4/2015, through 8/16/2020. That’s a terrific compound annual return, even though I was hoping I’d hit the 20% mark.
At the end of 2018, I had a -1.21% annualized rate of return with SWKS. However, sticking with my investment has allowed my standing to improve greatly less than two years later. As I always mention, the returns can change quickly over shorter holding periods (even a 5-year holding period like I have here).
Summary
After a slow start for SWKS with regard to performance in my Portfolio, the stock has heated up in the past year, which has resulted in some outstanding performance on an annualized basis.
My 16.51% annualized return is one of the better ones in my Portfolio. The question is… can SWKS keep it up?
As of now, SWKS has grown into my #4 position in Portfolio value, and I’m inclined to let this stock run. Even if the price continues its ups and down over the next year or two, but essentially trades sideways, I can live with that as long as nothing material changes with the company, and those double digit dividend raises keep coming.
Bringing the returns for my other Performance Check stocks (PG, RPM, AFL, PEP, JNJ, AL, GILD, TROW, FAST, WPC, O, GNTX, QCOM & XOM) up-to-date allows for the comparison below.
Note that the 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.
It’s a pretty strong debut for SWKS in my performance rankings. It shows up with the 4th best annualized return for the Portfolio stocks I’ve reviewed thus far with that 16.51% return.
About 15 months ago SWKS was hanging around breakeven with regards to performance. However, strong price gains since then have led to some desirable annualized returns.
With my last Performance Check post being just a week or so ago, there wasn’t much time for any of my reviewed stocks to move much in the rankings. However, I’ll note the best and worst here.
The biggest movers to the upside in the week that passed were Qualcomm (QCOM) and Air Lease (AL). QCOM gained 1.32% during the week, while AL had its annualized return advance 0.49%.
The biggest movers to the downside with regard to annualized returns were T. Rowe Price Group (TROW) and Realty Income (O), dropping 0.49% and 0.36%, respectively.
It’s no surprise my legacy 5 stocks (PG, RPM, AFL, PEP, JNJ) didn’t have returns that moved much given that so many years are factoring into their annualized returns.
Again, the performance of the group looks good. It’s now only 3 of 15 stocks showing compound annual growth rates less than 8.2%. I still have 3 stocks showing annualized returns over 20%, too.
On deck for my next Performance Check is Illinois Tool Works (ITW). Despite a volatile 2020 year-to-date, ITW’s stock price has risen. However, what’s it done for me since I initiated my position back in 2015? We’ll find out next time!
Hopefully, the performance of your portfolio stocks has been on the rise this year. But what about since you’ve first purchased those stocks? It could be time for a Performance Check! I look forward to your comments.