There was some Portfolio activity for me over the past 10 days that I wanted to share with you.  I recorded one sale and two purchases.

With regard to my sale, I sold all my shares of the company, leaving me with one less holding in my Portfolio.  In fact, it left me with no holdings in one the eleven market sectors.

As for the two purchases, both were additions to existing Portfolio positions…

In one case, I added to the position for the first time in nearly 9 years.  The company has declined in price with the arrival of the pandemic, and the shares appear as reasonably priced as they have been in nearly 6 or 7 years.

In the other case, I added to a newer holding, one that I’ve been growing over the past 20 months.  This company’s issues started before the pandemic, but the share price seems to have stabilized after a long downward trend since the start of 2018.

Let’s get more specific, shall we?  Here are some details on my trio of transactions…

 

Exxon Mobil (XOM)

Earlier this month, I did a Performance Check on XOM.  In that review, I calculated that my annualized return on my XOM position was close to -12%.  Nearly all of my losses were racked up since the beginning of 2020, when XOM begin a precipitous price decline from about $70/share.

Sadly, XOM has reported EPS declines in 7 of the past 9 years.  That includes stretches of time from the start of 2012 to the end of 2014 when oil was trading in the $90/barrel range.  In the time period from the start of 2015 to the end of 2019, oil has probably averaged closer to $50/barrel, and it’s gotten even worse this year as the pandemic has slashed worldwide oil demand, only exacerbating the problems for XOM.

While XOM has been able to maintain its dividend thus far, I’m not optimistic that they can continue to pay the current dividend given that I don’t see the price of oil rising significantly anytime soon.  The company has already reduced its capital investment in its business and taken on debt in order to support the dividend.  Meanwhile, a few of its peers have already cut their dividend.  I think the kicker for me was hearing earlier this month of XOM planning to eliminate the company contribution for participants (employees) in its 401(k) plan.  It seems like some dire financial conditions at XOM if it’s come to that.

With XOM having one of the largest dividend weightings in my Portfolio, and with an XOM dividend cut seeming more likely as the quarters pass, I wanted to take action, as opposed to wait for something to happen.  By doing so, I hope to potentially avoid another dip in the stock price that might accompany any dividend cut announcement, and improve the overall dividend safety of my Portfolio, too.

On 8/12/20, I sold all 134.134 shares at $44.00/sh.  After the SEC fee, the sale proceeds were $5,901.77.  At that sales price, shares of XOM yielded 7.91%.

The sale resulted in a long-term capital loss of $3,924.04, and a short-term capital loss of $586.32.

The sale also resulted in a hefty reduction in annual forward dividend income of $466.79, or about $116.70 each quarter.

By selling when I did, I was able to keep the upcoming September dividend payment, which should allow me an additional quarter to figure out how I might replace the lost dividend income.

With the departure of XOM from my Portfolio, I no longer have any stocks in the Energy sector.  I haven’t had any stock from the Utility sector for a while now either.

 

Aflac (AFL)

AFL is one of my five legacy stock holdings.  I’ve held shares in AFL since May of 1996.  At that time, I had AFL shares in a DRiP program, and I slowly built up my position.

In fact, my largest individual capital investment in AFL during that time was $250.  My last AFL purchase was in the waning days of 2011.

When I started my dividend Portfolio in 2015, AFL was such a large position already that I didn’t add to it.  This allowed me to diversify my Portfolio holdings by building up other positions.

However, in 2020, after AFL dropped in price and did not really bounce back (like other stocks during the market rally over the past few months), the stock hit my radar last month.  AFL’s price drop started with pandemic, at which time it dropped the stock out of my top 10 holdings.

The 2020 price decline has led to a valuation for AFL that appears to be as cheap as any seen in the past 6-7 years.  So, in an effort to help AFL reach my top 10 once again, I scooped up a few shares at reasonable prices.

On 8/17/20, I purchased 45 shares of AFL at $37.485/sh., for a total of $1,686.83.  Quite a step up from $250!  My AFL share total has now climbed to 309.499 shares.

The stock yielded 2.99% at my purchase price.  This is 0.4% above my current average Portfolio yield of 2.59%.

This purchase resulted in the addition of $50.40 in annual forward dividend income.  This was my first purchase made in trying to recoup some of the lost XOM dividend income.

Note, my purchase was the day before the stock went ex-dividend, so I’ll see a small boost in my AFL dividend starting in September.

With this purchase, my AFL position is now the 16th largest in my Portfolio, behind Abbvie (ABBV) and ahead of Broadcom (AVGO).

I’ll consider purchasing additional shares below the $34 level.

 

3M Co. (MMM)

MMM seems to be consolidating in price, despite continued uncertainty in its business.  The company continues to go through COVID-related restructuring.  There are some litigation issues overhanging the stock, as well.  More than likely, this will be 3M’s 2nd consecutive year of negative EPS.  However, analyst projections show positive EPS gains in each of the next two years.  So, perhaps the worst is over?

One positive for MMM is in its safety segment, as the demand for its N95 respirator masks has significantly increased due to the pandemic.  Still, that won’t carry their business.

My last purchase of MMM was back at the beginning of March.  At that time, I was able to add a few shares just below $150, the lowest price for any MMM purchase I’d made.

This purchase didn’t approach such attractive levels, but nonetheless was my 2nd best MMM purchase price point, and it lowered my cost basis.

On 8/17/20, I purchased 10 shares of MMM at $162.90/sh., for a total of $1,629.00.  My MMM share total now stands at 51.631 shares.

The stock yielded 3.61% at my purchase price.  This is just over 1% higher than my current average Portfolio yield of 2.59%.

This purchase resulted in the addition of $58.80 in annual forward dividend income.  This helps recover some of that now absent XOM dividend income, too.

As was the case with AFL, my MMM purchase was the day before the stock went ex-dividend, so I’ll see an increase in my MMM dividend starting in September.

With this purchase, my MMM position is now the 23rd largest in my Portfolio, easily behind Starbucks (SBUX) and a fair distance ahead of General Dynamics (GD).

In the near term, I probably won’t add to this position unless its stock price drops below the $150 price point.

 

Summary

I made a trio of transactions here in August… one sale and two purchases.

With declining sales and EPS, and a dividend that appears to be on shaky ground, I made a preemptive sale of XOM, eliminating it from my Portfolio.  Unfortunately, this left a big dividend hole in my Portfolio due to XOM’s elevated dividend weighting in my Portfolio.  However, I’ve got about 3 months to work on replacing that income before I’ll miss my XOM dividend.

On the bright side, I used some of the XOM sale proceeds to add to a couple of existing positions in AFL and MMM.  Both purchases helped to recoup some of that lost dividend income.

The result of the three transactions was a net withdrawal from my Portfolio of $2,585.94, and an major decrease in my annual forward dividend income of $357.59.  It will probably take all the remaining proceeds and a good chunk of additional capital to recover the remaining dividend income from the XOM sale.  I’ve got some work to do.

I also registered a total capital loss (long and short term) of $4,510.36 with the XOM sale.  I’ll use that to offset capital gains that I’ve already realized in 2020, helping to keep my taxes in check.

With the elimination of my XOM position, the number of stocks in my Portfolio dropped to 48.

 

Are you worried enough about any potential dividend cuts within your portfolio holdings to initiate a sale?  Or would you wait until the cut/suspension gets announced (or happens) first?  Please share in the comments!