I’ve got another transaction update for you. I made a pair of moves in my Portfolio today.
There was one sale and one buy. The sale was a complete sale of one of my smaller positions, while the buy was an addition to my newest position.
The proceeds from my sale, along with a token amount of cash, were used to buy additional shares in that existing position.
Thanks to a big difference in yield between the two stocks, I was able to boost my forward dividend income by a good chunk as a result of the switch. By how much?, you might ask. Keep reading to find out.
Here are my transaction details …
Sysco (SYY)
I initiated my position in SYY just last year, near the start of the pandemic (in March). As it turns out, I bought in at a very good time.
I was able to start my position with 25 shares at a little over $44. The stock proceeded to drop even further after I bought, but I was happy to start the position, and I hoped to build it up over time.
Well, before I got around to building up the position, the stock powered higher. It fairly consistently climbed in price over the past year (despite the business not fully recovering), and I now see the stock as overvalued. In addition, I think it could be a couple of years before earnings for SYY reach pre-pandemic levels.
In addition, SYY understandably chose to forego a dividend raise last year. Given that SYY is a Dividend King, I suspect they’ll find a way to boost the dividend this year and keep that dividend growth streak intact. However, I believe any raise will be minimal.
So, with the stock looking to have gotten ahead of itself, and thus limiting my chance to build the position at reasonable prices (not to mention the prospect of a small dividend raise on the horizon), I decided to exit my SYY position and move on.
On 4/27/21, I sold 25.901 shares at $83.50/sh. As mentioned, this was my entire position. After the SEC fee, the sale proceeds were $2,162.71.
At my sale price, shares of SYY yielded 2.16%, which is 0.1% higher than my current average Portfolio yield of 2.26%.
The sale resulted in a long-term capital gain of $986.61, and a short-term capital gain of $10.80. The sale also resulted in a $46.62 reduction in annual forward dividend income.
The elimination of SYY from my Portfolio brings the number of stocks to 52.
I’d certainly consider having SYY in my Portfolio again. However, I’d hope to re-enter at a more favorable valuation, and once the outlook for dividend growth is stronger.
OGE Energy (OGE)
I initiated a position in OGE earlier this month. It started as the smallest position in my Portfolio.
Well, with those SYY sale proceeds, I put them immediately to work in more shares of OGE. As a result, it’s safe to say OGE is no longer the smallest position in my Portfolio.
From a super-sector perspective, the transition from Consumer Staple (SYY) to Utility (OGE) did not impact a thing.
However, I was a bit overweight in Consumer Staples and a bit underweight in Utilities. So, this transaction helped to balance out my sector weightings a bit.
On 4/27/21, I purchased 67 shares at $32.645/sh, for a total of $2,187.22. The stock yielded 4.93% at my purchase price (more than double my current Portfolio average).
I was able to pick up these new OGE shares 5 cents cheaper than my buy earlier in the month, thus lowering my cost basis ever so slightly. I still view this OGE buy price as fairly valued.
This purchase resulted in the addition of $107.87 in annual forward dividend income. This more than made up for the lost dividend income with the SYY sale.
OGE is now my largest Utility holding, surpassing Pinnacle West Capital (PNW) and NextEra Energy (NEE).
OGE is still the 8th smallest position in my Portfolio, but that’s a nice step up from being the smallest of 52 positions. In terms of value ranking within my Portfolio, OGE sits behind Lockheed Martin (LMT), but ahead of Amgen (AMGN).
Summary
I made a pair of Portfolio transactions on 4/27. I started by selling my entire SYY position. The stock looked overvalued to me, and dividend growth appeared strained in the near-term.
I then used the proceeds to extend my position in Utility stock OGE. I essentially tripled my position, adding 67 shares to my existing 33 shares in order to bring me to an even 100 shares.
The 2 transactions resulted in a net investment of $10.80 into my Portfolio. However, my forward dividend income increased substantially relative to the net investment, as it climbed by $61.25.
With the SYY sale, I recorded total capital gains of $997.41, with all but $10.80 being of the long-term variety.
With a Portfolio position being eliminated by the SYY sale, the number of stocks in my Portfolio declined to 52.
What portfolio moves have you made in April? What has prompted the move(s)? Please share in the comments!