I’ve got another pair of transactions to provide details on.  In this case, it’s one sale and one buy.

I basically trimmed a position and used the proceeds to grow a new position that I established earlier in August.

So, not much was invested as far as new cash, but the pair of moves does boost the forward dividend income for my Portfolio a bit.

Let’s check out the transaction details …

 

Air Lease (AL)

In my last post, Portfolio Ranks – Dividend Safety, I highlighted that I had one stock in my Portfolio that had a very low Dividend Safety Score.  The stock was rated Very Unsafe by Simply Safe Dividends when it came to the safety of its dividend.  That company was AL.

That was by far the worst Dividend Safety Score in my Portfolio.  It came in at 16 on a scale of 0 to 100.  I surmised that it was AL’s poor free cash flow numbers that led to the low score, but the debt levels for AL are elevated as well.

While AL doesn’t make up a big chuck of my Portfolio’s dividend income (only 1.1%), it does make up a larger percentage of my Portfolio value (1.5%).

AL was the 25th largest position in my Portfolio at the time of this sale – so in the top half in terms of value.

I’d actually trimmed AL earlier in 2021 (January, to be exact), using the proceeds to purchase additional shares of Merck & Co. (MRK) and Lockheed Martin (LMT).

I’ve thought about trimming AL further in recent weeks due to dividend growth that has slowed the past couple of years, not to mention capital appreciation that didn’t quite meet my expectations for a lower-yielding stock.

However, I planned to give AL the benefit of the doubt and hold my position steady given that the pandemic has so negatively impacted the airline industry, and thus their results.

Unfortunately, the low Dividend Safety Score has me less patient with AL, and thus I decided to keep trimming.

The trim this time is only a third of the size of the one I did in January, but it starts improving the dividend safety of my Portfolio right now.

On 8/19/21, I sold 25 shares of AL at $40.50/sh.  This was 10.1% of my position.  After the SEC fee, the sale proceeds were $1,012.49.

At my sale price, shares of AL yielded 1.58%, which is 0.68% lower than my current average Portfolio yield of 2.26%.

I trimmed my most expensive AL shares.  They were the last of my original lot from 12/13/2013 which I’d purchased at $31.00/share.

The sale resulted in a long-term capital gain of $237.24, as well as a $16.00 reduction in annual forward dividend income.

I still have a pretty healthy AL position of 222.424 shares, but this could be getting smaller in the near future… we’ll see.

AL still ranks as my 29th largest position… behind Air Products & Chemicals (APD), but ahead of MRK.

One nice side note regarding the AL trim is that it reduces my Industrials weighting, which is one of my Portfolio goals for 2021.

 

Omnicom Group (OMC)

Earlier in August I established a position in OMC.  Now here I am, a bit over 2 weeks later, already building out the position.

This addition was an identical share-size purchase compared to the one earlier in the month, thus doubling my position.  However, I was able to scoop up this most recent batch at an even better price than last time.

Prior to initiating a position in OMC, it took me a while to find a new stock in the Communication Services sector that I wanted to invest in.  Given that I’m trying to increase my Portfolio weighting in this sector, I was happy to add to OMC again.

I used the proceeds from the AL sale, along with a smidgeon of cash, to make this OMC addition.

On 8/19/21, I purchased 15 shares of OMC @ $71.05/sh., for a total of $1,065.75.  The stock yielded 3.94% at the time of my purchase (or 1.68% above my current Portfolio average).

My cost basis was lowered to an even $72/share.

The purchase resulted in the addition of $42.00 in annual forward dividend income – more than enough to cover the lost income from the AL sale twice over, and then some.

I now own 30 shares of OMC.  However, the stock still remains one of my smallest positions.  It moves up to the 51st largest position in my Portfolio (out of 55 stocks), within striking distance of Omega Healthcare Investors (OHI), but well ahead of NextEra Energy (NEE).

I’ll certainly consider buying more OMC shares if I can continue to add around the $72 level.

 

Summary

I made a pair of Portfolio transactions last week, on 8/19.  I essentially trimmed one position and redirected the proceeds to help build out another position.

After posting the poorest Dividend Safety Score for any stock in my Portfolio, I trimmed AL.  I sold 25 shares, which was about 10% of my position.

I then used the proceeds to buy 15 more shares of OMC, doubling a position that I’d only started earlier in the month.

The two transactions resulted in a net investment of $53.26 into my Portfolio.  Meanwhile, my annual forward dividend income climbed higher by $26.00.  OMC has well over twice the yield of AL, so that’s what led to the income boost.

As a result of the AL sale, I recorded a long-term capital gain of $237.24.  I chose to sell the remaining shares in my most expensive AL share lot.

With my sale being only a trim, and my buy involving an existing Portfolio holding, the number of stocks in my Portfolio remained at 55.

 

What last led you to trim a position?  Are you monitoring the dividend safety of your portfolio stocks?  I look forward to your comments!