I executed a few Portfolio transactions earlier this week. Nothing major to report, but I wanted to provide my usual update.
This time I continued to add to one of my top positions as it’s been falling in price over the course of the past month.
I also trimmed a stock that’s been red hot over that same 1-month time period. Its weighting within my Portfolio got a bit large so I decided to trim a bit.
Lastly, I established a new Portfolio position. It’s a stock from my watchlist that I’ve been keeping an eye on over the past few months and its price finally reached my desired entry level.
So, it was 3 total transactions. I ended up investing more than $1K in cash over and above my sale proceeds. In addition, I’ll share the net increase to my forward dividend income as a result of the transactions. Here are the all the details…
Visa (V)
After not investing in V for close to 6 years after initiating my position, I’ve now made two small purchases within the past 3 weeks. The price of V continued to drop (payment processors have taken it on the chin recently) so I decided to continue adding in hopes of speeding up the process of eventually owning 100 shares.
On 11/22/21, I purchased 2 more shares of V @ $195.9372/sh., for a total of $391.87. The stock yielded 0.77% at the time of my purchase (a good 1.5 percentage points below my current Portfolio average).
This was a decent discount compared to the shares I paid $213.43 for on 11/9.
The purchase only resulted in the addition of $3.00 in annual forward dividend income due to the low yield V sports.
However, my V position has now climbed to 86.93 shares. My cost basis rose slightly to $76.36/share.
I plan to add to my V position again should the price decline further. Right now I have $185/sh. as a near-term target for considering another purchase.
V is currently the 14th largest position in my Portfolio. It fell out of my Top 10 during this past month. The stock was sitting in my #8 spot in last month’s Portfolio Thoughts post. V sits behind Nexstar Media Group (NXST), but ahead of Skyworks Solutions (SWKS) when it comes to current Portfolio value.
Qualcomm (QCOM)
The stock holding down the top position in my Portfolio is QCOM. It was in that position at the start of the month, when its price was $133/share.
About 3 weeks later, on the heels of a terrific earnings report and forecast, the stock is trading for $181/share and its established an even larger weighting in my Portfolio, north of 6%. I like to see the top position at 5% or less, but it’s not a hard rule.
Still, after contemplating a trim the last time the stock peaked around $165 in early February, only to see the price drop to around $123 (~26%) in about 5 weeks time, I was a little more motivated to get the trim done this time.
Even with the trim executed, QCOM easily remains my top position. I could have trimmed more than I did, but I wanted to keep the position above 200 shares.
On 11/22/21, I sold 10 shares at $187.00/sh., or about 4.7% of my position. The sale proceeds were $1,869.99 after my 1-cent SEC fee.
The shares I sold were ones from my original share lot on 6/24/2015, which I purchased at a price of $65.50/sh.
At my sale price, shares of QCOM yielded 1.45%, which is 0.81% below my current Portfolio yield of 2.26%.
The sale resulted in a long-term capital gain of $1,214.66. The sale also resulted in a $27.20 reduction in annual forward dividend income.
I’ve been trying to boost the Information Technology weighting in my Portfolio, and this QCOM trim didn’t help that. However, I used all the sale proceeds and some cash to invest in another technology name…
Amdocs Ltd. (DOX)
Look at this… another new stock for my Portfolio. I’ve been watching this stock for months, looking for it to reach my target price and that day came.
DOX is part of the IT Services industry within the Tech sector. Here’s a little background on the company…
The company specializes in the provision of software and services solutions for communications, media, and entertainment industries. It’s one of the world’s leading providers of billing, customer relationship management (CRM), and order management software systems to telecommunications companies in the U.S and internationally.
DOX formed in the 1980s and was originally based in Israel. It later moved its headquarters to Chesterfield, Missouri. However, the bulk of the current R&D and nearly half of it 8,600 employees still operate in Israel.
I haven’t come across too many technology stocks recently that appear fairly valued, yet still have a pile of metrics that look so favorable.
The performance of DOX has been very consistent. Revenue growth has historically been about 2%-3%, while EPS grows in the 6%-8% range. The P/E ratio is below that of the market, as well as other companies in the Technology sector. Dividend growth is in the low double-digits and the dividend safety is considered Very Safe (score of 90/100) by Simply Safe Dividends.
Returns on equity and invested capital look good and consistently come in over 12%, margins are good, share count is coming down, and there’s no debt. There’s a lot to like here.
While DOX only seems fairly valued at my entry point, I was happy to initiate the position and begin to monitor the stock more closely moving forward.
On 11/22/21, I initiated my DOX position by purchasing 40 shares at $72.00/sh, for a total of $2,880.00. The stock yielded 2.00% at my purchase price, about a quarter of a percent below the yield of my Portfolio as a whole.
This purchase added $57.60 to my annual forward dividend income. This recouped the dividend income lost due to the QCOM sale, and then some.
The addition of DOX to my Portfolio brings the number of stocks in my Portfolio to 55. DOX becomes my 9th Technology stock.
DOX starts as the 5th smallest position in my Portfolio, sandwiched in between two of my new REITs in Medical Properties Trust (MPW) and National Retail Properties (NNN).
As I normally do with a new holding, let’s take a quick look at the dividend growth history dating back to 2000…
One can see that DOX only started paying a dividend in 2012 (last quarter only). Since then, dividend growth has been very consistent in the 13%-14% range.
The dividend growth streak for DOX currently stands at 9 years after its last raise of nearly 10% in early 2021.
The earnings payout ratio is currently around 29%, while the free cash flow payout ratio is a bit lower at 25%. In either case, there appears to be plenty of room to continue raising that dividend.
Summary
There you have it! I made 3 more Portfolio transactions this past week.
I once again took some cash and added to my V position while the stock price is in decline. That was followed up by a trim of my top stock, QCOM, which has been on a terrific run up over the past 3 weeks. With the trim proceeds, and roughly $1K of additional cash, I then stayed in the Tech sector and established a new position in DOX.
The switch from QCOM to DOX offered a small yield boost (1.45% vs. 2.00%) in addition to better dividend safety (80/100 vs. 90/100), so those were a pair of nice benefits from the move.
The three transactions resulted in a net investment of $1,401.88 into my Portfolio. Meanwhile, my annual forward dividend income got a decent boost of $33.40.
I recorded a long-term capital gain of $1,214.66 from the QCOM trim.
As a result of initiating the DOX position, the number of stocks in my Portfolio rose to 55.
What moves have you been making in your portfolio recently, and why? I look forward to your comments!