Hey everyone! I made a few Portfolio transactions late last week – my first moves of 2022!
The primary reason within the trio of moves was to continue trimming a stock (a REIT) with the lowest dividend safety score in my Portfolio. Considering this stock is also currently in a dividend freeze, that’s two strikes against it.
I then took those sale proceeds and some cash and invested in a different REIT. This stock is one of my smaller positions, which I’m trying to build. It not only continues to raise its dividend, but it possesses a much higher dividend safety score, too.
Lastly, I made a small investment in another stock that I’d like to see become a larger part of my Portfolio. In this case, I dipped my toes into the Financial sector after many stocks in the sector received a nice price haircut to start 2022.
When all was said and done, I made a net investment and slightly increased my forward dividend income.
How big was my investment, and by how much did it boost my dividend income? It’s time to find out…
Omega Healthcare Investors (OHI)
It may just be me, but I really don’t get excited when I see a high yield. Instead I get cautious.
The yield for OHI has been north of 10% in recent months. While it’s come down a bit since then, it’s still close to 9%… easily my highest yielding stock. In fact, it’s one of only four stocks in my Portfolio with a yield above 5%.
While OHI might be considered a well-managed firm, it operates in a difficult industry (Skilled Nursing Facilities) and at this time faces plenty of risks outside of management’s control. Despite OHI paying uninterrupted dividends since 2004, with questionable dividend safety and no dividend growth over the past couple of years, I prefer to put some of this investment into another REIT that has a more favorable short-term prospects.
I mentioned that in the past month or so that I was looking to trim another 10 OHI shares and that’s what I did.
On 1/21/22, I sold 10 shares at $30.615/sh., or about 21.3% of my position. The sale proceeds were $306.15.
The shares I sold were the last of a share lot I bought in Nov. 2016, which I purchased at roughly $29.14/share. Thus, the long-term gain was only $14.36.
These shares I sold were also the last ones I obtained through new capital investment. All 36.946 shares I have remaining were accumulated via dividend reinvestment over the years.
At my sale price, shares of OHI yielded 8.75%, which is more than 3.6 times my current Portfolio yield of 2.41%.
The sale also resulted in a $26.80 reduction in annual forward dividend income. That’s a decent chunk of income provided by a small amount of shares.
From a value perspective, OHI is now the smallest position in my Portfolio of 55 stocks. However, it has the 7th smallest percentage of dividend income in my Portfolio as a result of that huge yield.
National Retail Properties (NNN)
When I sold some shares of OHI last September, I used the proceeds to initiate a position in NNN. That’s basically what I did this time, too. In this instance though, my position was already established.
With NNN being one of my smaller positions, I am looking to build out my holding. This purchase wasn’t even half the size of my initial purchase, but it did accomplish that goal of growing the position.
On 1/21/22, I purchased 13 shares of NNN @ $43.79/sh., for a total of $569.27. The stock yielded 4.84% at the time of my purchase (essentially double my current Portfolio yield).
The purchase resulted in the addition of $27.56 in annual forward dividend income, which was enough to recoup the lost income from the OHI sale.
My NNN position has now grown to 43.343 shares. My cost basis dropped a bit with the purchase, to $44.40/share.
Despite the investment, NNN remained my 4th smallest Portfolio position. The stock ranks well behind Amdocs Ltd. (DOX) in Portfolio value and narrowly ahead of Pinnacle West Capital (PNW).
Adding more NNN shares is a strong possibility if the shares continue to drop in price, and especially if the share price dips below $40. While NNN doesn’t yield as much as OHI, its dividend payout is safer. Also, NNN’s dividend growth over the past 2 years of less than 2% annually is nothing to get excited about, but it’s better than the 0% that OHI has provided over that same time period.
JPMorgan Chase & Co. (JPM)
While my swap of some OHI shares for some NNN shares was the primary development within this set of Portfolio transactions, I also managed to sneak in a small, single-share purchase of JPM.
I was looking to add to my JPM position this past summer when it dipped below $150, but I didn’t get it done. With the recent pullback in Financials to start 2022, the opportunity once again presented itself. However, I went light with the number of shares figuring I might scoop up more should the price fall further in the coming days/weeks.
On 1/21/22, I purchased 1 share of JPM @ $146.00/sh., for a total of… you guessed it… $146.00. The stock yielded 2.74% at the time of my purchase (0.33 percentage points better than my current Portfolio yield).
The purchase boosted my annual forward dividend income by a scant $4.00. Still, every bit helps.
I last added to my JPM position in August, 2019. My JPM position has now climbed to 71.477 shares. My overall JPM cost basis rose a bit, to $105.04/share.
I suspect I’ll look to add another share or two if the price dips below the level of this past purchase. A price under $140 could motivate me to buy several shares.
JPM is currently the 24th largest position in my Portfolio… putting it safely in the top half in terms of value . The position is behind that of Gentex (GNTX) and slightly ahead of Automatic Data Processing (ADP).
Summary
I tallied 3 Portfolio transactions last Friday. This constituted my first trading activity in 2022. All of the transactions were small.
Trading began with a trim of OHI. Sketchy dividend safety and no dividend growth for OHI were the impetus behind the trim.
I used those OHI sale proceeds and some new investment capital to add a baker’s dozen of NNN shares. With this purchase I was able to replace the lost income from the OHI trim.
Lastly, I bought a single share of JPM. The price dipped to a target level I had on the stock for a few months. I went easy on the share count figuring the price might decline further given recent market action.
The three transactions resulted in a net investment of $409.12 into my Portfolio. Meanwhile, my annual forward dividend income got a small boost of $4.76… an effective yield of 1.16%
Also, my OHI trim resulted in a long-term capital gain of $14.36.
With my sale being a trim, and my two purchases both being additions to existing Portfolio positions, the number of stocks in my Portfolio remained at 55.
Have you made any portfolio moves in 2022 yet? Are you eyeing any particular stock given all the price declines? Please share in the Comments!