It’s time for yet another Portfolio transaction update.  This time around I’ve got 4 transactions to cover.

My February transaction activity has been fairly steady this month, but I did make a cluster of moves in the past week and change.

I started by selling a stock in its entirety… one that I’ve been sour on for a while.  I followed that up by continuing to build up what I still consider to be a ‘new’ Portfolio position that I began about 11 months ago.  I then established a new position altogether, adding a stock that’s been on my watchlist in recent months.  Lastly, I added again to a stock I bought earlier this month.

I ended up investing all my sale proceeds and some cash to make the three purchases.  Unfortunately, my forward dividend income still dipped some after factoring in all the moves, so I’ll provide some info on the magnitude of that reduction.

Let’s get to it.  Here are all the details of my recent transactions.

 

3M Co. (MMM)

As I tend to do, I’ll begin with the sale.

As you probably know, MMM has had a rough time over the past couple of years.  Mounting legal issues on two fronts (PFAS chemicals & military earplugs) were seemingly kept in check for a while.  However, the stock price started to unravel in late spring of 2021 and has (for the most part) been in a steady decline since then.  Shares are now trading at their lowest level in nearly 10 years.

Not all of 3M’s troubles can be attributed to its legal issues though.  With its diverse product portfolio MMM generates steady cash flow, but sales and earnings growth has been hard to come by, especially over the past 5 years.  This has come to impact the dividend growth as well.  It’s true that dividend increases have continued over this time, but they are getting progressively smaller, and each of the past 3 dividend hikes has been less than 0.7%.

With slow growth set to continue over the near-term, coupled with ongoing litigation concerns and depressed dividend growth, I felt my investment was better off elsewhere.

I actually trimmed MMM at the beginning of April last year when I didn’t like the direction MMM was headed.  The stock price was just south of $150 back then.  I wish I’d come to the conclusion to exit the entire position at that time.

While I debated selling here at what looks to be a depressed and undervalued price, I just didn’t want to wait around for a recovery.  Perhaps that recovery happens sooner that I think.  I’ve been wrong before so it wouldn’t surprise me.  However, I feel better not owning the shares any longer.

On 2/16/23, I sold all 30.085 shares at $113.20/share.  The sale proceeds were $3,405.54, after the $0.08 SEC fee.

At my sale price, shares of MMM yielded 5.30% which is close to double my current Portfolio yield of 2.75%.

I realized a long-term capital loss of $1,507.55 and a short-term capital loss of $29.18.  The sale also resulted in a $180.51 reduction in annual forward dividend income.

While I hate to sell at a loss, at least I’ve got some capital losses to offset any capital gains I realize during the remainder of 2023.

I sold on the ex-dividend date.  Thus, I can expect one last dividend ($45.13) from MMM in March.

Since my initial MMM purchase on the last day of 2018 until this final sale (and next month’s dividend), I calculate my annualized return for MMM at -4.48%.

The number of stocks in my Portfolio temporarily dropped to 59 after MMM was removed.

Now let’s see what I did with the MMM sale proceeds…

 

Verizon Communications (VZ)

With VZ still looking undervalued to me, I decided to add more shares.  The dip below $40 was enough to call me to action.

While earnings growth looks muted for the remainder of this year and 2024, the dividend yield is noteworthy and it’s very safe.  I just wish we could see some stronger dividend growth while we wait for a price recovery.

On 2/16/23, I purchased 40 shares of VZ @ $39.90 for a total of $1,596.00.  The stock yielded 6.54% at the time of my purchase (close to 2.4x higher than my overall Portfolio yield).

The purchase increased my annual forward dividend income by $104.40.  This is about 57.8% of the income I lost with the MMM sale.

My VZ position has grown to 154.222 shares.  The purchase decreased my cost basis, too, to $43.90/share.  This was a drop of $1.40/share.

VZ is currently the 18th smallest position in my Portfolio.  Its ranking is just behind that of Pinnacle West Capital (PNW), and slightly ahead of Best Buy (BBY).

With my VZ position well north of 100 shares and soon to be delivering over $100 per quarter in dividends, I won’t be in a hurry to add further.

 

American Tower (AMT)

I’ve been watching AMT and Crown Castle (CCI) for months now.  I’ve owned CCI before, but not AMT.  I sold CCI at the beginning of the pandemic as I believed the stock was trading at an elevated valuation and I wanted the investment dollars placed in other stocks that had declined significantly.

Since then I’ve been looking to get a cell tower REIT back into my portfolio.  After nearly 3 years, that time has come.

While CCI sports the higher yield, AMT provides higher dividend growth and a lower adjusted FFO payout ratio.  FFO growth over the next 2-3 years appears to favor AMT as well based on analyst estimates.

What attracted me most to AMT was its dividend growth.  The stock’s payout ratios (adjusted FFO and free cash flow) look low for REITs, so I’m hopeful the dividend growth can continue for a while.  One interesting aspect of AMT’s dividend is that dividend raises come quarterly.  So, there’s a little extra compounding that takes place.

AMT has been dropping in price rather significantly since the start of February.  The drop was enough to get me to initiate a position with some of my MMM sale proceeds.

On 2/16/23, I initiated my AMT position by purchasing 7 shares at $212.1717/sh, for a total of $1,485.20.  The stock yielded 2.94% at my purchase price, which is slightly better than my overall Portfolio yield.

The purchase added $43.68 to my annual forward dividend income.  This recouped another 24.2% of the dividend income lost in my MMM sale.

AMT started its residency within my Portfolio as the smallest position, behind another recent addition in Whirlpool (WHR).

The price of AMT has continued to drop since I made my purchase only 8 days ago.  The price settled below $196 to end this past week.  Should the drop continue, I’ll look to add further.  My next target price is around $188.

 

As I normally do with a new holding, let’s take a quick look at the dividend growth history dating back to 2000…

 

 

Dividend payments from AMT started in late 2011 when the company converted to a REIT business structure.

The dip in 2014 was due to a shift in the dividend payment schedule, technically resulting in only 3 dividend payments that year.

Dividend growth has been strong since the start for AMT and still resides in the low double-digits despite a reduction in the percentage over time.

The 4 raises in 2022 amounted to a 12.23% raise for the entire year.

The dividend yield for AMT is currently 3.19% and the shares have a dividend safety rating of ‘Safe’ from Simply Safe Dividends (score of 73 out of 99).

The addition of AMT raised the number of my Portfolio holdings back to 60.

 

NextEra Energy (NEE)

With the remaining sale proceeds I had, I added some cash and continued to increase the size of NEE in my Portfolio.

At the start of the month I added to NEE (10 shares) for the first time since I established my position essentially 2 years ago.  It didn’t take nearly as long to buy NEE again.

On 2/23/23, I purchased another 10 shares of NEE @ $72.75, for a total of $727.50.  The stock yielded 2.57% at the time of my purchase (which falls a bit short of my overall Portfolio yield).

The purchase increased my annual forward dividend income by $18.70.  This is actually a larger amount that I got with the same 10-share purchase earlier in the month.  This was the result of the 10% dividend raise NEE provided last week.

My NEE position grew by over 39%, increasing the size of my holding to 35.536 shares.  The purchase lowered my cost basis by a small amount, to $73.35/share.

NEE leapfrogged several positions in my Portfolio rankings due to this purchase and it’s currently the 9th smallest position in my Portfolio.  Its position trails that of Accenture (ACN), but is narrowly ahead of the freefalling V.F. Corp (VFC).

 

Summary

My February transaction activity continues to be decent.  In a little more than a week, I’ve executed 4 more transactions in my Portfolio.  Most of the transactions were executed last week, but I did sneak one in this week, too.

My transactions consisted of 1 sale, and 3 purchases.  With the lone sale I said goodbye to MMM.  Two of the purchases were of existing holdings VZ and NEE, while the last purchase of AMT added a new stock to my Portfolio.

Most of the MMM sale proceeds went into VZ and AMT, with the remainder (and some cash) being invested into NEE as well.

Unfortunately, selling the high-yielding MMM resulted in good chunk of lost dividend income.  It was enough that I didn’t recoup it all with my purchases, despite adding cash into the mix.

All totaled, the 4 transactions resulted in a net investment of $403.16 into my Portfolio.  Yet, my annual forward dividend income declined by $13.73.  A temporary setback, no doubt.

I recorded a long-term capital loss of $1,507.55, and a short-term capital loss of $29.18 with the MMM sale.

While MMM exited my Portfolio, AMT became a new member.  Thus, the number of stocks in my Portfolio remained at 60 after accounting for everything.

 

Are you an MMM owner?  What do you make of the company’s current headwinds?  Any thoughts on my most recent addition, AMT?  I don’t see AMT in too many portfolios… does it exist in yours?  I look forward to your comments!