I made a pair of Portfolio moves recently and I’m ready to share the details.
There was one sale and one buy on the same day this past week. With the one sale, I eliminated the stock from my Portfolio. With the sale proceeds, I invested nearly all of it in an existing Portfolio holding.
Thus, it was a net withdrawal from my Portfolio. In addition, there was a slight decline in my forward dividend income. While not ideal, the reductions were small and I hope to overcome them with a purchase or two in the near future.
Let’s get to it. Here are the details for my latest Portfolio transactions.
Whirlpool (WHR)
I was optimistic that my WHR position would turn out to be a good one when I established a position back in January, 2023. The stock had retreated in price quite a bit and I thought the earnings slide would stop. The stock seemed to be a decent value.
However, earnings continued to decline as existing home sales slumped in the wake of high mortgage interest rates. In addition, shortly after I bought in, WHR froze their dividend, which should have given me reason for pause. I did pause in fact. I stopped adding to my position and hoped to ride out the ugliness.
Unfortunately, dividend safety has been weakening over the past year, too. The prospect of a dividend cut has even entered the realm of possibility. Rather than continue to wait for a recovery, I decided to exit my smallest position and invest the proceeds where more stability exists.
On 5/16/24, I sold all 16.069 shares at $92.80/share. The sale proceeds were $1,491.19 after the $0.01 SEC fee.
At my sale price, shares of WHR yielded 7.54%. This elevated yield was due to the stock’s steep price decline. This yield is close to 5 percentage points above my current Portfolio yield of 2.66%.
With this sale, I realized a long-term capital loss of $788.86 and a short-term capital loss of $27.99. The sale also resulted in a $112.48 reduction in annual forward dividend income.
Since my initial WHR purchase back in Jan. 2023 until this final sale, I calculate my annualized return for WHR to be -24.28%. Needless to say, this was a poor investment. I’m happy to cut my losses and move on.
Once the housing market recovers, perhaps WHR can turnaround the business, have earnings rise again, deleverage a bit, and get back to good business. In the end, WHR turned out to be more of a cyclical business than I expected.
I hoped to keep my WHR proceeds in the Consumer Discretionary sector, as I was already underweight in the sector before my WHR sale. I had some candidates in Starbucks (SBUX) and Nike (NKE). However, neither of these stocks has a dividend yield anywhere close to the current one for WHR, and I didn’t want to give up too much in forward dividend income. So, I targeted another high-yielder already in my Portfolio, with a nearly equivalent yield, in a sector that I was also underweight in.
Here’s what I did with the WHR sale proceeds…
Enbridge (ENB)
ENB has been performing well for me since I initiated my position a little over 7 months ago. With the price gains I’ve experienced since I started the position, I’d say ENB shares are only reasonably valued at this time.
Still, I was willing to invest now given my desire to add some weight to my Energy sector. Not to mention, the high yield sported by ENB was enough to compensate almost entirely for the one given up by my WHR sale.
Analysts have ENB earnings remaining essentially flat in fiscal year 2024, but growth picking up to 6%-7% over the next couple of years. This should support an increasing stock price and modest dividend growth.
ENB has recently filed for a potential $2B equity raise to help fund their Dominion utility network acquisitions in the United States. The shares would be offered to investors at ENB’s discretion, allowing sales to the public to occur intermittently at current market prices. This gives ENB the flexibility to sell and raise funds during favorable market conditions.
The company’s Net Debt to EBITDA and Net Debt to Capital are already at a point where investors may not want to see those ratios grow. So, this will be something to monitor moving forward.
On 5/16/24, I bought 40 shares of ENB at $36.689/share, for a total of $1,467.56. The stock yielded 7.33% at my purchase price, which is very close to that WHR yield, and is ~2.75x my current Portfolio yield. This yield is also slightly above ENB’s 5-year average yield of 6.88%.
My ENB share total increased by roughly 32% with this purchase, and my share total now stands at 164.935 shares. My annual forward dividend income rose by $107.52 with the buy (using $0.672 as the quarterly dividend after conversion from Canadian dollars).
This purchase also resulted in my cost basis rising by $1.25/share, to $32.77/share.
My ENB position is now my 41st largest position, moving up several spots and escaping my Bottom 10 (value rankings). ENB is sandwiched in my rankings between Cisco Systems (CSCO) and Medtronic (MDT).
I’m not looking to add any further to my ENB position in the short-term.
Summary
Mid-May I made a decision to eliminate a stock from my Portfolio. WHR had been performing poorly since I purchased it about 16 months prior. With no near-term catalyst in sight and deteriorating dividend safety, I decided to exit my position.
I used the sale proceeds to add to my ENB position, which was only 7 months old. The purchase nearly recouped the entire forward dividend income total given up in the WHR sale, and boosted my Energy sector weighting.
The two transactions resulted in a net withdrawal from my Portfolio of $23.63. My annual forward dividend income slipped, too, but by only $4.96.
With that WHR sale, I recorded a long-term capital loss of $788.86 and a short-term capital loss of $27.99. I ended my WHR investment with a -24.28% annualized return over 16 months.
With WHR being eliminated from my Portfolio, and ENB already being an existing holding, the number of stocks in my Portfolio declined by one to 57.
Have you decided to sell any of your portfolio holdings this year? If so, what was the primary reason? I look forward to your comments!