Maintaining stability in my Dividends and Yield portfolio

Author: Andrew Fletcher, Fletcher Wealth Management

Covestor model: Dividends and Yield

It appears to me that the market established its bottom in September 2011, as the overall market screamed higher through October. Volatility was somewhat lower last month, as strong earnings reports were not drowned out by news from sovereign fiscal struggles, both at home and abroad.

At month’s end, the S&P 500 had gained 10.77%.  True to form, the Dividends and Yield model did not participate in outsized gains, but exhibited continued stability, gaining 2.55% (according to Covestor’s calculations).

Trades

The drop in the overall market combined with a continually weakening dollar over the past several months left many defensive stocks and fixed income ETFs more attractively priced; however, with such uncertainty in the air, we have been hesitant to make any purchases.  The overall market appears to have somewhat stabilized, so we will consider making some purchases over the next few months.

No holdings met their target sell prices during October.

Update on some holdings

Ormat Technologies, Inc. (ORA) will be awarded with five geothermal energy exploration concessions in Chile.  If the exploration programs are successful, ORA will begin the steps to build new power plants.  On 31 October, subsidiaries of ORA issued U.S. Department of Energy guaranteed notes to construct two geothermal power plants.

In its 3Q 2011 earnings release, Exelon Corp (EXC) showed increased year over year earnings for 3Q 2011 of $0.01 per share, and reaffirmed its full year operating earnings guidance of $4.05 to $4.25 per share. EXC also announced that a $0.525 dividend would be paid on 9 December 2011 to the shareholders of record on 15 November 2011.  Future dividends are expected to remain $0.525, but may be paid at different times, depending when the merger with Constellation Energy Group, Inc. is completed.

The PIMCO Investment Grade Corporate Bond Index ETF (CORP) continued to sell at a premium, increasing from a $101.22 close on 30 September 2011 to an adjusted closing price of $103.74 on 31 October 2011.  It also paid a $0.302 dividend per share on 31 October 2011.

On 11 October, Proctor and Gamble Company (PG) declared a quarterly dividend of $0.525 per common share, payable on or after November 15, 2011 to shareholders of record on 21 October 2011. On 27 October, PG reported 1Q 2011 sales were in line with their expectations, showing a 9% increase in net sales.

Showing a 6.8% sales increase from 3Q 2010 to 3Q 2011, Johnson and Johnson (JNJ) updated its earning guidance to the full year 2011 to $4.99 to $5 per share. JNJ also declared a $0.57 per common share dividend to be paid on 13 December 2011 to shareholders of record at market close on 29 November 2011.

Energy Plus Holdings, LLC was acquired by NRG Energy, Inc. (NRG) in September.  It is ranked seventh on the Philadelphia 100, a list that recognizes the fastest growing, privately held businesses in the region.

Conclusion

We will continue to capitalize on discounts to fair value and net asset value in defensive stocks and fixed income ETFs.

As long as the overall portfolio moves with its benchmarks, we do not worry when quality holdings drop in price, as that helps move companies on our watch list onto to the buy list.  When a rebound does occur, we expect a stronger positive response from our individual holdings than from the index itself.