Investments

There was a significant hole in my portfolio which has been waiting to be filled up. Some are expecting a major market correction and the economy is in shaky grounds in many markets. To me it sounds like perfect time to start a position in alcohol sector. Gotta love the vice stocks – there aren’t many better businesses than legalised  drugs. So I went ahead and started a position in Diageo (NYSE:DEO) with a purchase of 20 shares for 113,76 USD per share.

Alcohol is a sector which is heavily consolidated for few major players. Diageo is one of the big dogs controlling brands such as Guinness, Smirnoff, Bayley’s, Johnnie Walker and bunch of local brands. They are a global company  operating in every geographical region. Together with major trends such as increasing population and middle class, it should provide a natural growth drivers for the years to come. Currently they are paying a dividend in the neighbourhood of 3,45 USD (being a UK based company they report in GBP so the USD dividend depends on the exchange at the time of the payment) which translates to a yield of 3%. That’s quite normal and appears to be sustainable as the payout ratio is below 55%.

At the time purchase the share price was down because of this: http://finance.yahoo.com/news/gpm-announces-investigation-diageo-plc-173200402.html. In long term I view such hiccups, whether or not they are true, as random noise.

Links:

• DEO Key Statistics in Yahoo Finance
• Diageo.com Dividend Information
• Diageo.com Business Overview

After closing position on Baxter International and Baxalta Incorporated, it was time to reallocate those funds. I was playing around with the idea of opening a new position either on Caterpillar or Diageo Plc but decided to finally add on existing positions on AT&T and Aflac Inc. There would have been better valuations for both of these during the past 6 months or so but it doesn’t matter much for the long term.

On August 4th I bought 43 shares of AT&T (NYSE:T) for 34,67 USD per share and 23 shares of Aflac Inc. (NYSE:AFL) for 64,09 per share. For AT&T this translates to a yield of 5,4% and for Aflac Inc. roughly 2,4%.

In my strategy I’ve ruled selling stocks as a mistake done in the past. It’s time to kick myself since today I decided to close my position on Baxter International (NYSE:BAX) and Baxalta Inc. (NYSE:BXLT).  This wasn’t an easy decision to make taking into account my general rule about selling. It was however motivated by two factors: slightly unexpected dividend policy going forward and the take-out offer Shire Plc (NASDAQ:SHPG) made for Baxalta today. These two provided what I consider a decent exit point when keeping in mind that my cost basis wasn’t particularly cheap.

In summary: sold 35 shares of Baxter International for 40,91 USD per share and 35 shares of Baxalta Incorporated for 38,25 USD per share. Original cost basis for Baxter position (Baxalta being a recent Baxter spin-off) was 71,57 USD per share which translates into a modest profit of 265 USD not including the dividends received during the ownership.

Links: Shire Plc Offer @ Wall Street Journal

It’s relatively cold outside and TeliaSonera AB is trading near 5 euros per share – it must be summer. So instead of buying huge loads of sunscreen, I went ahead and bought additional 200 shares for 5,13 EUR per share. That could be called averaging down (average price being 5,16 EUR per share before this) on a microscopic scale.

Outlook is still the same. Expecting a dividend of at least 3 SEK for FY2015 which would be roughly 0,32 EUR per share or yield of 6,2%.

See: http://www.teliasonera.com/en/investors/outlook/

Another month, another purchase. Fortum has been down lately and since it dropped down close to my current average price, I decided to buy additional 60 shares for 16,90 EUR per share. There’s a lot to like in the company itself but it carries also a significant political risk. They are currently sitting on a large pile of cash which should guarantee not only a nice dividend for the years to come but also growth drivers. If that plays out as expected, they should be in a better position in 5+ years scale. Meanwhile I’ll just enjoy the dividends and hope that political risk doesn’t manifest itself in the form of bad growth investments or too high payout ratio.

More info: Fortum investor relations

I really wasn’t planning to add on REIT positions until the interest rate hit would hammer them down but since my second favourite REIT position has been hit so hard lately, I decided to add on Omega Healthcare Investors (OHI). I bought 30 shares for 35,50 USD per share. At the time of writing this it was kind of a DGI community favourite – for example Dividend Mantra explained the quality aspects of the company really well.

This was rather unplanned action but since the monthly cash machine was dropping despite a solid quarterly report, I decided to add on an existing position on Realty Income Corporation (NYSE:O). This time around I averaged up slightly with a purchase of 22 shares for 46,88 USD per  share.

Some information about the latest quarterly report can be found from here: http://seekingalpha.com/article/3120706-an-impressive-quarter-from-the-monthly-dividend-company

 

It’s been a while since the last time I went shopping in NYSE. It was finally possible due to minor changes in EUR/USD exchange rate and USD income from existing positions. As planned I averaged down on Baxter International and bought 15 shares for 68,38 USD per share. Key factor here is the upcoming Baxalta spin-off for which some information can be found from here.

Company profile from http://www.baxter.com/:

Baxter International Inc. (NYSE:BAX), through its subsidiaries, develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. As a global, diversified healthcare company, Baxter applies a unique combination of expertise in medical devices, pharmaceuticals and biotechnology to create products that advance patient care worldwide. Baxter had 2014 sales of $16.7 billion and has approximately 65,500 employees.

Plans are meant to be changed. I couldn’t justify converting euros to dollars with the current exchange rate. Otherwise I would have started with Baxter International but in the current situation I’ll wait a while to build up dollar position from dividends received from existing positions. Instead I opened a new position on Telenor by buying 55 shares for 152,70 NOK per share. This is my second Norwegian holding. I’m not super excited about the valuation, this more like a good enough position in the current situation. I might double the position during this month and after that focus on finding something from the euro zone. Right now I’m considering to play the QE scenario by loading up on iShares STOXX Europe Select Dividend 30 UCITS ETF for two to four months.

Summary from http://www.telenor.com/investors/company-facts/:

Telenor Group:
186 million mobile subscriptions
One of the top 500 global companies by market value *
Revenues 2014: NOK 107 billion
Workforce: employees (Q4 2014)
Listed on the Oslo Stock Exchange
Telenor Group has mobile operations in 13 markets and in additionally 14 markets through our ownership in VimpelCom Ltd.

*Financial Times Global 500, 2012