Friday, October 26, 2012

Portfolio Change

This morning I sold the position in Abbott Laboratories (ABT) and then turned around and took a position in Kraft Foods (KRFT).

The ABT position closed out with a 32.75% long term gain.

There was simply too much uncertainty surrounding the future dividend growth when the company splits in two on January 1. I thought this latest earnings call would have clarified things for us, but it didn't, at least not to my satisfaction.

The objective of the portfolio is to build an income stream that is reliable, predictable and increasing. There is nothing predictable about ABT's dividend and dividend growth at this time, other than the two companies dividend will equal the whole. That's not good enough.

The yield on ABT is 3.06%. The expected yield on KRFT is expected to be around 4%. The dividend announcement should come next month. Management has already stated that KRFT will focus on the dividend and the growth of that dividend. So, I switched.

Monday, October 1, 2012

Portfolio Update

Today, I added 25 shares of General Mills (GIS) at a cost of $40.08 per share. The total number of GIS shares are now 76.118. This brings GIS up to a full position. A full position is $3,000.

Positions due for additional purchase, in order to bring up to full weighting are:

ADP, KMB, NUE, PEP  and SO.

I'm going to sell NUE in January, transfer the funds into the ROTH IRA, and repurchase NUE there. Since my son is reinvesting dividends, I think cyclical's are better suited in tax deferred accounts where the full amount of reinvested dividends go to work, as opposed to having to pay taxes on part of the dividend. I think this would enhance the dollar cost averaging of cyclical's better than if done in a taxable account.

The next purchase is due for December. The company above, with the best valuation, will be purchased at that time. If no one company stands out on valuation criteria, then I will purchase the one with the highest yield.

Three dividend reinvestment purchases showed up in the account today from the September 28 dividend payments.

Frontier Communications (FTR) ... $1.96 bought 0.405 shares
Lockheed Martin (LMT) ... .......... $34.25 bought 0.366 shares
Pepsico (PEP) .............................. $17.60 bought 0.248 shares