Rose’s Income Garden Portfolio With 7 March Dividend Raises/ Portfolio Yield 6%

Rose’s Income Garden Portfolio

Rose’s Income Garden “RIG” portfolio ended March with 83 stocks from all 11 sectors with a goal to keep a majority of income from defensive quality investment-grade common stock. The other investments and especially the financial sector has high yield (HY), business development companies (BDCs), a few mREITs, preferred stock and real estate adding to the income to help give it a yield of 6%. Admittedly growth stocks are the least represented as income is a higher priority, but preserving value remains an important goal.

The defensive stock in RIG comes from the following sectors with the number of stocks following:

-Consumer Staples (10)

-Healthcare (9)

-Communication/Tele (4)

-Utility (9)

-Fixed bonds and ETFs (3)

-Industrial defensive (2)

-Real Estate Healthcare (3)

These provide ~54% of value and approximately 46.4% of the income.

Note that cash is about 0.67% and cash equivalents that earn income is 6.2%.

The cash and cash equivalents allow for the income to be above the portfolio goal of 50% of it coming from defensive stock/positions.

March Income

March dividend collection came from 40 companies or 48% of the “RIG” portfolio. There were 7 dividend raises which are reviewed, analyzed and a Rose recommendation provided for each.

The 40 Payments were as follows:

1- special 8c payment from Blue Owl Capital (OBDC) the BDC or business development company.

9- Monthly: from a variety of BDCs, ETFs, and CEFs. My January article lists or mentions them.

30- Quarterly companies with 7 giving their normal yearly raises. The yields of these 30 payers range from 0.5% from Visa (V) to high yields like 12.3% from preferred shares NorthStar and 13.3% from BlackRock TCP (TCPC) a BDC.

2 of the quarterly payers usually offer varied payments and happily they both went up. The Canadian energy company, Enbridge (ENB), usually varies with the US$ exchange rate, this time it went from 64.7c to 67.5c. The other is a shipping stock Star Bulk Carriers (SBLK) that rarely ever pays the same. It went up nicely from 22c to 45c or ~100%. These both make investing with them quite interesting.

This article focuses on the 7 companies that gave raises and my thinking or Rose recommendation for their future in “RIG”.

The Raises- 7

Here’s what I like to look for in dividends for income and I will discuss each of these 3 reasons for the stocks below that gave raises.

1. Raises/growth of the dividend- a growing dividend comes from rising earnings that translate to higher payments and even a higher share price.

2. Continuous payouts over many years- The dividend rising, over at least 5 years, shows the company is on a positive earnings trend which is an investor’s friend. The 5-year DGR also is used to determine the Chowder#.

3. Reliable regular quarterly or monthly payments help the investor plan yearly income and perhaps estimating it for future years.

The statistics that follow for the S&P credit rating, 20-year reliable dividend payments, current P/E and normal 10-year P/E, as well as 5-year DGR come from FASTgraphs, “FG”, an investing service I subscribe to and utilize often.

The Rose recommendation follows each stock evaluation.

(WEC) $ 80.18 current price.

WEC Energy Group is a $25.5 Billion market cap energy company founded in 1896, is headquartered in Milwaukee, Wisconsin and has an “A-” S&P credit rating.

1. It has 21 years of rising dividend payments.

2. The 5.5c quarterly raise from 78c to 83.5c = 7.05% giving it a 4.1%yield and a 11.15% or 1-year positive growth number. The 5-year DGR rate is 7.1% + yield is 11.2% (some call it the Chowder # “C#”). For utilities a C# of 8 is the minimum desired, so this makes WEC outstanding for its raises. I like to compare the past with the most recent which reveals the raise was almost exactly right on.

3. WEC has paid quarterly dividends reliably for at least 21 years.

The normal 10-year P/E is 21.8x, and it’s selling currently at 16.7.x, which makes it undervalued by that metric.

Below is a 5-year price chart from SA service with some technical information provided and showing the price movement. Below is an analyst ratings summary found on SA.

Rose Recommendation:

The 4.1% yield is very desirable and high for WEC. It has a 5-year DGR of 7.14% which gives it a chowder# of 11.24%, above the desirable 8 for a utility and also makes it an attractive buy if you don’t own it.

(AMGN) $269.20 current price.

Amgen Inc. is a worldwide healthcare/biotech human therapeutic drug developer manufacturer with a $198.4 billion market cap and an S&P BBB+ credit rating. It was incorporated in 1980 and is headquartered in Thousand Oaks, CA.

1. It has 14 years of rising dividend payments.

2. The 12c quarterly raise from $2.13 to $2.25 = 5.6% giving it a 3.3%yield and an 8.9% or 1-year positive growth number. The 5-year DGR rate is 10% giving it a 13.3% Chowder #. For companies with a yield greater than 2.5% the minimum C# desired is 12. The most recent raise of 5.6% is below the norm, but nice, however just a bit disappointing.

3. It started paying a dividend in mid 2011 which has been a rising one too!

The normal 10-year P/E is 14.6x, and it’s selling currently at 14.2x, which makes it close to fair value by that metric.

Below is a 5-year price chart from SA service with some technical information provided, showing the price movement. Below that is a ratings summary also from SA.

Rose Recommendation:

This is a quality company that belongs in any portfolio. Fair value is great which makes it attractive, but as I own it, I will watch for a dip to add more. However, if you don’t own it, consider starting a position.

(CVX) $162.10 current price.

Chevron is an integrated oil and gas company or IOC that was founded in 1879 that is headquartered in San Ramon, CA. It was formerly known as Chevron Texaco and changed its name in 2005 to Chevron. It operates primarily in upstream exploration, production, transportation and development of crude oil and natural gas along with downstream refining. It has an “AA-” S&P credit rating.

1. It has paid rising dividends for 37 years in a row.

2. The 12c quarterly raise from $1.51 to $1.63 = 7.9% giving it a 4.19%yield and a 12.09% 1-year positive growth number. The 5-year DGR rate is 6.17% giving it a 10.36% Chowder #, which to me is nice, but a 12 would be what is acceptable.

3. It has been providing regular quarterly dividends for at least 20 years and as already mentioned rising ones for 37 years.

The normal 10-year P/E is 20.73x, and it’s selling currently at 12.4x, which makes it undervalued by that metric. However, the 10-year metric to me is not relevant, as it went through a low earnings cycle that caused the P/E to be elevated during that time period and makes it hard to evaluate in that regard.

Below is a 5-year price chart from SA service with some technical information provided and showing the price movement. Below it is an analyst ratings summary from SA.

Rose Recommendation:

Fair value and 4% yield is nice, I will just hold and enjoy.

(HSY) $193.17 current price.

The Hershey Co. manufactures and sells confectionery products, pantry items and salty snacks globally. It was founded in 1894 and is headquartered in Hershey, PA, has a $39.5 Billion market cap and an “A” S&P credit rating.

1. It has a 15-year record for raising its dividend.

2. The 17.8c raise from $1.192 to $1.37 = 14.9% giving it a 2.8% yield and a 17.7% or 1-year outstanding positive growth number. The 5-year DGR rate is 10.1% and with the yield has a 12.9% Chowder #. For companies with a yield greater than 2.5% the minimum C# desired is 12 which it has certainly met and exceedingly so for this year.

3. It has paid routine quarterly dividends for 20+ years and rising ones since 2009.

The normal 10-year P/E is 24x, and it’s selling currently at 20.18x, which makes it a bit overvalued by that metric.

Below is a 5-year price chart from SA service with some technical information provided and showing the price movement. Below it is an analyst ratings summary from SA.

Rose Recommendation:

The yield of 2.8% is very fair and actually attractive for HSY. I am pleased to own a position, but as I like to be cheap, I am watching closely for a dip to add more. I like the quality of this company and those raises.

(HD) $362.03 current price.

The Home Depot Inc. is a home improvement retailer globally offering building materials, lawn, garden and decorative products. It incorporated in 1978 and is headquartered in Atlanta, GA. It has an “A” S&P credit rating.

1. It has a 15-year record for raising its dividend.

2. The 16c raise from $2.09 to $2.25 = 7.65% giving it a 2.5%yield and a 10.15% or 1-year positive growth number, but not quite up to what was expected. The 5-year DGR rate is 15.5% giving it a 17.9% Chowder #. For companies with a yield under 2.5% the minimum C# would be 15. The 7.65% was therefore disappointing.

3. It has paid routine quarterly dividends for at least 20 years and rising ones since 2010.

The normal 10-year P/E is 22.11x, and it’s selling currently at 24.67x, which makes it overvalued by that metric.

Below is a 5-year price chart from SA service with some technical information provided and showing the price movement. The analyst ratings are also shown from SA below the chart.

Rose Recommendation:

Home Depot is a quality company I will keep but would not add to at this time.

(SHEL) $72.50 current price.

Shell PLC is an integrated oil and gas company or IOC that was founded in 1907 and is headquartered in London, UK. It was formerly known as Royal Dutch Shell and changed its name to Shell Plc January 2022. It is involved in up, mid and down-stream activities and infrastructure. It markets and produces chemicals and oil products, LNG, crude oil along with electricity, wind, solar, renewables, EV charging, sells hydrogen and offers energy solutions. It has an “A+” S&P credit rating.

1. It has a now 2-year record for raising its dividend.

2. The 2.6c raise from $66.2c to 68.8c = 3.9% giving it a 4.18%yield and a 8.08% or 1-year positive growth number. Since it cut the dividend about 2 years ago, the 2-year DGR is 33.5%, which is quite impressive. However, to use the Chowder # the 5-year DGR rate of 0.2% is needed which gives it a 4.38% Chowder #, which is not impressive as 12 is desirable for companies with a yield over 2.5%.

Below is a look at the dividend record from Nasdaq showing the dividend cut in 2020 from 95c to 32c. It shows it has been making up for it with more raises than just yearly since then. Offering at least 2 raises per year, which hopefully will continue through 2024.

3. It has paid routine quarterly dividends for at least 20 years, but it has a way to go to get back to the 94c it paid before the cut.

The normal 10-year P/E is 14.67x, and it’s selling currently at 8.7x, which makes it undervalued by that metric. As with Chevron it also was involved in a poor earnings streak and a long-term P/E to evaluate the value is probably inappropriate.

Below is a 5-year price chart from SA service with some technical information provided and showing the price movement. SA shows 3 years of technical history. The analyst ratings are shown below the chart, also from SA.

Rose Recommendation:

Quality energy stock that has been raising its dividend nicely and has done so twice in the past year. I am pleased to own it and will continue to hold it happily.

(SPG) $149.36 current price

Simon Property Group is a real estate investment trust owning quality premier shopping, dining, entertainment and mixed-use destination property types with headquarters in Indianapolis, Indiana. It has an “A-” S&P credit rating.

1. It has 3 years now for raising the dividend.

2. The 5c raise from $1.90 to $1.95 = 2.6% giving it a 5.2%yield and a 7.8% 1-year positive growth number. The dividend was cut in July 2020 from $2.10 to $1.30. 2020 was a difficult time for many companies and especially retail operators secondary to covid restrictions. It started to raise it again in 2021 but it still has not fully reached the old rate. The 3 year DGR is 7.8%, which adds up to 13% and impressive. However, to use the Chowder # the 5-year DGR rate of 0.15% must be used which makes it 5.35%. Not impressive as 12 is desirable for companies with a yield over 2.5%. Lower might be acceptable for HY companies if it competes with inflation or bonds and CDs.

3. It has paid routine quarterly dividends for at least 20 years, with a cut in 2008 as well.

The normal 10-year P/FFO is 13.3x, and it’s selling currently at 12.14x, which makes it near fair value by that metric. FFO or funds from operations is used for financial real estate companies.

Below is a 5-year price chart from SA service with some technical information provided and showing the price movement. The SA analyst ratings suggestions follow the chart.

Rose Recommendation:

SPG seems to be at fair value with a nice high 5.2% yield. It somewhat competes with some CDs, but its future in retail real estate commerce makes it only a hold for me at its current price.

Summary/ Conclusion

The 5 stocks with raises are all high-quality candidates to own in a portfolio and “RIG” was designed to have just these types in it. The dividend payers are what makes for income and the reliable and rising income also maintains value for the portfolio as well. The review was to show what to look for with hopes it will offer some good quality rules to help find good dividend payers that can help build a diversified high quality income portfolio. The goal of having 50% of the income coming from defensive stocks is still in effect and will continue.

Rose’s Income Garden “RIG” portfolio income yield today is 6% with a stable, green and rising value, which on March 30th was up 5.85% and since inception Sept 21, 2021, by 6.63%. Statistics are kept that continuously compare it to SPY which shows it is beating it by ~5.93% YTD from inception November 2021. The return since inception, as shown in the performance charts has it up 21.66%. Its income yield of 6% makes it a very pleasing income vehicle when considering the SPY yield of 1.29%.