It's June - Is it Time for a Checkup?

07 Jun 2018 23:12
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For many the month of June is the start of summer; kids & teachers get out school, barbeques are smoking and swimming pools become a common hangout. But for me the month of June gets me excited because it is time for my semi-annual checkup and not the kind with my doctor (I dread those).

This checkup is a review of my portfolio and something I recommend everyone do twice a year to keep you focused on your goals and not let your portfolio stray from your strategy. While there are several things I will review during a checkup the first thing I review are my holding against my investing rules.

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One of my big rules is to ditch stocks that have not increased their annual dividend for more than 2 years. This review has identified two stocks that meet this criteria; Ford Motor Company (F) and General Motors (GM).

Ford I held onto as justifying the holding because they issued supplemental special dividends. On the surface special dividends act like an increase but unfortunately are not sustainable. The last time Ford raised their annual dividend was 2014 and it just doesn’t appear to be changing for 2018 and beyond.

General Motors on the other hand gave me a dividend bump shortly after I bought it but dividends have remained unchanged for the last two years. I actually liked GM as I believe CEO Mary Barra has done a fantastic job reshaping the company, getting focused on profit and accelerating new product launches. Where the CEO is falling short is listening to bankers and using cash flow for buybacks. Personally I would have preferred some cash going to reduce pension liabilities, some to reduce debt and finally share some with shareholders via a dividend raise. But alas it is just not happening and there are no signals that a dividend raise is coming.

I hate to sell both but those are my rules and at the end of the day I want a growing cash flow. Some may think I am being hasty or too strict with my rules yet for me it keeps me emotionally detached from individual stocks and keeps focus on the real goal of increasing cash flow so I can retire from the old 9 to 5 job. I still have more checkups to do and we will wait to see of any other adjustments that need to be made.

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