Sold Position

13 Sep 2015 11:18
Tags prune_ratio

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Back in July I wrote about a new ratio I developed and currently testing called the Prune Ratio. The Prune Ratio is a portfolio analysis tool to determine which positions have significant equity growth that is outpacing dividend growth. Within that article I identified Hasbro (HAS) as a potential sell but used a wait and see strategy. It has been two months since that decision and HAS stock price has been pretty stable. The prune ratio sits just over my minimum requirement of 4 at 4.06 so I decided to sell (prune) 50% of my position.

I did not sell my entire position in HAS as they are one of the strongest companies in the toy industry. Though they will be losing toy revenue from Transformer and Jurassic World products they have the Star Wars line of toys to compensate. But, like much of the toy industry, HAS is yet to figure out a formula for girl toys and continue to see dramatic declines. The weakness of girl toy sales has tempered my expectations for future dividend growth in the 6 to 7% range, not bad but not spectacular and as such trimming back the position and redeploying in other assets is the appropriate action to expand my portfolios annual income without adding additional cash.

I currently have my eye on Johnson & Johnson (JNJ), WP Carey, (WPC), Domtar (UFS), and Span-America Medical (SPAN). My likely plan of attack will be to re-deploy the cash over three new positions providing not just more annual income but additional diversification as I currently do not own these positions. I have some time to be patient and will be opportunistic on my buys and estimate this little excursion to increase my annual income by $50. Combine this with July's annual income gain of $80 and the annual income increased an additional $130 without ever adding additional cash to the portfolio!

It is still too early to declare the Prune Ratio a success but early results are promising.

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