Follow the dividend investment decisions of a person who has no background in financial investment and wishes to take control of their financial future.

GE Selling Financial Arm - Jury is Still Out - 11 Apr 2015 13:04

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On Friday April 10, 2015, GE announced it is exiting the financial industry by divesting the last of its financial division for $26B. The markets immediate reaction was to drive the stock price up just north of 10% as investors were pleased to see GE returning to its industrial roots. But is it the right move?

I've been a shareholder of GE for sometime so the news was important to me. The signal that sends worries down my spine was Jeff Immelt signaling most of the proceeds will be returned to shareholders in the form of share buybacks. On the surface this sounds shareholder friendly but from my perspective this is the worst use of money.

The finance arm of GE made a lot of money for GE and what will fill that gap? This is such a short term gain and I'm looking for an investment that has legs to keep it growing for the next 20 or more years.

What I want to hear is hear is how they will improve margins and grow revenue. Without these how do you maintain long term dividend growth. I realize it is early so I'll wait and see if they develop a strategy but for now if Jeff Immelt or GE's board of directors are reading this post here are some ideas on how to spend $26B:

1. Pay down expensive long term debt
There is about $7B in long term debt with rates just above 5%

2. Issue a special dividend to shareholders
How about 25 cents per share

3. Make acquisitions with better margins and growth rates
Here are few examples:

  • AO Smith Corp (AOS) market cap $5.8B
  • Calgon Carbon Corporation (CCC) market cap $1.14B
  • Federal Signal Corp (FSS) market cap $1.01B
  • OSI Systems (OSIS) market cap 1.47B

So there its. GE you are officially on notice! You have till the end of the year to come up with a strategy of how how you will use the proceeds to improve the business and not manipulate share data.

In regards to discloser I have no positions, plan to buy or interests in AOS, CCC, FSS, or OSIS. - Comments: 0

1st Quarter Portfolio Growth Update - 03 Apr 2015 11:27

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Quarterly Dividend Growth
% from Div Growth -3.28%
% from New Investments 1.01%
% from Reinvested Div 2.77%
% from Special Dividends 0%
% Overall Growth 0.51%
growth_chart_5.png

Though the charts may show an ugly picture the 1st quarter had tremendous of growth opportunities but like many others the portfolio was not immune to the collapse of oil prices.

On that note we will start with the bad and get the pain over with quick. The collapse in oil prices caused two of my holdings to reduce dividend payouts and it cut my annual dividend by $170. Ouch! It could have been worse but here is a great example of diversification. Energy stocks only represented 8% of my portfolio and vastly limited my annual income loss to only 6%.

Now here is the good. I had five positions increase their annual payouts. Staring out there was Maiden Holdings (MHLD) who bumped up their dividend payout by 18.18%. After increasing my position last November by an additional 100 shares this was a nice boost.

Hasbro (HAS) continues to be a stalwart as they increased their payout by 6.97%.

Qualcomm (QCOM) is living up to their commitments of returning to shareholders as they bumped up the payout by 14.28%.

General Mills (GIS) continues to be amazing with consistent raises in the 7-8% and did not disappoint with their 7.31% raise.

Finally there is Waste Management (WM) with a 2.66% increase. While not spectacular it still beats the inflation rate and the primary reason I hold WM is as a defensive position.

Next quarter will be the last to feel the effects of the oil industry so I'm looking to the 3rd quarter to reset my growth on an upward path. - Comments: 0


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