Dividend basket in 2024

Investment Analysis Clubs Hohum's RollerCoaster Ride
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The dividend basket has had a difficult year in 2023. While I have reached my target wrt dividend payout, the basket has major losses (realized or unrealized) in 2023. Dividend/distribution cuts from PDT, IEP, GOGL, RA among others have also hurt. OTOH, positive payout surprises from TRMD, CLCO & FRO have helped offset some of the damage. QCOM has helped offset on the capital gains side.

Although I shared some thoughts in another thread earlier this month, I have been thinking about the issue for a longer period. Subject to possible revisions, a couple of items need to be there

  1. Need to have a core set of ideas. Sure, IEP, RA & AY disappointed this year. But that doesn’t mean a core idea is a mistake. QCOM & FLNG are proof that there is a place for core positions
  2. Manage expectations for shipping ideas in the basket. I partly did that this year by reducing dividend expectations for the dry bulk ideas in 2023. I plan to do something similar for the tanker picks in 2024.
  3. Need to have flexibility. An example of this in 2023 is NAT & GSL. Maybe VZ a little too.

So, the core ideas for 2024 are AY, IEP, FLNG & QCOM

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Though I have a small Golar LNG (GLNG) position in my taxable ac, I don’t consider it a dividend basket idea. I guess, if one asked me “why not?”, my answer would be

  1. Position too small
  2. GLNG just restarted the dividend in 2023

Since I am looking forward, both items can be addressed for 2024. I just have to increase my GLNG stake in 2024, and anticipate that GLNG will be financially stronger in 2024. I mean, the company should (eventually) start to recognize the revenue stream from FLNG Gimi. That will be a huge help in helping diversify the revenue base. Like QCOM in 2023, an improved outlook for GLNG could help support a better PPS.

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01/03
Normally, at the start of a New Year, there is at least an inkling of a list. In the worst case, I will just grab 10 - 20 names from a prior watchlist and start with those names. In 2024, not so much. If it is a watchlist, then it just needs to be a bunch of names - not necessarily a deep dive into the names. Ok, on the dividend side – UWM Holdings (UWMC). Google quotes seem to mess their PPS – SOFI.

4

01/12
Have a line item entry “Other” for those odd-ball dividend payments that occur in the DRIP ac. I give the line an annual target, and in 2024, the target was reached in the first week of the year!
How? Brazilian Beer Bet i.e. ABEV annual dividend accrued in the first week of the year. The problem with a Brazilian dividend paying holding is there isn’t an easy way to reclaim Brazilian withholding. For me, ABEV’s dividend is secondary. The bet usually pays off bigger.

This past week, a holding I no longer own i.e. UWMC, paid its dividend. So that also ends up in the line entry “Other”. Although not planned that way, UWMC’s exit was because it exceeded expectations so quickly. Ironically, that’s my criteria for an ABEV sell - reaching a target price. So two bosom buddies in the “other” category.

In search-for-dividend ideas: Will likely toss EQNR in the watchlist. Just to keep an eye on it.

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02/12
Hmm? The reason I started this thread makes sense today with a strong correlation to why I think I started it back in late Dec 2023. But, for threads I initiate, there is some type of frequency associated with it. Single subject threads go for as long as there is interest. Monthly threads focus on a month.

This thread? No clue. no recollection of having a frequency tied to it. It makes some sense that it would be worth revisiting. at least mid-year. Anything else is just a bonus. So that makes this a bonus post!

Awrighty, the deets. Though there were two smaller transactions - small gain from INSW trim, and a larger gain from GSL transaction. But, growing the basket has been the overall focus. This has been accomplished via adding to existing positions. Or, in a special case, multiple small transactions to make Dorian LPG (LPG) a formal position. I also decided to include the Covered Call ETF, QYLD, in the basket in 2024. Trending nicely in 2024 so far. On the flip side, the two largest holdings - AY and FLNG have not been behaving well to start the year. The latter just announced its Q4 2023 results and maintained their dividend. Lots of LNG tankers deliver in 2024, but FLNG are reasonably well hedged with 50 tanker-years of contract coverage across 12 of 13 owned vessels, plus interest rate hedges on a majority of its bank debt.

And … well, I wait for basket holding to announce their end-of-2023 results. That will likely inform me of any major changes I may need (or be forced) to make

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04/09
I guess this thread can be updated for an end-of-quarter perspective
March was a good month with 3 of 4 core ideas (QCOM, AY and FLNG) paying out their Q4 dividend. IEP announced in Feb, but pay in April 2024.
Started an initial position in LPG, then kept adding to the stake.
Also added to AMBP a couple of times in Q1.
Closed out PDT position.

At the end of Q1 2024, basket was 26.5% of the dividend target. [Edit] I have no expectation that the quarterly payout will be the same. Actually, with IEP’s first distribution of 2024 pushed into Q2 of 2024, there will be likely be some type of domino effect.

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Added to my AMBP position in Feb (X2), Mar and Apr. Company announced results last week, and share price popped. Not the most exciting or sexiest business out there (recyclable containers for the beverage industry). But, the name was appealing when the company came across my radar.

Is 10c quarterly doable? Not sure. Improve their debt position a little, and perhaps it is. Lower Capex spending in 2024 (and maybe 2025) might help.

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Not sure who the quiet visitors are, … but thanks for stopping by & reading.
I guess I can provide an update.
Though not considered in MY dividend basket, some recent developments in my Roth ac helped enlighten me to a “tax preferred” feature. I own AY in both my Roth ac and taxable ac. During 2024, I decided to flush out most of my AY stake in the Roth ac. The sold shares in the Roth ac don’t get any benefit. OTOH, there is a benefit for the AY shares in a taxable ac.

Why?
Well, it has to do with the nature of AY’s payout. Much of AY’s payout is a return of capital - in an ordinary course of events, one doesn’t notice. However, come tax-time AND one sold AY shares, the return-of-capital reduces AY’s cost basis. If I hadn’t sold some AY shares in 2023 and received an updated 1099, I would have likely missed that point.

I’m not saying never buy a major “return of capital” idea in a Roth ac. Just realize, the idea doesn’t get the tax advantage. FWIW, another holding that potentially has this “feature”, and I own in both Roth ac and taxable ac is International Seaways (INSW). Haven’t confirmed, so I say “potentially”. But from quick skimming of interwebs, “special dividends” are usually return-of-capital transactions. INSW paid significant special dividends in 2023, and announced a significant one in q1 2024. Overall, INSW is a small stake in the Roth ac. So, it won’t have a major impact in the Roth ac as the AY stake did.
But, now that I know, I will think twice about adding to INSW stake in Roth ac.

Another core dividend basket idea is IEP.
April - May 2024 have been an IEP recycle period. 04/01 (the irony :wink: ) is when I chose to sell a chunk of my IEP stake. Waited the requisite 30 days, and then purchased “replacement” IEP units over two transactions. This week, bought a a few more IEP units.

The other two core ideas are doing great and/or recovering.
QCOM is one of the few dividend basket ideas that is being DRIP’d in the taxable ac. Was purchased for its wireless edge. But QCOM is also showing that it can be an AI player - Wohoo! Last core idea is FLNG, and share price is starting to recover.

A couple of ideas showed up on the radar. Both shipping ideas, each pays a dividend, and the two companies are related. The two ideas are Hafnia Tankers (HAFN) and BW LPG (BWLP). Hafnia focuses on the clean tanker segment, while BW LPG is an LPG shipping entity. The latter has only been a US listing for about three weeks, and just came across my radar this week. Nibbled on HAFN already.

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05/28
Looks like I have to replace a dividend basket core holding - The English (and some co-investors) have landed

The release indicates AY will continue paying a dividend until the deal is complete in Q4 2024 or early 2025. That’s “nice” (sarcasm). Brookfield had been rumored as being interested in AY. I wonder if that’s still the case? Personally, already started dumping AY

10

q2 is coming to a close.
In the last five trading days, significant dividends from FLNG and IEP accrued in the account. Those two accruals have boosted the div total to > 57% of div basket expectations. Still have FRO to accrue in a few days.

The significant events the last 2 months.

  • Shipping names trimmed: CLCO, LPG
  • Shipping names added: GOGL, HAFN, BWLP. All small stakes currently, but open to building up a position in at least one.
  • Incorporating YieldMax funds into the basket.

AMBP has been a frustrating holding this last month. But, that’s probably part of the risk of an under-followed [Edit: & low priced] name in a boring sector.

11

Posting about a week later - the dividend basket reached the half way point of 2024.
Overall, pleased with the basket based on reaching 65% of dividend target.
For the 2nd half of 2024, the income target increases about 12.5%. A couple of reasons for this

  1. Mid-to-late June 2024, started position in BWLP. Then added to stake.
  2. Added to AMBP stake
  3. Mid-to-late June 2024, started position in NVDY. Then added to stake.

CLCO had a rough June. But seems to be recovering in July
Other shipping ideas e.g. LPG, INSW, FRO, pulled back and then seemed more uncertain.

A decision has been made on AY. With a buyout share price announced, I am not holding my breath for a better offer. Trimmed AY already, and will wait for Aug time-frame for a final decision (that’s close to the next div announcement). As AY was considered a core dividend idea, the new challenge is to find a replacement. Not pushing for a quick replacement. I haven’t given it deep consideration as several existing positions e.g. BNS, AMBP, could potentially be candidates. A new idea is not out of the question, but going with my favored pattern, the stake will be built up over time.

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09/12
Calendar Q3 still has a few weeks to go. But, most companies have reported their quarterly results. This week, four dividends accrued and particularly pleasing was that three of four were/are above-average payouts.

Tanker names have taken a beating in Sept 2024. But, that didn’t stop me from adding to my Hafnia Tankers (HAFN) position today. As HAFN just completed a NYSE-listing in Apr 2024, it is a relatively new dividend idea.
Just realizing there is a risk factor that is coming into play that didn’t exist when I initially invested. The company was based in Bermuda when I initially invested. But, the company is making plans to shift its corporate HQ to Singapore. Does this change anything wrt dividend?

Two other dividend paying ideas closed out this month

  • AY trading ex-div now. Company has agreed to a buy-out at $22/sh. Going into a major US election, I can’t see major changes to [edit: near-term] outlook on renewable energy. Plus, wind energy has had two recent setbacks offshore in MA (US) and UK (where AY is based)
  • BNS? Well, there was a price bounce and I decided to realize the gain.

The CLCO sell-off has been frustrating. I do have a price target that will have me adding to the position. [edit: If I did add CLCO shares, the intent would be to sell the older CLCO shares on a price bounce]

13

Starting to think ahead to 2025 and plans for that portion that is the dividend basket. For one thing, I currently only have three core ideas. AY was the fourth core idea at the start of 2024. It could have remained a core idea, except the major backer and occasional investment sponsor, Algonquin (AQN), soured on renewables, and sold out. I sold out of AY in early Sept 2024, and had Ardagh (AMBP) “fill in” as a core idea. That lasted a few weeks, and Ardagh has also since made an exit. So, there’s one core idea vacancy in 2024 currently. And there might another vacancy later in the year.

Shipping ideas are plentiful in the basket currently. But, there are still some interesting shipping names e.g. SBLK. In any case, I don’t think it is as much of a challenge to add shipping coverage to the basket. With the interesting financial ETFs, that segment is also easily addressed. Finding non-shipping and non-financial names that meet criteria seems like the challenge.

Saw a recent article on Hershey (HSY). It stressed HSY’s recent dividend growth record. Ok, that’s a data-point. Have had this idea on my watchlist - Equinor (EQNR). Shares have lagged the market significantly. But, it has a better dividend. So, a price recovery would be more helpful than the payout. In the same space, TotalEnergies (TTE) might be a decent candidate, TTE just announced the company was looking into LNG bunkering. Is that expected to be a significant market? Well, INSW and HSHP already have dual-fuel vessels on the water (Edit: LNG is the second fuel for the 3 VLCCs & 12 Newcastlemaxes), and more vessels are coming.

Still scouring the market. That’s how I accidently discovered AMBP last year. I think there’s probably one or two ideas like that one out there currently. Maybe more.

14

Since individuals on Reddit offer more “retirement portfolios” for review, been spending more time there. There is/was a recent post that offered some food for thought

https://www.reddit.com/r/dividends/comments/1g9n35e/finally_able_to_retire_with_61600_in_annual/

My takeaway and also a check-list to re-affirm my own plans

  1. First item, I don’t want a portfolio constructed like that. “No, no, no” to a portfolio that is very dependent on yield,
  2. I do have a basket that contains more than a few high dividend names. But, it has some guard-rails.
    a. The dividend basket is a minority % of my portfolio currently. The plan is to keep it a minority % going forward.
    b. The basket has to be diversified. Currently, the basket has idea diversification. But, probably needs a little more sector diversification
    c. “Testing” (if that’s the correct word) is now. The experience will be helpful for the future.

Back to the Redditor’s portfolio, it did sorta touch a nerve. Some years ago, I did have a significant PSEC stake. I too was drawn to the high yield and a “supposed” discount to NAV. PSEC is a Business Development Company. At some point, a bad investment or two fails, and the discount gets wiped away and the share price resets. In any case, what usually occurs is a double whammy. The individual holding (PSEC) takes a hit and the payout also takes a hit. Again, “experience” discovered earlier.

–

Been watching AMBP return back to my price-exit level. Too early, I can wait. Still on the sidelines wrt EQNR. But, as I think about it, EQNR has a characteristic similar to AMBP - bounce back potential. Adding to UPS nibble is another possibility.

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11/08
PSEC div cut 25%

Last week, I predicted something like this could happen. Just did not expect it to occur a week later. The share price reset today, the lower payout going forward.

–

Owned holding INSW reported on 11/06
Followed holding GNK reported on 11/06 (Q3 payout increase vs Q2)
NVDY payout for Nov this week. Payout target for 2024 has been exceeded with a month to spare.

16

11/22
Still on an ongoing challenge to figure out my options for core ideas. IEP has made a complete exit. That means I now have at least two core idea slots open. One of the interim ideas is YMAG to take one of the core slots. Now that ETF payout is weekly, it makes for an interesting trend watching pick. With its current position size, it won’t be too much work to get it “plumped up” as core pick. Like I needed additional motivation, YMAG has a 5 payout month in Dec 2024.

Some ugly blood-letting this week. The shipping sector had another ugly week. For my shipping basket, this affected a couple of names. In particular, LPG, CLCO & TRMD. CLCO announced results, which included a big div cut. From that perspective, a double whammy- lower share price, and lower future payout. Undecided whether the div stays at the projected level (15c/sh), or it nudges a little higher as CLCO gets more visibility on its near term revenue picture. LNG tanker peer Flex (FLNG) has also had a rough month, but share price is bouncing off lows. FLNG is a core dividend holding, and maintained its Q3 payout. FLNG also has more contract coverage/revenue visibility than CLCO.

Keeping FLNG. CLCO? Well, the damage is already done. The company did have a lot of challenges stacked up on it the last few months (multiple dry dockings, delivery of newbuild tanker, market turning weaker, etc.). But CLCO also completed a major refinancing that should provide additional flexibility. Also, the second newbuild delivers in early 2025 and has already secured a nice long-term charter contract. For now, CLCO is a hold.

This week, a big development with Target Corp (TGT) - an idea I’ve often considered for a dividend port. TGT took a > 20% price hit for projecting Q4 to be weaker than originally forecast. I’m not immediately piling in just because of the big drop. But, I did take a couple of nibbles, as a start. TGT also adds sector diversity to the mix. Helpful, since I exited AMBP.

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12/02
The first of five YMAG Dec 2024 dividends accrued in my taxable account today. It had a special significance - my dividend target for 2024 has been reached. I still have some shipping company stocks that pay their Q3 dividends in Dec 2024, so there are still a few more accruals left. While the dividend total has been cleared, there have been some major negatives with the dividend basket in 2024.

  1. IEP fell apart, and cut its distribution again - by 50%
  2. AY got acquired via a low-ball offer. Had already sold out when AY announced the last dividend - a prorated dividend.
  3. Mid Oct & all of Nov 2024 have been a rough time to be owning a basket of shipping stocks. The beat-down has been wretched for most shipping names (at least the ones I have owned)

Signs of hope?
a. TGT price got whacked for suggesting Q4 will be weaker. That was an opportunity to start a position in a Dividend aristocrat.
b. With the exit of two core positions, a chance to reset the basket and rebuild it slightly different in 2025
c. Selectively add to some shipping names at a significant discount