Category: Stock Market

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Economics Stock Market

Stock Market Week in Review – 11/4/22

This weekly market recap is brought to you by Koyfin, a powerful analytical tool that I proud to partner with. Their platform is entirely customizable for whatever data you want to look at including stocks, ETFs, mutual funds, currencies, economic data releases (one of my personal favorites used often for these posts), crypto, and even transcripts of company events! Click the link above to get a special offer only for Dividend Dollar readers!

Weekly Review

Congratulations on making it through October! The month came to an end on Monday and the Dow Jones Industrial Average logged its best monthly performance since 1976 with a gain of 14.0% after two down months.

The major averages clung to a narrow trading range in the first half of the week as market participants were waiting on the FOMC policy decision on Wednesday and Fed Chair Powell’s press conference.

The big run in October pushed on the idea that Fed might soften its approach after the November meeting. The following line in the policy directive from Wednesday added fuel to that notion:

“In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

AKA Fed is apt to raise rates higher than expected for longer than expected. Fed Chair Powell said at his press conference, “When (people) hear lags, they think about a pause. It’s very premature in my view to be thinking about or talking about pausing our rate hike. We have a way to go. We need ongoing rate hikes to get to that level of restrictive. We don’t know where that exactly is.”

Mr. Powell was also commented on how resilient the labor market has been, noting that the unemployment rate is still sitting near a 50-year low and that wage inflation, while flattening out, is still well above the level that would be consistent over time with 2.0% inflation.

The October Employment Report reflected a labor market that isn’t showing enough weakness yet to convince the Fed that it can stop raising the target range for the fed funds rate. That point notwithstanding, the October employment situation was more consistent with achieving a soft landing for the economy than a hard landing.

As we covered in my regular economic updates on my Twitter account, the ISM Manufacturing Index for October showed a moderation in manufacturing activity that borders on contractionary territory. Movement like this hasn’t been seen since the pandemic-led contractions in April and May 2020. The ISM Non-Manufacturing Index for October showed that business activity for the non-manufacturing sector, which comprises the largest swath of U.S. economic activity, softened in October at the same time price pressures remained elevated.

Treasury yields were on the rise in anticipation of Wednesday’s FOMC decision, but yields really moved up after that. The 2-yr Treasury note yield rose 25 basis points this week to 4.67%. The 10-yr note yield rose 15 basis points this week to 4.16%.

Other central banks made headlines this week aside from the Fed. European Central Bank (ECB) President Lagarde said that recession risk in the eurozone has increased, and that inflation is too high. ECB policymaker Nagel said that the ECB has a long way to go on rate hikes and that the central bank should begin reducing its bond portfolio at the start of 2023. The Reserve Bank of Australia raised its cash rate by 25 bps to 2.85%, as expected. The Norges Bank raised its key rate by 25 bps to 2.50% and the Bank of England raised its key rate by 75 basis points to 3.00%.

Market participants received earnings reports from over one third of the companies in the S&P 500 this week. Per usual, there were some big winners and big losers, yet macro factors tended to overshadow the individual earnings reports.

Growth stocks struggled this week, which were afflicted by rising interest rates, weak guidance in a number of cases, and the shift out of the mega-cap darlings. The Vanguard Mega Cap Growth ETF ($MGK) fell 6.8% this week. Apple ($AAPL) and Amazon.com ($AMZN) were among the losing standouts for the group, continuing the “techining” that started off last week.

Meanwhile, Chinese stocks were a pocket of strength this week as speculation circulated that China will ultimately relax its zero-COVID policy. JD.com ($JD) and Alibaba ($BABA) were among the biggest winners for Chinese stocks.

Energy stocks were another pocket of strength in the market. The S&P 500 energy sector closed with the biggest weekly gain, up 2.4%, as WTI crude oil futures rose 5.4% to $92.60/bbl. Only two other sectors out of the 11 total were able to squeeze out a gain on the week. Industrials rose 0.4% and materials rose 0.9%.

The dollar had a whipsaw week. The U.S. Dollar Index was inching higher all week until taking a sharp turn lower Friday as other major currencies registered big gains against the greenback (EUR/USD +2.1% to 0.9960). The U.S. Dollar Index closed the week unchanged.

That’s it for this busy busy week! Hope it all went well for you. I know it went well for me, I took some time early in the week to trim some positions and build up some cash (as mentioned in last week’s portfolio update). I have been bearish for a long time given the lagging economic indicators that still haven’t given a great picture on the progress of inflation, thus the Fed keeps trucking along! I think this week is just the beginning of a solid downtrend that could occur through the end of the year. With another rate hike expected in December and tax-loss harvesting season beginning, I think there is a good chance we end this year lower than where we currently are.

Because of this opinion, I sold some positions, took some gains, and grew my cash position to about 7% of my whole portfolio. I’ll be looking to deploy this cash closer to the end of the year. You can read about these moves in my weekly portfolio update here.

And if you like updates like this, follow my Twitter or my CommonStock page where I post updates on the economic data throughout the week.

Regards,

Dividend Dollars

Categories
Economics Market Recap Stock Market

Stock Market Week in Review – 9/9/22

This weekly market recap is brought to you by Sharesight, a portfolio tracking tool that I am happy to partner with. Their platform makes tracking trading and dividend history, understanding your performance, and saving time a breeze. Click the link above to get a special offer only for Dividend Dollar readers!

Weekly Review

Hope everyone had a great Labor Day! The shortened week in the market made it feel as if stocks had something to prove after having the extended weekend to think about their 3-week losing streak. Tuesday looked as if that streak was going to continue, however sentiment turned and powered a strong move through the rest of the week. Both the S&P and Nasdaq ended the week back above their 50-day moving averages.

What’s even more impressive is that the market continued to push higher this week, regardless of the spattering of news headlines which could’ve had more adverse effects than they did. China extended its lockdown of Chengdu, Russia claimed that the shutdown of the Nord Stream 1 pipeline could be long term and pointed blame to western sanctions, a handful of large reserve banks announced aggressive rate hikes, and the Fed and other officials continued to emphasize the need to fight inflation.

The market was immune to bad news this week! It also pushed higher despite a jump in market rates, volatile foreign exchange movements, and a Wall Street Journal report that predicts a 75-basis point rate hick at the next FOMC meeting.

Still, stocks stayed strong under the weight of rising rates and press that confirms it. The market’s bullishness even seemed to become its own self-fulfilling catalyst as a sign that the market had already priced in the next rate hike.

What’s especially odd, is that the market was particularly bearish on Tuesday but quickly turned that around. The American Association of Individual Investors Survey showed unusually low bullish sentiment and unusually high bearish sentiment. Bearish sentiment among investors hit 53.3% versus a historical average of 30.5%. Bullish sentiment fell to 18.1% versus an average of 38%. Those readings and their widespread must’ve been taken as contrarian indicator to buy/swing trade beaten up stocks. The view that the market was in an oversold condition sparked some bargain buying efforts that picked up pace later in the week.

Mega-caps led this week. The Vanguard Mega-Cap 300 Growth ETF ($MGK) jumped 3.99% this week. All 11 S&P 500 sectors made gains for the week, 8 of them making at least +3.2%. With the market’s strength this week, the CBOE Volatility Index fell 10.5%.

Next week’s data releases could prove to be significant if strength can’t carry through from this week. We have the next CPI reading which could give further insight into the next Fed action, a sentiment reading, and retail sales.

I personally think this rally may continue for another week or so, but I am still of the longer term bearish mindset. Maybe I am just biasedly a pessimist because I would love to be able to keep buying dividend stocks on deep discount! I tried to do that this week with my buys in Intel $INTC, $SCHD, and a few others you can read about in the portfolio update here.

Regards,

Dividend Dollars

Categories
Economics Stock Market

Stock Market Week in Review – 8/19/22

This weekly market recap is brought to you by Sharesight, a portfolio tracking tool that I am happy to partner with. Their platform makes tracking trading and dividend history, understanding your performance, and saving time a breeze. Click the link above to get a special offer only for Dividend Dollar readers!

Weekly Review

A pullback in the markets ended the 4-week win streak this week. For the week S&P was down 1.2%, the Dow was down just 0.2% and the Russell was down 2.9%. 8 of the 11 S&P 500 sectors finished lower with communication services faring the worst. Consumer staples, utilities, and energy were each up at least 1.0%.

Disregarding the red week, the S&P was up 1.1% at most last week on Tuesday. It was just short of its 200-day moving average which provides stiff resistance. After running up almost 19% between its low in June to it’s high on Tuesday, the market was due for a pullback on a short-term over-bought basis, and this strong resistance level was the perfect opportunity for some money to get pulled out of the market.

There weren’t any particular headlines that were the catalyst for this, but there were a mix of smaller headlines that contributed to the mindset. For one, the NAHB Housing Market Index fell for the 8th straight month to a reading of 49, which is considered to be a negative sentiment when below 50. The Empire State Manufacturing survey for the month fell to -31.3 from 11.1, one of the lowest readings on record. Retail sales were flat month-over-month. Fed President Bullard said that he is still in favor of a 75 basis point hike at the next FOMC meeting.

As you can tell, the narrative for the week was that the market got a head of itself while the underlying economic indicators continue to drag. Growth stocks and indexes were down this week compared to their value counterparts. In the same vein, the 10 year treasury note yield pushed 3.00%. These things point to inflation angst and growth headwinds.

This week also had some fallout in the meme stonk space which added to the reality check for a lot of retail investors. Bed Bath & Beyond ($BBBY) dropped over 40% in response to the news that RC Ventures had sold its entire stake and that $BBBY hired consultants to help address the company’s debt load.

Overall, many spaces in the market this week contributed to the broad based poor performance.

Next week we data releases on Durable Goods Orders, a GDP reading, a speech from Fed Chair Powell, employment numbers, and an ISM manufacturing reading to look forward to.

My bullishness last week was wrong, however, I think this last week’s pullback might’ve just been the little break the market needed before continuing a push higher. I see the docket of events on the calendar, and most don’t have terrible forecasts. If anything, the market is ready for bad readings, so anything slightly better than bad might be fuel to push higher. In addition to that, Powell has a talent for telling the market what it wants to hear, so I’m thinking next week we will be in the green.

However, I still believe that the market has more to lose on the long-term. I think that the Fed’s efforts to slow the economy in order to stave off inflation has yet to really materialize. When it does, I think the market has some room to move down and stay down for a decent period of time. Maybe I am just a biasedly a pessimist because I would love to be able to keep buying dividend stocks on deep discount! I tried to do that this week with my buys in Microsoft ($MSFT) and 3M ($MMM) Read the portfolio update here.

Regards,

Dividend Dollars

Categories
Economics Stock Market

Stock Market Week in Review – 8/12/22

This weekly update is brought to you by Sharesight, a portfolio tracking tool that I am happy to partner with. Their platform makes tracking trading and dividend history, understanding your performance, and saving time a breeze. Click the link above or the picture below to get a special offer only for Dividend Dollar readers!

The market had a field day this week with its 4th straight green week on the back of signs of disinflation in the Consumer Price Index (CPI), Producer Price Index (PPI), and Import-Export Price Index reports for July. All this data supports the peak inflation narrative.

All 11 S&P 500 sectors closed higher for the week. Gains ranged from 1.2% (consumer staples) to 7.1% (energy). Cyclical sectors saw some of the biggest gains and value stocks outlegged growth stocks in a move that showed reduced fears about the economy suffering a hard landing. The Russell 3000 Value Index increased 3.9% versus a 3.0% gain for the Russell 3000 Growth Index.

The S&P 500 crossed an important level (4,231) that some will interpret as a telltale signal that the low in June was the low for the bear market. The week’s gains were secured almost entirely from trading on Wednesday and Friday. Prior to Wednesday, which is when the CPI report was released, the major indices were all down for the week. The slow start was from reservations about the market being due for a pullback after the big run off the mid-June lows, some revenue warnings from NVIDIA ($NVDA) and Micron ($MU), and some uncertainty in front of the CPI report.

The CPI reading proved to be a major turning point for sentiment. Total CPI was unchanged month-over-month and core CPI, which excludes food and energy, was up a smaller-than-expected 0.3%. The key stat here was that the annual pace of total CPI moderated to 8.5% from 9.1% while the annual pace of core CPI held steady at 5.9%, meaning it did not move higher as had been feared.

The fact that inflation hadn’t gotten worse trigged the rally in the major indices, as investors relished the idea that inflation might have peaked, that the Fed might be able to temper the pace of its rate hikes, and that the U.S. economy, which learned last week that 528,000 positions had been added to nonfarm payrolls in July, might be able to enjoy a soft landing.

Various Fed officials attempted to downplay the idea of the Fed being ready to take its foot off the rate-hike pedal, not to mention pivoting in 2023 to a rate-cut cycle, yet equity market participants seemed to disregard the sentiment.

The view in the stock market was that inflation rates will continue to moderate in coming months and that Fed officials will ultimately be convinced to soften their hawkish-minded tone as a result. Then the PPI data and Import-Export price data move in the same direction as the CPI data, further solidifying that view.

Stocks wavered a bit in the wake of the PPI report on Thursday, but by Friday morning, that move had been written off as just a case of taking some money off the table after a big move. By Friday, buyers were back in action.

The S&P 500, which was flirting with 3,600 in mid-June, settled Friday at 4,280. The close above 4,231 will be seen by some as an important technical and psychological development. That level marked a 50% retracement of the losses suffered between the January 3 closing level (4,796.56) and the June 16 closing level (3,666.77). This is important because there has not been a bear market rally that pushed past the 50% retracement and then fall further to make new lows since 1950.

That doesn’t mean we’re in the clear, but it does resonate for some as a beacon of identifiable downside risk and a reassuring historical precedent.

There was also a revival this week of speculative activity that translated into huge percentage gains for many of the so-called meme stocks, as well as the SPAC and profitless story stocks that were all the rage last year. Their moves were clear reflections of a risk-on mindset driven by the hope that the Fed won’t have to go as far as it thinks into restrictive rate-hike territory.

The Treasury market wasn’t as optimistic. The 2-yr note yield, which is sensitive to changes in the fed funds rate, ended the week up two basis points at 3.25%, virtually unchanged from where it was when the CPI report was released on Wednesday. The 10-yr note yield settled the week up one basis point at 2.84%, up about five basis points from where it was trading before the release of the CPI report.

Obviously, stable inflation is better than rising inflation, but it is still ridiculously high. The Fed’s inflation target is 2.0%, whereas CPI is up 8.5% year-over-year and PPI is up 9.8% year-over-year. There is a lot more room for inflation improvement and there needs to be a lot more improvement to convince the Federal Reserve that inflation is back under control.

That will be an ongoing war, but there was no doubt that the stock market won the mental battle this week in seeing what it wanted to see, which was a lower inflation rate in July than it saw in June.

Next week we only have retail numbers and FOMC minutes to look forward to. Canada will report their CPI and both New Zealand and China will report on their interest rate decision. Overall, next week does not have a very impactful lineup. I believe next week we will see the market move sideways at the least. If not, the indexes will be looking to continue upwards with a fifth green week in the market.

My bullishness on the last week was correct as data and sentiment continue to trend in the right direction for the short term. And with no heavy hitting data releases coming, I think there is a good chance that continues next week. However, over the long term, I am still bearish as I believe the Feds rate hikes take a good amount of time before their effects are felt, let alone reported in data.

Maybe I’ve just been spoiled by buying so many cheap dividend stocks in this market that I want things to stay bearish! Regardless of the way things move, we will buy structurally sound companies that pay safe dividends and have a promising future. We did this last week with some movements in the portfolio towards the Global X S&P 500 Covered Call and Growth ETF ($XYLG). Read the portfolio update here.

Regards,

Dividend Dollars

Categories
Dividends Stock Market Strategy

What Dividend Strategy Does Best in a Bear Market?

As the economy falls further into bear market territory, it is clear that dividend investing strategies have held up better than most other investing strategies this year. Today I read an article from a Morningstar writer about which dividend investing strategies are outperforming year to date 2022. This article looked at how much that performance has varied depending on specific dividend investing approaches.

Generally speaking, there are usually two schools of thought when it comes to dividend investing: dividend yield investing vs. dividend growth investing. Dividend yield is calculated as the latest dividend payment annualized divided by price. Dividend growth is defined as the rate of change of dividends paid by a company over time, generally the most recent 3 or 5 year period. Clearly, a high dividend investor is more focused on the size of the dividends they receive while a dividend growth investor cares more about the historical and potential growth of the dividend. Both styles generally have the same goal, which is create an income stream.

However, an investor’s time horizon can play a significant role in determining which strategy they focus on. Older folks may want to put their money in high yielding yet consistent payers like Realty Income ($O) or Enterprise Products Partners ($EPD). This is because reliable income now is more important to them than growing long term wealth. For younger investors, it may make more sense to focus on a dividend growth strategy by investing in companies that have low payout ratios and potential to create a long track record of increasing dividends like Lowe’s ($LOW) or Visa ($V).

With dividend strategies faring better than most other for 2022, the article looked at which one is doing the best. The article concluded that strategies that invest in high yield companies with healthy financials outperformed the most. After reading that, I decided to evaluate that conclusion for myself by back-testing a handful of dividend paying ETFs which follow various strategies. Below are the ETFs that I was able to back-test through using Sharesight:

  • ProShares Dividend Aristocrats ETF ($NOBL) which contains the numerous stocks of varying yields and growth potential that are on the dividend aristocrat list
  • Vanguard High Dividend Yield ETF ($VYM) which contains the highest yielding stocks after being filtered by market cap adjustments
  • Vanguard Dividend Appreciation ETF ($VIG) which contains stocks with at least a 10-year history of growing dividends after passing market cap and trading volume criteria
  • Schwab US Dividend Equity ETF ($SCHD) which contains stocks that meet the criteria of both yield and fundamental aspects
  • Global X S&P 500 Covered Call ETF ($XYLD) this is not a dividend ETF perse, however lots of dividend investors use covered call funds to use their high yields for income purposes

As you can see in the graph below, the S&P has fallen by 20.55% year to date. The best performer of the dividend strategies was the dividend yield strategy down by only 9.46% year to date, followed by the dividend fundamental strategy down by 10.74% year to date. Surprisingly, the covered call high yield ETF was a very close third down by only 10.77% year to date!

High yield investors (assuming sound quality of stocks) have stayed strong in this market, in part by the strong finances of their holdings but also sizable exposure to the energy sector. A high yield dividend strategy almost inherently has extra exposure to energy and little exposure to tech. High yield strategies with a quality focus on seeking profitable firms in a position to consistently pay their dividends over many years and dumping the ones that can’t, are in a great position to keep the dividends flowing which is provides important financial stability even if a recession hits.

Though energy is starting to waiver, the sector’s performance this year is primarily the determinate of the success of these dividend funds. Energy tends to be much more prominent in dividend and value portfolios. $VYM, our high yield ETF, has the second highest yield at 2.79% and has greatest exposure to the energy sector at over 10%. That is more than double the S&P’s energy exposure at 4.68%

Dividend growth strategies haven’t done as well this year, mainly because of their exposure to tech. For example, our high yield ETF $VYM has 8.37% exposure to tech whereas its growth counterpart $VIG has more than double that at 16.78%. Prior to this year, most dividend strategies in general had not performed well when compared to the market. Even with a focus on which quality, dividend stocks tend to have a hard to keeping up when the market is focused on growth. However, now that the tide of the economy has turned, dividend investing, whether that is with an emphasis on yield or on dividend growth, is shining bright as the safeguard against this volatile market.

Categories
Economics Stock Market

Stock Market Week in Review – 6/17­­­­/2022

This week was another volatile one with most of the trading action coming as the market digested many actions from the world’s central banks. The markets are appearing to lose faith in the Federal Reserve.

This loss of faith had lots to do with the rate hike, it also had to do with liquidity concerns that smashed the crypto markets, earnings concerns, growth concerns, and strong volatility in the Treasury markets all together have shaken investors’ confidence. Emotions in the market are not positive ones right now, as evident by the fear & greed index which was at a reading of 28 last week.

Crypto, stocks, bonds, and commodities all experienced losses as recession fears grew this week.

The week started with crypto prices entering a freefall on the news that the crypto lender Celsius had suspended customer transfers and withdrawals. Concerns that this may happen among other platforms caused investors to panic sell and forced selling to meet margin calls. Just this week Bitcoin went from roughly $25,000 to $20,000.

Each major index set new 52-week lows. At the lowest, S&P briefly dropped 4.5%. All 11 sectors of the S&P 500 made losses this week with consumer staples doing the best at -4.4% and energy faring the worst with -17.2%. The energy sector, which is still the best performing sector this year, was watched very closely by the market as an indication of potential recession. The energy sector fell as selling interest grew as a result of increasing concerns of global slowdown as banks across the world rose rates higher than expected this week.

The Federal Reserve ended their two-day meeting on Wednesday with a decision to raise the target range for the fed funds rate by 75 basis points to 1.50-1.75%. The meeting also provided updated projections that showed a worsening revision to 2022 real GDP growth to 1.7% from 2.8% and to 2022 PCE price inflation to 5.2% from 4.3%.

Fed Chair Jerome Powell added at his press conference that the coming July meeting will likely have either a 50 or 75 basis point increase. He spoke on a commitment to getting inflation under control, however, the Fed’s actions and adjusted projections created uncertainty.

Afterwards, the Swiss National Bank followed suit with a surprise 50 basis point hike. This was their first hike in 15 years. The Bank of England raised their rate another 25 basis points and downgraded their GDP forecast.

The Bank of Japan continues to be the outlier as it stays steady in its rate and maintained a commitment to yield curve control of keeping the 10-year around 0%. The Forex market was not a fan of that decision, evident in the Yen falling 2.1% against the dollar on Friday.

In sum, the worries about current policy approaches by the central banks being mistakes were widespread in the market. Fiscal policies are necessary but risk excessive stagflation and even recession. Neither outcome bode well for the earnings potential of most companies, causing strong selling interest in stocks this week.

Anticipations of poor earnings paired with the uncertainty caused by central banks has led to the de-risking from stocks into safer Treasury notes. The 2-year Treasury note yield rose 3.18% and reached as high at 3.43% this week.

Next week, we have a shorter week with market being closed on Monday on account of Juneteenth, however there are still a few of economic events later in the week that could prove to be cause for a continued downtrend. Economic events don’t kick up till Wednesday with a testimony from Fed Chair Powell followed by some global PMI readings.

Stay informed, stay patient, and most importantly stay committed to your long-term plan! As dividend investors, markets like this allow us to buy discounted income, sometimes for an extended period of time. Be prepared for that! I was this week with my most recent buys which you can read about in the latest portfolio update here!

Regards,

Dividend Dollars

Categories
Market Recap Stock Market

Stock Market Week in Review – 6/10/2022

The three major stock indices (S&P, NASADAQ, and DOW) pushed higher on Monday and Tuesday of this week followed by a poor performance for the rest of the week. It was a steep decline, too.

After Tuesday, the S&P was up by 1.3% for the week, by the close on Friday it had given up those gains and more to end down 5.1% at 3,900.

Multiple developments happened this week that contributed to the poor performance:

  • Chipmaker Intel (INTC) pointed to the weaker macroenvironment as they announced a temporary hiring freeze and another delay in the release of the Sapphire Rapids CPU.
  • Scotts Miracle-Gro (SMG) reeled back on their FY22 EPS outlook to well below the analysts’ estimates. Their reasoning is that their fixed cost struggles is facing pressure due to replenishment orders falling short.
  • Target (TGT) cut their Q2 operating margin guidance to around 2% just a few after stating that it would be 5.3%.
  • The Reserve Bank of Australia and the Reserve Bank of India both raised their rates more than anticipated.
  • Many districts in Shanghai were put into lockdown again for COVID testing.
  • Total CPI increased 8.6% year-over-year in May. This marks the largest increase since December of 1981. The Core CPI was up 6%, down from the 6.2% we saw in April, however this is still far off from the Fed’s goal of 2.0% inflation.

The last bullet point of the CPI reading was the disappointing climax to an abysmal week. We saw other reserve banks this week pursue more aggressive policies against inflation. That paired with another disappointing CPI reading causes widespread concern that the US Fed will follow suit. If the Fed decides to be more aggressive against inflation, their actions could crush economic growth which in turn hurts earnings prospects for investors.

That concern was evident in the Treasury market and the stock market on Friday. Most note’s yields spiked almost a dozen to two dozen basis points. The S&P moved in turn and fell nearly 3% on Friday. All sectors of the S&P 500 had losses ranging from 0.9% to 6.8% with the financial sector getting hit the hardest.

Next week, we have lots of economic events on the calendar that could prove to be cause for a continued downtrend. Retail numbers and a Fed Policy Statement are set for Wednesday. Lots of eyes will be on the Fed meeting to see how the expected interest rate decision plays out. Investors expect half a point, but we very well could be surprised by a stronger stance from the increasingly hawkish Fed.

Aside from our Fed’s decision, there are lots of employment and GDP related statistics being released for many of the world’s strongest economies this next week. Whether these are received positively or poorly, expect those reactions to bleed into our market throughout this next week.

Stay informed, stay patient, and most importantly stay committed to your long-term plan! As dividend investors, markets like this allow us to buy discounted income, sometimes for an extended period of time. Be prepared for that! I was this week with my most recent buys which you can read in my most recent portfolio update.

Regards,

Dividend Dollars

Categories
Dividend Stocks Economics Market Recap Stock Market

Monthly Market Recap – April 2022

As I started my dividend investing in September of 2021, nearly at market highs, I noticed that investing spaces on Twitter and Reddit paid much more attention to future growth prospects than healthy balance sheets or dividends. The pandemic brought a new swath of retail investors into the playing field who favored these stocks much more than the safer and slower stocks favored by dividend investors.

However, these trends don’t always last. Recessions are always a possibility. It’s just a matter of when. Now the market is dealing with the highest inflation levels since 1981 and the ground beneath us is shifting. The Fed is fighting back by rising interest rates which increases the possibility that a recession is looming around the corner.

The S&P 500 had its worst month since March of 2020, this April with a loss of 8.8%. At the end of April, the market’s year-to-date performance was -13%. Tech, a high growth sector, lead the downfall. The tech heavy NASDAQ was down 20% YTD in the end of April. The MSCI All Country World Index fell 8% for the month. Even fixed income came under pressure, with global bonds dropping 5.5% for the month.

This environment has caused growth plays to struggle and showed that quality dividend stocks are resilient. In the midst of the pandemic, massive amounts of government spending and lax monetary policies allowed investors to take advantage of extremely speculative investments in crypto, SPACs, meme stocks, and growth stocks with absurd valuations. Attracted to the potential of huge gains, investors flocked to these instruments at inopportune times (hindsight 20-20 obviously). ARKK, led by the famous Cathie Wood, was the posterchild in this environment with speculative growth holdings in companies like Tesla, Zoom, Square, Coinbase, and more.

Expectations for monetary policies have seen a major shift this year with interest rate expectations being over 2% after more 50 basis point hikes at each of the Fed’s next meetings. The Fed’s appetite for interest rate increases right now has caused investors to de-risk their portfolios. These speculative plays that have led the markets for the last year or so are now the first to feel the pain. As evident by the graph below (keep in mind the recency of my portfolio makes this graph look more dramatic than it is on the long term) a good dividend portfolio in our current environment is a much safer bet. Slow and steady wins the race.

The moral of the story is that no one can predict when the cops will come to shut down the party. Sticking to a long-term strategy that aligns with risk tolerance and goals is great for long term performance. Companies that can maintain healthy margins thanks to strong pricing power will likely be relative outperformers as the markets navigate this environment.

Now this strategy isn’t for everyone, but it works. I bet on strong dividend paying companies with a strong balance sheet and a reasonably foreseeable decent performance. These companies have stood the test of time, they have strong products, durable cash flows, and dividends that are paid regardless of market conditions.

This method of investing will never be as exciting as the strategies that led the rally through the pandemic. But their predictability, to me, is attractive. As the market continues to look risky and speculative plays perform poorly, investors will rotate into companies that can withstand a recession.

It would be better if a recession could be avoided, but no one has a crystal ball to see how this all will play out. As usual, I will stay the course and stay very comfortable and confident in holding and growing my portfolio regardless of how gloomy the market continues to look.

Categories
Dividend Stocks Dividends Portfolio Stock Market

Dividend Portfolio: 4/14/2022 Week in Review

Photo by Pixabay on Pexels.com

Welcome back to Dividend Dollars and our weekly review! And boy what a week it was! We made some adjustments to our energy holdings and crossed our first $100 in dividends!

We lost a day of trading this week due to Good Friday. Having the day off was a good ending to a bad week! The S&P lost 2.1%, Nasdaq 2.6%, the Dow was down 0.8%, with Russell making the only gain of 0.5%.

The information technology, health care, financials, and communication services sectors were the S&P’s biggest losers. Downward movement in the information technology and communication sectors were linked to moves in the Treasury market. The 10-year yield went up 12 basis points this week despite economic discussion that inflation was peaking. That discussion was followed by two days of declining rates following big CPI and PPI numbers for March.

The financial sector was down particularly because of earnings missed by JPM and WFC. Other banks for the most part surpassed expectations.

Airline stocks showed strength this week with AAL raising their Q1 revenue guidance and DAL with earnings that beat expectations. JETS also went up 8% this week.

Aside from airlines doing well, the materials, industrials, energy, and consumer staples sectors of the S&P were positive with gains all under 1%.

Now let’s move on to reviewing our portfolio’s performance for the week.

Portfolio Value

To date, I have invested $8,020 into the account, the total value of all positions plus any cash on hand is $8,494.4. That’s a gain of $474.42 for a total return of 5.92%. The account is down $48.08 for the week which is a 0.56% loss.

We started building this portfolio on 9/24/2021 and when compared to the S&P 500 we are outperforming the market so far! Within that same timeframe, the S&P 500 is down -1.41% whereas our portfolio has an overall return of 5.92%! Let’s keep up this good progress with smart adds to the portfolio.

We added $120 in cash to the account this week. The stock purchases made with this will be broken out below.

Portfolio

Above is a dashboard of the portfolio that tracks annual dividend income, yield, beta, dividend growth, and more.

Below is a table of everything we are invested in so far. There you can see my number of shares, shares bought through dividend reinvestments, average cost, gains, and more. The tickers in green are positions that I bought shares in this week.

This week our annual dividend income increased by $20. My portfolio’s dividend yield may be just slightly higher than what you will see in other portfolios, however that is strategic per my time horizon. I am in my 20s and am just starting off this investment journey, so a higher dividend yield gives me greater cash flow now to reinvest which helps me realize the benefits of compounding sooner.

Our beta usually hovers right around the mid 0.6s which is good, especially in times of uneasiness. It means my portfolio won’t dip as much as the rest of the market on red days, however, it does go the other way around and I won’t have as much green on the good days. Therefore, it is good to watch your beta in terms of cyclicity. View the chart above to see the performance of my portfolio versus the S&P 500, notice how my portfolio’s green days are not as substantial as the S&P’s but neither are my red days, that is beta at work. My beta so far has led to better returns than the market since beginning this portfolio, however, on rally weeks I underperform. In order to combat that, I have started adding to a levered position to raise my beta. I would like to see it in the 0.8s.

Dividends

This week we received two dividends. $13.77 from UWMC and $3.17 from BBY

In my portfolio, all positions have dividend reinvestment enabled. I don’t hold onto the dividend, I don’t try to time the reinvestment, I just let my broker do it automatically. All dividends were reinvested (except for BBY, that will be reinvested on Monday).

Dividends received for 2022: $90.19

Portfolio’s Lifetime Dividends: $113.11

Trades

Below is a breakdown of my trades this week.

On Wednesday I did some restructuring of the portfolio. I sold my whole position in EOG and spun a majority of those into a new utilities position in AY. There are a couple of reasons I did this. The IPCC report came out this week and is pretty grim about the future of our planet. It makes it clear that the devastating impacts of a climate crisis are occurring and the opportunity to curb terrible outcomes are already slipping through our fingers. The report says that greenhouse gas emissions must peak by 2025 to limit global warming close to 1.5 degrees Celsius as targeted by the Paris Agreement. Mitigating climate change continues to a growing and ever important focus for governments, business, and people.

Though the Ukraine conflict is where the world’s attention is at right now. I still believe that oil will be a good business model in the short term, thus I am continuing to hold CVX, but I believe that adoption of more “green” policies are inevitable and will come sooner or later. When this happens, oil companies will come under pressure and renewable energy companies will benefit. It will be a long transition, possibly over decades. But I would rather build positions on renewable energy companies now instead of later. For that reason, I sold my EOG position and rolled it into a new position in AY, a sustainable infrastructure company with a majority of its business in renewable energy assets (solar, water, and wind).

  • April 11th
    • T – added 2 shares at 19.59
    • SMHB – added 1 share at $10.99
    • UWMC – added 3.251476 shares through $13.77 dividend reinvested
  • April 12th
    • UWMC – added 3 shares at $3.97
    • MMM – added 0.1 shares at $148.70
  • April 13th
    • EOG – sold position (3.113613 shares) for a 45% gain
    • AY – new position, bought 6 shares at $33.56
    • BAC – added 2 shares at $38.86
    • T – added 5 shares at $19.44
    • SCHD – added 0.126727 shares at $78.91 (recurring investment)
    • XYLD – added 0.201191 shares at $49.70 (recurring investment)
  • April 14th
    • SBUX – added 0.25 shares at $79.68
    • UWMC – added 3 shares at $3.90
    • SMHB – added 1 share at $10.94

Summary

That is it for the update this week. Let’s kill it next week. Stay patient and be ready to buy income producing assets at a discount!

Let me know what you think of the progress so far, share with me your progress and questions, interact with me on twitter and Instagram using the links below!

Thank you for reading! See you next week and have a happy and safe Easter!

Categories
Dividend Stocks Dividends Portfolio Stock Market

Dividend Portfolio: 3/11/2022 Week in Review

Welcome back to Dividend Dollars!

The market ended red this week after finding itself unable to climb out of the whole that high oil prices had put it in, despite the fact that oil prices eventually cooled off after flirting with $130 per barrel. The initial spike to $130 was in anticipation of bans on Russian energy imports. The US banned it and the UK and EU said they would phase out of Russian energy imports this year. WTI futures ended the week at $109.

Even though oil is dropping, our economic environment is still one of high inflation. Total CPI for the year is up 7.9%

The Russia-Ukraine situation continues to keep markets volatile. Ceasefire talks continue to make no progress. Treasury yields spiked, Nickel soared, AMZN announced a stock split, and the S&P ended fell 2.9% for an overall eventful week! Let’s see how we fared.

Portfolio Value

Last week our portfolio soared while the S&P lost more than 1% due to our positions in oil and defense. This week was another red week for the market, and this time our portfolio was not immune to those actions.

To date, I have invested $7,190 into the account, the total value of all positions plus any cash on hand is $7,399.46 . That’s a gain of $209.46 for a total return of 2.91%. The account is down $177.44 for the week which is a 2.34% loss.

We started building this portfolio on 9/24/2021 and when compared to the S&P 500 we are outperforming the market so far! Within that same timeframe, the S&P 500 is down 5.64% whereas our portfolio has an overall return of 2.91%! Let’s keep up this good progress with smart adds to the portfolio.

We added $170 to the account this week. My buys are detailed below.

Portfolio

Above is a dashboard of the portfolio that tracks annual dividend income, yield, beta, dividend growth, and more.

Below is a table of everything we are invested in so far. There you can see my number of shares, shares bought through dividend reinvestments, average cost, gains, and more. The tickers in green are positions that I bought shares in this week.

This week our activity raised our annual dividend income by $5. Our dividend yield increased by 0.08% and our beta stayed flat. My portfolio’s dividend yield may be just slightly higher than what you will see in other portfolios, however that is strategic per my time horizon. I am in my 20s and am just starting off this investment journey, so a higher dividend yield gives me greater cash flow now to reinvest which helps me realize the benefits of compounding sooner.

Our beta usually hovers right around the mid 0.6s which I like, especially in times of uneasiness. It means my portfolio won’t dip as much as the rest of the market on red days, however, it does go the other way around and I won’t have as much green on the good days. Therefore, it is good to watch your beta in terms of cyclicity. View the chart above to see the performance of my portfolio versus the S&P 500, notice how my portfolio’s green days are not as substantial as the S&P’s but neither are my red days, that is beta at work. My beta so far has led to better returns than the market since beginning this portfolio.

Dividends

This week we received dividends from 3 positions: $3.90 from AMGN, $0.62 from MSFT, and $1.42 from CVX. All dividends were reinvested. We are expecting another dividend from WBA for $0.96 to hit our account on Monday.

Dividends received for 2022: $51.36

Portfolio’s Lifetime Dividends: $74.28

Trades

This week I did some portfolio reorganizing. I liquidated my position on my Canadian companies (CNQ and TD) because I decided that extra tax wasn’t worth it in the long run for me. Selling those positions allowed me a realize some decent gains on CNQ and put that money elsewere.

Here’s the breakdown of the trades I made this week:

  • March 7th
    • SBUX – added 0.2 shares at $87.85
    • APD – added 0.1 shares at $224.00
    • O – added 0.5 shares at $65.32
    • CNQ – sold position at $59.71 per share for a 40% gain
    • TD – sold position at $76.39 per share for a 6% gain
    • PB – bought 2 shares at $71.62 (new position from the CNQ & TD proceeds)
    • CMI – added 0.2 shares at $191.80
  • March 8th
    • APD – added 0.2 shares at $218.35
    • AMGN – dividend of $3.90 reinvested
  • March 9th
    • XYLD – added 0.209556 shares at $47.72 (recurring investment)
    • SCHD – added 0.130074 shares at $76.88 (recurring investment)
  • March 10th
    • BBY – added 0.5 shares at $98.20
    • MSFT – dividend of $0.62 reinvested
    • CVX – dividend of $1.42 reinvested
  • March 11th
    • BBY – added 0.1 shares at $97.30

Summary

That is it for the update this week. Let’s kill it next week. Stay patient and be ready to buy income producing assets at a discount!

Let me know what you think of the progress so far, share with me your progress and questions, interact with me on twitter and Instagram using the links below!

Thank you for reading! See you next week!