Friday, October 01, 2010

RSY X: Update, Dividend Disasters.

On Friday, RSY portfolio recommended a long order of 400 shares of CODI at a strike price of $16.24. Looking at the stock chart at opening, this seems to be a reasonable price point for someone wanting to get a position. Hopefully, you got even a better price point. Let us now look at our model portfolio through a variety of tables. The first table, as a broker would display, is the open positions of RSY as of the close on Friday, 9-29-2010. {Click on tables for clearer images.}

It certainly has taken a drop in total gain of around $500 since Friday, 9/22/2010. As mentioned before, this was mostly due to IVR dropping after the ex-dividend date. The next table shows the executed transactions, so far, for the model portfolio. It also provides a running total of cash on hand (based on $100,000 portfolio size). RSY portfolio will also only record the dividends when the broker informs us of the deposit. For most transactions they need to be cleared within three days and thus the time value of money might be negligible, but some dividends are paid out over a month after the ex-dividend date. Thus we want to keep track of the dividend payouts when the broker tells us of the deposit.

Dividend Disasters:
The Motley fool recently gave some advice on
How to Avoid Dividend Disasters. The first point that Matt Koppenheffer considers is, "The balance sheet [reveals] a poor current position, or funded debt is growing too rapidly". The RSY portfolio considers this an important consideration and a reason to pick Sabrient rated strongbuys and good looking buys for the portfolio. RSY also look at the forensic accounting reports and the score of individual factors that Sabrient ranks on. To be selected for purchase in RSY, a stock must possess a strong score in one of the following: 1. Earnings Score [which] assesses a company's overall earnings performance and projected outlook; 2. Balance Sheet Score [which] measures a company's liquidity and debt issues, as well as receivables and inventory quality; 3. Fundamental Score [which] is the broad measure of a company's financial health,
including its balance sheet, cash flow, revenue, and earnings quality. For example, a few from our present portfolio show that: CODI has an excellent earnings quality score {about twice the industry average}; IVR has good earnings score above industry average and a very high fundamental score; MRH has extremely high fundamental score at 99.5 along with balance sheet score of 98.9.

Koppenheffer goes on to address two more concerns about choosing dividend stocks. He states them as: "Dangerous new competition [is] threatening or ... the company [is] losing ground in the industry", and "Reason to fear for the future of the industry as a whole". For simplicity they both lie within the aspects of microeconomics and sectoral analysis. This is good reason to have some idea what the company does and how it relates to the overall economy. Understanding their business model is one step toward this goal.

The next table shows the gains from the current positions and the closed position of ANAT along with dividends paid out.

Unfortunately the date was not updated to 9-29-2010 and average dollar profit should have been $267. But it does show that every position is positive so far, although of course some are very low.



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