Friday, April 29, 2011

RSY XXXIV:Update, More Alpha from Changes in Dividend Policy?

The table below is a summary of the RSY trades and dividend payouts since inception. Since the last update we added 100 shares of TOT at $61.07 on March 31st, and today added 600 shares of STM at $11.82 which was below our bid price of $11.99 along with 400 shares of TESS at $11.62. Hopefully, if you had an order in the morning it executed at the bid of $11.51, but if not and went with a market order you got it for $11.62. The RSY portfolio also recorded $367 in dividends for the month. This was led by $200 for IVR and $72 for CODI. (Click on tables for clearer images.)

The RSY portfolio has been holding onto the positions since last month as Sabrient has not downgraded any to Sell or Strong Sell. The table below shows the Sabrient ratings along with their respective growth, value, and momentum scores. Of course as discussed yesterday, the two new stocks are Strong Buys and the rest being mostly Hold with ARLP and TOT maintaining Buy ratings.


Can Dividend Policy Changes Yield Alpha?
Capital IQ asked the question above, that links to a PDF, about how policy changes with regards to dividends can yield alpha. Lots of interesting things for any dividend investor in the paper. For RSY, it shows that we are picking stocks that not only provide us with a steady stream of dividends but most of the older ones are increasing their payout dividends as the report says is a good thing. The stocks that have been increasing dividends lately are (in alphabetical order): ARLP increased their dividend from 79 cents in May 2010 to 81 to 83 to 86 to 89 cents this coming May 4th each quarter; GAIN recently increased their monthly dividend to 4.5 cents from 4 cents; CODI increased their dividends from 34 cents in January to 36 in March; FL increased their dividends from 15 cents in January to 16.5 cents paid out today; IVR increased it back to $1 from 97 cents; NGPC increased their dividend since purchasing it from 17 cents to 18 cents; TOT has been less consistent over time but the three most recent payouts have been $1.39, $1.54 and one set for May 18th of $1.577.

For dividend investors, there are two important points I wanted point out from the paper. First, the gains from stocks that initiate dividends is greater than those that increase dividend payouts. RSY has been focusing on consistent dividend paying stocks over at least a 3 year period. Secondly, stocks that have negative EPS that increase their payouts do the best overall in gaining alpha. That is another factor that the RSY portfolio avoids. It is also interesting to note that small cap stocks tend to gain more than large-cap stocks when changing their dividend policy. Overall we already knew that small-caps do better in the long-run.

RSY Current Holdings
The table below shows the current stock positions of RSY along with unrealized gains/losses. It shows a nice gain today and nearly $3500 in unrealized gains. ARLP accounted for most of it today and represents the largest unrealized gains stock. It did take a dive this last month dipping as low as just above $72. Sabrient continued to rate it a Strong-Buy or Buy during this time, so RSY held its position. It is also worth noting that FL has the second highest dollar gains, but back on February 1st the RSY portfolio took a $250 loss on half of the position.

The next table shows the percentage of each position held as compared to the whole portfolio including cash (assuming $100,000 portfolio to begin with). With 10 positions the RSY portfolio is starting to be more diversified, and with plenty of cash on hand we could easily add another 10 positions.


12 Favorite Oil & Natural Gas Dividend Stocks - Seeking Alpha

Gas Natural: Small Cap Roll-Up Utility Paying Monthly Dividends - Seeking Alpha

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