Thursday, June 30, 2016

Replacing Mocon with Disney in my DSPP/loyal3 monthly investment plan

This move was long overdue. It came to pass that Mocon (MOCO) has lost its growth momentum, earnings have been flat or worse for the past decade, ROE sucks, and dividend yield and payout ratio are high and unsustainable. It had to go.

I wanted to keep my overall investment level at $3500 a month, and looked to see if I could increase allocation to any of my current stock not already at the $200/mo level. I failed to identify any good candidate for such increase, as any potential candidates were either too risky, yielding too much (3% or more), not rated highly enough, or had a very lofty P/E. So I looked again at the loyal3 offering, found Disney which I liked, and added it to my plan.

Disney is a wide moat stock with a low dividend yield under 2% and spends about thrice as much cash buying back stock instead of paying out dividend. Lower dividend payout during my wealth accumulation stage helps to lower my tax liabilities and allows me to reach financial independence sooner.

My revised plan is now as follows:

TickerRatingDGIDiscount?Shiller P/EYieldMonthly InvestSectorSector TotalSector Percent
NVSA1BN17.293.30%$200.00Healthcare
$400.00
11.43%
SNYA2BN21.643.97%$100.00Healthcare
BDXB+2AN32.081.56%$100.00Healthcare
KOA+1AN25.413.10%$200.00Staples
$700.00
20.00%
WMTA1AN16.362.74%$200.00Staples
BUDA+2CN26.433.05%$100.00Staples
PEPA1AN26.272.86%$100.00Staples
ULA1DN24.613.01%$100.00Staples
XOMB+1AN12.603.21%$200.00Energy$200.005.71%
BRK.BA+2DN23.330.00%$200.00Financial
$650.00
18.57%
AFLB3AN14.302.29%$200.00Financial
HCNB2BY50.184.53%$150.00Financial
NNNDAY33.733.39%$100.00Financial
INTCA2DN17.953.19%$100.00Tech
$200.00
5.71%
MSFTA2BN23.582.82%$100.00Tech
EMRA2AN16.983.67%$200.00Industrial
$500.00
14.29%
NSCA2BN16.922.79%$150.00Industrial
VMIDBN21.551.12%$150.00Industrial
EXCB2DN11.183.55%$100.00Utility
$200.00
5.71%
YORWDBY41.241.97%$100.00Utility
VFCA+2AN30.392.43%$150.00Discretionary
$550.00
15.71%
NKEA+2BN42.981.16%$150.00Discretionary
MCDA2AN25.932.96%$150.00Discretionary
DISA2CN30.251.45%$100.00Discretionary
SONC2AN23.143.02%$100.00Material$100.002.86%
Total22.582.65%$3,500.00$3,500.00100.00%
Rating$%DGI$%
A$2,30066%A$1,70049%
B$75021%B$1,10031%
C$1003%C$2006%
D$35010%D$50014%
Total$3,500100%$3,500100%
Rating is based on Morningstar as follows:
A=Wide Moat; B=Narrow Moat; C=No Moat; D=Not rated by Morningstar
+=Exemplary; [blank]=Standard; -=Poor stewardship
1=Low; 2=Medium; 3=High; 4=Very High uncertainty
DGI (Dividend Growth investing) as follows:
A=25+ years of higher dividends;
B=10-24 years of higher dividends;
C=5-9 years of higher dividends;
D= less than 5 years of higher dividends.

Quality improved with this move, with A-rated stocks (wide moat) now comprising two-third of my monthly investment plan. Weighted average yield is 2.65%, which is not bad, though could be lower. I will continue to look for opportunities to replace higher cash dividend payout stocks with lower cash yield and higher buyback stocks. 

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