Monthly Archives: August 2015

New Buy: Omega Healthcare Investors (OHI)

The end of the month is an exciting time as it means the arrival of fresh capital that can be used to buy new stocks. This month I decided to load up on 20 shares of Omega Healthcare Investors (OHI), a US-based healthcare REIT specialized in skilled nursing facilities.

The REIT has a strong history of creating shareholder value, over the past ten years its share price has soared 168.85% while the quarterly dividend increased from $0.22 in late 2005 to $0.55 for the most recent payout. Outside of the strong fundamentals, one of the things I like about OHI is that the company has managed to increase its dividend nearly every quarter for the last couple of years! The stock currently yields around 6.40% and increases its dividend by about one cent per quarter.

Unfortunately, I could only pick up 20 shares this month as I need to set aside some money for a hefty property tax bill next month. Based on this quarter’s payout these 20 shares increase my total yearly dividend income by about 25EUR after taxes.

On a related note, the weekend started really good as Belgian lingerie maker Van de Velde announced an interim-dividend of 1.35EUR per share. I didn’t expect them to pay an interim dividend so this is a nice piece of extra dividend income for 2015.

OHI_logo_big

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The Watchlist Part 2: Royal DSM

Originally intended to be a single blog post, my list of potential future investment candidates quickly turned into quite a lot of more words than expected. I chopped up the first part in this post about Google and yesterday I finished a second part about Koninklijke DSM, a Dutch chemicals firm focused on nutrition supplements and high-tech materials.

This article has been published at Seeking Alpha, you can read it at 3.24% Yield From Dutch Specialty Chemical Maker DSM.

The Watch List: Google / Alphabet (GOOG)

When I started writing this post it was my intention to make this a list post, with a brief overview of several companies I’m considering buying at some point in the future. I like to keep my blog posts relatively brief so I decided to split the original post into a little series called The Watch List.

This series will not include energy stocks as I already have more than enough oil & gas related stocks for the time being. Stocks I already own aren’t part of the scope of these post but if opportunity arises I’d like to increase my positions in several stock, including Coca Cola (KO) and Unilever (ULVR).

Google

Google/Alphabet (GOOG)
This is far from a dividend growth stock, in fact they don’t even pay a dividend, but since Google won the search engine war in the early 2000s it has always been one of my favorite companies. In many ways Google had a tremendous impact on the Internet but in its early days no one expected the company would become what it is today. That is until Google came up with its ingenious, wildly profitable advertising model and turned into a company generating billion dollar profits.

Google was almost the first stock I bought sometime in 2005 but I was a total newbie to investing and didn’t go through with it. Partly because transaction costs in my country were so high back then but also because Google’s share price continued to soar. Looking back, it would have been a major winner as its share price more than quintupled versus a decade ago. But as I had no real strategy back then, had I bought it I would probably have sold it a long time ago after a double-digit gain.

Mayhaps they’ll initiate a dividend sometime in the future to return cash to the shareholder, they’re currently sitting on almost $70 billion in cash, but this is far from certain. The company seems intent on growing in all sorts of directions, no matter how crazy, especially with the new Alphabet corporate structure.

If Page and Brin can continue to work their magic, perhaps Alphabet may eventually turn into a tech-oriented version of Berkshire Hathaway. Although there are worries Google does not take shareholders at heart as some see several moves of the company as a way for the founders to increase their control (see the Google share classes) and as a method of reducing scrutiny over the countless unrelated and/or profitless projects the search firm has.

Then again, crazy investments are what made Google what it is today. Twelve years ago Google bought Applied Semantics for $102 million in an effort to improve its online advertising technology. That acquisition turned into Google’s Adsense advertising program and is now pulling in quarterly revenue north of $3.6 billion and hundreds of millions in profit.

With revenue growth slowing to the low teens (partly due to currency impact) and a P/E of around 33 a large investment in this stock seems hard to justify. However, if analysts are correct Google’s growth profile places the forward P/E for 2016 at a much more reasonable figure of just under 20.

I’m not sure if I’m going to initiate a position anytime soon but this is one of the few non-dividend paying stocks I’m considering for my portfolio.

Dividend income August 2015

The month is barely half-way but I just received my last two dividends for August. Just three of the companies in my portfolio pay a dividend in August so this month’s dividend income is rather small.

  • YUM! Brands (YUM): 3.56EUR
  • Kinder Morgan (KMI): 17.46EUR
  • Colgate-Palmolive (CL): 3.58EUR

In total that’s 24.6EUR in dividend income for August, which will be re-invested with my next purchase. The last couple of months I bought a load of RDSB stock but this month I’m going to diversify a bit outside the oil and gas patch.

New buy and crossed the 1000EUR mark!

I couldn’t help myself and loaded up 30 more Royal Dutch Shell (RDSB) shares yielding 6.4% at the end of this work week. With a dividend of $1.88 per share, this increases my forward dividend income by $42.3 after taxes or around 38.41EUR with the current EUR/USD rate.

This company doesn’t need much introduction, it’s one of the largest corporations in the world and I already discussed some of my reasons for buying it in previous posts. I like it for its quarterly distributions, the current high yield, its very long and reliable history of paying dividends, its commitment to shareholders and the favorable dividend tax conditions from my Belgian point of view.

Shell presented its second quarter results on Thursday, management once again stressed its commitment to the shareholder. The dividend will remain the same this year and at least the same amount in 2016, and the firm also reiterated its commitment to commence a big stock buyback once BG Group is integrated in 2017.

The company is pulling levers to increase its profitability in today’ oil market downturn and its earnings were actually a bit better than anticipated. Adjusted net income was 61 cents per ordinary share, 37 percent lower than a year before but much better than the analyst consensus of 46.5 cents. I feel my relatively large position in Shell carries an above-average risk in my portfolio but I believe the risk/reward makes it worth it.

deep water rig

I started dividend growth investing almost a year ago and it’s exciting to see the numbers are starting to get meaningful. Based on all current dividend announcements from the companies in my portfolio, I expect to receive a forward yearly dividend income of €167.9 plus $812.75 plus £67.2 in 2016.

Adding it all up this gives a dividend income of 1,001.51EUR for 2016 but the exact figure depends a lot on the currency exchange rates of course. The actual figure will probably be several hundred euros higher due to the new stock purchases, dividend reinvestment and dividend increases. The next major milestone is going to be 1,200EUR, as this corresponds to an extra income of 100EUR a month.