To start, I was not expecting to be this busy in back to back days. I made more portfolio changes this month. I highlighted the changes I made on the 27th – adding more Ameriprise and starting a position in Williams-Sonoma. On Friday the 28th, much of the healthcare sector was in an uproar after McKesson (MCK) reported much lower profits than expected.
So after reading their quarterly and seeing they took a large goodwill writedown (in the range of $1.20/share), their quarter would have been OK otherwise. This was now an opportunity!
Added More Cardinal Health
I already owned Cardinal Health (CAH) which is already a dividend contender (20 year growth streak). The stock was down about 10% on the day so I added another 25 shares @ 66.74. Here’s how Cardinal Health ranks on SimplySafeDividends, better than 98/99% of companies in terms of safety and growth, I’ll take it!
Amgen (AMGN) was another name that was down about 10% after their quarterly report was not viewed positively. The biggest thing they highlighted was not being able to keep raising prices on their major drug Embrel. Being in it for the long haul this seemed like another reasonable opportunity to add. The company’s dividend history is only 6 years but it is well covered. I added another 10 shares to my existing 10. Amgen has very similar ranks to Cardinal Health, better in terms of safety and growth than nearly every other company which offering a modest yield.
Finally, I decided to sell my entire stake in Occidental Petroleum (OXY). I have not been a fan of the oil sector and it was a mistake getting into it. I had purchased many names as the falling knife of oil prices was still falling. I’ll have to sit and figure out my exact gain/loss, I expect it to be a small loss overall, I had some reinvested shares help me out but at this point I fully expect they will have to cut their dividend. At that point I expect the stock price to crater as the market generally seems to be propping up shares.
The company fares poorly in their dividend safety metric. This in turn makes it in the worst percentile for dividend growth. I think the high yield score is a red herring that will vanish as they are forced to cut the dividend. They are expanding their balance sheet in order to pay it which can only happen for so long. One metric to look at is free cash flow, well they lost over $2.50 a share in 2015 as low oil prices crushed the business. This is before they paid out an additional $2.97 in dividends per share.
In this case, being able to sell at roughly break even or a small loss is a decent trade off. Doing so, I can apply the capital to companies that are more financially sound and less dependent on commodity prices.