Diego Tomazini
RIG = Rose’s Income Garden
Rose’s Income Garden (“RIG”) is a defensive, income-quality, value-built portfolio that includes 82 stocks from all 11 sectors. Yes, that number is down from 88, as I mentioned in my August update. The September update will reveal the changes. RIG includes virtually all investment grade common stocks, but also includes high yielding (“HY”) business development companies (“BDCs”) and some unrated real estate investments. The goal is to keep 50% of income from defensive sectors/equities and maintain a minimum dividend yield of 4% or higher. The current yield is 5.3%.
August
As most people know, August was a red month, with almost all major indices down 4-7.5%.
September
Sorry…September continues to display its usual attributes of being the worst month for the market.
last week ended badly
SPY/ S&P500 -4.7%
Nasdaq -3.9%
DOW/ DJIA -4.1%
Dow Transport -8%
Russell 2000 -4.2%
There is one metric that continues to climb. Inflation remained in the 8% range, compared with 8.3% in the previous report. The Fed’s target for 2% inflation is likely not to be met any time soon, and he in particular seems like a far-fetched target to reach in 2022. This is where the difficulty begins.
Further rate hikes are imminent.
Yes, gas prices are down, but they’re still a lot more than they were 18 months ago.
Strategic oil reserves are being depleted to keep gas prices down. It’s working to some extent, but everyone needs to know that it can, and won’t, continue past the time of the November midterm elections.
Gas prices will rise again, just as utilities have already risen. Be prepared, it happens.
Recommended S&P Sector Allocation and Real Internal Growth
The chart below summarizes the proposed percentage allocations for the 11 market sectors from January 2022, and does not appear to have changed much from year to year. A little more recently, a link from Fidelity close to the allocations listed below suggests a large allocation of up to 27% to technology/technical/“IT”. The love of technology is big and real, with many segments to diversify technology widely. I admit it’s almost a foreign language to me as a senior citizen and I’ve never embraced it because I don’t fully understand it. I put off most of my purchases because I didn’t.
As mentioned earlier, RIG retains 50% of the revenue value from the defensive sector, and technology is not yet considered one of them. Healthcare, Telecoms, Consumer Goods, and Utilities (indicated by the % in bold) are the sectors I’m looking at for defense.
S&P 2022 | |
sector | January 31, 2022 % |
Information technology | 28.7 |
Health care | 13.1 |
Consumer discretion | 12 |
Finance | 11.3 |
communication | Ten |
industry | 7.8 |
Daily necessities | 6.1 |
energy | 3.4 |
real estate | 2.7 |
material | 2.5 |
utility | 2.5 |
Using the % allotment above, you get ~31.7% of the defense value from the selected sector. Even the technical quota of 28.7% is only slightly below. So my goals and what analysts, brokers, or others suggest will always be driven by personal needs, and with the Nasdaq dropping more than 27% below his I am happy to have sector requirements. The low allocation to utilities is particularly surprising, compared to a real internal growth rate of over 10%. Perhaps once the crash is over, we’ll look more into RIG’s tech stock when it becomes a real bargain. Now let’s talk about the RIG Technology stock.
RIG Technology Sector Stocks – 4
RIG has always had allocations to tech far below the recommended 27+% level which is considerably higher. I currently have 4 stocks at 5% value and 1.9% of earnings. It is very difficult to extract high income from the technology sector. The individual stock charts below are arranged in descending order of value.
The following abbreviations are used:
S&P Credit Rating: Standard & Poor’s credit rating
Current price $: Price at the closing price on Friday, September 16
2022 Div$: Known Annual Dividend
installment yield = dividend yield using list price and known dividends
Tech | |||||
stock | Company | S&P | At the present time | every year | EST |
ticker | name | Cr rating | price $ | split $ | installment yield |
(AVGO) | broadcom | BBB- | 502.5 | 16.4 | 3.26% |
(pose) | master Card | A+ | 315.13 | 1.96 | 0.62% |
(CSCO) | Cisco | AA- | 43.3 | 1.51 | 3.49% |
(5) | visa | AA- | 193.3 | 1.5 | 0.78% |
Two of the above, MA and V, are actually known as data or financial “fintech” stocks.
Therefore, RIG only has two pure tech-type stocks. Luckily, looking back last year, I sold Intel for his $50s. I kept his CSCO and still saw a drop in price.
Here’s how the current price compares to some analyst estimates and 52-week highs and lows.
$M*FV = Fair value of Morningstar
Yahoo Fin$ = Yahoo Finance analyst price target
stock | 52 weeks | 52 weeks | At the present time | $ | Yahoo |
ticker | low | high | price $ | M* FV | fin $ |
AVGO | $463.91 | $677.76 | 502.5 | 624 | $656.00 |
MA | $303.65 | $399.92 | 315.13 | 369 | 423 |
CSCOMore | $40.82 | $64.29 | 43.3 | 54 | $55.00 |
Ⅴ | $185.91 | $236.96 | 193.3 | 229 | $261.00 |
Analysts say they’re all undervalued and all are still above their 52-week lows.
Next is information about each of these stocks. The statistics listed are taken from the Subscriber Services FAST graph maintained by Chuck Carnevale.
broadcom
AVGO operates in two technology areas: semiconductor solutions and infrastructure software and is headquartered in San Jose, California.
Current P/E is 13.8 with a 5 year average of 15.2.
The current earnings per share yield is 7.25% with an earnings growth potential of 18.8%.
5-year dividend growth = 53.3%, last 2 years 16.7%.
The current dividend of $16.40 is proposed to be increased to $18.83, a 14.8% increase. It maintains a close to 50% payout ratio, which is a safe dividend.
The current yield is 3.26%. This means it is an excellent candidate for a buy and hold dividend investment with a return of 18% or more. I found this to be a very pleasant addition to his RIG and it came to my attention a few years ago very cheaply as a trading alert offer from a fortune teller on the service Wheel of Fortune.
It has an investment grade credit rating of BBB- and has many excellent attributes to maintain its RIG over the long term.
Cisco
Cisco is primarily involved in the design, manufacture and international distribution of Internet protocols for communications technology equipment. Incorporated in 1984, the company is headquartered in San Jose, California.
The current P/E is 12.8 with a five-year average of 15.4.
The current earnings-per-share yield is 7.8%, with earnings growth potential of 4.1%.
5-year dividend growth = 6.5%, last 2 years 2.8%.
The current dividend of $1.50 is proposed to be increased to $1.54, which is a 2.7% increase. It maintains a payout percentage of close to 45% which indicates that the payout is safe.
Due to the low valuation, it currently yields 3.5%. We would like to expect a higher dividend for a higher total return. It’s not a big position in RIG, but I’m holding it for now because of the AA- credit rating that adds to the quality and safe dividends that have been rising for 12 years now.
master Card
Mastercard is a technology company involved in financial transaction processing and payment solutions internationally. Incorporated in 1966, the company is headquartered in Purchase, NY. The city name is perfect for this company.
The current P/E is 31.9, with a five-year average of 35.8.
The current yield per share is 3.14% and the potential for earnings growth is 19.3%.
5-Year DGR “Dividend Growth Rate” = 18.5% vs. 15.6% over the last 2 years.
The current $1.96 dividend has been suggested to be raised to $2.04, but as the high DGR suggests, it will be much more, perhaps closer to $2.24 or so.
It maintains a payout percentage close to 20% which represents a very safe payout.
It currently yields 0.62% and much of its appeal lies in its excellent dividend growth. Usually always overrated, and now he’s down to a low of $303 at 52 weeks, but he’s still not there.
A+ credit rating gives points for quality and safe investments.
visa
Visa is a recognized global payments technology company founded in 1958 and headquartered in San Francisco, California.
The current P/E is 26.5 with a 5 year average of 33.
The current earnings per share yield is 3.77%, with earnings growth potential of 16.8%.
5-Year DGR “Dividend Growth Rate” = 18.15% vs. 13.3% over the last 2 years.
The current $1.50 dividend is proposed to be raised to $1.64, which equates to a smaller-than-usual 9.3% increase.
It maintains a payout percentage of close to 22% which represents a very safe payout.
It currently yields 0.78%, and much of its appeal lies in its high dividend growth and rising capital prices. It usually always looks expensive and is currently trending downwards, but still not low enough to match its 52-week low of $186.
AA- credit rating gives points for quality and safe investment.
sector
Almost all sectors are in bearish territory and the biggest winner is energy, which should remain so. The next best bet is utilities, some commodities, and almost even health care.
Luckily for Rose and RIG, they are aiming to get 50% of their income from the defensive sector. Goals are important and I put her RIG in defense.
Summary and conclusion
The portfolio continues to hold roughly even values, with an income yield of 5.3% and cash of 8.1%.
RIG is listed and remains exclusive in The Macro Trading Factory with two main portfolio offerings.
FMPs are only funds managed solely by The Macro Teller.
RIG, as previously mentioned, is primarily a stock and controlled by RoseNose.
Suitable for those who have little time/knowledge/desire to manage their own portfolio and/or who want a simpler way of exposure to the market in a more risk-oriented (less volatile) way.
Our portfolios across all sectors offer hassle-free solutions that are easy to understand and implement.
Included in RIG, I continue to seek quality low-debt/high-credit-rated companies and have either launched a ‘WTB’ or purchased a list of non-RIG stocks for subscribers to follow. I want to It also offers a low purchase price and a great value purchase price for add-ons to RIG.
The search for RIG candidates is always ongoing, with goals and details including:
– Quality dividend stocks.
– Underrated, but sometimes fair value for the extra quality.
– Low debt/very high credit rating.
– Payouts and cash flow to easily cover dividends as dividend growth increases.
– I am defensive in nature to products and services that I understand and can easily follow.
As the market is still volatile and weak, we cannot consider adding new positions right now, but the WTB list is always waiting for the right time. Cash should be king, so my actions are very consistent with keeping it and collecting dividends. The real internal growth rate is now 8.9%. With an established quality dividend portfolio like RIG’s, we are confident that dividends/income will continue to flow in as expected, with a valuation roller coaster ride and the aforementioned quality expectations and targets.
Happy investing for all.