Except for the nibble discussed in Item # 9, trades made last week through Thursday will be discussed in the next weekly post. I am currently running about a week behind.
Big Picture Synopsis:
Big Picture Synopsis:
Stocks:
Stable Vix Pattern (Bullish)
Vix Asset Allocation Model Explained Simply
Use of the VIX as a Timing Model
Short Term: Hoping for a 15%+ correction
Intermediate Term: Slightly Bullish
Long Term: Bullish
What can you say, enjoy while it lasts. But, remember the old tried and true saying about sex and the stock market. CNBC
Bonds:
Short Term: Neutral to Slightly Bearish
Stable Vix Pattern (Bullish)
Vix Asset Allocation Model Explained Simply
Use of the VIX as a Timing Model
Short Term: Hoping for a 15%+ correction
Intermediate Term: Slightly Bullish
Long Term: Bullish
What can you say, enjoy while it lasts. But, remember the old tried and true saying about sex and the stock market. CNBC
Bonds:
Short Term: Neutral to Slightly Bearish
Intermediate and LongTerm: Slightly Bearish (based on Interest Rate Normalization)
The Difficult Path to Interest Rate Normalization
The bond forecast assumes that the average annual CPI rate will be 2% to 2.25% over the next ten years. That has been the recent forecast range embodied in the pricing of the 10 year TIP.
The Difficult Path to Interest Rate Normalization
The bond forecast assumes that the average annual CPI rate will be 2% to 2.25% over the next ten years. That has been the recent forecast range embodied in the pricing of the 10 year TIP.
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Recent Developments:
BDC's declined last Tuesday (2/25) after S & P announced that they would be removed from all S & P U.S. indexes effective 3/21/14. usmethodologychanges.pdf
The Case Shiller 20 city index showed a 13.4% Y-O-Y increase in home prices for December.
Emerging market stocks got a boost last Thursday after Brazil reported a better than expected .7% increase in 4th quarter GDP. Bloomberg
As expected, the government's second estimate of 2013 4th quarter real GDP growth was revised down to 2.4% from the first estimate's 3.2%. Current dollar GDP was up 4%. News Release: Gross Domestic Product Real personal consumption expenditures increased 2.6%. The gross domestic purchase price index increased to 1.5 from 1.2 made in the first estimate.
To keep Ukraine in perspective, I would summarize some statistics mentioned by Randall Forsyth in his Barrons' column. Ukraine's stock market has a capitalization about one-half the size of Disney; a GDP one-fifth the size of Turkey (another problem area at the moment); and per capita income at about one-half of Russia's. Russia already has a military presence in Crimea, including a naval base, in that area which is part of Ukraine' territory.
The West will avoid any military confrontation with Russia, even if Russia sent tanks into Kiev. A Russian military move into areas outside Crimea could start a civil war which would not be in Russia's interest. (see map at Latest Updates on Ukraine Crisis - NYTimes.com)
Russia's military invasion of a sovereign nation is likely to be limited to the Crimea peninsula. NYT That peninsula will become even more autonomous than it is now, probably a pro-Russian puppet state, or possibly absorbed formally into Russia.
Russia's aggression is a clear violation of the pact, known as the Budapest Memorandums, wherein it unequivocally agreed to respect Ukraine's territorial integrity and "to refrain from the threat or use of force against the territorial integrity" of Ukraine. Putin is not going to allow a piece of paper to stand in his way.
A Russian military incursion into eastern Ukraine, where a large part of the population is pro-Russian, could light a powder keg and would be counterproductive for Russia. Nonetheless, Russia may miscalculate, and it does appear that it is attempting to promote separatists in eastern Ukraine which could lead to a civil war.
To keep Ukraine in perspective, I would summarize some statistics mentioned by Randall Forsyth in his Barrons' column. Ukraine's stock market has a capitalization about one-half the size of Disney; a GDP one-fifth the size of Turkey (another problem area at the moment); and per capita income at about one-half of Russia's. Russia already has a military presence in Crimea, including a naval base, in that area which is part of Ukraine' territory.
The West will avoid any military confrontation with Russia, even if Russia sent tanks into Kiev. A Russian military move into areas outside Crimea could start a civil war which would not be in Russia's interest. (see map at Latest Updates on Ukraine Crisis - NYTimes.com)
Russia's military invasion of a sovereign nation is likely to be limited to the Crimea peninsula. NYT That peninsula will become even more autonomous than it is now, probably a pro-Russian puppet state, or possibly absorbed formally into Russia.
Russia's aggression is a clear violation of the pact, known as the Budapest Memorandums, wherein it unequivocally agreed to respect Ukraine's territorial integrity and "to refrain from the threat or use of force against the territorial integrity" of Ukraine. Putin is not going to allow a piece of paper to stand in his way.
A Russian military incursion into eastern Ukraine, where a large part of the population is pro-Russian, could light a powder keg and would be counterproductive for Russia. Nonetheless, Russia may miscalculate, and it does appear that it is attempting to promote separatists in eastern Ukraine which could lead to a civil war.
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Novartis (own):
NVS did something last week the Old Geezer really likes. The stock went ex dividend for its annual dividend of $2.7186 and gained almost all of that in share price appreciation on the ex dividend date and last Friday.
My last purchase was in December: Item # 1 Bought: 50 NVS at $76.72 (12/23/13 Post)
Closing Price Day Before Ex (2/26/14): $83.41 NVS Historical Prices
Last Friday's Closing Price: NVS: $83.18 +0.63 (+0.76%)
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Citigroup 3.00% Principal Protected Notes linked to Russell 2000 Index (MOU)(own):
I suspect Citigroup will rejoice some when it redeems this senior unsecured note in a few days. This exchange traded bond has a $10 par value and will mature on 3/10/14. Pricing Supplement
MOU is in its final annual coupon period which ends today. The closing price of the Russell 2000 today will determine the precise amount of the final coupon.
If the Russell closed today at last Friday's level of 1183.03, the coupon would be 29.08%. This annual period will be my second good payday for this senior unsecured note. I received a 27.93% coupon in February 2011 (snapshot at MBC & MOU)
I bought this security in April 2010 at $10.12, so I will lose about $20 when the bond is redeemed at $10. I will end up receiving over 70% in interest, with two annual coupons accounting for most of that total, which is a good trade off for me.
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Novartis (own):
NVS did something last week the Old Geezer really likes. The stock went ex dividend for its annual dividend of $2.7186 and gained almost all of that in share price appreciation on the ex dividend date and last Friday.
My last purchase was in December: Item # 1 Bought: 50 NVS at $76.72 (12/23/13 Post)
Closing Price Day Before Ex (2/26/14): $83.41 NVS Historical Prices
Last Friday's Closing Price: NVS: $83.18 +0.63 (+0.76%)
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Citigroup 3.00% Principal Protected Notes linked to Russell 2000 Index (MOU)(own):
I suspect Citigroup will rejoice some when it redeems this senior unsecured note in a few days. This exchange traded bond has a $10 par value and will mature on 3/10/14. Pricing Supplement
MOU is in its final annual coupon period which ends today. The closing price of the Russell 2000 today will determine the precise amount of the final coupon.
If the Russell closed today at last Friday's level of 1183.03, the coupon would be 29.08%. This annual period will be my second good payday for this senior unsecured note. I received a 27.93% coupon in February 2011 (snapshot at MBC & MOU)
I bought this security in April 2010 at $10.12, so I will lose about $20 when the bond is redeemed at $10. I will end up receiving over 70% in interest, with two annual coupons accounting for most of that total, which is a good trade off for me.
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Snapshot of Trade:
Company Description: Dundee Real Estate Investment Trust (D.UN:TOR) is a Canadian REIT that owns "high quality" office buildings "in key markets across Canada" with approximately 24.5M square feet of leasable area.
Dundee REIT
As with other Canadian REITs that I own, distributions are paid monthly. The current distribution rate is C$.1866 per unit. 2013 Distribution History; Dundee REIT January 2014 Monthly Distribution The dividend was raised from C$.183 in March 2013. That rate was in effect between July 2003 to March 2013.
So I will give this REIT a hand clap since there was no dividend cut during or after the Near Depression. I would give it, however, a failing grade on dividend growth.
At a total cost of C$29.35, the yield at the current monthly rate of C$.1866 is decent at 7.63%.
The stock went ex dividend for its monthly distribution shortly after my purchase:
The dividend is paid to me in Canadian Dollars after a 15% withholding tax.
Quote Toronto Stock Exchange
Toronto Exchange Stock Chart
On 4/30/13, the units closed at C$37.01 and hit C$27.14 in early December. REITs in both Canada and the U.S. experienced similar declines when rates started to rise last May.
Last January, Dundee sold C$150M of 4.074% senior unsecured bonds maturing in 2020. Dundee Announces Completion of $150 Million Senior Unsecured Debenture
Generally, Dundee classifies a substantial part of the distribution as a return of capital. Taxation of Unitholders
A list of properties can be found in Table 2 of this supplemental information package to the 3rd quarter earnings release. dundeereit.com/Q3-2013-SIP.pdf
Prior Trades: None
Recent Earnings Report: For the 2013 third quarter, Dundee reported funds from operations of C$79.298M or $.73 per unit. AFFO was reported at $.63 per unit. The REIT made distributions of C$.56 per unit or 89% of AFFO. dundeereit.com/Q3-2013.pdf AFFO increased by C$7M or 11.4% over the prior year's comparative quarter. The AFFO calculation is made at page 35. Dundee states that it made C$13.8M in building improvements during the quarter, "substantially all of which are recoverable from tenants". (page 17)
As of 9/30/13, the in service occupancy rate was 94.6%; debt to gross book value was at 47%; interest rate coverage ratio (times) 2.7; and weighted average effective interest rate was at 4.22%.
Rental revenue from government and government agencies comprised approximately 17.8% of revenues (page 11)
Snapshot of major tenants (page 12):
Rationale: I am simply attempting to generate some income on my Canadian Dollar stash that earns nothing. The goal is simply to receive several dividend payments and then to sell this position for a 5% or greater profit after brokerage commissions.
Risks: I have emphasized many times the currency risk. The CAD has been falling in value against the USD. Since I am a long term holder of Canadian dollars, I am not concerned about these currency movements.
Since the average maturity of a REIT's debt will be generally in the 4 to 6 year range, eventually debt will have to be refinanced at higher rates than prevailing now. Dundee's average term to maturity is 4.6 years.
Occupancy levels tend to go down during recessions. Competition for tenants during such periods can restrain rent increases and require the granting of rent concessions.
The company discusses risks incident to its operations starting at page 43 of its 2012 Annual Report.pdf.
Closing Price 2/28/14: D-UN.TO: C$29.53 +0.17 (+0.58%)
2. Paired Trade: Sold 50 USBPRH at $20.55 and Bought 50 CORPRA at $23.9 (see Disclaimer): This paired trade was all about slightly increasing income generation.
Snapshots of Trades:
 |
| 2014 Bought 50 CORPRA at $23.9 |
 |
| 2014 Sold 50 USBPRH at $20.55 |
USBPRH Profit:
 |
| 2014 USBPRH 50 Shares +$70.09 |
Item # 6 Bought 50 USBPRH at $18.83 (9/7/13 Post)
Security Descriptions: The U.S. Bancorp Non-Cumulative Perpetual Preferred Series B (USB.PH) is an equity preferred stock that pays qualified and non-cumulative dividends at the greater of 3.5% or .6% above the 3 month Libor rate on a $25 par value. Prospectus
Given the likely longevity of the Fed's ZIRP policy and the relatively slow tightening cycle after ZIRP's end, I would expect the minimum coupon of 3.5% to be the applicable rate until 2017 or possibly later.
The Coresite Realty Corp. 7.25% Cumulative Preferred Series A (COR.PA) is an equity preferred stock issued by the REIT CoreSite Realty which owns data centers.
This security pays non-qualified and cumulative dividends at the fixed coupon rate of 7.25% on a $25 par value.
The prospectus contains dividend stopper (S-22) and change of controls provisions.
Prospectus
Prior USBPRH Trades: I do not favor this equity preferred stock. I have infrequently bought shares, and only in very minuscule amounts. The minimum coupon at 3.5% and the float at a .6% spread to the 3 month Libor rate are inferior to most other exchange traded equity preferred floaters, though the credit quality is better than most of the others. The combination of a low minimum coupon and a relatively low Libor float makes this one somewhat unappealing for income generation.
Item #5 BOUGHT 50 USBPRH at $17.47 (September 2009)-Item # 2 Sold USHPRH at $20.35 (June 2010); Item # 1 SOLD 30 USBPRH AT $21.84 (August 2011)-Item # 2 Bought: USBPRH at $18.12 (August 2011)
Notwithstanding my lack of enthusiasm, I have clipped some coupons and realized $292.8 in gains from my inconsequential involvement. ($223.71 prior trades, snapshots in Item 6 of 9/17/13 post, linked above)
Prior CoreSite Trades: None
Recent Earnings Report: For the 2013 4th quarter, Coresite reported a 16.7% increase in FFO per share to $.49. Revenues increased 11.2% to $61.4M. The quarterly common share dividend was increased 30% to $.35 per share. The company maintained 2014 core FFO guidance at $2 to $2.1 per share.
SEC Filed Press Release
Earnings Call Transcript - Seeking Alpha
Rationale: This may sound like a broken record, but the reason for buying this security is the same as several recent REIT preferred buys.
The dividend yield is decent. At a total cost of $23.9, the yield is about 7.58%.
The dividends are cumulative.
The REIT has to pay cash dividends to the common shareholders when it has net income in order to maintain its tax status. The preferred stock owner has to be paid in full as long as the common shareholders receive any cash dividend, irrespective of the amount.
Unlike Mortgage REITs, equity REITs own property that will generally have a market value significantly above the total outstanding debt. In a BK, assuming no forced liquidation at the worst possible time (e.g. a depression), the common shareholders may get their equity wiped out but there still may be something left for the preferred shareholders. The liquidation preference clause, found at page S-7, gives the preferred shareholder a "liquidation" preference over the common share owners. In other words, if a Mortgage REIT or a bank holding company went into BK, I would anticipate that their preferred stocks would become worthless, as their debt will far exceed the equity, but a REIT that owns property may have some value for the preferred shareholder even in a BK, so the downside risk may not be zero, with the recoverable value in a BK ultimately dependent of course on the circumstances then existing which are not known now and may never come to pass in my lifetime anyway.
Risks: Risks relating to the preferred stock are discussed by the company starting at page S-12. Coresite discusses risks incident to its operations starting at page 17 of its recently filed 2013 Annual Report, SEC Form 10-K
Interest rate and volatility risks are probably the most important risks at the moment. Volatility can be caused by concerns or fears relating primarily to interest rates or creditworthiness or both. This preferred stock was trading largely between $26-$27 in April/May 2013. COR.PA Stock Chart
Future Buys and Sells: I would probably sell on a pop over par value, given my outlook on rates, and would consider averaging down when and if the dividend yield exceeds 8%.
Closing Prices Friday 2/28/14:
USB-PH: $20.55 +0.02 (+0.10%)
COR-PA: $24.11 +0.10 (+0.42%)
3. Sold 100 DRE at $16.57 (see Disclaimer):
Snapshot of Trade:
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| 2014 Sold 100 DRE at $16.57 |
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| 2014 DRE 100 Shares +$142.47 |
I received one quarterly dividend payment:
Total Return=$159.47 or 10.58% annualized on a total cost of $1,506.75, realized in about one month.
Rationale: The primary purpose for selling DRE was profit taking. I also received one quarterly dividend. A secondary reason involves a yield increase, substituting the higher yielding DREPRL cumulative preferred stock which had a current yield advantage of almost 3% when I bought 50 shares. When discussing that trade, I mentioned that the purchase of DREPRL was a paired trade with the common. Item # 5 Bought 50 DREPRL at $23.78 (2/17/14 Post) That preferred stock went ex dividend shortly after my purchase.
Future Buys and Sells: I have mentioned that Duke Realty had some major problems during the last recession that caused a major dividend slash. While I believe that it has upside potential, I am still in a trading mode for the common shares.
No one can predict the future, but I suspect there will be another REIT rout coming up later this year caused by a currently unexpected fast and sharp increase in interest rates. The market is very sanguine now that interest rates will remain abnormally low for an extended period of time. I hope to buy back DRE shares in the $14 to $15 range later in 2014.
Closing Price Last Friday 2/28/14: DRE: $16.80 +0.33 (+2.00%)
4. Sold 50 NNNPRE at $21.14 -Roth IRA (see Disclaimer): NNN.PE is an equity preferred stock issued by National Retail Properties that pays quarterly cumulative and non-qualified dividends at the fixed coupon rate of 5.7% on a $25 par value.
Snapshot of Trade:
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| 2104 Roth IRA Sold 50 NNNPRE at $21.14 |
Snapshot of History:
Snapshot of Profit:
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| 2014 Roth IRA NNNPRE 50 Shares +$57.48 |
Rationale: At a total cost of $21.14, the dividend yield is about 6.74%. Given my views on interest rates, I view it as more likely than not that I will have an opportunity to buy this one back at less than $19 within a year. The realized gain is close to three dividend payments on 50 shares, so I realized in effect a year's worth of dividends in about 5 months. I am playing these low yielding perpetual preferred stocks close to the vest.
Closing Price Last Friday: NNN-PE: 20.61 -0.02 (-0.10%)(ex dividend 2/26/14)
5. Sold 50 TCPC at $17.8 Roth IRA (see Disclaimer):
Snapshot of Trade:
Snapshot of History Before Trade:
Snapshot of Profit:
 |
| 2014 Roth IRA 50 TCPC +$93.98 |
Dividends Received: $56.5
Total Return: $150.48 or 19% based on total cost of $789.
Rationale: As of 9/30/13, the net asset value per share was reported at $15.06. SEC Form 10-Q at page 2 The $17.8 market price was well in excess of 5% of that number which is one condition underlying a BDC sell when owned in a retirement account. I calculated the premium at 18.19%. While I expected this premium to narrow when TCPC reported 4th quarter results, it would be reasonable to forecast only a small increase, given the history of this BDC. The net asset value per share was $14.71 as of 12/31/12, and $14.7 as of 6/30/12.
I also realized a profit on the shares and a greater than 10% annualized return on this investment, the remaining conditions.
There is ongoing cash raise occurring in the retirement accounts as I become even more concerned about interest rate risks balanced against current yields.
Closing Price Last Friday: TCPC: $17.68 -0.01 (-0.06%)
6. Bought 150 IRC at $10.35-Satellite Taxable Account (see Disclaimer):
Snapshot of Trade:
 |
| 2014 Email Confirmation |
Company Description: The Inland Real Estate Corp. (IRC) is a small REIT that is owns retail centers in the Midwest. IRC owned interests in 161 properties with 15M square feet of leasable space as of 9/30/13. About 60% of the portfolio is concentrated in the Chicago metropolitan areas and another 18% in the St. Paul-Minneapolis area. Corporate Profile
Company Website: Inland Real Estate
Inland Real Estate recently declared its regular monthly dividend of $.0475 per share which went ex dividend on 2/26/14.
I view this REIT's dividend history extremely negatively for two reasons. First, there was a monthly dividend slash from $.08167 to $.0475, effective for the May 2009 payment. Second, the dividend has not been raised since that slash. Inland Real Estate Corporation (IRC) Dividend History or Inland Real Estate Corporation - Dividends
Tax Allocation of 2013 Cash Distributions
The long term chart shows a rise from $9.5 (May 2004) to $20.83 (February 2007), followed by a downward slope to a $6 and change bottom in March 2009. IRC Interactive Chart No stocks splits are shown on this YF interactive chart.
SEC Filed Investor Presentation November 2013
SEC Filed Press Release: Earnings 2013 3rd quarter
Prior Trades: None
Recent Earnings Release: For the 2013 4th quarter, Inland Real Estate reported FFO of $.19 per share. Consolidated same store net operating income increased by .4% for the quarter and 3.7% for the year. Total portfolio leased occupancy was at 95.2% as of 12/31/13.
Earnings Call Transcript - Seeking Alpha
Rationale: With the correction in REITs, I started to nibble when the price corrections fell into the 10% to 20% range. The correction in prices brought them back into rational valuations.
Inland combines income generation with a potential for very modest capital appreciation. The current dividend yield at a total cost of $10.35 is about 5.5%.
The valuation is reasonable based on 2013 FFO of $.95 per share. The current consensus estimate is for $.97 in 2014 and $1.01 in 2015. IRC Analyst Estimates
Risks: As mentioned above, the long term chart and dividend history are major negatives in my opinion. The current price has worked its way back to 2004 levels, the dividend was slashed in 2009 and has not been raised at all since that slash.
The company summarizes risks relating to its business starting at page 7 of its 2012 Annual Report filed with the SEC. IRC-12.31.2012-10-K
Future Buys/Sells: I am not likely to buy more given my views on the risk/potential reward balance. If and when I am able to realize a 10% annualized total return, I will consider harvesting it.
Closing Price Last Friday: IRC: $10.71 +0.29 (+2.78%)(ex dividend 2/26/14)
7. Bought 100 Full Circle Capital (FULL) at $7.8 (see Disclaimer): I view this BDC with some trepidation.
Snapshot of Trade:
Company Description: Full Circle Capital Corp. (FULL) is a small BDC that invests in asset backed senior secured loans and to "a lesser extent" mezzanine loans and equity securities issued by small and lower middle market companies.
Full Circle Capital Profile Page at Reuters
Full Circle Capital Key Developments Page at Reuters
Company Website: Full Circle Capital
Full Circle CapitalDividend History
Full Circle started paying monthly dividends at $.075 effective July 2011. That rate was raised to $.077 in October 2011 and then cut to $.067 effective for the February 2014 payment.
In January 2104, Full Circle sold 1.8923M shares, raising gross proceeds of $13.5M. The offering price was $7.13 per share. Full Circle Capital Announces Full Exercise of Option to Purchase Additional Shares of Common Stock
In June 2013, the company sold $21+M in principal amount of 8.25% senior unsecured notes maturing in 2020. Prospectus
Full Circle Capital Corp. 8.25% Notes due 2020 (FULLL)
This is a link to a recent Seeking Alpha article discussing Full Circle. The capital raise in January was to fund a $7.5M senior convertible note issued by Advanced Cannabis Solutions (CANN), a company that provides solutions to the regulated cannabis industry. At least 95% of the proceeds from the note will be used to acquire properties to be leased to licensed cannabis growers. Bloomberg The amount of the note can be increased by $22.5M by mutual agreement. The loan will be secured by the real estate acquired with those funds. Advanced Cannabis Solutions, Inc. Secures $30 Million Credit Facility; Bloomberg; WSJ.com
Prior Trades: None
Last Earnings Report: For the second 2014 fiscal quarter, which ended on 12/31/13, Full Circle reported total investment income of $4M, up 29% from the year ago quarter, and net investment income of $1.9M or $.25 per share. This BDC paid monthly dividends of $.067 per share or $.201 for the quarter. The weighted average portfolio interest rate was 12.48% as of 12/31/13, with 90% of the BDC's investments being either first or second lien secured loans. About 78% of the loan portfolio at fair value bore interest at floating rates. Net asset value per share was reported at $7.09, down from $8.01 as of 6/30/13. That decline was one major reason for the small investment. The change in unrealized loss on investments was $2.627+M or $.34 per share related primarily to Full Circle's investments in ProGrade Ammo and Modular Process Control. SEC Filed Press Release
Earnings Call Transcript - Seeking Alpha
SEC Form 10-Q for the Q/E 12/31/13 (list of investments starting at page 6)
Rationale: This was a timid buy. As with other BDCs, I have a modest goal of a 10% annualized return which can be captured by simply selling the shares at break-even after collecting one year of dividends. Any profit on the shares would be viewed as a bonus.
Assuming no further dividend cuts, the yield at a total cost of $7.8 is about 10.31%.
I view the recent investment in real estate leased to licensed marijuana dealers to be primarily a gimmick, though a potentially profitable one. That initiative may draw individual investors to this BDC and drive some upward movement in price.
Risks: As noted above, the net asset value per share suffered a significant decline in the 2013 second half. That fact alone highlights the risk. The size of the unrealized losses are a matter of concern given the small size of this BDC.
The purchase at 7.8 was at a 9.1% premium to net asset value per share as of 12/31/13, which is viewed as too high, a second reason for the small purchase.
The company discusses risks incident to its operations starting at page 29 of the 2013 fiscal year Annual Report: 10-k Again, I would highlight the discussion about conflicts of interest, staring at page 31, and the recognition that its investments are "highly speculative" (see pages 39-44)
Another known risk for BDCs is a constant stream of share issuances. Subsequent to my purchase, Full Circle sold 630,000 shares at $7.81 to institutional investors.
The dividend cut earlier this year is also a major negative in my opinion.
Future Buys and Sells: I am at my limit with this 100 share purchase. I view the risks as significantly higher than most other BDCs which I view as a risky and disfavored asset class. I am hoping for a 10% annualized total return within 12 months and will consider selling this stock when and if that objective is hit.
Friday's Closing Price: FULL: $8.15 -0.08 (-0.97%)
8. Bought 50 KWN at $24.78 (see disclaimer): I recently discussed this exchange traded senior bond when I added 50 shares in the Roth IRA: Item # 5 Added 50 KWN at $23.79 -Roth IRA
This last purchase was made in a taxable account. I now own 150 shares of this bond.
Snapshot of Trade:
 |
| 2014 Bought 50 KWN at $24.78 |
The Kennedy-Wilson Holdings Inc. 7.75% Senior Notes due 2042 (KWN) is a senior unsecured bond issued by Kennedy-Wilson Holdings (KW). Interest is paid quarterly based on the fixed coupon rate of 7.75% on a $25 par value. Prospectus Supplement The current yield at a total cost of $24.78 would be slightly more than the coupon.
Company Website: Home - Kennedy Wilson
Profile Page at Reuters: Kennedy-Wilson Holdings Inc (KW)
Reuters reported in February that KW planned to raise as much as 750M pounds from a stock market listing of its European property unit.
This bond was purchased as a paired trade but the sell side of that trade was not filled on the day of KWN's purchase.
Friday's Closing Price: KWN: 24.95 -0.03 (-0.12%)
9. Bought 30 DLR at $53.4 (see Disclaimer):
Snapshot of Trade:
 |
| 2014 Bought 30 DLR at $53.4 |
Digital Realty Trust Profile Page at Reuters
Company Website: Digital Realty
Locations of Data Centers: Data Center Solutions
I view it as important, when doing due diligence, to review earnings reports when I am considering a buy of an equity preferred stock or bond. The focus of that review is different compared to the valuation issues associated with the purchase of a common stock. When purchasing an equity preferred stock or bond, I review the earnings report in order to make an assessment of credit worthiness and the likelihood of being paid distributions. An investor in equity preferred stock does not have an ownership stake in the business so I do not need to formulate an opinion on whether a price is fair for the equity slice represented by a share of common stock.
After reviewing Digital Realty in connection with the preferred stock buy, I decided to start a position in the common shares. Initially, I was going to buy 50 shares, and I then decided to buy up to 60 shares in two 30 share lots. If and when the price falls below $50, assuming no material adverse development, I would consider buying the other 30 shares.
I am hesitant since this REIT has an ugly looking one year chart, DLR Interactive Chart, even though 4th quarter FFO handily beat expectations with DLR maintaining its prior guidance on 2014 FFO. Digital Realty Reports Fourth Quarter And Full-Year 2013 Results
Earnings Call Transcript - Seeking Alpha
At the time of my purchase, the stock was bumping up against the 200 day SMA and was having difficulty piercing that line to the upside. The stock started the day like it was going to make a run for that line at $54.34, trading up to $54.05 before turning around and retreating to an intra-day low of $53. Ultimately, the stock worked its way back up to close at $53.71.
The consensus FFO per share estimate was $4.86 for 2014 and $5.24 for 2015. DLR Analyst Estimates Assuming those estimates prove prescient, a $53.4 price for a common share appears reasonable to me.
DLR has what I would call a very robust history of dividend growth for a REIT. Digital Realty Trust, Inc. (DLR) Dividend History - NASDAQ.com The quarterly dividend was $.2475 in 2005 and was recently raised to $.83 per share from $.78. Digital Realty Increases Quarterly Common Stock Dividend by 6% to $0.83 per share The next ex dividend date is 3/14/14, according to Marketwatch.
At the current quarterly rate of $.83 per share, the dividend yield at a total cost of $53.4 is about 6.22%.
The company discusses risks incident to its business starting at page 8 of its 2012 Annual Report filed with the SEC: Form 10-K
Friday's Closing Price: DLR: $54.16 +0.45 (+0.84%)
