CADEPRA, FENY, GOOD, GOODN, IIPR, KBWY, KEY, KHC, RTL, STT, UNB, ZION

Economy: 

Existing-Home Sales Retreated 3.3% in June; Monthly Median Sales Price Reached Second-Highest Amount Ever; June existing home sales drop to the slowest pace in 14 years One reason for the decline is that existing homeowners do not want to sell and lose their low cost, long term mortgage rates. That has led to a rebound in new home sales even with higher mortgage rates. Homeowners Don’t Want to Sell, So the Market for Brand-New Homes Is Booming - WSJ

June New Home Purchase Mortgage Applications Increased 26.1 Percent | MBA

July 2023 Philadelphia Fed Region Manufacturing Business Outlook Survey (11th consecutive month of negative readings)

The U.S. Leading index fell for the 15th consecutive month. U.S. leading indicators point to recession starting soon | Reuters; US Leading Indicators (Press Release 7/20/23)

The Atlanta FED GDP model predicts 2.4% real GDP growth in the second quarter as of 7/19/23. GDPNow- Federal Reserve Bank of Atlanta

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Allocation Shifts Discussed in this Post: 

Corporate Bonds: $5,000 in principal amount 

Treasury Bills: $8,000 in principal amount

The purchase of Treasury bills will start to pick up significantly starting in August due to the volume of maturing securities. 

Net Outflow Individual Common Stocks: -$2,842.21

(consisting of $3,531.32 in proceeds minus $689.11 in purchases)

Stock ETFs: -$431.96

REIT ETF (KBWY): $94.95 (yield at 8.53% using last 12 monthly dividend payments)

Net Outflow Stocks/Stock Funds: -$3,178.22

Realized Gains Common Stocks/Stock Funds: +$647.54 

Weighted Average Yield Common Stock Purchases: 6.07%

Equity Preferred Stocks: +$358.5 (weighted yield at 8.45%)

2023 Net Outflow Stocks and Stock Funds: -$34,197.46 

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Psychopath Putin and His Servile Orcs: 

Gary Shteyngart: I Watched Russian Television for Five Days Straight - The Atlantic Putin TV is geared to turning ordinary Russians into delusional and violent psychopaths capable of committing war crimes and crimes against humanity on an industrial scale and to justify their actions based on the reality creation that they are protecting the Motherland.   

The Russian built bridge linking Russia to Crimea, which Russia illegally annexed in 2014, is a legitimate military target since it is used by the Orcs to supply their military forces that have invaded Ukraine. 

Ukraine needs to keep attacking the Kerch Bridge until neither the road nor the attached rail line can be used by Russia until the war ends with a peace agreement. Ukraine claims responsibility for new attack on key bridge; Russia Working Fast To Restore Blown Bridge To Crimea  

Russian supply lines are vulnerable in other areas of Ukraine as well, particularly rail bridges in at least two places. Those sections need to hit with artillery, drones and missiles until the links are severed and then hit continually thereafter as Russia makes repairs.  Partisans blew up a railway bridge in the Zaporizhia region; Chonhar bridge strike may indicate a more potent strategy by Ukraine | CNN; Logistics. Russia's Fragility in Zaporizhia [Mapped] - YouTube (several rail lines that are crucial to supplying Russian forces are relatively near the front lines in Zaporizhia) 

Based on a review of Russia's defense in depth, I would agree with the go slow approach on Ukraine's counteroffensive. Supply lines need to be severely disrupted first coupled with the destruction of Russian ammo and other storage facilities located in Ukraine. Then there can be a massive push through a weak point in the defense lines that moves quickly behind Russian defenses in an envelopment. The main goal needs to be cutting off the land bridge to Crimea and then attacking the military bases and naval vessels there with Himars and missiles. 

Russia axes landmark Ukraine grain deal just hours before deadline The result will be to starve persons living in undeveloped third world countries. Russians will use food as a weapon to terrorize the world and as a means to achieve one of its terrorist policy goals.  

After deciding to prevent grain shipments from Ukraine to countries that need the food, the Orcs have been launching missiles everyday in an effort to destroy grain terminals and warehouses, practices consistent with Russia's status as a terrorist nation. So far, the Orcs have destroyed about 60,000 tons of grain, including a grain terminal owned by the Canadian firm Viterra in Odessa.     

Putin, Wanted for War Crimes, Will Attend BRICS Summit Via Video Call, Kremlin Says - The New York Times Putin is a war criminal leading a nation bursting at the seams with violent psychopaths. 

Igor Girkin: Russian blogger who called Putin a 'lowlife' arrested; Russian hardline Putin critic and commander Strelkov detained in Moscow - BBC News Girkin was convicted in the Netherlands for his involvement in shooting down Malaysia Airlines Flight 17 that murdered 298 civilians. He is not being arrested by Putin for his involvement in this massacre.  

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Trump and His Deeply Reactionary and Anti-Democracy Party:   

George Washington stated the President can not in any way "demean himself in his public character" and must always act "in such a manner as to to maintain the dignity of office". George Washington: Foundation of Presidential Leadership and Character - Google Books (Washington letter to John Adams dated 5/10/1789). 

Anne Applebaum wrote an interesting article that is factually correct about Tennessee Republicans. Is Tennessee a Democracy?-The Atlantic The answer to that question is "not really".  

Anne is a conservative intellectual who has published several books and numerous articles about authoritarian regimes. Twilight of Democracy: The Seductive Lure of Authoritarianism; Gulag: A History (won the Pulitzer Prize for nonfiction); Iron Curtain: The Crushing of Eastern Europe, 1944-1956; Twilight of Democracy: The Failure of Politics 

It is consequently understandable that she has now turned her attention to the now dominant authoritarian movement in Tennessee. The Atlantic asks: Is Tennessee a democracy? - YouTube  

Tennessee is the least democratic state-Vox: Laboratories against Democracy: How National Parties Transformed State Politics (Princeton Studies in American Politics)

Trump plans a frightening power grab if elected president in 2024 The republican party, now controlled by Donald, is clearly authoritarian and will act on that dominant ideology. They are IMO a clear and present danger to American Democracy and to institutions necessary for a democracy to function properly.   

RealClearPolitics - 2024 Republican Presidential Nomination Trump continues to hold a commanding lead over the other candidates. 

RealClearPolitics - Election 2024 - General Election: Trump vs. Biden The polling has Biden and Trump at about even. 

Donald Trump says he's a target of special counsel's criminal probe into 2020 election aftermath; Trump receives a target letter in Jan. 6 special counsel investigation - CBS News

Special counsel's target letter to Trump in 2020 election probe cites three federal statutes

Trump: "If you f**k around with us, if you do something bad to us, we are going to do things to you that have never been done before".Trump Threatens America: 'We Are Going To Do Things To You That Have Never Been Done Before'

Trump Plans to Expand Presidential Power in 2025 - The New York Times

John Kelly on Trump Plan to Expand Executive Power in his Second Term Will Cause Gunfight  

Senator Ted Cruz (R-TX) claims that the movie Barbie is brainwashing young girls with Chinese propaganda. Cruz had claimed earlier that Disney was on its way toward showing "Mickey and Pluto going at it", and that Sesame Street's Big Bird was spreading government propaganda. Ted Cruz Goes to War Against Barbie | Vanity Fair

A Saudi company took as much water as it wanted during Arizona drought - The Washington Post The republicans in Arizona leased state land to a Saudi owned firm at ridiculously low rates and allowed that firm to pump as much underground water as needed to grow alfalfa across thousands of acres that is then exported to feed the Kingdoms dairy cows. Saudi Arabia will not allow its precious water supply to be used for that purpose. Climate change will make living in most of Arizona incompatible with anywhere near the current population due to water shortages. I view that outcome as inevitable which will come sooner than necessary due to republican policies. Phoenix scorches at 110 for 19th straight day, breaking big US city records in global heat wave - AZPM 

{Climate change does not exist in Trump's America. Shortly before everyone is burned to a crisp, there will be a handful of republicans who could conceivably start to wonder some whether there may have, possibly, been something true about climate change.} 

Long-lost Greenland ice core suggests potential for disastrous sea level rise  

Mike Pence says inflation is 16%, but CPI is 3%. This is his logic. | Morningstar Pence is deliberately engaged in deception with that claim. As with the now standard false claims from Trump, Pence is counting on his listeners being both stupid and ignorant. Pence's average poll number for the 2024 republican presidential nomination is hovering near the mid-single digits with no upside traction since he entered the race. 

Pence's refusal to throw out the certified election results in 4 states won by Biden is simply unforgivable in Trump's America. As many Trumpsters shouted during the insurrection on 1/6, Pence needed to be hanged for refusing to throw out the state certified election results. 

Among Trumpsters, a republican V-P has the power to cancel the state certified vote total when the republican Presidential candidate loses several states and the election as a result. Then the republican VP may authorize republican state legislatures to decide who won their states, thereby ensuring a perpetual republican President irrespective of the state certified election results. Of course, democracy ends with that approach. There can be no dispute on what the republicans tried to do in 2020. The indisputable facts are available to anyone willing to look. 

Alabama Republicans refuse to draw a second Black congressional district in defiance of Supreme Court The Supreme Court found that the Alabama republicans had engaged in racial gerrymandering that was unconstitutional. The Tennessee Republicans totally disenfranchised Nashville's large black population in congressional elections through racial gerrymandering.  

Convicted con man who was pardoned by Trump is again charged with fraud

+++

1. Corporate Bonds: 

A. Bought 2 Golub Capital 3.375% SU Maturing on 4/15/24 at a Total Cost of 97.749: 

Issuer: Golub Capital BDC Inc. (GBDC)  - An Externally Managed BDC 

GBDC SEC Filings 

SEC Filed Earnings Press Release for the Q/E 3/31/23 

10-Q for the Q/E 3/31/23 (investments are summarized starting at page 8; debt is discussed starting at page 127; the 2024 bond is the first SU to mature; the company has outstanding substantial amounts of senior debt secured by portfolio loans, both securitization of loans and a credit facility; as of 3/31/23, the company claimed $5.671+B in assets and $3.165+B in liabilities) 

Prospectus ($400M in principal amount)

New Finra Page: Bond Page | FINRA.org

Credit Ratings: Baa3/BBB- (Lowest Investment Grades)

BDC SU bonds will frequently be rated 1 notch above junk. There are two reasons. The first is that all or almost of the net investment income is being paid out in common share dividends. The second is the high risk loans made by them. I am not currently concerned about the credit risk for this bond that matures in April 2024. Once the maturity goes out further in time, then odds of something going terribly wrong do increase IMO, a variation of Murphy's Law that anything that can go wrong will eventually go wrong. Murphy's laws So the credit risk for a 2028 maturity that has the same credit rating as one maturing in 2024 will be higher.    

Yield to Maturity at Total Cost: 6.512%

YTM at Purchase Price: 6.665%

Current Yield at TC = 3.45%

B. Bought 1 Site Centers 3.625% SU Maturing on 2/1/25 at a Total Cost of 95.47: 

Issuer: SITE Centers Corp. (SITC) 

SITC SEC Filings 

SEC Filed Supplemental Report for the Q/E 3/31/23 

10-Q for the Q/E 3/31/23 (claims assets of $4.053B and total indebtedness of $1.783+B)

New Finra Page: Bond Page | FINRA.org

Credit Ratings: Baa3/BBB-

YTM at Total Cost: 6.78%

Current Yield at TC = 3.8%

I now own 2 bonds. 

C. Bought 1 Keycorp 4.15% SU Maturing on 10/29/25 at a Total Cost of 93.759: 

Issuer: KeyCorp (KEY) 

KEY Analyst Estimates | MarketWatch

KEY SEC Filings

SEC Filed Earnings Press Release for the Q/E 3/31/23

SEC Filed Earnings Press Release for the Q/E 6/30/23 ("net income from continuing operations attributable to Key common shareholders of $250 million, or $.27 per diluted common share for the second quarter of 2023. This compared to $275 million, or $.30 per diluted common share, for the first quarter of 2023 and $504 million, or $.54 per diluted common share, for the second quarter of 2022." Net income included an $87M or $.09 share build in the allowance for credit losses. The Charge Off Ratio was .17%. NIM declined to 2.12% from 2.47% in the first quarter and 2.61% in the 2022 second quarter. The NPL ratio was at .36%) I profitably eliminated my KEY common stock position held in a ROTH IRA account in response to this report. Earlier this year, I eliminated my KEY common stock positions in taxable accounts. Item # 2.A. Eliminated KEY - Sold 15 at $17.04; 10 at $18.16; 10 at $18.22 (1/30/23 Post)(profit snapshots = $79.03) I later repurchased shares the 10 shares sold in my Schwab account and profitably sold those yesterday at $11.65 (see Item # 3.H. below)   

New Finra Page: Bond Page | FINRA.org

Prospectus (senior unsecured bond)

As previously discussed, there is not going to be enough left at the bank holding company level to pay debt owners when and if the FDIC seizes the operating bank. The principal amount of senior debt will likely be much higher than the value of the remaining assets. I am not currently concerned about Keybank's credit risk, but that can change quickly as proven earlier this year.  

Credit Ratings: Baa1/BBB+ 

YTM is inconsistent IMO with those credit ratings. 

YTM at Total Cost: 7.157%

This YTM is far higher than what would be normal for the current credit ratings. 

Current Yield at TC = 4.43%

I now own 3 bonds. 

D. Bought at par value 1 Royal Bank of Canada 5.8% SU Maturing on 8/19/24:

Interest paid quarterly. Purchased under the Fidelity Corporate Notes Program. 

Moody's rating at Aa1. 

2. Small Ball Buys: 

A. Restarted KHC - Bought 5 at $35.64: 

History this Account: 

Quote: Kraft Heinz Co. 

Cost: $178.2

KHC Analyst Estimates | MarketWatch

KHC SEC Filings

The Kraft Heinz Brands

Last Discussed: Item # 5.C. Eliminated KHC -Sold 5 at $42.44; 10+ at $42.33 (1/16/23 Post)(profit snapshots = $125.25) 

Dividend: Quarterly at $.40, last slashed from $.625 to $.40 effective for the 2019 first quarter payment. Dividend History | The Kraft Heinz Company

The $.625 quarterly dividend was not prudent given the past earnings history and likely future earnings growth. 

Input cost inflation, a heavy debt load in part created by the merger of Heinz and Kraft, and rising interest rates make a dividend increase unlikely. I do not anticipate a dividend increase for at least 2 years.

Yield at $35.64: 4.49%

Last Ex Dividend: 6/5/23

Last Earnings Report (F/Q ending 4/1/23). This the first fiscal quarter. 

SEC Filed Press Release 

E.P.S. = $.68, up from $.63

Revenues: $6.489B, up from $6.045B. As with other package food companies, price increases contributed to revenue growth as volume declined.  

Raised F/Y 2024 adjusted E.P.S. range to $2.83-$2.91. The range includes the following negative impacts: (1) about $.04 per share from "expected unfavorable changes in non-cash pension and post-retirement benefits"; (2) $.02 from currency headwinds; and about $.06 from fiscal 2023 having an extra week. 

I would ignore those adjustments and simply lower F/Y 2023 by $.06 account for the extra week. The reported adjusted E.P.S. number for 2023 was $2.78 so my adjustment takes that to $2.72. 

The USD has weakened some recently, probably due to lower inflation numbers. DXY-US Dollar Index - Investing.com or DXY | U.S. Dollar Index (DXY) Overview | MarketWatch

I view KFC in much the same way as CAG which was discussed in my last post.  

E.P.S. growth in the mid-single digits would be viewed as realistic. 

It is also possible that input cost inflation will subside while price increases will mostly hold which could improve results going forward. 

In my opinion, I would characterize a 6%-8% annual average total return as the most optimal and realistic return with the dividend providing more than 50%. 

As with CAG, I have no trouble in restraining any enthusiasm for KFC shares.  

On the positive side, the shares are selling at a rational multiple and would be more resistant to multiple contraction than the very high P/E stocks that have led the market higher this year.  

Last Bond Offering (5/2023): Prospectus (€600M in floating rate senior notes maturing on 5/9/25. "The interest on the Notes will accrue at a rate per annum equal to the three-month EURIBOR plus 0.50% per annum, reset quarterly"

B. Added to KBWY - Bought 5 at $18.99 (Fidelity Taxable Account): 

Quote:  Invesco KBW Premium Yield Equity REIT ETF Overview

Cost: $94.95

Sponsor's website: Invesco KBW Premium Yield Equity REIT ETF

Expense Ratio: .35%

Top 10 Holdings as of 7/14/23: 

Many of those stocks have dived in price, particularly the office REITs. I have individual positions in HPP, BDN, SLG, MPW, GNL, OPI, SBRA and RTL. I mentioned in my last post that I will likely eliminate or significantly pare my RTL positions before GNL completes its acquisition. I have now eliminated the RTL positions.  

Last Discussed: Item # 2.I. Bought 5 KBWY at $20.49; 5 at $19.95; 5 at $19.52 - Fidelity Taxable Account (12/20/22 Post) 

Dividends: Monthly at a variable rate. 

Last 12 Dividends: $1.618 per share 

I am not reinvesting the dividends. 

Average cost per share = $20.18  (30 shares)  

Yield at AC and Annual $1.62: 8.02%

Next Ex Dividend: 7/24/23

C. Added 10 GOODN at $18 - Schwab Taxable Account: 

Quote: Gladstone Commercial Corp. 6.625% Preferred Series E (GOODN)

Cost: $180

Issuer: Gladstone Commercial Corp. (GOOD)

GOOD SEC Filings

Properties

Investment Category: Advantages and Disadvantages of Equity REIT Cumulative Equity Preferred Stocks, part of the Equity REIT Common and Preferred Stock Basket Strategy 

Last Discussed: Item # 1.E. Added to GOODN - Bought 10 at $18.25 (7/8/23 Post) 

In this account, I eliminated my 26+ share position in the GOOD common stock and used about 1/2 of the proceeds to add to the equity preferred stock GOODN which has a slightly higher yield. (see Item # 3.B. below)

In addition to the slightly higher yield, the equity preferred stock also has more dividend protection due to its cumulative status and seniority to the common stock that requires the elimination of the common share cash dividend before the cumulative preferred dividend can be deferred. 

The cumulative preferred dividend can not be cut but only deferred when cash is no longer use to pay a common dividend or to buy common stock. 

The common share monthly dividend was recently cut from $.1254 to $.10. Gladstone Commercial Corporation (GOOD) Dividend History | Seeking Alpha; SEC Filing

Par value $25

Prospectus

Coupon: 6.625% paid on the $25 par value. 

Stopper Clause: Standard

Maturity: None, potentially perpetual with issuer optional call at par value on or after 10/3/24.

Dividends: Paid Monthly, non-qualified and Cumulative

New Average cost per share: $18.3 (50 shares)

Yield at New AC = 9.05% (.06625% coupon x. $25 par value = $1.6525 annual dividend per share ÷ $18.30 average cost per share = 9.05%) The yield at $18 is 9.2%. The common stock dividend yield at $13.33 is 9%. 

Last Ex Dividend:  7/20 (owned all as of)

D. Added 5 UNB at $22; 5 at $21.82 - Fidelity Taxable: 

Quote: Union Bankshares Inc. (UNB) 

Cost $219.1

"Union Bankshares, Inc., headquartered in Morrisville, Vermont, is the bank holding company parent of Union Bank, which provides commercial, retail, and municipal banking services, as well as, wealth management services throughout northern Vermont and New Hampshire. Union Bank operates 18 banking offices, three loan centers, and multiple ATMs throughout its geographical footprint."

Properties: Owns free of encumbrances 16 branch offices and its headquarters located in Morrisville, Vermont 

UNB SEC Filings 

2022 Annual Report 

Investment Category: Regional Bank Basket Strategy

There are no analyst estimates. The market capitalization at $22 is about $100M. 

I eliminated my UNB positions in my Schwab and Vanguard accounts, selling 5 shares in each account at $22 (see Item #3.G. below). I am consolidating the position in my Fidelity account. Any future purchase will be in that account. 

Last Discussed: Item # 4.N. Bought 5 UNB at $18.4 -Schwab Account (8/29/20 Post); Item # 1.J. Restarted UNB-Bought 5 at $18.5; 5 at $18.19 - Fidelity Account (8/22/20 Post)(still own those shares) 

New Average Cost per share: $20.18 (20+ shares)

Snapshot Intraday on 7/18/23 after second 5 share add 

Dividend: Quarterly at $.36 per share ($1.44 annually), last raised from $.35 effective for the 2023 first quarter payment 

Union Bankshares, Inc. (UNB) Dividend History | Seeking Alpha

Yield at New AC: 7.136%

Last Ex Dividend Date: 4/27/23 

Last Earnings Report (Q/E 6/30/23): Released after my buys and sells. 

SEC Filed Press Release This is a bare bones release. Financial metrics are generally provided later in a 10-Q filing. 

Net Income: $2.7M

E.P.S. $.60

E.P.S. 2023 Six Months at $1.26, up from $1.20 in 2022. 

"Total deposits were $1.1 billion as of June 30, 2023 and include $138.0 million of purchased brokered deposits compared to deposits of $1.1 billion as of June 30, 2022 with no purchased deposits. Also, advances from the Federal Home Loan Bank totaling $120.5 million were outstanding as of June 30, 2023 compared to no outstanding advances as of June 30, 2022."

"Investment securities were $268.9 million at June 30, 2023 compared to $262.8 million at June 30, 2022 . . . The unrealized losses in the portfolio are due to the interest rate environment as current rates remain above the coupon rates on these securities resulting in fair market values less than current book values. The offset to recording the unrealized losses is an increase in deferred taxes included in other assets and accumulated other comprehensive losses included in total equity"

Operations have been adversely impacted by flooding in Vermont in early July: 

10-Q for the Q/E 3/31/23 at p. 29 (NIM = 3.14%, down from 3.17% in the 2022 first quarter; NPA Ratio = .17%; Charge off ratio: zero;  ROE = 20.9%; loan-to-deposit ratio = 79.55%; investment security information at pages 12-13)

E. Bought 10 CADEPRA at $17.85: 

Quote: Cadence Bank (CADE-PA) 

Cost: $178.5

52 week price range: $17.03- $25.05

As with other bank preferred stocks, this one was pressured to the downside in 2022 due to the interest rate spike and the three bank failures earlier this year precipitated another move down starting in March. 

In November 2021, Cadence Bancorporation merged into BancorpSouth and then the surviving company was renamed Cadence Bank. The preferred stock was originally issued by BancorpSouth in 2019.  

Issuer: Cadence Bank  (CADE) 

CADE Analyst Estimates | MarketWatch

This bank does not file with the SEC but just with the FDIC which is unusual.  

Last Earnings Report (Q/E 3/31/23): Cadence Bank Announces First Quarter 2023 Financial Results - Apr 24, 2023 ("During the quarter, the Company initiated a balance sheet optimization transaction related to a portion of its investment securities portfolio. The Company sold $1.5 billion of available-for-sale U.S. Treasury debt securities yielding approximately 0.70% for an after-tax realized loss of approximately $39.5 million. The proceeds have been used to reinvest in higher-yielding debt securities, fund loan growth, and pay off borrowings.  The Company estimates that the loss will be recouped within approximately 7.5 months, resulting in incremental 2023 pre-tax income of approximately $10.5 million.") 

Security: Equity preferred stock 

The prospectus was filed with the FDIC. I found a copy at the quantumonline.com website. 

Dividends: Paid quarterly, qualified and non-cumulative 

Par Value: $25

Coupon: 5.5%

Yield at $17.85: 7.7% (.055% coupon x. $25 par value = $1.375 annual dividend per share  ÷ $17.85 total cost = 7.7%)

Last Ex Dividend: 5/4/23

Maturity: None, potentially perpetual. 

Optional Call: At par value + accrued and unpaid dividends on or after 11/20/24

Stopper Clause: Standard

Relevant provisions in prospectus: 

F. Started STT as a Placeholder - Bought 1 at $68.29; 1 at $66.52: 

 

Quote: State Street Corp. (STT) 

Cost: $134.81

Business Lines: Primarily fee based businesses 

Annual Report at page 7

2022 Annual Report (risk factor summary starts at page 23 and ends at page 52)

Overview Annual Results 2020-2022:

Page 60, 2022 Annual Report

On 7/14/23, the stock closed at $68.1, down $9.36 or 12.08% based on what my gut told me was at least a slight overreaction to the 2nd quarter earnings report and forward guidance. Two other companies in similar businesses, BK and NTRS, declined by 6.7% and 6.6% respectively in sympathy. STT, BK, and NTRS were the 3 largest percentage decliners in the S&P 500 on 7/14. 

BK rallied last Tuesday after reported adjusted E.P.S. of $1.38, beating the consensus of $1.22. BK SEC Filed Earnings Press Release for the Q/E 6/30/23 I have a small ball BK position. Northern Trust Corp. (NTRS) recovered on Wednesday, rising 13.36% after reporting better than expected earnings. NTRS SEC Filed Earnings Press Release for the Q/E 6/30/23 

I added 1 share on Monday 7/17 as the stock continued to decline. 

STT SEC Filings 

STT Analyst Estimates | MarketWatch

Average cost per share: $67.41  (2 shares)

Dividend: Quarterly at $.63 per share ($2.52 annually)

State Street Corporation (STT) Dividend History | Seeking Alpha

Dividend History: Good. The quarterly rate was at $.26 in 2013. 

Yield at AC : 3.74%

Last Ex Dividend: 6/30/23

Last Earnings Report (Q/E 6/30/23): 

SEC Filed Press Release and Supplemental 

E.P.S. at $2.17, up from $1.91 in the 2022 second quarter

Consensus at $2.1

Revenue: $3.11B with the consensus at $3.14B, up from $2.953B in the 2022 second quarter but flat with the 2023 first quarter

Fee Revenue: $2.419B

Net Interest Income: $691M

While net interest income was up 18% Y-O-Y, it was below the consensus forecast of $704.3M and was down 10% sequentially which was caused by a decrease in non-interest bearing deposits. 

Fee revenues experienced some weakness in several categories but was up 2.2% Y-O-Y: 

Supplemental at page 3

STT expects Q3 revenue to decline 1% to 1.5%. 

This is my first purchase of the common shares. 

G. Started IIPR - Bought 2 at $78.5: 

Quote: Innovative Industrial Properties Inc. (IIPR) 

"Innovative Industrial Properties, Inc. is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized properties leased to experienced, state-licensed operators for their regulated cannabis facilities."

Cost $157 

IIPR SEC Filings 

2022 Annual Report 

Management: Internal

100% Leased Properties- Triple Net  

Dividend: Quarterly at $1.8 per share ($7.2 annually)

Innovative Industrial Properties, Inc. (IIPR) Dividend History | Seeking Alpha

Yield at $78.5: 9.17%

Last ex dividend: 6/28/23

Last Earnings Report (Q/E 3/31/23): 

SEC Filed Press Release 

FFO per share: $2.04

AFFO per share: $2.25, up from $2.04 in the 2022 first quarter

Balance Sheet and Portfolio: 

"Rent collection percentage for the quarter also includes approximately $3.1 million of security deposits applied in connection with non-payment of rent by certain tenants, as previously disclosed (two affiliates of SH Parent, Inc. (Parallel) for a Texas property and a Pennsylvania property, and Green Peak Industries, Inc. for one property in Michigan). As of March 31, 2023, all security deposits for these properties were fully applied."

3. Small Ball Sells: 

A. Pared FENY - Sold 18+ at $23.01: 

Quote: Fidelity MSCI Energy Index ETF

Proceeds: $431.96

Sponsor's website: FENY | ETF Snapshot - Fidelity

Expense Ratio: .084%

Top 10 Holdings as of 6/30/23: 

Profit Snapshot: +$187.2 (7/13/23 sale only)

2023 FENY 43+ shares +$363.71

I sold every share with a cost basis over $10 per share. 

New Average cost per share: $8.42

Snapshot Intraday on 7/14/23 after pare

The remaining shares were bought at or near the bottom hit in 2020. 

Dividend:  Quarterly at a variable rate. 

Last 4 dividends: $.816 per share

Yield at $8.42 Using $.816 annual = 9.69%

FENY Realized Gains to Date: $1,002.94

Other realized gains: 

B. Eliminated GOOD in Schwab Account - Sold 26+ at $13.33: 

Quote: Gladstone Commercial Corp. (GOOD) - Primarily a net lease REIT

Proceeds: $357.71

Management: External 

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

GOOD SEC Filings 

2022 Annual Report (Risk factor summary starts at page 16 and ends at page 31). 

GOOD focuses on "acquiring, owning, and managing primarily office and industrial properties. . . .  We have historically entered into, and intend in the future to enter into, purchase agreements primarily for real estate having net leases with remaining terms of approximately seven to 15 years and contractual rental rate increases. Under a net lease, the tenant is required to pay most or all operating, maintenance, repair and insurance costs and real estate taxes with respect to the leased property."  

I am eliminating a duplicate position. Some of the proceeds were used to buy a GOOD equity preferred stock, see Item #1.C. above. 

In taxable accounts, I still own 50 shares in my Fidelity account (AC at $10.62 per share) and 16 shares in my Vanguard account with an $8.14 average cost basis.   

Vanguard Price as of 7/17/23 Close

Given the recent poor performance of the common stock and the dividend cut discussed below, I will sell at some point the remaining common shares, but am keeping them for now for the monthly income generation and yield at my average costs per share.  

Profit Snapshot: Net of $128.61 

Dividend: Monthly at $.10 per share, cut from $.1254 effective for the January 2023 payment. 

Dividend History-Gladstone Commercial Corporation (GOOD)

SEC Filing: "In an effort to increase retained capital in anticipation of further economic headwinds, the board of directors has taken what it believes is the prudent path and reduced the run rate on its monthly dividend (from $0.1254 to $0.10). In addition, and in support of the capital preservation effort, the Company’s investment adviser has agreed to amend the current Advisory Agreement to waive the applicable incentive fee for the quarters ending March 31, 2023 and June 30, 2023."  

No incentive is deserved given the price performance of this stock, but external managers nonetheless will generally be contractually entitled to incentive fee payments even when their efforts result in significant shareholder losses. 

In 2022, the GOOD external management company received a base management fee of $6.331M; an incentive fee of $5.27M and an administrative fee of $1.864M. (page 45, 10-K) The total fees paid to the external manager in 2022 was $13.465M or about 9.04% of total operating revenue. The stock closed at $25.27 on 12/31/21, at $18.5 on 12/30/22 and at $12.37 as of 6/30/23. The 5 year annual average total return through 7/17/23 was +.45%. DRIP Returns Calculator | Dividend Channel I have managed an acceptable total return through trading.  

Last Ex Dividend: 7/20/23 

Last Buy Discussions: Item # 2.J. Added 2 GOOD at $13.35 (5/30/20 Post); Item # 3.G. Bought 10 GOOD at $16.7; 10 at $16.4; 10 at $16; 10 at $15.7; 5 at $14.2, 5 at $13.6, 5 at $12.8; 5 at $12.1, 2 at $11.4, 2 at $10.85 and 2 at $9.5 (4/11/20 Post);   

Last Sell Discussions: Item # 2.B. Pared GOOD in Fidelity Account - Sold 8 at $16.69 (2/5/23 Post)(profit snapshot = $14.77); Item # 3.F. Pared GOOD - Sold 2.197 shares at $20.8  and 2.352 shares at $20.84 (6/4/21 Post)(profit snapshot = $20.77); Item 1.M. Pared GOOD-Sold 12 at $18.72 and 10 at $19.76 (6/20/20 Post)(profit snapshot = $48.17); Item # 1.C. Eliminated GOOD in Schwab Account-Sold 50+ at $20.88 and Item # 1.D. Sold Highest Cost GOOD Share in Fidelity Account at $21.36 (3/3/19 Post)(profit snapshots = $165.33)

Last Earnings Report (Q/E 3/31/23): SEC Filing 

Core FFO per share: $.37

Properties: 137 with 95.9% square feet leased 

Remaining average lease term: 6.9 years  

10-Q for the Q/E 6/30/23  

Debt: Debt is discussed starting at page 15. 

GOOD has 50 properties encumbered by fixed rate mortgages that have a weighted average interest rate of 4.24% and maturity dates ranging from April 6, 2023 through August 1, 2037". The amount outstanding was at $357.034M as of 3/31/23. 

The company had variable rate secured debt of $389.99M that was priced at spreads to SOFR. The SOFR rate was 4.87% as of 3/31/23, and is higher now. The weighted average interest rate on all debt was about 5.33% as of 3/31/23. The variable rate debt was secured by 84 properties. 

The reliance on variable rate debt priced at spreads to a short term rate is currently placing downside pressure on FFO. That pressure will abate in 2024 provided the Bond Ghouls are correct in predicting FF rate cuts. 

Statement at page 16, 10-Q: "We believe we will be able to address all mortgage notes payable maturing over the next 12 months through a combination of refinancing our existing indebtedness, cash from operations, proceeds from one or more equity offerings and availability on our Credit Facility."

C. Eliminated RTL in Vanguard Taxable Account - Sold 60 at $7.18: 

Proceeds: $430.5

Quote: Necessity Retail REIT Inc. (RTL)

RTL SEC Filings

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

Last Discussed: Item # 2.C. Bought 5 RTL at $4.6 (5/27/23 Post); Item # 1.H. Added to RTL - Bought 2 at $6.08 (4/1/23 Post) 

I eliminated my RTL positions in taxable accounts after receiving the last quarterly dividend. 

As previously mentioned, RTL is in the process of being acquired by Global Net Lease Inc. (GNL) whereby 1 share of RTL will receive .67 GNL share. Global Net Lease and The Necessity Retail REIT to Merge, Creating Sector-Leading Diversified Net Lease REIT 

Both GNL and RTL are currently managed by the same external manager. 

As part of the deal, management of the combined entity will be internalized by paying the external management company $350M in GNL stock and $50M in cash. I regard that as ridiculous compensation for failure that has resulted in a persistent stock price declines in both RTL and GNL. Getting rid of the external manager is a very long term positive IMO. 

Over the very long term, internalization will eventually benefit shareholders through cost savings. GNL estimates the savings at $54M per year "through elimination of the asset management fees, property management fees, incentive fees, equity issuance fees, and reimbursable expenses currently payable to the External Manager, net of internalized employee compensation, rent and overhead, and excluding the one-time costs associated with the Transactions."  

I already own too many GNL shares, which I intend to keep, and do not want even 1 more now. So that requires selling RTL before I receive GNL shares in the acquisition exchange.

I have quit reinvesting the GNL quarterly dividend of $.40 per share, noting in my last post that I received the last quarterly dividend payment of $548.38 in cash (Item # 6).  

After the merger is completed, GNL will reduce it quarterly dividend of $.354 per share from $.40. 

Both companies are primarily net lease REITs. GNL owns primarily office and industrial properties, while RTL owns single tenant retail and open air shopping centers.  

Profit Snapshot: +$47.01

Dividend: Quarterly at $.215 per share

Last Ex Dividend: 7/12/25 (owned as of)

Last Earnings Report (Q/E 3/31/23): 

SEC Filed Press Release and Supplemental 

Portfolio: 

10-Q for the Q/E 3/31/23 (page 11, discussion of uncollectible accounts which totalled $3.4M in the first quarter, of which $2.9M associated with 16 leases to 1 tenant that were terminated in that tenant's bankruptcy)

D. Eliminated RTL in Schwab Taxable Account - Sold 75+ at $7.17: 

See previous discussion. 

Proceeds: $544.64

Profit Snapshot: +$86.31

E. Eliminated RTL in Fidelity Account - Sold 235+ shares at $7.25: 

See previous discussion. 

Proceeds: $1,704.92

Profit Snapshot: Net of $87.23

F.  Eliminated ZION - Sold 6 at $31.41: 

Quote Zions Bancorp (ZION) 

Proceeds: $157.05

ZION Analyst Estimates | MarketWatch

ZION SEC Filings

Zions Bancorporation, National Association (ZION) Dividend History | Seeking Alpha I owned the shares long enough to receive 1 quarterly dividend payment. 

SEC Filed Earnings Press Release for the Q/E 6/30/23 (E.P.S. $1.11; consensus of NIM declined to 2.92% from 3.33% in the first quarter; efficiency ratio at 62.5%; charge off ratio = .09%; NPA ratio: .29%; deposits of $74.423B, up from $69.208B in the 1st quarter) 

I know that Zions has increasingly relied on brokered deposits since I have purchased several of its CDs at Fidelity. 

The squeeze in NIM results from higher funding costs (deposits and FHLB borrowings) and poor yields on owned securities. "The cost of total deposits for the second quarter of 2023 was 1.27%, compared with 0.03%. The rate paid on total deposits and interest-bearing liabilities was 1.88%, compared with 0.07%, reflecting the higher interest rate environment and increased short-term borrowings. Average noninterest-bearing deposits as a percentage of total deposits were 43%, compared with 51% during the same prior year period."

Proceeds: $186.46

Profit Snapshot: $52.28

Last Discussed Item # 2.H. Started ZION - Bought 5 at $22.8; 1 at $22.18 (5/20/23 Post) 

I still own 5 shares of ZIONL: Item # 2.I. Bought 5 ZIONL at $22.17 (5/20/23 Post); Zions Bancorp 6.95% Fixed-to-Floating Rate Subordinated Notes due September 15, 2028 (ZIONL)

G. Eliminated UNB in Schwab  and Vanguard Taxable Accounts - Sold 5 at $22; 5 at $22: 

Quote: Union Bankshares Inc.  (UNB) 

Proceeds = $220

See Item # 2.D. above where I discussed buying 10 UNB shares in my Fidelity account. I am simply consolidating the position in that account. Prior to looking for duplicate shares, I was unaware that 5 shares was owned in my Vanguard account and was vaguely aware that some shares were owned in my Schwab account. 

Investment Category: Regional Bank Basket Strategy

Profit Snapshots: +$35.1

UNB Realized Gains to Date: $332.26

Other Sell Discussions: Item #2 C. Sold 50 UNB at $24.56 (1/25/14 Post)(profit snapshot = $238.61); Item # 1 Sold 50 UNB at $19.5 (7/26/11 Post)  

H. Eliminated KEY - Sold 10 at $11.65: 

Quote: KeyCorp  (KEY)

Proceeds: $116.5 

KEY Analyst Estimates | MarketWatch

KEY SEC Filings

Investment Category: Regional Bank Basket Strategy

Last Discussed: Item # 2.B. Restarted KEY - Bought 5 at $9.7; 1 at $9.14; 4 at $8.77 (5/20/23 Post) I would probably restart at less than $9, assuming no major negative news in the interim. 

Last Elimination: Item # Eliminated KEY - Sold 15 at $17.04; 10 at $18.16; 10 at $18.22 (1/30/23 Post)

Profit Snapshot: +$23.8

The common stock has a lower yield than the YTM of a KEY senior unsecured bond that I discussed buying in Item #1.C.  above.

Dividend: Quarterly at $.205 per share ($.82 annually)

KEY Dividend History | Nasdaq

Last Ex Dividend: 5/26/23

Dividend History: My rating is poor. 

Last Earnings Report (6/30/23): SEC Filed Press Release 

As noted above when discussing the bond purchase, I eliminated my small ball common stock position in response to the last earnings report. 

My overall opinion about KEY is that it is at most a trade. Avoiding owning it is not a bad option. Management has traditionally made a lot of mistakes. The most recent major one was a failure to reduce duration in owned securities in 2021 when it was obvious that problematic inflation was going to result in higher rates, but bond prices had not yet reflected that inevitability. I have to wonder why anyone is paid to produce the results in so many bank owned securities portfolios.  

The most recent disconcerting trend involves NIM which declined in the second quarter to 2.12% from 2.47% in the first quarter. E.P.S. declined to .27 from $.30. The Charge Off Ratio was still good at .17% but KEY increased its loan loss reserve by $87M or $.09 per share. Deposits costs were reported at 1.49%, up from .99% in the first quarter.  Overall, I would expect the common stock to continue struggling. 

KEY Realized Gains to Date: $862.82

4. Treasury Bills Purchased at Auction: $8,000 in principal amount

A. Bought 2 Treasury Bills at 7/17/23 Auction: 

91 Day Bills

Mature on 10/19/23

Interest: $26.54

Investment Rate: 5.409%

B. Bought 4 Treasury Bills at 7/19/23 Auction:

Matures on 11/21/24

119 Day Bill 

Interest = $69.68 

Investment Rate: 5.453%

C. Bought 2 Treasury Bills at the 7/20/23 Auction: 

Matures on 9/19/23

56 Day Bill

Interest = $16.35

Investment Rate: 5.387%

Disclaimer: I am not a financial advisor, but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sale of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals, and situational risks. I can only make that kind of assessment for myself and my family members.