BMY, CPXPRE:CA; CTO, DOC, FDUS, GDV, HIW, MET, O, OBDC, PFE, THQ, TRPPRD:CA, VABK

Economy: 

As expected, the Fed left its FF range at 5.25% to 5.5%. Federal Reserve issues FOMC statement (9/20/23) 

The FED left open its option to raise the FF range by at least .25% later this year. That information can be found in the Dot Plot and in the Projection Materials: 

Summary of Economic Projections, September 20, 2023.pdf Looking at the blue dots for 2023, 12 out of 19 FED members expect the year end range to be 5.5% to 5.75%. And, for 2024, a majority of FED members expect the FF range to be 5% to 5.25% or higher.

FED Economic Projections as of 9/20/23

Compared to its June 2023 forecast, the FED increased its 2023 real GDP forecast to +2.15% from 1% and lowered its unemployment rate projection to  4.1% from 4.5%. In other words, the economy is performing better than the FED expected three months ago. The 2023 core PCE inflation estimate was reduced from 3.9% to 3.7%. 

Treasury Yield Curve - September 2023: 

The rise in intermediate term yields is starting to cause problems for stocks, particularly in the bond like stock sectors. 

The 2 year treasury yield is currently higher than almost all U.S. electric/gas utility dividend yields. 

TIP Real Yields - September 2023: 

10 Year TIP Breakeven Inflation rate as of 9/22: 2.33%

10 Year TIP Breakeven Inflation rate as of 9/1: 2.26%

10 Year TIP Breakeven Inflation as of 1/3/23: 2.26% (with the nominal yield at 3.79%)

10 Year TIP Breakeven Inflation as of 4/19/22: 2.93% (with the nominal yield at 2.93% and TIP real yield at zero)

The increase in the real yield for the 10 year TIP has not been caused by a material change in the breakeven inflation rate (the annual average CPI forecast over the ten year period), but to the rise in the nominal 10 year treasury yield that has normalized to an historical spread to the anticipated inflation rate. The breakeven inflation rate has come down since the Fed abandoned ZIRP. In this kind of scenario, the only way for a vintage 10 year TIP to adjust to higher nominal rates is to go down significantly in price so that the real yield increases to the current level of 2.07%. 

++++

Allocation Shifts Discussed in this Post: 

Treasury Bills Purchased at Auction: $7,000 in principal amount

Corporate Bonds: $5,000 in principal amount

Canadian Reset Equity Preferred Stocks: +C$1,727 (spreads to 5 year Canadian government bond, with 1 of 2 purchases having reset in June 2023)

Common Stocks: -$772.14

(consisting of $1,953.37 in proceeds minus $1,181.23 in purchases)

Weighted Yield Stock Purchases: 6.24% 

Stock Funds: -97.67

(consisting of $288.92 in proceeds minus $191.25 in purchases; weighted yield of stock CEF purchases = 6.98%, monthly dividends)

Net Outflow Common Stocks/Funds = -$869.81

Realized Gains Stocks/Stock ETF  = +$503.59

2023 Net Outflow Common Stock/Funds: -$39,656.34 

+++

Putin and His Servile Orcs: 

Tucker Carlson is constantly reaffirming that he is useful to Putin and other authoritarian leaders as discussed by Anne Applebaum in her latest article. Tucker Carlson, the American Face of Authoritarian Propaganda - The Atlantic There is a strong and growing authoritarian strain and tendency in Trump's party.  

Putin's strategy is to continue his genocidal invasion of Ukraine until western nations, including the U.S., grow weary of providing military and economic aid. The strategy will succeed in the U.S. with his soulmate winning the republican nomination and beating Biden in the general election (assuming Biden had not died of natural causes by then).  The strategy has worked in Poland and is apparently about to work in Slovakia. A shadow of 'Ukraine fatigue' hangs over Polish politics - BBC News; Slovakia's election front-runner wants to end aid to Ukraine - Los Angeles Times The front runner appears to be very friendly to Putin. Russia's disinformation is intense in that country.  In Slovakia, pro-Russia Robert Fico could hurt Europe’s unity on Ukraine - The Washington Post; Slovakia risks succumbing to Russian disinformation, president warns – POLITICO

Finland’s President Warns Europe About Russia - The New York Times

Ukraine launches attack on Russian naval headquarters - YouTube; Ukraine’s strike on key Russian naval HQ hints at ‘deep battle success’ | Major General Tim Cross - YouTube

++++

Trump and His Party: 

RealClearPolitics - Election 2024 - 2024 Republican Presidential Nomination

RealClearPolitics - Election 2024 - General Election: Trump vs. Biden

Fact-checking Trump's interview with Kristen Welker on 'Meet the Press'  

Trump flunks fact-check after Meet the Press interview goes off the rails: analysis - Alternet.org  

Trump Is Said to Have Told Aide Not to Acknowledge She Knew of Documents - The New York Times

Former Trump aide Cassidy Hutchinson claims Rudy Giuliani groped her on day of attack on Capitol; Rudy Giuliani sued by his former lawyers for $1.4M in unpaid legal fees - YouTube

Trump shares post on Jewish New Year attacking American Jews who didn't support him According to Donald, Jews who do not support him want to destroy America. 

Trump urged his fellow anarchists/nihilists in the House to vote against a republican budget bill that would keep the government open, even though the bill contained several measures that would never receive a single Democrat vote in the Senate and the republicans know that as a fact. Donald Trump calls on Republicans to allow government shutdown; House Republicans fail to move defense bill as government shutdown looms - The Washington Post 

Trump: "Republicans in Congress can and must defund all aspects of Crooked Joe Biden’s weaponized Government that refuses to close the Border, and treats half the Country as Enemies of the State. This is also the last chance to defund these political prosecutions against me and other Patriots. They failed on the debt limit, but they must not fail now. Use the power of the purse and defend the Country!" 

Governor Kristi Noem, “God-Fearing” Family Woman, and Corey Lewandowski, Trump Creep, Reportedly Had “Yearslong” Affair | Vanity Fair Both are family value republicans as reflected in their frequent public statements. OK Coupid - YouTube If a person is going to talk the talk, they need to walk the walk. Hypocrisy must have a genetic origin in republican DNA.  

+++

Senator Bob Menendez (D) Is Indicted in Brazen Bribery Plot - The New York Times After reading the indictment, the criminal charge of bribery looks solid.  Menendez should resign.  

+++

1. Small Ball Buys: 

A. Added 5 PFE at $33.61; 2 at $33.85; 3 at $32.59: 

Quote: Pfizer Inc. (PFE)

Cost: $333.52

PFE | Pfizer Inc. Analyst Estimates | MarketWatch

PFE SEC Filings

2022 Annual Report

I previously eliminated my duplicate positions. Item # 1.F. Eliminated PFE in Two Taxable Accounts - Sold 7 at $41.26; 3+ at $41.29 (3/6/23 Post)(profit snapshots = $48.92).  

Last Substantive Buy Discussion: Item # 1.B. Restarted PFE- Bought 1 at $31.08, 1 at $30.22; 1 at $29.45;  2 at $28.4 (4/25/20 Post)

I am not a fan, as previously discussed many times here. 

My long standing issue with PFE is that its growth by acquisition strategy has not produced satisfactory shareholder returns but management continues along that path nonetheless. 

The cost of completed acquisitions starting with Warner Lambert in 2000 far exceed the current PFE stock market capitalization.  

Some Acquisitions Starting in 2000: $284.26B

Market Cap at $33.6: About $191.3B 

Warner Lambert: $90.2B

Wyeth: $68B

Pharmacia: $60B

Hospira: $17B

Medivation: $14.3B

Biohaven: 11.6B

Array: $11.4B

Arena: $6.7B

Global Blood Therapeutics: 5.4B

Anacor: $5.2B 

King Pharmaceuticals: 3.6B

Trillium: $2.26B

Earlier this year Pfizer announced that it would acquire Seagen for a total enterprise value of $43B. Pfizer Invests $43 Billion to Battle Cancer | Pfizer I would anticipate that the completion of this acquisition will only add to the divergence between the cost of acquisitions and the market capitalization, a conclusion that I reached immediately after Pfizer made the announcement. The FTC is still reviewing this acquisition on antitrust grounds. 

My conclusion is that acquiring drugs primarily through expensive acquisitions, compared to internal drug discovery, does not work for long term shareholders. 

A purchase on the first trading day in 2000 produced an average annual total return of 3.96% through 9/18/23. DRIP Returns Calculator | Dividend Channel

PFE did experience a temporary price spike based on its Covid vaccine developed with BioNTech SE ADR (BINX) The stock price has now returned to a level where it was meandering before the pandemic and the huge Covid vaccine profit windfall, as if the huge profits from the vaccine did not happen, or maybe the Stock Jocks have considerable skepticism that this profit windfall will be used wisely.   

On the day of my last purchase, the stock fell in response to PFE's announcement that it expected a 24% U.S. Covid vaccination rate this year. Moderna, Pfizer Stocks Fall With Weak Expected Covid Vaccine Demand (9/18/23 article)

My reaction to that announcement was that the stock price already reflected IMO that profits from the Covid vaccine no longer existed at any level which was clearly not the case.   

5 Year Chart: 

Average cost per share: $33.87 (20 shares)

Dividend: Quarterly at $.41 ($1.64 annually), last raised from $.40 effective for the 2023 first quarter payment.

Pfizer Inc. (PFE) Dividend History | Seeking Alpha

The quarterly rate was slashed from $.32 to $.16 per share in 2009. 

I would rate the dividend history as poor starting with that cut. The increase from $.32 to $.41 is only 28.13% over a 14 year period.   

Yield at New AC = 4.84%

Last Ex Dividend: 7/27/23 

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

E.P.S. = $.41, down 77%

Non-GAAP E.P.S. = $.67, down 67%

The downdraft was caused by substantially lower revenues from the Covid vaccine, Comirnaty, and the Covid drug treatment drug Paxlovid. Excluding those two, revenues were up 5% operationally. 

"Second-quarter 2023 Paxlovid revenues declined $8.0 billion, or 98%, operationally compared with the prior-year quarter, primarily driven by no second quarter U.S. sales in anticipation of transition to traditional commercial markets in the second half of 2023, and lower contractual deliveries in most international markets." 

Second revenues for the Covid vaccine declined $7.3B or 82%. 

Product Revenues: 

10-Q for the Q/E 6/30/23 

Analyst Reports (available to Schwab customers):

Morningstar (8/29/23): 4 stars with a fair value estimate of $48 and a wide moat. 

S&P (9/15/23): 4 stars with a 12 month PT of $43 (noting that PFE has about $17B in product revenues at risk due to patent expiration in 2025-2030, but the analyst believes that 19 drugs in trials, including 15 developed in house, may generate $20B in revenues by 2030)

Argus (8/11/23): Buy with a $45 price target reduced from $50. 

Some Sell Discussions:  Item # 3.J. Sold PFE Shares Bought with Dividends at $51.714 and at $60.93 (12/16/21 Post); Item # 2.M. Sold 6 at $36.69 (11/28/20 Post)(profit snapshot = $43.6); Item # 4.A. Sold Remaining 33 PFE shares  at $33.44 (8/13/2017 Post)(profit snapshot = $90.67); Item # 3.A. Sold 100 PFE at $34.03 (7/13/17 Post)(profit snapshot = $143.42); Item # 3.A. Sold 100 PFE at $34.65 (3/13/17 Post)(profit snapshot = $235.86); Item # 1 Sold: 100 PFE at $31.68 (5/17/14 Post)(profit snapshot = $282.12) Buy discussions are linked in those posts. I highlighted the 2017 sale prices to emphasize how the stock would have been dead money except for the dividend payments over the past 6 years. 

Realized Gains 2006 to Date: $1,298.4

Goal: 8% annual total return with the dividend providing more than 1/2. 

B. Added to GDV - Bought 5 at $20.4: 

Quote: Gabelli Dividend & Income Trust Overview - Leveraged Stock CEF

Cost: $102

Investment Category: Monthly Income Generation

Last Discussed: Item # 2.J. Added to GDV - Bought 2 at $20.43; 5 at $19.97 (5/27/23 Post) 

GDV SEC Filings

SEC Filed Semiannual Report for the period ending 6/30/23 (cost of investments = $1.6117+B with a value then at $2.608+B)

Leveraged: Yes at 14% about using both fixed coupon and auction rate preferred stocks 

Average Cost per share: $20.28 (20+ shares)

Dividend: Monthly at $.11 per share ($1.32 annually)

Yield at New AC = 6.51%

Last Ex Dividend:  9/14/23 (owned all as of)

Data Date of 9/13/23 Trade: 

Closing Net Asset Value per share: $24.49

Closing Market Price: $20.35

Discount: -16.9%

Average 3 year discount: -12.44%

Sourced:  GDV-CEF Connect (Click "Pricing Information" tab)

Gabelli Dividend & Income (GDV)-Morningstar (currently rated 1 star) I view the recent expansion in the discount to be, in part, a response to poor management performance. 

Gabelli Dividend & Income (GDV) Portfolio-Morningstar (contains links to top 25 holdings)

Last Sell Discussion: Item # 1. Sold 200 GDV at $21.03 (11/12/13 Post)(profit snapshot = $1,393.8)

Maximum Position: 50 shares until there is a meaningful improvement in portfolio performance numbers. 

C. Added to HIW - Bought 1 at 22.51, 1 at $22.23; 1 at $21.03:

Quote: Highwoods Properties Inc. (HIW) - An Office REIT

Cost: $65.77

Markets: 

Sourced: HIW 2nd Q. Supplemental Operating Statistics.pdf (debt listed at page 8-SU debt rated at Baa2/BBB) 

I would characterized those metropolitan areas as being less impacted by the work-from-trend than major cities in the northeast and the west coast. 

Top 20 Tenants: 

HIW SEC Filings

2022 Annual Report

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

Last Substantive Buy Discussion: Item # 3.I. Added to HIW - Bought 1 at $22.04; 1 at $21.32; 3 at $21.25; 5 at $20.7  (5/13/23 Post) I discussed the 2023 first quarter report in that post. HIW-Announces-First-Quarter-2023-Results.pdf

Last Elimination: Item # 1.I. Eliminated HIW - Sold 7 at $47.22 (2/3/22 Post)

New Average cost per share: $25.04 (43+ shares)

Dividend: Quarterly at $.50 per share 

HIW Dividend History | Nasdaq

I am reinvesting the dividend. 

The current price reflects some pessimism that the $2 annual dividend per share will continue.  

Yield at New $25.04 AC: 7.99%

Yield at $21.03 - Last Purchase Price = 9.99%

Last Ex Dividend: 8/18/23

Last Earnings Report (Q/E 6/30/23): HIW 2023 2nd Quarter.pdf 

GAAP Net Income per share: $.40

FFO per share: $.94, down from $1 in the 2022 second quarter

GAAP to FFO: 

2023 Outlook: FFO per share between $3.69 to $3.81

Occupancy: 89%

Development Pipeline: 

10-Q for the Q/E 6/30/23 

I did not find a cash available for distribution ("CAD") number. Investors will not price Office REITs based off FFO given the significant cash maintenance expenditures and other items that negatively impact CAD including non-cash revenues created by the straight line accounting convention and cash spent on tenant improvements. The revenues created by the straight line accounting convention was reported at $3.544M. That number would be included in the total rent revenue of $197.217M. 

D. Added to DOC - Bought 5 at $13.13; 5 at $12.95; 5 at $12.75; 5 at $12.38 : 

Quote: Physicians Realty Trust (DOC)

Cost: $255.99

Management: Internal 

Last Discussed: Item # 1.H. Added to DOC - Bought 5 at $13.57 (7/1/23 Post) 

DOC is primarily a medical office building REIT (MOB). 

SEC Filing at page 16 

Every MOB REIT that I follow has overpaid for properties IMO, particularly when the capitalization rates at the time of purchase are compared to the current cost of capital. 

The end result has been a long term failure to generate meaningful increases in cash available for distribution ("CAD") per share even before the rise in interest rates. 

All of the MOB focused REIT stocks, including DOC, are in bear markets. The duration is not knowable. 

On the plus side, the MOB sector is more recession resistant than other property sectors. And, the stock price declines have increased the dividend yields to somewhat more attractive levels. 

New Average cost per share: $13.57 (45+ shares)

Working my way up slowly to 100 shares. 

Dividend: Quarterly at $.23 ($.92 annually), last raised from $.225 effective for the 2017 third quarter payment. The quarterly dividend was at $.225 in 2014. 

Physicians Realty Trust (DOC) Dividend History | Seeking Alpha

Without looking, this dividend history strongly suggests that management has failed to materially increase CAD per share over the past 5 years. 

I am reinvesting the dividend and will continue doing so for as long as the reinvestment lowers my average cost per share. 

Yield at New $13.57 AC per share: 6.78%

Yield at Last Purchase price of $12.38: 7.43%

Next Ex Dividend: 10/2/23

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

FFO per share: $.25, down from $.27 in the 2022 second quarter

CAD per share: $.241, down from $.255 in the 2022 second quarter

Net Income to FFO: 

FFO to CAD (DOC uses "FAD" which means the same): 

2018 2nd quarter CAD per share: $.232 per share, SEC Filing 

10-Q for the Q/E 6/30/23 (debt listed and discussed starting at page 15) 

I would expect CAD per share to be pressured some by higher interest costs. 

5 Year Annual Average Total Return Through 9/15/23: +.12%

Sourced: DRIP Returns Calculator | Dividend Channel

With this kind of poor return for a long term hold, I go into a DOC position with a trading mentality, which translates generally into selling the rips and buying the dips. The dip is happening now. A rip for DOC would moving from the current price to over $15 or possibly $16. 

Goal: Total annual average return of 8%

Some Prior Sell Discussions: Item # 1. Eliminated DOC- Sold 46+ at $17.66 (7/3/20 Post)(profit snapshot = $213.64); Item # 4.A. Sold Remaining DOC at $17.1-Used Commission Free Trade (12/9/18 Post)(profit snapshot = $69.5); Item # 5.A. Sold 100 DOC at $17.6 (8/22/18)(profit snapshot = $61.25); Item # 3.A. Sold 103 DOC at $16.92 (8/19/18 Post)(profit snapshot = $12.97)

A 2015 transaction was not discussed and netted a $237.96 profit: 

2015 DOC 100 Shares 

 DOC Trading Profits to Date: $617.28

E. Added To O - Bought 1 at $54.45; 1 at $54.17; 1 at $52.82; 1 at 52.35; 2 at $52; 1 at $51.57:  

Quote:  Realty Income Corp. (O) - A Net Lease REIT

Cost: $369.36

SEC Filings

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

New Average cost per share: $55.75  (20 shares)

Dividend: Monthly at $.256 per share ($3.072 annually), last raised from $.2555 per share effective for the October 2023 payment. The dividend payment made in October 2013 was at $.1819 per share. Dividend Payment Information | Realty Income

Yield at New AC per share:  5.51% (using $3.07 annual)

Yield at $51.57 - Last Purchase Price: 5.95%

The yield looked a lot more enticing when the 10 year Treasury yield was below 2%.  

Last Ex Dividend: 9/29/23

Last Earnings Report (Q/E 6/30/23): 

SEC Filed Press Release and Supplemental.

I discussed the last earnings report in this post. Item # 2.D. Added to O - Bought 3 at $58.97; 1 at $58.63; 2 at $58.08; 2 at $56.9  (8/19/23 Post) 

Last Round-Trip: Item # 1. Eliminated Realty Income (O)- Sold 100 at $52.37 -Seeking Alpha (profit snapshot = $1,579.6)-Item # 6 Bough 100 Realty Income (O) at $36.96 (12/10/13 Post)

Goal, Small Ball Trading, Purchase Restrictions: Annual average total return of 8%, using the small ball trading rule of selling the rips at a profit and buying the dips. A consideration to sell price is over $60. I will continue to buy in 1 or 2 share lots provided each such purchase lowers my current average cost per share.  

F. Added to THQ - Bought 5 at $17.85: 

Quote: Tekla Healthcare Opportunities Fund Overview - A Leveraged Balanced CEF 

Cost: $89.25

Investment Category: Monthly Income Generation

This fund owns primarily common stocks and bonds issued by healthcare companies. The fund will own some convertible preferred stocks and will write some options against common stock positions. 

THQ SEC Filings

SEC Filed Semiannual Report for the period ending 3/31/23 

SEC Filing- Holdings as of 6/30/23 

Tekla Healthcare Opportunities (THQ)-Morningstar (currently rated at 4 stars)

Tekla Healthcare Opportunities (THQ) Portfolio | Morningstar (lists top 25 holdings)

New Average cost per share: $18.82  (40+ shares)

Dividend: Monthly at $.1125 per share ($1.35 annually), with some recent ROC support. 

I am reinvesting the dividend. 

THQ Dividend History | Seeking Alpha

Last Ex Dividend: 9/20/23 (owned all as of) 

I have nothing further to add to the discussion in my last post. 

G. Added 1 BMY at $58.61: 

Quote: Bristol Myers Squibb Co.

BMY SEC Filings

BMY Analyst Estimates | MarketWatch

New Average cost per share: $60.18 (18+ shares)

Dividend: Quarterly at $.57 per share ($2.28 annually)

Dividend History - Bristol Myers Squibb

Yield at New AC = 3.79%

Next Ex Dividend: 10/5/23

I discussed the 2nd quarter earnings report in my last post: Item # 1.E. Added to BMY - Bought 1 at $59.82; 1 at $59.41 (9/16/23 Post) 

Last Eliminations: Item # 1.A. Eliminated BMY in Fidelty Account - Sold 14 at $74.64 (2/13/23 Post)(profit snapshot = $206.75); Item # 2. Eliminated BMY in Vanguard Taxable Account - Sold 15+ at $77.56 (5/5/22 Post)(profit snapshot = $279.11) I am buying back a few of the shares sold earlier this year at $74.64. 

H. Added 1 CTO at $16.67; 2 at $16.4; 3 at $16.17 : 

Quote: CTO Realty Growth Inc. (CTO) - Externally Managed Equity REIT 

Cost: $97.98

CTO SEC Filings

10-Q for the Q/E 6/30/23

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

New Average cost per share: $18.26 (63+ shares)

Slowly building my way up to 100 shares. 

Dividend: Quarterly at $.38 per share ($1.52 annually)

CTO Dividend History | Seeking Alpha

I am reinvesting the dividend. 

Yield at New AC = 8.32%

Last Ex Dividend: 9/13/23 (owned 56+ as of)

I discussed the second quarter earnings report in a recent post. Item # 1.B. Added to CTO - Bought 3 at $16.65 (8/26/23 Post); SEC Filed Earnings Press Release and Supplemental

2. Corporate Bonds: 

A. Bought 2 Canadian Natural Resources 3.9% SU Maturing on 2/1/25 at a Total Cost of 97.244- Interactive Brokers Account:  

Issuer: Canadian Natural Resources Ltd. (CNQ) 

CNQ Analyst Estimates | MarketWatch

Website: Canadian Natural Resources

Investor Relations – Canadian Natural Resources

SEC Filed Earnings Press Release for the Q/E 6/30/23 (Net income of C$1.463B or $1.32 per share) 

New Finra Page: Bond Page | FINRA.org

Credit Ratings: Baa1/BBB- 

DBRS has an A (low) rating. Canadian Natural Resources Limited: Rating Report | DBRS Morningstar

Credit Ratings – Canadian Natural Resources

The S&P rating is not consistent with the other two. When evaluating the ratings for a short term bond, I will consider the current earnings, the near term consensus E.P.S. estimates, free cash flow, and the bond maturity schedule. For a CNQ bond maturing in 2024 or early 2025, a bond rating of A- would be appropriate IMO, and no lower than the Baa1 rating from Moody's. Earnings and cash flows are strong. Debt is being reduced.  

YTM at Total Cost: 6.03%

Current Yield at TC = 4.01%

I now own 4 bonds. 

I have two CNQ 3.8% SU bonds maturing on 4/15/2024. Bond Page | FINRA.org I am replacing that bond in advance of maturity by buying 2 more of the 2/1/25 maturity. I decided to go ahead and do that after receiving the proceeds from 2 Oracle bonds in this account that matured on 9/15/23.

I no longer have a position in the common stock Item # 1.A. Eliminated CNQ - Sold 10 at $55.2 (6/10/23 Post)(profit snapshot = $237.5). I mentioned in that post that I would limit my exposure to CNQ SU bonds, noting further that I was considering buying two more of the 2025 maturity prior to the 3.8% SU maturing on 4/15/24.  

B. Bought 2 Arrow Electronics  6.125% SU Maturing on 3/1/26 at a Total Cost of 99.694:

Issuer: Arrow Electronics Inc. (ARW) 

ARW Analyst Estimates | MarketWatch

ARW SEC Filings 

SEC Filed Earnings Press Release for the Q/E 6/30/23 

New Finra Page: Bond Page | FINRA.org

Credit Ratings: Baa3/BBB-  

Prospectus

Issuer Call Option: On or after 3/1/24 at par value + accrued and unpaid interest (p. S-8) 

I do not care whether or not this bond is called at par value given the current yield and a total purchase cost at a discount to par value.  

YTM at Total Cost: 6.26%

Current Yield at TC = 6.144%

I own 4 Arrow Electronics 3.25% SU bonds that mature on 9/8/24. 

C. Bought 1 Jeffries 6.625% SU Maturing on 9/19/26 at Par Value: 

Issuer: Jefferies Financial Group Inc. (JEF) 

JEF Analyst Estimates | MarketWatch

JEF SEC Filings 

SEC Filed Earnings Press Release for the F/Q Ending 5/31/23 

Issuer Optional Call: "19th calendar day of each March and September beginning September 19, 2024 and ending March 19, 2026"

It is becoming more common for investment grade bond issuers to reserve a call right 1 year after issuance when the coupon is over 6%.  

Prospectus 

Current Yield and YTM at 6.625%

3. Small Ball Sells: 

A. Eliminated Duplicate OBDC Taxable Account Position - Sold 30 at $13.78 in my Vanguard Taxable: 

Quote: Blue Owl Capital Corp. (OBDC) - Externally Managed BDC 

Proceeds: $413.25

Blue Owl was formerly known as Owl Rock (ORCC). My prior discussions are now linked to the right using both symbols: OBDC-ORCC.  

OBDC SEC Filings 

2022 Annual Report (Risk factor summary starts at page 33 and ends at page 71)

Profit Snapshot: $52

Last Discussed: Item # 1.A. Eliminated  ORCC in Schwab Taxable Account- Sold 26+ at $13.6 (3/6/23 Post)(profit snapshot = $40.68) 

Last Buy Discussions: Item # 3.F. Added to ORCC in Fidelity Taxable Account - Bought 5 at $11.14 (10/4/22 Post); Item  L.-Bought 5 ORCC at $12.2 in Fidelity Taxable Account (6/22/22 Post); Item # 2.F. Added to ORCC-Bought 5 at $11.65 (11/13/20 Post);Item # 1.J. Added 4 ORCC at $12.02 (9/12/20 Post); Item # 4.E. Started ORCC-Bought 10 at $12.67; 1 at $12.59; 5 at $12.27 and 5 at $11.95 (6/27/2020 Post)   

Net asset value per share history: 

 6/30/23:  $15.26

12/31/22:  $14.99

12/31/21:  $15.08

12/31/20: $14.74

12/31/19:  $15.24

IPO: July 2019 at a public offering price of $15.5. Prospectus

Dividend-Regular: Quarterly at $.33, last raised from $.31 effective for the 2023 first quarter. 

Dividends-Owl Rock Capital Corporation (ORCC)

Special Dividends: A special dividend of 7 cents per share was paid in the 2023 third quarter, 6 cents in the second quarter and 4 cents in the first quarter. 

Last Ex Dividends: 6/29/23 (regular) and on 8/30 for the special. 

Next Ex Dividend: 9/28/23 (regular)

Last Earnings Report (Q/E 6/30/23): Blue Owl Capital Corporation Reports Second Quarter Net Investment Income Per Share of $0.48 and NAV Per Share of $15.26

Investment Income: $394.2M

NII per share: $.48

Regular Dividend: $.33

Weighted Average Yield on Accruing Loans: 12.2%

Based on fair value, portfolio consisted of 69.1% first lien senior secured debt, 14.1% in second lien debt, and the remaining in unsecured debt, preferred and common equity positions. 

"As of June 30, 2023, three portfolio companies with an aggregate fair value of $99.0 million were on non-accrual status, representing 0.9% of the total fair value of the debt portfolio."

Goal: Any total return in excess of the dividends received. 

Remaining Position: 40 shares with an average cost of $12.11; yield at 10.9% using the regular dividend only. 

SU Bonds: I own 4 SU bonds issued by the publicly traded Blue Owl Capital. FINRA page for 5.25% SU Maturing on 4/15/24; FINRA page for the 4%. SU Maturing on 4/20/25 I also own 2  Blue Owl Core Income 5.5% SU maturing on 3/31/25. Bond Page | FINRA.org That is a private BDC that has the same credit rating as the publicly traded Blue Owl Capital SU bonds but generally have higher yields that the publicly traded BDC bonds, usually close to an additional .5% YTM. 

B. Eliminated Duplicate FDUS Position in Taxable Accounts - Sold 20+ at $18.89:  

Quote: Fidus Investment Corp. - Externally Managed BDC 

Proceeds: $381.86

SEC Filings

2022 Annual Report (Risk factor summary starts at page 29 and ends at page 58)

10-Q for the Q/E 6/30/23 (summary of investments starts at page 7; the symbol "y" indicates that the loan was on non-accrual, for example, a $5.22M second lien loan to US Green Fiber has the "Y" and the loan has already been written down to a zero fair value)

5 year Financial Data through 2022: 

P. 122, Annual Report

I sold on the ex dividend day (9/19) for both the regular $.41 per share dividend and a $.31 per share special dividend. 

Special dividends are sourced from "spillover income", generally defined as income that has been earned but not yet distributed as part of the regular dividend payments. BDCs will distribute all or almost all of net investment income as dividends. Once the spillover pile is exhausted, special dividends will not be paid until the BDC has more spillover income and then it may elect to hold the spillover income for awhile as FDUS as done in the past and continues to do even after paying numerous special dividends.   

FDUS 2023 Dividends: 

Profit Snapshot: $194.21

Last Buy Discussion: Item # 3.C. Bought Back FDUS in Fidelity Account Bought 20 at $13.7; 5 at $11.99; 5 at $11.5; 5 at $9, 2 at $8.56, 2 at $5.98, 1 at  $4.65 (3/28/20 Post) 

Remaining Taxable Account Position: 30+ shares with an average cost per share of $9.77. 

Yield at $9.77 AC, using regular quarterly dividend of $.41 only = 16.79%

Net asset value per share history: 

 6/30/23:    $19.13, 10-Q at p. 3

12/31/22     $19.03, 10-K at p. 122

12/31/21:    $19.96, " at page 122

6/30/21:     $17.57

12/31/20:   $16.81
9/30/20:    $15.94
12/31/19:    $16.85
9/30/19:     $16.47 10-Q
12/30/18:   $16.47
9/30/18:     $16.41
3/30/18      $16.28
12/31/17     $16.05
12/31/16     $15.76 
12/31/15     $15.17
12/31/14     $15.16
12/31/13     $15.35
12/21/12     $15.32

IPO at $15 June 2011

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

NII per share = $.67

Adjusted NII per share: $.62

The adjusted number reduces the GAPP NII by $1.174M which originates, not from investment income, but a reversal of a capital incentive fee payable to the external manager. s

"Estimated spillover income (or taxable income in excess of distributions) as of June 30, 2023 of $36.2 million, or $1.43 per share"

"As of June 30, 2023, the debt investments of 46 portfolio companies bore interest at a variable rate, which represented $589.3 million, or 72.9%, of our debt investment portfolio on a fair value basis, and the remainder of our debt investment portfolio was comprised of fixed-rate investments. "

Performing debt investments weighted average yield = 14.2%

The higher than normal weighted average yield results from higher weightings in second lien and subordinated debt.

There are numerous examples of first lien investments made by BDCs becoming worthless or almost so.

Portfolio Asset Quality According to FDUS:

10-Q at page 47

FDUS Estimated Changes in Net Investment Income Based on Changes in Interest Rates:

10-Q at page 60

Sell Discussions: Item # 1.K. Pared FDUS in Schwab Account - Sold 3 at $17.5- Highest cost shares (10/15/21 Post); Item # 1.E. Sold 7 FDUS purchased with Dividends at $16.44-Schwab Account (4/30/21 Post); Item # 1.G. Pared FDUS in Fidelity Taxable Account-Sold 10 at $15.01(3/20/21 Post); Item # 1.I. Pared FDUS in Fidelity Taxable Account-Sold 2 at $13.6 and Item # 1J. Pared FDUS in Schwab Taxable Account-Sold 13 at $14.01 (2/13/21 Post); Item # 2.O. Continued Paring FDUS -Sold Highest Cost Lots in Fidelity Taxable Account at $13.75 (11/28/20 Post); Items 1.L, 1.M; 1.N (11/30/20 Post); Item 1.D. and E. Pared FIDUS in Schwab Account-Sold 50 at $15.34 and Sold 20 FDUS (Fidelity Account) at $15.4 (2/22/20 Post); Item # 1.C. Pared FDUS-Sold 52 at $15.15 (3/6/19 Post) 

FDUS Realized Gains to Date: $458.75 ($264.54 in prior gains, snapshots in Item # 1.K.) 

Goal: Any total return in excess of the dividend payments. 

C. Eliminated MET - Sold 5 at $65.84: 

Quote: MetLife Inc. (MET) 

Proceeds: $329.2

MET Analyst Estimates | MarketWatch

MET SEC Filings 

10-Q for the Q/E 6/30/23 

Last Buy Discussions: Item # 1.N. Bought 1 MET at $35.52 (10/24/20 Post); Item # 1.F. Restarted MET-Bought 5 at $37.3 (8/29/20 Post)(contains links to prior discussions and snapshots of realized gains)

Profit Snapshot: $144.5

Rational: I am eliminating several small stock positions where the current dividend yield is significantly below treasury bill yields. This is part of an ongoing risk reduction given the risk free return from treasury bills and my prior goals of capital preservation and income generation. 

Dividend: Quarterly at $.52 per share, last raised from $.5 effective for the 2023 second quarter payment. 

The 2017 4th quarter dividend was $.40 per share. MetLife Declares Fourth Quarter 2017 Common Stock Dividend

Dividend growth since 2017 has been restrained by the spinoff of Brighthouse Financial (BHF).

METLIFE Completes Spin-Off of Brighthouse Financial (8/7/2017)

Prior to 2013, MET paid an annual dividend. 

MetLife, Inc. (MET) Dividend History | Seeking Alpha

I do not expect a doubling of the dividend within the next years, viewing 15 years as more likely. This is another consideration for me. 

Last Ex Dividend:  8/7/23

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

With the usual caveat that accounting from life insurance companies is beyond my comprehension, and I have no desire to learn about it, the following is a summary of the last report. 

GAAP E.P.S. = $.48

Non-GAAP E.P.S. = $1.94, down from $2.13 in the 2022 second quarter. 

Adjustments to GAAP: 

MET Realized Gains 2009 to Date: $1,016.9

Largest Realized Gain: Item #5.A. Sold 106+ MET at $55.13-Eliminated Position (7/19/17 Post)(profit snapshot = $502.7)

Some Other Sell Discussions: Item # 1.E. Eliminated MET in 2 Taxable Accounts - Sold 1 at $71.31; 3 at $71.85 (3/6/23 Post) (profit snapshots = $142.42); Item # 1.C. Pared MET in Vanguard Taxable Account - Sold 1 at $59.61 (3/20/21 Post)(profit snapshot = $22.31); Item # 4.A. Eliminated MET in 1 Taxable Account (6/20/2017 Post)(profit snapshot = $149.48) 

Current Position: None

METPRA: I am considering restarting a position in this preferred stock that pays the greater of 4% or a 1% spread to the 3 month Libor rate but want a lower price. My restart at anywhere near the current price will only be 5 shares.  MET announced that it would be using SOFR rather than the now defunct Libor rate in its floating rate securities. Replacement Reference Rate for U.S. Law-Governed U.S. Dollar LIBOR-Linked Preferred Stock and Debt Securities Currently, the quarterly coupon is based on the higher floating rate which may be near its peak. The largest gain was this one: Item # 1 Sold 100 METPRA at $24.95 (7/9/12 Post)(profit snapshot  = 1,283.99). The total realized gains in METPRA is currently at $1,909,14. Last Elimination: Item # 3.A. Sold 50 METPRA at $23.86 (2/17/19 Post) The last ex dividend was on 8/30/23. 

D. Eliminated VABK  - Sold 15 at $36.01: 

Quote: Virginia National Bankshares Corp.

Proceeds: $540.14

SEC Filings

Profit Snapshot: +$91.49

Last Discussed: Item # 1.H. Added to VABK - Bought 5 at $27.88 (6/3/23 Post) 

Investment Category: Regional Bank Basket Strategy

Dividend: Quarterly at $.33 per share ($1.32 annually)

Virginia National Bankshares Corporation (VABK) Dividend History | Seeking Alpha

Last Ex Dividend: 9/7/23 (owned all as of)

Last Earnings Report (Q/E 6/30/23):  

SEC Filed Earnings Press Release 

Comparisons are to the 2022 second quarter. 

E.P.S. $1.05, down from $1.06

NIM 3.83%, up from 3.02%

Efficiency Ratio: 54.1%

NPL Ratio: .12%

NPA Ratio: .08%

Charge Off Ratio: .05%

ROA = 1.46%, up from 1.27%

ROE = 15.98%, down from 16.16%

Tangible Book Value per share: $24.01, up from $22.28

E. Eliminated VT - Sold 3 at $96.31: 

Quote: Vanguard Total World Stock ETF Overview

Proceeds: $288.92

Sponsor's website: VT-Vanguard Total World Stock ETF

Expense Ratio: .07% (a very low cost option for anyone wanting total world stock exposure in 1 security)

Number of Stocks: 8,572 as of 8/31/23

Top 10 Holding as of 8/31/23

The largest foreign stock holding is Taiwan Semiconductor at #18. The second and third largest are Nestle at #21 and Novo Nordisk at #22. 

Profit Snapshot: $21.39

This ETF provides exposure to the world stock market at a low cost. For a considerable period, the international exposure has resulted in lower returns than an ETF that attempts to capture returns from the entire U.S. stock market. I know that there have been periods in the past when international stocks owned by a USD priced ETF have outperformed the S&P 500 but I am questioning now whether that will occur again in my lifetime. 

VT vs. SPY Annual Average Total Returns through 9/20/23: Total return includes dividend reinvestments. 

SPY – Performance – SPDR® S&P 500 ETF Trust | Morningstar

VT – Performance – Vanguard Total World Stock ETF | Morningstar

3 years: 

SPY = 11.54%

VT =     7.96%

5 years: 

SPY  = 10.3%

VT =     6.85%

10 years

SPY = 11.93%

VT =     7.86%

15 years: 

SPY = 10.91%

VT =   7.25% 

One drag in the international stock portion for VT has been its exposure to emerging markets. The Vanguard Emerging Market ETF (VWO) has a 3 year annual average total return of -.21% and just +3.02% over the past 15 years through 9/20/23. VWO – Performance – Vanguard FTSE Emerging Markets ETF | Morningstar Russian stocks were included in VWO and are currently assigned a zero value. China is still classified as an emerging stock market and has been a negative detractor in VT's performance as well. A China stock ETF produced a -14.88% annual average total return for 3 years and only +.87% over ten years. 

Russia is clearly uninvestable now and will likely remain so for decades. 

China's stock market has potential, and I have successfully traded China stock mutual funds in the past. However, that market currently looks univestable to me based on a number of factors previously discussed here.

4. Treasury Bills - Purchased at Auction:   

Treasury bill auction purchases will increase meaningfully starting in October. That will result from the dollar amounts of maturing securities during the 4th quarter. 

60% to 80% of the $79K in proceeds received in October will be redirected into 2 month treasury bills purchased at the weekly Thursday auction. 

In my Schwab account, where the sweep account yield is currently at .45%, I am going to start buying the 2 year treasury note at the monthly auctions, and will likely continue to do so as long as the yield is over 5% which is the case now. U.S. 2 Year Treasury Note Overview | MarketWatch

The next monthly auction is on Tuesday. The first purchase may only be $1,000 and possibly as much as $10,000 in the October auction, with the amount dependent on my best guess about the likelihood of more FF rate increases.  The current T Bill rates are higher than the 2 year treasury note yield, so I will go slow in extending the maturities beyond the bill purchases.   

A. Bought 5 Treasury Bills at the 9/18/23 Auction: 

91 Day Bill 

Matures on 12/21/23

Interest $67.18

Investment Rate: 5.477%

B. Bought 2 Treasury Bills at the 9/21/23 Auction: 

56 Day Bill 

Matures on 11/21/23

Interest: $16.49

Investment Rate: 5.433%

5. Canadian Reset Equity Preferred Stocks: 

A. Added 50 TRPPRD:CA at C$14.9 (C$1 IB Commission): 

Quote: TRP-PD.TO 

Issuer: TC Energy Corp. (TRP), formerly known as TransCanada. 

TRP Analyst Estimates | MarketWatch

Last Earnings Report (Q/E 6/30/23): TC Energy reports solid second quarter 2023 results, while significantly advancing Coastal GasLink and Southeast Gateway projects to planned cost and schedule

Prospectuses for TRP preferred stocks: TC Energy — Stock Information

Prospectus Excerpt: 

This stock is similar to the fixed-to-floating rate U.S. preferred stocks that reset their coupon every five years. I discussed one of those in my last post (Item # 2.A.). 

TRP paid a 4% fixed rate coupon for the first five year period which ended in April 2019. The coupon then resets every 5 years at a spread to the 5 year Canadian government bond. 

Last Discussed: Item # 4.A. Added 100 TRPPRD at C$15.59 (7/1/23 Post); Item # 3.A. Bought 50 TRPPRD at C$13 (7/3/20 Post); Item # 1.A. Bought 50 TRPPRD at C$16.09 (11/2/19 Post)

The Canadian preferred stocks that reset at spreads to the 5 year Canadian government bond within the next 6 months are looking more attractive to me at their current discounts to par value. 

The 5 year Canadian government bond is currently trading with a yield slightly over 4%. Canada 5 Year Government Bond Overview | MarketWatch

Par Value: C$25

Coupon: 2.38% spread to the 5 year Canadian government bond, resets every 5 years. 

Current Coupon: 3.903% through 4/30/24

Last Reset: 2019 when the 5 year Canadian bond was at 1.523% 

Next Reset Period: Starts on 4/30/24. The calculation date for the reset coupon will be the 30th day prior to the first day of the reset period. 

Average Cost per share: C$15.05 (250 shares)

Callable at par: Only on reset dates  

Dividends: Paid quarterly and cumulative

Next Ex Dividend Date: 10/2/23 (C$.244 per share) There are 3 more dividend payments at that rate. 

I can only guess at what the 5 year Canadian government bond yield will be 30 days prior to 4/30/24. Currently, it does seem more probable than not that the yield will be close to 4%. If I assumed a 4% yield on the next reset calculation date, the coupon for the next 5 years would be 6.38%. 

The appeal is not so much the 6.38% reset coupon in this hypothetical,  but the current yield at my average cost per share. 

The yield at C$15.05 AC per share would be 10.6% (.0638% hypothetical coupon x. C$25 par value = C$1.595 annual dividend per share ÷ C$15.05 average cost per share = 10.598%)

I own the TRP common shares priced in USDs. Last Discussed: Item # 3.B. (7/29/23 Post) 

B. Restarted CPXPRE:CA - Bought 50 at C$19.6 (C$1 IB commission): 

Quote: CPX-PE.TO

Issuer: Capital Power Corp. - Canadian Utility with operations in both Canada and the U.S. Operations - Capital Power

Last Earnings Report (Q/E 6/30/23): Capital Power reports second quarter results and announces a 6% common share dividend increase - Capital Power

Preferred Share Information - Capital Power

Prospectus Excerpt: 

Sell Discussions: Item # 2 Eliminated CPXPRE - Sold Remaining 100 Shares at C$24.18 (7/30/21 Post)(profit snapshot = C$843); Item # 1.A. Sold 50 of 150 CPXPRE:CA at C$22.01(5/28/21 Post)(profit snapshot = C$217)

CPXPRE Realized Gains to Date: C$1,060

Previous Buy Discussions: Item # 3. Added to CPXPRE-Bought 50 at C$14.2  (4/18/20 Post); Item # 4.A. Added 50 CPXPRE at C$17.4 (12/4/19 Post); Item # 3.A. Bought 50 CPXPRE at C$17.63 (10/30/19 Post) 

Description: Reset Equity Preferred Stock

Par Value: C$25

Coupon: 3.15% spread to the 5 year Canadian government bond, resets every five years.  

Last Reset: June 2023 at a 6.631% coupon, remains in effect for five years. 

Series 5, CPX.PR.E - Capital Power 

This last reset raised the quarterly dividend to C$.4144375 from C$.327375. 

Dividends: Paid quarterly and cumulative

Yield at Total Cost of $19.62 per share: 8.45% (.06631% x. C$25 par value =C$1.65775 annual dividend per share ÷ C$19.62 Total Cost per share = 8.4493%)

Issuer Optional Redemption: On reset dates, 5 years of call protection after a reset. 

Stopper Clause: Enforces the preferred shareholders preferential right to cash compared only to the common shareholder. 

Gains from Other Previously Owned Capital Power Reset Preferred Stocks: C$895

Item # 2.A. Sold 100 CPXPRA at C$16.92 (1/15/18 Post)(profit snapshot = C$670)- Item # 3 Bought 100 CXPPRA a C$10.2 - Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As Of 4/14/16 - South Gent | Seeking Alpha That one reset in December 2020 at a 2.17% spread to the five-year Canadian bond. The reset coupon was only 2.621%. I have no current interest in that one given the time to the next reset, the low spread compared to other Capital Power preferred stocks and the low coupon at the last reset.  

I also have a prior round trip in CPXPRC, realizing a C$225 gain. South Gent's Comment Blog # 8: Sold 50 CPXPRC at C$19.08 (bought at C$14.54. Item # 2.) That one will reset in December 2023 at a 3.23% spread to the five-year Canadian government bond. The last reset was at 5.453%. 

Total Realized Gains CPX Preferred Stocks = C$1,955.

Current Position in CPX Preferred Stocks: 50 shares of CPXPRE. 

6. Last Week - Daily Dividend and Interest Payments Received in my Fidelity Taxable Account: 

Most of the dividend and interest income paid during a month will be received on the 1st, 15th and last business day.    

One objective of my portfolio management is to generate income every business day. There are several reasons for that approach including the one mentioned below. 

When there is blood in the streets, something similar to what was happening in September 2008-March 2009, or March 2020, I will at a minimum use daily cash flow to buy common stocks. Continuing to invest during those periods has proved rewarding but difficult mentally to do. At least initially, buying more stocks increases the portfolio losses. I easily overcome the emotional difficulty by buying dividend paying stocks with daily cash flow from interest and dividend payments. 

9/18 Monday

9/19

9/20

9/21 

9/22

The JP Morgan $2,000 CD, which was redeemed yesterday, was bought 1 year ago. Proceeds will be reinvested into a higher yielding security. 

Corporate Bond Interest Payments: $274.51

CDs (Monthly interest payments): $37.19

Stocks/Stock Funds (ETF/CEF): $51.19

The goal in this account is to build up cash flow to an average of $5,000 per month. To accomplish that goal, I  will need interest rates to trend up some and to successfully transition to longer term maturities before interest rates trend back down. At the current time, I do not foresee that transition occurring within the next 6 months. 

The largest dividend or interest payment received in my Schwab account last week was a $147 interest payment on 10 Nextera bonds that mature on 3/21/24. I received $6K in proceeds from a matured T Bill and CD last week in that account.    

I will be buying $5K in principal amount of the 91 T Bill that will be auctioned on Monday. This is the last 3 month T Bill that can be purchased at auction whose interest will be taxable in 2023. I view it as probable that my income will be higher next year and taxed at a higher marginal rate compared to 2023. 

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.