Our Stocks Pay Dividends, Too
Let's look at how dividends play into the Portfolio and some recent additions.
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Earlier this morning, we picked up more shares of American Express AXP and TJX Companies TJX, moves that, as we explained, add to the Pro Portfolio’s dividend stream. Of the 26 holdings in the Portfolio, 20 are dividend payers with some ranging from the minuscule $0.01 per share per quarter payment from Nvidia NVDA to the larger $1.96 per share per quarter one from United Rentals URI. The six that don’t pay dividends? Amazon AMZN, Axon AXON, Dutch Bros BROS, Elastic ESTC, ServiceNow NOW, and Palantir PLTR.
When thinking about dividend payments, some folks tend to think of it as an income stream, others use a dividend re-investment strategy, and some, like the Portfolio, credit the dividend payments to its cash position. What this means is that as our holdings pay their quarterly dividends, and if we receive any special dividends, they will show up in the portfolio’s cash position. This gives us additional firepower when we see an opportunity we want to jump on, be it a new position or, like we did today, adding more shares to an existing holding or two.
Based on announced dividends, we estimate annualized dividends to be received by the Portfolio total around, which includes the recent increases announced by Morgan Stanley MS and Bank of America BAC, to be near $39,000. That’s a dividend yield of around 0.7%.
Even though that is the process we follow for the Portfolio, when we think about a position’s performance, we should keep in mind its total return, which combines stock price appreciation and received dividend payments. We hammered this point home when we added shares of SuRo Capital SSSS to the Portfolio, given its business development company (BDC) business model that requires it to return at least 90% of its taxable income to shareholders.
SuRo's next cash dividend will be paid on July 31 to shareholders of record as of today’s market close. We’ll be talking with SuRo’s Chairman and CEO, Mark Klein, on this week’s Stocks & Markets podcast. You can be sure we’ll be asking Mark about dividends above and beyond that upcoming payment.
As we move forward, we will continue to look for companies well-positioned to benefit from multi-year tailwinds and structural changes, adding shares at levels that are favorable if not compelling risk-to-reward tradeoffs. If that brings additional dividends to the portfolio, or a company with a penchant for increasing its annual dividend, so much the better.
And if you read this and are thinking it would be wonderful if the Pro Portfolio Holdings table would show dividends collected for each position, all we can say is, we’re seeing what we can do and working on it.
The Portfolio is long American Express, TJX Cos., Nvidia, Amazon, Axon, Dutch Bros, Elastic, ServiceNow, Palantir, Morgan Stanley, Bank of America, SuRo, United Rentals.
