5×5-year dividend analysis as of 2/2016

(and three BIG surprises and their lessons in my wife’s portfolio)

The chart shows 5 year price performance for 5 high dividend securities as of 2/16/2016.  Net price change is in kind of small print at the right on colored arrows.  Approximate 5 year total yield is indicated by addition of colored up-bars to account for dividends.  Rather than add up the details, which I have challenged my accountant-wife to someday do for us, I approximated them in one of several ways:

  • Unless otherwise noted, 5 times current yield times 0.6 to account for taxes (25%) and somewhat higher current than normal yields due to current low prices (15%).  I might should have multiplied by .5, but this varies and I’m only looking for a relative figure of merit.  Then subtract the current negative 5-year price change from that to get the posted (top) 5 year net performance.
  • For MORL used 25% to start with not the current 34% because it has only been that high about a year.
  • For BP I used .4 instead of .6 because its dividend was low for several years after the Gulf spill.

You can quickly reach four conclusions from this:

  1. HTGC, which is primarily NOT in real estate, is far and away the best.  Don’t go looking for other similar funds, like HRZN, as I have, and none of them are any good.  Caveat: if you bought HTGC in the peak bubble-like periods from mid ’13 to early ’15, you didn’t do so well with it.
  2. MORL is second best, and not nearly as bad as it looks because of very high dividends, but it returns some capital to make its dividends.  This is not in the available data.  You have to not only own it, but then sell it to see the “adjustments” your broker will make to your sales price.  It paid 24% in 2015 but 7% was return of capital, so really it paid 17%, still the highest available, and 2x the typical mortgage REIT just as advertised, such as those in KBWD.  But not 2x AGNC or HTGC.
  3. KBWD, which is sort of the unleveraged version of MORL, is third best but not worth investing in.  You can’t exactly say it captures the worst of the lot, even though it’s tied with AGNC for last place, because this group generally is the 5 best.  We’ll talk about two below that are terrible.  AGNC is not diving at the moment, but KBWD is.
  4. BP will probably recover as oil will probably recover, and will be decent if that happens, but it is not now, and if that happens, it will only have about a 6% dividend as it has historically.  Although, that is still as good as the leader HTGC when accounting for its volatility and capital losses, while BP offers potential cap gains.

Now for the surprises in my wife’s portfolio, which I viewed for the first time in over a year today:

  1. My wife warned me about DCIX a year ago, selling all their ships like they were going out of business.  I sold half mine, then bought it back, now it’s dead in the water.  But my wife did not sell any and held it all the way down.  I could have sworn she told me she sold it.
  2. My wife still had FSC, one of the “bad” financials omitted from the above group which I used to own, but which I abandoned a year ago and warned my friends to get out of.  It has declined steadily and now appears to be dying.
  3. My wife still had RUSL, a leveraged Russia oil/growth ETF that I had before the war in Ukraine and kept holding thinking they’d back off, then held all the way down as Russia balked at agreeing to production cuts and helped OPEC run down the price of oil at the expense of its own economy.  It didn’t seem rational to me.  Markets are NOT rational.  Neither are investors.  My wife, a recent Russian immigrant, held this all the way down also, even though she told me repeatedly they were stupid criminals and it would keep going down.

We both had lots of company on the losers, including some “bright” hedge fund managers on DCIX.  But few analysts recognize any value in MORL, and HTGC hardly ever makes the news as anything unusual.

What to do?  Sell FSC if you can.  Too late for DCIX.  I’m going to hold RUSL but not buy any, and same for MORL.  Accumulations will be in HTGC, since I own plenty of BP.  Write and tell me what you think of this analysis and if you have any better ideas.

P.S. One brilliant move in my wife’s portfolio.  She held on to UPRO, the leveraged version of the S&P 500.  It was up quite a bit despite recent downturn.  I was and am chicken to hold it since over a year ago.


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