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What’s up, Dividend Investor! Have you noticed that much of the stock market is getting cheaper? Especially health care stocks in particular? The Health Care Select Sector SPDR® Fund ETF (XLV) is a basket of 66 healthcare stocks, and it’s down 6% over the past year.
Johnson and Johnson (JNJ) is down almost 16% over the past year alone.
I think there are many reasons for this like treasury rates sucking investors away, patent cliffs, the potential for a single-payer healthcare system, and Medicare drug price negotiations. They say that the stock market hates uncertainty, so it’s pretty easy to see why healthcare has been so beaten down. While looking over our holdings, we decided to start parting ways with Celanese (CE), to buy more Johnson & Johnson (JNJ), even though they have lingering issues with Talc powder litigation. We had initially become aware of Celanese when Berkshire Hathaway (BRK.B) began buying this materials company. But even they have started to sell off their position, decreasing their holding last quarter by 39%.
As Celanese describes themselves: “You will find Celanese chemicals and material solutions in many consumer goods, including Compact Camera Modules, sports equipment, gardening tools, cookware, personal care products, small and large appliances, eyewear, toys, and much more.” They have loads of chemicals that are behind the scenes in lots of things we use in our everyday lives. Our position was 25 shares at $100.14, up about 14% and their stock price over the past year is up 18%.
They have a dividend growth streak of 13 years.
But, check out their dividend details-
It looks like they forgot to raise that dividend! When we look at their recent history, going back to the spring of 2019, they raised the dividend in the spring of year one and raised it again in the fall of year two.
As long as a business raises the dividend in consecutive years, the streak remains intact. Also note that the ex-dividend date was 10/27, which qualifies us for the next dividend payment. A sneaky way to squeak out one more payment on those few shares we sold on 10/27! The dividend is very well covered by their free cash flow and is currently at 28%.
But, their Return on Equity and Return on Capital have been going in the wrong direction over the past few years.
Their net debt has shot up from their recent acquisition of a Mobility and Materials division from DuPont for $11B.
Which has drastically dropped their interest coverage ratio (ICR) to an uncomfortably low level.
While we think that Celanese will be a solid company for years to come, it feels like Johnson & Johnson has more upside potential here. And we like the fact that J&J has 25 platforms with $1 Billion in annual revenue. Plus, they have 107 years of uninterrupted dividend payments on top of 60 years of growth!
So that’s it. As the weeks go on, we’ll be unwinding our Celanese position for what we believe is a better long-term opportunity. I’d love to know what stocks you’d be tempted to sell for a better opportunity HERE. 😁Special THANK YOU to the (5) people who responded to my last newsletter!! With that being said, let’s get to the moves made this week. And remember, you can always check out the PORTFOLIOS, the PODCAST, or see what’s cooking on the YouTube channel. Dividends Received This Week $0😭
Dividends Received Year to Date~
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Source: Charles Schwab |
Stocks Sold (AVERAGE)
- 7 Celanese (CE) | $114.15
Stocks Bought (AVERAGE)
- 6 Johnson & Johnson (JNJ) | $146.12
- 4 VICI Properties (VICI) | $27.61
- 1 Toronto-Dominion Bank (TD) | $54.97
Notable Ex-Dividend Stocks This Week
- 10/31 Realty Income (O), 6.27%
- 10/31 Hasbro (HAS), 6.11%
- 10/31 Ally Financial (ALLY), 5.10%
- 11/1 Conagra Brands (CAG),
- 11/2 Costco (COST), 0.75%
🎙️Podcasts You Should Check Out!🎙️
✅Jack Hough on Barron’s Streetwise podcast dove into Mortgage REITs and one particular dividend community punching bag – Annaly Capital (NLY).
⚡Do you drink energy drinks? The incredible rise of the Celsius Energy Drink was discussed in a really fun episode of The Odd Lots podcast.
🤑Stay Informed With These Financial Newsletters!🤑
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Random music video I enjoy and you might too!
🎵Ministry – Every Day Is Halloween🎵
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