Investing in The Dirty Dozen

I nicknamed my portfolio “The Dirty Dozen” for the 12 stocks in which I have invested.  I don’t want to go any larger than that because it wouldn’t fit well into the spreadsheet I created.  Eleven of the stocks pay dividends, which were selected based on when the dividends are paid so that I would have some income every month.  The twelfth is a nod to my New England roots and favorite beer, Sam Adams, from Boston Beer Company (SAM).

I’m a dilettante when it comes to investing and I wouldn’t insist people follow my advice.  In fact, I have another spreadsheet titled “Stupid Investor” that I bring with me when we visit our accountant every April.  I first got involved in stocks through a Sharebuilder account.  I haven’t tried any of the other online trading Web sites, but I like Sharebuilder and have stayed with it for the last couple years. 

My first big purchase was in shares of Oshkosh Truck (OSK) after the stock lost about 66% of its value in a day.  OSK was a customer of Ziegenbein Associates, the company I was working for, and I knew it was doing a lot of work with military vehicles and had subsidiaries that built fire trucks, emergency vehicles, and refuse vehicles.  I was pretty sure the stock would come back again, and after a while it did.  When I finally sold all my shares, I made about $1,600.

I have recently inactivated that account, but had opened a second one after receiving my pension and profit sharing check when I was laid off from Ziegenbein Associates in July 2009.  I steadily improved my analytics of stocks to create a strategy with which I’m comfortable.  With the recent havoc of the debt ceiling debates in July and August, I had an opportunity to retool my portfolio.

Previously, once I found a stock I liked, I would buy a nice round number of shares based on the funds I had available (50, 75, 100 shares).  I didn’t take into account the amount of quarterly dividend income I would receive or the number of shares I would get with reinvesting the dividends.  Getting less than a full share every quarter was unsatisfying and growing the portfolio would take too long.

During the lead up to the debt debates, I was worried how the stock market would react and how much value I would lose.  I placed 60-day stop-loss orders on all of my stocks, even those that were up significantly.  I wanted to minimize my losses and take profits when I could.  The first stop-loss order was activated on July 12^th.  By August 22^nd, 11 of the 12 hit.  I waited out the volatility and slowly got back into the market.

While I waited, I made calculations to determine the amount of shares I should have in each stock so that I could get at least one full share when I reinvested my dividends.   I took the per share dividend and divided it by the 52-week High price for the stock to get the minimum number of shares needed to have a quarterly payout that matched the 52-week High.  I figured this would give me some cushion before the stock price exceeded my dividend payouts.  I had a finite amount of money, so I tried to get as close to the minimum shares as I could after rounding.  For example, the minimum amount of Mattel (MAT) shares was 123.8696, and I purchased 125.  If the stock price doesn’t increase by more than $2.50 by September 23, I will get at least another full share.

The crown jewel of my portfolio, the Lee Marvin, if you will, is Hershey Company (HSY).  I purchased my initial shares when the stock was at $38.07.  HSY closed today at $57.21.  This was the one stock that never reached the stop-loss level I assigned and was the first I took the opportunity to retool.  Over the course of owning this stock, I would receive a little better than .50 a share every quarter.  There were times when I didn’t reinvest the dividend and took the cash.  The stock was doing so consistently well, I wanted to improve my position.  The $56 price tag still felt steep, so I purchased just enough shares to match the minimum needed to cover the 52-week high.

Remarkably, the stock weathered the storm during the debt debates and posted a new 52-week High of $59.45.  I was nervous a couple days ago when the closing price was only $.70 away from my expected dividend payout.  I can’t believe I’ll say this, but fortunately, the stock has decreased in price since then and in line with the market.  I have a little more breathing room until my pay date of September 15.  I should receive another full share and an additional $.345 of cushion.

That’s one of the benefits of my new evaluation; I don’t feel as bad when a stock declines.  Granted, the additional partial share and scant change I would receive as the price declines doesn’t make up for the total dollars I’m losing with the existing shares, but I can improve my baseline when the decline happens.  This assumes the company continues to pay the dividend at the same level.

In case anyone is curious, here are the other stocks that make up “The Dirty Dozen:”

B&G Foods (BGS) – A pretty cheap stock (under $14/share at the time) which I thought was a January, April, July, October payout.  The payouts are close enough to these months to be included in my first month of the quarter group (1MQ).  In April, the dividend increased from $.17 a share to $.21.

Windstream (WIN) – A small telecom stock flying under the radar of the big boys.  A good payout at $.25 per share, but some analysts doubt this is sustainable.  I have my smallest position in this stock (1MQ).

Xcel Energy (XEL) – Local utility company.  Raised the dividend from $.2525 to $.26 per share in July (1MQ).

Paychex (PAYX) – Payroll servicing company.  Cheap price and high dividend of $.31 per share.  Payouts are in February, May, August, and November; second month of the quarter (2MQ).

A. Shulman, Inc. (SHLM) – Plastics and material manufacturer.  The smallest dividend provider of the group at $.155 per share, but I own the most shares in my portfolio.  Low priced stock and filled in the need for second month payers (2MQ).

Polaris Industries (PII) – The most intriguing opportunity.  The stock price topped at $123 per share and the dividend is $.45, the highest of my portfolio.  This put the minimum shares needed to cover the 52-week High price at 273.3333.  Buying the stock at $100 would require a $27,500 investment.  I wouldn’t consider Polaris normally; however, the stock will split on September 12.  Each share an investor owns as of September 2 will receive an additional full share.  I purchased 50 shares.  The stock last split in March 2004 and the dividend never decreased.  In fact, the dividend has increased at the beginning of each year since.  I have high hopes for this stock (2MQ).

Bristol-Myers Squibb (BMY) – Pharmaceutical company with nice dividend of $.33 per share.  Rounds out my second month payers (2MQ).

Mattel (MAT) – I was evaluating either Mattel or Hasbro as homage to my Toys R Us days.  Mattel looked better, but the dividend payout was annually and at the end of the year.  Towards the end of 2010 I read Mattel was going to a quarterly payout starting in 2011.  In addition, the quarterly payout would be $.23 per share, which was an increase over the annual payout.  The dividends are paid in March, June, September, and December (3MQ).

Waste Management (WM) – Recycling and waste management (like the name implies).  Sharebuilder rated the stock at an A level and the dividend is high at $.34 per share (3MQ).

Middlesex Water Company (MSEX) – A water utility.  Another A level rated stock from Sharebuilder.  The dividend is on the low side at $.1825 per share, but the stock was priced right and paid at the right time (3MQ).


Hershy Company rounds out the 3MQ payers.