For the start of June we have made another couple of trades in the IRA portfolios.
We firstly sold out of Medtronic (MDT), this is an excellent company and we had no real complaints so are very happy to have exited in the green with this position. From a value investment perspective it has really been an excellent holding but as a dividend stock it’s 2.1% yield is just not good enough after we factor in the Irish 20% dividend withholding tax that we cannot claim back in the Traditional IRA which reduces it’s payout significantly.
Using the proceeds from this sale we opened up a position in PPL Electric Utilities Corporation (PPL) which is a diversified utility covering Kentucky, Pennsylvania and the United Kingdom. We feel like the latter exposure uncertainty being the primary reason for the low price point at this time but with this in mind the UK Ofgem regulatory review under R110-ED1 has just passed without incident so by the time for R110-ED2 review in 2023 PPL should have had plenty of time to instigate it’s currently planned investment course that should result in EPS accreditive growth. At a lofty 6% yield it wouldn’t surprise us too much if the dividend growth leveled out a little but we are fine with that since they are making some future investment strides. The decades of payout growth history gives us some degree of confidence that this is an investor-friendly company.
We also sold out of William Hill Plc (WIMHY) in the Roth IRA which was one of our UK based gambling stocks. Our reason for this sale was the fact that the UK government has this month introduced new gambling legislation which has seen a reduction of the maximum stake on fixed-odds betting terminals reduced from 100GBP to 2GBP, which we think will greatly affect the cashflow at WIMHY since this is where it receives over half of it’s revenues.
From a value stock perspective we could have decided to stay the course with the company since it has new opportunities in the USA with the legalization of sports betting in one of it’s key markets, Monmouth Park in New Jersey. This would then have turned the position into pure speculation though and we aren’t speculators so we made the decision to exit the position while the stock was rallying on this news.
Using the proceeds from this sale we were very happy to buy ourselves some Farmland! well we bought into the Preferred Class A shares of Gladstone Land (LANDP) which is an REIT which owns farmland throughout the USA paying a yield of 6.35%. This is a sector we’ve been investigating for quite some time as we see opportunities here based on the ever increasing need for food aligned with population growth.
As you can see, these trades go some ways to again prove that dividend investing is not passive investing and that it is critical that we always carry out our due diligence with regards the company stocks we own and any regulation changes that can alter the trajectory of their growth and dividend payout. As usual the disclaimer applies, these trades are shown for entertainment purposes only and may not be suitable for your personal investment goals.
We are long PPL and LANDP.
Thanks for reading,