Income · Other

Hits and Misses – Income Portfolio

IncomeDespite interest rates moving higher and the specter of more to come, income holdings as a group had a fairly good 2016. Here are the details: 

       The ETRACS Alerian MLP Index fund recovered somewhat last year on better energy prices and potential for domestic growth. The shares moved higher by about 9.5% and the dividend provided a total return of 16.4%. Dow Chemical, in view of its upcoming merger with DuPont, as well as a more stable earnings outlook returned a handsome 14.7% to investors. A better global picture for DOW should provide decent momentum in 2017, as well. The picture was not as bright for chip maker Intel with its continued dependence on the PC market, but the acquisition of Altera in 2015 provided some relief. High-quality INTC returned a total of about 9% last year. The iShares Global Telecom ETF had a good year-end rally and the fund, which follows the benchmark S&P Global 1200 Telecommunications Index, was able to return 6.7% over the past 52 weeks.  Healthcare behemoth Johnson & Johnson did a bit better than the overall market averages with a 12.7% price advance and a 2.8% dividend payout, to boot. Kimberly-Clark, however, failed to meet expectations on a strong dollar and competitive pressures. The rotation out of consumer staples didn’t help and the shares retreated 10% last year, but paid out 3.2% in dividends. Shares of good-quality KMB, however, are higher by about 28% since entering the list back in 2013. 

       Royal Bank of Canada provided a good year for investors and holders of RY were able to see a 27% price advance and a total return of 30.5%. Higher interest rates and a recovering Canadian economy should help propel Canada’s largest bank this year, as well. The ALPS Sector Dividend Dogs ETF, which tracks the highest dividend paying stocks in the S&P 500 on a sector-by-sector basis, had a total return in 2016 of over 24%. The position also had a higher allocation percentage this year vs. the other choices on the list. French energy company Total, SA participated in the spike in oil prices and a re-positioning of its portfolio of production plays. TOT had a total return of 18.4% in 2016. The Vanguard REIT ETF was hit with a rotation out of real estate investments, as higher interest rates provided some headwinds. But a conservative holding in VNQ managed a nearly 9% total return. Despite competition from fixed income investments as rates moved higher, the Utilities Select Sector ETF had a decent run with a total return last year of 15.7%. Unfortunately, I pulled the plug on Verizon Communications too soon in the income account, as VZ had a nice post-election run. The shares returned 4.2% in dividends, but were flat from the beginning of the year until removal in mid-November. Verizon, however, returned 25% during the two-years on the list and remains a candidate for conservative investors.

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