We just made two new purchases in our Income Equity Portfolio, one industrial REIT and one old-school blue-chip tech company. Both offer healthy dividends and attractive share price appreciation potential. As a reminder, the Income Equity Portfolio is outperforming the S&P 500 by double digits this year, and we’re using the broader market wreckage to pick up some low-priced shares.
To get right to it, we added shares of Stag Industrial (STAG) and Intel (INTC). They are both mid-sized positions in the portfolio (1.6% and 2.0%, respectively), and they will be reflected in our Income Equity Portfolio holdings sheet in the next monthly update. We’re sharing the information with you in this note so you have it right away.
We sold…
Merck (MRK), Yield: 2.9%
We sold our shares of pharmaceutical company, Merck, to raise the liquidity to buy Stag and Intel. Merck had been performing extremely well this year (+23% ytd) because many investors flocked to it as a “safety play” (big pharma stocks can be less volatile because of the steady nature of their drug revenue). However, the share price of Merck had risen significantly this year, the dividend yield had mathematically fallen (to 2.9%) and the valuation had become less attractive in our view. We do continue to own other healthcare sector stocks in the portfolio for diversification and risk management purposes.
New Buys…
Stag Industrial (STAG), Yield: 4.9% (paid monthly)
Stag is a big-dividend industrial REIT that has sold off very hard this year. REITs are down year-to-date, but industrial REITs in particularly are down more as they are sensitive to the potential slowdown in the economy. We recently wrote up our detailed views on Stag back on June 9th, and the shares have become even less expensive since then. You can read our write-up on Stag Industrial here.
Intel (INTC), Yield: 3.8%
We added shares of blue-chip dividend stock Intel. Intel is the leader in PC and server chips. However, the share price has declined significantly as competitors Nvidia and AMD have grown. In our view, the valuation of Intel is now very low (the company is worth more than the share price), and its foray into foundry (i.e. making chips for other semiconductor companies) provides an added element of upside. You can read our latest report on Intel here (note: the title says Intel is “Ugly” but that’s a reference to the sharp share price declines—which actually make it a significantly more attractive purchase opportunity!).
Again, these new transactions will be reflected in the next monthly update to the Income Equity portfolio, but we wanted to share this information with readers right away.