Catching up with bookkeeping on my dividend income portfolio and my February 3 drop of Abbott Laboratories

07/02/2012 11:58 pm EST


Jim Jubak

Founder and Editor,

Tomorrow, July 3, 2012, I’m going to do one of my periodic updates of my Dividend Income portfolio. Those updates are useful for several reasons: I get to think about how dividends work in the current stock market, report on how the portfolio is doing, and make a few buys and sells.

And because they give me a chance to check up on my bookkeeping and see if the page that tracks this portfolio is up to date with the changes I’ve made in individual posts.

To my chagrin it isn’t. In my last post on this portfolio on portfolio February 3  I added three stocks to my dividend income portfolio and dropped three.

The reason, I argued then, was that the growing popularity of dividend paying stocks at a time when income vehicles such as Treasuries and CDs pay almost nothing had created a glorious but still real problem for income investors. As investors flocked into dividend-paying shares, they drove up share prices. That was great for investors already fully invested, but for investors looking to get into new positions or for investors looking to put more cash into existing positions, it meant that yields were in constant danger of erosion. In this situation, income investors needed to look for stocks that paid higher yields now and that were also positioned—by their growing cash flows and by management disposition—to keep raising dividends. Look for those stocks, I advised, and beware dividend payers that didn’t seem to be in a position to keep raising dividends.

And with that as background I tweaked this portfolio by adding General Electric (GE), Westpac Banking (WBK) and Kinder Morgan Partners (KMP) while dropping Potlatch (PCH), Merck (MRK) and Abbott Laboratories (ABT).

Well, at least that’s what I said in that February 3 post but one buy and one sell from that date never made it onto the portfolio page. So tonight, I’m doing a little catch up. I never actually got the drop of Abbott Laboratories done on the portfolio page. I’m going to fix that today with this post.

Frankly, I wish I could pretend that I never made this sell. At the time, my logic was that Abbott would turn out to be reluctant to pump enough into its dividend to keep the yield attractive until the company completed its breakup into two parts at the end of 2012.

Since then the company has raised its dividend once to 51 cents a share from 48 cents. That’s a 6.25% increase in the payout. Not nothing, but not very impressive at a time when other companies are embracing higher dividend payouts as an efficient way to support their share price.

But even if that projection might turn out to be reasonably accurate—although I’m sure some readers will want to argue that I’m wrong to dismiss a 6.25% increase in dividends—it has cost me money. Investors have found Abbott an increasingly attractive stock and the shares are up 18.5% since that my February 3 drop.

My only consolation is that Abbott remains a member of my Jubak’s Picks portfolio

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund , may or may not now own positions in any stock mentioned in this post. The fund did not own shares of any stock mentioned in this post as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at
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