Stock sale (& purchase) – August 2016

I don’t sell stock very often but I decided to sell out of one company this month. I used the proceeds to buy more of another stock that I hold. Read on for the details …

Sold: 11 shares of National Healthcare Corp (NHC) at $65.

National Healthcare (NHC) is a 13-year Dividend Contender. Based in Tennessee, it focuses on senior care / assisted living homes in 10 different states and is the oldest publically traded senior health-care company in the US. With a market cap just under $1B, it currently pays a 2.5% dividend which it recently increased from $0.40 to $0.45 a share in time for September’s payment.

I originally bought the shares over a year ago in June 2015 for $64.80. My selling price includes a small loss $2.2 loss and also incurs a $6.95 trading commission from Capital One. At the time I was looking to diversify into more healthcare stocks and considered NHC as a fairly steady business catering to an increasingly aging population.

None of that has really changed either; for this sale it’s a case of “It’s not you NHC, it’s me” as I’m no longer interested in owning as many diversified stocks. I’m already diversified across ~424 dividend stocks via VHDYX and although NHC isn’t a component of VHDYX, a 0.3% tilt towards NHC in my Income Fund isn’t going to significantly change anything. Actually I suppose that could be argued as a case for investing more in NHC since it’s outside of the VHDYX index…

But in any case, I decided to simplify my portfolio a bit and use the proceeds to make a stock purchase in my Vanguard account.

Bought: 7 shares of McDonalds (MCD) at $119.57.

I added a little extra cash to the proceeds from NHC and bought 7 shares of McDonalds (MCD) taking my total shares to 19.7 with a total cost basis of $2,012. McDonalds as a company needs little introduction and it’s a stock that I already own.

I’ve been impressed with the progress that MCD has been making in responding to changing consumers tastes and heavier competition. MCD has also been making a lot of stock repurchases which help lower the future cost of dividend payments and the payout ratio has improved from 73.6% in 2015 to a TTM value of 67%.

Valuation-wise, MCD is pretty averagely valued I think. It’s certainly not a bargain at these prices and its P/E of 22 is a little higher when compared against the S&P average P/E of 20. It is significantly cheaper than last year, but since I plan to hold this for the long-term anyway, I’m more interested in a sustainable dividend payment which so far has survived 40 years of increases.

MCD currently pays a $0.89 dividend which should increase again when the next dividend is announced later this month, if previous increase patterns are followed.

Summary

This stock transfer exchanges 11 x $0.45 x 4 payments = $19.8 from NHC into 7 * $0.89 x 4 = $24.9 payments from MCD.

My total holdings in MCD will now contribute $67 of dividend income; plus hopefully a rise in December’s payment, which should be announced towards the end of this month. As a wild prediction, I’m going to go with a $0.93 dividend announcement.

I’ve also reduced the number of individual stocks I own from 35 to 34 as a result of this transaction. I don’t have a specific target number in mind and I’m not in any hurry to sell any more stocks this year, but I’m continuing to focus individual stocks on quality companies whose products I use, or otherwise think are well managed. I’ll let VHDYX do the heavy lifting to generate most of my income.

What was your last purchase or sale?


Quote of the Day

One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.

4 thoughts on “Stock sale (& purchase) – August 2016”

  1. I just bought VOD and MRCC. Both I believe will be great buys.
    Love McDonalds stock just don’t own any yet want to buy a few more stocks then add money to those as oppurtunity exists

    1. Hi Doug,
      I don’t know much about MRCC but I do like VOD – the company has many of the qualities that I look for. I only own it indirectly as part of a larger fund, VIHAX, however.
      Best wishes,
      -DL

    1. Hi DM,
      Yes Loyal3 is a great way to buy stocks regularly. MCD has certainly been very rewarding over the last couple of years!
      Best wishes,
      -DL

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