By Charles Sizemore May was a good month for Sizemore Capital's portfolios. I made modest portfolio adjustments in my Dividend Growth and Tactical ETF strategies, but otherwise I am content to let our basic strategies for 2014 play themselves out. I expect to see dividend-focused equities continue their outperformance relative to the broader market, and I expect to see European and emerging-market equities outpace their U.S. rivals. In May I made portfolio moves in the Dividend Growth portfolio. I took profits in Martin Midstream (MMLP) and initiated a new position in Target Corp (TGT). Target may seem like a curious portfolio addition. Its CEO recently resigned in disgrace due to fallout from last year's credit card security breach. And Target's expansion into Canada 14 months ago has proven to be an unmitigated disaster, generating roughly a billion dollars in losses so far. In my view, these setbacks are temporary bumps in the road and provide us with an excellent buying opportunity in one of the most shareholder-friendly companies in the world. Target has raised its dividend every year since 1967—a run of 47 years, and counting—and it has also been a serial share repurchaser. Since 2002, Target has reduced its shares outstanding from 1.3 billion to just 638 million as of its last reporting. That's a reduction of 44%. Let's return to Target's dividend growth. Target's dividend has grown by 19% over the past year, which would be good news by itself. But what is truly impressive is the consistency. Target has grown its dividend by a compound annual rate of 20% for the past 10 years. And going back 20 years, it's 13%. (Of course, some of the recent statistics look impressive due to the overall reduction of Target's stock price.) Target pays a respectable 2.9% current yield, and its payout is growing at a good pace—making Target a holding for the dividend growth portfolio.
Overall, I have been very pleased with Dividend Growth's performance this year. Through June 14, Dividend Growth had delivered 10.6% year-to-date total returns after fees, compared to a 6.1% return for same period for the Russell High Dividend Yield Index. (Disclaimer: Returns calculated and published by Covestor; past performance no guarantee of future results.)In the Tactical ETF, I slightly reduced our exposure to China by selling the DB X-Trackers China A-Shares Fund (ASHR) and initiated a new position in the Cambria Global Value ETF (GVAL), which is consistent with my view that European and emerging-market equities will outperform in the months ahead. Additionally, I added to our existing positions in Turkey and Russia via the iShares MCSI Turkey (TUR) and Market Vectors Russia (RSX) ETFs. Tactical ETF is enjoying a good year. Through June 12, Tactical ETF had delivered 8.2% year-to-date total returns after fees, compared to just 5.1% on the S&P 500. DISCLAIMER: The investments discussed are held in client accounts as of May 31, 2013. These investments may or may not be currently held in client accounts. Index returns do not reflect any management fees, transaction costs or expenses. Individuals cannot invest directly in an Index. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.
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