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RIG = Rose's Income Garden

Rose's Income Garden ("RIG") is a defensive income-quality value-built portfolio with 82 stocks from all 11 sectors. Yes, the number is down from 88 as mentioned in the August update article and the September update will reveal the changes. RIG contains most all investment-grade common stock but also has high yield ("HY") business development companies ("BDCs") and real estate investments of which some are not rated. The goal is to maintain 50% of the income from defensive sectors/ stocks and to keep a minimum dividend income yield of 4% or more. That yield now is 5.3%.

August

August, as most already know, was a red month with most all major indexes down 4 - 7.5%.

September

Sorry, ……September continues to show its normal attribute for being the worst down month for the market.

This last week ended poorly

SPY/ S&P500 -4.7%

NASDAQ -3.9%

DOW/ DJIA -4.1%

Dow Transports -8%

Russell 2000 -4.2%

There is one metric that is up and remains up: Inflation staying in the 8% range, last report 8.3%. The Fed goal for 2% inflation now seems like a long and far distant goal that most likely cannot be accomplished quickly, and especially not in 2022. There is some talk of raising that goal expectation to 3 or even 4%, which also would be a difficult task from here.

More interest rate hikes are coming.

Yes, Gas prices are lower, but still very much more than 18 months ago.

The strategic oil reserves are being depleted to move gas prices lower; it has worked to a degree, but everyone needs to know it can and will not last past November midterm election time and then off and up again.

Gas prices will rise again, just as utility bills are already doing! Be prepared, it will happen.

Suggested S&P Sector Allocations versus RIG

The chart below shows a compilation for the % allocation suggested for the 11 market sectors from January 2022 which does not seem to vary much from year to year. The link here from Fidelity, which is a bit more recent and close to the allotments listed below, suggests a large allocation of ~27% to Technology/ tech / “IT”. The love of technology, which has many segments to make it broad and diverse, is huge and real. I admit it was almost a foreign language to me, being a senior citizen, and have never embraced it because of not completely understanding it. I have held off buying most as they are primarily growth stocks and don’t offer compelling dividends.

As mentioned, RIG keeps 50% of its income value from defensive sectors and tech is not considered, as yet, to be one of those. Healthcare, communication, consumer staples and utilities, shown in bold %, are the sectors I look to for defense.

	S&P 2022
Sector	1/31/2022 %
Information Technology	28.7
Healthcare	13.1
Consumer Discretionary	12
Financials	11.3
Communication	10
Industrials	7.8
Consumer Staples	6.1
Energy	3.4
Real Estate	2.7
Materials	2.5
Utilities	2.5

Click to enlarge

Using the % allocations above I get ~31.7% by value for defense from the chosen sectors. The tech allotment alone of 28.7% is just a hair below, oh my. Therefore, my goals and what analysts, brokers or others suggest is always subject to personal needs. With Nasdaq down over 27%, I am happy to have my own goals and sector requirements. I find the low allocation to utilities especially surprising compared to RIG >10%. Perhaps when the crash is over, I will consider more tech stocks for RIG if they become real bargains. The RIG tech stocks are discussed next.

RIG Technology Sector Stocks - 4

RIG has always had a much lower allotment to tech than the rather high suggested 27+% level. It currently has 4 stocks at 5% value and 1.9% of the income. It is extremely difficult to extract high income from the tech sector. The chart below with individual stocks is listed by the largest value first.

The following abbreviations are used:

S&P Credit Rating: Standard & Poor's credit rating

Current Price $: Price on Friday, Sept 16th end of market day

2022 Yearly Div $: Known yearly dividend

Div Yield = dividend yield using shown price and known dividend

Tech
Stock	Company	S&P	Current	Yearly	Est
Ticker	Name	Cr Rating	Price $	Div$	Div Yield
(AVGO)	Broadcom	BBB-	502.5	16.4	3.26%
(MA)	Mastercard	A+	315.13	1.96	0.62%
(CSCO)	Cisco	AA-	43.3	1.51	3.49%
(V)	Visa	AA-	193.3	1.5	0.78%

Click to enlarge

2 of the above, MA and V, are actually known as data or financial “fin-tech” stocks.

RIG therefore really only has 2 pure tech type stocks. Last year, happily, as I look back, I sold Intel in the $50 range. I kept CSCO and even it has seen price declines.

Next, I show how the current price compares to some analyst estimates and the 52 week High and Low prices.

$ M* FV = Morningstar fair value

Yahoo Fin $ = Yahoo Finance analyst price target

Stock	52 Week	52 Week	Current	$	Yahoo
Ticker	Low	High	Price $	M* FV	Fin $
AVGO	$463.91	$677.76	502.5	624	$656.00
MA	$303.65	$399.92	315.13	369	423
CSCO	$40.82	$64.29	43.3	54	$55.00
V	$185.91	$236.96	193.3	229	$261.00

Click to enlarge

They are all undervalued according to analysts, and all are still above their 52-week lows. Use caution with buying as all seem to be headed even lower for price.

Next is some information about each one of these stocks. Statistics listed are taken from the subscriber service FAST Graphs managed by Chuck Carnevale.

Broadcom

AVGO operates in 2 segments of tech: semiconductor solutions and infrastructure software and is headquartered in San Jose, CA.

The current P/E is 13.8 with a 5-year normal of 15.2.

It has a current earnings per share yield of 7.25% and earnings growth potential of 18.8%

5-year dividend growth rate = 53.3% with the last 2 years being 16.7%.

The current dividend of $16.40 is suggested to be raised to $18.83 which would be a 14.8% raise. It maintains a payout ratio near 50% which would indicate a safe dividend.

Current yield is 3.26% which means this is an excellent candidate for buy and hold dividend investing with a return rate of 18%+. I have found this to be a very pleasant addition to RIG and came to my attention a few years ago very cheaply as a trading alert suggestion from The Fortune Teller at the service Wheel of Fortune.

It does have an investment grade credit rating of BBB- with many excellent attributes to keep it in RIG for a long time.

Cisco

Cisco is primarily involved in designing, manufacturing, and selling Internet protocol for communication technology equipment internationally. It incorporated in 1984 and is headquartered in San Jose, CA.

The current P/E is 12.8 with a 5-year normal of 15.4.

It has a current earnings per share yield of 7.8% and earnings growth potential of 4.1%.

5-year dividend growth rate = 6.5% with the last 2 years being 2.8%.

The current dividend of $1.50 is suggested to be raised to $1.54 which would be a 2.7% raise. It maintains a payout ratio near 45% which would indicate the dividend is safe.

Current yield is a nice 3.5% because of the lower valuation. I would like to see a higher rising dividend to give it a better total return. It is not a huge position in RIG, but I am holding it for now for its AA- credit rating that adds to its quality safe dividend which has risen now for 12 years.

Mastercard

Mastercard is called a technology company involved in financial transaction processing and payment solutions internationally. It incorporated in 1966 and is headquartered in Purchase NY. That city name fits perfectly with this company.

The current P/E is 31.9 with a 5-year normal of 35.8.

It has a current earnings per share yield of 3.14% and earnings growth potential of 19.3%.

5-year DGR “dividend growth rate” = 18.5% with the last 2 years being 15.6%.

The current dividend of $1.96 is suggested to be raised to $2.04, however, as noted by the high DGR it has been much more and probably would be closer to $2.24 or so.

It maintains a payout ratio near 20% which indicates a very safe dividend.

Current yield is 0.62% and much of its attraction is for the excellent dividend growth. It generally always seems over valued and is now coming down to its low 52-week price of $303, but not there yet.

The A+ credit rating gives it points for quality safe investing.

Visa

Visa is known as a worldwide payments technology company founded in 1958 and is headquartered in San Francisco CA.

The current P/E is 26.5 with a 5-year normal of 33.

It has a current earnings per share yield of 3.77% and earnings growth potential of 16.8%.

5-year DGR “dividend growth rate” = 18.15% with the last 2 years being 13.3%.

The current dividend of $1.50 is suggested to be raised to $1.64, which equates to a raise of 9.3%, which would be less than normal.

It maintains a payout ratio near 22% which indicates a very safe dividend.

Current yield is 0.78% and much of its attraction is for the high dividend growth and capital price appreciation. It generally always seems over valued and is now coming down, but still not low enough to match its low 52-week price of $186.

The AA- credit rating gives it points for quality safe investing.

Sectors

Most all sectors are in bear territory with the big winner being energy, which should not change. Next best are utilities, some commodities and at close to even is healthcare.

Happily for Rose and RIG with a goal of 50% income coming from defensive sectors, it would seem that defensive goal has helped with holding its value near even. Goals are important and I have positioned RIG for defense.

Summary and Conclusion

The portfolio continues to hold near even value and has a 5.3% income yield along with 8.1% cash.

RIG is found listed and remains exclusive at The Macro Trading Factory where there are 2 major portfolios offered.

FMP is funds only and exclusively managed by The Macro Teller.

RIG, is as mentioned, primarily stocks and managed by RoseNose.

Suitable for those who either have little time/knowledge/desire to manage a portfolio on their own, and/or wish to get exposed to the market in a simple, though more risk-oriented (less volatile), way.

Each of our portfolios, spanning across all sectors, offers you a hassle-free, easy to understand and execute, solution.

RIG does contain and I still continue to look for quality low debt/high credit rated companies and have started a "WTB," or want to buy list of Non-RIG stocks for subscribers to follow. I also provide Buy under prices and a deep value buy price for addons to RIG.

The search is always ongoing for RIG candidates and the goals and specifics include the following:

- quality rated dividend-paying stock.

- undervalued, but can be at fair value for extra quality.

- low debt/great high credit rating.

- pay out and cash flows to easily cover the dividend along with a rising dividend growth rate.

- defensive in nature with products or services I understand and can easily follow.

The market is still too volatile and weak to consider adding new positions currently, however the WTB list will always be waiting for when the right time comes. Cash should be king and therefore my actions are very much in line with preserving it and collecting dividends, currently at ~8.9% in RIG. With an established quality dividend portfolio like RIG, I am confident it will ride the valuation roller coaster while the dividends/income continue to flow in as expected using the quality expectations and goal/s mentioned.

Happy Investing to all.

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