Positive surprise from Old Republic International

 Old Republic International has again surprised its owners with a special one-time dividend of $1,50 per share, payable to shareholders on October 6th 2021 with a ex-dividend date of 14th September 2021. For me this means an additional dividend of $105 gross dividend and $89,25 net of withholding tax. 

This is good news for shareholders and my short-term dividend goal of 2 200€ per year. I am still behind on my dividend goal, however Old Republics additional dividend can boost my investments a bit to ensure I should achieve the goal 2022, well ahead of the set deadline 2025. 

One challenge I find with the one-time special dividend from Old Republic is the challenge to find companies that pay a good dividend (dividend rate = dividend / stock price). For me it looks like the Board of Old Republic has the same issue, they see there is a challenge to find good investments and have therefore decided to distribute additional cash to shareholders. This is a very good practice from the Board and Managers, and I appreciate them for it. The way they work seems to be close to Warren Buffett's and Charlie Mungers principles, if you do not find good alternatives for your excess cash then distribute it to shareholders or buy back your share (Berkshire Hathaway has bought back B shares for some time now). There is a difference as Berkshire Hathaway had approximately 39 billion USD in cash and 102 billion USD in short term US treasury bills, equivalent to 141 billion USD in cash per 30th June 2021 (about 15% of total assets).

Now I face the challenge to find one or a few investments for the dividend, I do have some in mind which will show up in November once I update my portfolio. I will still follow my normal investment principle, by looking at my older posts you might figure out what I will do. 

Overall good news for Old Republic International shareholders and hopefully the company can continue to delivery good returns in the future.

A review of Nokia; The Rise, Fall and "Rise" of a Tech Giant

The first company I will review is technology giant Nokia. A lot has been said about Nokia, from praised to almost hated by some. Many made money and a lot lost when IT-bubble burst back in 2000. If you owned Nokia options and sold them at the right time you did make a lot of money in a short period.

The setup is Nokias history followed by biggest mergers & acquisitions, after that we will touch the financials for last 18 years and look at if you should have been an owner versus Nokia manager or board member. Before summarizing the post, I will display how I made a little of money of Nokia stock, a few old trades. 

Nokias History, From a Paper Mill to Tech Giant

Nokia has a long history, and it might surprise you that Nokia started as a paper mill in 1865. In 1898 Finnish Rubber Works was established followed by introduction of electricity in Finland, a company named Finnish Cable Work was established in 1912. These three companies were merged into one in 1966, the new company name was Nokia. During this time Nokia was in several industries, integrated cable, electronics, tires and rubber footwear. 

In 1979 Nokia and Salora founded a joint venture called Mobira (derived from mobile and radiophone) which focused on developing what was then called radio phones.

Since 1990 Nokia recognized the potential in mobile phones and started heavily investing and developing phones. Nokia got some publicity when Mihail Gorbachev called his communication minister from a Mobiara phone in 1989. After this the phones started to develop in a very fast paste, 2004 Nokia launched its first touchscreen phone, the Nokia 7710.

In Q4 2004 Nokia had a 34% market share of shipped phones, equivalent to about 66 million, only to sell about 3,8 million in Q3 2019. Today Nokia has a licensing agreement with HMD Global to manufacture Nokia phones, number of phones are not on the same level as during the hay days.

What also needs to be highlighted is the number of companies that today are listed or part of another company and once were a part of Nokia. Examples like Airam, Nokian Tyres, Essity (soft tissue division), PKC Group, Kemira Chemicals (part of Kemira group) and Grid Solutions (part of General Electric Grid Solutions). Nokia has been listed at Helsinki Stock Exchange since 1912 and in New York since 1994. If you would have received the shares in these companies you most likely would not have to work today (for the fire people).

Biggest Acquisitions & Divestments

Nokia has made a lot of acquisitions and divestments over the years, therefore we shall focus on the main acquisitions and divestments. You can have a closer look at smaller acquisitions and divestments on Nokias website.

The company has many big leaps over the years, from a papermill to dominant phone maker ending up as a network company today. Looking a bit closer at acquisitions and sold divisions we see a lot of interesting moves. One of the biggest acquisitions was Alcatel-Lucent back in 2015 for 15,66 billion EUR (announced April 15, 2015), which apparently has not delivered the promised synergies. 

2014 The big move

On April 25th 2014 Nokia sold its Devices and Services (mobile phones) unit to Microsoft in for 5,44 billion EUR, a really good price considering what market share Nokia phones had at that time. Eventually Microsoft did not see any use of the mobile devices purchased from Nokia.

2015 Maps out, France in

HERE was sold at the end of 2015 for 2,55 billion euros to Audi, BMW and Daimler (maker of Mercedes cars), HERE was Nokias mapping, navigation and location program

15 April 2015 Nokia announced its acquisition of Alcatel-Lucent at a cost of 15,6 billion euros, the acquisition was made as an all-share acquisition while Nokias share was at 7,77€. As stated on the press release, they targeted a reduced interest expenses by 200 million a year and 900 million euros in operating synergies, sales would land at 25,9 billion euros. Maybe some of the targets were met however they need to pick up on sales and profitability.

Nokia Financials and Dividends, From Good to Disastrous to what is wrong with this company bathing in cash?

In this section we look at Nokias financials and compare who the winner in the company is, is it the Board of Directors, Management Team or Shareholders who have gained the most. A big NOTE, only IFRS numbers have been gathered and each years numbers are according to that years annual report published on Nokias investors page. Do not look at the non-IFRS numbers as by now people should have learned, that is why Risto Siilasmaa was fired, apologies he was escorted out or requested to leave...

On October 24th 2019 Nokias Board of Directors decided not to continue distributing any dividends, discontinued the dividend, reasons were

1. Guarantee increase of 5G investments 
2. Guarantee Nokias cash position
   
3. Continue investing in growth in strategic areas such as enterprise and software
   

This decision frees up time and pressure from both Board Members and Management Team, if there is no pressure to deliver then time for laziness will proceed. 

On December 3rd 2019 Chairman of the Board Risto Silasmaa "resigned " after it was clear the board was looking at wrong numbers. It also weakened ex-CEO Rajev Suris position. Questioning internal reporting and reliability of numbers. What needs to be stated is the use of non-IFRS numbers in Nokias reporting. Sari Baldauf will continue as the new Chairman of Nokia from start of annual general meeting in 2020.

My question is therefore, how much value if any has the management group and the board of directors created for shareholders versus how much have they earned during the same period? 

This is a simplified question and example, yet one I have not heard anyone ask as it is sensitive. Question is also raised as my opinion is not to reward bad performance with perks, salary and fat bonus, that’s what I call skewed rewarding. 

When reading Nokia's annual reports it is a bit confusing what has actually been the total compensation to Management Team in shares and in base salary and other compensations. They have partially separated the President and CEOs salary and partially bulked together share compensation with the rest of the Management Team. The main issue I find in Nokias reporting set up is the unclarity in management compensation, fortunately Board of Directors compensations are the only clear and detailed information you get (except for 2016 and 2015). Guess shareholder are seen as second-class people based on Nokias reporting standards. 

Below are some of Nokias numbers summarized. Equity per share (excl. non-controlling interest), ROE (return on equity) and cash & cash equivalents per share. Equity per share has dropped due to poor performance while cash per share has increased coming from sales of business, mainly mobile devices. ROE swings a lot due to the volatile performance. What we can see is the impact from iPhone hitting Nokias profitability starting in 2007. Since iPhone was launched, we can roughly state that Nokia has not been profitable except when selling businesses. I would assume Samsung with their Galaxy models also destroyed Nokias phones. If I was a Nokia shareholder I would be worried that the company has not been profitable since 2007. This means the company has issues it needs to fix as soon as possible. Would also demand the Alcatel-Lucent synergies to be better highlighted and if there are none (which it looks like), then admit it has been a failure from some perspective.

Below we see R&D expenses (impacting income statement), retained earnings and cash & cash equivalents. An argument why Nokia should not pay a dividend could be the negative retained earnings. This argument is valid, however with over 6 billion euros in cash you can distribute some of it to shareholders without risking the whole company. Earlir stated the increased 5G investments are a little confusing, they had sold 5G already so why do they need to invest more in a product they already have made and does it really cost that much?

Owners Return

One note, the result may and will vary depending on which period is chosen. I chose the period end December 2004 to October 2020 as I wanted to display the long run return to shareholders and reduce the impact from overvalued periods such as the IT-bubble. I personally bought shares back in 2013 and 2019 only to sell them within the same year. Have to say it was profitable and a short-term investors wet dream. 

In order to give some examples on what return you as a shareholder have received, I have chosen two different dates, just for fun. The first date is 3 September 2013, as BBC had an article "Nokia: The rise and fall of a mobile giant", the stock opened at 4,36€ and closed at 3,97€. I will pick a stock price in between, 4,16€ shall do for this example. For the second date we will go further back, all the way to 2004, December 15th 2004 Financial Times article named "Nokia Bounces Back In Mobile Phone Sales", on this date the stock was at a high of 11,90€ and low of 11,71€, closing at 11,71€. Would say that based on the article by Financial Times some might have bought for say 11,89€ a share. We will go with the 11,89€ price per share. 

 

As the graph shows just holding Nokia stock since 2004 would have been a bad investment and result in a loss up to 70 % of your investment while investing in 2013 resulted in -13%. Taking into account received dividends the result has been a bit different, the 2004 investment would still be at around -66% while 2013 would show a gain of 16% (before tax and not reinvested). Dividends since 2004 would total 4,29€ gross and 1,23€ if you invested in 2013. Note 2003 result dividends were paid in 2004 and so on.

 

If you bought back in 2004 you had a chance to temporarily exit at around 28,60€ on November 6th 2007, only to buy it back 2008. This way you would still be on the profitable side even though the share price has declined a lot. Note that Apple launched iPhone back in January 9th 2007. 

If you sat on the board of Nokia or was one of the members in the management team you would be in a better situation. Management Team compensation in MEUR can be seen on the left axis and Board compensation on the right axis. As we see management team has partially compensation linked to the result while the board has seen a steady increase while the company has underperformed. I know many argue you must pay to get the best. I disagree with that statement, the best is not driven solely by money, but by the chance to make an impact and improve. It gives them pride and acknowledgement. The ones driven by money will only try to maximize their share whatever the cost, and that price is for the shareholders to pay. Here Nokia seems to be a good example. I do conclude it has been better to sit on the Board or in the management team of Nokia then to be a shareholder. We also have to note that the numbers given are absolute and not per person adjusted. Per person adjusted could give a better picture and there the board members have seen a compensation increase of almost 3,9% per year (2012 to 2019 as 2020 isimpacted by one small meeting fee). Not bad compensation increase given the performance. The management team has more volatile salary as they have more result oriented compensation. On average they have seen an increase of 7,6% per year (2012 to 2019) and 5,9% until 2020. 2020 is a bad comparison year due to change of CEO.

(On left Y-axis is the management team compensation in m€ while the right hand side represents the boards compensation in m€).

How I Traded Nokia Shares

First short-term trade was back in 2013. Bought in the beginning of the year and sold the shares at the end for a small profit. Sheet displays transactions made in 2013 with a small profit of 215,43€ or 34,32% before tax, after tax the profit was 150,80€ or 24,02% (30% tax rate on capital gains). Nokia did not pay any dividends during this period, dividend of 0,37€ was paid in July 2014.

My second trade was done in 2019 with a much smaller return as I found better investments and did not want to wait for the stock to rise. As you can see it was done in a short period from beginning of October 2019 to 11th of October. A gross profit of 0,87€ or 0,84% was made, equivalent to 0,609€ or 0,588%, considering the short period of the trade could be duplicated through the year a proper return would be made.

How could Nokia contribute with value?

Share buyback programs and reducing the amount of shares outstanding and in treasury to the extent necessary in order to still compensate board members and management team when performance is acceptable or better. This is possible as Nokia has cash, they also have short term investments that have performed poorly. Owners of Nokia would have received a better return by investing the amount in an index fund. Opportunity cost should be highlighted here. The board should be able to identify if shareholders can get a better gain somewhere else, then they should distribute the excess capital and let shareholders decide what to do, not the other way around.

These are good options for Nokias management to do their job and increase shareholder value. That is their job and that is why they are paid a lot of money, receive shares and other perks, therefore owners can demand some return. In Nokias defence they have had share buyback programs, however small and not removed most the shares. This action is not value creation, more own reward insurance. 

One additional point, 6billion euros in cash & cash equivalents is too much for a company like Nokia (Ericsson has about 3-4 billion euros in cash and has paid a dividend). It makes the management and board sloppy and slow. Comparable companies do not have that much cash and most perform better than Nokia. Maybe something for Nokias board to consider in their next meeting.

Conclusion

Nokia has lost much of owner equity with poor performance over the years and failed to convince all investors and owners. Usually it has been a serial disappointer, with some analysts focusing only on non-IFRS numbers which turned out to be a mistake. Since 2003 a Nokia owner has lost equity due to increased number of shares as well as earlier mentioned, poor performance. The equity change is smaller than the loss from market price which might hurt more. Out of 18 last years Nokia has made a loss in seven of them (2003 to 2020). If I would invest on average 4,4 billion in R&D every year, I would demand a better result than Nokia has contributed.

My own opinion about Nokia is this, for the long run it still is a poor company failing to deliver owner value yet for short term gains it is a good option. Many have made money on Nokia and many have lost a lot, focusing on the last 18 years Nokia has failed to deliver. We shall see if the new CEO Pekka Lundmark can change it for better...

I do not hold any Nokia shares at the moment, I might take short-term long positions (buy shares) in the company if I find the market price undervalued.

Portfolio Update July 2021

 During July I increased my positions a bit as all dividends were reinvested. Bought shares in AT&T, Bayer and Alibaba while wondering if any position should be decreased or liquidated. Companies or mutual funds on reduction or liquidation list is Handelsbanken Latin Amerika, DigitalBridge Group and Ventas. Made net investments, meaning I bought more than my portfolio received in cash inflow (dividends and cash from sales). Haven't been that lazy investor lately even though mainly bought companies I already have and which market value is below purchase price. For me the laziness comes from not buying and selling all the time, instead as many times mentioned, looking for value now and not worrying to much about the future.

July was interesting as on Monday 19th global stock markets dropped around 2%. Which is a big movement, I was on the buying side that day covering the pessimistic market. Bought AT&T and Bayer AG however not at their bottom. Afterwards I was disappointed of only being able to invest a small amount. Would like to have at least ten times the money to invest every month.

My Summer holiday started in July with two weeks off, will continue with two weeks end of August. Sunshine and increasing covid-19 cases was the topic of my holiday. Have people not learned anything in the last 12 months? If they just could use a mask and take care of their hygiene, we would be in a better situation today. It did not ruin my holiday or hotel stay but has made me a bit frustrated as every day you see people neglect any form of common sense.

Holiday also started with some additions to my wardrobe, did spend a lot on clothes, almost 500€ in total on a pair of shoes, pants, shirts and jackets. Lloyd shoes and Oscar Jacobsen jackets do have a fat normal price so did what I usually do, buy at discounts and off-season. 

Also spotted that I had forgotten to update my Kone Oyj position, bough one additional share back in May for 65,75€ including transaction costs. Small change yet does impact how much I have left to reach my goals. 

The portfolio return was a bit of due to the swings in currencies, have made some adjustments that will correct for the currency swings to show a more accurate and realistic return. It also corrects the currency impact in invested capital. Return is calculated on EUR basis which is impacted by current market exchange rates as well as market prices in all portfolio currencies. 

Portfolio value at end of July was 55 492,08€ or $58 513,84, have reached my short-term goal in market value however in dividends I am still behind. A short celebration of achieving one of the short-term goals this fast (mainly driven by investments). Now just focus on the dividend part as well as the long-term goal and eventually the 1-million-euro goal (once 1 million is achieve the next step might be a 5-million-euro portfolio). 

 

Portfolio Changes

Alibaba (ticker BABA)

 Increased my position in Alibaba as the price has been lower than my weighted average. Bought 5 shares and have now 14 shares in Alibaba for an price of $216,68 per share. The 5 shares were bought at $200,99 (weighted average), ranging from $209 to $191 per share. 

Main reason for the volatility is the tension between China and USA, Chinese Governments need to show its power over tech companies and US authorities demanding Chinese companies listed on their exchange to follow rules. There is nothing wrong with Alibaba, instead it is the political risk reflected in the price. Compared to Amazon which has less political risk now while higher legal risk. For me the swings are more of a opportunity to add to my position, do not see a huge risk here. Did quickly read Alibaba's annual report and did not see any big surprises or anything that worried.

 AT&T (ticker T)

Bought 4 AT&T shares in July, increasing my position from 117 to 121 shares. Weighted paid price per share decreased a bit from $30,87 to $30,79 as the four shares were bought at a price below $29 a share.

The stock price did fall below $28 after mid-July, however only bought one share… It seemed like the stock dropped after the Q2 earnings report was released and disappointments were revealed from subscription services. Apparently, Netflix lost a lot of subscribers as well. Should be logical if people only used it during lockdown and now are partially returning to their daily life or just want to do something else.

Bayer AG (ticker BAYN)

Increased my holding in Bayer by 13% or 4 shares from 30 to 34 shares. Price paid decreased a bit from 63,69€ to 62,14€. The increase was made before the latest announcement of an additional reserve impacting the result due to legal matter in US (Monsanto acquisition and Roundup products).

Did read Bayers 2020 annual report and it was represented by acquisition failure. I am thinking about Monsanto which Bayer acquired in 2018. Both the Bayer Board and Management Group has most likely lost more of shareholders money than any other legal entity (without going bankrupt). A loss of over 10€ per share, dragging down the profitable segments of Bayer. 

It seems like Roundup has become a chronic migraine for Bayer shareholders. $63 billion is what Bayer shareholders paid for Monsanto and in addition received legal costs and settlements to come and a write down of $10,9 billion. at least $73 billion has the Bayer Management team and Board of Directors caused in cost for Bayer shareholders so far, assume the payback time is more than their combined life expectancy. Let's hope they do not repeat a similar failure in the future unless they do a similar write off their salary and bonus. Yes, I am frustrated about the whole case and would fire the whole management team and ensure the board members are never again re-elected. These kinds of mistakes are hardly treated as they should be, financial damage caused due to neglect and sloppy work usually end in unemployment. Apparently once you get to the management team your failures result in reduction of normal staff while you get a bonus for bad performance. Does sound like the incentive system and responsibilities are far from aligned...

Dividends

In July I got 128,39 euros in gross dividends and net 118,12 euros. From a dividend perspective July was an uneventful month while waiting for beginning of August when AT&T dividend will be booked. Biggest single dividend came from GlaxoSmithKline with net 50,90€ or 43 % of total dividends. Kimberly-Clark was the second biggest payer with 17,06€ or 14,44% and third came iShares Asia Pacific Dividend ETF with 16,41€ or 13,89% of total dividends. Still small amounts coming in every month.

 

 

Struggling to see the possibility of dividends reaching 2 200€ this year, Telias second dividend at the end of October will be 1 300 SEK or around 128€ gross and around 109€ net of withholding tax. That will be one of the single biggest dividends coming in. To reach the 2 200€ dividend goal this year I should invest more heavily in companies that will pay the second half of their dividend this Fall or has at least one dividend payments left. This way I could maximize dividend return, problem is that companies tend to see their price increase before the ex-dividend date meaning the return drops. Lower return means you must buy more to get a significant amount in dividends. I have a tight budget, long-term goal and might therefore do more investments based on longer perspective and not the short-term 1 additional percent gain here or there with a 30% risk (poor risk adjusted return). It does explain my increased AT&T and Bayer position.

Just to make my point, I would need to have a portfolio value of around 61 000 euro with a 3,6% net dividend return to achieve the goal of 2 200€ in net dividends. Notably Alibaba and DigitalBrigde does not pay a dividend which raises the total required invested amount. Looking forward to a cooler August month and hopefully some good discounts in the market.

First company review will be published soon. Just need to finalize a few calculations.

Portfolio Update June 2021 with increased AT&T position

 June was an interesting month as markets are again worried about future interest rates and questions about market valuations has been seen in news. S&P 500 index made a new all-time high, markets are generally showing the increased flow of money pressuring prices higher. This is good for many people as they feel richer. New market highs are not that interesting for me, instead it limits my opportunities to find good companies at attractive or so-and-so prices. I do prefer to pay a reasonable price for a good company than a huge premium which will take a lifetime to get back. 

My portfolio and general market

My stock portfolio (only stocks) has a value of 52 521,62€ or $55 106,92 while my mutual funds have a value of 347,84€ or $411,75 and ETFs are valued at 1 836,79€ or $2 174,27. Total value of my investment portfolio is then 54 706,25€ or $57 692,94. Not a long way to my short-term goal in market value, yet dividends are behind schedule. This is not a full dividend portfolio as it combines index funds and mutual funds representing around 0,6% of total portfolio. My portfolio five largest holdings are (1 July 2021);

1. Telia Company 8,84%
2. Nordea 8,38%
3. Basf 6,78%
4. 3M 6,46%
5. Kraft Heinz 6,38%  

Of the top five holdings Telia and Kraft Heinz market value is still below acquisition price, even though Telia has reduced the gap significantly compared to beginning of 2021. As you can see the top five holdings represent 36,84% of my total portfolio which some would say is a badly diversified portfolio. As you might know, my goal is not to diversify, but to choose good companies that will return a decent profit in the long run. 

There is still a long way to my 2061 goal of a million-euro portfolio and dividends of 55 000 euro. As markets move higher, I usually get less encouraged to invest, this has bothered me, but worked well to reduce any major losses. 

Talks about inflation and economic data from U.S.A. as well as minor inflation in Europe might be a sign of interest rates rising in the future. This would move money from stocks to bonds as investors need compensation for bearing the extra stock risk. I would like to see interest rates rise, as we might see some small turmoil in markets which is equivalent to opportunities. What the outcome will be and will we ever see interest rates of 5% in the future is more speculation. 

Portfolio Changes

No special changes made to my investment portfolio during June, as you can see below AT&T is again one company, I have increased my position in. Made net investments of 259,89€ in June (net of net dividends) as I have difficulties finding good companies at bargain or so-and-so prices. Hopefully the prices will come down at some point. I you look at my portfolio you will see some holding with a negative return now. I will not buy them as I see they could come down a bit more and some might actually have bought limit orders open as I am writing this post.

AT&T (ticker: T)

Increased my position in AT&T with 14 shares at a total cost of 341,13€ or $408,54. Weighted average purchase price for AT&T position as a result decreased from $31,10 to $30,87.

I know many are criticizing AT&T for the coming dividend cut. For me it does not have a significant impact as most likely I will still get over 3,5% dividend yield and have shares in WarnerMedia. Hopefully WarnerMedia will pay a dividend compensating for the difference to current AT&T dividend. 

Apparently I have bought 37 shares in AT&T since start of 2021 for $1 083,99 or $29,30 per share. AT&T has paid me dividends of 63,88€ during 2021 which will drop once they cut their dividend in half. I hope the new combined WarnerMedia and Discovery (Warner Bros Discovery) will start paying a dividend in 2022. Discovery has apparently not paid dividend to common stockholders for a while, which does annoy me as I like companies that can generate some cash flow to owners.

Dividends

Gross dividends in June were 97,44€ and net of tax 81,24€. Compared to earlier months it is in the same range as February and March while May was exceptionally good due to annual dividends from European stocks. One factor impacting June dividends is that some companies who usually paid in June have now paid the dividend in July (or at least booked in July to my account). The impact is small however still the development would look better given they would have been booked in June.

The below graph displays dividend development since December 2020. During 2021 I have received 894,93€ in net dividends. Which is far away from my goal of 2 200€ at a market valuation of 55 000€, my portfolio value is close to the target while dividends are falling behind. One big question is when will banks be able to open their dividend flow to owners, if it will start in September then my dividends this year might come close to the target of 2 200€. Nordea has only paid a fraction of planned and Wells-Fargo still paid only $0,10 while they back in May 2020 paid $0,51 which would be a big increase to current low level. 

Enjoy the summer and will try to have my first company analysis done by end of July.

Deep Dive into ESG investing, mutual funds and ETFs

In this post I will dive into the World of ESG investing (sustainable investing), I will start with a quick explanation what ESG is and then list funds and ETFs I found. Kindly note that ESG funds are being created or old funds converted to ESG funds at a speed nobody can follow in their spare time. 

What is ESG?

ESG stands for environment, social and governance. ESG measurment means a company is rated on non-financial metrics instead of financial. The topic has been trending for a while as environmental topics have been lifted up as important. ESG investing is a recent investing trend, a form of highlighting sustainable investing and a way for investors to express their opinion.

A few ESG investment funds will be mentioned in this post and key information given. There are a few different ESG investment funds on the market, ETFs as well as mutual funds. Issue here is that some funds seek based on specific ESG citeria, others have less weight in low rated companies and other seem to be impacting.

A list of ESG funds and ETFs

Here I have listed funds launched by known banks and investment firms like Blacrock and Vanguard, which have launched their special ESG ETFs that follow specific ESG indexes. I have summarized the most relevant information about the ESG ETFs I found, link to homepage or search page for funds and for more information is given for each. Note that all of the given ETFs might not be available in you country or the broker you use. Note that all information is gathered based on data available 30th May 2021 and that all suppliers are not mentioned due to limited time and reduce your time spent here.

Blackrock and iShares

 Blackrock is known for their iShares ETFs which are most likely known all around the World, some have small charges other are a little more expensive per year. As you can see from my portfolio I do have some iShares ETFs. I will focus on Blackrocks ESG Screened, ESG Aware and ESG Advanced equity ETFs in this section. They do have other sustainability funds available which you can find on their webpage. For example the iShares Global Clean Energy ETF I owned at one point does not show up on the list when I looked at it.

This link will take you to the main page for sustainable investing as direct links might not work perfectly.

ESG Screened

 Screened funds aim to remove exposures to certain businessess that might be controversial or impose risks to investors preferences. 

iShares ESG Screened S&P 500 ETF (Bloomberg ticker: SP5ESUT)

Benchmark index is S&P 500 Sustainability Screened Index with ongoing charges of 0,08% per year and 2,2 million shares outstanding. It pays a quarterly dividend based on history and has 454 holdings. Six biggest holdings are Apple, Microsoft, Amazon, Facebook and Alphabet Class A and C shares representing 22,91% of portfolio. Interestingly on seventh place comes Berkshire Hathaway class B share, note that Berkshire Hathaway has decided not to make any additional sustainability reports and employer responsibility reports. In other words, they do not employ any additional reporting moving against the general trend.

Quickly reviewing the holdings, it looks like the S&P 500 index companies without companies like Exxon and Chervon.

iShares ESG Screened S&P Mid-Cap ETF (Bloomberg ticker: SP4ESUT)

Benchmark index is S&P MidCap 400 Sustainability Screened Index, the fund was launched in September 2020 with 800 thousand shares outstanding and 368 holding. The ETF has annual fees of 0,12% and seems to apply quarterly distributions of funds. Six biggest holdings are Bio Techne, XPO Logistics, Fair Isaac, Molina Healthcare, Signature Bank and Cognex representing 4,03% of portfolio. Here we see that the largest companies have small portions of the total portfolio which can be seen as a positive sign compared to many other funds were the six largest holdings can represent over 20% of the portfolio having a big impact on both upside as well as downside.

iShares ESG Screened S&P Small-Cap ETF (Bloomberg ticker: SP6ESUT)

Launched in September 2020 with 250 thousand outstanding share and annual charges of 0,12 %, this fund has 638 holdings. As the two other ESG Screened ETFs this also seems to follow the same distribution logic of quarterly distributions. Benchmark index is S&P SmallCap 600 Sustainability Screened Index which explains the amount of holding in the fund. Six biggest holdings are BLK Cash Fund Treasury, GameStop class A, Crocs, SAIA, Omnicell and Macys representing 5,55% of the total portfolio. As before we see that the number of holding in the fund reduces exposure to one specific company in this fund as well. Interestingly the fund holds swaps in a few stocks while the two other funds do not, this is one fundamental difference between the tree funds. 

 ESG Aware

The aware funds are supposed to strive for sustainable outcome yet still returning the market outcome. 

iShares ESG Aware MSCI USA ETF (Bloomberg ticker: GU719471)

Launched in end of 2016 with 180,7 million shares outstanding this ETF has ongoing charges of 0,10% per year. It has an MSCI ESG rating of A (AAA is the best rating) which seems to be due to military technology. Notably the fund holds positions in Exxon Mobile (0,62% of the portfolio) and Chevron (0,51% of the portfolio) which might explain why it is called Aware. The ETF has 351 holdings and has been paying quarterly dividends. The ETF follows MSCI USA Extended ESG Focus Index and the six biggest holdings are Apple, Microsoft, Amazon, Facebook and Alphabet representing 19,56% of the total portfolio.

Compared it quickly to iShares MSCI USA UCITS ETF which has a bit higher ongoing charges of 0,33% and has a little bigger weight in Exxon Mobile of 0,65% and Chevron of 0,53% they do look alike to a large extent. Just wondering why, the Aware ETF has lower charges then the normal accumulating ETF, maybe it is due to no mentioning of rebalancing in the Aware ETF which lowers costs.

iShares ESG Aware MSCI EAFE ETF (Bloomberg ticker: NU719472)

 Launched in mid-2016 with ongoing charges of 0,20% and MSCI EAFE Extended ESG Focus Index as benchmark index. It pays a quarterly distribution, has 72,1 million shares outstanding and consists of 482 holdings. Six biggest holdings are Nestle, ASML Holding, Roche Holding, LVMH, Novartis and Toyota Motor representing 8,6% of the total portfolio. This fund is a bit more geographically diversified in the sense of where the stocks are traded compared to the USA fund (obviously). The six biggest holdings have a significantly lower weight then in USA fund and has a better MSCI ESG rating of AA compared to A in the USA fund. The fund is focused on Europe, Asia and Australia based on company trading location and geographical distribution.

iShares ESG Aware MSCI EM ETF (Bloomberg ticker: NU719473)

 This ETF was also launched in mid-2016 and has 168,9 million shares outstanding with ongoing charges of 0,25% per year. The ETF pays quarterly dividends and has 357 number of holdings with a MSCI ESG rating of AA with MSCI Emerging Markets Extended ESG Focus Index as benchmark index. It as you might have guessed invests in emerging markets as the six biggest holdings are Taiwan Semiconductor Manufacturing, Tencent Holdings, Samsung Electronics, Alibaba Group, Meituna and Naspers Limited representing 22,77% of the total portfolio. The fund does have exposure to Russian NK Lukoil and interestingly has Greek Organisation of Football Prognostics (gambling company) as an investment of 0,28%. 

Gambling and oil might not be the best assets in a responsible fund, even though a gambling company would report all necessary ESG material it should be considered most likely not good practice. Oil companies such as Exxon and Chevron can change their energy sources after time, but a gambling company cannot change to more sustainable gambling methods.

ESG Advanced

 As with the other ESG ETF there are also 3 equity focused funds in the advanced portfolio as well as two bond ETFs not covered in this post. The aim of the advanced funds is to prioritize highly rated ESG companies and leaving the rest out.

iShares ESG Advanced MSCI USA ETF (Bloomberg ticker: GU729302)

 Launched in mid of 2020 with 6,35 million shares outstanding and an ongoing yearly expense of 0,10% it follows the MSCI USA Choice ESG Screened Index. The ETF has 320 number of holdings and MSCI ESG rating of AA with six largest holding being Tesla, NIVIDA, Visa, Home Depot, Mastercard and Paypal Holding representing 15,16% of the total portfolio. 

Vanguard

Have two Vanguard ESG ETFs summarized here and to a large extent they follow the same pattern as other ESG ETFs in portfolio holdings.

 Vanguard ESG U.S. Stock ETF (ESGV)

The ETF follows FTSE US All Cap Choice Index and has ongoing charges of 0,12% which is normal for a replicating index ETF. The ETF was launch back in September 2018 and contains 1 465 stocks which is a well-diversified portfolio already. Six biggest holdings are Apple, Microsoft, Amazon, Alphabet, Facebook and Tesla. The six largest holdings represent 23% of the portfolio, reversing my claim of a well-diversified portfolio. Here we see a big exposure to a few companies which means there are a lot of small holdings.

Vanguard ESG International Stock ETF (VSGX)

This ETF tracks the FTSE Global All Cap excluding US Choice Index and has ongoing charges of 0,15% per year. Launched back in September 2018 with 4 913 stocks and six biggest holdings of Taiwan Semiconductor Manufacturing Co, Tencent Holdings, Alibaba Group Holding, Samsung Electronics, Nestle and ASML Holding which represent 10,1% of portfolio. This ETF can be called diversified due to the limited exposure to the six biggest holdings and 10 largest holdings represented 13,3% of the total portfolio end of April 2021. A diversified portfolio at reasonable costs would be available here, might consider this fund if the market turns South.

Svenska Handelsbanken

 Handelsbanken seems to have adopted the ESG in most if not all of their funds. They use AI to scan company reports to identify the criteria's and which goals each company fulfils based on information about operating countries, products and services. The goals are based on Agenda 2030 and is available in Swedish.

Handelsbanken has 28 funds that based on comparison to other similar funds are positioned in the top percentile of sustainability. Because of the large amount of funds, I will only give the 28 funds as a list below. To analyse all the funds will take a lot of time and that we all have a limited amount of, for English list of Handelsbankens funds please use this link. The mutual funds links are to their euro denominated pages. Note that the amount of funds are due to different currencies and fund "shares". Fund shares might be accumulating or distributing or due to separation of institutional investors and individual investors.

Handelsbanken Asien Tema (available in fund currency of EUR, SEK and NOK, ongoing charges of 1,50% per year)

Handelsbanken Auto 50 Criteria (ongoing charges of 0,60% per year)

Handelsbanken Auto 75 Criteria (ongoing charges of 0,60% per year)

Handelsbanken Brasilien Team (available in fund currency of EUR, SEK and NOK, ongoing charges of  1,85% per year)

Handelsbaken Euro Corporate Bond Fund (available in fund currency of EUR, ongoing charges of 0,65% per year)

Handelsbaken Europa Selektiv (available in fund currency EUR, SEK and NOK, ongoing charges of 1,85% per year)

Handelsbaken Finland Småbolag (available in fund currency EUR and SEK, ongoing charge of 1,80% per year)

Handelsbaken Företagsobligation (available in fund currency SEK, ongoing charges of  0,95% per year)

Handelsbanken Global Dynamisk (available in fund currency SEK, ongoing charges of 0,80% per year)

Handelsbanken Global Selektiv (available in fund currency EUR, SEK and NOK, ongoing charges of 1,85% per year)

Handelsbanken Japan Tema (available in fund currency EUR, SEK and NOK, ongoing charges of 1,60% per year)

Handelsbanken Kapitalförvaltning 50 (available in fund currency EUR, ongoing charges of 1,56% per year)

Handelsbanken Kina Tema (available in fund currency EUR, SEK and NOK, ongoing charges of 1,85% per year)

Handelsbanken Latin Amerika Tema (available in fund currency EUR, SEK and NOK, ongoing charges of 1,60% per year)

Handelsbanken Multi Asset 40 (available in fund currency SEK, ongoing charges of 1,46% per year)

Handelsbanken Multi Asset 50 (available in fund currency SEK, ongoing charges of 1,54% per year)

Handelsbanken Mutli Asset 60 (available in fund currency SEK, ongoing charges of 1,58% per year)

Handelsbanken Mutli Asset 75 (available in fund currency SEK, ongoing charges of 1,61% per year)

There are a few more funds to be mention, however as I want to limit the post you can look for all the rest on Handelsbankens page, link to their fund selection is here. Overall I would say that Handelsbanken has some good funds and some I would challenge on the ongoing charges side, considering the fund owners could get some more contribution.

Notable is that I hold a small position in Handelsbanken funds, all Handelsbanken holdings available in my portfolio.

Nordea

 Nordea has dividend their funds in Star funds and Sustainable balanced funds, Star funds have as criteria that companies are responsible in the sense of environment, human rights, working conditions and business ethics and noted in their operations. Sustainable balanced funds do have the Paris agreement as a criterion, otherwise it seems to be weighted on choosing other ESG funds and creating a balance of it. Note that Nordea does have some Star bond funds of the similar Equity funds mentioned below, however not for all. The selection is available on Nordeas pages at funds now. Besides the tree funds given below there are additional tree funds focused on Europe, US and Asia which I will not cover here.

Global Stars Equity Fund BP-EUR(ISIN: LU0985320059)

 Nordeas Global Stars Equity fund invests as stated in global companies and globally. Funds currency is USD, fees of 1,79% on yearly basis and they apply a entry charge of up to 5% and benchmark index is MSCI All Country World - Net Return Index. Six biggest holdings per 31th March 2021 are Alphabet, Microsoft, Amazon, Rotork, Taiwan Semiconductor Manufacturing and ING Groep representing 17,58% of the total portfolio. Over 70% of the fund is invested in US, a little less than 16% in Europe and around 10% in Asia excluding Japan, geographically it is weighted in US yet the companies we see are global and in reality, if the split would be on revenue basis then the weights would change a bit. in total the fund has 78 positions in companies making it a diversified fund. 

My opinion is that the fund might be a good option for ESG investing, however the ongoing charges of 1,79% and a entry fee of up to 5% makes it expensive considering it has returned around 98 % since launch 2016. Of which most of the return has come in the aftermath of Covid stimulus. If I would buy into this fund, I would like to challenge the portfolio managers a bit on their ability to outperform the market.

Emerging Stars Equity Fund BP-EUR (ISIN: LU0602539867)

Launched in 2011 Nordeas Emerging Stars Equity fund focuses on equities in emerging markets like China, India, Taiwan and South Korea. Fund currency is USD, fees of 1,81% and entry fee of up to 5% and the benchmark index is MSCI Emerging Markets Net Return Index. Six biggest holding are Taiwan Semiconductor manufacturing, Alibaba, Samsung Electronics, Tencent Holdings, Ping An Insurance Group Co of China and Meituna representing 39,38% of all holdings. Around 32% of the holdings are in China, 13% in Taiwan and almost 13% in India. The fund has a total of 47 holdings and the as the geographical split shown heavily invested in China, the weight in China might well be motivated by the size of Chinas economy and therefore there is a lot of opportunity. 

I do find the fund proper if I would like to invest in China or emerging markets, yet the fee does bother me. It is a bit to high in my opinion considering that I could more cheaply create a similar fund in my portfolio. The fund has returned 141 % and beaten the benchmark index, this fund has basically since 2014 kept a good margin to its benchmark index and based on return it has outperformed.

Nordic Stars Equity Fund BP-EUR (ISIN: LU1079987720)

Launched in 2014 Nordeas Nordic Stars Equity fund focuses as the name indicates on Nordic countries and companies, biggest countries are Sweden, Finland, Denmark and Norway. The funds currency is EUR and has ongoing charges of 1,80% and a entry fee of 5%, benchmark index is MSCI Nordic 10/40 Index (Net Return). The six biggest holding are Sampo, Tryg, Gjesidige Forsikring, Novo Nordisk B, Volvo B and Bakkafrost representing 30,52% of the total portfolio and the total amount of holding are 32. Compared to the benchmark index the fund has just outperformed the index since launch, however with a limited margin. interesting is that the fund has one US and one Switzerland holding even though it should be a Nordic Equity funds.

Unfortunately since launch I do not see the fund to have significantly outperformed the benchmark index and considering it has returned 90 % since launch I would more likely take index funds even though they do include less ESG friendly companies.  

Nordeas Sustainable Selection Funds 

Nordea has tree Sustainable Selection funds, a moderate, balanced and growth fund. The difference between these funds is the equity weight. Kindly note that the funds had no mentioning of any easing of charges in the funds they invest, as there are cases where funds in funds are only charged once based on the fund you own directly and not indirectly via a fund.

Sustainable Global Moderate (ISIN: FI4000400080)

 The fund has ongoing charges of 1,18% and the portfolio consists of Nordeas Star funds and other Nordea funds. A fund of funds launched in 2016 with no benchmark index. These funds could be compared to a pension company which distributes assets all over and then returns after expenses a moderate amount to the owner. I would only buy this kind of an fund if I had no other options available due to the additional costs from owning a fund that invests in funds (you pay a fee directly to the fund which has investments in other funds that charge you as well, not a good deal in my opinion). 

The fund has a policy of holding 30% of its funds in equities and the rest is fixed income which explains the low return over the last 10 years. 

Sustainable Global Balanced (ISIN: FI4000400098)

 As the moderate fund this balanced fund has equity holdings of up to 50% and rest in fixed income holdings compared to moderate which has around 30% in equity. The fund was launched in 2016 and has ongoing charges of 1,58% per year and includes Nordea Stars funds and some equity holdings which are already included in the Stars funds. This means that you basically have twice the same holding which I find a bit confusing, to criticize the fund.

Sustainable Global Growth (ISIN: FI4000400106)

Sustainable Global Growth fund has equity holdings of 70% and the rest in fixed income assets, compared to the other Sustainable funds the equity weight is bigger and therefore a better return than the other funds. Ongoing charges per year are 1,62% and the fund was launched in 2016, no benchmark index given.

The fund does include Nordea Stars funds and bond funds as well as direct equity holdings of companies in the Stars funds. The difference is that the equity holdings are more and covers a bit larger sample then the Stars funds. What bothers me with the funds is the weight in Nordea 2 Global Sustainable Enh. Eq. Fd Y- EUR fund of 19,26%. 

Nordea selection summary

Nordea does have a few ESG funds from which you can choose, and I assume there might be something interesting for all, what bothers me are the high fees. Unfortunately, funds do have higher fees then ETFs due to the additional work from following up of cash flows and most likely some other costs which I do not know, but I assume we all agree that over 1,1% annual fees are quite high.

 JPMorgan ETFs (Ireland) ICAV - Carbon Transition Global Equity UCITS ETF (JPCT)

The ETF follows the underlying index which is JPMorgan Asset Management Carbon Transition Global Equity Index (JPMIGCTN). Balancing is done on a quarterly basis and has a fee of 0,19% and no performance fees with 1,1 million shares outstanding. The fees is low due to it being a index fund, it was established in 2020 and currency is USD. Biggest holdings are Apple, Microsoft, Alphabet A (Google), Amazon, Facebook and Johnson&Johnson representing 15,5% of the ETFs holdings. The fact sheet as well as KIID is available on the funds page which you can reach via ticker.

For me the question is more based on what criteria this ETF has chosen ESG fulfilling companies? It only states to be following an index created by the company, for information purpose to investors and potential investors it could be good to explain a little more what the ESG criteria is, a few sentences is enough on the homepage. J. P. Morgan has a webpage where they introduce the whole policy around ESG investing and it seems to be weighted towards Paris agreement and dedicated sustainability agenda. 

J. P. Morgan has a lot of SICAV funds under their EGS investment policy, more than a few posts would be able to handle so have decided not to look at them in this post. If you are interested in what funds they have then you click the link. It will take you to the main page from where you can look at their whole selection of ESG investment funds and ETFs, ranging from equities to bonds and all in between.

Summary

There are a lot of funds and ETFs stating and following an ESG investment policy. The issue is to find what fits you best and what you broker or bank has available. 

One question that I have and find important with ESG investing is, why are fossil fuel companies left out? Should we maybe see these companies as an opportunity to change instead of seeing them as the evil monster? Maybe consumers behaviour should also be reviewed and companies products? How long does the products last and how often do they launch new models that drive consumption and increase waste? For example electronical recycling in Europe has already been proven to work badly with a lot ending up in Africa as waste instead of recycled as promised. 

Relating to the trend of ESG investing and green future, there is a small issue of free riding that will occur here. As many investors can choose a low-cost fund covering the same companies while other might choose an impact fund that will work for the changes. In the example of Blackrock and iShares ETFs I do believe Blackrock will work for the total good via all their funds in which case they have a big impact due to the size and amount of their funds. If I remember correctly Larry Fink the CEO of Blackrock said back in 2020 that Blackrocks funds will start impacting company Boards and management to work for more sustainable future. 

If we quickly look at my portfolio composition from ESG perspective then Telia Company might be one to criticize due to their history of bribes given in old Soviet states. Canadian Utilities seem to move towards a more green perspective and for the rest of the companies and funds I would say it might be on a good stand. One problem is that I cannot get information on how how well the employer treates employees, if the management is in reality good and humane (off stage as well as on stage).  One way could be the amount of sickdays and weighted average numbers of years at employer on all levels including internal possibilities of career. Much more can be added, such as to what extent empoyee suggested improvements are initiated by management.

Which ESG ETF or mutual fund would I choose? Would not choose one single, instead mix with a few iShares, one Vanguard, some Handelsbanken spiced with one or two Nordea. Might consider J.P. Morgan ETF, however do want to limit my US large Cap risk and not that confident with Facebook and Tesla as ESG investments.

If you find any link not working please reach out to me in the comments or e-mail to edgwhstudio@gmail.com to ensure the links are updated as banks and investment houses might change the url from time to time. 

Disclaimer;

Of the mutual funds and ETFs mentioned in this post per publishing day I only have positions in a few Handelsbanken funds and a few iShares ETF. I do not have any personal financial interest in mentioning nor do I receive any compensation of any form from any of the mentioned entities. This post shall not be interpreted as financial advice nor is it, the reader is fully responsible for own financial decisions.

Will I reach my portfolio goals with current investment strategy?

 I have been pondering if my current investment method will achieve the 1 million euro portfolio goal and 55 thousand euro annual dividend. It is a big portfolio and it does depend on inflation and many other factors between heaven and earth. In order to better understand the requirements I made a few scenarios to display my thoughts and options. 

Have divided into two main options based on savings needed per month. Note that there are many moving factors impacting how much I can save and invest as well the market value of my portfolio might swing up and down in the future.

Option 1 Saving 250€ per month with 5,39% return

First option would be to save and invest 250€ per month which will be increased by 2% on an annual basis and have a dividend yield of 5,39% net of tax to be reinvested. This would yield a 1 million euro portfolio without any price appreciation (stock value increases). Important to remember that the portfolio does not start from zero at this moment, a over 50 thousand euro portfolio is fairly good yet nothing to brag about. I would have to save 232 444 euros of my own money over 40 years to get to 1 million, it does sound like a small amount compared to many other options out there. The reason for the quick growth comes from compounding, interest on interest growing at an exponential speed.

The graph below displays the above-mentioned case, the orange line displays dividend received per year (right y-axis) which will be reinvested into the portfolio and the blue staples show the year end value of my portfolio (left y-axis).

You can see that the dividends based on this model does not fulfil the goal as the calculations does not expect a full dividend for investments done during the year. For the investments done during the year only a quarter is expected to get the full annual dividend while the rest will then be received the year after.

This is one option to get to the goal and saving 250 euro per month which increases 2% per year should not be difficult under current circumstances. If I get fired or would end up unemployed for a long time, then the goal might be delayed by a few years. There are other risks that may delay it, sickness or any other that can impact my ability to work and earn. 

Option 2 Saving 200€ per month with 5,76% return

The second option I set up is a monthly saving of 200 euros that will increase by 2% on an annual basis. Here a requirement would be a yield of 5,766% per year, compared to 5,39% with monthly saving of 250 euros. We see that there is a very small difference between the return required between these two options and it all falls down to the 50 euro monthly difference. In this case I would only have to save 194 878€ of my own money to achieve a 1 million euro portfolio. By now you should understand that the difference is coming from the yield of my portfolio, if the yield drops then time to achieve my goal will be pushed further into the future unless I would save more. 

A yield of 5,76% per year is difficult, even though Warren Buffett, Peter Lynch, Charlie Munger, Joel Greenblatt and many more known investors have returned much more on an annual basis. As the future is unknown the returns are to a large extent unknown, businesses operating environment might change to which they need to adapt or wither away. 

The importance of yield and compounded interest

To give a little more perspective with lower expected returns I have made a similar graph with a monthly saving of 450 euros which would require a yield of 4,04% per year. The lower yield requirement might be expected under current market value, yield returns decrease as values increase.

With a monthly saving of 450€ and annual return of 4,04% I would need to invest 382 708€ of my own money, significantly more than in the two other options. As we see the yield is much lower, maybe not that much if we think about it, but over a period of 40 year it has a huge impact on portfolio returns and how fast it achieves a 1 million euro value. The graph below shows the 450€ monthly saving and 4,4% yield development.

 

Goal of million euro portfolio summary

These examples as you can see are all showing a smooth positive development every year. In reality we will see years of positive development as well as negative developments. Just recall March 2020 when the markets dipped and many thought the world will end, look at markets now, who would have thought values would be this high over a year ago. I expected a slower market recovery then we have seen, as we can conclude I was wrong on the recovery part. 

The goal I have set of a 1 million euro portfolio by 2061 is not impossible, but will require patience and focusing on continuing the same investment pattern as before. The compounding effect will be handled on my behalf and maybe the portfolio market value reaches the goal many years in advance, we shall see. 

To quickly explain why 1 million, it is more of a symbolic number to me and nothing more. Once I have reached it I will most likely continue investing as before, hopefully will be able to affect how companies work and make decisions on strategic levels as well as how companies form their culture and who they employ. This in order to increase the company value through increased dividends and market value in the long -run. Please note that in the end it is the employees who are the company, and they create the value for owners, hardly the other way around.

Portfolio Update May 2021 and Updated My Investment Goals

 Will start this post with a small update to my goals. The long-term goals are a portfolio value of 100 000€ and annual dividends of 4 000€ (equivalent to a dividend yield of 4%) by 2031 and short-term goals are a portfolio value of 55 000€ and annual dividends of 2 200€ (also 4% dividend yield) by 2025. I want to have some goals further into the future and have therefore set a third goal;

Portfolio value of 1 000 000€ and annual dividend of 55 000€ by the end of year 2061. This means I have about 40 years to invest and grow the portfolio from current value of 52 180€, a growth and investments equivalent to 947 820 euros. This will be a more challenging task and will require patience and consistency to achieve.

All goals available on Goals page as well as the updated goal of 1 million investment portfolio.

Back to my portfolio and the update, May was a little busy month with a lot of work and some good investment opportunities for me. Also got proper dividends of which all has been reinvested and additional investments to be done during Summer. Below is shown the portfolio development to long-term target (not the new 1 million euro target), for simplicity the data labels have been removed and you also have access to the google sheets file via portfolio page. Portfolio return is largely driven by the general upside in markets and less on company specific development. Portfolio value was 52 180€ or $56 695,95, which represents a 14,50% return.

 

 

One topic to be touched is AT&Ts decision to split WarnerMedia as a separate company which will be merged with Discovery. As a result, AT&Ts shareholders will own 71% and Discovery shareholders will have 21% own the new joint company consisting of WarnerMedia and Discovery. One of the reasons is direct consumer streaming for global customers, meaning they want to create scale and better compete with Netflix and Amazon Prime. I haven't had time to look at all the details in the transaction, therefore a bit difficult to comment if it is a good or a bad deal for me as an AT&T shareholder. What I can say is that I like the telecom industry and also like the entertainment industry as the revenue channels have increases over the years from only movies to today's merchandise, royalties streams from multiple parties.

Portfolio changes

Increased a few positions during May which will contribute with some additional dividend this year. Unfortunately, the dividend year has basically ended for European stock which pay only once a year a dividend. Rest of the year it will mainly be USA based companies and GlaxoSmithKline (primary listing is in UK).

AT&T (ticker: T)

Bought 3 shares at $29,50 to reduce the weighted average purchase price from $31,14 to $31,10. Some might have sold out due to the divestment news as they see the dividend to be cut to half of what it is right now and as a result based on today's price the dividend yield of 7,11% (Google Finance) would be 3,555%. The challenge here is what will the joint company WarnerMedia and Discovery pay in dividends, or will it pay a dividend? Many shareholders have held AT&T mainly for its high dividend if you are to believe other bloggers and writers in the social media. My view of AT&T is more a stable dividend payer who makes a lot of visible mistakes, acquisitions not in shareholders interest like the DirectTV while TimeWarner was in my opinion a very smart and good investment with good cash flow. 

Now I am also faced with the same dilemma, sell out or what to do? Based on all current information I will hold my position and even increase it, unfortunately I do not have an answer if anything changes then it will impact my judgment of the company.

Alibaba (ticker: BABA)

Bought 5 shares for an average of $222,93 per share which lowered the weighted average purchase price from $227 to $225,40.

I do find Alibaba a good long-term investment which might grow in Asia and even to Western countries if they so want, challenging Amazon in many of its business categories.

Dividends 

It did feel good to get some bigger dividends in to invest more in the markets, even thought a lot of assets seem highly valued on many metrics. The portfolio received 491,34€ in gross dividends and 374,13€ net of withholding taxes. Will have to apply for the withholding from Germany during this year and hopfully claim old taxes from two years back as well. As the picture below shows most of the dividends came from Basf, Fortum and Sampo. These three companies pay only a annual dividend so until next year.

The graph above displays year to date dividends both cumulative as per month split. There are clearly monthly differences driven by European companies and US companies quarterly dividends. 

In market value my portfolio is close to the short-term goal yet dividens are far away from the goal of 2 200€. Five months behind and seven to go, lets see how this year ends.