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New purchase in ROTH IRA – ConocoPhillips (COP) for 4.60% dividend yield

UPDATE: (04/14/2015) Yesterday, ConocoPhillips price dropped a bit. That allowed me to lower my limit price lower to $67.55. Today, the trigger order fired and executed my limit order. I bought 16 shares of COP today!
 

In my ROTH IRA account I use a commission free ETF to save money for my next purchase. Because of free purchases of the ETF I can buy one share and sell one share and pay nothing. This allows me to save all dividends and my small contributions into the ETF and once I have saved enough I sell the shares in ETF and buy a dividend paying stock.

Last Friday, I saved my minimum amount for purchasing a stock – $1,000 so I could sell the ETF (without paying any commission or trade fee) with 4% profit, release the cash, and now I am placing a purchase order for Monday to buy ConnocoPhillips (COP) stock.


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Conditional order

On Monday I will initiate my first position in COP. But I will use my trigger order strategy to buy this stock. That means, that I will place a conditional order to purchase this stock only if it moves higher. If it starts moving down from the current levels, I will not buy and my limit order will be lowered to a lower price. That means that I will be able to track the price down and buy into a position only when the stock reverses (or continues higher from the current price.

See the white board below:

Conditional orders

As you can see, I place my initial limit order slightly above the current price (P1). It is a conditional order, basically saying “if the price is equal or greater than P1 then enter a limit order to buy at P1 price.“.

So if the price of the stock goes higher, hits the P1 limit, the conditional order gets hit and it activates a limit buy order. The stock gets purchased.

If however, the stock goes lower, I will lower my limit price to P2, and then to P3, and P4, etc. If at the bottom the stock reverses and hits my target (P5), the stock gets purchased and I will ride it up.

Of course, this is not a 100% bulletproof strategy, but works most of the time to capture a better price.

Sometimes you will get filled and short after the fill the stock reverses back down and continues in a selloff. That’s a reality of the market. It happens and you cannot do much about it. But at least we tried to get the best price, right?

To eliminate a negative impact of this, I never use an all-in purchase but buy a small portion of the entire position. So if the stock reverses and continues lower I can repeat the process to add to my position.

Trade detail

On Monday, I will have the following conditional order out:

If COP last is equal or greater than 67.71 then
Buy 16 COP at 67.71 LIMIT GTC

Total shares holding after the purchase: 16
Estimated annual dividend: $46.72
Consecutive Dividend Increase: 2 years
Dividend yield today: 4.60%
Dividend 5yr Growth: 8.45%
Dividend paid since: 1934

This stock may also provide a nice capital appreciation when oil price returns back up. This stock may also move back up to ~$80 level and make a nice ~$12.30 capital gain per share. In the meantime, I will be collecting a nice dividend, which I will be saving into a commission free ETF, saving money for my next purchase.

What do you think? Would you agree with COP stock or do you prefer a different energy stock?

Happy trading and investing!
 





2 responses to “New purchase in ROTH IRA – ConocoPhillips (COP) for 4.60% dividend yield”

  1. A great company that Im sure you will be happy with for a long time. Congrats on adding this to your arsenal and increasing your dividend income.

    Best wishes

    R2R

    • Martin says:

      R2R,

      thanks for stopping by. I like COP too. I had it in my watch list and now it says a big BUY as it is undervalued (at least per my own numbers). I believe this is a good purchase although it didn’t happen yet. Thanks again.

      Martin

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