June 2017 dividend income

I was so busy in June working hard towards my financial independence that I almost forgot that the month is over again.

I am very tired these days because I took a second, part time job to make a few more bucks and that income goes towards my financial independence.

With the additional money I plan on achieving the following goals:

1) pay off all my debt
2) raise emergency savings
3) save money in my trading account to create a stream of income

In this post I would like to again report my dividend and options income for June 2017.

This month, we received $87.90 dollars in dividends. It was $1.58 dollars less than in the previous month.

Our options income exceeded all previous months of this year as we reached $192.00 dollars of received premiums. It was 5.82% on invested capital (ROC).

Our overall, average, annual, options income is 3.24% which is a great achievement considering that in our ROTH IRA we can only trade cash secured trades or spreads.

Although our month-to-month dividend income was less than the record month of May, I am happy to see that our annual dividend income increased again to $1,089.88 from previous month of $1,083.88 (0.55% increase MoM).

· ROTH IRA investing/trading strategy

If you are interested, here you can review our investing & trading strategy used in our ROTH IRA account.

In our ROTH IRA account we primarily invest into high quality dividend growth stocks. However, we allow exceptions and invest to higher risk, non-growth dividend stocks.

We reinvest all dividends using DRIP program. We will be using DRIP as long as dividend income will be below $1,000 per months or dividend period.

Once our dividend income reaches the limit of $1,000 dollars per the period (quarter, dividend payout, etc.) we will cancel the DRIP program and start re-investing the dividends selectively into either new stock holding, or existing stocks.

In our ROTH IRA account we also use options trading strategy called “triple play”.

We sell cash secured puts as long as we are assigned and buy the stock. With this strategy, we do not roll the puts unless there is a great opportunity to do so or the stock dropped in price significantly.

Once we buy shares, we keep them, collect dividends, and start selling covered calls.

We sell covered calls at the money, slightly in the money, or above the money. We do this as long as we sell the stock.

During this cycle, our DRIP program ensures that we reinvest the dividends.

For example, we sell puts against stock XYZ, we get assigned and buy 100 shares of the stock. Later, we receive the dividend, which is automatically reinvested. We buy fractional shares of the stock, for example 2.468 shares. Now we own 102.468 shares of the stock. While we are selling covered calls, when we get assigned the calls, we sell 100 shares of the stock. At the end of the cycle, we are left with 2.468 shares which continue bearing new dividends. These dividends are then reinvested back into the same stock, so our position is slowly growing.

Now, you may ask, what if you buy a stock and it drops significantly down, so selling covered calls down low may result in selling the stock at a loss and what would we do in this situation?

This is a valid question and no stock, even dividend growth stocks are not protected against a violent price drop. It may happen. In this case, we may temporarily stop selling covered calls and simply wait, or we may be selling covered call down low, but we will strive avoiding assignment and rolling those calls higher as long as we get above our stock purchase price where we can let the calls assign.

Once we sell shares via covered calls, we start selling puts again.

This options strategy is slightly different than the one we use in our trading account.

You may ask why doing this and not just keeping the stock to avoid losing capital gains?

Many times, the options income from puts and covered calls is a lot larger than the dividend itself. Also bringing income from options every week or two weeks will exceed any capital gains of the stock.

And we want options income too. We want to capture dividends and we want income from options. Most of the stocks are quarterly dividend paying stocks. That means, if we keep the stock and we will not be selling options, money invested in the stock will be dead money. There may be a small capital gain, but overall, it will be dead money.

· ROTH IRA dividend income

In June 2017 we have received $87.90 in dividends. All dividends were reinvested back to the companies which generated them using DRIP program.

We use DRIP as long as our dividend income is small to use direct reinvesting by manual stock selection. Once our dividend income reaches at least $1,000 dollars or around this number, we will cancel our DRIP and start using selective reinvesting.

Selective reinvesting means that we will pick our own other stocks into which the dividends will be reinvested. It will no longer be an automated DRIP program buying the same stocks which produced the dividend.

But it still is a long way to go.

Here are some numbers:

Dividend Income = $87.90 (account value = $22,734.57 0.08%)
The account is up 9.42% for the year.

Monthly dividend Income:

My dividend holdings:

(Click to enlarge)

· ROTH IRA options income

Our options income reached $192.00 dollars of received premiums.

We trade conservative trades to create income in this account which can be later used to buy more dividend growth stocks.

After our options income reaches $2,000 dollars, we will use 50% of the amount to buy dividend growth stock. Until then, we will just reinvest the options income back into options trading.

This is a great deal as I personally struggle depositing more money to our ROTH IRA account and dividends along with premiums help generating a good deal of money.

Here are the numbers I am looking at:

$50 monthly deposits (contributions)
$107 monthly average options income
$88 monthly average dividend income
$245 monthly average money available to invest

Compare it to just a simple contribution and the picture is no longer as pathetic as it would be. And I hope, these numbers will keep growing.

I also have a plan to reach a certain amount of cash available for options trading. The goal for 2017 is to reach $6,000 dollars cash buying power for options.

As of today, we only have approx. $4,293.24 dollars in ROTH IRA available for options trading.

With that money available for trading, in June 2017, we generated $192.00 dollars income from options 5.82% return on invested capital.

This month we opened only a few new option trades. Otherwise we mostly maintained the existing trades.

ETE

We had a trade against ETE stock. ETE continued dropping all the way down to $15 dollars a share. We own 100 shares at $19.00 a share and continue selling covered calls. However, with the stock so much down it became difficult to sell a covered call at 19 dollars strike. We thus rolled the trade into October 2017 and 18 strike. Shortly after the stock recovered much of its losses and as of today it trades at $17.96. I may roll slightly higher again and about a month away to raise the strike at 19 or 19.50 and then let the trade end in the money.

In the meantime, we will continue collecting dividends.

ETE triple play – dividend capture trade – TRADE OPEN

As soon as the trade above closes, our next trade will be a covered strangle (we will sell a new covered call and bull put spread against this stock) to generate more income.

AGNC

I tried to sell covered calls against 100 of our 172 shares of AGNCbut it turned to be a bad choice.

Unfortunately, AGNC is not a very good optionable stock. So we haven’t loss money but we neither made them. It was just a wash trade not worth doing. The trade ended this month, when we sold our 100 shares (when our calls got called away) and we got assigned to the puts we sold afterwords. We are back at the original 172 shares position and we will leave it that way. I do not plan any new trades using this underlying.

Here is the trade against ANGC shares:

AGNC covered call (ROTH) – TRADE CLOSED

TECK

TECK Resources (TECK)is doing well although it gave us some hard time too when the stock was dropping hard this month. It later recovered and we are in good shape again.

Here are a few trades I opened, closed, or carried over this month:

Options Trade: TECK Iron Condor trade (ROTH IRA) – TRADE OPEN

New Iron Condor using TECK in ROTH IRA – TRADE OPEN

TECK Iron Condor trade (ROTH IRA) – TRADE OPEN

TECK Iron Condor (ROTH IRA) – TRADE CLOSED

TECK June 30 Iron Condor closed (ROTH IRA) – TRADE CLOSED

STX

At first, Seagate Technology (STX) looked like a disaster. With a first technology sector selloff however our calls closed for 0.05 debit, and when the stock recovered, our puts closed soon after. We could then open a new Iron Condor using this underlying.

Our goal is to increase cash in our ROTH IRA account enough that we can start trading a triple play trades against STX and allow stock assignment so we can start collecting dividends and buying shares of STX. As of now, we can only trade Iron Condors and prevent stock assignment and if it ever happen, we will have to liquidate the position immediately, although at a loss.

Here is the STX trade done in May:

STX Aug18 Iron Condor (ROTH IRA) – TRADE OPEN

New Iron Condor with STX in ROTH IRA – TRADE CLOSED

· Our dividend investing outlook

I am still very bullish on the US stocks as the economy keeps growing. Our GDP recovered from 2016 drop to 1.3% and now we are back up to 2.1%. With consumer confidence rising again we may actually see 3% GDP again. Thus would have a positive impact on stocks and push them higher.

On top of that, the US banks passed a stress test and FED cleared the way for banks buybacks and dividend increases.

Personal income of consumers grew by 0.4%, which is also good after years of salaries stagnation.

What is your stock market expectation?

Spicer Matthews says:

August 13, 2017 at 6:31 pm

Great post! Wish you lots of luck getting to FI!

I really enjoyed your spread sheet with the gauge resolving around dividends.

This one.

https://docs.google.com/spreadsheets/d/1J9lKPbfM-HEx6UnIfPmDgVok1aeKLpFFDe-kVEgJj20/pubhtml?gid=674190613&single=true

I am totally going to copy what you have done there. Franky I have no idea how well my dividends are doing. I need to monitor that more.

Thanks for sharing.
~Spicer

Martin says:

August 14, 2017 at 3:23 pm

Spicer, thanks for stopping by. Yes it helps me a lot to visualize my dividend growth and reinvesting of the dividends. I am a visual person so dry numbers do not speak to me much, but charts do, a lot.

Amber tree says:

July 3, 2017 at 9:56 am

Taking a second job to be FI sooner is an intentional bold move. How long I’ll you keep doing that?

Martin says:

July 5, 2017 at 12:49 am

With an intention of paying off all my debt and save enough to trade for a living I calculated it to be 5 years. I hope I will be able to shorten it and also survive it.

- Amber tree says:
  
  July 5, 2017 at 4:10 am
  
  All the best!