Posted by Martin May 10, 2020
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I bought a stock, it fell like a rock, what shall I do now?

Someone asked. He bought 100 shares of SWK (Div Aristocrat, now one of those Kings). Stock was at $173.35 and dropped to $129 and he thought well it is a King, what could go wrong. Continued dropping to low of $72 and now at $117.33 and question is, what should I do to make money, do I just wait and it will be ok? He is ok buying another 100 shares. Any suggestions?


This amazes me all the time. People buy stocks and then ask what to do. Did you heck had any plan why are you buying it in the first place?
Same as many long term investors, they are long only till the next selloff…

If he bought in for a long haul of the next 20 – 30 years as a dividend growth investor, his question is irrelevant and since he is asking, it probably was not his intent (long term investor like Buffett, or didn’t do his homework).

If he bought for short term speculation to make a quick buck, he missed the boat and should have sold in February.

If you have a short term plan and now changing it into a long term plan because the stock fell down, you have no business in the stock market.

If you have a long term plan and now changing it into a short term plan because the stock fell down, you also have no business in the stock market.
Sort out what you want before you invest.


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Posted by Martin May 08, 2020
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Stock market expectations (May 08, 2020)

The market completely invalidated all my expectations in the last week. We were range bound and we broke the range on April 29th just to give it all back the very next day. We returned back into the range. A false breakout? It seemed like one. Until this week.

Amid bad data people were expecting this market to fall badly. Pessimism out there is the highest since 2015. And today, we have received another batch of bad employment data. The market rallied up +1.68% and everybody is outraged and complaints about the market being overbought, manipulated, fake, and whatever else emerged again. But if you look at the underlying data, the picture shows that this market is not overbought at all, manipulated at all, and it still has a room to go higher.

I would also prefer some retreat and longer consolidation to give this market some more strength to run and align itself with the economy, but, today’s market is not about today’s economy! It is about future expectations.

For example, unemployment data. Everybody was expecting a carnage at labor market. Everybody was predicting 20% – 25% unemployment rate. I have seen people saying that the bad data are yet to come due to a reporting delay. And the data came. Data were bad, sure, but not as bad as expected. Instead of 20% unemployment, we only got 14%. Instead of expected 22 million job losses in April, we only saw 20.5 million lost jobs. Not good, but better than expected.

Add to the mixed bag of apocalypse that some companies are reporting rehiring employees at a faster and higher pace than expected as the economy starts slowly reopening. With these reports of slowing down unemployment claims, speeding up rehiring employees, FED stimulus, companies reporting better than worst earnings (yes, not all of them, but some are, and they are used as those first sparrows indicating spring coming) and the market suddenly appears as not high enough.

For example, after Shanghai Disneyland reopened this Friday, it got immediately sold out. This again indicates that people are willing to go back to pre-virus activities than expected. And the gloomy expectation was set by German experience earlier last month when people didn’t go shopping as expected and reopened businesses saw slow starts. It is all past and the future looks differently all of a sudden. And remember, the market looks at the future. It doesn’t predict it, it expects it. And it tries to price that expectation in.

The question would be, is it too optimistic? If so, it will correct itself again. If not, it will rally even more. And today’s momentum is “a bright future ahead of us.

I have a friend, who is in the same engineering field as I am. He works in a different company which stayed partially open, unlike mine. And whenever we talk, he says the same thing: “We will see a very sharp recovery. I have tons of new proposals coming in and clients bombarding me with new requests for proposals, they are all coming back and fast…” At first, I didn’t believe him. I though, when people start losing jobs, there will be no new demand for services, jobs, etc. But it is not happening.

Of course, this may all come to an end if those bright future expectations fail to materialise and and the future will not be as bright as expected. Or the future still be bright, but not as bright as the market is pricing in. Then we will see a decline. But as of today, do not blame the market for acting irrationally because of the data we see today. It is all about hope. It always has.

When looking at the market trend it is apparent that the sideways trend broke to the upside. It may return back inside next week, but the underlying data indicate rising strength behind this market which may push us higher.

People say the market is again overbought, but if you look at the weekly chart, it is not true. The RSI reading is slightly below 50 (a midpoint). The distribution is on a decline, accumulation is on the rise, this is also apparent on a daily chart, where accumulation is on a rising path again. Big players are buying shares. Nothing to throw a party about but it is happening. A weekly trend is still up although weakening, which doesn’t mean a trend reversal is in. And there is still a lot of room to go.

I expect the market to respect the new trend lines (either a major one or the secondary one and crawling slowly higher towards the 3020 resistance. Unless we fail again and go back into the previous range (see the two black lines indicating the sideways channel). The trend is still quite bullish.

SPX 05082020 -01
SPX 05082020 -02
SPX 05082020 -03


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Posted by Martin May 08, 2020
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Leverage investing, mainly in these times of selloffs!

I keep struggling with enough cash to invest. I want to invest a lot be buying equities, hold them, collect dividends, and monetize those holdings to generate even more cash. But family life, bills, kids in college, and situations like “something always happens int he worst time ever” is preventing me from investing more. So I was searching for opportunities how to boost my investing while using less cash.

And of course, one way to do it is to trade a Poor man’s covered call (PMCC), where you buy a long term LEAPS and start selling covered calls against it. I like this strategy because, instead of buying 100 shares of a stock for full price, you buy a LEAPS for less than a quarter of the full price.

For example, I bought LEAPS for PPL stock. It cost me $570 per contract. If I decided to buy 100 shares of PPL, it would cost me $3,000 instead.

PPL poor man's covered call trade

The picture above indicates my PMCC trade and what I have done with it since opening. A nice part is that I have collected enough premiums to lower the original cost of $527 down to $349. And I will keep doing this until the cost is zero and / or the LEAPS gain in value again to close the position and reopen a new one.

However, the problem with this is, I do not own the asset and I do not collect the dividends. And I want the dividends. The dividends are true passive income. Selling PMCC is not as you have to work for it, monitor the position, keep selling new calls against the LEAPS and eventually close the position, roll the LEAPS, sell new calls, etc. If the market closes today for several months, the dividends will keep coming, the PMCC will stop generating cash.

So I like to be trading true covered calls (CC) rather than PMCC but, during the period of low cash, I have no choice.

But this hasn’t satisfied my thirst for more leverage, safe leverage though. But what is a “safe leverage”?

Is it margin? Or any other debt to leverage your investment?

No, it is not margin or any other debt. These can actually get you into trouble and eventually ruin your investments.

And then it struck me. Why not using PMCC as a leverage? It will be a safe leverage, exposing myself to the market at a very low cost but controlling the same (larger) amount of shares as if purchased at full cost. And my new strategy has been born.

We can agree that over the long period time the stock market tends to go higher. Yes, there will be periods of time when the market will go down and struggle. It may be for a prolonged period of time (a typical bear market lasts up to 3 years, average is 1 and a half year), but generally, it will go up. and I am going to take advantage of this phenomenon and buy the entire index (here, it will be IWM, and SPY). But to buy 100 shares of IWM or SPY would require $11,691 and $27,910 cash respectively. I do not have it! So, how can I buy 100 shares of each!?

Well, that’s where PMCC comes handy. I can buy 3 years LEAPS on both indexes and it will cost me little less than $2,000 for IWM and $4,000 for SPY (talking about ATM LEAPS calls). I will be exposed to, and control 100 shares of each index for a fraction of its price. And we can safely assume that in the next 3 years the market will be higher (mainly when we recover from this covid selloff). And here is my “safe leverage”. Yes, I can lose all I paid for those LEAPS if the market doesn’t go higher in the next 3 years, but that would happen if I keep sitting on those LEAPS and do nothing. But, this will be a PMCC strategy so immediately, I will start selling covered calls against those LEAPS and lowering my cost basis.

Today, for example, IWM is trading at 116. I can buy 120 LEAPS, pay about 18.00 (or $1,800) for it. If the stock reaches $140 a share, an goes no more higher for the rest of the LEAPS life, I lose nothing. Add premiums for covered calls to it and it is a win-win trade.


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Posted by Martin May 07, 2020


3 Dividend Kings For Rising Income

The coronavirus crisis has dealt a severe blow to the global economy in 2020. Stocks have not surprisingly performed poorly as a result. While the S&P 500 Index is meaningfully off its 52-week low, it remains down 11% year-to-date. For income investors it is particularly challenging, as the Federal Reserve recently lowered its benchmark rate to zero.

As a result, investors should use the recent market dip as a long-term buying opportunity. But danger still lurks, especially among the hardest-hit market sectors, which means investors should also be selective when considering stocks for purchase.

We believe the Dividend Kings are a haven for dividend growth investors. The Dividend Kings are a group of just 30 stocks that have each raised their dividends for at least 50 consecutive years. They have demonstrated an ability to withstand recessions without skipping a beat. These 3 Dividend Kings should continue to increase their dividends every year, even during recessions.


 · Dividend King #1: Johnson & Johnson (JNJ)


Johnson & Johnson is a healthcare conglomerate with a diversified business model that includes pharmaceuticals, medical devices, and consumer healthcare products. Johnson & Johnson was founded in 1886 and currently generates annual sales above $82 billion. The company currently has a market capitalization of nearly $400 billion.

The company has performed relatively well to start 2020. In the first-quarter earnings report, the company grew revenue by 3%, while adjusted earnings-per-share increased nearly 10% for the quarter. Johnson & Johnson lowered its full-year outlook owing to the coronavirus impact on the global economy. The company now expects sales in a range of down 3% to up 0.5% for the full year. However, investors can be confident that the company will return to long-term growth, thanks to its world-class business segments.

For example, Johnson & Johnson has a robust pharmaceutical pipeline to bring multiple years of positive growth to the company. Oncology sales increased 22% last quarter, while immunology sales increased 13%. The company also has an excellent balance sheet, with a AAA credit rating, to help it navigate the coronavirus crisis.

Johnson & Johnson has increased its dividend for 58 consecutive years, and the stock has a solid yield of 2.7%. With an above-average yield and steady dividend growth, Johnson & Johnson remains a strong dividend growth stock, even if a recession hits.


 · Dividend King #2: The Coca-Cola Company (KO)


Coca-Cola is the largest beverage company in the world. It owns or licenses more than 500 unique non-alcoholic brands. It now sells products in more than 200 countries around the globe. The stock has a market capitalization above $200 billion, while the company generates approximately $39 billion in annual sales.

The company reported solid first quarter earnings on April 21st, with revenue and earnings beating analyst expectations. Total revenue declined -1%, while organic revenue was flat year-over-year, at $8.6 billion. North America posted a 4% gain in organic sales, driven by pantry-stocking ahead of and during stay-at-home orders due to COVID-19.

However, this only offset a decline in organic sales in Asia-Pacific, driven primarily by China. Pricing and mix were flat during the quarter. Operating margins were 30.7% on an adjusted basis in the first quarter, up from 28.2% in the year-ago period. Earnings-per-share were up 8% on an adjusted basis to $0.51 from the year-ago period.

Coca-Cola has benefited from the pantry-stocking of consumers during the coronavirus lockdowns, but has also warned investors that away-from-home volume would likely continue to suffer as sports arenas, restaurants, and other public gathering areas experience large traffic declines.

Coca-Cola has increased its dividend for 58 consecutive years, including a recent 2.5% raise. Investors can expect continued dividend growth in the years ahead even during a recession, as consumers will keep stocking their pantries to help offset declines in restaurants and other public venues.

It has also been expanding its presence in still beverages and coffee, to help diversify away from sparkling beverages. Coca-Cola acquired Costa for $4.9 billion, which is a significant future growth catalyst due to the company’s impressive reach in coffee. At the time of the acquisition, Coca-Cola estimated that the global coffee market was growing at 6% per year.


 · Dividend King #3: Altria Group (MO)


Altria is another recession-resistant dividend stock. It operates the flagship Marlboro brand in the United States. In recent years, the company has diversified away from cigarettes by expanding into a number of adjacent product categories. For example, the company owns the smokeless tobacco brands Skoal and Copenhagen, wine manufacturer Ste. Michelle, and it also owns a 10% investment stake in global beer giant Anheuser-Busch InBev (BUD).

Altria has performed very well to start 2020. In the first quarter, revenue increased 15% to over $5 billion, due to over 6% growth in smokeable products volumes. Consumers loaded up on cigarettes in the first quarter, in anticipation of lockdowns that have taken place in multiple cities across the country. Altria’s adjusted EPS increased 18% last quarter. The rest of the year is not likely to be as strong for Altria, as the benefits of cabinet-stocking fade.

However, Altria has a strong balance sheet and sufficient liquidity to get through the coronavirus crisis. It recently drew $3 billion on its revolving credit facility and suspended its share buybacks. However, it continues to target a competitive dividend payout ratio of 80% in terms of adjusted EPS. Therefore, it would take a significant decline in EPS for Altria’s dividend to be in danger, which seems highly unlikely given the company’s leading market share and brand loyalty.

Altria has a high dividend yield above 9%. Investors should view such high yielders with some skepticism, and continue to monitor the company’s future earnings report. But barring a near-depression in the U.S., Altria’s dividend appears secure. The company has increased its dividend for 50 years in a row, an impressive track record that proves it can withstand recessions.


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Posted by Martin May 06, 2020
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New Purchase for dividend income

Bought 5 BIF shares @ 9.24
Bought 5 ETJ shares @ 9.11

We keep ing these CEF funds for income as both pay decent dividend.

Boulder Growth & Income Fund, Inc. (BIF) pays 0.41 annual dividend (4.44% yield). The fund invests in dividend paying equities and fixed income papers (bonds) worldwide and its goal is dividend income. The fund constantly trades below its NAV value (usually -16% discount) so, in my opinion it is a good vehicle to invest for dividend income. However, the fund is non-diversified and highly invested in small number of equities. To some, this may be a problem. I do not mind it. The fund has been around since 1972 and annualized return is about 6%. However, note that the return is not the primary goal of the fund. The primary goal is income. The fund uses no leverage.

Eaton Vance Risk-Managed Diversified Equity Income Fund (ETJ) pays 0.91 annual dividend (10.09% yield). The fund invests in the US equities, majority of them pay dividends. It also buys SPX out of the money puts while selling out of the money calls against it (a collar strategy) which provides a cheap downside protection for the fund (note, the price decline, you may see on the chart, is the investors overreaction and not a NV decline. The NAV is protected by the long SPX puts). The fund is also income oriented and trades at discount -3.21% to NAV. The fund uses no leverage.


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Posted by Martin May 01, 2020
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How much can you make trading options?

That’s a question people ask often. I did ask that question too. Many times. I still do ask that question. I want to know whether my trading is aligned with others, expectations, and goals of mine. The answer is not simple and results really vary based on your account size, trading strategies, and risk you are taking. So, it is not easy to say a number and call it a day.

But there are new traders and investors who want to know whether it makes sense to spend time and learn trading options despite many so called experts telling them that options are risky and that they should stay away.

So what can you expect?

Before I get to my numbers, let me first ponder on the general expectations.

I browsed the Internet to find out what others say and what other traders told people what to expect from options trading. All I could find was that you should be lucky to see 20% annual growth of your portfolio. Yes, 20% was their number, on average. I didn’t find anything better than that. If you could find others telling a better expectation than that, please, let me know in the comments below.

They also say, that anything above it is unrealistic and if you go and aim toa number larger than 20% then you are assuming a large risk and you will probably lose money.

On this website (and my Facebook group) I have a motto “making 45% annually trading options against dividend growth stocks” and people were telling me that this is a ridiculous claim and not achievable unless I am taking a huge risk. Yes, I was taking a huge risk in the past few years but that was trading SPX options, not dividend growth stocks.

So, is 20% a good number and 45% a bullshit?

Let’s take a look at S&P500:

Dec 31, 2019 – 29.44%
Dec 31, 2018 – 20.49%
Dec 31, 2017 – 16.21%
Dec 31, 2016 – 9.27%
Dec 31, 2015 – (15.42%)
Dec 31, 2014 – 2.11%
Dec 31, 2013 – 15.82%
Dec 31, 2012 – (0.51%)
Dec 31, 2011 – 12.41%
Dec 31, 2010 – 51.76%
Dec 31, 2009 – 242.54%
Dec 31, 2008 – (77.52%)
Dec 31, 2007 – (18.81%)
Dec 31, 2006 – 16.73%
Dec 31, 2005 – 19.27%

Can you see the gains of the SPX per year? Yes, there are a few years with some serious declines, but mostly the growth is around 20%. Some years are 29%, 51%, or even 242% after a recession.

So, if you think, 20% gain trading options is reasonable expectation, and everything above it is a gamble, then I have an advice for you. Save yourself all the hassle, buy SPY index and sit on it for years. You will get more than 20% in many years (yes, you will also see some serious loses, but that’s the nature of the game).

Then let’s get to my numbers. I started diligently recording my trades at the beginning of 2018. I know, it is only 2 years of records and it may not be long enough to claim it relevant. But, unfortunately, before I didn’t keep records of trade by trade results. I wish I did record them but I didn’t know how to do it efficiently.

In the 2 years of options trading, I averaged 8% gain in 15 day long trade (average days in trade). That translates into 16.20% monthly return, and 197.05% annualized return. You can go to check my spreadsheet and see all recorded trades and averages. Check my math, maybe I made some algebraic mistakes. But, if I didn’t make mistakes, you can expect definitely more than 20% annual gains. My 45% annual gains are definitely achievable.


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Posted by Martin April 28, 2020


What would you invest in 2020, growth stocks or dividend stocks?

It all depends on many things – your age, money available, goal or why are you investing, time horizon you want to invest, and so on.

If you are young and want to create a portfolio for your retirement, then I definitely vote for dividend stocks. Why?

If you want to invest for the next 20, 30, or 40 years and build a portfolio for your retirement, how would you cash out your investments once you retire?

If you invest in growth stocks, the only way to cash out is to sell some of your investments (4% rule).

If you invest in dividend stocks, you will be cashing out dividends only and not selling your assets.

Then what happens if a market goes into a bear market selloff or recession and you have to cash out?

If you create $1,000,000 worth portfolio then growth stocks will pay you (usually) nothing in dividends. Dividend stocks will pay you $150,000 annually in dividends (15% YOC after 25 years of dividend growth). If the stock market crashes 68% (like it did in 2008) than your portfolio will shrink to $320,000.

If you have to sell 4% of your portfolio to cash money for living, with growth stocks (now valued at $320,000) you will sell 0.04 and receive $12,800 instead of $40,000 (4% rule). Will you be able to live on $12,800 that year? Probably not. I suppose, you will have to go back to work. Or you will sell out $40,000 and hope, your even more shrank portfolio (now $280,000) recovers. And fast! If however the recession takes 3 years (like the one in 2008), you will be doomed. The second year, you take our $40k (down to $240,000) and third year another $40,000 (down to $200,000). And even if the market starts recovering at the same rate as 2009 to 2020 (399%) your account will be up to only $799,000 in 10 years (2019 – 2009) and that is if you do not take any money out of it for the next 10 years. And that is a very bleak outlook I personally do not like much. What can you do? Well, save even more than $1,000,000 account. Maybe $3 million account will do the trick. But, that means, you will have to be saving a lot, every year! For the next 25 years or more. Or?

Or, invest in dividend stocks. Because, even if the market slumps and crashes 68% like it did in 2008, and it will be $320,000 value only, it still will pay you $150,000 annual dividends. If you think it’s not true, go and check how the high quality dividend stocks behaved during 2007, 2008, and 2009 years. ALL of them not only paid their dividend, but also INCREASED the dividend. And those are the companies you want in your portfolio.

If you want some excitement and rapid growth, you may use, let’s say 20% of your capital and put it into growth technology stocks. The rest should go to dividend stocks.


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Posted by Martin April 25, 2020


Creating passive and semi-passive income

This week, I continued building my passive income (accumulating dividend stocks) and a semi-passive income (trading options). But, when reviewing my portfolios I realized one thing – I had my positions all over the place dispersed among many shares. There was nothing wrong with it, those are all stocks I want to hold. But, in order to monetize those positions, I need to be more concentrated than having a few shares here and there. I know, I can hear all diversification gurus yelling now. But, I take investing probably quite differently than many investors. If you pick good stocks, you do not have to be diversified. And that is something even Warren Buffett would agree with me… and William O’Neil too.

So, this week, I decided to focus on concentrating my holdings. Here is a brief view.

I have 92 shares of HP (Helmerich and Payne). Can I monetize this position (selling covered calls)? No, I cannot. I do not have enough shares. I can trade naked, but that would require margin I currently do not have. So, the only thing, instead of investing into other positions (which I was doing) is to put all my effort and raise this holding to 100 shares. But, there is a problem.

Helmerich and Payne is a company involved in oil. It manufactures rigs and oil drilling equipment, so not involved directly in drilling, though. Well, they do the drilling but they do it on contractual basis, they do not drill for the oil itself but for a company who buys their drilling service. But if all the drilling companies stop drilling and extracting oil because of the oil slump, they will also stop buying the equipment or companies hiring them for drilling would stop. And that would impact HP.

HP was a dividend aristocrat increasing dividends for 47 years. It is amazing how this company could sustain all oil crisis in the past, until this one. After 47 years of consecutive dividend increases, HP cut the dividend. And I have 92 shares.

I was accumulating this stock way before this self imposed, hysteria driven crisis. Maybe I could have foreseen this coming but I am not that smart to foresee everything. As a dividend investor, I should close this position and move on. But, I decided not to. I decided to increase the position to 100 shares and start selling covered calls to lower my cost basis and then eventually sell. Not exactly what a dividend growth investor would do, but I was accumulating this stock when it was trading at $40 – $45 a share. Today, it trades in a $15 – $19 a share range. The price drop from $45 a share happened way before they announced the dividend cut.

HP dividend cut

The market actually looked at the cut positively and I agree. The company decided to protect its cash flow until the economy stabilizes. Although, this was good for the company, it is not good for me as an investor. Not only I am under water now, but also, my passive income has been compromised.

I am not also much eager to close the position at a loss (at my current cost basis of $40.96 a share, I would be closing with 56.61% loss). This is a reason for me to hold the position, increase shares to 100, and start selling covered calls, lowering my cost basis. Although, this feature is more psychological, than real, but, at least, you have a good feeling that the position didn’t come in vain.

Of course, I would use this income to start increasing my positions in other stocks I own so I can also use them to sell covered calls. My next holdings will be:

PPL – currently holding 72 shares
O – currently holding 53 shares
ADM – currently holding 28 shares
KMI – currently holding 46 shares
VLO – currently holding 18 shares

All dividends and income from options will be used to purchase those shares so I can start selling covered calls.


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Posted by Martin April 24, 2020
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How much should I invest in the stock market as a teenager?

As much as you can. Every penny you get and can call “yours” should be invested in the stock market – 100% or more in stocks. Forget any defensive safe investing. You are young, you have time on your side so you can go aggressive as you will be able to fix any mistake. Leverage your investments. If you want to know more of what I am taking about, read a book “Lifecycle Investing

Learn as much about investing as possible, set a goal which will tell you how you want to invest, what stocks, how much money, for how long, when you will be buying, when selling, etc. and then stick to the plan for decades. 20 or 30 years later, you will retire financially free.

Learn to use options to boost your returns. For example, if you buy 100 shares of a stock and it appreciates a lot, you can convert your stock holdings into a long call option which will allow you to keep profits and release cash for more purchases (safe leveraging, read the book above). Sell cash secured puts to buy shares, sell covered calls to monetize your holdings. Be aggressive.

Study the market, ignore suckers who are scared to death whenever the market goes up (claiming it is overvalued) and scared anytime it goes down a bit (claiming end of the world and a crash), they have no clue. If you study the market, you will be able to identify when the market is in corrective or bearish mode (which should be respected) and when it is just a dip (to be ignored and bought more). No crisis takes longer than about 3 years (usually 1 to 3 years) so you can be buying more during recessions when you are young and in accumulation phase and be defensive when you are older and closer to retirement. You will hear people claiming that “if you bought on top of 1930 it would take you 25 years to get even”. That is a nonsense, ignoring that the market wasn’t down all the time for 25 years. It went up and down in waves. So, yes in that period it went nowhere but, if you started investing, buying high quality dividends stocks (for example), reinvesting dividends, you would be buying more and more cheaper shares anytime the market would go lower, and anytime it would be going higher, the recovery would be faster and cumulative. In your 20s, this wouldn’t matter at all and if you were in your 50s, it wouldn’t matter either as you would be living off your dividends, options premiums, and maybe some selling. The market (stocks) prices will eventually go to a price which will be beyond any crash level (unrepeatable price) so you can ignore any gloomers and doomers scared of any decline or recession. What do I mean by “unrepeatable price? It is a price the stock or market will probably never revisit. Example: JNJ stock. I bought it at $38 a share. Today, it trades at $140 a share. If the stock market loses 70%. The price would be $42 a share. It is still above my cost basis, so even if everyone panicked all around and kept selling and screaming, I still would be in green and buying more shares. And even if that happens, how long would it take before the market recovers? 2008 took 2.5 years to get back to pre-crash level. And imagine, that you would be buying more at $42 level. so when the stock goes back up you will be riding great recovery even if the market recovers partially only.

So, do not be afraid and look for long term perspective, long term investing. Many people are long term only until the next correction, don’t be like them. Have 20 or 30 year time frame in mind (even if you trade short term products such as options, you still must be aware of the long term results). Believe, me, you will reach great results.


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Posted by Martin April 24, 2020


Realty Income: The Top Monthly Dividend Stock For Income Investors

Dividend growth stocks have a number of buying opportunities to consider right now, thanks to the significant drop in the stock market to begin 2020. Even with the recent rebound, the S&P 500 remains down 13% per year. Certain sectors such as real estate have been hit even harder, due to the widespread store closures across the country.

This makes certain high-yield Real Estate Investment Trusts highly attractive for income investors. We believe Realty Income (O) is a high-quality monthly dividend stock with a high yield of 5.6% and a secure monthly payout. The company is an appealing stock for income investors looking for a high yield, and a reliable monthly dividend.


 · Business Overview


Realty Income is a Real Estate Investment Trust, also known as a REIT, which means it owns real estate properties that are rented out to tenants. As a landlord, Realty Income collects rental revenue, while avoiding much of the operating expenses such as insurance and taxes, which the tenant pays. Realty Income’s property portfolio is focused on retail.

Realty Income has a diversified real estate portfolio of over 6,400 commercial properties under long-term leases. The properties are leased to over 300 commercial tenants, spanning 50 industry groups. Properties are located in 47 states as well as Puerto Rico, and the United Kingdom. Realty Income owns retail properties that are standalone properties. This means that the properties are used by a wide range of tenants, including government services, healthcare services, and entertainment.

The current occupancy rate exceeds 98%, and has never fallen below 96%. Convenience stores represent the largest individual industry group, at over 11% of Realty Income’s rental revenue. The top tenants include Walgreens, 7-Eleven, Dollar General, FedEx, and Dollar Tree.

The company’s strong property portfolio has led to steady growth for many years. In the 2019 fourth quarter, revenue $398 million increased 16% from the same quarter the previous year. Contributors to revenue growth included rental increases at existing properties, as well as rental increases from investments in new properties made in the past year.

Funds from operation, or FFO, were flat in the 2019 fourth quarter from the same quarter the previous year. While total FFO continued to rise due to rental increases, on a per-share basis the FFO figure was partially offset due to equity issuances over the past year. Still, Realty Income’s funds-from-operations increased by 9% year-over-year, as its funds-from-operations-per-share came in at $0.86 during the fourth quarter.

For the full year, adjusted FFO-per-share increased 4% to $3.32 per share. It is likely Realty Income will continue to generate growth in the years ahead, even with a highly challenging environment for 2020. While FFO will likely decline in 2020, over the long-term, we expect continued growth once the coronavirus crisis is over. Realty Income’s future growth will be fueled by its investments in new properties. For example, in 2019 Realty Income invested $3.7 billion in 789 properties and properties under development or expansion, including $797.8 million in 18 properties in the United Kingdom.


 · Dividend Analysis


We currently hold Realty Income as our top-ranked monthly dividend stock. There are many reasons for this, including its top-tier property portfolio, but also due to its impressive dividend history. Realty Income has declared 597 consecutive monthly dividend payments, which goes back nearly 50 years. It has also increased its dividend 106 times since its initial public offering in 1994. With at least 25 consecutive years of annual dividend increases, Realty Income is a member of the Dividend Aristocrats.

Realty Income Dividends

Realty Income currently pays a monthly dividend of $0.233 per share, which equates to an annualized payout of $2.80 per share. With a recent share price of approximately $50 per share, Realty Income has a current dividend yield of 5.6%. This is a highly attractive yield for income investors, especially due to the low interest rate environment. Stocks do not widely offer high yields either, as the S&P 500 Index on average has a 2.1% dividend yield right now.

By comparison, Realty Income stock is very attractive for income investors such as retirees. Not only does Realty Income provide a much higher level of income than the average dividend stock in the S&P 500, it also pays its dividend each month. Most other publicly-traded stocks pay dividends quarterly, semi-annually or once per year. This means Realty Income shareholders receive 12 dividend payments per year, which could be more useful for investors who utilize dividend income to pay for monthly expenses.

In addition, the dividend appears secure. Consensus estimates call for FFO-per-share expectations of $3.42 for 2020. Based on current analyst estimates, Realty Income’s dividend payout of $2.80 per share represents an implied dividend payout ratio of approximately 82% for 2020. This is a relatively high dividend payout ratio, but it is not uncommon for REITs to distribute the vast majority of per-share FFO to shareholders.

The company also has a strong financial position which will help it navigate a potential recession in 2020. Realty Income has a long-term credit rating of A3 from Moody’s and A- from Standard & Poor’s. According to the company, it is one of only 8 REITs with at least two A3 or A- credit ratings. Having a strong balance sheet and property portfolio helped the company survive the previous recession of 2008-2009. Realty Income was one of only two REITs in the S&P 500 with positive earnings growth, dividend growth, and total shareholder return during the Great Recession.

While no two recessions are identical, Realty Income’s track record of successfully navigating the previous recession to hit the U.S. recession at least bodes well for the company’s performance if another recession occurs.


 · Final Thoughts


The stock market decline to begin 2020 has presented multiple buying opportunities for investors with a long-term view. But investors should focus on quality, as many hard-hit sectors will continue to struggle in this environment. Investors should assess the underlying company fundamentals to ensure the stocks they are buying have sustainable dividends. We believe Realty Income is among the highest-quality REITs in the entire market, as it has a long history of navigating recessions and paying dividends.


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