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Posted by Martin January 20, 2013
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My inspiration in last week #6


I often browse the internet to find ideas about investing, trading stocks, options, investing opportunities and strategies. I like to read about investors and what their investing/trading approach to create income you can live on is.

This week I found the following interesting posts:

Secrets of Super Savers Revealed – My Journey to Financial Independence

20 Stocks with Yields over 10% and Highest Buy Ratings – GuruFocus

Low-Volatility Stocks Consistently Outperform; Dividend Investors Rejoice – Seeking Alpha

This Undervalued High Dividend Stock Should Rise In 2013 – Seeking Alpha

Five Minute Investing – The Investment FAQ




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Posted by Martin January 17, 2013
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Trade adjustment – AT&T (T) addition


Yesterday, as AT&T continued slipping down, which I originally missed to recognize and also set my buy point too low so I got hit in a small bump up, I bought more shares of this stock. When buying stocks, I want the stock to be in upward move, so I usually set my price slightly above yesterday’s high, but try to be high enough not to get hit with a regular volatility. If the stock goes up, I buy. You can assume that the stock will continue up, so you should be ridding that move. If the stock won’t go up the trade shouldn’t execute and then you can trail down your buy order as long as the stock reverses.

With my first buy order of this stock I set the buy too low and got hit and the stock continued down. Well, I am still learning to master this strategy. I am not mad at myself however, I like the stock, I like the dividend it pays and the dividend growth. So as the stock went down, I added more shares.

01/16/2013 10:19:11 Bought 29 T @ 33.46

Total shares held as of today: 61
Estimated annual dividend: $109.8
Consecutive Dividend Increase: 8 years
Dividend yield today: 5.26%
Dividend 5yr Growth: 5.09%
Dividend paid since: 1881




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Posted by Martin January 16, 2013
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The power of dividends


Today I sold my stake in Full Circle Capital (FULL) because I didn’t like the outlook of this company and I think, there is a potential for a dividend cut. In short, the FULL portfolio seems not supporting today’s dividend rate and the company pays more in dividends than it brings in.

So I sold the stock @7.51 a share and made $8.96 (commission excluded). That sounds like a bad trade, right? If I include commissions I actually lost money. If I include inflation for almost a year period of holding this stock, I lost even more money, right?

Well, the whole story is in dividends and that’s why I really like investing into dividend stocks. Over the period of holding this stock I received $98.56 in dividends. If I use those dividends to offset my cost basis of the stock, my profit then was $107.52 or 11.20%.

I think, that wasn’t a bad trade, wasn’t it?

So what to buy in lieu of FULL?

I have two potential candidates to buy. One is NGLS I wrote about in my previous post and the second is PSEC which has a lot better quality portfolio than FULL and thus safer dividend payout. Right now I am only waiting for a good entry price. Both stocks were in upward move, so I think it will be worth to wait for the first pull back to buy.

NGLS is right below 200 day MA, so before it breaks through, it will most likely retreat a bit and then I will buy.

PSEC already had that pullback about a week ago and then broke through the 200 day MA, but that break thru looks somewhat weak to me and the stock may pull back again. The price action looks like a consolidation to me, so I will wait for some move, if the stock moves up I will buy, if it moves down, I will wait for the price to drop further down and buy then.




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Posted by Martin January 15, 2013
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Replacing FULL with NGLS


I do not have much to say, I just am not comfortable anymore holding Full Circle Capital (FULL). Although I liked monthly payment I didn’t like recent price action of the company, rumors of dividend cut, writing (issuing a new public offering) of new shares and thus diluting existing shareholders’ stake.

So I did little research trying to find some data about FULL because of the rumor about possible dividend cut. I also contacted FULL, investor’s department with questions and received no response.

Based on the information I could find on the internet my uncomfortable feeling of holding this stock increased. That’s why I decided to dump FULL and replace it with NGLS. It pays lower dividend, but still high enough (as of this writing it was 6.40%), the 5 yr average dividend growth 30.38%, 5 years of consecutive dividend increase, they are paying dividends since 2007 and increased the dividend recently.




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Posted by Martin January 13, 2013
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My inspiration in last week #5


I often browse the internet to find ideas about investing, trading stocks, options, investing opportunities and strategies. I like to read about investors and what their investing/trading approach to create income you can live on is.

This week I found the following interesting posts:

Best US Dividend Stocks for 2013 – The Dividend Guy

Dividend Income Projection – Dividend Growth Machine

6 Stocks Expected to Grow Their Dividends in 2013 – Dividend Growth Stocks

Slow is Smooth & Smooth is Fast – Brick By Brick Investing

Microsoft Dividend Stock Analysis – Dividend Growth Stock Investing

Realty Income – This Monthly Dividend Company Has Years Of Growth Ahead Of It – Seeking Alpha

Determining Dividend Growth Rate of Your Portfolio – Passive Income Pursuit




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Posted by Martin January 10, 2013
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New trade – AT&T (T)


As I wrote in my previous post I am replacing ABT with AT&T due to overall drop in dividend payout receiving from ABT.

01/10/2013 09:31:41 Bought 32 T @ 34.41

Total shares held as of today: 32
Estimated annual dividend: $57.6
Consecutive Dividend Increase: 8 years
Dividend yield today: 5.26%
Dividend 5yr Growth: 5.09%
Dividend paid since: 1881




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Posted by Martin January 10, 2013
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New trade – TASER International Inc (TASR) covered call


Another trade – covered call I decided to add to my portfolio. TASER International, Inc. develops, manufactures, and sells electronic control devices (ECD) for use in the law enforcement, military, corrections, private security, and personal defense markets. Analysts are bullish on this stock with the target from $10 – $11 per share. The stock is slowly marching toward that mark. With all the gun-talks and anti-gun talks this company benefits from the overall mess.

01/10/2013 10:33:51 Bought 100 TASR @ 9.37
01/10/2013 10:33:51 Sold 1 TASR Mar 16 2013 10.0 Call @ 0.5

Total trade: $887.00
Commissions: $8.78
Total NET trade: $895.78

Option assignment: $1000.00
Option assignment fee: $19.00
Expected proceeds: $981.00

Expected NET gain: $85.22
Expected ROI: 9.51%




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Posted by Martin January 09, 2013
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Replacing ABT with AT&T (T)

Replacing ABT with AT&T (T)

For the reasons I wrote in my previous article I am replacing Abbott with AT&T stock. This stock paid dividends since 1881 and it has a history of 8 years of increasing the dividend. Currently the stock is trading below 200 day MA and it pulled back due to ex-dividend date which was today (Jan-08, 2013). The company increased its dividend recently.

The stock created a corrective pattern and thus I am initiating a first buy and I opened a contingency order for tomorrow morning. If the stock rises above 34.70 I will open a limit order of 34.74 per share to buy 31 shares of this stock.

If the trade executes tomorrow, I will own 31 shares of AT&T which will bring me $55.8 annual dividend instead of $19.04 dividend provided by ABT.

If the stock surpasses the limit price, the order will not execute and I will continue waiting for next pullback.

AT&T

The daily chart above indicates the price action of AT&T. We are below 200 day MA, dropping back down (and the stock may drop even further) and getting close to the 3 year long term trend support line (the thick green line). Short term indicators such as CMF, MACD indicates rising interest in the stock, the ultimate oscillator is in overbought, which may indicate further drop of price.

AT&T 3 year chart

The 3 year chart show the price at the support line (the thick green line) bouncing off of the lower standard deviation Bollinger Band while staying slightly above 50 day MA (which is very positive indicator). However money flow CMF indicates heavy selling during this period. MACD seems to be slowing down its downward move and may create a divergence (which however may fail) and Ultimate oscillator is neutral.

AT&T has a dividend rate at $1.80 (5.00 % yield), 5-year annual dividend yield growth 4.8% and consecutive dividend increase for 8 years. The stock seems to be overvalued, however I am willing to initiate the trade if the price meet my trigger or wait for it if it doesn’t.

As far as ABT, I may get back to this stock and buy those shares back when I will be able to see and know more about this stock.




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Posted by Martin January 08, 2013
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Unloading ABBV from my portfolio, what about Abbott?


I was looking for information about ABBV and ABT to find out whether to keep these stocks or get rid of them. It was very difficult to find anything which would help me to make the decision. Keep the stocks or not? That’s the question.

Mostly I used information about ABBV and ABT from Morningstar web site since today they updated their outlook. The Morningstar analysts like ABBV over ABT. But still their favorable outlook for ABBV is only until roughly 2015 or 2016. Then Humira drug will be over and who knows what would happen next.

I am a bit confused and I do not like the uncertainty in regards to ABBV as a long term investment.

The next, in my opinion negative point is the current declared dividend. Prior to company spinoff the dividend rate for ABBV was $1.6 a share. Today ABBV announced a new dividend at 40 cents a share. If my calculator is correct, it translates into a yield of 1.2%. With no history, no certainty limited data, this stock no longer meets my dividend growth criteria and I decided to unload shares of this stock from my TD portfolio and I will be doing the same in my ROTH IRA account.

What about ABT?

Unfortunately I have the same dilemma with Abbott. After the spinoff this stock also no longer meets my criteria. The Morningstar outlook is somewhat confusing. They didn’t like what was left in Abbott after the company split. They claim that it was actually the Humira drug which generated income and covered Abbott’s loses in its other segments. However, Morningstar still believes Abbott will be able to consolidate and provide annual growth of around 4.8%.

Does it make sense holding ABT?

As a dividend investor I am actually disappointed with the outcome of this spinoff. The new dividend yield is now 1.62%, way below my requirements. Will the company be able raising dividends to reach pre-spinoff level? And how long will that take to reach previous levels? Does it make sense to lock my money in a company paying me only 20$ a year, while I can relocate to another company which will pay me a lot more?

A simple comparison:
I currently hold 15 shares of MCD, total market value around 1364.90 dollars and receiving $46.20 annual dividend.
With the new ABT I would hold 34 shares, total market value 1133.90 dollars and receiving $19.04 annual dividend.

I am interested in rising dividends and secure dividend income stream. Abbott is no longer providing me with such income. Therefore I believe there is time to sell this stock and replace it with a different company.

What do you think, sell or hold?




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Posted by Martin January 08, 2013
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New trade – Kodiak Oil & Gas Corp (KOG) covered call

New trade - Kodiak Oil & Gas Corp (KOG) covered call

Another company I decided to add to my options portfolio is Kodiak Oil & Gas Corporation. Kodiak is focused on the exploration and production of crude oil and natural gas in the United States. Kodiak now looks to develop its robust portfolio of assets. The energy company plans to grow production 80% year over year during the interim (Source: Motley Fools). There are 18 brokers following this stock and the mean price target is is at 11.39, with high target at $13 a share. Credit Suisse, The Street, Global Hunter Securities, Wunderlich, and Canaccord Genuity are bullish on the stock.

The company achieved over 250% revenue growth in FY2012 and analysts expect almost 100% sales increases in FY2013. KOG has a minuscule five year projected PEG (.40). Earnings per share more than quadrupled from FY2011. Earnings are project to rise another 75% in FY2013 by analysts. The stock is priced at less than 13x forward earnings, a discount to its five year average (16.7) (Source: Seeking Alpha).

KOG

Since the stock has a bullish expectation with a great growth potential and it is a buy at $9 a share I decided to play this stock as a covered call – total return strategy (meaning that I want the stock to be called away).

01/08/2013 09:30:42 Bought 100 KOG @ 9.41
01/08/2013 09:30:42 Sold 1 KOG Mar 16 2013 10.0 Call @ 0.52

Total trade: $889
Commissions: $8.78
Total NET trade: $897.78

Option assignment: $1000.00
Option assignment fee: $19.00
Expected proceeds: $981.00

Expected NET gain: $83.22
Expected ROI: 9.27%

There are a few outcomes with this stock. I am taking March 16, 2013 expiration as part of my “covered call ladder” (and I could get a lot better premium with max 68 day expiration (time) I am willing to sell) and that can bring some issues or possible outcomes:

  1. The stock will slowly grow and chop around $10 a share and it will be called away. In that case I will realize above spelled ROI. Since I like this stock, I will most likely repeat the process and buy-write another trade after this one will be over.
  2. The stock won’t rise above $10 a share. but stays above my break even point. In that case the option call expires worthless, I’ll keep the stock and a premium and sell a new $10 option for the next period. I will repeat this process as long as the stock is called away.
  3. The stock will skyrocket and surpass quickly the current strike price and lands at 12 or even 13 dollars a share during the end of January or February 2013. If that happens I want to participate on that growth. In that case I would buy-write another contract with higher strikes. I will continue doing this as long as the stock will be rising.
  4. The stock will suffer and falls too deep before expiration. In that case I will evaluate a trade repair strategy similar to one I described for my DMD trade (see My DMD covered call and fiscal cliff? post). I might be selling another lower strike OTM covered call before I sell deep ITM covered call to get rid of this trade break even or with a small gain.

Happy Trading!




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