Today, Realty Income ran up in the morning and my conditional order triggered my limit order. The limit order was filled and I bought 19 more shares of this monthly dividend payer.
However, later in the trading session, the stock reversed and continued down. The loss today was -1.77%. This purchase is now losing me some money. It is not anything dramatic, since I am still 13.13% profitable (capital appreciation only).
If I add dividends to my calculations, I am 15.19% profitable with this stock.
And my average yield on cost with this stock is currently 5.09%. It is not bad at all!
However, today’s trade execution made me think about adjusting my conditional order system. I was thinking to provide more room for the stock to move during the day without being executed too early.
How To Buy Stocks To Increase Profit Potential
If you remember my post about entering into a stock position I calculate the stock entry price the following way:
(0.5 (Day High price – Day Low Price)) + Last Price = New Entry Price
I think, this equation doesn’t provide enough “wiggling” room for the stock to trade higher or lower during the day without being executed prematurely.
I decided to increase the result by 1%:
((0.5 (Day High price – Day Low Price)) + Last Price) * 1.01 = New Entry Price
Maybe you are asking, why I am calculating the entry price this way instead of waiting for the stock or using charts (technical analysis), etc.
The reason for this is that I (must admit) am not good at timing the stock market. I always get trapped into a circle of questions such as “Is this the low? Will it go lower? Is it turning around already?” etc.
The equation above helps me eliminate such questions and sort of automate my trading. It eliminates my emotions. All I have to do is watch the stock and as it starts going lower (but it must be based on panic or predictions of talking heads who start predicting gloomy future for the stock based on their thinking and crystal ball reading, and not based on dividend jeopardy) then I put the equation into play and let it go.
Buying A Monthly Dividend Paying Stock
Today I bought my 19 additional shares of Realty Income. Although the stock may go even lower than my today’s purchase price, I am happy with this addition.
| Total shares held as of today: | 117 |
| Estimated annual dividend: | $253.89 |
| Consecutive Dividend Increase: | 15 years |
| Dividend yield today: | 4.40% |
| Dividend 5yr Growth: | 3.62% |
| Dividend paid since: | 1994 |
The stock may continue falling lower. Although today we touched its 50 day MA, so I am not expecting (from technical analysis perspective) the stock really going lower. We should bounce from here and move upwards. Such bounce may only be a temporary rally and the stock may turn back down. Or the bounce may be the end of this correction (which would indicate a very healthy price action) and we will continue to new highs.
If the stock goes lower I may be considering adding more shares of this monthly dividend paying stock.
I love how you have this automated. So much easier to adjust an algorithm than constantly be manually managing things. I wouldn’t mind seeing a more detailed post on your automation approach here.
Nick, I am actually writing it up, but it’s getting longer than expected, so it will take me more time and when done I will probably break it to more articles than having one long.
I like how you’re illustrating that with dividend stocks, as long as it is fairly stable, even a decrease does not mean that you are losing money. Looks like this one is working out alright and the dividends are covering any downturn in the share price.
Sounds like this was a good buy for you. You have to be happy with a 15% increase already and the recurring monthly dividends. That 4.4% dividend yield is very appealing.
Well, I wish I could wait a bit more. Maybe tomorrow I could be buying even cheaper. But I am not complaining. I am not much concerned about the capital gains, but dividend income stream and this purchase is more than OK with me. Still better than buying at $55 a share.