I bought 480 shares of EPB (El Paso Pipeline Partners) for $14,423 on March 31. Those shares sold on April 17 for $15,869, giving me a profit of $1446. That means I realized a 10% profit in 18 days holding the stock. That was certainly nice. And it is another example of how my investing strategy* can work when it works right. Here is how things went down this time.
EPB came up on my weekly high-dividend company screen in late March with an 8.9% dividend yield so I started my evaluation process* on the company. Did I have room in my portfolio for a company operating interstate natural gas pipeline and storage facilities**? Lots of room. Did EPB's business model look good? Yes; this is a business built on longterm fee based contracts.*** So I checked out EPB's balance sheet. Was EPB's ratio of current liabilities to current assets less than 1? Yes; it was 0.91. Was its ratio of longterm debt to total assets (not counting goodwill) less than 1? Yes; it was 0.64. Then, on the company's income statement, was the ratio of operating income to interest expense more than 1? You bet; it was 3.1. And on the cash flow statement, was the ratio of cash from operations to paid dividends greater than 1? Yes; it was a solid 1.6. EPB had passed my financial criteria gauntlet with flying colors*.
Next I checked for any bad news or possible hidden problems****. Nothing there, except for the fact that EPB is actually a subsidiary of Kinder-Morgan, and KM could decide to basically swallow EPB any time; but that was a remote possibility. So, I was ready to buy. But at what price?
The next stop in my evaluation process was EPB's six-month price chart. I found 2 key things. First, EPB stock had taken a price dive from $40 to $35 in early December (get this) because the company had not raised its dividend that quarter. The price had been drifting downwards ever since. Second, I found strong price support on EPB's price chart at $30. And the price that day had dipped below that support to $29.19. (But that was not to last, as we shall see.)
To calculate what I would consider a "safe to buy" price for EPB, I took the $30 price support and added to it the stock's $2.60 annual dividend. In my view, that made the stock safe to buy all the way up to $32.60 -- from which, if the price fell to the $30 support, I would recover my money in the form of dividends over the following 12 months*.
I put in my order to buy EPB at $30.03 a share and waited, because by then the price had spiked back over that $30 support level. On March 31st I caught the stock at $30.03.
I monitored EPB's news and price every day, as I do for every stock in my portfolio****. When I saw that the price was up over 7% from my buy point, I put in an order to sell if and when the stock rose to my 10% profit price.*****. And on April 17, that price was reached, the sale was triggered and I had a 10% realized gain in less than 3 weeks.
I LOVE it when a plan works!
* My High Yield, High Risk Investing:
** Stock Diversification My Way:
*** Stacking The Deck For Dividends:
**** How I Stay On Top Of My Stocks:
***** What Makes Me Sell a Stock?:
(Please remember: I am not a professional financial or investment advisor. I am just relating my personal experiences. You need to do your own research and reach your own conclusions.)