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My Failed Try at Bond Investing

July 22nd, 2014 at 11:19 am

(I now blog weekly on frugal living, personal finance & earlier retirement at:
Text is retiredtowin.com and Link is
retiredtowin.com)


In 2013, I took 20% of my investing capital and moved it from high dividend stocks to high yield bonds. I did that because a portfolio with stocks and bonds was supposed to be safer than an all-out stocks portfolio. Boy, did that theory go down in flames for me!

I bought into 9 corporate bond positions after doing A LOT of financial analysis of the companies involved. It was for naught. Four of the companies did unnecessary VOLUNTARY bankruptcies to get out from under their debt. Another four exercised tender offers for their bonds that left its bondholders grasping the short end of that transaction stick.

A year and a half after going into those bonds, I was all out of them. But I had incurred a $2740 out-of-pocket loss and missed out on about $9000 to $10,000 in dividends I would have collected if I had left the money in high yield stocks.

So, lesson learned. Goodbye bonds. And good riddance.

(You can read the whole gory story on my main blog at
Text is retiredtowin.com and Link is
retiredtowin.com.)

Enough Time for Enough Money

July 12th, 2014 at 10:23 am

I do not want my investing work time to cut into my free-for-fun time any more than is absolutely necessary. And that means doing just enough work to generate $20,000 a year of investment income(1*). Having that as a benchmark has radically changed my attitude towards investing. It has also relieved my pressure-to-invest stress level. And it has freed up a good chunk of extra time for more fun stuff. Here is how and why.

My previous maximum-income investing attitude had become a problem. That is because I follow a dividends-focused investing strategy(2*) that does not factor in (or expect) stock price appreciation. All my income expectations are based on dividends, so to maximize that income I need to stay fully invested in dividend-paying stocks. But those stock positions get regularly and steadily sold off(3*) as the positions build up enough unplanned for gain.

Those stock sales throw off a bunch of cash back into my investment account which in the past has virtually screamed at me not to be left sitting as cash but to be reinvested as soon as possible. And that pressure to invest has been a problem because it requires that I stay on the investing job until I do find other stocks to buy with that cash.

Now I have shifted to an enough-income investing attitude. As long as the projected annual dividends from my existing stock positions stay above $20,000 that is enough. The cash in the investment account no longer exerts an urgent pressure on me to be put back into stocks to maximize dividend income. I do not HAVE to give priority to the work of applying my research-intensive investing strategy(4*). I can take my time. I can do that research and stock buying at my own pace and when I like. And that has changed that activity from being a pressure job demanding many hours a week to a relaxed and interesting hobby I do when it suits me.

This has dramatically reduced my weekly investing work time. Instead of laboring 16 hours a week (and sometimes more) to stay fully invested, I just have to put 4 hours a week into essential avoid-at-your-own-risk portfolio monitoring(5*). That is "enough time for enough money." That has given me an extra 12 hours a week to hike(6*), or blog(7*) or just play(8*). And that has reduced my stress and made my days more relaxed. All of which has left me a much happier camper.

The takeaway: Seeking to maximize income can materially increase stress and definitely reduces time available for rest and leisure. If one cannot define a specific life-enhancing use for the extra money, it could be preferable to forego the added income and thereby avoid the labor and stress of producing it. Instead, one should consider enhancing one's life by taking the increased time that would thereby become available and using it to have fun and pursue personally satisfying activities.

# # #

1* Enough Money From Enough Time:
Text is http://retired-to-win.savingadvice.com/2014/07/08/enough-money-from-enough-time_123217/ and Link is
http://retired-to-win.savingadvice.com/2014/07/08/enough-mon...

2* Why I Only Buy Dividend Stocks:
Text is http://retired-to-win.savingadvice.com/2014/01/01/why-i-only-buy-dividend-stocks_106441/ and Link is
http://retired-to-win.savingadvice.com/2014/01/01/why-i-only...

3* What Makes Me Sell a Stock?:
Text is http://retired-to-win.savingadvice.com/2014/01/14/what-makes-me-sell-a-stock_106692/ and Link is
http://retired-to-win.savingadvice.com/2014/01/14/what-makes...

4* My High Yield, High Risk Investing:
Text is http://retired-to-win.savingadvice.com/2013/12/20/my-high-yield-high-risk-investing-strate_106216/ and Link is
http://retired-to-win.savingadvice.com/2013/12/20/my-high-yi...

5* How I Stay On Top Of My Stocks:
Text is http://retired-to-win.savingadvice.com/2014/04/09/how-i-stay-on-top-of-my-stocks_108229/ and Link is
http://retired-to-win.savingadvice.com/2014/04/09/how-i-stay...

6* My Love Affair With Hiking:
Text is http://retired-to-win.savingadvice.com/2013/12/23/my-love-affair-with-hiking_106264/ and Link is
http://retired-to-win.savingadvice.com/2013/12/23/my-love-af...

7* Why Share My Retirement Journey?:
Text is http://retired-to-win.savingadvice.com/2013/12/13/sharing-my-retirement-journey_106099/ and Link is
http://retired-to-win.savingadvice.com/2013/12/13/sharing-my...

8* My Strategy Games Rainy Day Passion:
Text is http://retired-to-win.savingadvice.com/2014/01/07/strategy-games-my-rainy-day-passion_106565/ and Link is
http://retired-to-win.savingadvice.com/2014/01/07/strategy-g...

OCIR: Big Dividend, Big Profit

June 6th, 2014 at 04:16 am

Between February 5th and February 21st, I bought 1380 shares of OCI Resources (OCIR) for $29,288. On May 28th, about 3 months later, I sold those shares for $32,766. That sale gave me a $3478 realized gain. Just one month before that sale, OCIR had paid me $690 in quarterly dividends. All told, holding OCIR for a little over 3 months netted me $4168 which worked out to a 14.2% profit on my original investment. This was another "textbook case" of my dividend-based investment approach* in action. Here is how that worked this time.

I discovered OCIR during my weekly stock search. Its 9.4% dividend yield caught my interest. Its financials passed my tests.* And its business model, centered on long-term sales contracts, gave OCIR's dividends the extra stability I like to see.** So it was just a question then of when to buy shares of this utterly boring soda ash mining and production company.

OCIR was good to buy right then. That was because the stock was selling around $21 a share with solid price support at $20.00. So, if I bought around $21, the stock's annual $2 dividend would give me downside protection down to $19, which would be well below OCIR's $20 price-support level. This made OCIR a "safe buy"* right then and there.

I bought at an average $21.22 and sat back to collect dividends. Because that is what I always do. I buy stocks for the dividends.*** I never buy a stock on the expectation that its price will rise. (Well, almost never.****) But often, the price does rise. That is what happened with OCIR, due to some happy talk about the company here and there in the investing blogosphere.

And within 3 months, OCIR reached my sell point. That sell point was a 10% realized gain, which in my view is the same as collecting an entire year's worth of dividends in advance.***** So I pulled the trigger and sold OCIR once its price had risen past that point -- which is another thing I always do. And that (1) put a year's expected income in my pocket now from the $29K I had invested, and (2) gave me a year's time to find the next company in which to invest that now cashed-out $29,000.***** Like I said at the beginning: a textbook case.

The takeaway: Have a plan for your investing. Have the discipline to stick to it if it is working, and the flexibility to change it if it is not working. Know how much money you want to make and take it when you have made it. Do not be greedy. And know how low a stock's price can fall before you need to start worrying. Do not be a Pollyanna. But do not be a scaredypants either.

# # #


* My High Yield, High Risk Investing:
Text is http://retired-to-win.savingadvice.com/2013/12/20/my-high-yield-high-risk-investing-strate_106216/ and Link is
http://retired-to-win.savingadvice.com/2013/12/20/my-high-yi...

** Stacking The Deck For Dividends:
Text is http://retired-to-win.savingadvice.com/2014/04/14/stacking-the-deck-for-dividends_108326/ and Link is
http://retired-to-win.savingadvice.com/2014/04/14/stacking-t...

*** Why I Only Buy Dividend Stocks:
Text is http://retired-to-win.savingadvice.com/2014/01/01/why-i-only-buy-dividend-stocks_106441/ and Link is
http://retired-to-win.savingadvice.com/2014/01/01/why-i-only...

**** Stock Panic Nets Me 13% Overnight:
Text is http://retired-to-win.savingadvice.com/2014/05/15/stock-panic-nets-me-13-overnight_108916/ and Link is
http://retired-to-win.savingadvice.com/2014/05/15/stock-pani...

***** What Makes Me Sell a Stock?:
Text is http://retired-to-win.savingadvice.com/2014/01/14/what-makes-me-sell-a-stock_106692/ and Link is
http://retired-to-win.savingadvice.com/2014/01/14/what-makes...

Should I Still Work At Investing?

May 17th, 2014 at 09:47 am

Overseeing and managing my stock portfolio is just like having a part-time job.* To be sure, at $100 an hour** the pay is great. But the truth is I do not need that money*** and spending it does not come easy.**** So I have had to ask myself whether I should "quit" this part-time job and increase my time freedom even more.***** Here is how my thinking went.

My baseline living expenses would still be covered. Heck, at $18,000 a year****** my baseline living expenses get covered by my Social Security pension. And that $18,000 a year includes premiums for insurance to cover just about anything.******* So I do not need my investment part-time job to make ends meet.

I would still have extra money coming in. If I stopped putting time into managing my stocks, the portfolio would still generate a lot of dividends.******** In fact, if I did leave my stock portfolio on "autopilot" it would throw off about $32,000 a year without touching the principal. So I do not need my investment part-time job as a backup to Social Security or to have plenty of spending money in my pocket.

My stock portfolio would still be my ace in the hole. Besides the social security income and besides the stock dividends, I would still have my portfolio's principal value. At the presently accepted 4% so-called safe withdrawal rate, that principal value by itself would keep me solvent for 20-plus years. So I do not need my investment part-time job as a backup to my backup.

So why should I hang on to this part-time job?

There are 2 main reasons to stop. The first reason is that I would reclaim the 8 hours a week that the job eats up. The second -- and really the main reason -- is that I would eliminate the mental pressure that comes from always having cash from dividends and stock sales sitting in the account demanding to be reinvested. If I stopped my stock selling*********, the portfolio would remain fully invested and I would not have to constantly be looking for companies in which to invest. So I would have no reinvestment pressure and no time demand.

But there are other reasons NOT to stop. These reasons cannot be about money, because I have already decided that there is little point in more money. The reasons have to be about the doing. And it turns out I do have such reasons. Like finding the financial research and the learning about how companies operate interesting. Like finding the evaluation and decision-making that comes from that research mentally stimulating. Like finding that those profit-making sales actually feel like emotionally rewarding "scores" in some complex computer game.

So it is not just a job after all. Overseeing and managing my stock portfolio is -- almost -- a hobby. And I can turn it into an actual hobby by removing the pressure to reinvest the cash from sales and dividends. I know I can do that. So I will.

The takeaway: Work is not always just about making money. Sometimes the activity itself is part of the reward... even the main reward. A small adjustment may be all that is needed to make that work feel like it is not work. But we may have to look behind the surface to put all that together. So let's make sure we do look.

# # #

* My High Yield, High Risk Investing:
Text is http://retired-to-win.savingadvice.com/2013/12/20/my-high-yield-high-risk-investing-strate_106216/ and Link is
http://retired-to-win.savingadvice.com/2013/12/20/my-high-yi...

** Profiting From Working My Stocks:
Text is http://retired-to-win.savingadvice.com/2014/04/28/profiting-from-working-my-stocks_108586/ and Link is
http://retired-to-win.savingadvice.com/2014/04/28/profiting-...

*** My Six Lines of Financial Defense:
Text is http://retired-to-win.savingadvice.com/2014/04/29/my-six-lines-of-financial-defense_108598/ and Link is
http://retired-to-win.savingadvice.com/2014/04/29/my-six-lin...

**** Making Sure I Spend That Money!:
Text is http://retired-to-win.savingadvice.com/2014/04/08/making-sure-i-spend-that-money_108219/ and Link is
http://retired-to-win.savingadvice.com/2014/04/08/making-sur...

***** Optimizing My Use of Time:
Text is http://retired-to-win.savingadvice.com/2014/05/12/optimizing-my-use-of-time_108871/ and Link is
http://retired-to-win.savingadvice.com/2014/05/12/optimizing...

****** My $18K Annual Baseline Budget:
Text is http://retired-to-win.savingadvice.com/2013/12/29/my-18k-annual-baseline-budget_106374/ and Link is
http://retired-to-win.savingadvice.com/2013/12/29/my-18k-ann...

******* My Stash-Shielding Insurance:
Text is http://retired-to-win.savingadvice.com/2014/04/10/my-stash-shielding-insurance_108254/ and Link is
http://retired-to-win.savingadvice.com/2014/04/10/my-stash-s...

******** Why I Only Buy Dividend Stocks:
Text is http://retired-to-win.savingadvice.com/2014/01/01/why-i-only-buy-dividend-stocks_106441/ and Link is
http://retired-to-win.savingadvice.com/2014/01/01/why-i-only...

********* What Makes Me Sell a Stock?:
Text is http://retired-to-win.savingadvice.com/2014/01/14/what-makes-me-sell-a-stock_106692/ and Link is
http://retired-to-win.savingadvice.com/2014/01/14/what-makes...

Stock Panic Nets Me 13% Overnight

May 15th, 2014 at 08:41 am

On Friday May 9th, I bought 1040 shares of Niska Gas Storage Partners (NKA) for $13,138. On Monday May 12th -- the very next market day -- I sold those shares for $14,802. That is a gain of $1664, representing a realized profit of 12.7% overnight (since weekends do not count as market days). I made that money thanks to a flash stock panic. I made that money by keeping my head, not falling victim to the panic and taking advantage of it instead. Here is how that went down.

On May 8th, stock analysts panned NKA. They did that based on their perception of "challenging fundamentals for natural gas storage providers." They discounted everything NKA had recently done and is going to do to overcome those upcoming industry challenges. So the analysts threw out the baby with the bathwater and set a $12 price target for NKA -- which was trading around $15 that day. And the selling panic began.

On May 9th, I saw opportunity in the panic. My daily stock monitoring* brought NKA to my attention. I ran the company's financials through my tests** and found NKA solid. I read the company's conference call transcript and saw how NKA was taking big steps to stay ahead of the game. Refinancing its debt so it would not come due until 2019. Reducing the company's interest costs by $15 million a year. Building up a war chest and making concrete plans to use it to diversify away from gas storage. Bringing in new top management experienced in such diversification. It was all good! And it had all been ignored by the stock analysts.

So I bought NKA for its dividend. NKA's stock price had dropped from around $15 on May 8th to around $13 on May 9th. With an annual dividend payout of $1.40 and a price of $13 a share, NKA would yield 10.8% a year. That made the stock what tv stock guru Jim Cramer calls an "accidental high yielder" -- which is the only kind of company I will invest in.*** So, taking into account the stock's downward price momentum, I set my buy price at $12.63 early on May 9th and waited.

I got my buy and it was well hedged. NKA's annual $1.40 dividend made my $12.63 price a safe buy for me even if the stock's price dropped down to $10.23.** And for an extra bonus, the next 35-cents quarterly dividend would lock in on May 15th, less than a week away. That made my buy safe even if the stock price dropped to $9.88.

But NKA's stock price went up, not down. The panic subsided. Other people must have begun seeing what I had seen. And they pushed NKA's stock price up to $13.74 by the close of market May 9th.

So on May 12th I set up to sell. I was up 8.8%. Though I buy a stock for its dividend, I will sell it at a 10% profit.**** And it looked like NKA would get to that point that very day. I got ready to put in an order to sell at $13.89, which would give me that 10% profit. But then (greedy me) I decided I also wanted that May 15th 35-cent dividend. So I upped my asking price to $14.24. And I got it that day. A 12.7% realized profit in just ONE market day.

The Takeaway: Never pay attention to stock brokerage analyst recommendations. If they knew what they were talking about, they would be stock-market rich and not be working for a living. In fact, do not listen to anybody's opinion on a stock (including me). Get the facts and make your own assessment. When you do, never judge a company solely by its industry's prospects. And remember that you must be nimble. The opportunity to grab a ride up -- or jump off before a plunge down -- comes and goes in a flash.

# # #

* How I Stay On Top Of My Stocks:
Text is http://retired-to-win.savingadvice.com/2014/04/09/how-i-stay-on-top-of-my-stocks_108229/ and Link is
http://retired-to-win.savingadvice.com/2014/04/09/how-i-stay...

** My High Yield, High Risk Investing:
Text is http://retired-to-win.savingadvice.com/2013/12/20/my-high-yield-high-risk-investing-strate_106216/ and Link is
http://retired-to-win.savingadvice.com/2013/12/20/my-high-yi...

*** Why I Only Buy Dividend Stocks:
Text is http://retired-to-win.savingadvice.com/2014/01/01/why-i-only-buy-dividend-stocks_106441/ and Link is
http://retired-to-win.savingadvice.com/2014/01/01/why-i-only...

**** What Makes Me Sell a Stock?:
Text is http://retired-to-win.savingadvice.com/2014/01/14/what-makes-me-sell-a-stock_106692/ and Link is
http://retired-to-win.savingadvice.com/2014/01/14/what-makes...

Profiting From Working My Stocks

April 28th, 2014 at 12:28 pm

I follow a high dividend / high risk investment strategy.* It gives me an average 8% dividend yield on my portfolio. One would think that should be enough. It must not be, though, because I actively work my portfolio to realize profits from stock sales.** The question is whether all the time and work that takes* is worth it -- or whether I would be better off letting the stocks just ride, collect my dividends and free up all that time. Here is how that shakes out.

Selling a stock can lose me its dividend. That happens because I sell the stock while the next quarterly dividend is still pending. In the worst cases, I sell a stock just days before that quarterly dividend would have been locked in. So, for all my extra work to make sense I need to end up better off selling the stocks than holding them and collecting the dividends.

Buying and selling stocks takes work. There is a set amount of work I do every week to stay on top of my stocks***. That much I have to do whether I hold the stocks or sell and buy them. But there is extra work to do if I do not hold the stocks. Because, when I sell a stock, I have to find something else to buy with the money from the sale. And going through that search process* takes me 6 to 8 hours a week. I would not have to do that work if I left my portfolio alone and just sat back and collected dividends.

But the extra 350 work hours a year do pay off. In 2013, my portfolio's average dividend yield was 7.9%. IF I had left my portfolio (and my wife's, which I also manage) alone, the 2 portfolios would have collected around $56,000 in dividends. Because I sold and bought stocks instead, they only collected $49,090 in dividends. But I more than made up for that $7090 dividend "shortfall" by realizing $43,470 in profits from sales. And that means the net extra profit from buying and selling was $36,560.

That is more than $104 an hour for my labor. And that is four times my preretirement hourly wage! So I do think I will keep on actively working our stock portfolios. Doing the work and not being a passive investor makes financial sense to me.

# # #

* My High Yield, High Risk Investing:
Text is http://retired-to-win.savingadvice.com/2013/12/20/my-high-yield-high-risk-investing-strate_106216/ and Link is
http://retired-to-win.savingadvice.com/2013/12/20/my-high-yi...

** What Makes Me Sell a Stock?:
Text is http://retired-to-win.savingadvice.com/2014/01/14/what-makes-me-sell-a-stock_106692/ and Link is
http://retired-to-win.savingadvice.com/2014/01/14/what-makes...

*** How I Stay On Top Of My Stocks:
Text is http://retired-to-win.savingadvice.com/2014/04/09/how-i-stay-on-top-of-my-stocks_108229/ and Link is
http://retired-to-win.savingadvice.com/2014/04/09/how-i-stay...

OTT: My 88% Stock Loss That Wasn't

April 23rd, 2014 at 05:37 am

In late 2012, I bought shares of regional phone company OTT for $14,142. One year later, I sold those shares for $1667 after the company declared bankruptcy. That was an 88% drop in the stock's value. I lost $12,475. Or so it seemed at first glance. A catastrophic stock loss like this seemed to prove the folly of my high-yield high-risk investment strategy*. Or so it seemed at first glance. But when I analyzed the numbers carefully, I found that my real loss was significantly lower and that my investment strategy is proving successful. Here is how that can be in spite of that huge stock loss.

As part of my stock investing process*, I run a screen for high dividend companies once a week. OTT first came up on that screen in August of 2010; it passed my financial criteria tests, and I bought shares. A few weeks later, OTT hit my sell-at-a-profit trigger** so I sold my initial position at a gain. But then OTT came up again on my high-dividend screen as its price dipped from its previous spike and I bought it again. The thing is that over the following 2 years this process repeated itself a total of thirteen times. That means that I bought and sold that original block of OTT stock 13 times. And made a total realized profit of $6483 doing so. In retrospect, that takes my final loss on my OTT investment down to $5992. But there is more.

I only invest in dividend-paying stocks.*** So during the 3 years or so that I held OTT stock in my portfolio, I collected $1101 in dividends. (It would have been more had I not been flipping the stock so often.) Those collected dividends take down my final loss on my OTT investment down to $$4891. And that is a 35% loss on my last OTT stock purchase -- which is a whole lot better than the 88% loss it first looked like. But there is still more.

Following my portfolio diversification strategy,**** I never put more than 5% of my portfolio's book value in OTT stock. That final OTT stock purchase in late 2012 represented 3.8% of my portfolio book value at the time. So the net loss to my overall portfolio from OTT's bankruptcy and subsequent stock sale was severely limited -- to a paltry 1.3% of my portfolio book value. But there is still more.

All of my portfolio's holdings are selected based on the same investment strategy that led me to buying OTT stock. Looking only at my OTT experience, my investment strategy would seem to be a losing one. But not so when I look at my entire portfolio experience. Because, between the time I made that final OTT stock purchase and the time I sold it at a big loss, my portfolio book value had GROWN by 14.5% -- even factoring in the loss on OTT. Even more persuasive, between the time of my first OTT stock purchase and my last OTT stock sale, my portfolio's book value (as well as its dividend payout) had risen a satisfying 40%. So I am way, way ahead. And, yes, I am staying the course with my high yield, high risk dividend investment strategy*.

# # #

* My High Yield, High Risk Investing:
Text is http://retired-to-win.savingadvice.com/2013/12/20/my-high-yield-high-risk-investing-strate_106216/ and Link is
http://retired-to-win.savingadvice.com/2013/12/20/my-high-yi...

** What Makes Me Sell a Stock?:
Text is http://retired-to-win.savingadvice.com/2014/01/14/what-makes-me-sell-a-stock_106692/ and Link is
http://retired-to-win.savingadvice.com/2014/01/14/what-makes...

*** Why I Only Buy Dividend Stocks:
Text is http://retired-to-win.savingadvice.com/2014/01/01/why-i-only-buy-dividend-stocks_106441/ and Link is
http://retired-to-win.savingadvice.com/2014/01/01/why-i-only...

**** Stock Diversification My Way:
Text is http://retired-to-win.savingadvice.com/2014/04/13/stock-diversification-my-way_108304/ and Link is
http://retired-to-win.savingadvice.com/2014/04/13/stock-dive...

Buying Preferred Stocks My Way

April 20th, 2014 at 09:34 am

Three years ago, all my investment capital was in common stocks. Then, about a year ago, I ran into a dry spell where I could not find any common stocks to add to my portfolio* with the cash that was piling up from dividends and profit-taking stock sales. So I started looking into preferred shares as a way to fill out my portfolio. Here is how I handled that.

I practice a high-yield, high-risk income investing strategy.** That means in part that I have selected the common stocks that I have bought for my portfolio screening in for the highest possible dividend percentage payout, and then screening out from the resulting list those stocks whose issuing companies fail my own particular set of financial performance criteria.** But evaluating preferred shares requires an additional level of scrutiny.

What I learned about preferred shares boils down to this. They are issued by most companies at a set face value price, usually either $25 or $100. They carry a fixed percentage dividend yield that cannot be changed or cancelled (unlike common stocks). And the payment of this preferred stock dividend takes precedence over the payment of any dividend on common stocks (which simply means that preferred stock holders get paid first). But there is still more.

Preferred shares can be "callable" (that is, redeemable) at any time by the issuing company at the company's sole discretion and for a price that has been stipulated at the time the preferred shares were originally issued. Preferred stock can also be "convertible" (that is, exchangeable) into common stock shares at the sole discretion of the issuing company at a predetermined time. And preferred stock dividends can be "cummulative" (that is, accruable) which means that, if a preferred dividend is skipped by the company for any reason, that skipped dividend remains due and must be paid before any other dividends are declared.

With that information in hand, my buying criteria for preferred shares (over and above my core buying criteria**) became very clear. Never buy preferred shares that are not cummulative because I want every chance of actually collecting my dividends. Never buy preferred shares above their issue price because if I do I am certain to lose money if the company calls in those shares. And never, never, never buy preferred shares that are convertible to common stock because the chances of getting shafted on that deal are way too high.

Other than that, it is easy-peasy. I screen for higher-yielding preferred shares. I then check each share issue against my three preferred share never-nevers. Once those special hurdles are cleared, I make sure there is still room in my portfolio for the industry the issuing company is in.*** If that looks okay, then I run the issuing company through my standard business model review and four-hurdle financial criteria gauntlet** just like I would with common stock shares. And if all still looks good, then I put in a buy order for the preferred shares and lock in their dividends until and unless I am later able to sell at a 10% or better profit.****

# # #

* Why I Only Buy Dividend Stocks:
Text is http://retired-to-win.savingadvice.com/2014/01/01/why-i-only-buy-dividend-stocks_106441/ and Link is
http://retired-to-win.savingadvice.com/2014/01/01/why-i-only...

** My High Yield, High Risk Investing:
Text is http://retired-to-win.savingadvice.com/2013/12/20/my-high-yield-high-risk-investing-strate_106216/ and Link is
http://retired-to-win.savingadvice.com/2013/12/20/my-high-yi...

*** Stock Diversification My Way:
Text is http://retired-to-win.savingadvice.com/2014/04/13/stock-diversification-my-way_108304/ and Link is
http://retired-to-win.savingadvice.com/2014/04/13/stock-dive...

**** What Makes Me Sell a Stock?:
Text is http://retired-to-win.savingadvice.com/2014/01/14/what-makes-me-sell-a-stock_106692/ and Link is
http://retired-to-win.savingadvice.com/2014/01/14/what-makes...

EPB: Another Quickie 10% Stock Profit

April 19th, 2014 at 04:49 am

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:
Text is http://retired-to-win.savingadvice.com/2013/12/20/my-high-yield-high-risk-investing-strate_106216/ and Link is
http://retired-to-win.savingadvice.com/2013/12/20/my-high-yi...

** Stock Diversification My Way:
Text is http://retired-to-win.savingadvice.com/2014/04/13/stock-diversification-my-way_108304/ and Link is
http://retired-to-win.savingadvice.com/2014/04/13/stock-dive...

*** Stacking The Deck For Dividends:
Text is http://retired-to-win.savingadvice.com/2014/04/14/stacking-the-deck-for-dividends_108326/ and Link is
http://retired-to-win.savingadvice.com/2014/04/14/stacking-t...

**** How I Stay On Top Of My Stocks:
Text is http://retired-to-win.savingadvice.com/2014/04/09/how-i-stay-on-top-of-my-stocks_108229/ and Link is
http://retired-to-win.savingadvice.com/2014/04/09/how-i-stay...

***** What Makes Me Sell a Stock?:
Text is http://retired-to-win.savingadvice.com/2014/01/14/what-makes-me-sell-a-stock_106692/ and Link is
http://retired-to-win.savingadvice.com/2014/01/14/what-makes...

(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.)

Stacking The Deck For Dividends

April 14th, 2014 at 04:53 am

The success of my stock investing strategy is based on actually being paid the dividends offered by the companies in my portfolio*. But those promises to pay depend on the future earnings success of those companies. And the further out one looks into the future, the more speculative those promises become. But that is not the case for all companies. There are some that have their earnings locked in for years to come -- which makes their dividends a lot more reliable. Here is how I have stacked the deck for dividends in my portfolio with those companies.

Certain types of companies, in certain industries, have business models that allow them to (1) operate based on longterm sales contracts and/or (2) enter into financial operations that guarantee the future price of their products. This makes it possible for me as an investor to have visibility well into the future regarding those companies' sales and cash flow. And that is what the continued payment of dividends depends on.

As I write this, 15 of the 20 companies in my portfolio have those types of business models. It is only because of my stock diversification strategy** that I do not have 100% of my portfolio companies falling into those categories. But the 15 I do have give my portfolio a more reliable future dividend payment stream.

Longterm equipment lessors. As I write this, I am holding stock in 6 companies whose business model it is to own equipment which they lease out on multi-year contracts for set daily rates. This includes companies owning and leasing out dry bulk cargo ships, container ships, offshore drilling rigs, and tankers. Because of that business model, I am able to see that the cash flow to pay out dividends is (almost) sure to be there years into the future.

Basic materials producers. As I write this, I am holding stock in 6 other companies whose business model it is to dig stuff out of the ground and sell it to other companies that then process it. This includes companies extracting oil, natural gas and soda ash (trona). Not only do these companies sell their production by future contracts, but they also engage in hedging operations that allow them to predict and secure how much they will be paid in the future for their production. Because of that business model, I am again able to see the future cash flow that will support my dividends.

Fee-based servicers. As I write this, I am holding stock in 1 company whose business model it is to own pipelines and storage facilities that its clients contract to use on a multi-year basis at guaranteed rates for specific storage capacities and volume flows. Because of that business model, I can project that the cash flow to pay out my dividends will be there years out.

Interest and dividend accruers. As I write this, I am holding stock in 2 companies whose business model it is to provide financing to other companies through mixes of secured loans and equity investments under contract terms that lock in set rates of return for years out into the future and also secure substantial termination fees if the loans are paid off ahead of time. Because of that business model, I am able to see where the cash flow is going to come from to pay out my dividends well ahead.

What all these companies share in common is longterm cash flow predictability. That predictability makes my future dividend flow more reliable and lowers the risk of my high-yield, high-risk portfolio***. And that is what I call stacking the deck for dividends.

# # #

*Why I Only Buy Dividend Stocks:
Text is http://retired-to-win.savingadvice.com/2014/01/01/why-i-only-buy-dividend-stocks_106441/ and Link is
http://retired-to-win.savingadvice.com/2014/01/01/why-i-only...

**Stock Diversification My Way:
Text is http://retired-to-win.savingadvice.com/2014/04/13/stock-diversification-my-way_108304/ and Link is
http://retired-to-win.savingadvice.com/2014/04/13/stock-dive...

***My High Yield, High Risk Investing:
Text is http://retired-to-win.savingadvice.com/2013/12/20/my-high-yield-high-risk-investing-strate_106216/ and Link is
http://retired-to-win.savingadvice.com/2013/12/20/my-high-yi...