Hi Hammer,
I started selling puts on Cohu, Brks and Amat - all 10.00 strikes and Intc 20.00 strikes.
They've moved up beyond where I sell puts.
Then I learned about dividend Aristocrats.
I sold a lot of T , KMI, HCP,and got nervous on some and bot to close.
Then the price went up and I regretted not getting some shares.
Over time, I sold puts early and as the price continued down I'd stagger in and a third traunche.
Now all of this has been in a long bull - so caveat emptor.
Now I try to look at a first selling of puts that hopefully get assigned , then I try to work down lower strike prices that help me pay for the assigned stock.
I have a good account and no margin.
The real test will be in a downturn - the stock must hold the dividend,and in a decline I'll reinvest in more shares and give myself a pay raise for the next year.
That's easy to say and tough to hold.
I like over 12 month puts, as the gain is treated as capital gains. I still have a position in a dealership interest and it flows through to my personal income - so tax consideration is key in what I really hold onto.
When you buy a dividend payer and it yields around 4% and it trades at near 4 year lows , buy it and hope to sell calls as it hits 4 year highs.
It can yield 6-8 %.
If you sell a put and the premium to net price pays 12-15 percent - I'll take it either way.
The worst is just a good situation.
That being said the company must not suspend or reduce the dividend - so they must have a future that includes a stable dividend payout.
Some fail and it does happen !
After years of study, you become familiar with some stocks and you swing the range that can be multi year.
I think it is the dirty little secret that annuities never discuss.
But you must watch it on your own.
It so happens I enjoy that now.
I'm hopeful of establishing a solid portfolio so it creates stable revenue plus some crazy money to buy the off sector stocks.
This last energy crisis was my first buy of that idea - I bot KMI and ENSCO ( Esv).
I'm already above water and surprised how quickly it reversed.
I love selling puts - it puts time value on your side - an edge I need . LOL
If this market goes down and the company gives the same dividend - it buys you more shares and gives you a raise the next year.
I'm into growing my future income. <smile>
At this time in my life, I own more properties that are hard for me to keep nice and am debt free.
I live a country lifestyle and garden hunt and fish.
All I need to do is pay real estate taxes and utilities.
The rest of the portfolio grows either way.
The account grows the fastest when the stocks go up.
But when they go down - the dividends buy more and the future revenue goes up.
In between I have gardens to take care of - it's not a bad way to retire.
I do have reserve cash and if the market gets so bad that dividends get reduced - I'll not have to sell anything. gulp
So in a down market, my reserve cash will be buying stock and my dividend stream will increase.
I'm OK with that.
At this stage of a long bull market - I'm mostly focussed on taking my high growth stocks and converting them into high dividend payers that will continue their payout rate during a decline in the overall market.
Just keep reinvesting the dividends and growing your future revenue.
Like Warren Buffet said when asked what he wanted to be in the future - he replied " The oldest man in the World!" I suspect he was aware of the power of compounding. LOL
I had thought CY was getting to the top of its channel when they announced good earnings. KMI has recovered from the energy collapse. They've indicated they will increase the dividend to 1.00 in 2019 and 1.25 in 2020. So if that happens buying today at 18,makes it a great dividend growth story. About a year ago I sold KMI $18.00 puts which will bring my net purchase price to 15.50-ish and a sweet yield on cost.
So I had 11.37 in CY and swapped it out for KMI at 17.90 ish as I sold CY for 18.38.
That gave me an upgrade from a 44 cent dividend to an 80 cent dividend with the same number of shares. I call that a raise for next year!
That allows me to buy more stock every 90 days - I like it.
Good to post with you Hammer - I still remember your excellent advice on several questions I had on dividends in lieu.
I've owned CY for about 3 years -originally sold 8 and 10 dollar puts and worked my way up to 12 puts.
In 2020 they are 13's.
Hope to hear your future thoughts.
Best of Trades
Bob |
