Another month, another dividend pay check, things are building. My July dividend haul came in ok, nothing spectacular but then my dividend income is all over the place month to month. For July, i managed to earn $481.26. In 2013, it was $196.05 so that is approximately a 2.5x increase, can’t complain about that. I’m still on track for earning over $8000 in dividend income this year – the August dividend is already way ahead of July so things should be pretty good at the end of this month.
My base dividend income continues to creep up, i’ve sacrificed some short-term dividend income for potential big capital gains in other stocks where i believe the growth in capital will outperform the dividends i would receive over the short-term. This is mostly done via call or put options and has worked well for most of this year.
As for other stocks, i’ve been building a position in things like LYG, VOD, AIG, PBR, ABX and some very risky plays which i won’t go into here but they could pay off huge or be worthless, not something for most people.
Why the stocks above? Well a quick overview on each..
I believe this stock will start dividends later this year and these will continue to grow for the next several years, while that is occurring i am expecting the share price to start creeping back up so i continue to accumulate a large position. The float is enormous but over time ( i’m talking 5 to 10 years ) i believe this stock will return back to somewhat of its former glory and be a leading dividend payer on the FTSE. I’m expecting the share price to slowly rise to $7-$10 during this time.
Huge cash pile, awesome dividend, decent management. The stock has really come off the high since the AT&T rumour of an acquisition died down, the earnings on this stock will have been hit since letting go of Verizon Wireless. Can’t argue with a 7% dividend, i continue to accumulate a position on weakness.
Long term hold, growing, undervalued, still 30% below book value, expecting this stock to hit $60 on the next attempt at $55. Short-term it could go into the $40s if the market sells off hard, i’ll be buying hand over fist on any weakness. Long term i believe this stock can get back to $100 and the dividend should at least double. This is a capital appreciation play rather than a dividend income play for me. I also have a ton of long term calls on this.
Risky play but it is so undervalued it is silly. There are a few catalysts coming up ( Brazil Elections, Olympics etc ) i think this stock can rip back to $30-$40 once things sort themselves out, there are plenty of issues as to why this stock is still down here at this price so i’m taking advantage of investors who have a shorter time horizon. I continue to accumulate a position on any weakness. Very long term play as the debt is large but the earnings are big.
Gold has been hammered and there is potential to fall further but look what happens to a sector when the commodity gets nailed? The companies streamline down, they sell assets, they become more efficient, when the bottom comes in they will rebound better, the profits will improve. I have been buying this stock right from the lows 6-12 months ago when everyone was throwing out the baby with the bathwater on this sector. This is a capital appreciation play as the dividend is pretty crap. It is also a potential hedge when the inflation genie rears it’s head again as gold should in theory rip once that cycle starts again. Long term hold.
On top of all of this i continue to swing trade option positions on momentum stocks that i like and have upcoming catalysts. If i see anything that is oversold in the short-term, i’ll typically take a long term in-the-money option to capitalize on leverage and a rebound in the price.
The key for me is to ignore the media in terms of following the urge to sell when things get hairy, always think beyond the short-term and accumulate on weakness if it is a quality stock. Use of FinViz.com has been extremely useful in filtering for undervalued plays.
This is a very narrow overview here and there are sectors that are all over the place but my opinion is sideways churn for now while this Russian geo-political risk continues to grind. We’re going into August/September which is where historically things can change dramatically. There is potential for the market to sell-off really hard given the right catalysts as we are near some key support levels. Funny how so many people come out screaming about the apocalypse on a 4-5% dump right? I think of it as them screaming there is a sale on although valuation is subjective. If the market dumps 20%, use it to your advantage, never panic, i think having a basket of solid dividend stocks have helped me ignore the short-term swings as i know i’m getting paid. I get shares more cheaply if the stocks dump, kinda takes the heat off to some degree right?
There is still a ton of money on the sidelines, you only need to see how much cash Buffett has waiting for the next opportunity.
Here is a chart of the S&P 1 year futures chart..
You can clearly see where the buying kicked in late in the week around the 1900-1910 zone. The rebound although big, may run out of steam again soon. If we do rip through 1900, my expectation is a flush to mid-1800s at least….
The support levels on the way down that i see ( white dashed line )
On the upside..
Here is a closer view of the same chart, cleaner look showing the gaps.
Gaps can tend to help with targets aswell, not 100% guaranteed of course but if the momentum is in a certain direction, they are often filled aggressively.
Remember when we get huge moves up or down there is usually a few days of consolidation or back and filling while the market digests the move.
This does not mean the initial move is over so don’t go chasing like a mad person. Just wait, it’ll be pretty obviously where the market is going once things calm down, right now there the market is jumping on every news article out of the press and it is impossible to determine where we will be with any significant probability.
Gaps shown here are
1868 – right above the rising 200ma
1897 – right near where we bounced off before. If the market goes near a gap but doesn’t fill like here, i’ve found it will often come back and take it in the the ‘near term’ ( days or weeks ) unless some key support/resistance value gives out elsewhere.
1953 – the point where the big sell off occurred at the end of July.
1965 – if this fills and holds then chances are we are headed to over 2000.
As you can see, there is a high probability of churn between 1860’ish and 1950 while things sort themselves out.
Stay frosty, good luck.