JANUARY DIVIDENDS UP 33% OVER 2017!

Collected a whopping 14 dividend payments on the last day of January 2018!  Compared to January of last year, dividend income for the month is up by over 33%!  While that's not as much of an increase as I've seen in past years, it's still pretty amazing.  Looking forward to a big jump in year over year earnings in February as well, with the first dividend payment from AGNC.  This monthly dividend payer alone will increase total cash flow by over 5% per month!  

Looks as though the stock market is reacting favorably to Trump's state of the Union address.  I'm seeing nice increases in share prices on the majority of the stocks I hold.  Whether or not anything the President says or does helps the stock market, I think we're going to see an overall increase in the market again this year.  Whatever happens, I'm confident I'll see a big increase in monthly cash flow from dividends by the end of 2018.

I've decided to sell my stakes in ORA and PFE for a small gain on both and reinvest the cash in QYLD.  This will significantly boost monthly dividend income and I'll still be invested in ORA and PFE through some of my other fund holdings.  My intention when I bought the shares was to hold them for capital gains and collect the dividends along the way.  While my gains on both stocks after commissions is only a little over 10%, I'm satisfied with that and looking forward to increasing monthly income and getting involved with covered call trading through QYLD.  I'll hold off on the sale of PFE just long enough to collect their next dividend payment, which still gives me time to buy QYLD and collect a dividend from them in February.    

CHASING CAPITAL GAINS CAN LEAVE YOU EMPTY HANDED

I mentioned in my last post how much more I prefer to pursue dividends as opposed to capital gains.  Like I said before, I enjoy capital gains as much as anybody, but I also know how easily they can quickly disappear.  The drop in the stock market this week provides ample proof of what I was saying. The drop in share prices over the past two days has dramatically impacted the overall value of my portfolio.  However, even if the market shows a loss for the month, my dividend income will increase!  Had I only been invested for growth, i.e. capital gains, I would have been sorely disappointed.  Since my investment objective is increasing dividend income every month, I'm actually quite excited.  With the stock prices being down, my big dividend days at the end of the month and the first of next month, will buy more shares than they would have had prices remained the same or went up.  So I'll make a bigger gain in monthly dividend income than I had expected.  I'm pretty happy about that.

I've bought and sold a lot of stocks over the past 25 years.  Some I made a lot of profit on, some I lost money on, that's the way it works.  I still buy some stocks with the intention of trading for capital gains, but I only buy stocks paying dividends, so if the price should go down instead of up, I'll still collect some cash on a regular basis.  

As a reminder of how fleeting capital gains can be, I own 1,000 shares of stock in my taxable account that I bought on a tip from my sister's boss.  It seemed very promising at the time.  Didn't pay a dividend, but it looked as though they were really going places.  I'm not sure exactly where they went, but it wasn't where I expected.  My 1,000 shares is currently worth 10 cents.  Which is exactly why I say chasing capital gains can leave you empty handed. 

CAPITAL GAINS VERSUS DIVIDENDS

In an earlier post, I mentioned my interest in getting involved in trading options in the form of covered calls.  While I don't have the cash available to do this at the present time, I've discovered there are funds specializing in selling covered calls to generate income for shareholders.  I read an article today comparing an ETF I'm interested in buying in to with a CEF.  The author made the case that it would be foolish to go with the un-managed ETF when the "professionally" managed CEF more closely tracked the performance of the covered call market, generating more capital gains for its' shareholders.

Well here's my take on that.  As someone who's invested through lots of market ups and downs, I see very little advantage to favoring an investment for potential capital gains.  Capital gains can only be collected if you sell some or all of your shares, otherwise they're just paper profits.  On the other hand, dividends can be collected as cash payments from the get go, either buying more shares or to use however you see fit.  Since the closed end fund's (CEF) fees were extremely higher than the exchange traded fund (ETF) I'm interested in and the dividend yield is 3% higher, I think it would be better to save on fees and take more cash up front.  Anyone who has invested for any length of time realizes how quickly share price gains can evaporate in a down market, but while dividends might be reduced, it's a lot less likely they'll be discontinued altogether.  When I read this article, I couldn't help but wonder why someone would encourage you to pay more in fees and just hope for the market price to continue to rise.  I'll be buying into the ETF instead and collecting a nice monthly dividend, which by the way had also increased in price.

As far as I'm concerned, if it's a choice of investing for capital gains or dividends, I'm always going to go for the dividends.  Capital gains tend to follow stocks paying reliable dividends, so whatever I earn from higher share prices is just icing on the cake. 

SELLING BLW, BUYING AGNC FOR AN 82% BOOST IN MONTHLY DIVIDENDS!

I was less than enamored of BLW to begin with and wasn't excited by anything I read in their latest report.  So I decided it was time to part with the fund and will replace it in my IRA account with AGNC.  Both pay monthly dividends, but by reinvesting the cash in AGNC I will boost monthly dividend income from dollars invested by a whopping 82%!  I'm not just chasing after yield here, since I believe that AGNC's share price will also outperform my previous stake in BLW.  This trade will also boost overall monthly dividend income by around 2%.  While that may not sound too exciting, all those little percentage increases add up.

Still tossing around ideas to come up with some extra cash to start trading covered calls.  Haven't quite decided how I'm going to do that yet, but I'll think of something before the year is over.  

GGT BECOMES A "FREE STOCK"

I've written about my strategy of "free stocks" in the past.  What I mean by "free stock" is any stock I no longer have cash out of pocket invested in.  GGT has become my latest free stock.  The way I accomplish this is by buying a stock, reinvesting the dividends and holding on until dividends and capital gains allow me to sell enough shares to get my original cash investment back, while still keeping a small position in the stock.  Stocks in my current portfolio that meet this criteria include UVE, HWBK and now GGT.  Selling shares and taking out my original investment allows me to reinvest the cash elsewhere, while still collecting dividend income on the free stocks.

My original cash investment in GGT will now be invested in monthly dividend payer GLAD.  While the dividend yield on GLAD of 8.96% is a little less than the yield on GGT, I prefer the monthly income and I believe there is more upside potential on the share price with GLAD.  I took advantage of UVE's recent run up in price to sell a few shares and free up cash to purchase a stake in JPS.  Both purchases are scheduled for next Tuesday and I should collect my first dividend from each in February.  This will bring my total number of dividend payments collected per year up to 516!

I've been doing a lot of research on covered calls.  While I used to find options trading quite confusing, I'm beginning to see that it's not quite as difficult as I once thought.  I'm especially interested in covered calls for the income they're potential income and for their relative safety.  Got more research to do, but I expect to be writing my first covered call before the end of 2018.