WINDSTREAM: ANOTHER FREE STOCK

My stake in Windstream Corp. (WIN:NASDAQ) is up by 28.84% since my initial purchase.  I've put in an order to sell most of my shares so I will regain all of my initial cash investment.  The remaining shares were paid for with profits (capital gains) from my investment in Windstream, making them essentially free stock.  I will have none of my own money tied up in these shares, so all past and future dividends plus any gains in share price from now on, are just icing on the cake.  Counting Windstream, I'm up to 5 different companies I've repeated this strategy with.  I'm looking to do more as opportunities present themselves, with a goal of building an entire portfolio of free dividend paying stocks.

As for the money I've pulled out of the stock, I've placed an order to purchase shares of Annaly Mortgage Management (NLY:NYSE).  NLY currently pays a dividend of $2.72 per share which represents a yield of 14.95% on their recent share price of $18.20.  While an increase in interest rates could hurt NLY's profits, I'm hoping to collect a nice return on dividends while rates are low, then trade out of the stock should rates begin to rise.  The goal here is to boost monthly cash flow from dividends with this one. 

UNIVERSAL INSURANCE HOLDINGS INC

Had some extra cash from dividends in my money market account and decided to put it to more profitable use. So I put in an order and picked up more shares of Universal Insurance (UVE: AMEX). I'm currently long on UVE although I have traded in and out in the past. I especially like their dividend yield right now of 9.60%, which beats the you know what out of the return I was drawing from the money market account. They're currently trading near their 52 week low, most likely due to hurricane season, so I'm taking advantage of the low price to increase my stake and boost my return from dividends. I've noticed it's not unusual for the price to drop during spring and summer months and rebound when hurricane season ends in September.

I'm currently sitting on some nice paper profits, but haven't decided to pull any cash out at the present time. I'd like to make a couple more trades where I pull out my initial investment and keep the remaining shares, in effect gaining "free" shares. While I am in a position to do this with a few of my current holdings, I haven't found any new investments that I prefer over the ones I already own. So I'll sit tight for now and keep my eyes open for a good opportunity.

Bought a commercial carpet cleaning machine for $700. I've made a deal with my apartment complex to clean all their carpets as tenants move out. I figure that I can easily earn a 40-50% return on dollars invested in the machine by doing 8-10 apartments per year. But if I only do enough to earn 20% on dollars invested, I'd still get my money back in 3.6 years and everything after that is pure profit. Not to mention that I can clean my own carpets without paying for a rental machine. So I think this may actually be one of my best investments of the year.

FREE STOCKS!

I mentioned this ploy in a recent post about updates to my stock portfolio, but I thought it would be good to go over it again. Two of the stocks I sold recently had went up considerably since my initial investment. Instead of closing out my entire position in both stocks, I only withdrew the amount of my initial investment. In other words, I took out the entire amount of money I had invested in each stock and kept the remaining shares. Which means I am still a shareholder, still drawing dividends on both stocks, but none of my money is invested in either one. Free stocks!!!

No matter how good or how bad these shares perform in the future, it's nice to know that I'm risking none of my hard earned money. If they keep paying dividends and keep increasing in value, fantastic! If they eventually halt dividends and go completely under, I've lost none of my own money. In the mean time I benefit from any future dividend payments, which I'll take in cash and redeploy elsewhere. What's really exciting to me is that this process can be repeated over and over. I could eventually own several stocks, drawing untold amounts in dividend income, that I have none of my own money tied up in!

I've known about this tactic for quite some time, just never put it into practice until now. While I probably won't make a habit of selling stakes in winning positions, it's good to have one more tool for the wealth building process. It's really true, the more you learn about stocks and investing, the easier it is to make money.