NICE RUN IN THE STOCK MARKET!

WOW!  It's been a nice couple of days for the stock market :0).  While you tell yourself a real investor stays with the market in good times and bad, it is nice to see some upward movement for a change.  How long it will last is another story.

Collected some nice dividends from AGNC and NLY today.  Using that money to purchase shares in dividend paying utilities.  Like I mentioned in an earlier article, I expect them to do well as long as interest rates remain low.  So I'm willing to put my money where my mouth is in this case.

I'm on a new schedule at work, so tomorrow is my last day of work for this week.  Looking forward to some R&R this weekend.

SELLING BTI, BUYING CHIMERA

I decided to sell my stake in British American Tobacco and take the profit of 34.75%.  While I believe BTI would make a good long term holding, I also own shares of PM and MO and decided to reduce my investment in the tobacco industry. 

I'm taking the money from the sale of BTI and reinvesting it in a Chimera Investment Corp. (CIM:NYSE).  CIM is a REIT with a dividend yield of 13.83% on their recent price of $4.05.  While I am aware of the risks of investing in REIT's in a market with increasing interest rates, I'm primarily seeking extra income from the higher yield on dividends (dividend income from CIM is more than twice the yield of BTI).  With CIM being much lower in price and having great financials, I'm also looking for some upside potential here.  If I do make a decent gain on share price, I would most likely pull out my initial investment and keep the remaining shares as one of my "free stocks" for the dividend payout.  Otherwise, I'll draw the dividends, monitor it closely for any ill effects from interest rates and if the price should start to decline, I'll move the money elsewhere. 

FOLLOW UP ON ANNALY MORTGAGE MANAGEMENT

My sale of Windstream shares and purchase of Annaly Mortgage Management are complete.  Looks like I may be positioned to collect my first dividend payment from Annaly (NLY) either by the end of this month or sometime around the first part of 2011, depending on the ex-dividend date.  Either way I stand to collect over three times as much in dividend payments as I was making with Windstream.  As long as interest rates remain favorable I should be able to hold shares of the REIT for quite a while and continue collecting the increased dividend income.  At the same time I'll still be collecting a nice dividend payment from Windstream (WIN) shares that were paid for out of capital gains.  Was also able to keep back some of my original cash investment to hold as a reserve in my money market account, should I need the extra cash or find another investment I'd like to take advantage of. 

AGNC NEWEST ADDITION TO STOCK PORTFOLIO

Looking to boost overall cash flow from dividends I've decided to add American Capital Agency Corp (AGNC: NASDAQ) to my taxable investment account.  AGNC is a real estate investment trust which earns income primarily from investing in residential mortgage pass-through securities and collateralized mortgage obligations. These investments consist of securities, for which the principal and interest payments are guaranteed by United States Government-sponsored entities, such as Fannie Mae and Freddie Mac or by a United States Government agency, such as Ginnie Mae. The Company is externally managed by American Capital Agency Management, LLC, a subsidiary of a wholly owned portfolio company of American Capital, Ltd.

AGNC has a price to earnings of 4.01 with a ROE of 34.17.  They have earnings per share of $6.84 with a dividend of $5.60, which represents a return of 19.55% on their recent share price of $28.64.

I have to admit a bit of trepidation about investing in AGNC after previous experiences with REITs.  However their reported earnings seem to indicate support for their current dividend and their share price has remained fairly stable during the past year, with their 52 week high being $30.09 and their 52 week low of $23.61.  Since the total initial investment I'll be making is a small fraction of my portfolio, I believe the risk is acceptable for current returns.  The fact that they've managed to thrive during one of the worst economic downturns in this writers memory is yet another positive as far as I'm concerned. 

This Week's Trades

Decided to take advantage of Universal Insurance (UVE) 11% dividend yield and pick up some more shares for my taxable portfolio. UVE is a long term holding in my regular portfolio and my IRA. Also decided it might be time to have a look at REITs again. With real estate turning around and several companies gearing up to pick up distressed real estate investments, thought it might be good to shop around. I've decided on Capstead Mortgage (CMO), one of the real estate trusts that has survived the turmoil of the past few years and seems to be on track for recovery. Their dividend yield is currently 16.30%, which is enticing in its' own right, but I chose them mainly for their experience. They've been in business for quite some time and I figure if they could survive the past year and keep their dividend intact, then they're likely a pretty good bet going forward.

Still building cash, but things are looking up on the job front, so I may soon be deploying excess cash in my stock portfolios. Even though I'm not happy with things on the political front, I believe that the stock market and the American economy can overcome a lot of idiotic moves by our nations politicians. And there's always the hope that they'll be voted out and replaced with people who have show a little more fiscal responsibility.