Someone recently sent me a message on StockTwits;
Intriguing strategy. Checked out your website and portfolio. What’s your time frame? Strategies for severe market downturn?
Allow me to attempt an answer;
First off, I’d like to thank you for the comment and I’d also like to apologize for the delay in responding.
Now I’ll try to answer your questions.
My timeframe is from now until I die because I’m, well, retired. Some stocks may not ‘live’ long enough to go the distance with me, and some may. As far as that’s concerned, my portfolio’s purpose is to provide dividend income, so that is why I am focused on dividend stocks. So far this year, I’ve received $12,644.51 in dividends (and interest). I ended 2014 with $26,910.38 for the year, which is higher than the 2013 total of $25,265.76 by $1,644.62, and quite a bit higher than my first year total of $14,146.33 for 2012, which is when I first transitioned to dividend investing for income. My projected annual income from dividends now stands @ $31.581.44, but just last week it was $35,106.36. The reason for the difference is that $MORL recently announced a May coupon payment (i.e.; dividend) that is considerably lower than April’s.
I’d like to point out what I post each weekend in one of my posts (#HYHRD: Show me the money! Ex-dividend and dividend pay dates as of w/e…);
Dividend paying stocks that I hold pay either quarterly or monthly dividends (I hold no annual or semi-annual paying dividend stocks). What this means is that while some stocks provide a steady monthly income for each of the 12 months in a year, some only pay 4 times each year. This should result in roughly 2 months of ‘slightly lower’ dividend payments, followed by one month of ‘substantially higher’ dividend payments, repeated four times each year. That’s in theory, only.
In reality; AGNC, MORL, O, ORC, and PGH pay every month. AI, CYS (mostly), LOAN, and NYMT pay in January, April, July, and October. BGCP, CYS (only December), NRF (only March), and VGR pay in March, June, September, and December. CNSL, DRAD, and NRF (mostly) pay in February, May, August, and November. Data is based on TTM dividend payment dates, and will probably change in the future (AGNC recently changed from paying a quarterly dividend to paying a monthly dividend). Confusing? You betcha! But, that’s what makes it fun, right?
You can see the varied ‘coupon payments’ for MORL here http://www.dividend.com/dividend-stocks/uncategorized/other/morl-etracs-monthly-pay-2xleveraged-mortgage-reit-etn/ if you scroll down, but please disregard the figure for yield because dividend.com figures it in such a manner as to be almost misleading. If you want the figure for yield without much caluclation, check out the Google Finance page; https://www.google.com/finance?q=NYSEARCA%3AMORL&ei=GeJNVbHqAYfEe9mcgXg for a much more realistic figure that takes into account the past three months and then annualizes those figures. Dividend.com recently showed 54.65% dividend yield, while Google showed a much more reasonable (and more accurate!) annual dividend yield of 23.28%.
But, I digress…
To sum up my answer to your first question I would have to say that my timeframe is governed by the dividends paid. If a stock was to stop paying dividends, then I would have no desire to continue to hold it in our portfolio. I would then most likely sell the stock, even at a loss if necessary, to free up capital to invest in stock(s) that are paying dividends. I don’t like to sell at a loss, but it is sometimes necessary. I try to minimize those times.
That’s why I continually screen for dividend stocks, and I’ve even started to screen for ETFs/ETNs, although I’m not sure if that will continue or not. I recently started to diversify slightly with an acquisition of a small starter position in $O, “The Monthly Dividend Company”. This new acquisition pays a considerably lower rate than most of our other holdings, but it is one that I have held before and it does have a good long history of paying and increasing monthly dividends. Diversification will probably continue later this year, and into next year and beyond.
This brings me to your second question about my strategies for a “severe market downturn”.
Lately it seems that there’s a “severe market downturn” every time a Fed official speaks, but as soon as they shut up there’s a recovery.
But, you might be talking about the raping that investors got as a result of excessive and criminal Wall Street greed a few years ago. Too big to fail certainly does not apply to me, and most probably not to you either. It only applies to those corporations that can afford to buy legislation. But, that’s a political discussion, and out of my control and certainly out of the scope of this post.
My strategies are simple and have already been at least partially stated; hold a stock as long as it continues to pay dividends, occasionally add more in order to get more dividends, sell when the price appreciation or portfolio re-balancing warrants it, DRIP occasionally, and continue to attempt to enjoy retirement.
If there is a downturn of sufficient severity one might be tempted to unload at much lower prices than those at which stock(s) were acquired. But, again, if they continue paying a comparable dividend why would I do that? I’d lose an income stream, and I’d like to think that I’m going to outlive the downturn so why not continue to collect a ‘paycheck’ every month or quarter and wait it out. Maybe some accumulation of cash in the accounts would enable me to judiciously purchase at depressed prices, adding to my income stream.
I must point out that while I hold a stock and it continues to pay me on a regular basis, even though the price of that stock might have declined, any perceived loss is unrealized but as soon as a stock is sold at a loss (or a gain!) then any unrealized gain or loss becomes a realized gain or loss! I would much prefer my losses to be unrealized and my gains to be realized!
I hope I’ve answered your questions at least partially, and I’d like to point out to you that last week’s posts (with the exception of the 2 ‘screening’ posts from yesterday (those are “this week’s” posts) can be found chronologically prior to this blog post, and this week’s (and beyond) posts can be found chronologically after this blog post.
There has recently been a minor change in one of my strategies (concerning DRIPs), and add that any strategy should be adjusted periodically to adapt to changing market and global conditions as well as personal needs. Another change I have been pondering of late is a change in my screening processes to accommodate lower yields and/or lower annual returns to get a wider selection of stocks on my watch lists. I will experiment more with that this weekend.
I also need to point out that I am not giving advice, because I am unqualified to do so, and nothing on this blog or in these posts thereon should be construed as such. You may consider this as entertainment, however. Also, YMMV!
Thank you again for your comment, and allowing me to posit on my portfolio.
Live long, and prosper!