There Are Usually Several Reasons I Buy
Although my primary, and usually default investment strategy is dividend growth, that does not mean I don’t have sub-strategies. Dividend growth is the backbone of the portfolio, but there are some ribs as well. One rib is connected to trading stock options and is a bit more speculative, and therefore, higher risk. Another rib is pure speculation and very high risk. Year-to-date I have purchased eighteen investments. This, of course, does not mean that I have only executed buy orders. I have also sold some positions or portions of some holdings.
Ticker Symbols Purchased
Here are the ticker symbols of the buy orders: BNL, CGBD, CVX, GLYC, GSL, GTY, IBM, JEPI, MULN, NLCP, NNN, OGI, PNNT, SAVA, SCM, SELF, SPYD, and TSLA. Of these, three 100-share positions were obtained using cash covered put options: CVX, IBM, and SAVA. Some of these were the start of new positions: BNL, JEPI, NLCP, and TSLA. Most were additions to investments already in our investment portfolio.
Dividend Announcements for PNNT and GLW
One thing I do every week is review all dividend increases using the online version of Barron’s or the Wall Street Journal. I saw that both Corning (GLW) and Pennant Park (PNNT) announced dividend increases. Because I own shares of both investments, I then look to see if I want to buy more. I already had 500 shares of PNNT, so I bought another 500 shares. This brings my total investment to 1,000 shares. However, this is still a relatively small investment. I only have about $5,760 invested in PNNT. This is much less than 0.2% of our total investment portfolio, so our risk, in my opinion, is small. If I hold less than one percent of an investment, the impact on the portfolio is going to be minor to the downside and to the upside. This is just for income.
PennantPark Investment Corporation is a BDC. I looked at PNNT’s dividend history, profitability, earnings history, P/E ratio, valuation, and its QUANT ranking in the industry. The industry is “Asset Management and Custody Banks.” It is a financial sector investment. The following images show more of what I looked at before adding 500 shares.
This business development company is a private equity fund specializes in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The fund typically invests in buildings and real estate, hotels, gaming and leisure, technology, telecommunications, transportation, information technology services, electronics, healthcare & pharmaceuticals, education and childcare, financial services, printing and publishing, consumer products, business services, energy & Related Services and utilities, distribution, oil and gas, media, environmental services, aerospace and defense, building materials, capital equipment, chemicals, plastics, & rubber, food & beverage, wholesale, manufacturing and basic industries and retail. It invests in equity securities and debt transactions through preferred stock, common stock, warrants, options, senior secured debt, subordinated debt, subordinated loans, first lien debt, mezzanine loans, and distressed debt securities and private equity co-investments. It seeks to invest in companies based in the United States. The fund seeks to invest between $10 million and $100 million cross the capital structure (senior secured loans, subordinated debt, and other investments) in its portfolio companies with EBITDA between $10 to $50 million. Its mezzanine loans, senior secured loans, and other investments in its portfolio companies are between $15 million and $50 million. The fund may also make non-control equity and debt investments.
Why Did I Buy CVX, IBM, and SAVA?
These three fit with my 2023 strategy of selling more put options with the goal of getting the shares so that I can sell cash covered puts on the shares. Both IBM and CVX pay dividends, so I get paid to wait until my shares get called away at a profit. SAVA, however, is much higher risk, but it can become profitable very quickly. It can also be a huge loss. I will be using the “Wheel Options Strategy” for these three investments.
Why Did I Buy Tesla (TSLA)?
Generally speaking, I think Tesla is a very aggressive growth stock. Therefore, because TSLA does not pay a dividend, and tends to be very volatile, I don’t recommend it for the dividend growth investor. However, by buying shares, and then selling covered call options, I have made $2,736 in the last six weeks from TSLA options. Over $1,500 of this income was from cash covered put options. One covered call option trade added $824 in income to my traditional IRA.
These are like “synthetic dividends.” Other investors are paying me for downside price protection (puts) and other investors are paying me for upside price opportunities (calls.) Although TSLA does not pay dividends, it doesn’t mean I have to sell my shares to get income from my shares.
The Dividend Investments
Thirteen of the buys this year are stocks or ETFs that pay a dividend. IBM, NNN, and CVX have all been paying a growing dividend for longer than my oldest granddaughter has been alive. Some of the dividend investments are high yield, not growth investments. There are REITs in this mix, including NNN, SELF, GTY, and BNL. BNL is a new addition to my REIT portfolio and I plan to buy more shares.
A Complete List
Here are all of the buys that I have completed. This shows the number of shares I purchased and the prices I paid. Notice a couple of things: First of all, I bought 100 shares of IBM the “normal” way and another 100 shares of IBM using a cash covered put option. Notice too that I have been buying shares gradually. I don’t buy the full amount I want with each order. For example, I plan to buy more of SELF, NCLP, and BNL. Be careful to read the color-coded notes at the bottom of this table. The final column shows some important notes including the shares acquired using put options. JEPI and SPYD are both ETFs that pay dividends.
Caution in Closing
Do not buy an investment “because Wayne bought shares.” Not all investments are appropriate for every investor. If you are new to investing, you should not be buying shares of SAVA or TSLA unless you understand the risks you are taking.