ABBV Update

Easy Income Strategy – Bought NNN and UAL plus ABBV ROTH Conversion

In my previous post I mentioned that I purchased another 50 shares of AbbVie Inc. (ABBV) in my traditional IRA. After reviewing the likelihood of continued growth in the stock price, I decided to convert all 200 shares of ABBV from my traditional IRA to my ROTH. As a result, there are 900 shares of ABBV in my ROTH account. They are currently worth just over $152,000 and yield 3.69%. The annualized dividend per share is $6.20, so the easy income from this investment is $5,580. In other words, we can withdraw these dividends without paying income taxes. In addition, all capital gains, if any, will be tax free. Furthermore, I can trade covered call options on these shares, and not pay income taxes on those gains as well.

Bear in mind that I will now have to pay income taxes on the cost of the ABBV shares. ABBV closed at $169.20/share yesterday, so I owe income taxes on $33,840. This conversion, however, spares me from a higher RMD for 2025. Keeping my traditional IRA balance under control is a wise tax planning strategy.

United Airlines (UAL)

UAL is a speculative growth investment. This airline does not pay a dividend. I purchased 300 shares of UAL on July 12 at a cost of $44.95 per share. As I said, UAL is more speculative, and I generally avoid airline stocks. However, I think United Airlines is undervalued at this time.

In addition, UAL is scheduled to report earnings today. This might present a selling opportunity if the shares bounce higher.

Be cautious and don’t buy shares if you cannot stomach some turbulence. There are issues the airline faces. “United Airlines flight attendants will vote whether to authorize a strike as “frustrations in contract negotiations” continue, the Association of Flight Attendants-Communications Workers of America said Tuesday. The union, which represents 28,000 United flight attendants, said the vote will open Aug. 1 and close Aug. 28 as Labor Day travel starts. The union said the flight attendants sought federal mediation eight months ago and have been working for three years under an amendable contract.” – MT NEWSWIRES 12:30 PM ET 7/16/2024

At the current price, I think the risk is worth the potential reward. Bernstein adjusted United Airlines Price Target to $68 From $72 and maintained an Outperform Rating. Berstein, therefore, rates UAL as a buy.

NNN Shares Purchased – NNN REIT, Inc.

NNN REIT invests primarily in high-quality retail properties subject generally to long-term, net leases. As of December 31, 2023, the company owned 3,532 properties in 49 states with a gross leasable area of approximately 36.0 million square feet and a weighted average remaining lease term of 10.1 years. NNN is one of only three publicly traded REITs to have increased annual dividends for 34 or more consecutive years.

I purchased another 300 shares of NNN. This brings our total share count to 1,700 with a current value of about $775K. The Ex-Dividend date for NNN is July 31, and the dividend per share will be $0.58. Therefore, we will receive $986 if I don’t sell shares before the ex-dividend date.

5 Year Growth Rate for NNN is not spectacular, as it is only 2.47%. However, there is no CD on the planet that has an interest rate growth and NNN’s Payout Ratio is a reasonable 68.92%. The Seeking Alpha QUANT rating for NNN is a buy at 3.92 and NNN has a dividend consistency rating of A+. That is easy income.

Covered Call and Cash Covered Put Option Trades

I continued to trade covered calls since my last update. My month-to-date income from covered call options trades stands at $4,063.75. Most of this income is in my traditional IRA, but some is from my ROTH. In addition, I earned $104.32 for a cash covered put option trade on NVDA shares in my ROTH IRA. A put option trade is another relatively safe way to earn income without owning the shares. The option expired worthless, which was good news. I got to keep the option premium but did not have to buy the shares because the share price never dropped to my contracted buy price.

As a result, my total MTD options income for July stands at $4,168.07. In June my total options income was $12,245.83. When you add in the dividend income for June ($21,867.22), the total income for June was $34,113.05. The easy income strategy June results alone more than covers all of travel costs for three trips this year, including Hawaii with a granddaughter, a trip to California to see my brother, and a trip we are taking this month to Montana.

Easy Income Strategy Reminder

The goal of easy income is to have consistent and often increasing income that requires little or no effort. When I buy any position, whether it is a stock or an ETF, I want to see gradually increasing dividends. Sometimes good news comes in groups, but that is, admittedly, rare. It really depends on the makeup of your investment portfolio. The best thing about a long-term investment perspective is that it requires very little time, effort, or maintenance. I don’t have to day-trade, sell covered call options, or even think about the ups-and-downs of a volatile stock market.

Recommendation

If you have less than $200K, don’t buy UAL shares. Focus on dividend growth ETFs like VYM, DGRO, and SCHD. Be careful about adding NNN to taxable accounts. It is better to own REITs in traditional or ROTH IRA accounts.