Retirement Security: Confessions Of A Serial Stock Predator

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Time was when a woman not interested in a man’s approaches might say, “Flattery will get you nowhere.” In today’s confusing world, flattery might get you somewhere; to the unemployment line, to the shame and approbation of the town square, or worse yet, to the confines of a cold, damp and lonely jail cell.

The recent revelations about men, from Bill Cosby to Roger Ailes, formerly at the Fox News Network, to Hollywood producer Harvey Weinstein, to comedian, actor and producer Louis C.K., to Senator Al Franken and now news personality Charlie Rose, to Senator wannabe Roy Moore, have forced us to confront some pretty ugly truths.

Like dominoes falling, pressure is building on representative John Conyers to resign in response to multiple accusations of harassment, while NBC host of the “Today” show, Matt Lauer, joined the parade of those fired for sexual harassment.

The nation seems on the precipice of a very important moment as more and more women are gaining courage and feeling empowered to tell their stories publicly.

Questions Asked

source Phobia Wiki

All types of men, of all descriptions, from various backgrounds are asking questions.

There’s the skittish colleague (“If I ask a woman out at work, am I going to be reported for harassment?”).

The nervous cad (“Will one unfortunate hookup land me on a public list of ‘sh*tty men’?”).

And the vexing question underneath it all: “If we get so worked up about sexual harassment and assault, what will happen to sex?”

Source: Washington Post

It’s entirely possible that as today’s climate intensifies, it could intimidate even the most confident male to dial back his expressions of interest in the stronger sex for fear that his interest be interpreted as sexual harassment. You might laugh at this, but today’s climate carries the real and present danger of freezing budding relationships in their tracks. Less frequent dating could morph into lesser numbers of marriages and fewer resulting births. There was a time that we worried about a world population explosion. Well, today we might have a population implosion in the making.

Here’s My Story

Source: iStock

Long time readers know that my artistic proclivities led me to form a rock band by age eleven. In this article, I described how every penny earned was deployed into the stock market when my love of investing blossomed right alongside my love of creating music and performing professionally. When college came a ‘calling at the age of sixteen, I studied toward my ultimate professional calling, which eventually led to a graduate degree in clinical psychology.

In my senior year of college, I had completed all of my requirements to graduate, freeing me up to take as many electives as my heart desired. I really let my hair down and explored more of the arts. I studied piano, classical guitar, photography, and bowling (30 years later I came awfully close to rolling a perfect 300 game).

Then, I took the opportunity to delve into modern dance. One of only two males in a class of thirty women, it seems I had my choice, as it were. One young woman in particular caught my eye from across the large gymnasium floor where we danced and practiced. I pitched her with the idea of teaming up for the choreography and performance we’d be expected to complete for our grades. She accepted my entreaty and our dance partnership flourished.

I became enamored with everything about her. She was very bright, intellectually curious and had opinions about everything. I wanted to know more about her and to explore our relationship further.

I Asked Her Out

It seemed only natural to me to ask her out for coffee so we could get to know each other better. She declined. I asked her again at the conclusion of our next dance class. Again, she politely declined.

Rejection Didn’t Stop Me

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This went on, three times a week, after each class, for eight weeks. For anybody counting, this amounted to 24 separate attempts (or if you prefer, pestering). Today, this type of persistence might be labeled as sexual harassment. What eventually followed might never have happened had I not persisted. Thankfully, this lovely young woman did not regard my entreaties as harassment of any kind.

She saw it as an expression of my attraction to her and interest in getting to know her better. She finally relented, one fine day. She gave me her digits and said I could call. One thing led to another. As of today, we’ve been very happily married for over 43 years and we have experienced the joy of building a wonderful life and family together.

I’m A Serial Stock Predator

In the same fashion as I persisted in the pursuit of the young woman who would eventually be my bride, I am constantly on the prowl and in perpetual pursuit of stocks that have temporarily fallen out of grace. I’m a serial stock predator. When the crowd turns cautious on an otherwise fundamentally sound company, they sell and push the stock price down. As the price continues to fall, I lie in wait, placing limit orders at prices that will give me the yield and income that I demand from a position. I wait and I wait. And then I wait some more, until the stock simply falls into my lap.

I Like Cheap Dates And Cheap Stocks

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I’m cheap. I didn’t much care for the young women who wished to be wined and dined in the fanciest of restaurants. I didn’t feel it necessary to prove my bona fides by ponying up huge sums for a bite to eat. $25.00 martinis at an upscale club was not my style. I didn’t even like alcohol, even though my dad owned a liquor store in those days.

I much preferred a cheap date. Dinner in a local joint, an entertaining movie, a local concert; these were more to my taste. I was always more interested in value than glitz.

In the same way, today I search for value in my stock selections. I’d much rather pay less for a dividend stock than pay more. Whenever I pay less, the dividend yield is higher. Always.

What Do You Prefer, Higher Or Lower?

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Buying value in a dividend stock in the stock market always confers higher value in the dividend you receive. If a stock price is lower, you can either spend less than originally contemplated, or you can buy more shares. This correlation between lower price and higher yield is set in stone. It’s simple math. If followed religiously, the investor will ALWAYS be the beneficiary of higher yield and higher income, for life.

In the first case, you’d receive a higher yield on your invested money. In the second case, if you spent the same amount originally intended, you’d get more shares at the higher yield and even more income. Let me demonstrate.

The Case For Higher Yield

Source: att.com

Remember, just a few weeks back, when AT&T (T) was selling for just $32.60 per share?

Source: YCharts

As discussed in “AT&T’s Downward Spiral; What, Me Worry?” T has been under a great deal of price pressure, selling lower all year long. Investors are concerned about the implications of the merger with Time Warner (TWX). Some feel that adding billions of debt to the balance sheet will eventually sink the company. For this and other reasons, they’ve been abandoning their positions.

Most analysts, including this one, regard the proposed merger to be a vertical merger, one that adds content to a distributor and one that will add value for consumers and hold prices in check. The Department of Justice holds another opinion. They view the merger as one that will be anti-competitive, one that will add costs for the consumer. The DOJ has sued to stop the merger, and Randall Stephenson, AT&T’s CEO has sued the DOJ in response.

Many believe the DOJ move was a political one. Reflect upon candidate Trump’s vow on the stump to never allow this merger to go through. His conviction surrounding this issue could be tied to his oft repeated statements that CNN is “fake news” and as part of the news media, “the enemy of the people.” AT&T has proposed a February 20, 2018 court date, while the DOJ is aiming for one on May 7th, which would come after the deadline for the merger agreement passes. Perhaps they’re playing a game to work down the clock here.

AT&T offered up a seven-year ban on blacking out distributors from Turner programming. CEO Stephenson says it demonstrates their willingness to concede in getting its $85B acquisition to a successful closing. In essence, AT&T is making it known to the Justice Department that they will not prevent other content distributors from distributing Turner content. Stephenson is hoping this will demonstrate the lack of anti-competitiveness of this deal.

As a result of all of these issues and the uncertainties they create, T’s stock price has been under pressure for quite some time now.

Source: YCharts

Paying an annual dividend of $1.96 per share, we’ve had our eye on buying more shares for the Fill-The-Gap Portfolio as well as our subscriber portfolio. We placed limit orders at $32.60 and let them sit. At that price, we’d obtain a yield of 6.01% on our investment.

A Picture Of Yield Opportunity

Source: YCharts

Note how, since the financial crisis and Great Recession back in 2008, each time AT&T’s price rose, it’s dividend yield compressed. And after each of six large yield compressions, there was yet another opportunity when the yield expanded. The baseline yield has been close to the 4.75% to 5.0% level. This clues us into the higher yield opportunities that exist each time the share price falls.

For investors with portfolios that are constantly accumulating dividends, and for investors still working that have extra monies available to buy new shares, this is a pattern that can be exploited for its higher yield and higher income possibilities.

AT&T’s average dividend yield over the past many years is closer to 5%. It’s 52 week high price is $43.03. Buyers who bought at that higher price received a much lower yield:

$1.96/ $43.03 = 4.55% yield

Our purchase on 11/6/17 bought us a much higher yield:

$1.96/ $32.60 = 6.01% yield

What A Difference A Few Weeks Makes

Only three weeks later, AT&T’s shares have popped. Shares, as I’m writing this, are changing hands at $36.53. What will today’s buyer receive in yield?

$1.96/ $36.53 = 5.36% yield

Not only have we and our followers and subscribers achieved a yield that is 12.13% higher than today’s buyer, we have also been the happy recipients of capital appreciation on the order of 12.05% in just three weeks time, or $393.00 on our latest 100 share purchase.

The Case For Additional Shares

Let’s now imagine that we had $3653.00 available to invest three weeks ago. At the price of $32.60 per share, our $3653.00 stake would have bought us:

$3653 / $32.60 = 112 shares

With that same stash available for investment, today’s buyer could buy just 100 shares:

$3653.00 / $36.53 = 100 shares

Buying three weeks ago when the price was very depressed, with the same amount of money could have bought 112 shares instead of just 100 shares today.

The Case For Greater Income

100 shares X $1.96 = $196.00 annual dividend income

112 shares X $1.96 = $219.52 annual dividend income

Patience, persistence and stalking of your prey could bring you $23.52 of additional income on the same amount of dollars invested. This is equivalent to 12% more income per year on this one small investment. Practice this religiously and you can look forward to 12%, 15%, even 20% more income than your impatient neighbor, friend or colleague at work who are constantly chasing prices higher in this bull market that sets new high records almost daily.

If you’re working with a $50,000 portfolio, all invested at an average 4.55% yield, you’d be generating $2275.00 in annual dividend income.

Invested at a 6.01% yield, you’d generate $3005.00 per year.

Have a $500,000 portfolio? Instead of taking down $22,750.00 per year, you could be bringing home $30,050.00 in annual dividend income.

Do you think it’s worth the wait, to plan your target entry prices in high-quality stocks in order to generate $7300.00 more income per year from your hard-earned savings?

The Icing On The Cake

Source: Theplasticsurgerychannel

Though our primary focus is always on the income we generate, we are not oblivious to the total return aspect of investing. It is my contention that high quality dividend companies that grow their earnings attract both types of investors; income investors for the dividend income they produce, and capital gain investors for the higher stock prices that higher earnings always confer over the long term. It is this relationship that allows us to have our cake and eat it too, along with that icing.

It is with high-quality companies such as these that we will continue to build, grow and protect dividend income for our retirements.

The Fill-The-Gap Portfolio

The FTG Portfolio contains a good helping of dividend growth stocks, like AT&T, which has been in the portfolio for a good length of time. It was built with the express purpose of benefiting from this and other strategies.

Two and a half years ago, I began writing a series of articles on December 24, 2014, to demonstrate the real-life construction and management of a portfolio dedicated to growing income to close a yawning gap that so many millions of seniors and near retirees face today between their Social Security benefit and retirement expenses.

The beginning article was entitled, “This Is Not Your Father’s Retirement Plan.” This project began with $411,600 in capital that was deployed in such a way that each of the portfolio constituents yielded approximately equal amounts of yearly income.

The FTG Portfolio Constituents

Constructed beginning on 12/24/14, this portfolio now consists of 21 companies, including AT&T Inc. (NYSE:T), Altria Group, Inc. (NYSE:MO), Consolidated Edison, Inc. (NYSE:ED), Verizon Communications (NYSE:VZ), CenturyLink, Inc. (NYSE:CTL), Main Street Capital (NYSE:MAIN), Ares Capital (NASDAQ:ARCC), British American Tobacco (NYSE:BTI), Vector Group Ltd. (NYSE:VGR), EPR Properties, Realty Income Corporation (NYSE:O), Sun Communities, Inc. (NYSE:SUI), Omega Healthcare Investors (NYSE:OHI), W.P. Carey, Inc. (NYSE:WPC), Government Properties Income Trust (NYSE:GOV), The GEO Group (NYSE:GEO), The RMR Group (NASDAQ:RMR), Southern Company (NYSE:SO), Chatham Lodging Trust (NYSE:CLDT), DineEquity (NYSE:DIN), and Iron Mountain, Inc. (NYSE:IRM).

Because we bought most of these equities at cheaper prices since the inception of the portfolio, the yield on cost that we have achieved is 7.57% since launch on December 24, 2014.

Due to our recent purchases of additional shares of AT&T at fire sale prices, current portfolio income now totals $31,502.46 annually, which is $392.00 more annual income than just last month. This represents a 1.95% annual income increase for the portfolio.

When added to the average couple’s Social Security benefit of $32,848.08, this $31,502.46 of additional supplemental income brings this couple annual income of $64,350.54. This far surpasses the original goal set to achieve a total of $50,000.00, which is accepted as a fairly comfortable retirement income in many parts of the country. That being said, this average couple now has the means to splurge now and then on vacation travel, dinners out, travel to see the kids and grandkids and whatever else they deem interesting.

Taken all together, this is how the FTG Portfolio generates its annual income.

FTG Annual Dividend Income

Source: author spreadsheet

Your Takeaway

Flattery is one thing. Sexual harassment is quite another.

Sublimation of certain proclivities and characteristics can be turned toward the good. The predatory characteristic exhibited by those in power can be sublimated in the world of investment into a trait that hurts no one, yet brings the investor great rewards.

Exercising discipline, aided by historical guidance, patience can be greatly rewarded by both long-term capital gains as well as increased yield and income.

Income investors should pay particular heed to this since, if practiced regularly throughout an investment career, it can have an enormously beneficial impact on ultimate income available in retirement.

Final Thoughts

Investors who dismiss the pernicious effects of inflation do so at their own peril. The pervasive loss of purchasing power that it inflicts can turn a comfortable $500,000.00 nest egg into a scrambled egg, just 20 or 30 years into the future. Monetizing your assets and investing to stay ahead of inflation will keep this bogeyman away.

Our subscriber portfolio uses these and many other strategies as we actively manage it on an ongoing basis to generate steadily growing, reliable income for retirement. In addition, subscribers get the benefit of instant free texts and receiving material days before the public in addition to many exclusive articles, updates, commentary and analysis throughout the week. If you’d like a taste of even better performance and faster dividend growth, before the free two-week trial offer expires, I encourage you to try it before you buy.

Author’s note: Should you be interested in reading any of my other articles detailing various strategies to enhance your returns on a dividend growth portfolio, you will find them here.

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As always, I look forward to your comments, discussion, and questions. Do you stay on the lookout for bargains like these? Are you able to recognize that different types of investors have different motivations that might lead them in the opposite direction than you? Are you able to run counter to the crowd to grab accidentally high yield opportunities? Please let me know how you approach these situations in your own portfolio and how you arrive at your decisions.

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Disclaimer: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.

Disclosure: I am/we are long ALL FTG PORTFOLIO STOCKS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.