Leveraged Income Experiment

[George the original one]

@jennypenny - it was only 4 days ago that I was pondering TICC as a sell. My expectation was for the price to rise as we come to ex-dividend, but Mr. Market has proven to be contrary to my expectations. secretwealth reminded me to check book value, which was a solid reason to buy. Buying at book value and collecting a dividend at that price seems to be a good value.
If TICC's price had risen $0.30-0.40 above book value, then I would have sold.
***

Reviewing two years of dividend growth in this portfolio (for the stocks I've held most of that time):

ARCC +22.8%

TICC +20.8%

OHI +18.9%

PNNT +7.6%

[George the original one]

December 2012

https://docs.google.com/spreadsheet/ccc ... y=CMHbguoK
As noted in the thread, I did some horsetrading. Got the dividends for extra shares of TICC, sold them for small profit plus a little ARCC, and bought AGNC before it went ex-dividend.
This action created a significant bump in December income and rebalances January income. Hopefully AGNC will be stable enough that I can ignore it for awhile again.
ADC continues to have a strong market price. I'd hoped to get another 100 shares, but the current valuation is more than I'm comfortable buying.
Edit: oh, yeah, forgot to mention XIRR for 2012 is 31.9% (!)

[George the original one]

I can't help myself... I'm addicted to increasing income (which brings up the question of how/when to exit this portfolio, a topic for later discussion).
I know I wrote that I was going to sit back and collect income for a while, but Mr. Market gave me a healthy dose of excess liquidity last week, so I turned some of it into 100 shares of GOOD. That's equivalent to a 3.8% cost of living increase. And since GOOD pays monthly, the purchase doesn't upset the monthly balances.

[George the original one]

11 Jan 2013 - Time for a little celebration as Mr. Market has been tremendously generous these past two weeks.
Usually I just talk about the income it generates, however the portfolio closed above $27k for the first time today, which is 50% more than I've put into it.

[secretwealth]

BKCC and TICC have been doing very well--I hope this keeps going. Jan '13 is looking a lot like Jan '12, so I expect a rising tide for a few days to come.

[GPMagnus]

George - it's a pleasure to read this thread and your enthusiasm is awesome!
Keep it going!
Magnus

[George the original one]

Jan 30 - Trimming time. Minor slowdown in economy coupled with relatively high valuations compelled me to sell all ADC and half the PNNT since they were both ex-dividend.
ADC is +20%, yielding only 5.6% at current price, and doesn't provide dividend growth, so it's an easy one to trim from the portfolio at this time.
Trimming PNNT may not make sense, except that it's ex-dividend and the economic climate is souring.
There's plenty of time to evaluate the other positions and they've not yet fallen to my stop loss alert level.

[George the original one]

January 2013

https://docs.google.com/spreadsheet/ccc ... y=CMHbguoK

[secretwealth]

George--I know we're inbetween updates, but two years into this experiment it seems pretty clear that this strategy works. Are you considering adding more to this account? By my reckoning, you're earning about 23% monthly income on your deposit--if you bumped this account up to $100k you'd be getting almost $2k/mo., which is more than enough for any EREr.

[George the original one]

I have daydreams, but... I also have doubts. And that's why there's about $10k of excess liquidity right now. Apart from the current market highs, I still haven't figured out a suitable way to mitigate the risks from buying at the high points of the market.
I have to say, I'm not used to leaving the liquidity unused. It is very hard to leave it sitting.
So overall I'm comfortable with the status quo (account value was over $29k on Tues, so the market has been pushing us very high, very fast). What might cause me to take a bigger plunge is if I see a good buying opportunity.

[thebbqguy]

I have enjoyed your experiment. I don't know if it was intentional or not, but since 2010 dividend investing has been on rocket fuel. Bond prices were so low and people were skittish about investing full bore back into non-dividend paying growth equities.
The party will probably slow down eventually, but kudos to you for your willlingness to experiment.
I purchased Pfizer during this timeframe for $18 and the current price is around $27. Plus, it pays a pretty good dividend. My goal was to earn more money than the pittance my savings account pays. Here's a 2 year chart: http://finance.yahoo.com/echarts?s=PFE+ ... =undefined;
My broker actually talked me out of several REITs over concerns that interest rates would be rising and the value of the investment would fall. That was almost 4 years ago. It looks like my broker and his conservative brokerage firm were wrong in their prognostications.
The closest I've ever been to leveraged investing is taking out several credit cards with 0% introductory offers and investing the funds in my employers MMA that at the time paid nearly 3% (no FDIC guarantee). That experiment worked out for me, but it made my wife nervous.

[George the original one]

@thebbqguy - Dividend income, particularly dividend growth income, has been a deliberate choice since 2008.
> That experiment worked out for me, but it made my

> wife nervous.
LOL. My wife calls the investments "fake money". To her, real money only comes in checks and savings accounts. She is highly loss averse, but also knows that risks are rewarded.
Thankfully, for both our stress levels, she's very trusting of my investing ability.

[George the original one]

February numbers are in:

https://docs.google.com/spreadsheet/ccc ... y=CMHbguoK
Getting itchy to even out the predicted monthly income, I bought 100 AGNC the day before they offered more shares. Fortunately the price drop was not significant, so my lack of patience wasn't punished too severely.
There's still about $6,500 of unused equity. I plan on using it to bolster February income first and then January income if I see an opportunity.

[secretwealth]

Thanks, George--I always look forward to the updates. Do you think GOOD or OHI is a good buy at current levels? I've been wanting to get into long-term healthcare and non-retail commercial real estate for a while, and I've been eyeing both stocks for months.

[George the original one]

GOOD is reasonably priced. OHI less so (my preference would be to purchase it when yield is 7% or higher), but it is definitely the most favorable of the long term care firms (compare SNH, LTC, UHT) in terms of getting paid for the risk.
In fact, if you look at dividend growth and tax treatment in a taxable account, LTC & UHT are currently worse investments at this time than a good utility like AVA (or even a mediocre utility like PPL).

[dan23]

Nice results. Looks like current XIRR of about 26% (assuming inflows/deposits are first day of the month and end balance last day of the month). You should add a XIRR of latest month to the spreadsheet (even better would be for every month but I am not sure of an easy way to do that).

[George the original one]

@dan23 - overall XIRR since inception is 26.9%.

[George the original one]

Depending on how you look at it, I've either lost my patience or ended analysis paralysis
Added 200 NRP and 200 JCS today.

[secretwealth]

I'm shadowing NRP; of course, if it goes down, I'll blame George 110% for my losses.

[George the original one]

@secretwealth - I trust you realize my picks for this portfolio are designed for income rather than capital growth and remember that I was wrong about NRP once!