The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘PG’

Procter & Gamble (PG)

Posted by mounddweller on April 21, 2018

Fellow Investors,

PG is not in my ‘top 10’ watch list for Dividend Kings simply because its revenue and dividend growth rates have been slowing while other Dividend Kings have not. However, most of the stocks in my ‘top 10’ watchlist are also far above my target buy price. PG is currently substantially below my target buy price. Thus, I am taking another look at PG.

To determine a target buy price for stocks to add to my long-term holdings portfolio I compute annual high/low dividend yields for the past 10 years and then average the annual high yields. Taking the current annual dividend and dividing it by the 10-year average high yield gives me a target buy price.

Let’s look at how this plays out with PG. PG has a 10-year average high yield of 3.5%. With the recently announced increase in the dividend in 2018 PG will pay out a total of $2.84 per share. Thus, my target buy price for PG would be $81.14.  PG closed on Friday at $73.80, a 9% discount to my target buy price.

PG’s highest dividend yield in the past 10 years was 4.05% which occurred in 2015. PG’s dividend yield for 2018 is now 3.84%, thus, higher than the 10-year average but not quite as high as available at its lows in 2015. That’s what makes PG an interesting potential buy at current prices. You get a blue-chip stock with a 62 year history of annual dividend increases at a dividend yield that exceeds its 10-year average high yield. In my mind the low price/high yield makes up for the slower growth rate relative to some of its other Dividend King peers.  Its dividend growth rate, while slowing over the past 3 years, still exceeds the rate of inflation.

Given the downward trend in price I will likely hold off for a while longer but anything below $70/share will be very hard to resist.  At $70/share the dividend yield would exceed 4%.

Best Regards,

Troy

 

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May 2014 – Results

Posted by mounddweller on June 1, 2014

Fellow Traders,

My results in May were kind of a mixed bag.  I had some trades that worked well and others that didn’t.  The frequency of my trading was impacted by several factors:

(1) responsibilities at my day job increased and so I have less time to follow my trades during the day,

(2) my personal life has also become more hectic, and

(3) the seemingly irrational movement down in volatility means premiums are very low and thus the risk/reward ratio does not seem favorable to me.

With that as a back-drop let’s look at the results of the trades I did make this month.  First, let’s look at the closed trades.

(1) Coca Cola (KO) – I am building a long-term position in KO.  While accumulating shares using dividend reinvestment I also want to be opportunistic in selling CCs against my existing shares and selling NPs until assigned to acquire additional shares.  On 4/16 I sold MAY $40 calls at $0.82 believing that KO had peaked and was destined to head back down for a short period of time.  Unfortunately, this was not the case and so on 5/14 I had to buy back my MAY $40 calls at $1.14 to avoid having them called away.  This resulted in a loss on the trade.  I am planning on re-entering the trade again when it appears KO has peaked and is ripe for a short-term fall.

(2) Kinder Morgan (KMI) – Like KO, I want to build a long-term position in KMI.  I feel KMI is a bargain at current price levels.  Consequently, for the past several months each time KMI approaches $32.50 I sell puts at this strike price.  On  4/25 I sold MAY $32.50 puts at $0.50.  These puts expired OTM on 5/14.  Thus, net of commissions my ROIC was 1.45% with a holding period of 22 days.

(3) Family Dollar (FDO) – I have made a couple of trades in FDO in the past 3 months.  Both were profitable.  My latest trade was initiated on 3/21 when I sold the APR $57.50 puts for $0.96.  As many of you are aware FDO has been volatile these past several months due to lackluster performance and rumors of them being bought.  Consequently, I had to roll my position down and out to the MAY $55 puts.  These MAY $55 puts expired OTM on 5/17.  My ROIC on this trade in FDO, net of commissions, was 1.38% with a holding period of 57 days.

(4) Franklin-Templeton (BEN) – Like FDO, I have made a couple of trades in BEN these past few months.  Both were profitable.  My latest trade was initiated on 4/7 when I sold the MAY $50 puts at $0.70.  These puts were never in danger of becoming ITM and expired OTM on 5/17.  Net of commissions, my ROIC was 1.32% over a holding period of 40 days.

(5) Lowe’s (LOW) – I initiated my trade in LOW back on 4/7, selling the MAY $46 puts at $0.75.  On 5/6 I had to buy back the MAY $46 puts and ended up selling a higher quantity of JUN $44 for a net credit.  On 5/23 I was able to buy back the JUN $44 puts for $0.19, thus closing out the trade early.  My ROIC, net of commissions, was 1.99% with a holding period of 46 days.

(6) Procter & Gamble (PG) – This was my very first Bollinger Band (BB) strategy trade.  The basic premise of the strategy is to buy stock and/or sell NPs as a stock is bouncing off it’s lower BB.  PG seemed like the perfect set-up and a low risk trade for my first attempt at mastering this strategy.  PG hit and bounced off it’s lower BB on 5/21.  On 5/22 I bought shares of PG at $80.20.  Looking at the chart I believed PG would be able to make it back up to the middle of the BBs (essentially the 20-day MA).  Alas, this was not the case.  The stock’s rise stalled out before even hitting $81.  Not wanting to risk large losses I sold my shares as soon as it became apparent to me that the trade wasn’t going to work out.  On 5/27 I sold my shares in PG at $80.27.  Net of commissions I lost about $10 on the trade.

(7) Exelon (EXC) – Yes, believe it or not I am out of EXC with a profit!  Long time readers of my blog will know that I’ve been working my way out of this position for a very long time.  This trade actually started in APR 2010 by selling puts at the $42.50 strike.  A lot has happened since then.  I’ve collected four years of dividends, sold CCs and NPs numerous time and have had stock put to me and called away at least once each.  Through all of this I was able to reduce my net cost.  Finally last month, prior to EXC going ex-dividend, I sold CCs at the $35 and $36 strikes.  A portion of my shares were called away from me at $35 by someone wanting to capture the dividend.  The $36 CCs expired OTM.  I will be receiving the dividend on these shares.  It should hit my account later this month.  Then, this past week, I sold all of my remaining shares at $36.10.  The final result will be a ROIC of around 12% but the holding period is just over 4 years so the annualized return while beating US Treasuries is nothing to brag about.  What I will brag about though is that I refused to give in and exit the position at a loss.  By selling NPs and CCs when the opportunity presented itself and collecting the dividends over time I was able to successfully exit the trade.

(8) Microsoft (MSFT) – On 5/6 with MSFT at $39.06, I sold the 30MAY $38 puts at $40.  This past Friday those puts expired OTM.  My ROIC was 0.98% with a 24-day holding period.

Now let’s look at the new trades I opened this month.

(1) Back on 5/12 I expanded my long position in $VIX JUL $14 calls.  I bought 2 more calls at $1.95.  Thus far this trade isn’t looking very good.  The market continues to defy gravity by going higher while driving the VIX lower and lower.  The long expected summer slump has yet to occur.

(2) Lastly, I sold more puts on EXC.  I know, I’m stupid.  I can just hear you saying, didn’t you just get yourself out of a long-term losing trade in EXC.  Yes, I did.  However, in this case the market is moving in my direction.  When I originally opened my trade in EXC back in 2010, I thought the stock was bottoming out.  Alas, it continued to fall much further than I thought possible.  This time, I waited until I was sure the market was moving in my favor.  Back on 5/20 I sold the JUN $33 puts at $0.35.  EXC was trading at $34.04.  Friday, it closed at $36.83.  Thus, I should be able to buy to close my puts for pennies on the dollar in the coming week.

Well, that’s it for this month.  As I mentioned at the beginning of this post, I have slowed the pace of my trading substantially.  Put premiums are extremely low right now.  I’m keeping my ‘powder dry’ until things pick back up again.

Best of luck to all my trading friends in the coming month!

Regards,

Troy

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March 2014 Results

Posted by mounddweller on April 3, 2014

Fellow Traders,

Better late than never I always say.  Other responsibilities have kept me from compiling and communicating the results of my trading during the month of March.

In March I closed out 6 trades with a net profit of $1,084.20.  The 6 trades required $72,835 in capital which means my ROIC was 1.488%.  The average holding period was 42 days.

I closed out NP trades in 5 stocks and 1 CC.  The NPs were:

(1) BEN MAR $50 puts expired OTM,

(2) KO MAR $37 puts expired OTM,

(3) WMT MAR $7.50 puts expired OTM,

(4) FDO MAR $60 puts expired OTM, and

(5) PG MAR $75 puts expired OTM.

My CC trade was in AT&T (T).  Back in January I had purchased 500 shares at $34.97 and sold CCs to capture the dividend.  The calls expired OTM and I received the dividend.  I then sold another round of calls and also sold puts at $33 and $32.  I closed the position last week after both my puts and calls expired OTM by selling my stock at $34.86.  All in all, it turned out to be a good trade.

I also have a few trades that rolled over into April.  I rolled my KMI $32.50 puts out from MAR into APR.  I also have pen NP trades in CSCO and TGT.  I am short the APR $21 and $57.50 puts respectively.

My only new trades in MAR that remain open are FDO APR $57.50 puts and my most recent trade which occurred back on 3/27 where I STO NKE APR $72.50 puts at $0.75.

With just over two weeks left before APR expiration I am keeping an eye on a couple possible trades:

(1) STO ABT APR $37 puts at $0.30 or better, and

(2) STO KO APR $37 puts.

 

Well, that’s it for the month of March.  Unless something big happens in the next couple of weeks it looks like I’m not going to have much to write about in April.

Best of luck to all my trading friends.

Regards,

Troy

 

 

 

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Portfolio Update – September 2013 Results

Posted by mounddweller on September 30, 2013

Fellow Traders,

The 3rd quarter is officially history.  Given the impact of a so-so economy and the political antics in Washington it should be interesting to see how we finish out the year.  Most of what I’m currently reading says to look for a big run-up to the end of the year after Congress gets done trying to get our attention on the budget debate and the debt ceiling.  Stay tuned it should be interesting!

Enough of that, let’s take a look at how The Money Tree made out this month.

Number of Closed Positions: 9

Profit on Closed Trades: $1,418.22

Total Capital Used on Closed Trades: $91,073.63

Average Number of Days Trades Were Open: 124.7*

Return on Invested Capital: 1.56%

You’ll note the average number of days trades were open is much higher than usual.  That’s because I finally closed out my position in SUNE (formerly WFR).  I had that position for well over 2 years.  We’ll talk more about SUNE later in this article.  Excluding SUNE, the remaining 8 closed trades had an average holding period of 33 days.

Let’s dig a little deeper into these 9 closed trades.  Seven of the nine closed trades involved naked puts.  The remaining two were covered calls.  All nine closed positions were the result of the options expiring OTM.  I had puts expire in ABT, CAT, CCJ, EXC, LNCO, MSFT, and TEVA.

I sold the ABT SEP $34 puts when the underlying was trading at $35.29.  ABT continued to fall and was ITM for some time before recovering and finishing OTM.

I sold the CAT $80 puts for $0.72 when the underlying was at $82.38.  At expiration CAT was at $84.75.

While CCJ was at $19.54 I sold the SEP $19 puts for $0.50.  At expiration CCJ was at $19.38.

I sold the EXC SEP $30 puts at $0.60 when Exelon was at $30.20.  The puts expired OTM with EXC closing at $30.13.

LNCO was at $25.55 when I sold the SEP $24 puts for $1.30.  At expiration LNCO closed at $29.04.

My trade in MSFT also turned out well, I sold the SEP $30 puts at $0.25 when MSFT was at $31.42.  They expired OTM with Microsoft trading at $32.79.

My final NP trade involved TEVA.  As regular readers know, I’ve been trading this one for several months now.  Once again I sold the SEP $37.50 puts; this time for $0.50.  At the time TEVA was trading at $38.81.  At expiration it closed at $37.72.  If you haven’t taken an opportunity to look at TEVA before, I highly encourage you to do so.  I’ve been trading it since late April and it has treated me very well.

Now let’s look at my two covered call trades.  First up is my trade in KO.  Back on August 23rd I bought KO for $38.42 and concurrently sold the SEP $39 calls for $0.34.  On September 12th KO went ex-dividend making me eligible to receive the $0.28 dividend.  With KO trading at $38.94 on expiration day I decided to roll my calls out into OCT.  Doing so gave me an additional net credit of $0.62.

Last, but certainly not least is my covered call trade in SUNE (previously WFR).  Long time readers know I’ve been in this position for quite some time.  NO MORE!  I closed out my SUNE trade on 9/25.  Over the course of 2+ years I had managed to work my net cost basis in SUNE down from $10 (the strike price of my original puts) to $7.74.  After my SEP $9 calls expired OTM I decided to keep a close eye on SUNE and sell my shares at $8 or better.  Last Wednesday, I got my chance and sold SUNE for $8.10.  My annualized ROIC was a laughable 1.91%.   However, I’m still proud of this trade because I stuck with it, didn’t give up, and worked on it until I was able to exit with a profit.  With more experience under my belt and better stock selection I hope to avoid a repeat performance.

 

Now let’s look at my open trades.

Number of Open Positions: 7; 4 naked puts, 2 covered calls, and 1 call purchase

Net Cash Flow in September from 4 new naked put Open Positions: $591.70

Cash Flow from 2 covered calls: $288.50

Capital Used on Open Cash Secured Naked Put Trades: $36,350.00

Capital Used on Open Covered Call Trades: $24,313.90

Capital Used on $VIX call option purchase: $760.00

Net Cash Flow on Invested Capital: 1.43%

I have previously opened positions in GDX, and KO.  My new open positions are in ABT (OCT $33 puts), CCJ (OCT $19 Puts), EXC (OCT $30 puts), TEVA (OCT $37.50 puts), SYY (CC OCT $32), and $VIX (DEC $13 calls).

Going into October I am considering an additional trade in CCJ (OCT $18 puts), and new trades in CAT (OCT $80 puts), CLX (OCT $80 puts), GIS (OCT CC trade, stock goes ex-dividend on 10/8), T  (OCT CC trade, stock also goes ex-dividend on 10/8), DE (OCT $80 puts), and PG (OCT $75 puts).

Regards,

Troy

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