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DarkToast (96.84)

High Dividend Stocks and S&P at 600

Recs

5

February 09, 2009 – Comments (11) | RELATED TICKERS: PRGN , TTO , ARCC

Heya Fools - 

I sold all of my long positions which were mostly energy and commodities in June, and
got back into the market after the October 10th bloodbath. When I started buying equities
again I focused on stocks which payed a high dividend.

Between the time I got back into the market and today my portfolio has lost around 2%.
The losses would have been closer to 10%, but the high dividend payouts have covered the
rest. I made some good picks that were too early, like PRGN (which is finally green) and ESEA
(which is still red) and some picks that have a long way to go to break even like HTE and my
biggest loser ARCC.

I am mostly buying small lots of 100 shares. Transacting with such small amounts means that my commision fees as a percentage of the stock price are substantial.

I have seen some recent posts by Fools that I respect pointing to some technical analysis that
convincingly shows a move by the S&P to around 600.

While I would want to sell and repurchase at a lower cost basis, I don't know the best way to play
this. Would realizing losses and paying commisions X3 be offset by a lower cost basis? Should I sit tight and let dividend reinvestment take advantage of the lower prices if the S&P really does drop
another 250ish points? Should I add to my positions in the case of another steep plunge?

A good sized portion of my portfolio is tied up with closed end funds based on indexes that are approaching their termination date, hedged by ultrashorts of their indexes. This is to take advantage of discounts to NAV as outlined by RipeTrade here.

Most of the rest of my portfolio consists of:

PDS
PRGN
TTO
ESEA
BGF
PZE
HTE
HIMX
FLY
ARCC
HYF

with some purely speculative positions (scratch tickets) in biotechs ACTC and BVTIE.

Any suggestions and feedback would be appreciated.

Stay Foolish,
DT

11 Comments – Post Your Own

#1) On February 09, 2009 at 2:51 PM, Schmacko (96.99) wrote:

I'm pretty negative toward PZE and most argentinean stocks in general I guess.  I don't think the current administration in Argentina is too foreign investment friendly and I don't like some of their petrochemical laws and taxes especially make me weary of wanting to invest in PZE.  Also note they've only paid an anual dividend twice in the last 5 years and 4 times in the last 10.  I haven't read their most recent quarterly results though so maybe things have changed. 

I think you'd be better of with PBR or EC for south american oil companies.  Alot also depends on your entry price though if you got in around their nov 20th lows around $4.50 you're still doing pretty well for yourself. 

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#2) On February 09, 2009 at 3:14 PM, DarkToast (96.84) wrote:

Schmacko  

I bought PZE a week or so before Argentina nationalized their pension funds or whatever they did. My cost basis is around $8, and I have a limit order placed to get out of it if it ever hits what I paid for it. I didn't do enough due dilligence before buying. Both PZE and HIMX pay dividends only once a year, if that, and didn't fit the style I was going after when I started assembling the portfolio.

Thanks for the feedback!

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#3) On February 09, 2009 at 3:51 PM, Eagle68 (62.06) wrote:

The longer this downturn goes on, the more I become convinced that dividend-paying stocks are the only way to go. If a stock pays a decent dividend and you hold it long enough, eventually it will pay for itself and whatever you sell it for is pure profit.

Of course, the trick is to select stocks which will keep paying a dividend and not cut it to next to nothing. Even a company like GE is considering cutting its dividend, but that's expected to make the price of the stock go up by strengthening its balance sheet, so there's an offsetting benefit.

It takes a lot of research, of course, but those steady streams of income sure are nice.

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#4) On February 09, 2009 at 6:02 PM, EnigmaDude (97.62) wrote:

You probably heard that PDS cut their dividend today.  But that should help to level off their decline.  I have a very similar approach in my Roth IRA right now, and several of the same stocks - HTE, PRGN, BGF.  I would look to add stocks that just increased their dividend, like ADM. 

I also have a corporate Bond ETF that is high yielding (HIO).  If stocks do see a sharp decline as some are predicting then bonds may be a better place to park your cash for a while.

I'd like to compare notes in a few months and see how things are working out.  Good luck!

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#5) On February 09, 2009 at 6:26 PM, DarkToast (96.84) wrote:

EnigmaDude

The PDS dividend cut was the one announced in late January?

I'll look at HIO, I really like monthly payers. Though not monthly, BGF has a bond component and has been my biggest winner.

Thanks for posting. 

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#6) On February 09, 2009 at 7:18 PM, DarkToast (96.84) wrote:

Hmm, I guess not...

"Precision also announced that it has suspended cash distributions for an indefinite period, due to its lower financial operating performance at the start of 2009."

This makes me a sad panda.

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#7) On February 10, 2009 at 2:05 AM, awallejr (84.39) wrote:

Be careful with PRGN.  Although I am top pitch for that stock, there is a possibility the dividend could be cut per the last CC. Take a look at stocks like EVEP, LINE and PVR for dividend yield.

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#8) On February 10, 2009 at 2:31 AM, DarkToast (96.84) wrote:

awallejr

EVEP, LINE and PVR all seem pretty similar to me. I'll take some time to look at them more closely. Which of the three do you prefer?

Thanks for the suggestion.

I didn't hear the PRGN conference call, were they talking about a reduction of the dividend like ESEA did or cutting it altogether like PDS?

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#9) On February 10, 2009 at 10:44 AM, awallejr (84.39) wrote:

CEO wasn't clear about the dividend status.  Possible cut back or total suspension.

Both EVEP and LINE are nat gas companies, and both use hedges, so their dividends are covered.  PVR is in the coal business mainly.  But it leases its property as opposed to actually mining it.  I own all 3 in real life.  Bought em when the hedge funds were dumping everything.  They've made a nice move back up off the lows and still pay a sweet yield.

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#10) On February 11, 2009 at 4:07 PM, StockSpreadsheet (77.39) wrote:

DarkToast,

Selling the stocks now could be a good idea if you have income to offset and you need the deduction.  If you don't need the deduction, it might be best to hold on to the stocks that still have good dividend-paying potential and ride out the storm with them.  When the economy does come back, your dividend stocks should have cushioned your downturn, (as you stated has happened to you already), and given you some extra cash to invest.

If you do sell now and buy back when the stocks are cheaper, I would suggest keeping your commissions down to only a few percentage points of what you are investing.  Remember that on average the S&P500 goes up 10% per year.  It makes no sense to pay a 20% commission on a purchase that will take you on average 2 years just to make back your commission.  You would have been better off putting all your money in a bond fund and be done with it.  Even a savings account would on average make you more money on average over that two year span.  Or you could even buy Treasuries direct through http://www.treasurydirect.gov/ .

Just some thoughts and suggestions.

Craig 

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#11) On February 11, 2009 at 4:57 PM, DarkToast (96.84) wrote:

Thanks for the feedback Craig. Much appreciated.

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