08-01-2022, 10:09 AM
There are two parts to this rather long comment. The first concerns my taxable account, the second is mostly non-DGI though it does impact my income investments.
I had a busy first 10 minutes of the market week, at least for me.
On June 30 I bought 155 shares of BBY at $65. This was purely a tax loss purchase. It took me overweight in it but I have some shares I bought this spring for as high as $99 - I had a $100 price on it then. I intended to sell an equivalent dollar amount once the wash period was up.
So this morning I sold 130 shares at $76.53.
Now this particular transaction worked out and I'm happy with it. But I'm reminded of Churchill after Dunkirk (paraphrasing), "A retreat is not a victory."
Well, losing money is not making money. When I bought BBY at $99 I thought the price would move up. It did not. It's nice that the US Tax Code offers the chance to get a consolation prize. It's even nicer that on a trade-for-trade deal I sold for about 17% higher than $65. Or to look at it another way, for the same money I picked up 25 more shares of a dividend-paying company I like.
But it isn't a win.
So I had roughly $10k to work with. One option was to repeat the tax loss game. My problem is that I have limited losses left to work with and with the market moving up again I'm less confident that it will work out. I decided not to press my luck and just make buys of long-term holds to generate income.
My buys were 40 shares of MO at $44.01 and 65 shares of TROW at $121.17.
Deciding to pick a little MO up was easy. I was about $1,800 short of a full position, it's trading at an attractive level, we all know about the yield and despite the continued predictions of its demise it keeps churning out cash. Tobacco's been called dead since 1965. The day may come where the "they're right eventually" saying will be proven true but I'm not seeing it. The only negative is it's my largest dividend payer, well over 10% of my Taxable Account income and this didn't help with that.
TROW was tougher. I ended up looking at three companies besides it, two of which I own. These, and the reason I didn't buy, are as follows:
1) VZ. If you'd asked me to make a snap call Friday when I decided to do this I'd have said I'd probably go the "income now" route and pick it up. Then I looked at the latest ER over the weekend. There's nothing there I liked. Cash flows and income down, debt up, no growth prospects for an extended period. I don't think the dividend is in any immediate danger but I have about a half position. Based on the latest financials I decided that was quite enough, thank you.
2) AVA, TROW or WHR. These all fit in the roughly 4% yield category.
a) AVA is the one I do not own though it's been on my watch list a while. I went through some ARs, read up on the company and I like it. It has a focus on renewables and carbon reduction which I think is important for utes these days. The financials look good. But the mid-single digit DGR turned me off when compared with the other two AND the share price has done nothing for several years. Now price isn't a primary concern of mine but it's still nice to have. So I set it aside.
b) WHR is a good company but for a long time its dividend has had mid-single digit growth. The monster 25% hike it just gave catapulted the 5-yr DGR into double-digits. That was great and I was happy to have it but to me it still looks like a company that will have mid-single digit revenue growth going forward. I expect the dividend to follow suit.
c) TROW's latest financials don't look good but to me they are the kind of un-good looking that should be expected for an investment company during a declining market. Of course AUM is down along with revenues, cash flows, etc. But this is nothing like 2007-09 and it managed to increase dividends then. I don't see anything to really worry about or a reason to think strong dividend growth won't continue (long-term, harder to say for a year or two).
So that's what I did. I momentarily wished that Canada has the same tax treaty with us as the UK does so I could buy one of their banks but they don't so it didn't take up much of my mental time.
This whole thing started when I sold AOS - then yielding about 2% - in June so I grew my dividend income significantly and increased my DGR. I could probably calculate it but in essence I gained 25 shares of BBY, 40 of MO and 65 of TROW in exchange for 200 shares of AOS. I also knocked about $3k off my 2022 income.
So when I look at the whole thing from June on it's a win but I did sell 130 shares of BBY at nearly a 25% loss.
Non-DGI (mostly)
I've pretty much decided to do annual IRA conversions to the 24% tax bracket limit, $170,050, each year. Now I do not know why the market is trading where it is or why it has recovered like it has over the past month. But at one time I was planning to convert around $70k at S&P 3500 - I really thought the bear market floor would be in the 3200-3400 range.
I gave up on this idea after the market's response last week to the Fed and the GDP report. Obviously it could still happen in which case I'll be kicking myself for not sticking to my plan but after last week I'm just not seeing it.
So this morning I did a conversion with 190 shares of NVDA and 390 shares of AMD along with cash that had come in from dividends. Choosing those two was simply asking myself the question, "What companies might make a large recovery in the fairly near - next 6 months - future?" I had plenty of choices but those are the two I went with. I was down about 17% on AMD and 24% on NVDA since buying them in Feb-March.
The DGI "tickle" is this means I'll need to generate the cash to pay the taxes by September so I'll need to sell something from my Taxable Account. Unless something crazy happens I expect this to be AAPL. Later this week I'll run through the calculations to see what I'll owe. Then it'll be a matter of coming up with a sale price. I could sell GOOGL but right now I think it is significantly undervalued with more potential run - not that Apple won't run too. Plus I have much more of it.
I should be sitting at about $140k income from the IRS perspective (including my expected dividends for the rest of the year). I expect to make a smaller conversion in December to get closer to $170k.
So that's today. Now I need to decide what to buy with the about $1200 cash I have in the Roth but I'll give myself a bit to mull that over and maybe wait until tomorrow.
I had a busy first 10 minutes of the market week, at least for me.
On June 30 I bought 155 shares of BBY at $65. This was purely a tax loss purchase. It took me overweight in it but I have some shares I bought this spring for as high as $99 - I had a $100 price on it then. I intended to sell an equivalent dollar amount once the wash period was up.
So this morning I sold 130 shares at $76.53.
Now this particular transaction worked out and I'm happy with it. But I'm reminded of Churchill after Dunkirk (paraphrasing), "A retreat is not a victory."
Well, losing money is not making money. When I bought BBY at $99 I thought the price would move up. It did not. It's nice that the US Tax Code offers the chance to get a consolation prize. It's even nicer that on a trade-for-trade deal I sold for about 17% higher than $65. Or to look at it another way, for the same money I picked up 25 more shares of a dividend-paying company I like.
But it isn't a win.
So I had roughly $10k to work with. One option was to repeat the tax loss game. My problem is that I have limited losses left to work with and with the market moving up again I'm less confident that it will work out. I decided not to press my luck and just make buys of long-term holds to generate income.
My buys were 40 shares of MO at $44.01 and 65 shares of TROW at $121.17.
Deciding to pick a little MO up was easy. I was about $1,800 short of a full position, it's trading at an attractive level, we all know about the yield and despite the continued predictions of its demise it keeps churning out cash. Tobacco's been called dead since 1965. The day may come where the "they're right eventually" saying will be proven true but I'm not seeing it. The only negative is it's my largest dividend payer, well over 10% of my Taxable Account income and this didn't help with that.
TROW was tougher. I ended up looking at three companies besides it, two of which I own. These, and the reason I didn't buy, are as follows:
1) VZ. If you'd asked me to make a snap call Friday when I decided to do this I'd have said I'd probably go the "income now" route and pick it up. Then I looked at the latest ER over the weekend. There's nothing there I liked. Cash flows and income down, debt up, no growth prospects for an extended period. I don't think the dividend is in any immediate danger but I have about a half position. Based on the latest financials I decided that was quite enough, thank you.
2) AVA, TROW or WHR. These all fit in the roughly 4% yield category.
a) AVA is the one I do not own though it's been on my watch list a while. I went through some ARs, read up on the company and I like it. It has a focus on renewables and carbon reduction which I think is important for utes these days. The financials look good. But the mid-single digit DGR turned me off when compared with the other two AND the share price has done nothing for several years. Now price isn't a primary concern of mine but it's still nice to have. So I set it aside.
b) WHR is a good company but for a long time its dividend has had mid-single digit growth. The monster 25% hike it just gave catapulted the 5-yr DGR into double-digits. That was great and I was happy to have it but to me it still looks like a company that will have mid-single digit revenue growth going forward. I expect the dividend to follow suit.
c) TROW's latest financials don't look good but to me they are the kind of un-good looking that should be expected for an investment company during a declining market. Of course AUM is down along with revenues, cash flows, etc. But this is nothing like 2007-09 and it managed to increase dividends then. I don't see anything to really worry about or a reason to think strong dividend growth won't continue (long-term, harder to say for a year or two).
So that's what I did. I momentarily wished that Canada has the same tax treaty with us as the UK does so I could buy one of their banks but they don't so it didn't take up much of my mental time.
This whole thing started when I sold AOS - then yielding about 2% - in June so I grew my dividend income significantly and increased my DGR. I could probably calculate it but in essence I gained 25 shares of BBY, 40 of MO and 65 of TROW in exchange for 200 shares of AOS. I also knocked about $3k off my 2022 income.
So when I look at the whole thing from June on it's a win but I did sell 130 shares of BBY at nearly a 25% loss.
Non-DGI (mostly)
I've pretty much decided to do annual IRA conversions to the 24% tax bracket limit, $170,050, each year. Now I do not know why the market is trading where it is or why it has recovered like it has over the past month. But at one time I was planning to convert around $70k at S&P 3500 - I really thought the bear market floor would be in the 3200-3400 range.
I gave up on this idea after the market's response last week to the Fed and the GDP report. Obviously it could still happen in which case I'll be kicking myself for not sticking to my plan but after last week I'm just not seeing it.
So this morning I did a conversion with 190 shares of NVDA and 390 shares of AMD along with cash that had come in from dividends. Choosing those two was simply asking myself the question, "What companies might make a large recovery in the fairly near - next 6 months - future?" I had plenty of choices but those are the two I went with. I was down about 17% on AMD and 24% on NVDA since buying them in Feb-March.
The DGI "tickle" is this means I'll need to generate the cash to pay the taxes by September so I'll need to sell something from my Taxable Account. Unless something crazy happens I expect this to be AAPL. Later this week I'll run through the calculations to see what I'll owe. Then it'll be a matter of coming up with a sale price. I could sell GOOGL but right now I think it is significantly undervalued with more potential run - not that Apple won't run too. Plus I have much more of it.
I should be sitting at about $140k income from the IRS perspective (including my expected dividends for the rest of the year). I expect to make a smaller conversion in December to get closer to $170k.
So that's today. Now I need to decide what to buy with the about $1200 cash I have in the Roth but I'll give myself a bit to mull that over and maybe wait until tomorrow.