04-18-2022, 06:22 AM
I'm a pretty infrequent trader in my taxable account. If nothing else, having to pay taxes on gains is an inhibitor. But I make occasional moves, including last week. I thought I'd go through these and their impact on my dividend income.
My WHR and BBY buys were roughly twice the size of the T purchase. In essence - not exact - I used WBD to buy back the parent company and used ADM to buy BBY and WHR.
Here are the net impacts of all this on my dividend income.
Of course I'll need to pay taxes on this. This will result in less hurt this year than it would in the future. As I went into retirement with a large cash pool I shouldn't need to sell any stocks just for living expenses and I plugged my full budgeted retirement expenses in as my expected 2022 income level for quarterly payment purposes. But they still matter, particularly later in the year when I think about Roth Conversions and what Taxable Income level I want to use for them.
Still, while taxes are a factor, I'm trying not to let them keep me from making what I think are necessary moves.
Other companies I considered buying were FAF and HD. But I don't consider FAF to be quite the DGR quality of the two I picked up and while HD is trading at a discount to recent valuations, its yield is much lower and the company is projecting slow growth in 2022.
And thank you ADM. All my buys were in early 2019 in the $42 range. This was not a company I ever expected much from in cap gains and considering dividends (and not considering taxes) it returned 152.90%. Very much a windfall.
*I'm sure I own some paying more like 8-9%. And AAPL is my number 1 position by size but it's a "pseudo-cash" position which I'll periodically trim to make up for my dividend income "gap." I also own GOOGL, same purpose.
- 4/11/22 - Sold WBD at $25.25. As the taxable account's main purpose is to provide me with income it had no place there. If I owned it in one of my TR accounts I more than likely would have held.
- 4/13/22 - Sold ADM at $96.00. I have certain dividend income guidelines for this account. I own some very low yielders such as MSFT and UNH. My guideline is that if a company yields under 2% it should be annually increasing its dividend by 10% or more.* When ADM went over $80 it no longer met the 2% threshold and it's usually raised its dividend by 5% or so annually. Also, while I think it will continue heading up I don't see this being at the pace of the past couple of months. I did contemplate waiting for $100 but this could be a while. Or today.
- 4/13/22 - Bought T at $19.20. I wouldn't be able to bring a strong argument to someone questioning this move however it was yielding 5.8% and I am living off dividends from this account today. Hopefully they'll resume dividend growth in a couple of years.
- 4/14/22 - Bought WHR at $175.00. It's yielding 4% at this level and has a double-digit 5-yr DGR including monster recent hikes. Not a big growth or cap gains company IMO.
- 4/14/22 - Bought BBY at $95.00. This one's yielding 3.7% at this level and also has a double digit 5-yr DGR. Better growth/cap gains prospects than WHR IMO.
My WHR and BBY buys were roughly twice the size of the T purchase. In essence - not exact - I used WBD to buy back the parent company and used ADM to buy BBY and WHR.
Here are the net impacts of all this on my dividend income.
- T dropping its dividend from $2.08 to $1.11 reduced my taxable account dividends by 2.71%
- The combination of selling a company yielding 1.67% and exchanging it for higher yielders increased my dividend income by 1.92% - and this is above the level it was at before T cut the dividend. I also increased my taxable account's 5-yr DGR from 9.44% to 9.97%.
Of course I'll need to pay taxes on this. This will result in less hurt this year than it would in the future. As I went into retirement with a large cash pool I shouldn't need to sell any stocks just for living expenses and I plugged my full budgeted retirement expenses in as my expected 2022 income level for quarterly payment purposes. But they still matter, particularly later in the year when I think about Roth Conversions and what Taxable Income level I want to use for them.
Still, while taxes are a factor, I'm trying not to let them keep me from making what I think are necessary moves.
Other companies I considered buying were FAF and HD. But I don't consider FAF to be quite the DGR quality of the two I picked up and while HD is trading at a discount to recent valuations, its yield is much lower and the company is projecting slow growth in 2022.
And thank you ADM. All my buys were in early 2019 in the $42 range. This was not a company I ever expected much from in cap gains and considering dividends (and not considering taxes) it returned 152.90%. Very much a windfall.
*I'm sure I own some paying more like 8-9%. And AAPL is my number 1 position by size but it's a "pseudo-cash" position which I'll periodically trim to make up for my dividend income "gap." I also own GOOGL, same purpose.