Today I sold 52 shares of WM for $34.63/share. This leaves me with 100 shares that could be called away near the expiration date of the call I sold. I made a profit of $484 (not counting any dividends) on these shares that will be taxed as a long-term capital gain.
This reduces my yearly dividends by $75.92. I plan to reallocate this money into another position soon.
The latest dividend increase was pretty lousy. I hadn't even noticed it till now, thanks for bringing it to my attention. I really like your covered call exit strategy, it makes a lot of sense. I also like the SO purchase the other day, just don't expect huge increases with Southern...
ReplyDeleteThanks CI for stopping by to comment. WM's dividend increases have kept decreasing percentage-wise and it was so low this time (2.8%) I decided to get rid of shares. I think the money could be put to better use.
DeleteI agree SO won't have huge increases but they shouldn't have any sub 3% increases like WM. Plus WM has had a big increase in price lately, I could always buy the shares back if they get close to $30 again.
Take care.
Sounds like a reasonable decision, especially after that paltry dividend increase. I've looked at WM from time to time, but I wasn't thrilled by their financials, which is why I never started a position. I look forward to seeing what you buy with the proceeds from the sale.
ReplyDeleteThanks for stopping by DGM. I look forward to seeing your new purchases as well. I was hoping for some sort of correction from the debt ceiling debates, we shall see.
DeleteAAI, thanks for the post, I learned one important thing and that is to select stocks which dividend raise is better than the inflation. I was doing it unintentionally so far, but your article brought this to my attention.
ReplyDeleteHi Martin,
DeleteYou hit on a big point. If your dividend income increases at a lower rate than inflation then you are losing purchasing power. The purpose of a DG strategy is to live off the dividends and not have to sell any stock. Take care.
I've been thinking about selling out of my WM shares as well. I just wish I had enough to be able to sell some covered calls like you're doing with the other 100 shares. I was very disappointed with the increase as well.
ReplyDeleteHey PIP. I would sell more calls also but I don't have a lot of holdings with more than 100 shares. Most of the ones that I do have 100 shares of I don't want called away.
DeleteI do have another options trade to report soon from Friday. Thanks for stopping by.
AAI,
ReplyDeleteThis seems like a solid move. While WM has a very attractive (garbage can be attractive?) business model, the fundamentals just don't seem to add up to a solid investment opportunity. It appears to be one of those "wonderful company, lackluster stock" situations. I'm with DGM on this one - I never liked the fundamentals enough to initiate a position. While it has a solid yield, you can easily replace this with a better anticipated growth rate to boot.
Best wishes!
Hey DM,
DeleteI agree with everything you said. I have owned WM since before I started DG investing. While they do have 10 years of increases, a slow down in dividends paid that has occurred over the last several years is just another red flag for me. While I do believe they have a large moat and in no danger of insolvency, it is red flags like these that can keep you from buying another Eastman Kodak.
Hi All About Interest,
ReplyDeleteI had looked at WM in the past (I liked the business model almost as much as Stericycle which is focussed on medical waste, but unfortunately doesnt pay a dividend). I am fairly surprised like many of those who posted earlier that they can't even post a dividend covering inflation. These should be narrow/wide moat businesses. You can't just create new dump sites, and at a minimum you'd expect a local/regional moat. I see that there revenue has been flat for years with a progressively increasing payout ratio. Makes you wonder.
If you do have some surplus cash, I recommend you take a look at CME, I just initiated a position and reviewed it recently. I love that business :)
Integrator
Integrator,
DeleteI don't know anything about Stericycle but if they don't pay a dividend I wouldn't be interested currently. WM does have a wide moat as you mention but I think the growth will be really slow.
I read the CME review you did. Thanks for that. You are cranking out some good articles on companies I don't know anything about. It looks like CME paid the same dividend in 2008, 2009 and 2010 not counting any special dividends. They only have two year's of increases. I want to see a company with at least five year's of dividend increases.
Also Their earning in 2011 to 2012 dropped from 3.41 to 3.03 according to E*Trade. As you mention, they make more money when there is more volatility. I also want a company that can consistently grow their earnings each year.
However, they do have great margins as you point out. I also found another article on them about their international exposure. That could also help them grow. I wish you luck with this trade but I'm not looking to add another financial company at this time. I already have BBVA as my financial speculative play.
Good luck and thanks for stopping by!
I would have to disgree about selling waste management. This is a company with a really excellent business model.
ReplyDelete