Within the first week of March I made not just one, but two stock buys. I’ve noticed that it was rare for me to make more than one stock buy in a month, but now it seems to be happening with increasing frequency. More frequent buys seems to indicate that my dividend income is picking up strength as it continues to slowly grow.
When I bought my first 100 shares of CTCM, I had my reservations about CTC Media. With the hits to the Russian economy due to the glut of oil and economic sanctions to punish Russia, I had good reason to worry. In late January, the stock price dropped to a 52-week low of $3.51, so it had seemed like my concerns were well founded. Fortunately, the stock price has rebounded since then, and while the earnings announcement on the 5th said that profits were down a little bit, they would stay the course and pay 17.5 cents per share for this quarter. Yeah! With an ex-div date of March 12th, I knew I had to move quickly if I wanted to get more CTCM stocks, so I put in an order and got 140 more shares at $4.45 each, making this my fourth buy of the year.
My second buy I discovered while using the CEF Connect stock screener, plus Google Finance. I was looking for some stocks of interest that had a focus on a particular sector (energy, finance, utilities, health/biotech, etc.). I came across one stock that met the majority of my criteria: First Trust Specialty Finance and Financial Opportunities Fund (NYSE: FGB). What
Positives
- Yield. Before the financial crisis of late 2008, the yield used to be quite high at 37 cents per share. But in 2009, when the Dow bottomed out, the dividend was slashed down to 14 cents. But since then, the dividend has been slowly and steadily increasing, and is currently 17.25 cents (it was 17.00 cents in Q2 2014 and 16.5 cents in Q2 2013). So evidently FGB is a dividend growth CEF/ETF, which is quite rare.
Negatives
- Age. This is a fairly young stock, with an inception date of 5/25/07. Ideally, I like stocks that around 25 years old or more, as they have weathered multiple recessions. In FGB’s favor, it has endured the Great Recession which should say something about the resilience of FGB in future recessions (that, hopefully, won’t be as bad as the Great Recession).
- Institutional investment. With institutional investors holding only 10% of their stocks, FGB doesn’t seem to be very attractive to pension funds and other institutional investors.
- Leverage. Like many of my CEF/ETF positions, FGB is leveraged. With an effective leverage of 18.47%, FGB’s leverage seems somewhat moderate compared to some of my other stocks with 28% or higher leverage. FGB’s leverage only makes me mildly concerned, so this isn’t that big of a negative.
The negatives or causes for concern are negated by FGB’s current and (hopefully) future yield, so I bought 125 shares of FGB at $7.64 per share. FGB is my fifth buy for 2015. I normally buy stocks that are at a discount, but this time I got FGB at a slight premium of 2% over NAV ($7.49). Hopefully this will be the last time I buy at premium.
With these two stock buys, my projected average monthly dividend income increases to $566.90. My 2015 goal of $600/month just got a little closer… 🙂
