You are currently viewing My Latest Buys: CODI, PNNT

Thanks to February’s dividend payouts and my matching program’s funds, I started March with fresh capital for buying more dividend stocks. This month I bought something old and something new.

First, I bought an additional 50 shares of CODI at $14.40 per share, lifting my total shares of CODI to 150. My average yield for CODI is now approximately 9.6%. Not bad.

Next, a new position I bought into is PennantPark Investment Corp. (NASDAQ:PNNT), a business development company with a diverse portfolio of industries including aerospace and defense, auto sector, beverage, food and tobacco, business services, cable TV, communications, distribution, education, electronics, grocery, insurance, logistics, and retail stores.

I bought 75 shares of PNNT at $6.44 per share. With a quarterly dividend of 28 cents per share, this buy has a yield of 17.39% (!). Like any stock investment, PNNT has its share of pluses and minuses, so let’s see what those are:

Yield. Yeah, I know a 17.39% dividend yield is insanely high and it’s certainly way above my usual 9-11% target yield. Yes, it’s a risky play, but sometimes it’s occasionaly good to inject a high yielder into the portfolio mix because it makes a nice little boost to overall yield. The key is to not get seduced by the yield and get deep into it. I made that mistake with CFP/CSM and I’ve learned my lesson.
Dividend history. PNNT’s current dividend of 28 cents has been unchanged since December 2011, so there’s a track record of stability with this dividend. From inception in 2007 to mid-2011, the dividend grew nicely but started to plateau in 2010. I’d rather have a dividend that stays the same (and at a high yield or moderate yield) than one that’s erratic and unpredictable.

Age. PNNT is a relatively young stock, launching in 2007. It has only been tested by the Great Recession and no other recession, so management’s experience with adverse economic conditions is limited.

Being a young stock with such a sky-high yield, PNNT is certainly high risk. While its dividend history should give me cause to be confident, I can’t help but feel uneasy about PNNT continuing its 28 cent dividend, especially considering its currently operating at -$0.38 EPS. At some point, PNNT will need to trim back the dividend to help move the EPS back into the black. For short term investors whose only concern is the dividend yield this may be bad news, but for long-term investors who want to see the stock back up to its early 2015 highs of $9+, then a return to solid profitability would be welcome news.

Because of my reservations about PNNT, I’m not going to get too deep into it, limiting myself to around 200 shares, at most.

Together, these two buys help to boost my projected average monthly dividend income by $13.00 to $675.52 total. Another step closer to $700.00!

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This Post Has 2 Comments

  1. Dividend Monster

    Whew, DQ!

    That is quite the yield and a lower price than I normally see anywhere near my own portfolio. You’re definitely taking a risk but it’s like they always say, nothing risked, nothing gained. I’ll be watching your upcoming returns and changes in your portfolio. Hopefully it works out for you!

    -Dividend Monster

    1. Dividend Quest

      Thanks for visiting Monster! You’re right that I’m taking a risk, and I know I’m really sticking my neck out when I invest in unusually high dividend stocks. Which is why I won’t buy too many shares and focus on stocks with yields in the 9-11% range. Some would say even that’s too high, but I want yields that exceed inflation by a good margin and not by a mere 1-2%. No two investors have the same risk tolerances and investing methodologies. I wish you all the best in your dividend investing journey. Remember: it’s as much about having fun and enjoying the game as it is about the money.

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