Get Rich - Stay Rich - Investing for Monthly Income

Posts Tagged ‘monthly income plan’

The Secret to Great Investment Returns

People ask me all the time what is the real secret to great investing returns.  They have lost faith in the talking heads on TV who are selling their latest investments hyped as the place to be in today’s market.  Often times these investments only separate the investor from their money. I have a proven strategy that is more rational so any investor can generate income by investing in great companies. My premise is cash doesn’t lie so when you have it in hand (or in your investing account), you know you have made money.  Probably the two most important attributes to making money on a stock investment is (1) buying a great business model; and (2) buying at the right price. I constantly see investors buying a great business but at a price too high to ever generate a return.

I have this thought leadership built into my investing strategy. One, I only buy great blue-chip stocks that have validated profit margins and competitive advantages. Many refer to these stocks as market dominators because they have well recognized brands such as Walmart, Intel and others. Two, I look to invest in these great companies at the right price. My research will point me to these stocks trading below fair value. These are the companies that will give us market beating returns with lower than average risk.

We further lower the purchase price by selling puts on the great stocks we want to own. Each month or so, we will sell a put options at the money to collect premium income. This premium income lowers the purchase price with each sell until the stock gets put to us. For example, selling an option put for $1.00 per contract in 3 consecutive months gives the investor $3.00 or $300 in cash. If the stock is trading at $40 per share, the put selling drops the investors cost to $37 per share ($40 – $3 = $37) In the meantime, the investor is earning an average of 1-3% each month in income.

This is the power of this strategy – creating income streams while buying great businesses at a discount price.

Learn more here: Monthly Income Newsletter

 

How to Get 50% of Your Stock Purchase in Monthly Income Installments

A covered call trade is a very simple instrument to increase your monthly income. The basic idea is to sell a call option for every 100 shares of stock you own.  By selling the call option, the investor receives a premium which is what our investors call monthly income or monthly dividend payments.  We sell new call options each month to create new income – month after month.  This is in addition to the current dividend paid by stocks on a quarterly basis.

Here is an example of what subscribers to the Get Rich Monthly Income Plan achieved in 2013:

Subscribers purchased Holly Frontier in January 2013 for $46.35 per share. So purchasing 100 share of stock will cost a total of $4,635 plus commission costs.  At this time, HFC was paying a $0.30 per quarter dividend for a dividend yield of 2.59%.  This is a nice yield on a fairly stable stock but it gets even better.  In addition to the $1.20 in quarterly dividends, HFC paid $2.00 more per share in special dividends.  This increases the total dividends to $3.20 per share in 2013.  The addition of special dividends increases the stocks annual dividend yield to 6.9%.  Wow, a 6.9% dividend yield is great in this low yielding stock market!

But it gets even better for Get Rich Monthly Income Plan subscribers.  They sold a call option on each 100 shares of HFC stock they owned each month of 2013.  Based on our results, this created a total of $1,985 for the entire year.  This created an average monthly income of $165.42 by selling the call option which created the covered call trade.  The total premium income of $1,985 is about 40% of the total cost of entering the trade – $4635 at the beginning of the year.  Therefore, investors received nearly half of their initial investment in HFC back during the year through a simple monthly covered call trade.

Now, subscribers can add the three sources of income – quarterly dividend, special dividends and covered call income together to create a Monthly Income Plan.  In total, subscribers received $2,305 in additional income from owning 100 shares of HFC stock in 2013.  This is an average of $192 in additional income each month of 2013. And, the $2305 in income is 50% of the total amount of the initial investment in 100 share of HFC!

Covered Call Trades of the Month

Investors have been bracing for anything that could reverse at the last minute the market’s year-long rally, which saw the Dow and S&P 500 hit record highs again this week. The S&P 500 is up 26 percent this year and registered a sixth week of gains on Friday.  However, income investors seeking to trade covered call investments have been performing well too.

Below are two successful trades from the past month listed in the Monthly Income Plan at getrichinvestments.com .  Each month, income investors are creating income streams from selling covered call options against high quality stocks.  Here are some winning trades from the current newsletter:

Covered Call on USG Corp (USG)

STRATEGY: Look at the Nov 27 covered call. For each 100 shares of USG stock you buy, sell one Nov 27 covered call option for a $25.50 ($26.65 – $1.15) debit or better.

Actions: USG is currently trading at $27.66 at the close on 11/15 so the 27 call we sold is ITM.  These shares and call options will be called away.

This is a 5.88% return for one month and an estimated 70% annualized return.

 

Covered Call on Flour Corp (FLR)

 

STRATEGY: Look at the November 2013 77.5 covered call. For each 100 shares of FLR stock you buy, sell one Nov 2013 77.5 covered call option for a $74.89 (77.19 – 2.30) debit or better.  That’s potentially a 3.49% assigned return.

Actions: FLR is currently trading at $79.36 so the 77.5 call we sold is ITM.  These shares and call options will be called away on Friday (11/15).

This is a 3.49% return for one month and an estimated 42% annualized return.

Order Some Special Dividends from these Stocks

Saratoga Investment Corp. (NYSE: SAR) declared a special dividend of $2.65 per share.  The dividend will be payable on December 27, 2013, to stockholders of record on November 13, 2013, with an ex-dividend date of November 8, 2013.  The annual yield on the dividend is 13.9 percent.

The dividend will be paid in cash or shares of the Company’s common stock at the election of the shareholders, although the total amount of cash to be distributed to all shareholders will be limited to approximately 20% of the total dividend to be paid to all shareholders. The remainder of the dividend (approximately 80%) will be paid in the form of shares of the Company’s common stock. This dividend is being made in accordance with certain applicable Treasury regulations and private letter rulings on cash/stock dividends issued by the IRS over the years that allow a publicly-traded regulated investment company to satisfy its distribution requirements from a distribution paid partly in common stock provided that at least 20% of the distribution is payable in cash and certain other requirements are satisfied. The dividend includes a carry-over balance of $3.9 million from the Company’s fiscal year 2013 taxable income and a significant portion of the Company’s fiscal year 2014 estimated taxable income.

Cohen & Steers, Inc. (NYSE: CNS) declared a special dividend of $1.00 per share. The dividend will be payable on December 20, 2013, to stockholders of record on December 2, 2013. The annual yield on the dividend is 2.6 percent.

Wynn Resorts Ltd (NASDAQ: WYNN) declared a special dividend of $3.00 per share.  The dividend will be payable on December 6, 2013, to stockholders of record on November 20, 2013, with an ex-dividend date of November 18, 2013.  The annual yield on the dividend is 1.8 percent.

New Covered Call on this Vice Stock

Constellation Brands (STZ), together with its subsidiaries, produces and markets beverage alcohol.  The stock was reiterated with a Buy rating by analysts at Stifel Nicolaus. The firm raised its price target on the stock to $69 from $64.  STZ Thursday posted better-than-expected Q2 results and said for FY 2014 it expects EPS of $2.80 to $3.10 per share. The Street is at $2.83 per share.  STZ is up 2.3% at $61.55, near the stock’s 52-week high of $62.15.

Here is a Covered Call Strategy:

STRATEGY: Look at the January 2014 60 covered call. For each 100 shares of Constellation Brands (STZ

) stock you buy, sell one January 2014 60 covered call option for a $57.38 (61.58 – 4.20) debit or better. That’s potentially a 4.6% assigned return.

COMMENT: The technicals for STZ are bullish with a strong upward trend. The stock has had support recently around 56.50. S&P rates this stock 4 STARS (out of five) – buy.

RISK: The stock has to drop 6.8% to threaten the break even point. This trade rates 3 keys out of 5 – moderate relative risk.

RESEARCH: S&P maintains Buy recommendation on shares of STZ. On revised forward multiple analysis, we lift our target price by $2 to $66 and our FY 14 (Feb.) and FY 15 EPS estimates by $0.12 and $0.07 to $2.90 and $3.55, respectively. Adjusted Aug-Q EPS of $0.96, vs. $0.71 exceeded our estimate of $0.85 on a significantly lower tax rate and expenses than our forecast. Crown depletions rose 7% on a strong summer selling season driven by healthy growth in Corona as well as expanded distribution for Modelo Especial. As production ramps in the Piedras Negras facility, we look for margins to improve in the beer segment.

 

Look for a Tasty Profit from this High Quality Dividend Grower

Investors looking for an A-rated quality company with a growing 3% dividend yield should look at the soup favorite – Campbell Soup Company.  The company just increased its dividend 7.6% but still has room for growth.  Campbell’s is rated a 5-star stock by S&P indicating a strong buy recommendation.  The stock has a 12-month price target of $48, an increase of 15% from its current price.

Campbell Soup Company (CPB) recently announced that the company’s Board of Directors has approved an increase in its quarterly dividend from $0.29 per share to $0.312 per share, an increase of approximately 7.6%.  The quarterly dividend is payable Oct. 28, 2013 to shareholders of record at the close of business Oct. 8, 2013.

“This dividend increase is another step forward as we execute our plans to drive shareholder value by delivering sustainable, profitable net sales growth,” said Denise Morrison, Campbell’s President and Chief Executive Officer. “We are encouraged by the progress we’ve made and are confident in our long-term growth prospects as we strengthen our core business and expand into higher-growth spaces.”

The company has paid dividends since it became public in 1954. The last quarterly dividend increase was to $0.29 per share from $0.275 per share on Nov. 1, 2010.

We look for Campbell’s to focus on new products, expanding its presence in packaged fresh foods, and growing sales in some international markets.  We expect at least near-term challenges in U.S. beverage, North American foodservice, and the Australian businesses.

The company has long term targets for annual sales growth of 3% to 4% and 5% to 7% annual growth in earnings per share. Over time, we expect that growth to be helped by new or enhanced products. Areas of new product focus, in our view, will include expansion of the Goldfish snack brand, development of the dinner sauce category, and introduction of a Homestyle soup line. We see the Bolthouse business aiming to have more of a presence in the snack food area with a ShakeDowns carrot product that includes seasonings.

Investors should look to add Campbell’s to their Monthly Income Plan for both current income and future growth.

Targa Resources Can Produce 10% Distribution Growth in 2013

Targa Resource Partners (NGLS) is a buy recommendation for income investors.  The MLP has a current dividend yield of 5.98%.  NGLS has a 5-year average annual dividend growth rate of 10%.  NGLS is a strong buy recommendation with a 12-month target price of $51.

Targa Resource Partners announced that the board of directors of its general partner has declared a quarterly cash distribution of $0.6975 per common unit, or $2.79 per common unit on an annualized basis, for the first quarter 2013.  The approved distribution represents an increase of approximately 3% over the previous quarter’s distribution and 12% over the distribution for the first quarter 2012. This cash distribution will be paid May 15, 2013 on all outstanding common units to holders of record as of the close of business on April 29, 2013.

First quarter 2013 net income attributable to Targa Resources Partners

was $38.9 million compared to $70.1 million for the first quarter of 2012. Net income per diluted limited partner unit was $0.16 in the first quarter of 2013 compared to $0.63 for the first quarter of 2012. The Partnership reported earnings before interest, income taxes, depreciation and amortization and other non-cash items (“Adjusted EBITDA”) of $132.2 million for the first quarter of 2013 compared to $145.4 million for the first quarter of 2012.

NGLS is a quality mid-cap natural gas processing and fractionation MLP that has an impressive array of fee-based expansion projects set to come into service over the next 18-24 months that should help to offset an over-supplied, and consequently, soft NGL pricing environment for the next three years. The key question regarding investing in NGLS is how the fee-based operating margin from the expansions will offset the drag from likely NGL over-supply. We believe that NGLS’ recent emphasis on fee-based operations will allow it to continue providing its unitholders distribution growth well above the sector average. Given the increasing percentage of fee-based projects, NGLS’s mix should improve to near 55% by the end of 2013 and 65% by the end of 2014. NGLS reiterated its guidance of 10%-12% distribution growth for 2013 and is comfortable having 0.9x coverage for the first half of the year which improves as the year goes on and as expansion projects are completed. Management is guiding to an average of ~1.0x for FY2013. We are modeling high single digit distribution growth for the next several years.

We are holding our three-year distribution growth forecast of 9% CAGR. NGLS’s 4Q results give us confidence that the growing fee-based portion of its business (Logistics, Marketing, Badlands) could support distribution growth despite a challenged NGL pricing environment for the next few years.

We are making minor changes to our outlook with DCF/unit adding $0.03 to $2.97 in FY2013 on lower assumed equity issuance, though EBITDA drops $23mm to $623mm after the 1Q miss and re-setting our commodity price deck. NGLS reiterated its $595mm-$655mm EBITDA guidance for 2013 and 1.0x distribution coverage for 2013 overall.

Buy This Monthly Dividend Payer for 2013

Home Loan Solutions Service (HLSS) is worth a look as a monthly dividend paying stock.  The company has exceeded earnings estimates for 4 straight quarters.  Home Loan is benefiting from the rebounding housing market as it focuses on servicing mortgages for fees.  The company has increased its monthly dividend by 63% in the past year.

While Home Loan Solutions is not what I consider a value play trading at 1.5 times book value, the company has 80% plus operating margins and generates $1.9 million in income per employee.  That is no typo, $1.9 million per employee.  This is a very enticing business model.

The risk to sales growth is an increase in prepayment rates but these have been lower than expected.  Also, the mortgage refi boom seems to be slowing so HLSS will likely purchase additional bundles of mortgages to service.

Home Loan Solutions received gross proceeds of $480.7 million from the December 24 follow-on offering of 25,300,000 ordinary shares at $19.00 per share. Proceeds from the offering and two new variable funding notes with a total commitment of $1.6 billion were used to acquire non-agency mortgage servicing assets from Ocwen representing mortgages with an unpaid principle balance of $34.6 billion.

Home Loan Solutions Service reported Q4 GAAP earnings of $0.44 per share, ex one-time items, versus the Capital IQ GAAP consensus of $0.39. Revenues were $61.07 million, versus the analyst estimate of $59.32 million.

“Reflecting on our first year of operations, I believe that we have delivered on our plan to provide our shareholders with earnings and dividends that are particularly attractive given the stability and low risk of our assets which the ABS markets are starting to reward,” said ChairmanWilliam Erbey. “I am pleased with the continued support of our equity and debt investors and look forward to further growth in 2013.”

“Our results in the fourth quarter exceeded our revised guidance as lower than expected prepayments reduced amortization expense,” said PresidentJohn Van Vlack. “We are pleased that the variations from our guidance in 2012 have all been positive. Additionally, strong executions in the ABS term note market are continuing to reduce our borrowing costs relative to our expectations.”

On February 7, 2013 the board of directors at Home Loan Servicing Solutions approved a dividend of 0.13 per share. The dividend is payable on April 10, 2013 to shareholders of record on March 29, 2013.  HLSS has a current dividend yield of 6.78% following a 63% increase in its monthly dividend in the past year.

HLSS is trading at $23 with a fair value of $27, a 17% discount to fair value.  First Call analysts’ consensus is for 2013 EPS of $1.75, a 12% increase from 2012.  The First Call consensus is a buy recommendation with a rating of 1.8.

Based in George Town, Cayman Islands, Home Loan Servicing is a mortgage investment company. Founded in 2010, the company together with its subsidiaries is engaged in acquiring mortgage servicing assets, mainly subprime and Alt-A mortgage servicing rights and associated servicing advances.

HFC pays 8th Special Dividend and Boosts Regular Dividend by 50%

Investors looking for a regular helping of special dividends should consider HollyFrontier Corporation (NYSE: HFC). The company just announced its 8th special dividend since August 2011.  In addition, HFC just juiced its regular dividend by 50%.

Subscribers to my Get Rich Monthly Income Plan received $31.00 per share in dividends in 2012 with a yield on cost of 12.5% in one year.  In addition, subscribers received $1,690 in call premiums on each 100 shares of HFC stock in 2012.  The covered call premiums accounts for a yield of 68% as subscribers utilized a special income technique called the perpetual covered call.  In total, Monthly income Plan subscribers booked a total return of 219% on HFC in 2012 alone!

HollyFrontier Corporation (HFC) announced today that its Board of Directors approved a 50% increase in the Company’s regular quarterly cash dividend to $0.30 per share from the current rate of $0.20 per share. This is the fifth increase in the regular dividend since the merger in July of 2011, representing a total increase of 300%. The regular dividend will be paid on April 2, 2013 to holders of record of common stock on March 15, 2013.

The Company also announced today a special cash dividend in the amount of $0.50 per share. The special dividend will be paid on March 19, 2013 to holders of record of common stock on March 5, 2013. This is the 8th special dividend declared by HollyFrontier since August 2011.

HFC’s stock price is up 70% in the past year but still trades at a low PE of 7.5 which is a 60% discount to the industry average PE ratio.  HFC has an equity summary score of 9.8 out of 10 for a VERY Bullish outlook.

Mike Jennings, CEO and President of HollyFrontier, said, “Our Board of Directors remains committed to delivering value to our shareholders through both a growing regular dividend as well as special dividends. After today’s 50% dividend increase, our current regular dividend yield is 2.2%, and our trailing twelve month cash dividend yield stands at 6.1% relative to today’s closing price of $53.72. Including today’s announcement, HollyFrontier has returned almost $1.3 billion in capital to shareholders through regular dividends, special dividends and buybacks since the July 2011 merger.”

This Company Just Raised its Monthly Dividend by 8.4%

Pacific Coast Oil Trust (ROYT) owns net profits interests in the sale of oil and natural gas production.  The Company pays monthly dividends with an annual dividend yield of 9.8%.  Pacific Coast Oil Trust just increased its dividend by 8.4% to $0.151 per month, payable on February 14, 2013, to unitholders of record on February 4, 2013. The Trust’s distribution relates to net profits and overriding royalties generated during December 2012 as provided in the conveyance of net profits and overriding royalty interest.

Pacific Coast Oil Trust (ROYT) is projected to produce earnings of $1.84 in 2013 which is a 28% increase from 2012.

First Call has a consensus BUY recommendation with a 1.8 rating.  Zacks Investment has a 12-month price target of $19.40 on ROYT.

Higher crude oil production and prices favorably impacted this month’s distribution as total production was approximately 8% higher and average realized prices were 2% higher than the prior month.  The current net profits amount from the Developed Properties was approximately $5.8 million, after receipt by PCEC from its counterparties of $0.4 millionrelated to the settlement of applicable hedge contracts. The development expense for the Developed Properties was $0.5 million during the period.

The current distribution also includes a 7.5% overriding royalty on the Remaining Properties which produced 22,783 Boe from 36 Orcutt Diatomite wells and one Orcutt Field well. Production from the Remaining Properties was approximately 10% higher than the prior month due to the Orcutt Diatomite expansion project being ahead of schedule. The cumulative deficit of the net profit interest on the Remaining Properties, including the 7.5% overriding royalty payments, is approximately $5.4 million.

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