My Financial Independence Journey » Investment portfolio » Recent Transactions – Lots of Stuff
Recent Transactions – Lots of Stuff
As part of my commitment to keep my readers up to date on my stock portfolio and my options, I write up short posts describing my transactions. Recently, I sold a few put options and bought a few stocks. So here we go. I’m going to rock with the narrative format since it’s fun to write and you guys and gals seemed to enjoy the last one.
So June… What can I say about June? Well it’s a pretty awesome month for me money wise. I got my regular investment capital and I got my annual bonus. Yay for bonuses! After getting my bonus I predictably had a long internal debate about how much of it to save and how much to spend on fun stuff. I elected to save 58.11%. Why? Because that left me with $3,500 for fun, which is a nice round number. Note: I am not a particularly fun person, so this money will probably just be invested later.
Enough rambling about money, onto rambling about stocks. Which is kind of like rambling about money.
The market has been severely overvalued for a while. There was really only two sectors that could passably be considered to be in value territory. 1) Energy. 2) REITs. And given that I just dumped a bunch of money into CVX last month…. I think you know where this is going. REIT-mania here we come.
It just so happens that the market was spazing out and beating down REITs at the time. Big drops in Digital Realty (DLR) and Realty Income (O). The first thing I did was sell put options against DLR and O.
Puts Sold:
- Digital Realty Trust (DLR) Jan 18 2014 $55.0 Put – This brought in $389.22.
- Realty Income (O) Dec 21 2013 $40.0 Put – This brought in $189.22.
Why stop at just selling a put. Let’s buy some stocks. Keeping with the theme of REITs I bought some O and some DLR.
Digital Realty Trust (DLR)
- 59 shares
- Cost basis: $3,549.99 or $60.17 per share
- Yield: 5.185%
- Dividends: $3.12 per share
- This will increase my yearly dividend stream by $184.08
Realty Income (O)
- 82 shares
- Cost basis: $3,607.48 or $43.99 per share
- Yield: 4.93%
- Dividends: $2.17 per share
- This will increase my yearly dividend stream by $177.94
In total I have increased my yearly dividend stream by $362.02 with these purchases. Not too bad. Of course, as soon as I finished buying the stock prices of both DLR and O started dropping even more. Such is my luck, but I’m not too worried. Let the market do what it will, these companies have great underlying fundamentals and were good values at the time.
Disclosure: I am long or short everything discussed as indicated.
Readers: What do you think of these purchases?
Written by MFIJ
Filed under: Investment portfolio · Tags: dlr, o, recent buy
11 Responses to "Recent Transactions – Lots of Stuff"
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I’ve been going back and forth myself about whether to pick up some shares of O. I have an open put option, but there’s no guarantee it will be executed so I’m leaning towards adding a smaller position. I’m not really sure why O and the other eREITs have been punished as bad as they have been. Rising rates don’t have nearly the same effect on eREITs as they do on mREITs. But for long term buyers all it means is better starting yields. Nice pickups.
I can’t explain the eREIT dip either. My guess is that short term yield hungry investors ran into them and then got spooked as soon as interest rates went up. Some kind of logic that goes: interest rates up, real estate prices down, sell all the REIT because the RE means real estate. Honestly, trader logic confuses me.
The market has been crazy the past few weeks. One day it’s down 2%, the next it’s up 1%. It would be easy to get nervous if you were a short term investor. Being that I’m in it for the long haul (like you), I’m not too worried about the short term fluctuations. Looks like you made some good purchases!
This is where being a long term investor is great. I see people around me getting confused and pulling their money out. I just keep my plan moving forward, because I don’t see any structural or fundamental reason to exit any of my positions yet.
Great buys here!
O is near the top of my watch list right now, along with some energy and Canadian bank plays. If it stays near $40 I’ll be hard pressed not to add to my position.
I think you picked two of the best REITs available, as I purchased both not long ago myself. I did extensive research on both and feel confident in their futures. The CAGR of revenues for DLR over the last decade has been astonishing. I think DLR is a great value under $60, while O is fairly valued near the mid-$40′s.
Best wishes!
Thanks. Currently I’m watching CAT to see if it dips down to $80 or so. We’ll see if it ever drops low enough for this limit order to kick in.
Nice work on the O purchase. I think its a top quality REIT. I have been buying KO and Colgate recently myself.
As soon as KO drops to a 3% starting yield I’m going to be very tempted to add to my position.
[...] FI Journey talks about his recent purchase of Realty Income. I’ve owned REITs in the past. I tend to focus more on industrials now, but O is a top [...]
My understand is that REITs are interest rate sensitive. Realty Income pays out almost all of it’s earnings as dividends. To fund new property acquisitions it must borrow. Higher interest rates are not good. Not only that, but when older debt matures, they must issue new (or sell properties) to pay it off. Again higher interest rates = not good. O was able to retire a preferred series, then issue a new one at a lower rate, can’t do that with higher interest rates. The spike in interest rates couple with nosebleed stock prices was the reason for the drop IMO. REITs were pretty frothy not too long ago… I think the drop was more than warranted…
Usually if interest rates are rising it means the economy is in good shape. If that is true, potential sale-lease back targets may be looking for capital to expand. That should be a good business environment for O, NNN, WPC, etc.
I haven’t looked at DLR very closely, but I think O is top notch!
Equity REITs like O and DLR are sensitive to interest rate changes, but not nearly as much as mortgage REITs or some of the other REIT flavors. I think that O and DLR were unfairly punished by the market so I bought some shares of each.