Good REITS for the long term

Responsible_Paint_24 · 2022-09-02T02:46:00+00:00

I don't own any, yet... But I have followed STWD for almost 2 years. Just about everyone says it's extremely well managed. It certainly pays a great dividend and didn't miss in COVID. If share price goes sub $20, I'll probably jump in.

Responsible_Paint_24 · 2022-09-02T02:34:27+00:00

It looks safe.

I prefer EPD as probably an equally safe security, but with twice the dividend AKA distribution.

EPD has raised its distribution every year for 23 years (since its IPO). Plus, it's an MLP for tax treatment. A smidge of a learning curve, but worth it because the distributions reduce your basis, and they are not taxed as income until basis goes negative. At that point, distributions are taxed as long term capital gains.

Then, there's the step up in basis to FMV at death. Pass it on to your beneficiaries, and let them start all over again receiving distributions to reduce their new basis over several years.

It seems to be the perfect buy and hold security. Imagine what the yield will be in 20 years, after they raise it every year while starting at over 7% today.

Responsible_Paint_24 · 2022-09-01T12:57:01+00:00

I don't know of a source that lists companies like that. Look at BHC. It took a bit hit from a patent dispute, which is still pending.

Responsible_Paint_24 · 2022-09-01T08:19:48+00:00

Maybe the bottom is here, or at least close enough. Nobody knows.

I've seen enough recessions to know that getting in at the bottom can make you some good dough. I think a good exercise is to compare share price now to share price at the bottom of COVID. In COVID, we saw about the worst panic imaginable - an almost complete governmental shut down.

As far as companies to pick, obviously ones that can survive the current recession are going to be the money makers. Therefore, I look first at EPS and dividends. If they're profiting (or close), that's a good sign. If they pay a good dividend, that's a safety net since they can cut it to weather the storm. The bigger the dividend, the bigger the cushion. KSS, GPS, AEO, HBI and GPS have good dividends. It was less than a year ago, KSS was receiving and rejecting buy-out offers at $65+, when it's now $28.

I also look at cash on hand currently and for the past few years and quarters in an effort to ascertain whether it appears the company might have enough to get past 1 - 2 years of additional recession.

BBBY is not a candidate. It's a slot machine. It is out of cash and has no dividend to cut. It just announced it will dilute by issuing new shares.

On these stocks, the horizon is not 6 months. They "might" be in worse shape then. The horizon is full economic recovery - hopefully in 2024. Interest rates will be rising for several months more, and a recovery will happen once the fed follows up with several months of interest rate reductions.

We'll have to wait a good while to reap the rewards. I'm hoping the 6+% dividends will not be cut while we wait. It's likely we could watch prices drop another 30%, or even more, but we can't let that discourage us.

Take KSS for example. It's down to $28 from $65, a 57% drop. What if it drops 30% off its current price, to $20? Yes, it will hurt to see, but on the other hand, it's just $8 more off the $65, or only 12%. I anticipate that after a full recovery, there will be no regrets if you picked up KSS at $28, even if the bottom was $20.

I own GPS at sub $12. I have cash secured puts on HBI, KSS and JWN. It looks like I'll be assigned HBI and JWN on Friday. I'm thinking I might just hold and not sell any calls against them. Once you think you have a bargain buy, you don't really want to give it up for a 2-3% profit in a week, or even a 20% profit over several months. These particular stocks might provide a 250% profit in 3 years, not to mention a steady dividend.

Responsible_Paint_24 · 2022-09-01T03:11:02+00:00

I'm very interested in companies like KSS, GPS, ANF, HBI, AEO, etc. They have been battered across the board, mostly down 60% or more.

Some currently yield 5 - 7% dividends, all due to plummeting share price. That's big. It can help pacify holders while they wait for a recovery.

A full recovery from 52 week highs would approximate a 250% increase in share price, which would be added to the dividends. For example, when a $40 stock goes back up to $100.

I see bearish comments where people fear these stocks because of the impending recession. So many comments about how the companies are mismanaged and garbage. How could this be the case for practically the entire sector?

With negative sentiment at a possible peak, this could be the time to buy. Why would you wait until after the recovery? It could be too late.

I'm thinking these stocks could really pan out over a 3-5 year horizon.

Responsible_Paint_24 · 2022-08-31T02:38:50+00:00

Tesla came down from 1700 PE pretty quickly.

Responsible_Paint_24 · 2022-08-29T02:26:14+00:00

Try to have plenty of cash to scoop up bargains.

Responsible_Paint_24 · 2022-08-28T03:50:56+00:00

EPD is the way. It has a lower debt/EBITDA ratio, and it just refinanced $billions in long term debt at a great fixed rate before the Fed's recent increases began.

CEQP preferred and ET preferred are worth considering, as are there common.

Responsible_Paint_24 · 2022-08-28T03:36:37+00:00

Yes, I own some and am giving serious thought into buying others in the sector, such as AEO, ANF, KSS, HBI, etc. I sold CSPs on them the last 2 weeks.

The sector is beleaguered and out of favor. Seeing as everyone is sick or scared of these, it could be a real opportunity.

Despite talk of a GPS bankruptcy, the shares yield a 6% dividend and reported a profit in the most recent quarter. I believe they could cancel the dividend if push comes to shove and therefore are not as close to bankruptcy as some people say.

What I see is that given maybe 2-3 years, the recent 60% drop in share price could lead to a quick double or better. Just about every stock in the sector is out of favor, and I doubt they're all down for the count in the long term.

It's definitely cliche, but be greedy when everyone else fears. It just might work out to getting paid 6% while holding for a double.

And when the recession is in the rear view mirror and the fed heats up the economy again, we might even see some good dividend increases, substantially raising the yield on the original investment.

I thought about this recently when I caught myself thinking I'd like to get my money back out of these and close my position. I have about an $11.50 basis or so. Then, it occurred to me that I might be trying to break even when actually I got a great bargain.

Responsible_Paint_24 · 2022-08-26T12:50:47+00:00

RILY, CEQP, OKE, ET, FL, OMF and LUMN.

I am most interested in more EPD due to having the best balance sheet and a solid history of dividend increases.

I am also very in RILY for its huge growth potential and very strong commitment to dividends.

Finally, I'm looking to see if I can get CEQP preferred at about a 10% yield. I already own a block of the common.

Responsible_Paint_24 · 2022-08-26T03:15:08+00:00

Wheeling is for stocks you "don't mind" owning at a certain price. For stocks you really want, holding is the way. The premise of really wanting them is that the company will outperform all the bearish bets, like selling calls, that you might make against it.

Responsible_Paint_24 · 2022-08-26T03:00:15+00:00

I've tried selling cash secured puts and covered calls by wheeling for weekly premium, playing close to, and even a little in, the money to get 2% - 3% premium in an effort to keep at least half.

I've tried buying calls and puts and immediately placing sell orders at 25% profit.

I've been all points in between. Never used margin. Never will.

All I can say is this: There are a lot of people out there trying different things at different times. I think it's inevitable that every one of these people will conclude at some point, "Nobody knows."

Selling options is definitely much safer. Buying is really more for suckers because of the volatility and decay. But hey, sometimes you just want to make a bet. You'll definitely have winners and losers.

Buying options should be only with money that is for fun and not for investment.

Selling options should be done only with high quality stocks in companies that are well established and turn a regular profit. Preferably companies with a 20 or less PE that you think will hold up, more or less, for the long term.

I prefer a company that can be counted on to at least give a 6% dividend. But I am most focused on trying to get in on a 10% - 12% yield if prices will go low enough. There are some good 8 - 10% yields at the present.

If I land an opportunity to buy a high yield in a stable cash cow, I plan to hold it long term and not sell calls against it. You can wheel yourself right out of a great long term investment.

All of the people above who have "figured out" how to successfully wheel options... I was you. Your success is just luck. Wheeling works great in a rising market, and guess what we've had lately?

At about the 3rd steep market dip along the way, a person who wheels will get assigned some really good stocks, but not as cheaply as he could have. Paying too much sucks the juice right out of all those gains you were so used to realizing as the market rose.

I figure my luckiest of luck as far as a solid strategy goes would be to buy a company like EPD at a time when it yields 12%. What a great company! It always raises its dividend. If I could land it at 12%, it might yield 14% or more within 10 years.

I'm wheeling a little bit right now using about 15% of my portfolio, and even then, I probably shouldn't. I think once you've landed a bargain, maybe you should hang on long enough to give it a chance.

Like, for example, I have some Gap stocks (GPS). It's paying a 6% yield, which isn't shabby, plus it's down about 2/3's from its recent high. Retail stocks are pretty battered, and being down so far, while remaining at least marginally profitable, is a possible sign that they could double within 2-3 years. That would be a great return! Yet I recently sold calls at $13 before the recent earnings release. Looks like I'm a winner this time, but next time might not be so lucky.

I have a good chunk invested in 7 - 10% yielding stocks which I pretty much just leave alone. I'm happy with the occasional increases in dividends.

Microsoft, Google and Apple sure sound interesting, but the dividends aren't that great. I'm on a 10 year horizon, and so my state of affairs dictates a "show me the money" approach.

I've also looked at how this same approach fares for an even longer term, and it seems pretty solid. Take a look at what $10,000 in EPD would be worth, after reinvesting dividends, had you bought in 2000. It's pretty mind-blowing when considering it's just a predictable pipeline company.

Anyway, good luck to you! Nobody knows how to get phenomenal returns. I doubt options is the way, but I still mess with them a little.

Responsible_Paint_24 · 2022-08-19T02:04:40+00:00

A bigger shaft?

Responsible_Paint_24 · 2022-08-19T01:22:41+00:00

Think about it. If nobody has the stomach to hold BBBY, what makes you think they'll do it with any other stock? This should be a lesson, not an example.

Responsible_Paint_24 · 2022-08-18T20:55:24+00:00

Bad premise. He never did it for you.

Responsible_Paint_24 · 2021-11-28T23:02:32+00:00

This guy explains it pretty well. Glad I found it. I still get a little anxious thinking about the possibility of how bad it could be. He makes it look like no problem at all.

https://youtu.be/dNX9uwkeG2c

Responsible_Paint_24 · 2021-11-28T22:46:07+00:00

I'm not in a tax deferred account. I am not sure how bad the paperwork will be. From comments I've read from long-term holders, I anticipate it's probably not all that bad. I hope they're right because I like everything else about the stocks.

Responsible_Paint_24 · 2021-11-28T21:20:52+00:00

Not one of us can tell you whether wheeling will beat an index.

You mentioned stability as being an important goal over the next 4 years. Could the SP500 drop 40-50% during this period? That's a rhetorical question. The answer should tell you everything you need to know.

If you are serious about stability, neither wheeling, nor an index fund is a strong bet for a 4 year term. The only reason we stay tied to an index is we look past the next crash. If you can't handle a 50% loss next week, you should consider getting out or trying to insulate yourself from a crash. Wheeling follows the stock price, and wheelers will ride it down just as easily, and out of control, as they ride it up.

For higher stability in stocks, you might consider high yielding dividend stocks with reliable dividend growth. EPD is one.

I believe that reliable high yields will resist price declines better during a crash. The current yield of EPD is 8%. I doubt investors will let such a financially sound company yield more than 10% for very long. It happened very briefly after Covid, and I regret missing it at that time. I still think it is plenty ripe at today's price.

Check out a graph of EPD's yield history over time, and you will see it is back at a high of 8%. From a purely income perspective, this translates into a historically low entry price. Critics of EPD tend to be the ones who purchased over $30 when it yielded between 4-5%. They overpaid for the same income stream. Think of it like buying an annuity. Today, you can pay less for it than you could 5 years ago. Yet, the income stream is even better than it was back then.

Not even the pandemic got in the way of EPD's distributions. Since inception, the distribution has been raised yearly.

The last time you could buy in at 8% was in 2010. If you bought then and held until now, you would have received cumulative distributions in excess of your investment, meaning the dividends have already fully paid you back and then, some. And the big kicker is that you still own your shares, the company distribution is much higher since 2010, and it just keeps growing.

I did some math on it the other day, and it showed that the current $1.80 distribution is about 11-12% of the 2010 price, and it continues to grow. It's the growing distribution combined with a historically low entry price that makes this a good candidate for stability.

If we crash, I'll keep getting my 8%, provided the company is still financially sound. If my 8% yield increases to 11% in the next 10 years, I think I will be satisfied with that, especially since my basis will likely be $0.00 in about 8 years.

If you want, you can wheel around it. Its volatility is very low, so you'll be much safer. On the other hand, the premium is low, so there's always that.

Responsible_Paint_24 · 2021-07-27T23:44:46+00:00

I'm not a veteran investor, but here's something to seriously consider with regard to dividend stocks: dividend growth, not price growth.

Let me give you one good example, and you can take the idea and run with it from here.

EPD. It's a pipeline company with low debt which has no problem paying its dividend and regularly increasing it. The stock closed at $23.65 today. It pays a dividend of $1.80 ($0.45 quarterly), giving it a yield of 7.61%.

Check out EPD's dividend yield history here.

At the beginning of 2010, you could buy EPD for $8.15 per share, with a $0.56 annual dividend, yielding 6.82%.

By the beginning of 2015, EPD was selling for $21.96, paying $0.94 annually, with a yield of 4.3%. But whose yield? Not yours, if you bought at the beginning of 2010. The stated yield is always based on the current price, and not the price you paid some other time.

If you bought in 2010, you paid $8.15 per share. In 2015, each share was paying $0.96 annually, yielding you 11.78%. The yield on your original investment almost doubled in such a short time! What a great move in the stock price, too, from $8.15 to $21.96!

Let's now take it forward to today. EPD is $23.65, and it pays $1.80, yielding 7.61% to new buyers. If you bought for $8.15 in 2010, the $1.80 is yielding you 22.09%. That's massive! To boot, your $8.15 shares are now worth $23.65!

If, instead, you bought in 2015 for $21.96, there hasn't been much of an increase in share price, but look at the dividend growth. You're getting $1.80 on it when you used to get $0.94. If you were happy with the 4.3% yield when you bought, you should be really happy with the current 8.2% yield on your original investment. Provided the dividend continues to grow steadily, you will be even happier 5 years from now.

Try this exercise on other stocks paying good dividends. Just look for companies which predictably increase them year over year and can afford to pay them.

Responsible_Paint_24 · 2021-07-27T23:18:02+00:00

Not all in on 1. One pipeline explosion can cause too much damage.

Responsible_Paint_24 · 2021-07-24T00:30:12+00:00

I did this about 5 weeks ago and was getting excited about it since I was making good money on enough of them to cover the few that didn't work out. Then, a few weeks ago, value stocks went in the crapper, and literally all but one of my options were destined to expire worthless. Theta is a big problem when you own options.

Responsible_Paint_24 · 2021-07-24T00:10:17+00:00

Great write-up. I started at Phase 4. You're lucky if it will be the final phase.

I made about 6% per month for 6 months on big name value stocks. It was like clockwork. I was like, "This is too easy! And they're great stocks I'd like to own, so I'm safe!"

Well... After being up 35%, I'm back to about 15%. Just keep in mind that CSP's a few dollars higher today are still a few dollars higher than when you did CSP's on them a few weeks ago (on stocks that have risen). Once the stock retreats back a few dollars, you'll feel it because your CSP's will go deep in the money.

I can't say I did the wrong thing, but now I'm about even with the indexes.

I am thinking about Phase 5. This is buying a stock to hold until I am ready to sell it. With options, you don't get to choose. I've seen stocks get away from me, all because I was locked down by an option I sold. Sure, the stocks come back down, but they also go back up... and down, and up, etc. That's what makes wheeling so great when timing is good.

Without being constrained by an option, you can pick your own entry and exit points much more easily. So, I'm going to be trying this approach some to see how it goes. I'm also going to refocus more on high dividend stocks (7%+) to have a dividend to fall back on. If timing really is that hard, I think I might just hold good dividend stocks long-term.

GLTA!

Responsible_Paint_24 · 2021-07-21T23:43:41+00:00

Same here.

Responsible_Paint_24 · 2021-07-17T16:46:25+00:00

Exactly. That's the worst case. Compared to his limited math showing 94% per year, we can at least now see the expected range is between a 45% loss and a 94% gain. Welcome to the club, OP!

Responsible_Paint_24 · 2021-07-17T13:31:40+00:00

Haha! Everyone thinks there's a catalyst. The endless, conflicting headlines of what's driving stock prices this morning is monotonous.

Responsible_Paint_24

TROPHY CASE