Selling two under performers and replacing them with…
Even the best investors make mistakes so for a little guy like me it would be no different. It’s part of the process and we can only hope to learn from our failures. When I first began to focus on a dividend portfolio back in 2021, I was attracted to the Aristocrat list same as any new investor. I didn’t chase yield per say but was focusing on blue chip companies.
One of my first investments was ATT ( T ) with a long history of dividend hikes and a name brand company what could go wrong? In the 2.5 years since that purchase it has dipped and recovered twice above my cost basis, I was tempted to sell out earlier this year and looking back it was a mistake not to. What I have learned over time is not to focus on what a company did in the past but what it’s future has to offer. The Telecom industry, especially legacy companies have a massive amount of debt and little growth prospects. The days of every house having a landline and a monthly bill are long gone, yes they were replaced by cell phones but there’s a plethora of competition for subscribers and the costs to maintain, and keep up with ever changing technology will never stop. The trend and chart does not look good and the threat of future lawsuits over the lead cable wraps could see the spiral continue. It was time to say goodbye down 32%
Now comes cut #2
A little over a year ago I took a gamble on Paramount ( PARA ) thinking it could recover and I can flip it for a profit, Nostradamus I am not. Buying in at $30 and watching it continue to tumble was not pleasant but I was willing to go along for the ride so long as the decent dividend was being paid out. Well that party came to an end earlier this year with a nasty dividend cut. Ready to move on I began to write Covered Calls to collect some premium until it got called away, the volatility is low as are the premiums. I collected $63 in premiums over the last 2 months but today I decided to sell it off and 49% loss.
Trying something different.
In my eyes both of the transactions above were dead money – $2936 to be exact and only represents 1.6% of this portfolio. I have not ventured into the high yield funds like JEPI, QYLD etc. But decided I would take this small amount and experiment with of all things a Covered Call ETF with a single holding! A few months back YieldMax created a group of new ETF’s focusing on writing Covered Calls on single stocks instead of a basket of stocks. I picked their Tesla fund TSLY and time will tell if this will pan out and I’m ok with that. It pays a monthly dividend similar to JEPI and should continue to pay well with market uptrends.
The fund began to payout dividends at the beginning of this year and has an outrageous 70% rate. Hard to see that continuing but TESLA stock is highly volatile and the options market pays well for volatility. That $2936 from selling ATT and PARA has now turned in 163 shares of TSLY, drip is off and I will reinvest the monthly dividend into one of my current holdings.
In the end I jumped in on ATT when I should have spent a bit more time evaluating the company and PARA just didn’t pan out. Time to move on and not dwel on the past.