August 2021 Dividend Income Report

Another month has passed and it’s time again to update the monthly dividend income reports. I am making a habit of doing the dividend reports pretty late. I should probably have that as my new year’s resolution. 

August was a worse month than July. A total of $54.83 in dividends from 11 different companies.

No Dividend increases or decreases this month. Just the usual fluctuations in the SPHD dividend

General Mills (GIS) – $1.53

Verizon (VZ) – $2.51

AT&T (T) – $23.92

CVS Health (CVS) – $7.00

Texas Instruments (TXN) – $1.02

Apple (AAPL) – $0.88

AbbVie (ABBV) – $16.90

Citibank (C) – $0.51

Sirius XM (SIRI) – $0.18

Helmerich & Payne (HP) – $0.25

Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) – $0.13

July 2021 Dividend Income Report

Another month has passed and it’s time again to update the monthly dividend income reports. July was a better month than June with almost double the amount in Dividends. A total of $64.97 in dividends from 12 different companies.

Dividend increases from 3 companies.

Cardinal health raised its dividend by 1% from $0.486 to $0.491 per share. 

Medtronic by 5.8% from $0.58 to $0.63 per share.

Simon property by 7.7% from $1.30 to $1.40 per share. Added bonus with Simon Property is it looks like there will be another dividend increase to $1.50 for the next payout which is scheduled on 09/30/2021.

General electric is not part of the portfolio anymore after the 1 for 8 reverse split that went into effect on August 2nd. I think my brokerage (Robinhood) automatically sold it since I only had 5 shares and it wasn’t enough to form one share after the reverse split. 

Iron Mountain (IRM) – $9.90

Seagate Technology (STX) – $5.36

Altria (MO) – $23.22

Occidental Petroleum (OXY) – $1.05

Franklin Resources (BEN) – $1.96

Cardinal Health (CAH) – $0.49

Medtronic (MDT) – $1.26

Simon Property (SPG) – $1.40

General Electric (GE) – $0.05

Cisco Systems (CSCO) – $0.37

Annaly Capital Management (NLY)  – $19.80

Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) – $0.11

June 2021 Dividend Income Report

It’s almost August and I didn’t do my June dividend income report. Pretty late to the party. June looks like a slower month with $34.80 in dividends from 16 different companies, the lowest haul after I started tracking dividends here. 

Most of these shares were bought more than a year ago. Some of them are closer to 5 years. That was when I was too scared to commit a lot of money to buy shares in one company. So I would usually do onesie-twosie shares and that is pretty clear here with dividends less than a buck from half of the companies in the list below. 

Wells Fargo (WFC) – $0.50

Helmerich & Payne (HP) – $0.25

Invesco (IVZ) – $6.29

Discover Financial Services (DFS) – $0.44

Valero (VLO) – $0.98

Archer-Daniels-Midland (ADM) – $3.33

Exxon Mobil (XOM) – $0.87

Target (TGT) – $2.72

Walgreens (WBA) – $6.08

3M (MMM) – $7.40

Kinross Gold (KGC) – $0.30

L Brands (LB) – $2.55

Royal Dutch Shell (RDS.A) – $0.35

Kraft Heinz (KHC) – $1.20

Gilead Sciences (GILD) – $1.42

2 ETF for Weekly Income

All of us are used to dividend stocks being paid out on a quarterly basis. You need to get creative to have a portfolio with income every month. This led me to look into dividend stocks that pay dividends every month.

I found a few companies that paid dividends every month. Here is my post on 4 companies that pay dividends every month. I didn’t list all of them. Just the ones I liked the most.

The question here is what if monthly dividends are not enough. What are the choices available if you are looking for something that pays a dividend every month?

SoFi has done exactly that by creating two ETFs that pay a dividend every week.

What is SoFi?

SoFi is a relatively new fintech company that specializes in all things money. Their number one priority is to help you get your money right. So you can secure your financial future and live life on your terms. It doesn’t matter what kind of money trouble you have or what kind of money tool you are looking for. They have a solution for you.

Are you looking to consolidate credit card debt? They offer personal loans.

Are you in the market for a new home? They offer mortgages.

Are you looking to get your finances in order? They have SoFi Relay for budgeting.

They have a product for all of your money needs. If they don’t have a tool directly, then they have a partnership that will get the job done.

I first heard about SoFi a few years ago when a friend mentioned about refinancing and consolidating all of their student loan debt. Student loan refinancing was their first product and from there they introduced more products as time went by. They launched Mortgages in 2014 and SoFi invest in 2019.

While sofi has made products like an investing app, they have also dabbled in making some ETFs. They offer 6 ETFs as of now but I am going to look into 2 of them that have dividends paid out every week.

1. SoFi Weekly Income ETF (TGIF)

I can’t think of a better ticker name than TGIF that would suit this ETFs purpose. I couldn’t find any information whether it is named for Thank God it’s Friday but I think it’s safe to assume that’s the case. As the name suggests Dividends are paid out every week on Friday.

This fund invests in investment grade and high yield fixed income securities. That’s a difficult way of saying it invests in corporate debt and junk bonds. It is an actively managed fund with exposure to over 100 different bonds for diversification. Biggest holding as of March 31st 2021 is a Ford corporate debt that expires in April 2023.

Dividend Details

  • Dividend: $0.05
  • Annual Dividend: $2.60
  • Dividend Yield: 2.46%
  • Paid out: Weekly

This is a relatively new offering so there isn’t a long history for dividends. The first date of dividend payment is 10/07/2020.

Expenses

Every Mutual fund and ETF charges a fee to its shareholders to cover operating expenses. TGIF is no different. Since it is an actively managed fund, the fees are a bit higher than usual. TGIF’s expense ratio is 0.59%. That’s $5.90 for every $1000 invested in the fund over a span of the year. 

2. SoFi Weekly Dividend ETF (WKLY)

This is the second one on the list. I like how they have named these ETFs in the most straightforward way possible. This one is even newer than the TGIF ETF. First day of trading was 5/11/2021.

The goal with this is the same in terms of paying out dividends every week but the investments are different. This fund is made up of the most consistent dividend paying companies throughout the world. I couldn’t find a list of the companies they have in their holdings. However they have some stringent criteria for the companies that’s in the fund. Market capitalization of $1 Billion, dividend payout ratio not exceeding 100%, Company has paid dividend the last year and is projected to pay dividend the coming 12 months.

Dividend Details

  • Dividend: $0.02
  • Annual Dividend Payout: $1.04
  • Dividend Yield: 2.07%
  • Paid out: Weekly

Expenses

Expense ratio for WKLY is 0.49%. It is a bit cheaper than TGIF but this is still expensive. The 0.49% expense ratio amounts to $4.90 for every $1000 invested in the fund for a year.

Effective Dividend Yield

The dividend yield you will find by a quick search of TGIF and WKLY shouldn’t be considered as the dividend yield you can expect. You will not see any difference in the payout into your brokerage account but the expense ratio has to be accounted for somewhere since that is a cost to you. 

The way I would look at the effective dividend yield for funds like these is the Dividend yield – Expense ratio.

Should you buy it?

On a high level, there is a quick and easy method you can use to decide this. If you don’t have a lot of money to be well diversified and want to have weekly income, then TGIF and WKLY make a lot of sense for you.

This is a scenario where you are not looking at the dividend yield or the stock movement. A set it and forget mentality that will bring in income.

Now to the nitty gritty- this is the I care less about getting dividends every week. 

WKLY is a diversified fund invested in dividend stocks. The 2% dividend yield is more than the S&P 500 dividend yield which is currently at 1.37%. so it’s definitely not slacking in that area. However, since this fund is invested in dividend stocks. You could look at the fund holdings and pick out individual stocks you want to own. Some of them will have a dividend yield higher than 2%. You can have the ones you want and ignore the ones you think are not good. You will be sacrificing some diversification in the process.

TGIF is a fund invested in corporate debt and high yield junk bonds. The 2.5% dividend yield is good and similar to WKLY is higher than the S&P 500 dividend yield. Again if you are not desperately looking for weekly income, you can pass on this and go for a dividend stock that pays better. Only reason I can think of adding TGIF is for the added diversification. I have no exposure to bonds and TGIF can help with that.

What are options?

Raining Money

Options are financial contracts that give the buyer the right and not the obligation to buy or sell a stock at a specific price by a certain date.

The seller has the obligation to buy or sell the stock at that specific price if the buyer wants to at that specific price.

This all sounds very formal and I am sure that definition is a modified version of something I read in the past. 

This is a pretty straightforward concept or at least it’s supposed to be straight forward but anytime I’ve read about it, it’s just complicated. Options are flexible and people use it for different purposes and I think trying to explain all of that makes it complex for anyone let alone a beginner. The flexibility that comes with options makes it a very vast topic and jumping into them with a lot of money in the beginning can quickly spiral out of control leading you to lose all of your money. Here, I will try to explain the very basics (just scratching the surface) of options but before we get into them, there are a few terms that you have to know.

  1. Strike price

It’s a contract so two people have to agree on what price the shares are going to be bought or sold. That’s the strike price.

  1. Expiration

This contract is only valid for a certain amount of time. That’s the expiration date. Another way to think about it is like your car insurance where you pay your premium for 6 months and you get coverage for those six months. Once those six months are over and if you don’t pay again then you don’t have insurance. Your coverage is over. your contract has expired.

Popular stocks that trade very often and are household names have contracts that expire every Friday for the most part and the rest of them have one expiration each month which is on the third Friday of every month.

  1. Premium

Using the car insurance example, you pay a premium to have the insurance. Similar to that, a buyer has to pay a premium to have the opportunity to buy or sell the stock at the strike price. This applies to anyone buying an option.

  1. Collateral

if you get into a car accident your insurance company covers the cost because of the insurance contract you have. The money that is set aside by insurance companies to pay for those damages is the collateral. Depending on the kind of option, the collateral can be money or stock. This applies to anyone selling an option. It is also called buying power reduction if you are using a margin account.

  1. Option size

This is not a definition per se. This is more of a need to know. Each option contact is for 100 shares. 

There are two types of options

  1. Call
  2. Put

There are two parties involved

  1. Buyer
  2. Seller

Combining all of these different variables seems very daunting but those give you the flexibility of making a directional bet easily. 

As a beginner to options this is how I look at it. The risk is different depending on what combination you go with.

If you think a stock will go up then you can either buy a call or sell a put. The amount of money you can make will be vastly different and the way you would set up the options contract would be different. Buying a call would cost you very little upfront and the amount you can make from is astronomical if the stock skyrockets. Selling a put would require you to keep a significant chunk of money as collateral and the maximum profit would be whatever you collected initially as premium when you sold the put option.

So how does this work and what would it look like

Buying call options

XYZ company is trading at $50 a share right now and you think the stock is going to move up to $70 a share in two weeks. 

You might consider buying the $60 strike call option that expires a month away for $1.00. This will cost you $100 because each option contract is for 100 shares. This is the premium.

If your assumption comes true then you stand to make $9 per share ($900 because a contract is 100 shares) 

The calculation works out to be $70 per share which is the stock price at expiration minus $60 per share which is your strike price and then minus the $1 per share you paid in premium.

This would be a 900% return because you made $900 using $100. The same move in the stock will get you a return of 40% where you would make $2,000 in profits on the initial $5,000 spent to buy the stock.

$70 – $60 – $1 = $9 

Stock price at expiration – Strike price – Premium Paid = Profit

This is great when everything works out the way you want but what if the stock price stays at 50 and does not move at all then the call would expire worthless and you would lose the $100 you paid initially as premium.

When and why would you do this?

  • Amplified returns.
  • You are convinced the stock will move up dramatically in a certain time frame. Especially handy for small biotech companies that sees a big stock price jump after getting FDA approval.
  • You are willing to lose the premium if the stock move you are hoping for doesn’t pan out.
  • More Misses than hits.
  • YOLO move – you only live once or you really lose once depending on how you look at it.

Selling put options

All the assumptions for XYZ company stays the same, XYZ company is trading at $50 a share and you think it will go up to $70 in two weeks

You might consider selling the $30 Strike put option for a month out for $1.00 ($100 since the contract represents 100 shares). This will cost you $3000 in collateral.

If they stock moves up to $70 a share in a month then the contract expires worthless and you will keep the $100 in premium you collected. Well as long as the stock price stays above the $30 strike price at expiration, you will keep the $100 collected initially.

If the stock is below the $30 then you will have to buy the stock at $30 a share since that is the contract you agreed to. This is where the $3000 collateral comes into play. You have already set this money aside when you started this trade.

The calculation works out differently from buying a call, you already know the maximum you can make is $100 as long as the stock price is above $30 a share at expiration.

Your return would be $100 on $3,000 you put down as collateral. This would be 3.33% in one month

When and why would you do this?

  • Consistent returns.
  • It’s a stock you like but you want to buy it at a lower price.
  • You think the stock will move but you are not fully convinced of it.
  • You want to get paid while waiting for the stock to come to a lower price.
  • More hits than misses.
  • Generate an income-based investing or trading.

Now moving to the other side, the scenarios are going to sound very repetitive since it’s just the other side of the same coin.

If you think a stock will go down then you can either buy a put or sell a call. Everything in this portion works in reverse of the items mentioned above. Buying a put will cost you very little upfront and the amount you can make from it is significant if the stock tanks. A key difference here compared to buying a call is that there is a limit to how much you can make because the worst that can happen to a stock is for it to go to $0. Similarly to selling a put, selling a call would require you to keep a significant chunk of money as collateral or 100 shares of the stock and the maximum profit would be whatever you collected initially as premium when you sold the call option.

Buying put options

Buying a put resembles the car insurance analogy I gave earlier except you are hoping for an accident to happen. Pay the premium and get a big payout if things go horribly wrong with the stock. But a less cynical way to look at it is buying a put option to protect stock you already own and in this way the put will behave exactly as having car insurance where you pay your premium just in case something bad happens.

Using the same XYZ company as the example, XYZ company is trading at $50 a share right now and you think it’s going to come down to $30 in two weeks. You can buy a put at a strike price of $40 spending $1 in premium which would be $100 because each contract is one under chairs.

Similar to buying a call, if everything works out you would net $900 profit after spending $100 in premium.

The calculation works out to be $40 per share which is the strike price minus $30 per share which is your stock price at expiration and then minus the $1 per share you paid in premium.

This would be a 900% return because you made $900 using $100.

$40 – $30 – $1 = $9 

Strike price – Stock price at expiration – Premium Paid = Profit

When and why would you do this?

  • Amplified returns.
  • You are convinced the stock will move down dramatically in a certain time frame.
  • A cheap way to protect stock you already own.
  • You are willing to lose the premium if the stock move you are hoping for doesn’t pan out.
  • More Misses than hits.

Selling call options

We are back to XYZ company and it’s trading at $50 a share and you think it will go down to $30 in two weeks.

You might consider selling the $70 Strike call option for a month out for $1.00 ($100 since the contract represents 100 shares). This collateral is a bit iffy, you can put 100 shares as collateral or it would be an amount that is calculated by your broker if you have a margin account.

If the stock moves down to $30 a share or stays below the $70 strike price in a month then the contract expires worthless and you will keep the $100 in premium you collected.

If it doesn’t work out then you sell the shares at the agreed strike price.

When and why would you do this?

  • Consistent returns.
  • Make money on the stocks you already own.

Conclusion

Options are risky but the first step is to understand what options are so you can understand the risks associated with them. Buying options is the easy part where you could potentially make a lot of money but the trade off is you will have more losers than winners. Selling options gives you a cap on maximum returns and statistically have more winners than losers.