Month in Review – March 2018

March Madness? More like Market Madness…amirite?

Okay, that was a little lame. But all this volatility sure does make things interesting. It also provides great opportunities for selling options. February was one of my busier derivatives months in a long time, but I managed to keep that momentum through March.

I wouldn’t be surprised or disappointed if it continues.

So let’s dive right on in, shall we?

Portfolio Summary

Metric

End of March 2018

End of February 2018

Total Invested

$445,183.54

$435,791.06

Market Value of Total Invested

$469,169.86

$461,735.31

Allocation % – Equity

61.43%

59.92%

Allocation % – Bonds

18.33%

18.06%

Allocation % – “Other”

2.73%

2.97%

Allocation % – Cash

17.43%

19.00%

Income Assets – Invested

$286,267.37

$276,505.64

Income Assets – Market Value

$289,710.06

$278,710.45

Projected Annual Income

$15,635.75

$18,618.86

Invested Yield

5.46%

6.73%

Market Yield

5.40%

6.68%

Stock Purchases

2 stocks purchased. Both are additions to existing positions; projected annual income increased by $544.00 based on current dividends.

03/06/18 – VCF: 115.3448 shares purchased @ $14.41/share. I’m continuing to build a position in this muni-bond closed end fund in our taxable account.

I have the sharebuilder auto-invest feature set up to buy $1,666 worth of shares once per month. The account is funded with 5 more months worth of cash for these auto-investments, so this will keep showing up here for a while.

I’m dollar cost averaging into the position because I expect negative pricing pressure on bonds this year as rates rise and inflation picks up.

Since the dividends are set to be automatically reinvested, I don’t count this investment towards my total projected investment income.

3/16/18 – WHG: 200 shares purchased @ $62.50/share (average). I actually purchased 100 shares at $65.00/share and another 100 at $60.00/share as a result of put options assignments.

The WHG share price really got hammered during the February selloff and it didn’t recover at all. It trades on really light volume, so it can be subject to pretty big swings.

Projected investment income is increased by $544.00/share based on the annual dividend of $2.72/share.

Choose the Form of the Destructor

No UVXY trades this month. With the increased market volatility and the reduced leverage of the fund I’m a little hesitant. I think VIX futures might still be in backwardation, so it’s probably a good idea to just chill on this for a while. I’d really like to see another reverse split actually.

All UVXY put trades are documented in the “UVXY” tab of the Dividend Income Tracker, and any future trades will also be documented on the twitter (as long as I can remember to post them).

For the uninitiated, I had been shorting UVXY because it was the worst ETF ever. They lowered the leverage ratio from 2.0X to 1.5X so it is slightly less awful, but still probably deserves to be shorted.

I use long put positions so I can avoid the use of margin and do these trades in tax-advantaged accounts. It remains to be seen if the reduced leverage will bring the ETF’s decay rate in line with the time decay rate of the options. There’s really only one way to find out though…

Pay Days

Dividend Income Tracker is published here at the mothership and has been updated.

Total investment income of $2,685.72 with a taxable total of $33.91. We’ll call it 17 “pay days” with 39 individual payments received.

Options premiums represent $665.32 of that total.

Capital gains made up $1,300.00.

Which leaves $686.49 of actual bona fide dividends (plus $33.91 of interest from P2P lending).

Lending Club

Lending club income is aggregated into a single income record for simplicity’s sake. It actually arrives as a lot of small payments over the course of the month.

No loans got charged off this month! Yay!

Of course on the other hand, it doesn’t look like any loans became current either. We still have 5 loans that are late, and now 3 of those 5 are “extremely late”.

We might see a couple more get charged off in April. The number of bad loans we’ve invested in so far remains at 13 out of 220 or 5.91%.

Oh well.

Month

In Grace Period

Late (16 -30 days)

Late (31 – 120 days)

Charged Off (aggregate)

End of 2017

0

0

6

8

January 2018

1

0

4

9

February 2018

0

4

1

13

March 2018

0

2

3

13

I’m glad I started tracking this stuff last year. It should be fun to continue to follow it through 2018.

Lending club’s algorithm is suggesting I should write down $58.56 worth of principal for the five loans that are late, but as the eternal optimist, I’m going to continue to wait until the loans are actually charged off to recognize the loss.

That is up ever so slightly from what it suggested last month ($55.21). That doesn’t seem like enough to me, but let’s just say I don’t have a lot of faith in the algorithm these days.

I continue to lose interest in my new experiment which involves buying late notes on the secondary market at a discount. I feel like I have a good set of rules to follow to pick out decent loans among the garbage on the secondary market. But it’s so tedious to do. It continues to remain a separate deal for the time being. If/when I ever decide to just cut bait on this half baked idea, I’ll recognize the loss here and move on.

Anyway, here’s the latest on all that.

Comparisons

Month over month, investment income was up 116.2% compared to $1,242.10 in February. Of course I had a $1,300 capital gain recognized from my SCHB covered call getting assigned.

If we take that out of the equation, it was really only an 11% increase.

Month over month comparisons can be a little weird with the way I count “income”, since options activity and capital gains are going to be erratic. But that’s how I count it, so it is what it is.

I now have over 4 years (!) of data on my income tracking sheet.

So I’m including a table in this segment to look at longer term trends:

MARCH – INVESTMENT INCOME HISTORY

Year

Dividends

Options

Capital Gains

P2P

Total

2015

$274.52

$0.00

$0.00

$0.00

$274.52

2016

$451.97

$0.00

$0.00

$0.00

$451.97

2017

$384.52

$557.64

$151.30

$30.01

$1,123.47

2018

$686.49

$665.32

$1,300.00

$33.91

$2,685.72

Pretty cool huh?

Raises

There were several raises worth mentioning this month.

The VLO quarterly distribution was $0.80/share, which is up from $0.70. That is a 14.29% increase! The share price has really taken off in the last year or so, but thanks to this raise, shares still sport nearly a 3.5% yield.

GILD also rewarded shareholders with an increase, paying $0.57/share. That is up $0.05 from last quarter’s payment of $0.52 and represents a 9.62% increase. Mr. Market has punished Gilead over the last year or so because their Hepatitis C treatment works too well and is curing all their customers. I have faith that their recent acquisitions in oncology and the existing portfolio of HIV compounds are going to provide future growth. Meanwhile, the cash cow continues to return cash to shareholders, which is just how I like it.

CVX paid $1.12/share this quarter, which is a whopping $0.04 more than the previous distribution of $1.08 (3.70% increase). We’re not going to give it back, but Chevron probably shouldn’t be increasing its payout right now. Total dividends paid for the trailing twelve months still exceed total free cash flow generated. That is ultimately an untenable situation. It is possible to be TOO shareholder friendly you know.

So there you have it. The first quarter of 2018 is already over. I’d say we’re off to a pretty good start.

How was your month? What do you think of mine? What is the airspeed velocity of an unladen swallow?

Let’s hear it in the comments!

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