July Portfolio 2021 Update

I realize that over the last couple of months I have been a little bit absent on this blog. However in the background I have been working away feverishly on a couple of different projects. Along with my weekly Dividend Talk podcast with my buddy, European DGI, Work has been ongoing on a new initiative with 15 members of the European investing scene.

Together we have set up a new website called the European Investor Network . The goal of this initiative is to inspire, educate and help investors take control over their finances in the search for financial freedom from a European perspective.

This community is open to any Investor and if you would like to be featured on the website than please feel free to get in touch with me .

We believe that sharing our journeys and knowledge will inspire every day Europeans to take control over their own finances in their search for financial freedom.

Along with TEIN, I have also taken up a role as an analyst for Sure dividend. As this is a paid position, I usually prioritize my updates and analysis for Sure dividend. To avoid any conflict, I do not analyze any companies in my portfolio for Sure dividend . I also do not share any of my analysis on their website here for obvious reasons. Ben and the team do a huge amount of work behind the scenes to provide top quality content and analysis. So I would recommend anyone to check them out especially their free articles.

Recommend Read

https://www.suredividend.com/microsoft-dividend-stock/

My Portfolio – USA Companies

My portfolio has undergone quite some changes since the last time I published an update like this. 57% of my portfolio is invested in 12 companies based in the USA. My largest position is in Altria ($MO). This was not by design by the way but rather due to being assigned 100 shares when selling a cash secured put.

I initiated one new position in Texas instruments (TXN) this year. Back in June of this year, I wrote 9-dividend-growth-stocks-for-2021 where I highlighted TXN as a company on my watchlist. They have a long history of dividend increases, low payout ratios, strong business model and have provided superior returns for investors over the last 5 years.

My main issue with US bases companies at the moment is that they seem a richly valued at the moment. I have had this feeling for quite some time. However we all know and quote the mantra :

Time in the Market beats timing the market. 

How many of us, truly follow this rule. If I was a betting man and based on conversations I have had with investors from the US and Europe, I would argue that very little follow this rule to a tee.

Why else do we perform valuation analysis? or why do we compare our investments against the market? or why is it even important to beat the market at all?

This was one of my main issues with TXN , they always appeared over valued.

I had this same problem with Microsoft when I wanted to buy them at $180. Luckily I gave in and bought them at an average price of $211 and they have skyrocketed in price since.

Taking my learnings from Microsoft and given that I try to have a long term investment view, I plan on easing into my position in TXN and hoping for a substantial dip so I can allocate a decent position in them.

My Portfolio – European Companies

There is not much change in my European portfolio apart from adding Fresenius and selling Enagas. Fresenius was inspired by the recent podcast from Phil and European DGI on dividend talk.

Enagas turned out to be a mistake due to trying to make a quick buck selling covered calls. Not only did miss out on the dividend after holding them for nearly a year but the price appreciated to where I would have made a loss on them if I was to buy them back. I learned a simple lesson here -> Only sell covered calls on companies I do not mind selling. I will wait again to see if I will add them back in the future.

Dividends

Last month was quiet on the dividend front with only 3 companies distributing dividends. They were

• Red Electrica – €72.73
• Altria – €72.40
• Realty Income – €10.17

This ensured that I have already surpassed the total amount of dividends that I received in 2020

Options Trading

Recently I had Phil on dividend talk where we both discussed our new love for options trading using the wheel strategy. If you have an interest in options than feel free to check it out, however I would urge you no to follow my picks as I am only learning this as I go along.

That said my income from options has already overtaking my income from dividends this year with only a fraction of the money needed to do it.

For those who are interested, there are two ways that I use options to supplement my income.

Tool for Dividend Portfolio:

The idea is to use options as a tool to buy 100 shares of a company at a price that I a willing to pay. For example if Unilever was trading at €50 but I wanted to buy 100 shares at €45. I could sell a put option with a strike price of €45 and receive a premium.

This premium is mine to keep no matter what happens. I receive a premium because I am obligated to buy the shares at €45 if the underlying (Unilever) is trading at €45 or below.

There are a couple of scenarios here:

• If the price is above €45, I am not obligated to buy and I keep the premium
• If the price is at €45 or below I am obligated to buy 100 shares at €45 each.  

When I am using options for my dividend portfolio, I do not mind getting assigned because I am happy to own the companies long term

Option-based Strategy for regular income:

For regular income, I use a wheel strategy. The key difference here is that I am hoping that  do not get assigned. While I intend to only pick companies that I don’t mind holding for 12 months or so, My preference is to not get assigned and to just keep collecting premium.

The wheel strategy has 5 different steps

• 1 -> Sell Cash secured put
• 2 -> Maybe Roll
• 3 -> Get Assigned   ( I hope I never get this far)
• 4 -> Sell Covered call
• 5 -> Get assigned  

Open Trades

Below are my current open trades for August

Covered Calls:

• 1 * BME: REE,  €16 CALL  expiring 17 SEPT 21  for  €35
• 3 * SOLO,   $5 CALL expiring  21 JAN 22 for €356
• 1 * T, $30 CALL expiring 17 June 22 for $164
• 1 * MO, $50 CALL expiring 17 SEPT 21 for €50

Cash Secured Put:

• 4 * SOLO, $3 PUT expiring 21 JAN 22 for $277
• 1 * RIDE, $7.5 PUT expiring 21 JAN 22 for $200
• 1 * WSH, $13 PUT expiring 18 AUG 21 for $351
• 2 * NCLH, $25 PUT expiring 20 AUG 21 for $145
• 2 * CCL, $25.5 PUT expiring 27 AUG 21 for $160
• 1 * UAL,  $50 PUT expiring 20 AUG 21 for $205
• 1 * INTC, $51 PUT expiring 03 SEPT 21 for $115

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