5 August, 2022 seen 17This article has been sitting in the blog's draft section since May 2018, I decided I just have to write an answer to…
On December 28, 2019, I noticed that 100 shares of NRZ I hold were called away. This comes as a little shock, as just a couple of days ago I bought an additional 53 shares of NRZ as I was looking to repair my dividend income in January 2020.
With 100 NRZ shares called away, January 2020 dividend income will drop by $42.5 (after tax), which is quite a pain. Every year I'm looking to growth YoY for about $50-$70, with this latest stock sale I will barely reach January 2019 income level.
Now, back in August 2019 I sold following covered call NRZ JAN 17 '20 16 Call @0.17
With NRZ price rising to $16.65 I got called away from these shares just a day before stock going ex-dividend. A double loss to me.
In total, my loss here is 48$ from the stock sale (my break-even was at $16.17 when writing a covered call option) + I won't get a hefty +$42.5 dividends in January. Now, the stock price most probably will drop by 50 cents after NRZ will go ex-dividend.
I could probably buy back 100 shares straight away but I won't qualify anymore for dividends, and if so my loss will be double that. Now, as painful it might be, one is for sure there won't be a miracle with January dividend and I will barely overpass (if) January 2019 dividend income, but here is what I decided to do.
As I got $1,600 capital, I will buy 2 (or 3) monthly dividend-paying stocks, right now (to get income in January) + these stocks will give a good boost to the rest of the months in a year. Right now I have several candidates like EDI, EDF, RA, CLM
Quick math here;
100 shares of NRZ would give me $170 in dividends a year
From the $1,600 I could buy 60 shares of EDF and 68 shares of EDI
- 60 EDF shares = $110.16
- 68 EDI shares = $104.61
That's some $44.77 more than by having those 100 shares of NRZ.
Also, both EDF and EDI would give to January (and every other month of the year) + $17.93. it won't save my January 2020 dividend income but will offset some loss at least + it will give some boost to the rest months of the year. For example, it was not planned to reach $200 in dividend income next February, but with additional capital, I already can see $200+. Awesome.
Now I still want to get back those NRZ shares, and for doing that I have already started selling naked puts (Currently, I have already sold one 16 strikes put for May 20, for what I got premium $75).
As the next month when I'm looking to take a dividend from NRZ is April, I will sell February 20' 16 strike naked put for some $25-$35. Depending on the NRZ price in February, if under $16 I will get assigned 100 shares or if above $16 I might buy at market price 100 or at least 47 shares of NRZ (ironically I bought 53 shares just a couple of days ago)