I know, the markets are going to ZERO, the double dip recession is just around the corner, thousands more employees are getting pink slips and real estate will never get better. We’re all going to HELL!
But I bought anyway…
Will the markets go up? Will they go down? YES! Of course they will do both. We’ll probably get a dead cat bounce (or bear market rally depending on your position) tomorrow and then we’ll fall some more. Dow 10,000 here we come. But with talk of QE3 (quantitative easing round number 3) – I’m putting my money on rising markets by year end.
What did I buy? Well, as I mentioned on Monday’s post, my focus is to increase cash flow and top off my existing positions so I started with two obvious choices:
- added 50 shares of Prospect Capital (ticker: PSEC) with a yield of about 13% paid monthly
- added 15 shares of Century Link (ticker: CTL) with a “current” yield of over 8% paid quarterly
Century Link came out today with a less than stellar earnings report and the stock sold off with over a 6% drop. However, the real risk lies in the fact that based on their earnings projections they may not be able to support their current dividend yield going forward unless their business improves.
Like all of the positions in the DDI portfolio, no one position is so large as to cause a catastrophic failure and so I was willing to add shares of Century Link today on what may end up being a timely buying opportunity. Even with the poor current earnings, I would expect management to pause for at least 1-2 quarters, allowing time for business operations to improve, before making any dividend policy adjustment.
Admittedly, my purchase of Century Link is a bit of a contrarian play, which often make for a incredible gains or phenomenal wipe outs – only time will tell.
Prospect Capital (ticker: PSEC)
Prospect Capital has been on a downward trend of late – losing about 10% in the last month alone. However, some of this downward pricing pressure has likely been caused by a secondary stock offering in late June and the markets are still working to absorb the extra inventory of available shares.
In the mean time the dividend yield on this BDC (Business Development Company) has continued to tick up and is now in the 13% range – risky, yes : deadly, probably not.
Remember, for every share of riskier holdings such as Prospect Capital, the DDI portfolio holds shares of steady “Eddie’s” such as Caterpillar, American Express, AT&T, Campbell Soup and Intel – with the intent of providing balance of risk throughout the portfolio.
With these two purchases I’ve now deployed all but about $100 of my available cash. While I’ve moved the portfolio closer to my near term goals of topping off holdings and increasing cashflow, I’ll be sitting on the sidelines waiting for my account balances to recharge. With the markets expected to remain volatile, I would welcome the opportunity to make some additional discounted purchases in the next few weeks.