While I may sound like I am entirely in a bunker waiting for incoming, I do own common stocks that pay dividends.
My allocation to bonds is more significant and my cash allocation is growing primarily through bond, CD and treasury bill redemptions where the proceeds have not yet been reallocated out of broker sweep accounts. Cash is now my largest asset category exceeding the combined total of my bond, CD and treasury bill allocation. I will just wait until the risk/reward balance for both stocks and bonds are more in my favor. In recent history, I have not had to wait for an extended period of time.
I am not likely to buy more corporate bonds until I am presented with an opportunity to earn a yield that provides adequate compensates for the credit risk. That is not possible with current prices and yields. Proceeds from corporate bond redemptions are ending up in my brokerage sweep accounts.
I am not purchasing newly issued CDs and U.S. treasuries since the current yields are extremely unacceptable.
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| New CD Rates at Fidelity |
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| U.S. Treasury Rates June 2020 |
I am consequently in a run off phase for my bonds, treasury bills and CDs. That is going to continue for as long as interest rates remain at extremely low levels.
The last buying opportunity for corporate bonds occurred in March and April 2020. My focus during that meltdown was short term investment grade bonds, which I define as bonds maturing within 3 years of the purchase date.
For purchases during that period, several issuers have already exercised their optional redemption rights. For example I received yesterday proceeds from two 5% AON bonds that would have matured on 9/30/20, with the issuer paying a premium of $11.20 per bond to exercise that early redemption:
Item # 5.A. Bought 2 AON 5% SU Maturing on 9/30/20 (5/9/20 Post)(the purchase was made on 3/24)
The make whole payment associated with another AON bond is too large for an early redemption. Item # 3.A. Bought 2 AON 3.5% SU Maturing on 6/14/24 at a Total Cost of 95.563 (5/23/20 Post); Bond Detail I also added to my AON 2.8% SU bond position, discussed in Item #4.B.
The following are snapshots of my cash flow into my Fidelity taxable account on 6/29-7/1/2020:
The last entry is an early redemption of a Fifth Third SU that did not require a make whole payment since the redemption occurred within one month prior to maturity.
The foregoing shows some immaterial hedging with purchases of SDS and TWM.
I have not discussed yet some purchases where dividends are shown as being paid, which includes the stock CEF SWZ that I have bought and sold many times.
The first entry, BXMX, is a recent addition and is discussed in my prior post.
The ETFs that are referenced are recently additions, with less than 5 shares purchased to date.
Monthly dividends from CEF positions that have been previously discussed include BTZ, FAX, GDO, IGR, JRI, PPT, and THQ; while purchases of currently owned monthly payers EXG, ERC and WIW have not been discussed, though I will be discussing EXG in a subsequent post. I have discussed EXG, ERC and WIW in older posts, but those positions were eliminated.
BDC dividends include those paid by ARCC, NMFC, PPLT (monthly), OFS, TCRD, (a big loser for a small position), TCPC and TPVG. Risks in BDCs are controlled in part by small cash allocations to each one.
Other common stock quarterly dividend payments include FHN, HBAN, PPL (own PPL in 4 accounts with this account being the second largest position), and VIAC (the second largest position). SJR pays monthly.
I also received and reinvested a quarterly dividend from the CEF SWZ, where I will be discussing a 100 share purchase.
3 different five Tennessee municipal bond positions made their semi-annual payments on 7/1.
The ETFs BAB and PGX make monthly payments, but my positions are miniscule. I recently discussed a 100 share purchase of PGX.
The equity REIT GOOD and its preferred stock GOODM are recent purchases discussed previously and pay dividends monthly.
I added 1 TD share brining my total up to 40+ shares. That is just an example of super, extreme caution. Toronto-Dominion Bank (TD)
I received $12,022.4 in corporate bond and CD proceeds from redemptions.
The exchange traded bond THGA made its quarterly interest payment.
I bought 10 shares in HTIA, a high risk REIT equity preferred stock that is ex dividend today which I will discuss in a subsequent post. HTIA | Healthcare Trust 7.375% Cumulative Preferred Series A Overview; Prospectus (par value $25; REIT owns MOBs and senior living) The common shares of that REIT are not publicly traded and should not be confused with the publicly traded HTA which has a similar name. I currently own HTA common shares.
Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.
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