BAMPRS:CA, BAMPRT:CA, BXMX, CVX, FIDI, IRM, ISBC, JRI, KBWY, SCM, STK, VSTM

Economy: 

Retail sales producer price index May 2021 jumps 6.6% from May 2020

Homebuilder sentiment drops to 10-month low as building costs boost prices

The FED acknowledged the existence of inflation last Thursday and the Stock Jocks had a mini freak out. 

In the FED members "Dot Plot", 10 out of the 18 members opined that the federal funds rate will be at least .625% in 2023, up from near zero now. The Fed - June 16, 2021: FOMC Projections materials (Figure 2) 

A .625% FF rate is a completely meaningless gesture in fighting inflation and will have no discernible impact on the real economy. 

The FED's current 2021 PCE inflation prediction is higher than its previous forecast but the members continue to see this year as a mere blip in a long-term subdued inflation trend. 

The FED uses PCE rather than CPI.

Personal Consumption Expenditures Price Index | U.S. Bureau of Economic Analysis (BEA) 

The PCE inflation number is published as part of the government's monthly Personal Income and Outlays report. The last report was for April 2021. Personal Income and Outlays, April 2021 | U.S. Bureau of Economic Analysis (BEA):   

Annual PCE at 3.6%/Core at 3.1%

The report for May will be released in late June. 

I read several articles that characterized the FED as turning "hawkish", a bizarre and absurd characterization (e.g. A Hawkish Fed Created a Lot of Losers. Here’s the Big Winner. | Barron's and Shaken but not stirred: bond markets may weather hawkish Fed for now | Reuters)

The ten-year treasury yield finished the week at 1.45% down from 1.57% last Wednesday. Daily Treasury Yield Curve Rates

Taking interest rates down in response to a hot inflation report is not explainable in any rationale manner other than to simply accept that inflation is not a factor in setting interest rates, a conclusion that is buttressed by the historic anomaly that investors knowingly buy U.S. treasuries expecting a significant negative real yield before any tax bite. Take it or leave it. The market is not setting interest rates. Interest rates throughout the maturity spectrum are being set by the Federal Reserve (and other major CBs) without regard to inflation, inflationary pressures, and anticipated inflation expressed in the breakeven inflation rates for the TIPs. And those CBs are willing to allow inflation to run its course without taking any action that will impact that course. Hopefully, the FED will be proven correct that inflation will return to 2% in 2022 without the FED taking any meaningful action to tamp it down.  

+++

Markets and Market Commentary: 

Close on 5/18/21: VIX 20.70 +2.95 +16.62% The VIX had simmered down and closed at 15.65 on 6/11/21.  CBOE Volatility Index Historical Spiking back above 20 after a brief period of below 20 movements is a characteristic of the Unstable VIX Pattern. This upward whipsaw movement will be accompanied by a meaningful decline in the S & P 500 index. This last happened in May: 

For as long as the whipsaw action consisting of temporary movements below 20 and spikes back over 20 continue, there is an enhanced danger that something worse may happen that causes a more serious stock market correction and a VIX spike into the 30s or higher. 

Regional bank and other financial stocks were hammered after the FED announcement. The SPDR S&P Regional Banking ETF (KRE) closed at $69.37 last Wednesday and at $63.66, down 8.23% in 2 trading days. 

'Big Short' investor Michael Burry is back on Twitter - and warning of the biggest market bubble in history | Markets Insider

'Shocking' inflation will end, hurt reopening stocks: David Rosenberg

Paul Tudor Jones: 'Go all in' on inflation trades if Fed ignores higher prices For Jones, that includes buying commodities and gold. REITs who largely have rent increases indexed to CPI can benefit provided rates for debt refinancings remained suppressed.  

Jamie Dimon: JPMorgan is hoarding cash because 'very good chance' inflation here to stay

Commodities from copper to corn tumble on China crackdown, a rising dollar (6/17/21); Cramer: Market is signaling commodity inflation is 'pretty much over

Why China Can’t Stop the Rally in Copper | Barron's (6/17/21)(green energy is a heavy copper user)

Kroger (KR) Delivers Strong First Quarter Results and Raises Full-Year 2021 Guidance

New Covid study hints at the long-term loss of brain tissue, Dr. Scott Gottlieb warns

++++

Essex Redeems Early 10 SU Bonds -Subject to Make Whole: 

Essex redeemed early its 3.375% senior unsecured bond maturing on 1/15/23. The bond was clearly subject to a make-whole payment attached to an issuer optional redemption: 

Nonetheless, Schwab only credited my account on the 16th with the $10K principal amount and the accrued and unpaid interest: 

I knew that was wrong so I sent them this email: 

Late last night, my account was credited with the correct amount of  $10,465.65, which includes a $465.65 make-whole payment in addition to the $10K principal amount + the interest.  

I seriously doubt that Essex failed to pay the make-whole penalty required by the prospectus. Most likely, Schwab failed to credit my account, though it is not 100% clear whether it was an internal failure or a failure by an intermediary to pass along the correct amount which I doubt was the cause. 

Buy Discussion: Item # 3.A. Bought 10 Essex Portfolio 3.375% SU Bonds Maturing on 1/15/23 at a Total Cost of 97.114-TC includes $10 commission (6/6/20 Post) When I bought these bonds, I classified them as part of a short term bond strategy which simply means that interest rate risk was not a material concern. 

Profit Snapshot: $634.46 (73.39% of the profit from the make-whole payment)

Issuer: Operating company for Essex Property Trust Inc. (ESS) (all of the bonds issued by the operating entity are guaranteed by ESS)

I still own 2 other Essex Portfolio bonds: Item # 1.B. Bought 2 Essex Property L.P. 3.25% SU Maturing on 5/1/23 at a TC of 99.628 (4/20/17 Post) I am expecting an early redemption for those bonds that will be subject to a make-whole payment.  

Essex redeemed last year my two 3.625% SU bonds that would have matured on 8/15/22. 

Profit = $90.32 includes $119.20 Make Whole Payment More than  Offsetting Premium Purchase Price 

I rarely pay a premium to par value price for corporate bonds. 

+++

Tucker Carlson Bizarrely Blames the FBI for MAGA Riot | Vanity Fair; Tucker Carlson's baseless conspiracy theory that FBI 'organized' Jan. 6 - The Washington Post Tucker Carlson is one of the main anchors for the real Fake News network, hosting an hour-long program on Fox "news" during prime time. 

Trump pressed DOJ to fight election results, emails show: House panel; Trump Pressed Official to Wield Justice Dept. to Back Election Claims; republished by MSN.com from Trump Pressed Rosen to Wield Justice Dept. to Back 2020 Election Claims - The New York Times; New emails detail Trump’s efforts to have Justice Department take up his false election-fraud claims - The Washington Post  That is out, of course, part of the authoritarian's playbook. 

One of the emails sent to the AG attached a video claiming that Italians used satellites to manipulate voting equipment to Don the Authoritarian's detriment. 'Pure insanity': Emails detail Trump's pressure on Justice Department to overturn the election Facts and truth do not matter in Trump's America. Fox News caught trying to pass off GOP operatives as parents "concerned" about critical race theory; Fox’s anti-“critical race theory” parents are also GOP activists | Media Matters for America 

The brazenly bogus and partisan "audit" of the Maricopa County election results, initiated by the  Arizona republicans to challenge the November 2020 election results for no purpose other than to cast doubt on the democratic process, is nearing a conclusion. It is unfortunate that anyone will place any credence on the outcome irrespective of the findings. The Republicans in Arizona have already passed a voter suppression law that will assist them in taking back the two Senate seats and winning the state in the next presidential election. Arizona’s Voter Suppression Bills Are Dangerously Close to Becoming Law | Brennan Center for Justice; Arizona G.O.P. Passes Law to Limit Distribution of Mail Ballots - The New York Times  

New questions about key Trump impeachment witness - The Washington Post It looks like Kurt Volker knew there was a quid pro quo but claimed otherwise in his testimony.  Rudy Giuliani: New audio of 2019 phone call reveals how he pressured Ukraine to investigate debunked Biden conspiracies; A New Giuliani Tape Shows a Key Witness Didn’t Testify Accurately in the First Trump Impeachment 

GOP Election Analyst 'Aghast' at Arizona Audit as Republican State Senator Wendy Rogers Threatens U.S. Attorney General with prison 

Arizona voting data taken to so-called 'lab' in remote Montana

Trump Justice Department took records from Apple secretly on White House Counsel Don McGahn  

The United States for most of its history has not been a universal democracy where all adult citizens had the right to vote. It took a Constitutional Amendment to provide universal suffrage for women (ratified on 8/18/19) and blacks were largely excluded from voting until the later part of the 20th century. 

Casting ballots in secret is of recent origin, which nullified the ability of political machines to punish those who voted the wrong way.   

The U.S. was unique in the 18th Century in the number of individuals who were allowed to vote for their representatives. The U.S. was not then anywhere close to a full-fledged representative democracy. 

The primary anti-democracy party in the U.S. has changed over time. 

After the passage of the 13th and 14th Amendments, and prior to the 1960s, the Democrats were the primary anti-democracy party, particularly in the South, implemented through Jim Crow laws and intimidation practices, but now Trump's party is the one that leans heavily toward authoritarianism. Trump can only be characterized as a demagogic autocrat. And, it has now been proven that no Republican politician will be willing or successful in resisting that strong authoritarian, anti-democratic trend. There was a political party trying to steal the 2020 presidential election and it was not the Democrats.  

In world history, democracies are an aberration. The dominant trend has been centralized and autocratic rule. And I would view the continued existence of a democracy to be fragile given the willingness of humans to endorse or tolerate autocratic rulers.  

How Democracies Die 

The United States surpasses 600,000 deaths from covid - The Washington Post; Trump Has Often Downplayed The Coronavirus. Here's A Sampling 

Officer injured in Capitol riot blasts GOP Rep. Andrew Clyde's behavior as 'disgusting' after tense exchange 

The 30 most bizarre lines from Donald Trump's interview with Sean Hannity 

Republican Congressman Madison Cawthorn Casually Suggests Armed Citizens Should Overthrow the Government 

Affordable Care Act survives third Supreme Court challenge, as the case from Trump administration and GOP-led states are rejected - The Washington Post The Republican effort to repeal Obamacare through judicial fiat was rejected based on the plaintiff's lack of standing to challenge the law rather than on the merits. 

++

1. Canadian Reset Equity Preferred Stocks: 

I have eliminated several of these securities based on a likely continuation of low coupons, either from spreads to the 3-month Canadian treasury bill or likely low coupons resets to the 5-year Canadian government bond. 

A. Eliminated BAMPRS:CA-Sold 50 at C$20.22 (C$1 IB Commission): 

Quote: BAM-PS.TO 

Issuer: Brookfield Asset Management Inc. Cl A 

Profit Snapshot:  +C$281.5

Buy Discussion: Item # 1.A. Bought 50 BAMPRS:CA at C$14.55 (9/9/19 Post) 

Par Value: C$25

Coupon: 2.35% spread to the 3-month Canadian treasury.  

Canada 3 Month Government Bond Overview | MarketWatch

When I bought this security in 2019, I was not expecting the 3-month Canadian treasury bill to collapse in yield and the discount to par value at C$14.55 at least sparked some interest. I am not interested now with the 3-month yield near .11% and the price over C$20. 

I am deemphasizing floaters that pay a spread to short-term rates and have been selling them in response to price rallies.  

B. Eliminated BAMPRT:CA-Sold 50 at C$20.51 (C$1 IB commission):  

Quote: BAM-PT.TO 

Issuer: Brookfield Asset Management Inc. Cl A 

Profit Snapshot: +C$273

Buy Discussion: Item # 4.A. Bought 50 BAMPRT:CA at C$15.21 (10/23/19 Post) 

Security: Equity Preferred Stock
Par Value = $25
Coupon: 2.31% spread to the 5-year Canadian government bond
Next Reset: 4/1/22
Dividends: Cumulative and Quarterly
Canada 5 Year Government Bond Overview

Last Reset and Current Coupon: 4/1/17 at 3.471%

This one is looking like it will reset in April 2022 near the current coupon. The profit is worth more to me than receiving a similar coupon through April 2027. If the coupon resets at close to 3.4%, and interest rates start to persistently rise shortly thereafter, the price will fall. A possible repurchase may occur when the price sinks back below C$15 with 2-3 years until the next reset.  

2. Small Ball: 

A. Pared JRI-Sold Highest Cost 30 shares at $15.9: 

Quote: JRI - Nuveen Real Asset Income and Growth Fund

"The Fund seeks to deliver a high level of current income and long-term capital appreciation by investing in real asset-related companies across the world and the capital structure, including common stocks, preferred securities, and debt. Real asset-related companies include those engaged in owning, operating, or developing infrastructure projects, facilities, and services, as well as REITs." Sponsor's Website: JRI - Nuveen Real Asset Income and Growth Fund

Leveraged: Yes at 27.77% as of 5/31/21 

Last Buy Discussions: Item # 1.G. Added to JRI-Bought 10 at $11.8; 10 at $11.66 (8/1/20 Post); Item # 1.C. Added 5 JRI at $8.95; 10 at $8.09; 10 at $10.16; 10 at $10.66 (5/16/20 Post) 

JRI SEC Filings 

SEC FilingPortfolio as of 3/31/21 (as of, the total cost was at $588.6+M with the total value at $608.9+M)

Nuveen Real Asset Income and Growth Fund (2020 SEC Filed Annual Report)

Profit Snapshot: +$14.73

The shares were purchased in 3 ten share lots with an original total average cost per share of $15.59. 

New Average cost per share this account: $11.17 (141+ shares):

Snapshot Intraday 5/27/21 after pare

The average cost per share was $11.91.  

Dividend: Monthly at $.0965 per share ($1.11 annually), with some ROC support. 

The monthly dividend was cut from $.117 to the current rate effective for the April 2020 payment.  

Yield at new AC = 9.94%  (assuming no dividend cut)

Last Ex-Dividend: 6/14/21

Data Date of 5/27/21 Trade: 

Closing Net Asset Value per share: $17.06

Closing Market Price: $15.94

Discount: -6.57%

Average 5 Year Discount = -11.63

Sourced: JRI- CEF Connect

Prior Sell Discussions: Item # 1.K Eliminated JRI in Schwab Taxable Account-Sold 100 at $11.48  (6/6/20 Post)(profit snapshot = $69.35); Item # 2.A. Sold 102+ JRI at $17.98 (12/22/19 Post)(profit snapshot = $140.67); Item # 1.A. Sold 100 JRI at $17.51(10/30/19 Post )(profit snapshot = $100.41); Item # 4 Sold 100 JRI at $17.23 (10/2/19 Post)(profit snapshot = $40.45) 

JRI Realized Gains to Date: $365.61 ($350.88 in prior trades)

B. Started CVX-Bought 1 at $102.75:

Last Trade: Item # 2.A. Sold 30 CVX at $107.16 (9/11/2017 Post)(described therein as part of a dividend capture strategy with a $113.86 realized profit + one dividend)- Item # 4.A. Item # 4.A. Bought 30 CVX at $103.82 (7/31/17 Post) 

Quote: Chevron Corp.  (CVX) 

Closing Price 6/18/21: CVX $103.03 -$4.04 -3.77% 

CVXAnalyst Estimates | MarketWatch

CVX SEC Filings 

CVX 2020 Annual Report 

Key Financial Results (2018-2020): Extremely erratic and consequently hard to value. 

10-Q for the Q/E 3/31/21 

Dividend: Quarterly at $1.34 ($5.36 annually), last raised from $1.29 effective for the 2021 second quarter payment. 

Prior Dividend History: 

Yield at $102.75 = 5.22% 

Last Ex-Dividend: 5/18/21

My last round-trip was a 30 share lot sold in 2017 that was part of a dividend harvest strategy approach: 

Profit $113.26

Item # 2.A. Sold 30 CVX at $107.6 (9/11/17 Post)(received 1 quarterly dividend)- Item # 4.A. Bought 30 CVX at $103.82 (7/31/2017 Post) 

Prior to that round-trip, I have to go back to a 40 share lot sold in 2007: 

Profit $100.35

For that year, I found in a file have a PDF for all of the sell transactions in my Fidelity taxable account for that year. My prior involvement was solely pursuant to a dividend capture strategy. A 1 share purchase does not evoke the existence of a strategy now. 

Last Earnings Report (Q/E 3/31/21): 

Adjusted net profit = $1.73B or $.90 per share.

Results were negatively impacted by the winter storm URI and the pandemic.  

Revenues rose 2% to $32.029B 

Brokerage Reports (available to Schwab customers): 

Credit Suisse (5/2/21): Outperform with a $126 PT. 

Morningstar (5/26/21): 3 stars with a fair value ("FV") of $115, rated as a narrow moat. 

Argus (5/12/21): Buy and raised PT to $127 from $108, raised 2021 E.P.S. estimate to $5.29 from $3.57, and increased 2022 E.P.S. estimate to $6.15 from $5.45.  

S & P (4/30/21): 3 stars with a 12 month PT of $109 (an 8.3x multiple to 2021 projected cash flow; notes that free cash flow covered the dividend and cash Capex.)

Purchase Restriction: Average down only in small lots, with each subsequent purchase having to be at the lowest price in the chain. 

C. Pared BXMX-Sold 10 at $14.14: 

Quote: Nuveen S&P 500 Buy-Write Income Fund Overview- A CEF 

Sponsor's Website: Nuveen S&P 500 Buy-Write Income Fund 

BXMX SEC Filings

Nuveen S&P 500 Buy-Write Income Fund 2020 Annual Report 

Buy Discussions: Item L. Added to BXMX-Bought 10 at $10.96 (11/13/20 Post); Item # 2 Bought 100 BXMX at $11 (6/27/20 Post)

Profit Snapshot: +$33.66 (5/27/21 sale only)

New AC per share this account: $10.44 (100 shares

Snapshot Intraday on 5/27/21 after pare

Dividend: Quarterly at $.215 per share ($.86 annually)

Significant ROC support.  

Yield at AC = 8.24% 

Last Ex-Dividend: 6/14/21

Nuveen S&P 500 Buy-Write Income Fund Common Shares of Beneficial Interest (BXMX) Dividend History | Nasdaq

Data Date of 5/27/21 Trade: 

Closing Net Asset Value Per Share: $14.74

Closing market price: $14.12

Discount = -4.21%

Sourced: BXMX- CEF Connect

Last Sell Discussion Item # 2.J. Sold All Shares Purchased with dividend in Fidelity Taxable at $13.63 (4/24/21 Post)(profit = $13.63) 

D. Eliminated STK-Sold 10+ at $34.57: 

Quote: Columbia Seligman Premium Technology Growth Fund Inc. Overview-A CEF

SEC Filings 

Last SEC Filed Shareholder Report (period ending 12/31/20)

SEC Filing: Holdings as of 3/31/21 (Cost at $233.3+M; Value at $494.2+M)

Sponsor's Website: Columbia Seligman Premium Technology Growth Fund 

Top 10 Holdings as of 4/30/21: 

Profit Snapshot = +$132.15

Last Discussed: Item # 1.K. Bought 5 STK at $22.58; 5 at $21.53 (9/12/20 Post) 

Data Date of 5/27/21 Trade: 

Closing Net Asset Value: $32.05

Closing Market Price: $34.57

Premium to Net Asset Valuer per share: +7.86%

I see no good reason to hold this fund when it is selling at such a significant premium to net asset value per share. 

5 Year Average Premium: +2.57% 

Sourced: STK-CEF Connect 

STK Total Returns As of 5/28/21: 

YTD: +29.54%

5 Years Annual Average: +24.42%

10 Years Annual Average: +17.88%

Sourced: Columbia Seligman Premium Tech Growth (STK) Total Returns | Morningstar

Compare with -

XLK Total Returns as of 5/28/21: Technology Select Sector SPDR® ETF (XLK) Performance-Morningstar

YTD: +6.67%

5 Year Annual Average: +27.74%

10 Year Annual Average: +19.9%

I still own XLK. 

STK makes more sense to me when it is selling at a discount to net asset value per share or at no more than a 1% premium.   

E. Pared ISBC-Sold All Fractional Shares Bought with Dividends at $14.64: 

Quote: Investors Bancorp Inc. (ISBC)

Closing Price 6/18/21: ISBC $13.82 -$0.59 -4.09% 

ISBC  Analyst Estimates | MarketWatch

ISBC SEC Filings

Investors Relations | Investors Bank

Buy Discussions: Item # 1.G. Bought 5 ISBC at $7.21; 5 at $7.09; 5 at $6.9(10/24/20 Post); Item # 1.D. Started ISBC-Bought 10 at $7.97; 4 at $7.7 (9/5/20 Post) 

Investment Category: Regional Bank Basket Strategy

Profit: +$2.31 

New AC after pare = $7.48  (30 shares)

Snapshot Intraday on 5/27/21 after pare

Dividend: Quarterly at $.14 per share ($.56 annually)

Dividend Yield: 7.49% 

Last Earnings Report (Q/E 3/31/21): Investors Bancorp, Inc. Announces First Quarter Financial Results and Cash Dividend

E.P.S. = $.31

Net Income = $72.3M

NIM: 2.9%, down 8 basis points from the prior quarter

Efficiency Ratio: 51.99%

ROA: 1.11%

NPL Ratio: .4% down from .51% in the prior quarter

Coverage Ratio: 340.6%

Tangible Book Value Per Share: $11.23, up from $10.97 in the prior quarter 

My $7.48 AC per share is at a -33.39% discount to that $11.23 tangible book value per share. 

ROE: 11%

F. Eliminated VSTM-Sold 100 at $3.97: 

Quote:  Verastem Inc. 

VSTM Analyst Estimates | MarketWatch

SEC Filings 

2020 Annual Report 

10-Q for the Q/E 3/31/21 

Profit Snapshot: +$8.22

Investment Category: Lottery Ticket Basket

Last Discussed: Item # 1.A. Bought 50 VSTM at $4.73 (5/28/18 Post) I later averaged down with another 50 share lot purchase that allowed me to escape profitably.  

The shares popped in response to this press release. Verastem Oncology Receives Breakthrough Therapy Designation for VS-6766 with Defactinib in Recurrent Low-Grade Serous Ovarian Cancer While receiving a breakthrough therapy designation from the FDC is better than not having one, it does not mean the drug will ultimately succeed and be approved by the FDA. My inclination is to reset my cost basis at a lower number down the road. 

Other News: 

Verastem Oncology Reports First Quarter 2021 Financial Results and Highlights Recent Company Progress 

Verastem Oncology Signs Definitive Agreement to Sell COPIKTRA® (duvelisib) Rights to Secura Bio to Focus on Development of VS-6766 and Defactinib in KRAS Mutant Solid Tumors (8/10/20) ($70M upfront payment + double-digit sales royalties + milestone payments; this transaction has closed) 

Verastem Oncology Announces $100 Million Private Placement Offering of Common Stock to Premier Life Sciences Investors (2/28/20)

G. Pared SCM in Vanguard Taxable-Sold 10 at $13.2: 

Quote: Stellus Capital Investment Corp. (SCM)- A BDC

Closing Price 6/18/21: SCM $12.63 -$0.42 -3.22% 

Website: Stellus Capital

SEC Filings

2020 Annual Report (risk factor summary starts on page 33 and ends on page 70) 

Lots prior to the pare: 

I sold the 10 share lot bought on 3/6/20.  

Profit Snapshot: +$11.33

Last Discussed: Item # 1.C. Pared SCM in Fidelity Taxable -Sold 13 at $12.46 and 13+ at $13.25 (4/17/21 Post)(profit snapshot = $69.04)

Last Substantive Buy Discussions: Item # 1.E. Bought 5 SCM at $7.41 in Fidelity Account (8/15/20 Post); Item # 3.J. Added 10 SCM at $7.85; 5 at $7.65; 10 at $7.5 (7/18/20 Post); Item # 2.B. Added 10 SCM at $7.8; 2 at $6.26, 3 at $5.30; 5 at $7.53 (5/9/20 Post)

SCM Net asset value per share history: 

3/31/21:     $14.03  10-Q for the Q/E 3/31/21 at page 3 

12/31/20:  $14.03 10-K at page 74 
12/31/19:   $14.14
12/31/18:   $14.09
12/31/17:   $13.81
12/31/16    $13.69
12/31/15:   $13.19
12/31/14:   $13.94
12/31/13:   $14.54

November 2012: IPO at $15 ($14.46 after underwriters discount)

Net Asset Value per share before Pare in this account: $8.52

Net Asset Value per share after Pare this account: $7.365

Dividend: Monthly at $.0833 per share (rounded $1 per share annually)

Stellus Capital Investment Corporation Announces Second Quarter 2021 Monthly Dividends

I have turned off dividend reinvestment.

Yield at New AC per share of $7.365 = 13.58%

5 Year Chart: Crashed and Burned March 2020

Last Earnings Report (Q/E 3/3121):  Stellus Capital Investment Corporation Reports Results for its Fiscal First Quarter Ended March 31, 2021

NII per share = $.26

Core NII per share = $.28 

Sell Discussions: Item # 1.F. Pared SCM in Fidelity Taxable-Sold 20 at $11.08 and Item #1.G. Pared SCM in Vanguard Taxable-Sold 20 at $11.17 (12/19/20 Post)(profit snapshots = $14.23); Item # 3 Sold 50 SCM at $13.72 (9/21/19 Post)(eliminating position as of that date; profit snapshot = $3.75); Item # 1.I. Sold 20 SCM at $7.61 (8/22/20 Post)(contains snapshots of prior trades; profit snapshot = $10.84); Item # 1.B. Sold 32+ SCM at $14.22-Used Commission Free Trade (2/2/19 Post)(profit snapshot = $78.09); Item # 1.A. Sold Highest Cost Lot-50 Shares at $12.63 (5/3/18 Post)(profit snapshot = $34.24); Item 2.B. Sold 100 SCM at $14.23 (2/27/17 Post)(profit snapshot=$285.96); Item # 2 Sold 100 SCM at $13.02 (1/12/17 Post)(profit snapshot= $141.96) 

SCM Realized Gains to Date:  $649.44  (prior sales = $638.11)

Goal: Any total return in excess of the dividend payments. 

H. Bought 3 KBWY at $22.88-Vanguard Taxable: 

Quote: Invesco KBW Premium Yield Equity REIT ETF Overview 

Closing Price 6/18/21: KBWY $22.78 -$0.69 -2.94% 

Sponsor's Website: Invesco KBW Premium Yield Equity REIT ETF

Expense Ratio: .35%

Some Top Holdings as of 6/11/21: 

I own 10 of the stocks listed in the previous snapshot and 2 others that are owned by this fund (BRG and STAG). 

Current Position this account: 42+ shares

Average Cost per share: $23

Dividend: Monthly at a variable rate

Note the trend down in monthly payments. 

Yield at $23: The fund paid $1.76 per share in dividends over the 12 month period ending in May 2021. However, several holdings cut their dividends during that period and that payout is no longer an appropriate measure of future dividend yield. Stocks owned by this fund that cut their dividends last year include the following: American Finance Trust, Inc. Class A (AFIN) Dividend History (cut monthly payment and then went to quarterly payments at the reduced monthly rate); City Office REIT, Inc. (CIO) Dividend History; Global Net Lease, Inc. (GNL) Dividend History; and Preferred Apartment Communities, Inc. (APTS) Dividend History; Sabra Health Care REIT, Inc. (SBRA) Dividend History. For 2021 through May, the average is at $.1188 per month. If I assumed an average of $.12 per month for 2021 ($1.44 annually), the yield at an AC of $23 would be about 6.26%. 

For those with experience investing in high yield REITs, dividend cuts are a known risk. 

Many of those REITs have payouts that exceed cash available for distribution. 

When REITs first go public, there is also a tendency to entice retail investors with an unsustainable dividend that will inevitably be cut, sometimes timed when the REIT buys out the external manager or some external event that provides an excuse.

An event like the pandemic provides an excuse for slashing the dividend to a more reasonable level. Even after the slashes, yields will generally be higher than those paid by more established blue-chip REITs.  

Last Ex-Dividend: 5/24/21

I. Started KBWY in Fidelity Account-Bought 5 at $22.87: 

See Item # 1.H. above. 

J. Started CNQ in Vanguard Taxable-Bought 5 at $32.9: 

Quotes: 

USD: Canadian Natural Resources Ltd. 

CAD: Canadian Natural Resources Ltd. (Canada: Toronto) 

Website: Canadian Natural Resources 

CNQ SEC Filings (foreign company)

Dividend: Quarterly at C$.47 (C$1.88 per share); last raised from C$.425 effective for the 2021 second quarter payment. 

Dividend Yield: This will depend on the CAD/USD conversion rate and whether the investor can take a tax credit for the Canadian withholding tax (15% for U.S. citizens when held in a taxable account)  Claiming Foreign Taxes: Credit or Deduction? | Charles Schwab The Canada-U.S. tax treaty does not permit tax withholding when the dividend is paid into a U.S. citizen's retirement account provided the dividend is paid by a company that is taxed at the corporate level by Canada, which excludes pass-through entities like REITs. The CNQ dividends would be exempt. I did buy in 2 Roth IRA accounts as well. 

If I assumed full recovery of Canada's withholding tax through a U.S. tax credit and a constant .82 CAD/USD conversion rate, which is absurd of course, then the dividend yield at C$.47 would be before taking into account U.S. taxes on the dividend. (C$1.88 annual rate per share x. .82 conversation rate into USDs = US$1.54 annual rate per share ÷ $32.9 total cost per share = 4.68%)

Last Ex-Dividend: 6/17/21 (after purchase)

Last Earnings Report (Q/E 3/31/21): SEC Filed Press Release 

Operating costs for CNQ's "Oil Sands Mining and Upgrading assets are top tier, averaging $19.82/bbl (US$15.66/bbl) of SCO in Q/121, decreases of 5% and 2% from Q1/20 and Q4/20 respectively. " I view this data as important given the long-lived nature of oil sands production. 

E.P.S. = C$1.66

Net Income = C$1.377B

Adjusted E.P.S.  = C$1.03

Adjusted Net Income: C$1.043B

Free cash flow after capital expenditures and dividends = C$1.4B.

Record Quarterly production volumes of 1,245,703 BOE/d

The 2020 first-quarter results illustrate what happens when energy prices collapse. 

I have owned CNQ senior unsecured bonds in the past. Item # 2.B. Bought 2 CNQ 2021 SU at a Total Cost of 99.997  (6/4/18 Post)

I can find one prior round-trip in the common stock. 

2017 CNQ 50 Shares +$66.02

Item # 2.A. Sold 50 CNQ at $33.22 (5/4/17 Post)-Item # 3 Bought 50 CNQ at $31.88 (12/23/13 Post) 

K. Pared IRM in Fidelity Taxable-Sold 5 at $44.18: 

Quote: Iron Mountain Inc (IRM)

SEC Filings

2020 IRM Annual Report

10-Q for the Q/E 3/31/21 

Website: Iron Mountain Inc (IRM)

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

Last Buy Discussions: Item # 2.E. Started IRM in Schwab Taxable Account-Bought 10 at $26.8; 5 at $25.8; 5 at $25.25; 5 at $24.9 (12/5/20 Post); Item # 1.B. Added 3 IRM at $22.99; 2 at $22.31 (6/20/20 Post); Item # 2.F. Added to IRM in Fidelity Taxable-Bought 1 at $26.88; 2 at $26.2; 1 at $25.7; 1 at $25.52; 1 at $24.96 (12/5/20 Post)(substantive discussion); Item # 2.A. Added 1 IRM at $26.46; 1 at $26.07; 1 at $25; 2 at $23.95; 1 at $23.3; 1 at $23.76; 1 at $24.33; 1 at  $22.61; 1 at $24.33; 1 at $22.6 and 1 at $21.79 (5/2/20 Post)

Profit Snapshot: $77.94 (6/1/21 sale only)

New Average Cost Per Share this account: $24.01 (20 shares)

Dividend: Quarterly at $.6185 per share ($2.474 annually)

Iron Mountain - Stock - Dividend History and Tax Treatment

Dividend reinvestment has been turned off. 

Yield at $24.01 AC = 10.3%

Last Ex-Dividend: 6/14/21 

5 Year Chart: 

Last Earnings Report (Q/E 3/31/21):

Sell Discussions: Item # 1.K. Sold 5 IRM at $37.69 (4/30/21 Post); Item #1.B. Sold 2 IRM at $35.63; 5 at $36.8 (2/27/21 Post); Item # 1.L. Sold 5 IRM in Schwab Account at $36.42  and Item #1.M. Sold 2.731 in Fidelity Account at $36.86 (4/1/21 Post); Item #1.B. Sold 2 IRM at $35.63; 5 at $36.8 in Fidelity Taxable (2/27/21 Post); Item # 1.B. Pared IRM-Sold 15 at $33.04 (2/22/20 Post); Item # 1.C. Sold 10 IRM at $33.91-Used Commission Free Trade (12/26/18 Post); Item # 3 Sold 50 IRM at $33.82 Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha

The goal in all accounts for this stock is a total return in excess of the dividend payments before the ROC adjustments to the tax cost basis.

Broker Reports (available to Schwab customers): 

Credit Suisse (5/6/21): Underperform with an $18 price target. This analyst looks stupid when focusing just on the current IRM price. That does not prove that his analysis is wrong long term.  

S & P (5/21/21): 4 stars with a 12 month PT of $40. The price was at $43 when the analyst assigned a 4-star rating. 

L. Pared IRM in Vanguard Taxable Account-Sold 1 at $46.79: 

See Item # 2.K. above. 

Profit Snapshot: +$24.34

Remaining Shares in this account: 3  

Average Cost per share: $21.75

Snapshot 6/9 Close after pare

Yield at $21.75 AC = 11.37%

M. Pared IRM in Schwab Taxable-Sold 1 at $46.93: 

See Item # 2.K. above

Profit: +$20.13

New AC this account: $25.7 (19+ shares)  

Yield at new AC = 9.63%

IRM Realized Gains to Date: $801.41  ($679 in prior trades)

N. Pared FIDI-Sold All Fractional Shares purchased with dividends: 

Quote: Fidelity International High Dividend ETF Overview

Buy Discussions: Item # 1.I. Started FIDI-Bought 10 at $16.56; 5 at $16.11; 5 at $15.91 (8/2/20 Post); Item #1.O. Added 2 FIDI at $15.46 (10/24/20 Post)

Sponsor's Website: FIDI | ETF Snapshot - Fidelity

Holdings as of 5/28: 116 

Profit = $.55 

New Average Cost per share = $16.17 (20 shares)

Snapshot Intraday 5/28/21 after pare

Dividends: Quarterly at a variable rate

I have turned off dividend reinvestment.  

2020 Dividend Total per share = $.615

Yield at $16.17 using $.615 =  3.8%

O. Issuer Redemption of Baby Bond OPINI at the $25 Par Value: 

$25 par value x. 15 shares

Profit Snapshot: +$116.12

Investment Category: Exchange Traded Baby Bonds, a subcategory of Exchange Traded Bonds 

Buy Discussion: Item # 3.B. Bought 10 OPINI at $18.45; 2 at $15.6; 3 at $14.38 (3/21/20) 

OPINI was a 5.875% senior unsecured baby bond issued by Office Properties Income Trust. As with other exchange-traded bonds, the issuer reserve the right to redeem at par value five years after the IPO. The optional call date was on or after 5/26/21. Unless the issuer exercised that call option, the bond would have matured in 2046. That kind of option creates asymmetric interest rate risk in favor of the issuer. Call protection only lasts for five years and then an optional redemption is allowed at par value (no make-whole provision). 

The yield at my $17.86 AC per share was 10.86%. The purchases were made in March 2020 when the prices for exchange-traded bonds were in freefall, a normal and expected occurrence during periods of extreme stock market turbulence (VIX spiking) with common stock prices collapsing. 3 shares were filled at $14.38 even though my limit price was at $14.75 and that limit was below the then-current bid price when placed. See generally, Item # 1.  Fear and Enhanced Volatility in Certain Classes of Income Securities (8/9/2011 Post) 

The volatile downside price action in these securities was most pronounced during the Near Depression period (2008 and into 2009). The best buy that I made during that period, based on subsequent history, was a $25 par value REIT equity preferred stock that paid cumulative dividends at 8.75%. The purchase price was at $2.9 (75.43% yield at $2.9), no dividend payments were missed, and the issuer ultimately redeemed at the $25 par value. The risk for an equity preferred stock owner is that the downside is a zero price in bankruptcy. 

3. Cash Flow into Fidelity Taxable Account on 6/15/21: 

I have now turned off dividend reinvestment for almost all common stocks owned as I reduce risk. The following snapshots also highlight my current inch-deep, mile-wide approach to risk mitigation. 

I am surprised that Argo has not yet called its senior unsecured baby bond ARGD. Argo Group International Holdings Ltd. 6.5% Senior  Notes Due 2042 (ARGD) The price is hugging close to par value plus accrued and unpaid interest due to optional call right at the $25 par value. Interest payments are made quarterly.  

I only own 5 ARGD shares in this account that were bought during the March 2020 meltdown at $11.6 (14.01% yield) and currently rated at BBB- by S & P: 

Snapshot as of close on 6/15/21

I own 100 shares in my Schwab taxable account.

Snapshots show the recent quarterly interest payment and the acquisition prices for those shares:

Quarterly Interest Payment ARGD 

Values as of 6/15/21 closing price

The price hit a low at $9.6 during the March 2020 meltdown. I have no interest in selling this 6.5% coupon baby bond and am merely waiting for Argo to redeem it.    

The National Rural Utilities Corporation and Goldman Sachs bonds pay monthly interest and are either 1 or 2 bond lots. Those bonds were bought at par value and were offered as part of Fidelity's corporate notes program. Those bonds are offered primarily to retail investors and are generally illiquid given the small number of bonds outstanding. 

The Lexington REIT (LXP) $1K par value bonds shown in the snapshot above pay interest semi-annually: 

Lot details as of Close on 6/15/21

FINRA Page 4.4% Lexington 2024 

FINRA Page 4.25% Lexington 2023 

The Ventas 2023 position is 2 bonds with interest paid semi-annually. 

FINRA Page 3.125% Ventas 2023 

The Crown Castle, Discovery Financial, DTE Energy, and Martin Marietta Materials bonds are 1 bond lots that pay semi-annually. 

FINRA Page 3.7% Crown Castle 2026 

FINRA Page 3.375% Discover Financial 2026 (illiquid and rarely traded)

FINRA Page 3.3% DTE Energy 2022

BFINRA Page 3.5% Martin Marietta Materials 2027 

The largest dollar common stock position reflected in the snapshots belongs to Kellogg at 23+ shares with an average cost per share of $60.66. 

In this account, I own only a 10 share position in the BDC Horizon Technology Finance Corp. (HRZN) which pays dividends monthly: 

Item # 1. Bought 10 HRZN at $9.29 (6/20/20 Post), previously sold 30 at $11.8. Item # 1.B. Sold 30 HRZN at $11.8  (11/18/18 Post) The last reported net asset value per share was $11.07. 10-Q on page 3. 

I have taken larger positions in Horizon's exchange-traded baby bonds but it has called those. 

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 sale 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 my family members.