Portfolio Update: New Subtraction and Addition (AXP and O; May 05, 2015)

Realty Logo - new COLOR

Perhaps I have a little bit too much free time on my hands, as I found myself trading another stock again this morning. Although I much prefer to employ a Buy and Hold strategy with individual stocks, I couldn’t resist the opportunity to make a move today.

I sold out all 70 shares of American Express (AXP) for $78.08/share, and closed out my position. After commissions, I netted $5,460.54. My cost basis was $5,429.95. I netted $30.59 before taxes. Woohoo, that’s enough profit for a very cheap steak dinner! 🙂

However, I instead chose to immediately put that capital to work and purchased 120 shares of Realty Income (O) for $45.97/share.

Reasoning

To get started, let me first explain my decision to exit out of AXP. I first purchased shares of American Express back in February, shortly after I completed a cash out refi on Rental Property #1. Looking back, I guess you could say I was a little too impulsive with utilizing the new funds, as I had not yet really formalized an underlying strategy for the new investment capital. I knew that I wanted to invest in individual stocks again, and AXP looked attractively priced. So, I made the move to buy…

Even at today’s prices, AXP still looks like a decent purchase for a long-term play. However, the stock doesn’t really serve a purpose in my stock portfolio.

Let me explain:

My goals with investing in individual stocks are two-fold:

1) Hyper-Growth (capital gains)

2) Decent/strong dividend yield

Unfortunately, AXP doesn’t really fit into either one of those categories… It’s not really a growth stock, and the current dividend yield of ~1.34% leaves a lot to be desired. With my recent move to pick up shares of SBUX, I simply felt like I had too much capital allocated to low yielding stocks in my portfolio (that also aren’t hyper-growth candidates).

Today’s Purchase

Enter Realty Income and REITs. Last year, I wrote an article comparing REITs to rental properties, suggesting that the two forms of investments are inherently different and can’t really be compared. Although I still believe that, the article shouldn’t suggest that investors have to pick and choose one or the other alone. Like always, I’m a fan of diversification and believe that there is a place for both types of investments in a well balanced portfolio. And although my bread-and-butter is rental property, I’m more than happy to own some shares of a blue chip REIT such as O.

REITs took a hit today, and I used the negative news as an opportunity to initiate a small position with O. Although I didn’t quite get in at 5.0% yield, my entry point was close enough for comfort, and the purchase helped me accomplish what I really wanted to get done with the freed up capital — increase the dividend yield and overall passive income of my stock portfolio.

Yes, better entry points will likely arrive in the future, should the Fed ever get around to actually raising interest rates (I’ve been hearing about an impeding rate hike since like 2013). O is currently trading around 17.5 FFO, which is also higher than its historical average. Since the Fed tends to move as slow as molasses when it comes to these things, I’ll believe it when I see it… Chances are, any rate hike will be subtle, so who knows how much impact it will really have on the markets?

Anyway, I’m not looking to beat the market, or capture substantial capital gains with this stock. Rather, I just need the “monthly dividend company” to just keep doing what they do best — churn out monthly dividends like clockwork. 🙂

 

Happy Investing!

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FI FighterZero to ZerosFerdiSBeSmartRichMark Recent comment authors
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FFdividend
Guest

i too am looking to add to my O position. great buy.

Dividend Hustler
Guest

Awesome buy FIF. Good Trade and understanding of your road to success. You know yourself best. I think that’s a nice move. Keep it up and wish us plenty of success. I love Dividends! 🙂 Cheers bud.

No Nonsense Landlord
Guest

Is the majority of the RE trend already past us? If interest rates rise, financial firms are the first to benefit. REITs will be the first to fall.

You are trading too much to make decent gains. What would your gain be if you held IVV or SPY, rather than AXP?

Jason@Islands of Investing
Guest

It can be a fine line when you start making too many trades, especially when you’re paying close attention to the market, but sounds like it was probably the right decision for you to sell out of a stock that you didn’t have a clear plan for. I’ve make plenty of impulsive purchases like that without clearly thinking it through, and usually at some point down the track I decide to sell, because I didn’t have a good enough reason to buy!

Just keep playing the game FI Fighter, and I’m sure that dividend factory will keep churning them out for you!

Cheers,

Jason

Mark
Guest
Mark

O is a great company. The valuation is too rich for me. More over you should research how O dividends are taxed. They are taxed differently and at a higher rate than normal dividends. Something to consider.

BeSmartRich
Guest

Great decision moving in REIT. I feel you as I have so many low yielding good quality stocks so I am looking into adding some REITs in tax free registered account. Some REITs (Artis, Cominar and Choice REITs in Canada) are really attractively valued at this time.

Cheers,

BeSmartRich

FerdiS
Guest

Great entry — much better than my recent entry at over $50 a share. If O drops further and I can get a yield of >5%, I’m going to double-up. Take care!

Zero to Zeros
Guest

Realty Income is one of those stocks I really want to initiate a position in, and given the current valuations, I think it makes for a solid entry point. Great purchase man!

I’m new to your blog btw, just stumbled upon it today. Been reading through a lot of your older posts, it’s awesome to see how far you’ve come and how much you’ve evolved over the years. Looks like you are getting very close to FI.

Keep it up!

Cheers

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