Accumulating dividend payer CPLP during the crash

Here is a picture of my 'dividend accumulation strategy' throughout the crash and bounce.

I'm still down 11% on CPLP, but the stock I bought at $5.95 will pay 16% dividend at the price I paid. If I'd had a bit more courage, I would have bought three times as much, and with today's huge bounce, would have been profitable already on the overall position, with an average dividend payout for the whole position around 14%.

This position was by no means perfectly managed. I missed the bottom of the bounce by a whopping 15%, but things were so damn scary 5 days ago I just feel grateful that my stomach is no longer turning knots. However, monthly SPY chart still says this bear market is only getting started, so this is still a longer term position designed to accumulate dividends in a sector that the global economy cannot function without.

You could argue that accumulating into a crash is crazy, but I've been trading CPLP almost every dividend cycle for 2 years, so know this stock is extremely cyclic, and bounces back over the next dividend quarter. Supertankers don't dissapear overnight, so when a stock like CPLP dives 40% in a month, you can be fairly confident the market is incorrectly valuing CPLP and a bounce will occur.

Another Recovery day - huge 18% bounceback for CPLP on merger news

Huge bounceback today helped my 'dividend accumulation' strategy on CPLP.

How well will these 10%+ dividend payers weather the debt crisis?

My entire portfolio is high dividend stocks right now. I don't have the time to second guess the Russian Roulette being played by Republicans in congress who would rather destroy the worlds largest economy than pay more taxes, and as a result the market is simply too volatile for my usual style of swing trades to work.

Here is the breakdown of my current dividend only Portfolio

CMO (finance) - currently paying 14.5% 

NLY  (finance) - currently paying 14.87%

AGD - (Global Dividend Fund) - currently paying 10.17%

AOD - (Global Dividend Fund) - currently paying  11.32%

CPLP - (Supertankers) - currently paying 11.44% 

My income portfolio is fairly diversified, but did get hammered in the last week, so I was glad to see the recovery today. Look at this graph of the bounce back from the last weeks vicious drop.

CPLP Sold as market softens after the rally of the last two weeks

Sold CPLP for 9.2% gain in 19 trading days. Market looks like it is softening after the rally in the last two weeks. Price dropped under the 7-day EMA (green line), and Williams and RSI indicators show uptrend has been broken.

CPLP Trade is going well - 12% in 18 days

If a trade is going well, it's time to take some profit out and put it in your pocket.

The entry was a little early - I didn't follow my recommendations in the June 3 post exactly. I only waited one day after the candle was completely inside the bollinger band, but I also only entered with a small position due to recognizing the risk was higher. Actually a good part of the timing was the fact that I went on vacation on June 13, and didn't know how much time I would have to check progress while on vacation.

In hindsight June 15 was actually the perfect entry day, when the candles straddled the 7 day average and the green line was completely flattened out.

I'm quite happy to sell this right now.

 In 15 days, the profit on this trade

  is more than the yearly dividend

 for this stock. 

This is what I like about trading CPLP - it is very cyclic because of the dividend, but if your timing is right you can trade the cycles to achieve a yearly dividend every quarter.

I'm now putting a stop in to exit at 9.5% profit if it drops back. If it goes higher based on promising jobs data, then let it run for a bit more. Williams R and RSI both show some weakness, so there is no certainty that it will keep going up. So if I get stopped out at this price I won't be surprised, but I won't be upset either.

Make 15% in the next 60 days on cyclic shipping stock CPLP

CPLP has dropped off over $2.50 a share after they paid their dividend and then the market went down, exaggerating the usual post dividend revaluing of the stock.

Now is the time to

 start thinking about 

buying CPLP again.

 At the current price it’s paying over 10% dividend. But my target will be to make between $1 and $2 per share profit, within 60 days, or keep it for the dividend if the market doesn’t recover again over the summer.

Look for these technical buy signals

This is the chart from 2010, where I traded the cycles in CPLP due to it's big quarterly payouts.  The technical buy signal I’ll be  looking for is the purple and green lines to get much closer together.  You can see this happened at $8.20 back in August 2010, then $8.40 in November 2010.  You can see when green crosses above purples, that’s when the uptrend starts. We don’t even think about buying until the candles are completely inside of the lower bollinger band, and there is no hurry, CPLP usually trades up and down a bit before people realize that a 10% dividend is pretty good and that the global economy still needs supertankers to carry oil around the place.

.

Sold CPLP at $8.66 5% profit in 35 days

My planned CPLP profit point was $9.20, but I had a tight trailing stop which sold this position at $8.66. Given that the quarterly dividend is $0.255, I was happy with $0.45 per share in half that time.

Long CPLP at $8.20

Couldn't get in as intended at below $8 as identified in the previous post. As the CPLP trading range between dividend payments greater than the dividend amount, this may end up being a medium term trade rather than an income buy and hold position.

The dividend is expected to be $0.225 again, so if it goes above $8.45, I will sell to take the profit rather than hold for the dividend.

As of 10/10, my sell trigger was $8.47, so trading this stock technically has already turned out more profitable than holding for the dividend.

CPLP Drop off due to dividend payout

Here is the dropoff due to the CPLP dividend payout that I spoke about in yesterdays post. I was seconds too late selling at the $9.20 high on Monday, but got out yesterday at $9.12.

Although I'll miss the dividend due to the record date being August 6, taking $1.12 profit per share by banking my trading profit exceeds the $0.25 per share dividend that I'm missing this quarter.

Action to take: Let the dust settle, then buy back in under $8 if possible (see the chart in yesterdays post).

Aim to make $1 per share profit within the next quarter. If you don't get the timing right, buy and hold for the dividend income. It's still a good income stock - Supertankers need to be kept running, and the world still needs oil.

Sold CPLP at $9.12. Stock will drop once the dividend is announced next week. 25% profit incl. dividends over 9 months.

Although I like CPLP a lot as a company, I'm taking some profit off the table here.  I may buy back in once the dividend is paid and CPLP drops back to my buy zone between $7 and $8. This stock is quite cyclic due to the generous dividend payouts, so there is good potential to make more money trading the cycles than holding it for the dividend. Especially as my broker doesn't offer DRIP on this stock. The quarterly dividends are marked below with a D in the chart below. Notice how close the price bars come to the bollinger bands before it drops back around the time the dividend is paid. Although right now is a bullish uptrend, its trading  right on the bollinger band and my prediction is that the quarterly pullback will follow in the next ten or less trading days.

The buy back point is where the candles intersect the lower bollinger band, approx 2-4 weeks after the dividend is paid.

Income Portfolio Analysis

The next few months are going to provide an excellent test of the Daily Income for Life trading and investing strategy.

After I dump my last remaining Active Trading (NOK, TNP) and underperforming income positions (AWP) tomorrow to stem further losses, I will only have income stocks remaining. I'm shorting one tech stock (HXL), but am not attached to the result. Catching it's correction might for a small gain might just make me feel better that I sold my HXL position too early back in April at 20% profit in a month rather than 60% gain in three months I could have made.

Left in the Income Portfolio
AGD
AOD
CPLP
FTR
AGNC
NLY

These stocks are all paying between 10% - 23% in dividends. The income stocks that were yeilding less than 10% were sold to realize capital gains from the last 14 month bull market.

Currently, only FTR does not have unrealised losses after the panic market correction and spiking volatility we saw in the last three weeks. However, because of the high yields,  if I hold these positions long enough they will all turn around eventually and continue to provide long term dividend reinvestment.
As the prices decline further before we reach a stable bottom, the yields relative to price actually will increase. Also, dividend reinvestment will purchase more shares. This should position the Income Porfolio to gain healthily if this correction rebounds. These stocks were all purchases with the long term investment and dividend reinvestment in mind. Gains that were taken were based on the recent bull market and technical analysis providing solid reasons to exit.

The real question is, what will happen after this correction? Commentary is all over the map right now. The only sure thing is that trust in the entire financial system will sink to yet another low after the two shocking down days in the last two weeks.

CPLP Dividend Paid 23c 11.26% p/a

Greek Shipper runs super tankers. They cut their dividend to 23 c, which still makes it 11.26% return P/A at the current price. May pick up more stock if I can see a good entry point.