In my previous post about my “Lunch Experiment“, I mentioned that I was looking at buying a type of dividend producing stock called a REIT (Real Estate Investemnt Trust).
Well, this past Friday, I decided to jump in the market while it was low from the Dubai World credit crisis fallout.
Even though the market might move lower on Monday, I’m pretty confident that it isn’t going anywhere near the recent recessionary low that we experienced in March 2009. “Sell high, buy low”, if possible (actually I prefer dollar-cost-averaging for my real investments).
So what did I buy?
First, let me say that I can afford to lose this money. The stock was bought with money that I would have wasted on buying “out of the office” meals at work. This is the reason that I call this an experiment, and the money involved truly is non-necessary money.
On to what I bought. Drumroll… I bought AHN (Anworth Mortgage Asset Corporation)! This REIT company does the following:
“…invests primarily in United States agency mortgage-backed securities issued or guaranteed by United States government sponsored entities, such as Fannie Mae or Freddie Mac, or an agency of the United States government, such as Ginnie Mae, including mortgage pass-through certificates, collateralized mortgage obligations, and other real estate securities, on a leveraged basis…” – from finance.yahoo.com
Why did I buy it?
I bought this stock for the 15.5% dividend yield.
How much did I buy?
I bought $2,000 dollars worth. I decided to take an extra $1,000 from my regular brokerage account (that was sitting in cash) and put it extra towards the experiment. So now I owe my regular account $1,000.
How much money will I get from the quarterly dividend?
If you consider taxes as part of the decision this is trickier than it sounds. Not taking into account taxes (for example, if I put bought ANH in a Roth IRA), I would receive ($2,000 x .155) = $310 dollar annually ($25 a month and about $6 a week). Currently, I’m holding this in my regular stock account, but in January 2010 this is going into my Roth. For more information about REITS, see this wiki article (especially the taxing info.)
Why did I put in extra money?
The extra $1,000 that I added will enable me to take 1 additional lunch as soon as the dividend is paid out, instead of waiting 25 24 additional weeks. this will enable me to start enjoying the lunch out with friends in a few months, instead of waiting 1/2 a year (not to mention the current high dividend). Though honestly, I could have waited…
The company may cut or reduce it’s dividend. Yes, I’m taking more risk than is customary for me. I’m willing to roll with the punches though.
Tell me what you think of my latest move? What kind of strategy would you pursue? Is my timing bad?