Tag Archives: REITs

Dividend Stocks, Free Lunch Experiment #8

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Dividend Stocks, Lunch Experiment Update:

Dividend Experiment

Dividend Experiment Update

This month, long with the Stock market overall (the DOW is above 12,000 again… hooray), I gained in both EVEP and CIM!  The stock ANH didn’t move staying the same price.  If I could, I would like to get rid of ANH and buy something more conservative. 

So far, I’ve been impressed with the performance of my experiment portfolio, I gained another 2% from last month.  I’ve heavily invested in REITs, and I need to switch into another type of dividend stocks some day.  Most likely, I will try to dump ANH…  soon! 

Background:

The Free Lunch Experiment, which invests in dividend stocks so that I can use the yield to pay for my work day lunches, is my first true experiment here at MoneyReasons.com and was started with the article called: “Paying An Adult Allowance, A Lunch Experiment”.  As explained in the post link above, the money used in this experiment is sort of like free money because it would have been spent on eating lunches out at work anyway.  This means that if I were to lose the money in this experiment tomorrow, it wouldn’t bother me because it really didn’t cost me anything to fund.  Of course the probability of losing all my money in the stocks in the experiment is very slim. 

Having practically free money in this experiment, I’m able to take higher risks that I normal would consider. 

Now on to this month’s results!

           
  Stock Name Anworth EV Energy Chimera  
  Stock Ticket ANH EVEP CIM  
  # of Shares 260 45 600  
  Orig. Price $7.84 $23.25 $4.01  
  Curr. Price $6.95 $42.98 $4.26  
  Orig Cost $2,038.14 $1,046.25 $2,404.80  
  Curr Value $1,807.00 $1,934.10 $2,556.00  
  Annual Yield 13.24% 7.05% 16.90%  
  Actual Dividend $59.80 $34.07 $108.00  
      Total Dividends $807.48  
      52 weeks 52  
      Dividend / week $15.53  
           
      Total Gain in    
      Stock Apprec. $807.91  
           
      % Change 14.72%  
           
           
      Amt Loaned to myself: $1,726  
      Amt paid back to date: $1,459  
      Amt Still Owned: $267  
           

  

Priming the Pump:

As I stated in my previous posts, the money involved in this experiment is technically free money, to expedite the stock purchases I’ve borrowed money from myself a few times just to speed up the investing process, this action is called “priming the pump “.  Of course I’m paying myself back.  Currently, I still owe myself $267. 

Modifications to the Experiment

I decided to wait to make changed to the experiment, I’m still rolling around ideas in my head, who knows… maybe I’ll end up putting the money in some dividend yielding mutual funds instead and just leave it g0!  I wonder if I make enough in dividends if I’ll have to pay an estimated quarterly tax payment 2011?

-MR

REITs as Investments

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Okay, I decided to take the money from my Lunch Budget (Experiment) and put it into a REIT (Real Estate Investment Trust).  Now, I don’t expect the stock price of the REIT to rise much higher than the levels that they are currently at.  So you might be wondering why am I doing this?  …The dividend!

REITs historically pay a dividend percentage payout of about 6% to 7% for their dividend.

Why? Because they get special tax treatment if they do so.

To qualify as a REIT tax structure, a company has to:

  • invest at least 75% of total assets in Real Estate
  • deriving at least 75 percent of gross income as rents from real property or interest from mortgages on real property
  • distributing annually at least 90% of taxable income to shareholders in the form of dividends

So why would a company decided to be classified as a REIT?  Because they are able to pass the taxes to the shareholder instead of paying it themselves.  So these investment would be great in a Roth IRA, or in a child’s UTMA account where they don’t earn much money or the tax consequence is minimal.

I’m hoping that the addition of a REIT company while the fed interest rates are low will benefit me by the REIT stock appreciating and by receiving the juicy stock dividend that is higher than normal at this time!!!

Bests,

Don