Microsoft
tests investors:
How many times will Microsoft (MSFT) test even the most
disciplined income investor (me?) What are we to think of the Ballmer
retirement, the Nokia acquisition, the PC market?
These are factors you cannot ignore yet you
have no control of any of these events.
You read one expert telling you all is well; you read another expert
telling you to dump the stock; and you watch the tape waffle around $31.00. And, still you have no control. This is why you have to make your investment
decisions based on another discipline.
The discipline I use is my Dividend Machine Strategy.
Dividend
Machine Experiment:
My work with dividend machines could be called an
experiment. The 2011 and 2012
portfolios are set and now I can evaluate how the strategy worked. In this blog I write about my personal buys
and sells and covered calls, but once the blog’s portfolios are set, I do not
trade. Note that the 2013 portfolio is
still in development.
Microsoft
(MSFT) as a Dividend Machine:
Microsoft (MSFT) took a long time to show up as a
dividend machine. Not until October 7,
2012 did MSFT meet all four of my dividend machine criteria. Click
here to see the original post on MSFT. That was about eleven months ago.
I am dedicated to dividend and income investing
because that is one of the ways I fund my life. Therefore, any analysis of my dividend
strategy work has to concentrate on how MSFT performed as an income stock. Let’s take a look.
Results
from Eleven Months of owning MSFT:
During the past eleven months we bought 100 shares
on October 8, 2012 @ $29.85; the dividend yield at that time was just above
three percent. We immediately sold a
December Call. In January when the
price of MSFT fell to $26.74; the dividend yield at the time was 3.44%. We immediately sold a March call. Four dividends were received (November, 2012;
February, 2013; May, 2013; and August, 2013.) Each of the above calls expired. The final trade to date is an October $35, 2013 call on all shares.
The table below presents the data on MSFT. Income over eleven months = eight
percent. Capital gain over eleven
months = thirteen percent. Total return
= over twenty percent.
My take is that I will continue to hold MSFT. If the stock price goes down and the
dividend continues to go up MSFT, I could add to my position. My favorite result would be it goes up
enough that the call buyer takes my 200 shares at $35 which would add another
eleven percent to my capital gain. My
worst case scenario is MSFT’s price goes down and they do not continue to
increase the dividend. Then I would
sell! Right now I’ll stick with it
because I am a disciplined income
investors.
The
Money Madam
