All About Interest

One man's journey to financial independence.

Purchased 50 TWGP

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I decided to purchase 50 shares of Tower Group, Inc. (TWGP) today.  I’ve been looking for a P&C Insurance company ever since I sold Harleysville Group (HGIC) due to the buyout last year.  They are only a 900 Mil Market Cap company.  P&C businesses didn’t do well in 2011, with many losses occuring from natural disasters.    I believe the company has a lot of room for growth as does the dividend.

TWGP has increased it’s yearly dividend from .1500 in 2007 to .6875 in 2011.  It has a Price/Book of .85 and payout ratio < 50%.  It has a low beta of 0.6 and its current yield is 3.3%.

Overview:

Headquarted in New York, NY, Tower Group, Inc. (Tower), through its subsidiaries, offers a range of commercial, personal and specialty property and casualty insurance products and services to businesses in various industries and to individuals. The Company provides coverage for many different market segments, including non-standard risks that do not fit the underwriting criteria of standard risk carriers due to factors, such as type of business, location and premium per policy. It provides these products on both an admitted and excess and surplus (E&S) basis. The Company operates in three segments: Commercial Insurance, Personal Insurance and Insurance Services. On July 1, 2010, it acquired OneBeacon Personal Lines Division (OBPL). On November 2, 2010, Tower acquired the renewal rights to the commercial automobile liability and physical damage business of AequiCap Program Administrators Inc. (AequiCap II), an underwriting agency based in Fort Lauderdale, Florida.

Sold BBVA Puts

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I sold 3 BBVA $7 July 21 ’12 Puts @ .55
Net proceeds (after commission) = $152.73

This is obviously a very speculative play.  The 52-week low/high is 7.02/13.01.  I believe most of the near-term risk is already priced in.  If these get assigned I will get 300 shares for an average cost of $6.49/share.  I already own 105 shares at a cost of $9.48.  Total I’ll have 405 shares at an average cost of  $7.27.

BBVA is a 39 billion market cap company at today’s prices.  They are currently slightly larger than Bank of Montreal.  They have a lot of exposure to Spain.  They have been buying up smaller banks recently and they already own a U.S. bank, Compass Bank, that they paid 9.6 Billion for in 2007.  I banked with Compass for 10 years before being bought and they have always been well run and profitable.  I believe there could be more downside but most of the risk is priced in.  I also believe BBVA will do well in the longterm (5+ years).  

Their dividend payments have been sporadic:


Year
Declaration Date
Ex-Dividend Date
Record Date
Payable Date
Dividend $ Amount
2012
N/A
Jan 05, 2012
Jan 09, 2012
Jan 25, 2012
0.1277
2012 Total:
0.1277
2011
N/A
Sep 27, 2011
Sep 29, 2011
Oct 28, 2011
0.1379
2011
N/A
Jul 05, 2011
Jul 07, 2011
Jul 20, 2011
0.1421
2011
N/A
Mar 29, 2011
Mar 31, 2011
May 02, 2011
0.2138
2011
N/A
Jan 05, 2011
Jan 07, 2011
Jan 20, 2011
0.1160
2011 Total:
0.6098
2010
N/A
Nov 29, 2010
Nov 09, 2010
Dec 03, 2010
0.3669
2010
N/A
Oct 06, 2010
Oct 08, 2010
Oct 22, 2010
0.1244
2010
N/A
Jul 07, 2010
Jul 09, 2010
Jul 22, 2010
0.1128
2010
N/A
Apr 07, 2010
Apr 09, 2010
Apr 22, 2010
0.2032
2010
N/A
Dec 22, 2009
Dec 24, 2009
Jan 08, 2010
0.1293
2010 Total:
0.9366
2009
N/A
Oct 07, 2009
Oct 09, 2009
Oct 23, 2009
0.1329
2009
N/A
Jul 10, 2009
Jul 14, 2009
Jul 27, 2009
0.1250
2009
N/A
Jan 07, 2009
Jan 09, 2009
Jan 22, 2009
0.2171
2009 Total:
0.4750
2008
N/A
Oct 07, 2008
Oct 09, 2008
Oct 20, 2008
0.2203
2008
N/A
Jul 07, 2008
Jul 09, 2008
Jul 21, 2008
0.2608
2008
N/A
Apr 07, 2008
Apr 09, 2008
Apr 21, 2008
0.4288
2008
N/A
Jan 07, 2008
Jan 09, 2008
Jan 22, 2008
0.2193
2008 Total:
1.1292
2007
N/A
Oct 04, 2007
Oct 09, 2007
Oct 22, 2007
0.2117
2007
N/A
Jul 05, 2007
Jul 09, 2007
Jul 20, 2007
0.2035
2007
N/A
Apr 04, 2007
Apr 09, 2007
Apr 20, 2007
0.3181
2007
N/A
Jan 05, 2007
Jan 09, 2007
Jan 22, 2007
0.1371
2007 Total:
0.8704

Options Trades

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I have a separate smaller options account to suffice for my need to gamble.  I usually sell puts against companies I’d like to own but I do have some speculative plays.  I will try and mention any new trades with this account as well.

I have three options trades that are still open for this year.  I had some GE puts and WM puts expire.  I will mention my purchases since the beginning of the year.  I have three trades still open.

Open:

01/19/12 Sold 2 TSM July 21 ’12 $15 Puts 1.80
01/23/12 Sold 1 KMI June 16 ’12 $30 Put 2.25
03/12/12 Sold 1 AZN Oct 20 ’12 $45 Put 3.00

Closed Out:

01/03 – Sold 1 RIG $35 May 19 ’12 PUT for $2.11
03/12 – Bought to close 1 RIG $35 May 19 ’12 PUT for .09
Profit – $202.00 before brokerage fees

01/06 – Bought 10 SLV Jan 19 ’13 $45 Calls 1.05
01/26 – Sold to close 5 SLV Jan 19’13 $45 Calls 1.85
02/28 – Sold to close 5 SLV Jan 19 ’13 $45 Callas 2.03
Profit – $890 before brokerage fees

First Published Article on Seeking Alpha

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I submitted an article last week on seeking alpha regarding one of my methods of picking stocks that uses a 10-year Yield on Cost (YOC).

You can find the article here:

http://seekingalpha.com/article/457581-evaluating-dividend-yield-and-dividend-growth-rate-over-time

Purchased NSC

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When I want to initiate a position in a company I like to split it up into a few purchases every 3 or 6 months to average the price in over time.  This is my second purchase of Norfolk Southern Corp. (NSC).  I purchased 16 shares at 65.36 this morning so my average cost is 67.22.

I wanted to add to my position for a few reasons:

I wanted to further increase my exposure to Transportation
They are a 22B market cap company with a dividend of 2.9%.
They have a 5-year CAGR of 19.08%
They have increased dividends yearly for 10 straight years.  They actually have been increasing dividends about every 6 months.
I believe the loss of revenues from coal are already priced in and this provides for an attractive entry point.
Their earnings estimates for 2012-2015 are 5.81, 6.53, 7.26, 8.06 according to E-Trade.
Railroads provide the cheapest forms of transportation for many goods and this isn’t expected to change.

10-year YOC Strategy

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So one of my strategies is to buy stocks that I believe will have a YOC (Yield On Cost) of at least 10% after 10 years.  See Mathematics tab if you want to know how to calculate this yourself. 

For example:  Let’s take a purchase I initiated earlier this year of NSC.  It’s currently yielding 2.9%.  It has a 5-Year DGR (Dividend Growth Rate) of 19.08%.  If that continues then the 10 year YOC would be 16.63%, much higher than the 10% I look for.  However, I don’t count on them keeping it quite this high.  The 3-year DGR is 10.98%.  Using this I would get a 10-year YOC of 8.22%.  I would expect the DGR to be somewhere between those numbers.

Purchased VZ

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I just purchased an additional 25 shares of Verizon Wireless (VZ) today.

They were already a core holding in my portfolio and now make up the largest % holding at a little over 10% now.  This will be my third purchase of VZ since starting the portfolio.  I bought 33 shares on 09/10/10 for 30.79, 27 shares on 09/27/11 at 37.04, 25 shares on 03/21/12 for 39.90 and have dripped the whole time.

A few of my reasons for purchase:
I have used them for services and been very happy since they bought out MCI Worldcom in 1998. (yes this one is biased)
They are the nation’s largest wireless carrier
They pay a nice dividend of .50 quarterly (about 5% as of today’s prices) and are expected to increase this by early November.  
VZ has their 4G LTE in about 200 markets and expects to double this by year’s end.
They have consistently increased dividends each year for the last 7 years even through the latest credit crisis. 
Their earnings estimates for 2012-2015 are 2.49, 2.78, 3.10, 3.22 according to Etrade.
With earnings growing in the double digits I believe they will be able to continue to increase their dividend for the forseeable future.  

Goals for 2012

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This will be my first post and I just want to share some of my goals for this year.

I want to aggressively grow my portfolio this year to a point where my yearly dividend income will be $2000.  I’m building a cash account to use as my “dry powder.”  I will be watching a lot of dividend payers with long histories of increasing dividends.  This list will typically be from the Champions, Contenders and Challengers list made courtesy of David Fish.  The website is located here.

I will be posting any new additions or sells that I make and some reasoning.  I currently use an options account for selling puts against some companies I’d like at a cheaper price.  If any of these get assigned I will mention them also.

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