Income investing through the downturn

Originally Posted by Newporttom

I'm an income investor. Essentially all of my stock investments produce income. I invest in REITS, BDCs, CEF's, and a lot of preferred shares.

Since I've gotten myself to a position financially where I don't have to spend all my investment income, I reinvest the rest. In fact I basically reinvest all of it.

It spits out a little more then $2,000 a month. About half is Dripped right back in, and about half is taken in cash and then I purchase some more income producing stocks. I have a lot invested in preferred stocks and my broker won't DRIP those. And sometimes I just end up with too much of a certain stock, and rather than sell it, I'll just start taking distributions in cash and invest elsewhere.

I usually buy $1,000 a month, but that means periodically some cash builds up and I can 'double up' and buy more. Heading into November that's where I stood. My valuation peeked about 30 Sep.

October valuation slipped and they really slipped in Nov and first 3 weeks of December. Income stocks were getting pummeled. In all I lost about $35,000 in valuation during that time frame.

But, when income stocks go down in price, it doesn't affect the income they throw off, and you start getting some nice bargains.

In September my investment income went up about $117. Pretty typical month. In Oct, I bought $1,800 worth of a BDC and my income went up $210.

On November 1st I bought 50 shares of HT-D preferred stock at what seemed a really low (below par) price for around $1,100 and income for the month increased $138.

By start of December things were even a little lower so I bought 50 more shares of HT-D for $1033. As things continued to get hammered on 20 Dec I bought 50 shares of INN-E, another preferred stock well below par and my first double purchase in a month for a while.

I had been reading on Seeking Alpha about a really good deal on a beaten down preferred stock. (You have to be careful on Seeking Alpha. Anyone can write about a stock. You have to be able to tell the good authors from the bad). I decide to round up a few stocks that weren't my favorites, sell them and buy 400 shares of DNLG-B preferred stock at $17.87 ($7,100). It has a 12% yield at that point.

But it kept going down so I bought another $1,000 worth at $17.15. So in all I had a huge bump in income of $544 in December because I was bargain hunting. All of this is without investing new money. Just reinvesting. DLNG-B would sink to as low as $16.27 on Dec 27th. It closed today at $20.85.

It was my intention to buy 50 shares of VER-F as soon as market opened on 2 Jan. I put in really low bid of 23.60 and said 'good till cancelled' and it got executed on 28 Dec. But I didn't count it till Jan. It's my Jan purchase of $1,000.

Now I always say I don't sweat whether a stock is ahead or behind after i own it. But VER-F is a slightly different story. I owned it before about a year ago and the price was about $26.50, and could be called back in Jan 2019 for $25. So I sold. And I now have it back at $23.60. If they buy it now at $25 I'm totally cool with that. So sometimes the price can get so high it hardly make sense to keep it.

So with my VER-F purchase and a few other stocks that had dividends on the 1st, I'm already at $106 in increases for Jan.

Income investing is like having your own annuity except you maintain control of the underlying assets, and can grow them, as long as you are cash flow positive. You can decide how much risk you want to take, etc.

I highly recommend it.

PS -in last 2 weeks, I've recovered $18K of that $35K drop.