My Investing Journey with Passive Income and Stock Market investing

Category: Recession Proof Page 1 of 6

My GROWTH stocks are destroying my DIVIDEND stocks!!

Here is my latest youtube video where I detail how my GROWTH stocks are killing my DIVIDEND stocks. How are your dividend stocks fairing in this Coronavirus Correction? I’ve had THREE Dividend cuts and that sure hasn’t helped things

My top performers continue to be Fortinet, Netflix, and General Mills.

I am up over 30% in each of these. I’m up almost 40% in Fortinet in a super short time (only 2 months!). General Mills I’m up in because I bought it starting Christmas Eve of 2018 and by the time I count the dividends I’ve gotten, my total return is over 40% on this stock. Netflix continues to outperform; I just hope that price appreciation continues.

In this video, I also detail why I am buying ITOT and QQQ over NOBL and DGRO. In summary, a basic Total Market ETF outperformed ETF’s that focused specifically on Dividends. Focusing on dividends led to increased risks and a weaker performance. One line often touted by Dividend investors is “Dividend Investing performs better during bear markets, it is safer.” However, what this correction is proving is that it is NOT necessarily safer. Currently over 33 companies have cut their dividend. Imagine relying on that dividend during retirement? Not good!

I am continuing to buy QQQ and ITOT a little bit each week. I also plan on increasing positions in Marten Transports, Chewy, Eaton Vance, and perhaps Mcgrath Rentcorp. I think these stocks still present incredible growth opportunities and I’m thinking LONG-TERM here.

As usual, I will repeat the old mantra, timing the market is difficult. I think there is nothing wrong with sitting on the sidelines for a bit, but I want to get that money working for me as quick as possible.

Did we hit Bottom? Why you shouldn’t care

One question I keep seeing all over the internet is was March 23rd the bottom? Well, that remains to be seen. Maybe, maybe not.

I am of the opinion that the market could keep going up and that COULD have been the bottom. At the same time, we could also go lower from here.

At the same time, I can’t say I care one way or the other. The majority of my investments are on a 5-20 year timeline. All that matters to me is that the prices we saw in January are not the highest we will EVER see again. I expect that we will get back to All-time highs and go higher after this is over. The pressure is building and when we hear good news, I fully expect the market will rally like never seen before. I won’t be surprised if a rally occurs faster than most people expect.

As long as the market is up higher than the current ATH during your investment horizon, you are getting dividends, reinvesting, making regular contributions, then the current market conditions are not something to worry about.


How is the Coronavirus itself looking?

We are now seeing a slowing of Coronavirus cases in Italy and Spain. Cases are increasing under 3% and deaths under 4%. This is reassuring. Who knows how long it will be until those economies open back up. However, we are seeing a move in a positive direction. Here in the states, we are still seeing an increase of 8.4% in cases and a whopping 18% increase in deaths today. We have a ways to go, especially here in Georgia, where I don’t believe we adequately prepared for this. Our governor is a bit of a disappointment.

I think life as we know it will probably change until the end of the year. Things will gradually open up but we will all be cautious of going to a crowded concert or restaurant again. Who wouldn’t be???

I have largely been staying in, only to go out for mail/groceries and a rare walk (most places are closed). My fear is not the illness itself but perhaps the medical bills that come with it. My greater fear is having it, not knowing it and giving it to my elderly mother who is an extremely high-risk case here. These are the things that linger at the back of our minds as we face this. My wife’s job has been TERRIBLY affected because she is a full-time musician who depends on gigs for a living. Imagine all of your work gone in a blink of an eye. Myself, I am lucky that I do mostly online teaching anyways and my business has even increased due to the virus.

I fear what will happen to the country during this downturn. So many small businesses could go under here. I see LOTS of businesses over leveraged, borrowing more so they will be “prepared” if this goes on longer.


Anyways, what moves have I made this week with my buying and selling?

1)I keep buying Stanley Black & Decker. I am up an incredible 42% in one tranche I bought, not even that long ago. Of course, I keep buying, so overall I’m up something around 18% in the stock. Nice Dividend Aristocrat and solid company LONG-TERM

2)I am taking nibbles at ITOT every couple of days. I am NOT trying to time the bottom here. I am sticking to my plan of buying anywhere near 2400 and under. I am also buying smaller portions at 2600. I think these are decent entry points long-term.

3)I am gobbling up QQQ on any dips. I think this is a SUPERB ETF to be in. It is less exposed to things like restaurants, hotels, and cruise lines. It is tech-heavy, but I am fine being tech-heavy during these times.

4)I bought Lowes for a SWING TRADE. I only made around $24 bucks off of it but I only held it like three days. I continue to play either Home Depot or Lowes for weekly Swing trades. I like these stocks for swing trades, because I am fine holding either long-term if I can’t get out of my trade quickly for a profit. I made around 8.4% off of this trade. Last week, I traded Home Depot in my IRA account for even a greater profit. I think THIS is the type of market to swing trade-in. You will see tremendous volatility, swings of 8-10% in one day. Why not take advantage of it to go with your long-term investing??

5)I am still playing the TRUCKING SECTOR as I feel these stocks were already beaten down prior to the crash and are holding up well. Marten Transports is one that continues to perform well. So far, up over 8% in the stock over the course of a few days.


As always, here is the YOUTUBE video discussing Some of this:

What am I buying?

1)Universal Forest Products is a new position I started, it is a small-cap company in the lumber, backyard equipment, gardening supplies area. They also supply materials for Construction as well

2)Chewy– I’m still taking Nibbles at CHEWY :)….a few shares here and there. My wife and I use Chewy for our two cats (Sid and Ellie) and we love the service. At this point, I consider this a speculative bet though.

3)Mcgrath Rentcorp-I was FINALLY able to buy shares of this company at a reasonable price. The books look great and it is well managed. Another small-cap stock.

4)Still buying Stanley Black & Decker

5)Schneider Trucking and Marten Transports-You MAY be thinking, didn’t this guy just sell SNDR? I did, but I kept a small portion of my shares and at these prices, I think TRUCKING STOCKS present an incredible bargain. They were already priced for a recession and have held up pretty well during the Corona Crash.

6)Taking small nibbles at ITOT and QQQ every few days. I know we can’t time the bottom so I am just buying around 2400 and under mark on the S&P 500. These are great index ETF’s that I want to hold until retirement.

7)Hooker Furniture Company-another small-cap I’ve been holding almost two years. This presents me with a great opportunity to lower my cost basis considerably. I am down around 40% in this stock, luckily it’s not a huge position but I believe in the company long-term, if it can get past the Tariff stuff (and now the virus!)

8)Lowe’s-I had recently bought Home Depot to swing trade and here I am with Lowe’s this time for another swing trade. I am up 3.5% after one day so far, I play on getting out around 5-6% unless it just blasts up and then I will, of course, hold longer.

Will Dividend Investing Protect you more?

I will preface this article by stating I do a good bit of “Dividend Investing.” At the same time, it is not all I do.

One common argument by dividend investors is that by focusing on Dividends, you are more protected during a market correction, recession or bear market.

How has that technique faired in this Coronavirus Correction? Let’s take a look at some major ETF’s.

ITOT (Total Stock Market ETF containing 3633 holdings): It pays a distribution of 2.05% and is currently down 22.11% YTD.

NOBL (A Basket of 65 S&P Dividend Aristocrats): It pays a distribution of 2.13% and is currently down 24.54% YTD

DGRO (A basket of 477 Dividend Growers): It pays a distribution of 2.48% and is currently down 22.76% YTD.

If we do some quick math here and add back in the dividends we get a total return of the following, all numbers NEGATIVE (Yes, I realize that doesn’t take into account some factors over the next year but we have to work with knowable here)

ITOT 20.06%, NOBL 22.41%, DGRO 20.28%.

If you look at those numbers; NOBL is the worst performer, even taking into account the dividend. ITOT and DGRO are very close; DGRO paying a greater dividend.

ITOT holds the largest number of companies, followed by DGRO, followed by NOBL. I believe the greater diversification is part of the protection equation.


SECTOR exposure plays a big part here:

ITOT is 8.45% tech, 5.33% IT services

NOBL is 9.41% chemicals, 7.86% Household products

DGRO is 12.06% banks, 9.13% Pharmaceuticals

The lack of TECH exposure within NOBL is part of the reason it doesn’t perform as well poorer. DGRO has 4% Software and 3% Tech storage/hardware exposure and notice the better performance.

It turns out over the last 4 weeks, DGRO has fared slightly better than ITOT; NOBL is still behind. It remains to be seen how each will do over the next month or so.


Some other considerations when focusing on dividends:

LOTS of Dividends have been slashed during this Coronvirus Crash:

Here are just a few:

  • Macy’s
  • Occidental Petroleum
  • Ford
  • Darden Restaurants
  • Nordstrom
  • L Brands
  • GAP
  • Texas Roadhouse
  • FCX
  • Cracker Barrell
  • Delta
  • Boeing
  • Marriot
  • AMC

There are many on that list that NO ONE would have predicted would have to cut their dividend. For example, if you just looked at Delta’s payout ratio, you wouldn’t have thought it was at risk? Some of those companies have been paying dividends for DECADES.

Please keep this in mind: The risk of a DIVIDEND stock is compounded by the possibility of its dividend being cut/reduced. When the dividend is cut, it sells-off, causing the price to crash further. You not only lose the dividend but you lose the total return as well.

Furthermore, something that MANY Dividend Investors don’t realize. When that dividend is cut, a dividend-focused ETF has to remove it from it’s holding. Thus, there is more selling of the stock. Yet, another reason that even a dividend-focused ETF could present more risks. At the moment, I don’t know if any Dividend Aristocrats have had their dividends slashed or not.

I think before this is over, the Corona crash will prove that Dividend Investing is NOT innately safer. It has risks just like everything else. I say this as someone who has already had TWO dividend cuts (Darden Restaurants and Ryman Hospitality Properties). There is NOTHING wrong with Dividend Investing; however, I don’t think to focus solely on it or even heavily making that your deciding factor when investing is a smart idea, even during bear markets.

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