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Saturday, October 26, 2019

Recent Sell: Ford Motor

I first bought shares of Ford Motor (F) in November 2014 and increased my position occasionally to a maximum of 2,000 shares.

One of the reasons I've held my F position for so many years (despite its poor performance) is that I managed to boost my yield through options income.

But I'm no longer interested in holding F. The stock has a Borderline Safe dividend according to Simply Safe Dividends and a quality score of only 11. For reference, only stocks with quality scores of 15 and above are considered to be high-quality stocks.

In this article, I'll share my thoughts on F and provide a transaction summary.

Background


I've been using a slightly modified version of David Van Knapp's quality scoring system to assess the quality of my DivGro stocks. The system is simple and does a great job identifying high-quality stocks, and also lower quality positions that may be candidates for the chopping block.

While my portfolio contains mostly dividend growth [DG] stocks, I also own so-called dividend stocks. These are stocks that pay dividends but have not increased those dividends for some time. My F position was one of six such stocks:



Here is a table that presents a breakdown of quality scores for these dividend payers:

TickerCompanyVL
Safety
Rank
VL
Fin. 
Stren.
M*
Econ.
Moat
S&P
Credit
Rating
SSD
Divi.
Safety
QualYieldRecent
Price
CVSCVS Health1A++NarrowBBB67213.08%
65.10
FFord Motor3B+NoneBBB47116.98%
8.72
GPSGap3ANoneBB+4695.60%
17.33
NSRGYNestle SA1A++WideAA–99252.31%
105.39
PSAPublic Storage1A+NoneA96183.31%
234.00
TSMTaiwan Semiconductor Manufacturing2A+NarrowAA–62213.13%
51.13

Notice that F and Gap (GPS) have Medium-Quality and Low-Quality scores, respectively.

In the past few month's I've been working on improving DivGro's overall risk profile, favoring stocks with higher safety ratings and quality scores. I've completed the first pass on my DG stocks, so now I'm doing the same with these dividend payers.

I'll present my decision on GPS in another article.

Trade Summary


In December 2018, I sold all but 100 of my F shares to harvest tax losses. After waiting 31 days to avoid violating the IRS wash-sale rule, I bought 1,900 F shares to restore my original position, just in time to collect the first-quarter dividend.

Here is the trade summary of transactions and dividends related to the 100 retained shares and the 1,900 shares I added back in January: 

2017-04-21Bought 100 shares of F at $11.38 per share:$1,137.99
2017-09-01 Dividend on 100 shares at 15¢ per share: $15.00
2016-12-01 Dividend on 100 shares at 15¢ per share: $15.00
 2018-03-01 Dividend on 100 shares at 15¢ per share: $15.00
2018-03-01Special dividend on 100 shares at 13¢ per share: $13.00
2018-06-01 Dividend on 100 shares at 15¢ per share: $15.00
2018-09-04 Dividend on 100 shares at 15¢ per share: $15.00
2018-12-03 Dividend on 100 shares at 15¢ per share: $15.00
2019-01-24Bought 1,900 shares of F at $8.42 per share:$15,996.00
2019-03-01 Dividend on 2,000 shares at 15¢ per share: $300.00
2019-06-03 Dividend on 2,000 shares at 15¢ per share: $300.00
2019-09-03 Dividend on 2,000 shares at 15¢ per share: $300.00
2019-10-03Sold 2,000 shares of F at $8.57 per share:$17,130.00

                                                 
              

Capital Loss:
$
3.99

Dividends Received:
$
1,003.00

Commissions/Fees/Taxes:
$
20.04
Net Gain: $978.97

I made a net gain of 5.7% on the original amount invested, which is a gain of 7.1% annualized.

Selling these shares reduced DivGro's projected annual dividend income by $1,200.

Concluding Remarks


I've held my F position for a long time because I could boost my yield by selling covered calls. In all, I collected about $3,250 in options income over the years. This helped keep my investment net positive, but only by about $386. That's a poor overall result.

The good news is that I could redeploy some $17,000 in capital in higher quality DG stocks. I'll share those buys in a future article.

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