2020 Tax-Loss Harvesting (Part 3)

Part 3 of my article on harvesting tax losses covers three more recent sells. Two of these were closing trades, while the other involved trimming a position split across two different accounts. 

I'm unsure if I'll be reinvesting in any of these stocks once the blackout period required by the IRS wash-sale rule expires. These are struggling stocks with strong headwinds and, besides, I already own similar stocks in my portfolio that are performing better. 

Part 1 explained the ins-and-outs of tax-loss harvesting and I reported one closing trade to offset some 2020 capital gains. Part 2 covered three sells of Energy sector stocks, which realized losses totaling $8,671. In the conclusion of this article, I'll provide a summary of all the trades I executed to harvest tax losses for the 2020 tax year.

2020 Tax-Loss Harvesting (Part 2)

In Part 2 of a three-part article, I'm presenting three more sales to harvest tax losses. All three stocks happen to be from the Energy sector, by far the worst-performing sector this year (and for several years running!). 

I'm trimming one of my Energy stocks and closing two additional Energy stocks. I'm hoping to reinvest in at least one of these positions, but it would depend on what happens in January. 

Part 1 explained the ins-and-outs of tax-loss harvesting and I reported on a recent sell to offset some 2020 capital gains, closing my Gilead Sciences, Inc (GILD) position and recording a loss of about $2,725. I'm hoping to reinstate the position before GILD goes ex-dividend again in March 2021.

2020 Tax-Loss Harvesting (Part 1)

In previous years, I've sold stocks in late November and December to offset capital gains and to limit my tax liability. Given the stock market crash in late February and early March, it is remarkable that I'm facing a similar challenge in 2020. 

So far in 2020, I've recorded capital gains of about $14,383, and another $14,494 from options income. Additionally, I'm expecting to have dividend income totaling about $30,000 in 2020. 

To lighten my 2020 tax burden as much as possible, I decided to realize some offsetting losses by trimming and even closing several losing positions. This strategy of tax-loss harvesting is not without problems, but I like having an excuse to clean house.

Part 1 of this article explains the ins-and-outs of tax-loss harvesting and reports a recent sell I made to offset 2020 capital gains. Part 2 and Part 3 will cover additional sells. In all, I closed seven positions to harvest tax losses.

My First Sell in Eight Months

The last time I wrote about selling a stock was in March this year when I trimmed my position in Amgen (AMGN). 

Before the Covid-19 pandemic hit and changed my approach, I wanted to reposition DivGro to produce annualized returns of at least 8%. That would have resulted in trimming or closing positions with unfavorable Chowder Numbers (CDNs). 

The impact of the pandemic on the economy changed my approach. Instead, I'm now focusing on increasing DivGro's defensive exposure. 

This article discusses a recent sell, one in which I closed a position due to a recent dividend cut. 

I Trimmed AMGN Before The Market Tanked

This year I'm looking to reposition DivGro with the view of producing annualized returns of at least 8%. To do so, I'm using the so-called Chowder Rule to select or favor stocks with favorable Chowder Numbers [CDNs].

In February, I trimmed my Procter & Gamble (PG) and Chubb (CB) positions because it looks unlikely that these stocks will produce the annualized returns I'm looking for.

I've trimmed or closed other positions in February, though I have not yet reported on these transactions. This article covers one of the sells. I'm hoping to cover the others in upcoming articles.

I Also Trimmed CB

Earlier, I reported that I'd trimmed my Procter & Gamble (PG) position because it looks unlikely that PG will produce total returns in excess of 5%, whereas I'm looking for annualized returns of at least 8% from my DivGro holdings.

I identified another stock, Chubb (CB), with lower than expected growth prospects — at least when considering its unfavorable Chowder Number [CDN] of 5.

CB's dividend yield of 1.82% at $164.56 per share is on the low side and about 15% below its 5-year average dividend yield of 2.14%. Furthermore, CB's 5-year dividend growth rate [DGR] is quite low at 3%. To achieve annualized returns of 8%, a stock yielding less than 3% should have a CDN of at least 15, according to the Chowder Rule. For low-yielding stocks such as CB, CDN's less than 10 are unfavorable, meaning such stocks are unlikely to deliver annualized returns of 8% or more.

I decided to trim my CB position and to invest the proceeds in a higher DGR stock. This article details my CB trade.

I Trimmed PG

This year I'm looking to improve DivGro's growth prospects by favoring stocks with higher dividend growth rates [DGRs].

To identify stocks with questionable growth prospects, I consider the so-called Chowder Number [CDN], a metric that adds a stock's current yield and its 5-year DGR. For stocks yielding at least 3%, a favorable CDN is 12 or higher. Stocks that yield less than 3% require a CDN of 15 or higher. Utilities yielding more than 4% get a special dispensation: a CDN of 8 is considered favorable.

I've identified two stocks in my portfolio that have questionable growth prospects. Rather than close them outright, I decided to trim these positions. This article details the first trade.

Another Recent Sell

Recently, I closed two of the weaker positions in my DivGro portfolio, Nestlé SA (NSRGY) and Stanley Black & Decker (SWK), In my view, these positions are unlikely to deliver annualized returns of at least 8% going forward.

NSRGY and SWK are both high-quality stocks, based on their quality scores of 25 and 20, respectively. But I'm looking to improve DivGro's growth prospects by favoring stocks with higher dividend growth rates [DGRs], and NSRGY and SWK just didn't make the cut anymore.

I've identified another stock with questionable growth prospects, at least in the near term. The stock has a quality score of 21 and a favorable Chowder Number [CDN], but serious headwinds will affect the stock for the foreseeable future. This article provides details.

Recent Sells

I've adopted the DVK quality scoring system as the primary way to assess the quality of dividend growth [DG] stocks. I love the simplicity of the system, which does a remarkable job identifying high-quality stocks!

Another recent addition to my evaluation process is the use of the so-called Chowder Number [CDN], a popular metric that favors DG stocks likely to produce annualized returns of at least 8%.

I now regularly rank my DivGro stocks by quality score and by CDN. Following a recent ranking, I identified two weaker positions that I decided to eliminate. This article provides details.

Recent Sell: Intel

In September 2014, I decided to stick with Intel (INTC) notwithstanding the company's decision to freeze its dividend. Not long thereafter, INTC resumed its dividend increase!

INTC was my second purchase for DivGro after Chevron Corporation (CVX). I bought 120 shares on 8 January 2013, paying $21.21 per share with an initial yield on cost of 4.09%.

In time, I increased my INTC to one of the largest positions in my portfolio, topping out at 500 shares trading well above $50 per share.

Recent Sell: Gap

I bought shares of Gap (GPS) in June 2019 due to an options assignment.

When I first looked at GPS, the company seemed to have good prospects on top of a generous dividend. Now, unfortunately, the prospects seem less favorable and, while the dividend is very generous, it is deemed Borderline Safe by Simply Safe Dividends. 

I've been using a new 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. GPS has a quality score of only 9, which puts it in the Low-Quality category.

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.

Recent Sells (Part 2)

Welcome to Part 2 of my article on recent sells.

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.

In Part 1 of this article, I discussed four lower quality positions and decided to close one of them, EPR Properties (EPR). In Part 2, I'm covering three additional lower quality stocks and my decision to close out two of them.

Recent Sells (Part 1)

Lately, I've been using David Van Knapp's quality scoring system presented in this article on high-quality, high yield DG stocks. I love the simplicity of the system and it appears to do a remarkable job identifying high-quality stocks. Also, there appears to be a positive correlation between quality scores and my recent ranking of the top holdings of dividend ETFs (presented here and here).

So I decided to rank the dividend growth [DG] stocks in my DivGro portfolio by quality score with the objective to identify and potentially close weaker positions. The results of this ranking can be found here.

Seven of my DG stocks got quality scores below 15. For reference, only DG stocks with quality scores of 15 and above are considered to be high-quality stocks.

Recent Sells to Harvest Tax Losses (Part 3)

Part 3 of my article on harvesting tax losses covers three more recent sells. I'm trimming these stocks rather because I'm hoping to buy back shares in 2019 to retain the dividends and to lower my average cost basis.

Part 1 covered Ford (F), while Part 2 covered recent sells on Gilead Sciences (GILD), KB Home (KBH), and Nvidia (NVDA). I trimmed GILD, but closed KBH and NVDA because I'm no longer  interested in owning those stocks.

In the conclusion of this article, I'll provide a summary of all the trades reported in this article.

Recent Sells to Harvest Tax Losses (Part 2)

Today I'm presenting Part 2 of a three-part article on recent sell transactions to harvest tax losses. With one of the sells presented today, I'm trimming two-thirds of a losing position with the view to reestablishing the position next year. Two additional sells are closing trades because I have no desire to hold onto these positions.

Part 1 presented a recent sell of Ford (F) in which I significantly trimmed my losing position. I hope to buy back shares next year before F goes ex-dividend, but I'll need to wait 31 days to avoid breaking the wash-sale rule.  F's next ex-dividend date should be near the end of January, so I'll have a window of about a week to buy back shares.

See Part 3 of this article for the final tax-loss harvesting sells.

Recent Sells to Harvest Tax Losses (Part 1)

 In year's past, I've sold stocks in late November or into December to offset capital gains, so limiting my tax liability. The strategy is not without problems, but I like having an excuse to clean house.

So far in 2018, I've earned about $15,000 in capital gains from sold stocks and an additional $6,000 from closed options trades. To lighten my 2018 tax burden, I decided to realize some offsetting losses by trimming and even closing several losing positions.

Part 1 of this article presents a recent sell in which I'm trimming a losing position. I hope to buy back shares next year before the ex-dividend date and to establish a lower cost basis. I'll need to wait 31 days to avoid breaking the so-called wash-sale rule.

Part 2 and Part 3 will cover additional sells. Most of these are similar in that I'm hoping to reestablish my positions next year. But I'm also closing one position altogether.

Recent Sell: Microsoft

In my last Pulse article, I looked at a yield channel chart of Microsoft (MSFT) that clearly shows that the stock is trading at an overvalued yield when looking at historical yield patterns.

MSFT is DivGro's seventh home-run and one of my top performers with annualized total returns of about 55%. It is tough to sell a home-run stock when it is performing so well, but my yield channel chart suggests it is a good time to do so.

I think MSFT has more room to grow, so I decided to sell a portion of my shares and ride the upward trend as long as it lasts. This article presents a short summary of the trades and dividends received as well as a net profit analysis.

Recent Sell: Northrop Grumman

In my latest Pulse article, I presented a yield channel chart of Northrop Grumman (NOC) that clearly shows that the stock is trading at an overvalued yield when looking at historical yield patterns.

Furthermore, NOC is trading at a 30% premium to my fair value estimate and yields only 1.3% at $349.12 per share. The stock's premium price is one reason that it is ranked #32 of 47 dividend growth (DG) stocks in my portfolio.

As one of my home run stocks, it is tough to sell NOC when it is performing so well, but my yield channel chart suggests that now is a good time to do so. This article presents a short summary of the trades and dividends received as well as a net profit analysis.

Recent Sell: Cisco Systems

On 3 January, the February $34 covered call options I sold against my Cisco Systems (CSCO) shares got exercised early.

CSCO traded ex-dividend on 4 January, so the options holder decided to call my shares away just in time to grab the dividend. This is one of the drawbacks of American-style options – they can be exercised before expiration.

With CSCO trading in the money, I was well aware of the possibility that the options could be assigned. However, I was traveling from South Africa via Dubai to San Francisco (an exhausting 30 hours of traveling time!) and could not make a defensive move in time. Fortunately, I still own 200 CSCO shares, so I collected the dividend on those shares.

This article presents a summary of my CSCO trades and a final profit/loss analysis.