Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Sticking My First Foot On The Retirement Ladder

|About: InfraCap MLP ETF (AMZA), Includes: REML
Summary

Transferred the $ to late to play AMZA this Q1.

REML still too expensive? Hmmmmm.

Maybe I'll just pay off debt instead.

Maybe I'll do both.

Well 'Week 1' of 2018 was entertaining. Sadly my 10 year retirement plan didn't get started last week when I missed getting the AMZA before this Q1 Xdiv date. Now that would have been a sweet play. How sweet? This sweet:

Now why would that be? 

Well here's the deal. IF my $$ had actually transferred in time. (my mistake - sigh) then I could have bought shares at the open Tuesday in time to

  1. catch the opening price of $8.65ish on 1/2
  2. have shares in my name prior to the X-Div date of 1/3
  3. have those shares lined up to sell the June 15 $9 Calls on 1/3

Remember that AMZA is just a $3/share stock in this price range, so the 10,000 shares I wanted to get would just be $30,000 out of pocket.

10,000 X the Div of $0.52 = $5,200.00, plus selling the 100 June $9 Calls would have been an additional $4,000 or so for an instant ~30% return. CRAP!

Oh well, maybe I'll try that on April 2 to catch the April Div since it's dead money until then.

I still have time to catch the other half of the retirement play though, REML.

and it's trending down:

REML is a 50% stock @ Fidelity, and I just want to tie up $30K to start like I would have with the AMZA position so I have a GTC order in for 2,040 shares at $29.00. 

Yes, it's not the SCREAMING DEAL! AMZA would have been, but it's the other leg of my 10 year retirement ladder. And I can DRIP it, and January is a "big month" for divs, and what else can I tell myself that might make me happy even though I messed up? not much. I'm sucha putz for blowing the AMZA play this time.. Maybe I can redeem myself some other way between now and April.

OK, back to the mundane matter at hand - Trailing 12 month dividends on REML = $5.80/share/$29/share entry = a projected 20.00% income stream X 2 for being on margin = 40%/year. Pathetic, but it's passive, and it will be DRIP'd, so it will compound.

Last years "average" share price was $29.655/share, so if the dividends are similar to last year, and the average share price I reinvest at is as well, I ought to add ~399 shares to the total. Hopefully that happens every year for 10 years.

IF:

  • I never put in another dime and
  • the stock price never increases over my projected entry of $29 and
  • this was in a cash account* and
  • the dividends remained about the same
  • the stock price does not go to $0.00

*cash = the amount of stock you would buy in a cash account

My initial $30,000.00 investment could add up to this:

22X your original investment isn't too terrible for only 1 initial trade plus 12 DRIP's a year. Nothing's stopping you from adding additional funds on any BTFD opportunities either.

So the REML cookie looks pretty sweet, except the AMZA one looks soooo much sweeter. Lets run those numbers again. Remember that my $3/share margin requirement allows me to control $85,000 or 10,000 shares at today's prices. Starting with $2.04 divs + ~$0.70/year net for selling the $9 calls 2X (or whatever the closest to the ATM strike is when you get in and then roll forever) you end up with about $2.75/year/share to reinvest. (only a +90% ROI on your actual out of pocket, but I digress)

Trailing 12 month "dividends" (or ROC - depends I suppose) on AMZA = $2.04/share/$8.50/share entry = a projected 24.00% income stream X 2 for being on margin = 40%/year income. add on the ~$0.70 or so for the options sell/roll and you get to ~32.22%, and it will be DRIP'd, so it will really compound.

Last years "average" share price was $9.54/share, so if the income is similar to last year, and the average share price is there or even in a range -$1 lower like it has been recently, (so lets pretend it's ~$9ish) I ought to add ~3,044 shares to the total. Hopefully that happens every year for 10 years.

IF:

  • I never put in another dime and
  • the stock price never increases over my projected entry of $8.50 and
  • this was in a cash account* and
  • the dividends remained about the same and
  • the stock price does not go to $0.00

*cash = the amount of stock you would buy in a cash account

My initial $30,000.00 investment could add up to this:

so your pitiful $30K could almost become a 100 bagger. Why, that's almost

Of course I'll do both, and with any luck, I might actually be able to live on that.

I guess I'll find out in 10 years.

YRMV

Disclosure: I am/we are long AMZA, REML.

Additional disclosure: It's only 10 years - right?