Author Topic: REIT strategy for retirement accounts  (Read 1192 times)

0 Members and 1 Guest are viewing this topic.

Offline zubs

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 66
  • -Received: 365
  • Posts: 1807
REIT strategy for retirement accounts
« on: June 12, 2019, 12:21:43 PM »
CIM is a REIT stock that sells at $18.90/share and pays a dividend of $2.00/share (10.96% dividend)
The ex-dividend date is 06.27.2019 for a dividend that pays on 07.30.2019


So you have to buy the stock before or on 06.27.2019 to get the dividend.


Would a good strategy be to keep your money in the 2.1% money market and buy CIM right before the ex-div date, and then sell after it pays the dividend to put it right back into the 2.1% money market, and do that 4 times a year?


Example with $100,000:
$100,000/$18.90 = 5,291 shares
5,291 shares X 0.50 = $2,645.50


After dividend payout, sell and put $100,000 into the 2.1% money market for 2 months before you have to stick it back into CIM
So you get about $175 in interest.


So after 1 year:
CIM dividend X 4 = $10,582
Interest from moneymarket X 4 = $700/
Total: $11,282


Even better is if you can use a bunch of REIT's where you just circle the money around getting the high dividends.
CIM to AGNC to ARR
Find ex dividend dates for high dividend stocks as the strategy. 


Please poke holes as I am looking for a reason this doesn't work.

Offline Liar Loan

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 531
  • -Received: 355
  • Posts: 1777
Re: REIT strategy for retirement accounts
« Reply #1 on: June 12, 2019, 01:37:38 PM »
So you have to buy the stock before or on 06.27.2019 to get the dividend.

You have to buy the stock before the ex-dividend date.  Starting the day of the ex-dividend date (June 27) a new buyer would not received the June 30th dividend.

Would a good strategy be to keep your money in the 2.1% money market and buy CIM right before the ex-div date, and then sell after it pays the dividend to put it right back into the 2.1% money market, and do that 4 times a year?

This strategy will not work because the stock price drops on the ex-dividend date by the same amount of the dividend. 

Believe me, when I was a young investor I thought of trying this and many others have as well, but it doesn't work.  If it did, there would be mutual funds and wall street strategies galore set up to take advantage of it.

Offline zubs

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 66
  • -Received: 365
  • Posts: 1807
Re: REIT strategy for retirement accounts
« Reply #2 on: June 12, 2019, 04:12:19 PM »
Let's use 2018 as an example with CIM and AGNC and $100,000
AGNC pays 0.18 dividend every month
CIM pays 0.50 dividend every quarter


For this example lets fix AGNC at $17 & CIM at $18
Using $100,000 you get the following:
AGNC 5,882 shares
CIM 5,555 shares


AGNC 2018 Dividend payout dates.
EX DIV DATE -=-=-=-=-=- PAYOUT DATE
12/28/2018   Cash   0.18   1/9/2019
11/29/2018   Cash   0.18  12/10/2018
10/30/2018   Cash   0.18  11/9/2018
9/27/2018   Cash   0.18   10/9/2018
8/30/2018   Cash   0.18    9/11/2018
7/30/2018   Cash   0.18    8/8/2018
6/28/2018   Cash   0.18   7/9/2018
5/30/2018   Cash   0.18   6/8/2018
4/27/2018   Cash   0.18   5/9/2018
3/28/2018   Cash   0.18   4/9/2018
2/27/2018   Cash   0.18   3/8/2018
1/30/2018   Cash   0.18   2/8/2018


CIM 2018 dividend payout dates
03/28/2018  CASH  0.5   04/30/2018
06/28/2018  CASH  0.5   07/31/2018
09/27/2018  CASH  0.5   10/31/2018
12/28/2018  CASH  0.5   01/31/2019


Buy AGNC on 01/30/2018 and hold for 2 dividend pay outs ending 03/08/2018
~5,882 * 2 * 0.18 = $2,117.52
Sell AGNC and buy CIM around 03/15/2018 for 1 dividend pay out that ends 04/30/2018
~5,555 * 0.5 = $2,777.50
Sell CIM and buy AGNC around 05/05/2018 for 1 dividend pay out that ends 06/08/2018
~5,882 * 0.18 = $1,058.76
Sell AGNC and buy CIM around 06/15/2018 for 1 dividend pay out that ends 07/31/2018
~5,555 * 0.5 = $2,777.50
Sell CIM and buy AGNC around 08/20/2018 for 1 dividend pay out that ends 09/11/2018
~5,882 * 0.18 = $1,058.76
Sell AGNC and buy CIM around 09/15/2018 for 1 dividend pay out that ends 10/31/2018
~5,555 * 0.5 = $2,777.50
Sell CIM and buy AGNC around 11/15/2018 for 1 dividend pay out that ends 12/10/2018
~5,882 * 0.18 = $1,058.76
Sell AGNC and buy CIM around 12/15/2018 for 1 dividend pay out that ends 01/31/2019
~5,555 * 0.5 = $2,777.50

Total after 1 year of shenanigans: $16,403.80 or about a 16.4% return on $100,000

If you just held CIM or AGNC without switching, you would have only gotten around $11,000 to $12,000

Offline Compressed-Village

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 251
  • -Received: 178
  • Posts: 1413
Re: REIT strategy for retirement accounts
« Reply #3 on: June 12, 2019, 07:21:51 PM »
This is a good strategies to put your capital to work.

Rewards comes with risks, looking at CIM historical chart, end of 2015 was a shit in the pants times. But if held on, it would eventually return pretty handsomely.

Offline Liar Loan

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 531
  • -Received: 355
  • Posts: 1777
Re: REIT strategy for retirement accounts
« Reply #4 on: June 12, 2019, 08:16:13 PM »
I'm telling you... you can't just look at the dividends, but you need to also consider capital gains (losses) in your return calculation.  In 2018, AGNC lost -12% and CIM lost -1.8%.

Also, remember that dividends from REIT's are taxed at a higher rate than dividends from normal blue chip stocks.

Offline woodburyowner

  • O.C. Resident
  • ***
  • Thanks
  • -Given: 60
  • -Received: 130
  • Posts: 883
Re: REIT strategy for retirement accounts
« Reply #5 on: June 12, 2019, 09:46:00 PM »
Also, remember that dividends from REIT's are taxed at a higher rate than dividends from normal blue chip stocks.

Exactly.  Look into the definition of qualified vs. non-qualified dividends.

Offline zubs

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 66
  • -Received: 365
  • Posts: 1807
Re: REIT strategy for retirement accounts
« Reply #6 on: June 13, 2019, 09:10:47 AM »
The money being traded here is a retirement account, so forget about tax implications.


We have the historical share price of AGNC and CIM, here are the results using the dividend hopping strategy and real data for the full year in 2018:





If you did this in 2018, you would start with $100,000 and end up with (102,203.55 + 15,197.34) $117,400.89 on 02.01.2019.


I'm gonna do this...someone stop me!
Tell me it's a bad strategy.

Offline daedalus

  • O.C. Resident
  • ***
  • Thanks
  • -Given: 151
  • -Received: 176
  • Posts: 630
Re: REIT strategy for retirement accounts
« Reply #7 on: June 13, 2019, 10:04:51 PM »
I had a good trade in AGNC years ago.  Bought it in 2008.  Sold some a month later for nearly a 50% profit.  Kept the rest until May 2013, getting out @ $28.  Back then it was paying ~$5/year in dividends.  I made 148% profit! I never realized I did that good until this thread made me go look.  I don't think that kind of return will be seen in AGNC over the next 5 years, but who knows?  You just don't want to be holding it when default rates and interest rates are going up.

Offline momopi

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 645
  • -Received: 368
  • Posts: 1694
Re: REIT strategy for retirement accounts
« Reply #8 on: June 14, 2019, 09:14:05 AM »

No love for TWO (Two Harbors) ?   :(

Offline madhuri

  • Tourist
  • *
  • Thanks
  • -Given: 6
  • -Received: 1
  • Posts: 10
Re: REIT strategy for retirement accounts
« Reply #9 on: June 14, 2019, 10:01:02 AM »
@zubs,
doesn't the stock price drop after ex-div. date by almost same amount as dividend. I am a newbie to this and trying to understand.

Offline zubs

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 66
  • -Received: 365
  • Posts: 1807
Re: REIT strategy for retirement accounts
« Reply #10 on: June 14, 2019, 11:22:29 AM »
So I used the same data & strategy and put it into 2017.  AGNC vs. CIM






86,928.24 + 16,273.22 = $103,201.46
Not a very good return for 1 year, but reason being CIM had dropped a lot from DEC 2017 to FEB 2018.
In fact if you just bought CIM and held it for 1 year, you would have made more money.  <---Actually let me calculate this statement:

$100,000 / 19.99 = 5,002 shares
5,002 * 2.00 = $10,004 in dividends
selling 5,002 shares @ $16.52 = $82,633.04
82,633.04 + 10,004 = $92,637.04
Look like the dividend hopping strategy is still superior.

You can see if the stock price drops after dividend payout.  I have the numbers all in the chart above.  It doesn't for AGNC, but CIM it looks correlated.


FYI: Investors use REITs in retirement accounts because the dividends from REIT stocks are always ordinary income.  REITs have to give out 90% or more of their profits in dividends and so their dividends are never qualified.  It's the reason to put REIT stocks in retirement accounts.  I'm not stock broker, so I'm not sure if what I said above is true, but I read it on the internet, so I'm pretty sure I'm qualified to give financial advice.
« Last Edit: June 14, 2019, 11:48:31 AM by zubs »

The following member(s) thanked this post:


Offline Panda

  • "Live a life that will help others financially, spiritually, physically, and emotionally. Live a life that serves as an example of what an exceptional life could look like."
  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 282
  • -Received: 373
  • Posts: 1601
  • Gender: Male
  • Location: Johns Creek, GA
    • www.realwealthmanagement.com
Re: REIT strategy for retirement accounts
« Reply #11 on: June 20, 2019, 06:25:13 PM »
Here are my stats for AGNC

Start Date: 05/15/2008
End Date : 06/19/2019
Start price / share : $19.35
End share price $16.92
Starting shares: 516.80
Ending shares : 2835.11
Dividends reinvested/share : $40.85
Total return : 379.70%
Average Annual Total Return: 15.17%
Starting Investment : $10,000
Ending Investment : $47,967.93
Years 11:10

One does not short or trade in and out of AGNC. AGNC is a long term investment that is best kept in your ROTH IRA allowing the shares to compound over time with DRIP.
James Park, MBA
Investment Real Estate Broker
CalBRE# 01894781, NMLS License # 1572291
Direct: (678) 865-6250
Email: jpark@johnscreekrealtypartners.com

http://www.biggerpockets.com/users/Panda
http://www.johnscreekrealtypartners.com

Offline zubs

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 66
  • -Received: 365
  • Posts: 1807
Re: REIT strategy for retirement accounts
« Reply #12 on: June 21, 2019, 11:37:26 AM »
Thanks for calculating the results, but have you tried it with moving the total investment back and forth between CIM and AGNC?

So the strategy would be to always get the CIM quarterly payout, but after the payout, to immediately put it into AGNC, to get 1 monthly payout, then switch it back to CIM to get the quarterly again. 

Offline Compressed-Village

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 251
  • -Received: 178
  • Posts: 1413
Re: REIT strategy for retirement accounts
« Reply #13 on: June 21, 2019, 02:15:22 PM »
can this be setup as a cron job, set it and forget? Let the systems do the tasks and automate it. Then let it ride for 10 year cycles would be ideal.

Offline Panda

  • "Live a life that will help others financially, spiritually, physically, and emotionally. Live a life that serves as an example of what an exceptional life could look like."
  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 282
  • -Received: 373
  • Posts: 1601
  • Gender: Male
  • Location: Johns Creek, GA
    • www.realwealthmanagement.com
Re: REIT strategy for retirement accounts
« Reply #14 on: June 21, 2019, 02:48:16 PM »
Just for example if you bought Analy, ticker NLY at inception of 10/08/1997 at 12.62,and continued to DRIP. If you had invested $100,000 back then, your value would be $870,396 today with a price per share of $9.15 which is significantly lower than the inception share price of $12,62.. Average total return would be 10.50% for 20 years which is not bad at all for a buy and hold. If you don't reinvest the dividends, the annual return goes down to 5.88%. Your starting shares would be 7920 which will grow to 95,557 shares in 20 years. That is the power of DRIP investing.

Thanks for calculating the results, but have you tried it with moving the total investment back and forth between CIM and AGNC?

So the strategy would be to always get the CIM quarterly payout, but after the payout, to immediately put it into AGNC, to get 1 monthly payout, then switch it back to CIM to get the quarterly
can this be setup as a cron job, set it and forget? Let the systems do the tasks and automate it. Then let it ride for 10 year cycles would be ideal.
again. 

James Park, MBA
Investment Real Estate Broker
CalBRE# 01894781, NMLS License # 1572291
Direct: (678) 865-6250
Email: jpark@johnscreekrealtypartners.com

http://www.biggerpockets.com/users/Panda
http://www.johnscreekrealtypartners.com

The following member(s) thanked this post:


 

Talk Irvine Links

[Recent Posts]
[FAQ / Rules]

Site Supporters



Related Links

Recent Posts

Re: Low Income Housing Coming to CVE and PP by aquabliss
[Today at 12:10:02 AM]


Re: Tesla Solar Panels Price Cut by zubs
[Yesterday at 11:51:14 PM]


Re: Tesla Solar Panels Price Cut by zubs
[Yesterday at 11:17:15 PM]


Re: Tesla Solar Panels Price Cut by irvinehomeowner
[Yesterday at 10:33:41 PM]


Re: Tesla Solar Panels Price Cut by USCTrojanCPA
[Yesterday at 09:08:16 PM]