Hi Everyone,
OUR UNEXPECTED TAX BONUS
Sometimes it pays to read the fine print, but among financial docs, sometimes the print is very fine for old eyes like mine and often complex. This Morning, as I was reviewing the majority of our dividend stocks with the YieldMax ETF dividend declarations, I looked at the ROC column which I had always thought was Return On Capital. Looking at the footnotes I discovered ROC stands for, in this case, Return OF Capital. Google Search offers lots of information here, but basically the payments are classified as a return of our cost, and the wonderful thing for us is that almost everything we collect as dividends (otherwise taxed as ordinary income) is instead taxed as capital gains but only after payback. If the investment pays for itself in 1 year and the ROC% is for example 95%, we only pay ordinary tax on 5% of the earnings. After the stock is paid off, then it gets taxed at the reduced Capital Gain Rate. WHAT A HUGE BREAK FOR US, RIGHT????? If you did not use an accountant for your own taxes this year, you might want to submit a revised form, to recapture tax that could have been excused. These ROCs should be listed on your 1099s but their disposition can be confusing.
OUR INVESTMENTS
We follow some lower yielding issues for several reasons – they are super cheap but still pay a good dividend, are potentially high dividend payers, or are subject to large changes in dividend yields when major events might effect them. However accurate the expectations are, timing of them is not very predictable, but regardless we almost always make good money with very little risk until, and as in their past histories, when their situations improve – then we collect fantastic money! This week’s issues are:
- ECTM – A natural gas royalty trust that peaked at $3.50 in 8/22 when it was paying quarterly dividends of $0.176/sh quarterly or 20% yield, but if that stock had been bought at today’s price of $0.55 that royalty dividend would be a whopping 128% !!!!! In December it dipped below $0.40 and 2 years before its 5 year peak smart folks bought a dip to $0.18/sh – Imagine collecting their dividends – 391%. Cutoff date to buy this stock is 5/20 for payment on 5/30. KEEP IN MIND, NAT GAS IS STILL CHEAP BECAUSE OF WHAT THE BIDEN ADM. DID TO THE INDUSTRY. Trump’s team is putting us back in the energy exporting business and I am expecting it to start paying of big within a year ————- but still getting paid while we wait!!!
- USOI – A UBS type of bond sold like a stock called an exchange traded note (ETN). The coupon it pays us stockholders every month varies according to the profits it collects selling and recovering covered call option contracts on USO – the oil stock fund of which they actually own many shares. In 3 years the price has ranged between $58 and $90 with yields between 8% and 56%. As oil goes up and down, so does the USO and the demand for related call options. Politicians and the USO companies are playing nice right now thus USOI is cheapish $55.15. I bought at about $60 in 2021 and saw it go to over $80 while paying me an amazing 74% yield on my original investment. This one needs to be purchased by 5/21 to collect on the 27’th. With today’s price, and a fairly low oil price the yield is still a respectable 23.83%.
- SLVO – Similar to USOI, this is another USB ETN but its payments are based on profits from covered calls where the calls are covered by massive holdings of metal they actually own. Obviously, their profits and stock value is leveraged to the price of Silver. As you can see from the charts in this link, USOI seems to be on a 1.5 year low to high cycle with the current price on an upswing about half way to its possible peak. You will also notice that in spite of silver prices moving slowly and until recently not much, the payout chart is noisy but still good. Gold has done well but silver has yet to catch up, so there might be some opportunity to see yields climb here.
So here are this Friday Night’s Payment Declarations For those who own any of these by close of market today:
| Ticker | Frequency | Share Payment | Yield | Payment Date | |
| LFGY | Weekly | $0.4747 | 61.54% | 5/16/25 | |
| ULTY | Weekly | $0.1059 | 87.93% | 5/16/25 | |
| CRSH | Every 4 weeks | $0.3153 | 75.37% | 5/16/25 | |
| SNOY | Every 4 weeks | $1.3068 | 101.54% | 5/16/25 | |
| TSLY | Every 4 weeks | $0.7600 | 105.58% | 5/16/25 | |
| YBIT | Every 4 weeks | $0.8697 | 100.89% | 5/16/25 | |
Isn’t making money like this just an absolute joy. Some of you did extremely well last week, so Congratulations to you!
Stay focused -> collect many eggs -> but in many baskets.
Regards,
Clint