Passive Income - GILT Dividends

I could sell this stock after the payout date, net my dividends, and not worry about the short term capital gains.

Passive Income - GILT Dividends
Photo by NASA / Unsplash

I added $GILT to my passive income portfolio at the beginning of 2021. I did it because the ex-dividend date was on 1/8/2021 and I saw that it had a low price with a history of big dividend payouts.

Albeit it is a short dividend history.

I’ve written that my goal is to build up a passive income portfolio.  My measure of success will be when I generate a $100,000 a year income, and right now GILT is part of that strategy.

The angle here was to buy 200 shares for $1,400, net the dividends, and keep it going. That's the main one but here are the reasons WHY I zeroed in on this company.

Some Attractive Fundamentals

As of this post date, GILT has negative earnings of -$0.07 per share. Not great, but it’s paying on a decent dividend yield of 3.75%. The only drawback is that it pays dividends yearly. You'd have to wait a whole year before getting more dividends! Still, if you bought GILT before the Ex-Dividend date, you would be netting $0.63 per share of dividends on 1/20/2021. Wowzers!

It might pay a special dividend in the latter part of the year but that’s ok, I’ll take my money now and reinvest it! I use TD Ameritrade, and pay zero dollars in commission for buying GILT.  I’ll pay zero dollars for reinvesting my dividends too!

With my 200 shares that would be $126 in dividend income. Again, assuming GILT stays at $7 a share, this would net me 18 more shares!

A drawback I see is that GILT is trading around $7 a share. That's pretty low and I don’t always buy low-priced stocks. There’s something about owning stocks with rich prices, everyone wants them! When they're low, you wonder why.  Still, I’m Bullish on them. They’re satellite technology that enables 5G communications and 5G is a win in my book.

The other fundamental I like is that it has a pretty low Beta, it’s 0.65. The big risk I’m taking here is that it has negative earnings. You never know if earnings will collapse and take the stock with it. Still, it's just below $0, so it could become profitable at the next earning's call in May.

My mitigation for that risk is that I bought a small number of shares in my tax-deferred IRA account. I could sell this stock after the payout date, net my dividends, and not worry about the short term capital gains. Of course, this means I have to stay vigilant all the times and be active in the market, which isn't my passive income strategy at all!

$126 down, $99,874 to go.

Disclosure: Long GILT