The original Sharpe Income post can be found here.
The Sharpe Income category be found by clicking on that red ‘Sharpe Income’ tag next to this post title, or by clicking here.
We continue the discussion from the last entry.
While we are all digesting that great jobs report, I thought I would enter a little note here regarding the Sharpe Income project.
The American Express (AXP) dividend posted to the project this morning.
Oh, and by the way, when you are experiencing draw-down in your trading account? This is why you keep a separate Income account, that pays you a regular income. Again … this goes back to points we highlighted in the very first entry we had in the history of this project.
Regardless, the dividend from American Express (AXP) has been noted and recorded on the spreadsheet that tracks the project. And in an earlier entry, I had stated that I was expecting American Express (AXP) to fall more in price.
Well, if this is an income account that we are looking to grow, this dictates that the time-frame we have to consider. We can’t look to grow an income account over a long period of time, and be studying a 5 minute chart. That would be insane. Generally, I want to be looking at a weekly chart, at the bare minimum.
American Express – Weekly Chart (tradingview.com)
And the trend and the momentum for American Express (AXP) on a weekly chart, at least at the moment … is clearly down.
This agrees with what is fundamentally occuring with the company right now.
So what is the plan?
Let the thing drop!
We will be receiving dividends in the mean-time. And this next point is critical …
If our yield on cost improves, while the price of American Express (AXP) falls, and our cash in the project increases? We simply allow American Express (AXP) to drop in price, continue to evaluate the company as time passes, and evaluate the price action. We have five other income instruments, and an entire separate capital gains strategy to construct. This means that we have time to allow the yield on cost to improve, while we concentrate on other matters that make us money. In the meantime, those dividends continue to ‘cushion’ what is occurring here American Express (AXP). If the stock price does fall farther? Then buy the time we come back to it to buy more and concentrate our yield, our ‘dividend cushion’ will be greater.
We continue the Sharpe Income project with this next entry.