If you’ve been following our coverage of the 138SL APO then by now you might have heard about one of the biggest selling points – a 8-10% dividend yield based on the APO price. If they are able to make that projection a reality, it would put them at the top of the list in terms of Dividend paying stocks on the Jamaica Stock Exchange. This is a big deal and is worth a review especially for those who invest for dividends.

A few weeks ago, in a previous newsletter, we made the case for investing for dividends in the current climate we find ourselves in as investors – The case for Dividend Investing – Learn Grow Invest (learngrowinvestclub.com). The reason why we encourage this now is that for the most part stocks are trending down, interest rates are higher, which makes optimizing cash flow important for investors.

I spoke in our Telegram group recently about the importance of optimizing cash flow during this season where capital gains are few and far between for the average investor. In the conversation, I provided three tips to our community.

Tip #1: Keeping Cash on Hand (Asset Allocation Strategy)

Having adequate cash on hand will help you as an investor prepare for opportunities to come up on the market. This cash is of course separate from your Emergency Fund (although I do think there are opportunities to use your emergency fund for investing, let me know if you’d like to hear more) and is to be on hand on your investment account. This cash is best used for short term investments and should be ready and available again for the next investment play.

Tip #2: Take Profits Often

Any unusual run ups in price recently seem to be short lived on the market. This means investors aren’t waiting to take their profits and maybe you shouldn’t either (if you want to optimize cash flow). So you can either take profits in cash or take profits and add back to your position on the correction which will allow you to have more units than before.

Here is a simple example of this: You own 10,000 units of a stock that you purchased for $2. When that stock gains 50 cents, you’ll have unrealized gains of 25%. If you sell those shares you’ll have $25,000 in cash (not accounting for fees). If the stock corrects back to $2 then with your $25,000 in cash you can now purchase 12,500 shares of that stock. If you’re able to purchase those shares then your profit is now locked in, regardless of any fluctuations in price you’ve increased your original position by 25% and you’ll own those shares going forward. Of course, this example is contingent on a lot of things and is simplified to make a point.

Tip #3: Concentrate (Smaller Portfolio)

A smaller portfolio allows for larger positions which enables larger potential gains should the price start to increase. I’ve done videos on this over on our YouTube channel, so be sure to check those out. Essentially the premise is that a smaller portfolio in terms of number of stocks can increase the potential for gains. However, note this approach increases your risk and is the opposite of a diversified portfolio. You’ll have a smaller margin for error if you have less stocks.

Back to the 138SL Opportunity…

As we have been seeing over the past year with the PBS Preference Share Offer, the Mayberry Bond and now the 138SL APO, companies are understanding that investors are seeking greater assurances of cash flow and are positioning themselves to make their offers attractive.

138SL projects that with the proceeds from the APO being used to reduce its debt, lower finance costs as a result of lower debt and continued increases in profitability provides the opportunity to pay more cash back to shareholders at a higher yield.

Let me know what you think of the opportunity and be sure to check out all our videos on the offer, over on YouTube.

Disclaimer: The above article is not meant to be financial advice. Please speak with a licensed financial advisor who can help guide you to a making a sound financial decision.

If you need financial consultation or coaching, be sure to check out this page: https://learngrowinvestclub.com/consultation/. We provide support for persons wanting to learn about their options, get on track with budgeting, clearing debt and starting their investment journey.