My Cunning Plan Is Working

Mostly.  Kind of.

The plan is this:  Do what I did in Fall 2010 and Spring 2011, but moreso.

In the Fall of 2010 I bought 300 shares of MIND CTI (hereafter referred to by its ticker symbol of MNDO) for $1.86 per share.  In the Spring of 2011, MNDO rose to $3.57 a share and also paid a dividend of $0.32 per share.  I sold and netted a 90% profit, once all was said and done.

In order to do the same thing, but moreso, I just needed to buy more shares this year.

Accordingly, in the Fall of 2011, I bought 1,600 shares of MNDO for $1.85 per share.  It’s now Spring of 2012 and MNDO has been generally rising.  At one point in the last month it was $2.78 per share.

I probably should have sold then.  But I didn’t know then what I know now. To wit:

MNDO recently announced their annual dividend.  This year, though, instead of $0.32 per share, the dividend is going to be $0.24 per share.  This year’s dividend is 75% of last year’s.

But wait, there's more! MNDO is an Israeli company, and Israeli taxes are taken out of the dividend before that dividend gets near the shareholder. Last year the tax was 20%. This year it's 25%. Oy.

Once the taxes are taken into account, this year's practical dividend is 70.3% of last year's. Instead of rising to $3.57 a share, then, it’s reasonable to assume that MNDO will only rise to about 70% of that amount, AKA $2.51 per share.

And that still rocks, of course.  But I’m not going to net a 90% profit.  Instead I’ll probably be netting a 35% profit. 

I could take some risk with the timing of the dividend payment, dividend re-investment, and the sale of my additional shares as a result of the aforementioned dividend reinvestment and maybe, just maybe, net a 36% profit if it all goes perfectly, but more likely under this scenario I’ll end up reducing my profit when all does not go perfectly.  

With all that in mind, then, I’m modifying my sell order for my MNDO shares.  I’m planning to sell at $2.51, and I'm willing to sell before the stock goes ex-dividend on Monday March 12th.

If I don't sell by then, though, I'm going to cancel my sell order for 1,600 shares, take the dividend on the pay date of March 28th, automatically invest that dividend in 100+ additional shares, and then put in a new sell order for 1,700+ shares (possibly for as low as $2.36 a share).

I might make more money after taking the dividend, but it's a bit more work, and I have to have my money tied up in this investment a little longer, meaning that I might miss another opportunity.  

For instance, RadioShack(RSH) has just announced a reasonably sweet quarterly dividend, but the ex-dividend date is March 14th. If I have to leave my investment in MNDO alone until the end of March then RadioShack's dividend is an opportunity I'll definitely miss.

RadioShack is not the only thing I'm thinking about buying, and I'm not planning to put all of my eggs in one basket, anyway. Let me refine my thinking about the various baskets under consideration and I'll write about them in the near future.

Of course, I’ll not be deciding anything for certain until I sell my shares in MNDO. Without cash in hand all I’m doing is dreaming of the various baskets in which I might invest. When I’m taking action in the waking world, though, then I’ll let you know what those actions are.

As of now, though, I've reduced my sell order for MNDO to $2.51 a share.