What am i HODLing: KRP

This is not investment advice and is intended for entertainment purposes only

I’ve been spending WAY too much time on Twitter (X?) recently and if there is one thing Financial Twitter adores, it’s dividends.

A younger Courtney working on the Power User desk working with sexy trading strategies would poke fun at people in their twenties who invested primarily in dividend yielding stocks.

I was the opposite of a value investor… but that had to change when I made the decision to leave Robinhood and be #funemployed.

Passive Income Strategies

There are three passive income strategies that are probably the most popular in the investing space:

1. Dividend income from your portfolio

2. Rental Income from owning Real-estate

3. Selling or Writing Covered calls

jk covered calls is not up there in popularity… but it should be!

3. Yield from Fixed Income

All of these offer different benefits and difficulties to their holder, but essentially when you own them, you get incremental payouts for owning them.

💤💤💤

Okay sorry I fell asleep because passive income assets are SO boring!!!

But in this case, boring is good.

When I quit my job, i needed boring.

My Boring Position: KRP

Ticker: $KRP

Position Size: 103 shares

Dividend Yield: 12.34%

I had a compelling conversation with a friend who works in tech and doesn’t have a background in finance but likes to manage her money. (#WomeninTech)

Typically I don’t take advice from conversations about the stock market because this is a dangerous practice as someone who talks stocks a lot. With this one, I needed to start building a yield bearing position.

My unofficial game-plan was to quit my job in about a year and a half and I wanted to have some more passive income on top of the covered calls I sold.

So I slowly dollar-cost averaged into about 103 shares of KRP by the time I invested. Now I get about $40 a quarter. Great!

Strategy: Where I went wrong

1. It takes a long time to build up a position to a size where the yield payouts are actually substantial

If you are trying to supplement you Snowboard Instructing Income (what income? I’m getting paid to snowboard?) then $40 in a quarterly yield is insignificant. I think I could get one burger and twisted tea at the lodge with that.

I needed to build a much larger position and start reallocating my portfolio to actually reap the benefits of passive income through dividend yield.

Your portfolio should revolve around you, not the other way around. I may the decision to leave Robinhood 6 months earlier than expected which made it difficult to continue to buy more shares of KRP. I could’ve sold another position and reallocated towards this one, but I’m a big-time #HODLer. (I hate selling and paying taxes)

2. It’s good to know what the company your investing in actually does

And I definitely didn’t do that.

In case your wondering, KRP or Kimbell Royalty, is a Limited Partnership that owns and buys mineral rights in oil and natural gas properties.

When I research what this entails, it basically means they own just the royalty interests in properties… but honestly I really don’t get what they do.

I’m a firm believer in investing in sound companies with operations I can fully comprehend. This is not the case for KRP.

3. I wanted to get my position to 100 shares so it could be an even lot I could write covered calls on top of

Covered call premiums and dividend yield?? 🤑🤑🤑

Well, not so fast.

The market for options contracts on KRP was pretty illiquid which means there weren’t a lot of buyers and sellers.

That made the bid-ask spread very wide and premiums difficult to predict and collect.

Buy, Sell or Hold?

For now, it’s a solid hold in my portfolio. It’s not a massive position for me so it basically just plays the part of a nice dividend payment coming in every quarter.