My Roth IRA had some spare change sitting around. Essentially, the stocks I had invested left me with about $56, well below the price of any of my stock holdings. This is what happens when you pipe money into your brokerage account and can only buy whole shares.
For my regular brokerage account, this hasn’t been a problem. Since I’m using the monthly dividends to pay off my low interest HELOC, I simply tacked on it’s spare $10 into the next month’s payment. But my Roth IRA is different.
I setup a Roth IRA years ago. It was invested in some mutual funds. I transferred all the funds to another brokerage house, but then repurposed all that money into General Dynamics, Berkshire Hathaway, Apple, and Chevron. Amidst all that, I was left with $56 in change. Since then, I have checked the “DRIP” option on each of those to route all dividend payments into new units of stock. So what was I to do with that loose change in my Roth sofa?
I decided to buy one share of British Petroleum (BP). You may remember them as the company responsible for the oil leak in the Gulf back in 2010. Their stock price had peaked at $61.64 until that catastrophic leak. Their stock price plummeted. Despite paying out almost $42.2 billion in claims and resolving federal charges laid against them by the Department of Justice and the SEC, BP still generated $400 billion in revenue last year. This has resulted in a P/E ratio of 5.09 while sporting a dividend yield of 5.0%. I don’t think I’ve ever seen a stock selling so cheap while having such a high dividend yield, such that those two numbers are the same! My hope is that BP will successfully weather this storm and continue to generate dividends which I can use to grow my position.
Some of the risk involved with investing in BP is that there may be more claims coming. There are chances they may have to pay some other fines as high at $17.6 billion. They also made a dividend cut, which explains why Dividend Growth Investor sold his position after holding it for a long time. Hence the reason I only entertained using this as a place to invest the change in my sofa. I’m not ready to buy a bigger position in BP, and I don’t have the spare capital right now to do so. This move certainly puts BP on my shortlist of stocks to watch. There are others I’m monitoring as well. We’ll see how it does.
P.S. After writing this article, I observed that Dividend Growth Investor has purchased a new position in BP. Go figure!