What about 20% in one year?
What about over 50% since 2008?
Dividend stocks have lots of appealing factors. Some stocks have a great dividend yield, providing steady income in good markets and in bad. It’s a big reason why I’m growing my portfolio with them. Some of those same stocks have a great dividend history. Their history has been so strong there is no reason to think the future for these companies will be any different. Other companies still, the best of the best, increase their dividends year after year after year. There are many reasons to dividend paying stocks. What about reasons to sell them?
If your nerves are shot, here are some reasons for selling your dividend paying stock:
The company has changed (too much)
The market share has bottomed out or revenue has declined beyond repair. These are just a couple of outcomes from poor management and could be a few reasons to “get out” of a dividend paying stock. Businesses need to change with time but it needs measured and calculated. A key question to ask: is anything wrong with the company?
The company is overvalued
If a stock has become overvalued because of a market run-up, it might be time to take some profits off the table. Recognize if you do this, in some accounts, you will incur a capital gain. Markets are largely efficient in my opinion but valuations do get out of whack now and again. So, another key question to ask: if I take some profits, are there better opportunities available to invest the cash?
The dividend has been reduced or eliminated
If the dividend is held static, at $0.29 per share per quarter, it could be sign that management does not acknowledge the dividend payment is at an unsustainable level. On the flipside, if management cuts the dividend, the stock price will rise over time and more importantly maybe the company will be back in favour sooner than later. Lowell Miller, author of The Single Best Investment says “dividend cuts are the kiss of death for stock pricing generally” but I don’t necessary subscribe to this theory. I never want a company I own to continue to pay a dividend just for the sake of doing so – it can be a healthy decision to make the haircut. The final key question to ask: what are the long-term prospects of this company? If in the short-term, a dividend cut is required to get the company through a rough patch, I can stomach and would applaud management for that. Dividend elimination – that would likely be my trigger to sell the company.
What would you do? Would you sell a stock that went down 20%?
From myownadvisor.ca
Related Books
The Dividend Growth Investment Strategy: How to Keep Your Retirement Income Doubling Every Five Years
Dividend Stocks For Dummies
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