I usually don't have many sell orders because I want to keep my dividend growth stocks forever as long as fundamentals haven't changed. I just can't see myself heavily invested into DOW.
DOW does pay a nice dividend that amounts to a yield of 3.8%. However, they cut their dividend from .42 to .15 back in 2009. They have since raised it back to .32 per share but it's still less than where it was in 2008. I also don't believe the company has much of a moat or barrier to entry. They also have a high beta of 2.4.
I sold out of my small position of only 35 shares @ $33.92. My Cost basis was $33.66. I lost 0.89 but collected dividends of $33.60 since April so I still earned over 3% on my money.
Upon weakness, I may still sell some puts on DOW as a speculative play but I don't feel that it belongs in my portfolio as a long-term holding.
I was trading DOW many years ago too. I am trying to buy only stocks which consistently raise their dividends rather than cut them. But I also have a few exceptions to this in my portfolio, so I understand your move as I am doing the same and slowly cultivate my portfolio by getting rid of my "old skeletons in the wardrobe"...
ReplyDeleteI agree with your "old skeletons" metaphor. I believe I am developing myself into a more disciplined DG investor with each passing month. I try to be more critical of each purchase I make. I also have a few exceptions but I like to have a couple of speculative plays every once in a while.
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That's kind of a tough call. I agree that they don't have much of a moat, but they have been picking up a bit since the recession. I probably would have given them a bit more time - but I'm often too nice. And I really don't like selling. The only two dividend stocks I've sold (TEF and NRGY) so far were because they cut their dividends and I became convinced that the companies just didn't have their acts together.
ReplyDeleteI could be wrong but I feel that I can find a better place to put the money. I have made a little money on DOW with options. With the high beta, it makes them a good options candidate. If they have a nice drop I will consider selling puts again. Thanks for commenting.
DeleteI think this may prove to be a good call. As My FI journey points out, DOW revenue profile has been improving in the last few years, but I think there are a few concerns about some low cost competitors starting to flood the low end chemicals market which may start to impact their margins. It sounds like they are trying to transition to more specialty chemicals, but thats no sure thing. Looks like their payout ratio has ballooned a bit this year also.
ReplyDeleteI do agree with you. Their main advantage is just pricing. Not having a large competitive advantage, high beta and payouts are the main reasons for selling. Their future is too uncertain for me to make them a large part of my portfolio.
DeleteTo sell a position has always been a hard decision for me. And my track record shows that each time i have sold, the stock performed well thereafter. I joked about this at work last week, saying that if anyone wanted to make money, they should buy what i sell. However, I used the money to purchase depressed stock with better dividend growth. I don't have numbers, but i think i'm better off.
ReplyDeleteADY,
DeleteI agree it is hard to sell a position. I would only sell if I think I can put the money to better use. I am kicking myself that I sold Phillips 66 after the split. Every trade is a learning experience.
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