Comments on: 3 Reasons to Sell a Dividend Stock

By: Matt

Matt — Sun, 29 Jan 2012 20:18:20 +0000

Hi Kevin, thanks for the comment.

In my view, the answer to that question would be based 100% on the reasons for the underlying under-performance.

-Is the company doing well, but the stock lagging behind? If that’s the case, I’d check if the company is undervalued, and if so, I’d be far more interested in buying than selling.

-Is the company experiencing slow growth? If so, I’d try to conclude whether this is due to a short term headwind, or due to a long term business model problem. If it’s former, I’d generally not sell. If it’s the second, it means revisiting my investment thesis, and if I conclude my investing thesis is in error, I’d consider selling.

So basically, poor stock performance generally either is not an indicator to sell, or it’s coupled with a fundamental reason to sell, such as one of the reasons on this list. It’s not a reason in-and-of-itself to sell, in my view.

By: Kevin B

Kevin B — Sun, 29 Jan 2012 13:54:37 +0000

What about selling when the dividend stock isn’t keeping up with the S&P 500, even including dividends?

By: Knowing when to sell a stock

Knowing when to sell a stock — Mon, 13 Sep 2010 10:23:18 +0000

It does not matter what you bought the action, its not like you can sell at that price if you do not want the stock more. You must sell at market price. If the price drops HD compared to the initial amount of 60 for a lower price, so you get a lower return on your (bad) investment indicates that the actual price. But if you must sell your shares and reinvest in new shares at 2.9% more, you can always see exactly the same because it would yield a higher return on initial investment much lower.

By: Shannon Kawane

Shannon Kawane — Sun, 04 Jul 2010 13:04:07 +0000

I agree that a company that cuts its dividend deserves to be sold. I’m not the kind of person to wait for that to happen. I am a “value” dividend investor meaning I love investing in undervalued dividend stocks. However, I’m not a buy-and-hold type of guy. I think there’s a lot of merit to watching what other investors think about the stocks in my portfolio, and one of those ways is watching the stock’s price in relation to its 200-day moving average. A juicy stock yielding 8% after it falls even 20% will need over 4 years of dividends to make back that lost capital, but not if the company cut’s its dividend! BP is a perfect example of how a trend following strategy “foretold” upcoming events and would have prevented a significant loss well before BP suspended its dividend. You can read about it here http://www.dividend-investing-lighthouse.com/trend_following.html (click on the “unfortunate example” link).

By: Steve

Steve — Wed, 30 Jun 2010 00:52:45 +0000

THANK YOU for posting this! I really like your blog!!

Steve
Common Cents

http://www.commoncts.blogspot.com

By: Matt

Matt — Mon, 28 Jun 2010 22:20:50 +0000

Passive,

I of course don’t make direct investment recommendations to individuals, but in my investing view, I don’t sell good companies that are not overvalued.

Thanks for the comment.

By: The Passive Income Earner

The Passive Income Earner — Mon, 28 Jun 2010 04:36:32 +0000

Nice post. I started doing dividend investing over a year ago and I have one investment that double since I bought. The yield has significantly changed at the current valuation. Selling has cross my mind for reason 3 but not because the price is over valued but because I got it at a bargain price. I bought a Canadian bank during the market melt down at 50% the current price. They have been paying dividends for over 100 years with regular and consistent growth. The dividend growth is a key component of buying dividend paying companies for me and selling it feels like I am going against my rule … I continue to hold at the moment since as my core holding in the finance sector.

By: Marc

Marc — Sun, 27 Jun 2010 21:57:17 +0000

Matt,

Never thought in those terms before when considering yield.

Thank you for the new perspective.

Marc

By: Wisdom Distilled from the Top: A Yakezie Carnival | Invest It Wisely

Wisdom Distilled from the Top: A Yakezie Carnival | Invest It Wisely — Sun, 27 Jun 2010 18:37:50 +0000

[...] Dividend Monk: 3 Reasons to Sell a Dividend Stock [...]

By: Matt

Matt — Sun, 27 Jun 2010 16:04:36 +0000

Larry,

The overvalued sale is definitely tough. I generally advise only selling for this reason if the stock is really overvalued. If one sets their “overvalued” threshold too low and sells for this reason too often, constantly getting in and out of positions, they’re going to lose tons of money to fees and taxes and they might be more and more inclined to try to time the market which is a bad bet.

My rules of thumb are that:
-The stock must be very overvalued, not just somewhat overvalued. I continue holding onto companies I view as somewhat overvalued if I still think it’s a great company for the long-term.
-I must have a perceived better place for my money after I sell.
-I must take taxes into account for my sale, and still find this new place for my money to be desirable even though I’ll have less money to invest after taxes.
-I must provide myself with a significant margin of error. If I’m going through the hassle of selling and taxes, I must be quite confident that this new place for my money is better than where it is now. It doesn’t make sense to do all of this just to break even- it has to look like a very considerable improvement over the current place of the money.