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Dividend stock
Old 07-27-2016, 08:55 AM   #1
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Dividend stock

I posted this on bogleheads forum, but some responses have been a bit above my head on prior questions. A more on my level feedback would be most appreciated.


We have a number of dividends stocks we are in the process of selling and investing in our new vanguard accounts. However, I am trying to read up on which ones to sell now and should we keep a few that have performed well. My question is to do with performing well. When you analyze a dividend stock - do you look at growth of the stock as a larger factor than the dividend yield? When you view dividend yield do you consider keeping any stocks with high yield? One example- We have Southern Companies which has a 4+ yield and has grown from $42 to over $50 in stock price.
and Pitney Bowes which was $20+ and is now at $18 and a yield of 3.99%.

After doing some reading and searching threads I am still not sure if any are worth keeping long term.

M
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Old 07-27-2016, 10:42 AM   #2
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I always look at total return when investing in stock.... period...

Dividends are nice, but for stock I want growth... and growth includes a rising stock price... if I need the money I can always sell some of the stock...
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Old 07-27-2016, 10:45 AM   #3
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The dividend yield is just one part of the equation. You need to look at the total return. I like high dividend stocks because in general, in this market they will have greater price appreciation and I get paid to wait. In the case of Southern Company, the 20% increase in price added to the 4+% yield would signal to me that it is a keeper IF the dividend appears secure AND the future prospect are good. On the other hand the Pitney Bowes would be under further review for the longer term prospects and the safety of the dividend.
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Old 07-27-2016, 02:59 PM   #4
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Originally Posted by ecowtent View Post
I posted this on bogleheads forum, but some responses have been a bit above my head on prior questions. A more on my level feedback would be most appreciated.


We have a number of dividends stocks we are in the process of selling and investing in our new vanguard accounts. However, I am trying to read up on which ones to sell now and should we keep a few that have performed well. My question is to do with performing well. When you analyze a dividend stock - do you look at growth of the stock as a larger factor than the dividend yield? When you view dividend yield do you consider keeping any stocks with high yield? One example- We have Southern Companies which has a 4+ yield and has grown from $42 to over $50 in stock price.
and Pitney Bowes which was $20+ and is now at $18 and a yield of 3.99%.

After doing some reading and searching threads I am still not sure if any are worth keeping long term.

M
As already mentioned, you shouldn't be focused on dividend, but rather on total return.

What the stock has done in terms of price movement should be (mostly) ignored in your decision making process. Instead, you should be asking yourself whether you would buy the stock TODAY if you didn't own it. That is, what do you expect the total return to be GOING FORWARD. If the investment thesis that you used to previously purchase the stock remains, then its a keeper (or you might consider buying more as long as the single stock exposure remains ok). If the investment thesis has changed (negatively), consider selling. If the investment thesis remains reasonable, but not enough that you would buy more (given more funds), then it is a hold situation.

Doing the above is hard to do because we (as humans) have emotional ties to our previous purchase decisions.
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Old 07-27-2016, 03:16 PM   #5
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Thank you all. We actually had an advisor who purchased several groups for us. Now several years later as I read more and start to take over our investing, I am not sure how to go forward.


I like the lower risk as mentioned in other threads to have index funds and dividend funds which is more conservative, but don't want to sell a stock that is performing. There is just so much to digest that I was hoping for a strategy or process...
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Old 07-27-2016, 04:36 PM   #6
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You do not need to sell stocks to move them to Vanguard, I'm telling you this so that you don't unnecessarily pay taxes.
You can move stock X, Y, and Z "in kind" to your Vanguard account, just phone Vanguard and tell them and they will help you.

I am slowly moving from individual stocks to more ETF's to lower risk and simplify our holdings.
The bottom line is you will always be able to find a stock that pays more dividend than a broad ETF (VTI, SDY) at the same time that single stock can drop in value 50% or 100% (ENRON, NORTEL) the same will not happen for VTI as it's so diversified.

For example:
Look at CAT, it pays 3.66% and is a well known company, it used to be $115 and went down to ~$55 , now it's back to $84.
CAT says the outlook is bad, but people don't believe the CEO and have recently bid it up ?
The Dividend they pay out each year is more than the money they make each year,
the Dividend Payout Ratio is 1.67
Who knows where it will be, but I sold all my CAT as I had to sell something and I know I would not buy CAT right now for these reasons:
- Outlook by company is bad again.
- Stock jumped in price 16% in last month.
- dividend while good is at risk since it takes more than all their earnings.

I also think it's ok to keep some of your holding in individual stocks that you strongly believe are a good bet, just make it a small portion of your investments and have the core in broad based low cost etf's or mutual funds.
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Old 07-27-2016, 07:09 PM   #7
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The only reason I buy a common stock is for the dividend payment and my expectation for increases in the dividend going forward. If a company has a dividend but there is no expectation for an increase in the dividend in the next 12-18 months then I am not interested in investing in that company for the forseable future. I cannot analyze but lack the ability to control or have a good idea of the short to intermediate return the capital gain portion of a stock will be, I can evaluate a company based on their dividend policy, earnings, expected future growth of earnings and future growth of the dividend.

As for Southern Company it is a very slow growth company (1.5% revenue growth last 10 years) that has had construction problems on many of their projects and has merged with AGL resources. At present they pay out 80% of their profits as dividends a very high percentage signifying low growth in the future which is why the stock yields 4.18% more than twice the yield on a 10 year US government bond. Expectations for me are for the dividend to increase at best 1-2% faster than the inflation rate. I do not eliminate this company from investing on that basis but I find many other companies more interesting than Southern based on the dividend prospects for the company.
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Old 07-29-2016, 07:53 PM   #8
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Originally Posted by ecowtent View Post
Thank you all. We actually had an advisor who purchased several groups for us. Now several years later as I read more and start to take over our investing, I am not sure how to go forward.


I like the lower risk as mentioned in other threads to have index funds and dividend funds which is more conservative, but don't want to sell a stock that is performing. There is just so much to digest that I was hoping for a strategy or process...
If you have a stock that you have significant capital gains in and want to keep it, keep it.

Past that, remember that while the market is not perfectly efficient, it is extremely hard for professional investors to outperform and over longer time periods few do. It's damn hard to pick winners consistently. Some people (myself included) do it as more of a hobby, but for most peole, you're better served by focusing on ultra low cost ETFs, probably diversifying and minimizing your trading to keep costs and capital gains low. There are a lot of good low cost dividend funds out there.
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