As a dividend growth investor, the point is to accumulate stocks that provide passive income through dividends. Based on that, I thought I would calculate how many years it would take to reach my current stock gain in just the dividend payments alone.
So for example, my largest gain in OKE is around $650. With my current shares, it pays me $87.88 each year. Therefore it would take 7.4 years of those dividend payments to equal the gain that I am currently up. Why is this important? Well it really isnt, other than I (like the rest of the world) am anticipating a correction or at least some pullback in the market. So why wouldn't I sell now and buy back in a few months. I would lose out on the dividend payments and pay taxes on the gains, but I would hopefully be able to buy back at a lower price in the future.
Here is my full portfolio sorted by current gains. I have not made a decision yet and probably will not sell, but it is getting extremely tempting.
What would you do in this situation??
| Ticker | Gain ($) | Gain (%) | Annual Dividend | Years to Gain |
| OKE | $648.95 | 64.9% | $87.88 | 7.4 |
| DLR | $474.83 | 63.7% | $41.77 | 11.4 |
| MMM | $377.19 | 32.3% | $39.96 | 9.4 |
| O | $329.01 | 44.2% | $40.17 | 8.2 |
| DPS | $263.32 | 21.8% | $33.92 | 7.8 |
| JNJ | $247.86 | 19.4% | $41.86 | 5.9 |
| MCD | $234.41 | 30.1% | $29.26 | 8.0 |
| PM | $220.34 | 28.2% | $40.07 | 5.5 |
| HCP | $152.00 | 9.5% | $115.00 | 1.3 |
| UTX | $140.67 | 13.8% | $30.02 | 4.7 |
| ADM | $126.43 | 25.8% | $17.40 | 7.3 |
| EMR | $116.80 | 11.7% | $39.70 | 2.9 |
| TROW | $113.57 | 9.0% | $41.04 | 2.8 |
| KO | $101.68 | 13.0% | $27.38 | 3.7 |
| WPC | $100.07 | 6.2% | $97.50 | 1.0 |
| HTR | $51.17 | 3.3% | $159.60 | 0.3 |
| HSY | $50.89 | 6.8% | $19.16 | 2.7 |
| RY | $48.90 | 4.2% | $51.20 | 1.0 |
| CVX | $30.73 | 3.9% | $33.70 | 0.9 |
| PFE | $19.33 | 3.9% | $18.02 | 1.1 |
| CAT | $17.94 | 1.6% | $44.60 | 0.4 |
| F | $2.35 | 0.2% | $60.00 | 0.0 |
| OHI | -$6.32 | -0.9% | $52.25 | -0.1 |
| CMP | -$41.07 | -3.8% | $36.14 | -1.1 |
| DE | -$51.49 | -6.9% | $19.47 | -2.6 |
| UNP | -$53.16 | -3.1% | $42.10 | -1.3 |
| IBM | -$54.17 | -6.9% | $25.49 | -2.1 |
| WFC | -$57.33 | -5.7% | $30.46 | -1.9 |
| TGT | -$87.82 | -7.1% | $37.91 | -2.3 |
| DIS | -$98.79 | -4.7% | $28.36 | -3.5 |
| AAPL | -$101.14 | -11.2% | $19.10 | -5.3 |
| RDS.B | -$122.02 | -11.2% | $61.92 | -2.0 |
| KMI | -$418.61 | -53.7% | $9.96 | -42.0 |
Disclaimer: I am not a licensed investment professional. I am not liable for any losses suffered by any parties. Any information on this site is my opinion only and should not be used for investments of any kind.
I have sold a few that do not offer any dividends. I doubled my investment with TRUP.
ReplyDeleteHi Morrigan. Thanks for stopping by and commenting! I have not heard of TRUP before. I will check it out. Take care!
DeleteHey Adam,
ReplyDeleteI appreciate the indecision on when to sell and I'm sure other investors (myself included) have grappled with this. I can't recommend what to do but I will explain my rules:
1. I've learned the hard way, do not speculate. I let numerical calculations be the basis of my decisions (it takes the emotion out of the decision)
2. Why did I originally buy this stock? Is the reason still valid or has the company changed in some way.
3. If I bought strictly for dividend growth and equity growth exceeds dividend growth by a factor of 4 I will evaluate if I should sell. I did this last year when I reduced my Hasbro holding and invested the proceeds into JNJ around $94. Considering JNJ is around $116 not a bad deal. I call this my prune ratio :)
4. Is this a company I bought for stability more than dividend growth? A good example of this is Waste Management (WM). Not the greatest in annual dividend growth but if the economy crashes the same amount of garbage still needs to be collected. WM is an 86% gain for me but I have yet the desire to sell.
5. Companies financials have degraded below my standards so I'll grab my profit and run. I did this recently with Seagate Technologies when I sold at $26 and then a couple weeks later stock price dropped to $19.
Hi Ken! Thank you very much for the thoughtful and long response. You posted a great set of rules but what sticks out to me is your number 3. I was contemplating selling enough shares to equal my "gain" in the stock, then investing that elsewhere. Then the problem becomes... where to put it? I am having trouble finding anything these days that is not overvalued to some degree.
DeleteAlso, your number 2 above hit me hard. Is there anything about OKE and DLR specifically that would trigger me to sell? No.
Again, I really appreciate the comment and it definitely helped me think through this some more!
An interesting topic every dividend growth investor discusses at some point in their investing career. Personally, I tend to keep my stock even with a high price appreciation. I think the overall point of being a dividend growth investor is patience and time which many seem to lack. Being a DGI your primary concern is building up an ever growing passive income stream via dividend growth, reinvestment and adding fresh capital. Taking your OKE gains and have it sit on the sideline or potentially lose it in a new stock is not worth the risk. Being a DGI I am only concern with my dividend income and making sure every company I hold can continue to pay its distribution. I'd consider a sell if I see red flags with a dividend and not because of capital appreciation. It's a fine line being a long term holder and trader.
ReplyDeleteHi DivHut!
DeleteThanks much for the comment! I think you hit the nail on the head with this comment: "Taking your OKE gains and have it sit on the sideline or potentially lose it in a new stock is not worth the risk"
What other stock am I so confident in that I could sell my gains and reinvest them in? I would say right now the only answer to that is cash but as you stated, then I risk any further gains.
Based on the fact that I am only talking about a few thousand dollars as opposed to a few TENs of thousands of dollars, I am not too worried about what I do here. I just want to debate, with the community, and with myself, how to handle these situations.
Thanks for the wisdom!
i will sell if its a share if i am holding for gain or speculation,i got burnt when i didnt sell twtr .For dividend shares i think i will hold on to the gain,but may decide other way also.
ReplyDeleteHi Desi... thanks for weighing in. It is a tough decision to make. Ultimately, I think it makes the most sense for me to hold for longer and just pay attention to the dividend growth of each stock. I agree with you though, obviously if I were holding a stock looking for growth in share price alone, I would sell at 65% gain! Many would be happy with that! Thanks for the comment!
DeletePersonally I wouldn't sell the shares just because of price appreciation or on the hopes of buying back in later. In my almost 5 years of investing in individual stocks and paying attention to companies on a close level I've made calls myself and heard plenty of others for a correction, a stock market crash, a this or that going to happen and if I listened to them then I'd still be on the sidelines. In isolation share price appreciation means nothing. It's share price appreciation when compared to your valuation of the company that really matters. Just my $0.02. I accept PayPal. ;)
ReplyDeleteHi JC! Thanks for the comment. I hear ya and the more I think about it, the more I am leaning to just hold since my plan involves long term growth. I just read the post by Roadmap 2 Retire about him selling 1/3 and it got me thinking again... lol, well I guess I could have worse problems right? Take care. Paypal coming your way :)
ReplyDeleteLike you mentioned on my blog comment, its hard to decide when to pull the trigger. Buying is the easy part...its the selling that everyone gets wrong. Sometimes you just have to take what is given to your on a platter and pull the trigger to book the profits.
ReplyDeletebest wishes
R2R
Hi R2R! You are right... and its very difficult to do sometimes. I have thought long and hard about this decision and actually am still undecided. :) Thanks for your thoughts!
Delete