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SDS (Seductive Dividend Stocks)
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Sorry I hide my true identity but I'm a physicist/engineer, native contrarian and idea generator. I am an eclectic dividend investor with motto "In God We Trust, All Others Pay Cash" applied to companies I invest in. I like to read /and read a lot - did you look on my SA photo 8-)? /... More
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  • Dividend Suspensions I Like 9 comments
    Aug 21, 2012 2:11 PM

    I often argue that a dividend cut is not always sell signal.

    Imagine that ABC company cuts dividends in half after N years of good DG history. Investor X recently bought ABC and her YoC=3% so she might consider to sell ABC instantly. Investor Z bought ABC many years ago and his YoC was 30% before cut and 15% after cut so she might hold ABC if the reason for cut is not real disaster for this for dividend investor (Di).

    But quite often even stronger harm that a dividend cut occurs - this is dividend suspension or omission. In this case I think Di should sell the company stocks. Bur as always in stock market there are exclusion from this rule, e.g. dividend suspension by BP in 2010 under pressure of Obama administration. I decided to hold BP because it was clear to me that company wanted to pay dividends. They not only re-established dividends in 2011 but increased dividends in 2012.

    I also admit Telefonica decision:

    "The Board of Directors has decided that under the criteria of prudent administration it is in the best interest of all Telefónica's stakeholders that the dividend and share buyback program corresponding to 2012 be cancelled as a one-time exceptional measure.

    The objectives underlying this decision are:

    To further strengthen the balance sheet through retained earnings, deleveraging and increasing shareholder value.
    To substantially accelerate debt reduction in the short term.
    To decouple from exogenous macroeconomic factors affecting our country of domicile.
    To immunize from debt markets liquidity conditions, by having debt maturities covered till the end of 2013
    To de-risk the execution of the already announced portfolio management and asset divestment program, to which the Company remains fully committed.
    To continue investing in profitable growth in our operations.
    .....
    The Company will resume its shareholder remuneration in 2013 by paying a dividend of 0.75 euros per share. The Company intends to pay in two tranches: a first payment in Q4 2013 and a second one in Q2 2014."

    So I decided to hold TEF and due my wide diversification this (as well as BP) dividend suspension is not critical for my income stream.

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Comments (9)
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  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3298) | Send Message
     
    Author’s reply » TEF announced that they will start rewarding their shareholders again by paying a dividends - see http://reut.rs/11ezHEG.
    12 Jun 2013, 01:50 AM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3298) | Send Message
     
    Author’s reply » Nokia (NOK) suspended dividends after ~ 150 years of payments - too bad.... I sold....
    12 Jun 2013, 01:54 AM Reply Like
  • Ckent323
    , contributor
    Comments (507) | Send Message
     
    SDS,

     

    I also kept BP and TEF. Relative to total return I am still about 10% underwater on BP even after dividends but I see a good path forward. For TEF my total return is still in the red but down only a few %.

     

    I think I will be looking at positive total returns within a year with good future total return prospects so it looks like keeping them was not a bad move although perhaps not optimal use of the funds in the short term.

     

    Regards,

     

    Craig
    12 Jun 2013, 03:13 PM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3298) | Send Message
     
    Author’s reply » I guess my BP and TEF are both in red but they are ~ 1% of portfolio and income from dividends isn't important for me now. So I also can wait.
    To me total return is like a complex number T=D+iC where i is imaginary unit, D and C is price change. Although I did and will sell a very overvalued stock I remember that no grocery around accepts "i" as a payment 8-) .
    SDS
    12 Jun 2013, 08:29 PM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3298) | Send Message
     
    Author’s reply » I just got 2013 tax report - TEF paid me dividends in 2013. Although it is still in red (just checked), I'll holt the stock. My BP is in black now but I don't care.....
    SDS
    4 Mar, 01:50 PM Reply Like
  • Ckent323
    , contributor
    Comments (507) | Send Message
     
    SDS I also received TEF dividends in 2013 but I am still in the red in both stock price and total return.

     

    My total return from BP is now in the black given the recent dividends and the rise in the stock price but I am still down 3.7% on the aggregate purchase price.

     

    I continue to hold both.

     

    I also hold positions in ORAN, DTEGY, RCI, CTL, T, VZ and VOD. I am in the red on cost and total return for CTL and ORAN. I am in the red on cost for RCI (3%) but in the black for total return since I have owned it for some time.

     

    I am in the black in both price and total return for DTEGY, T, VOD & VZ.

     

    Overall I am in the black for both cost and total return in telecoms but it is my poorest performing sector.
    4 Mar, 02:05 PM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3298) | Send Message
     
    Author’s reply » Ckent323
    I think time is on your /and my/ side.
    I consider telecoms as HY stocks and use their dividends to expand my portfolio. I also long on ORAN, RCI, T, VZ, VOD, CTL. I need to figure out cost basis of VOD/VZ (as far as I understand some of my VOD will be replaced by VZ shares).
    SDS
    4 Mar, 03:14 PM Reply Like
  • Ckent323
    , contributor
    Comments (507) | Send Message
     
    SDS,

     

    The VZ shares and VOD split info showed up in my account on 2/24. The cash portion showed up in the account today.

     

    See Ray Merola's article for additional info:
    http://seekingalpha.co...

     

    Regards,

     

    Craig
    4 Mar, 04:05 PM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (3298) | Send Message
     
    Author’s reply » Thank you Craig. I didn't check my account yet.
    4 Mar, 06:40 PM Reply Like
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