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PRIMARY OBJECTIVE: ... Income Replacement! Escape velocity is the speed that an object needs to be traveling to break free of the planet's gravitational pull and leave it without further propulsion. This portfolio is looking for the point where the income being generated can allow the holder of... More
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  • Managing Your Portfolio - Selling 48 comments
    Jan 22, 2013 9:57 PM

    You've decided to become a self directed investor. You want to take control and be responsible for your own financial future. Welcome to a whole new world.

    As a self directed investor, you've probably taken a lot of time researching and doing your proper due diligence before purchasing your positions. You're hopeful. You're confident. You're expecting the best.

    In the real world of investing, the Market has a way of throwing 98 mph curve balls at you. You must be in position to inspect what you expect.

    There will be times during your inspection, or monitoring period, where you will find that things aren't going according to plan. You are faced with adversity. You need to have a plan to offset and overcome that adversity.

    Investing is about 90% emotional. People don't fail due to lack of knowledge, they fail due to an excess of emotion. They don't know when to sell. We spend hours justifying a purchase and very little time developing a selling plan.

    Selling is tough because it's a direct attack on your ego when the position goes against you. Selling is telling you that you were wrong, and most of us don't like being wrong.

    Sometimes, when you have a very successful holding, you may not be ready emotionally to let it go because it has been so successful. The Market doesn't care. React properly or be eaten alive, it's your choice.

    This blog is going to attempt to share some real selling experiences I executed the last couple of years and provide you with a track to run on. What may have been a selling situation for me, may not have been for you. That's fine. Adjust things to a point where they work for you. We all have different objectives, so kindly take that into consideration.

    Preparation is everything. ... Sun-Tzu, The Art Of Warfare ... The battle is won before it is fought.

    It is important to have a selling guideline in place before your positions are purchased. This way, when prices are going against you, you won't freeze and compound your losses. When price is going in your favor, you won't sell too soon, giving up considerable additional gains.

    I have broken down my selling guidelines to various scenario's. I will list them, there may be more, you decide for yourself.

    These are the situations where I consider selling:

    1. Dividend cut.

    2. Dividend frozen.

    3. Dividend eliminated.

    4. Mergers.


    6. Company fundamental changes.

    7. Risk adjustments or speculation.

    8. Overvaluations.

    9. Systemic risk, entire market falling.

    10. Declining dividend growth.

    As a dividend growth investor, my focus is on an increasing dividend. I expect a pay raise every year, regardless of economic or market conditions. So, dividend cuts are like pay cuts. I don't take kindly to them.

    Over the last few years, I've had a few dividend cuts among the various accounts I manage. I'll start with the worst one.


    I made the mistake of violating my stock selection process when I purchased FTR. It was basically a speculation play that I hoped would turn into a dividend growth play. I was blinded by the yield. (Yeah, that's right, just like some of you. - Ha!)

    Anyway, FTR cut the dividend for the second time and I decided enough was enough. I sold it. Easy right? Problem was, I was down 49.90% on the position. If you read my earlier blog on Weightings, I only ended up with a 1.4% loss to the entire portfolio value. Whew!

    Some people can't bring themselves to sell. FTR has gone nowhere. Cut your loss and move on. Your loss should be minimal if you weight your positions properly and hold enough positions to dilute the damage.

    I had two other companies that cut the dividend, and a dividend cut is an automatic sell for me. I sold PFE and ended up with an 8.1% loss and I sold WFC, but thankfully I had capital gains and I sold for a profit of 20.0%.


    I had a couple of companies that froze the dividend, CTL and BMY. The thing that bothered me about CTL was they had a 37 consecutive year streak of raising dividends going. They didn't think twice about ending it. That bothered me and in spite of the decent yield, I sold it. I didn't want to risk losing my capital gains which were 57.5%. I have no regrets.

    I had a gain of 21.4% in BMY when they froze the dividend. Again, if you can't provide me with a pay raise, I will find someone who will.

    EXC froze their dividend and I commented on that in the previous blog on Weightings.


    I only had that happen one time and that was BP. I already covered that in the Weighting blog.


    This is a hard one to analyze. You have to take it on a case by case basis and do the best you can.

    The first one was easy! HGIC was being bought out by Nationwide Insurance. As soon as it was announced, I sold and locked in a profit of 79.46%. End of story! ... Ha!

    I was a shareowner in PGN. DUK announced they were going to acquire PGN. There wasn't much of a premium applied at the time of the announcement. Share price had run up prior to it though. I decided I would hold and become a DUK shareowner although I wasn't enthralled with the idea.

    The merger dragged on and on. I decided enough is enough. I didn't want to risk losing my capital gains in the event the merger collapsed. I sold PGN and locked in profits of 37.15%. I had more than that but price was drifting lower as the merger dragged on.

    I think with utilities, I will sell on merger news and come back to them later after everything settles down.


    I own COP and they spun off PSX. I decided to keep PSX because COP didn't lower their dividend. The PSX dividend would be a bonus. I wasn't fond of the yield, but I held anyway. I finally sold my shares in PSX and locked in a gain of 63.25% over the spinoff price. Sweet!

    I wanted to use the funds to generate more income, so I didn't mind selling PSX while locking in those profits.

    I owned ABT when they announced their spinoff. I believed management when they said they wanted to unlock shareowner value. I doubled down on my position after hearing the announcement. As time wore on, it wasn't clear to me what the dividend growth was going to be for ABT and ABBV. The more I waited, the more impatient I became. A couple of weeks prior to the spinoff, I still was unclear of the certainty of both companies going forward, so I sold. My profit for the total position was 32.75%. I had more than that in my original position but when you double down, you increase your cost basis. I'll take what I got.


    This is a tough one. If a company has performed well over the years, we want to give them the benefit of the doubt. We may not be ready emotionally to give up a winner.

    I owned HCBK through the banking crisis and it came through with flying colors. I was so proud of myself. I'm a genius! ... Ha!

    Anyway, our Government changed the banking regulations and when they changed regulations, it affected all banks, not just the guilty banks. I saw share price dropping. I read many comments on SA where people weren't ready to give up on HCBK. They trusted management. I trusted them too, but they no longer had access to doing business the way they were used to doing business. To me, that was a fundamental change. I sold. I hesitated before I sold and I saw my capital gains disappear. I took a loss of 12.87%. It barely scratched the total portfolio value.


    This is easy for me. I owned a position in TOO. It may be an excellent company. I thought it was, which is why I bought it. What I didn't feel comfortable with was the price volatility. I felt like I had to micro manage the position by keeping a constant eye on it. I was never a micro manager. I always delegated responsibility and expected others to follow through. If I have to micro manage a position, it means I took on too much risk. So, I decided to sell it for a small gain of 2.8%. That was a relief! I didn't have to log into my portfolio everyday after that.

    This sale had nothing to do with the company or its performance. It had to do with me. I handled it.

    You must determine your own risk tolerance levels and plan accordingly.


    This is very subjective! I'll provide my guideline, but it may not fit for others. I have many stocks that are overvalued, yet I don't plan on selling them or selling a part of them. Just to name a few; O, DEO, PNY and others. I keep them because the yields are still acceptable and they are run by strong management teams.

    Two companies I did sell due to valuations were VFC and MKC. I love both of these companies and would buy them back in a heart beat if they can yield more than 3% again.

    I purchased both of them when they were yielding about 3.5%. I held them until the yield dropped below 2%. I won't purchase a company that yields 2%, but I will hold on to one. Anyway, once the yield for both of these companies dropped below 2%, I sold. My profits were as follows: VFC - up 78.19% and MKC - up 37.24%.


    Hold on to your seats! ... I ignore systemic risk. It's nothing more than noise to me.

    I maintain this attitude because I own quality. I own best in breed. I own the most financially sound companies in the market. If they fail, everybody fails. So, I sit tight, monitor the dividend and the growth of the dividend, and reinvest those dividends and wait for the flight to quality which always happens coming out of a recession.

    I can't say that I wasn't nervous watching KO and PG drop 30% or more in share price, but my comfort level was restored when I saw them increase the dividend within historical averages. They were telling me everything was under control.


    This is the most critical points of my portfolio management and probably the most controversial among other investors.

    If you read my blog on stock selection, you'll know that dividend growth is the critical piece in the puzzle for creating a portfolio that will serve you over the years.

    Dividend growth drives the compounding principle for individual stocks in a way that is certain and inevitable. It is an authoritative force that compels higher returns regardless of the other factors affecting the stock market.

    Part of the stock selection process is the 5 year compounded annual growth rate of the dividend. I look at the other time frames as well. I want as much consistency as possible.

    When I look at KO, here is their dividend growth history.

    10 year - 11.3%

    5 year - 8.4%

    3 year - 7.5%

    1 year 8.5%

    Those dividend growth rates include two recessions. So, in times of adversity, I expect KO to stay within that established range. As long as they do that, I don't monitor, micro manage or sell the position.

    I had several companies I sold who didn't live up to their historical performance's. I'll list a couple for the benefit of completing this blog.

    I owned shares in SYY. They are a dividend champion which means they have increased their dividend for 25 years or more.

    Here's a look at their dividend growth history.

    10 year - 11.6%

    5 year - 7.3%

    3 year - 4.0%

    1 year - 3.8%

    Once the dividend growth dropped below 5%, I became concerned. I put SYY on probation. I wanted to allow them time to get back on track, but a couple of years later, they are still lowering the dividend growth. I decided to sell.

    If the yield were above 5%, I would have been more patient. If SYY were producing capital gains, I would put up with the lower dividend growth. They did neither, so I took my small profit of 11.80% and moved on, locking in a higher yield with a company expected to show better dividend growth.

    I would consider owning SYY again in the future if they get back on track.

    The same concept was applied to WM. Each time period is showing lower and lower dividend growth. That's not what I signed up for. So, it was a selling situation for me.

    In closing, the moral of the story is to establish a set of guidelines, in advance, to indicate when you should consider selling a part or all of your position.

    I wouldn't worry about whether you are right or not. It is always better to err on the side of caution. If you make a mistake under those circumstances you only lost out on an opportunity. Another one will come along.

    You don't want a position to wipe out the profits of many other positions, so be smart.

    It's important to eliminate as much emotion as possible as fear blinds us to opportunity; greed blinds us to danger - emotions cause "perceptual distortion'" where we only see the part of the picture that our beliefs allow us to see.

    The decision that you made, given the data, given your knowledge and experience and the urgency to fix the problem, was the right one - even if the outcome was not what you want.

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Comments (48)
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  • OntheRock
    , contributor
    Comments (274) | Send Message
    This is a great article. I started my DG portfolio about three years ago, and establishing a sell strategy is the hardest task for me. I am so happy to see you are doing a blog, as I always seek out your comments, you have really helped educate this novice investor! Thank you!
    22 Jan 2013, 11:28 PM Reply Like
  • Stephen J Melnykevich
    , contributor
    Comments (1332) | Send Message
    Hands down your instablog series rivals many articles!
    23 Jan 2013, 12:12 AM Reply Like
  • maybenot
    , contributor
    Comments (6784) | Send Message
    Thanks chowder -- keep 'em coming.
    23 Jan 2013, 12:58 AM Reply Like
  • Ckent323
    , contributor
    Comments (1316) | Send Message


    Excellent work! Thanks for sharing. My experience with several of these companies parallels yours.


    I think one of the first things new investors need to learn is when to sell, before buying anything. In some ways it is the hardest part (psychologically anyway) so might as well lay the sobering foundation and awareness before the buying frenzy starts. Perhaps that will help minimize the mistakes that all must go through learning about the irrational part of our investing brains.




    23 Jan 2013, 01:47 AM Reply Like
  • tuliptown
    , contributor
    Comments (1566) | Send Message
    great info Chowder, thanks for the details. I appreciate the look at how you came to the decisions you did. Did you have any additional advice on when a stock gets ahead of itself but is still doing well?
    23 Jan 2013, 05:26 AM Reply Like
  • Chowder
    , contributor
    Comments (15531) | Send Message
    Author’s reply » >>> Did you have any additional advice on when a stock gets ahead of itself but is still doing well? <<<


    Absolutely! Stay the course!


    I say this provided that your objective is income replacement and the growth of that income stream.


    You need to look at price history to determine the better approach.


    KO and CL are almost always overvalued. It took The Great Recession just to bring them down to fair value. If you own either of them, then get used to overvaluations and focus on the dividend growth.


    Here is their 10 year compounded annual growth rate (CAGR).




    10 year - 9.8%
    5 year - 8.4%
    3 year - 7.5%
    1 year 8.5%




    10 year - 13.0%
    5 year - 11.8%
    3 year - 12.4%
    1 year - 7.5%


    As long as these companies continue to grow the dividend within those ranges, I don't sell, even if they are overvalued because they are always overvalued.


    If you own a cyclical like EMR for example, then you may want to consider selling part of your position, if not all of it, when they get ahead of themselves.
    23 Jan 2013, 07:03 AM Reply Like
  • Iwant2fly
    , contributor
    Comments (336) | Send Message
    Thanks chowder. I think this is your best yet. Selling is by far the hardest part. Your guidelines will help many of us remove the emotion and make the sale while we are still in the green.
    23 Jan 2013, 05:38 AM Reply Like
  • Bob Wells
    , contributor
    Comments (7957) | Send Message


    Very fine work here my friend. I expected no less. Guidelines for when to buy and when to sell are critical to success. They have to be personal and of course they have to be followed. Now if someone would just do a series on fine coffees and fine beer....


    Take care
    23 Jan 2013, 06:46 AM Reply Like
  • Big Thunder
    , contributor
    Comments (1291) | Send Message
    Chowder, I'm so glad to see you're doing these instablog articles! Your perspective has shaped quite a bit of my thinking on building my portfolio.


    When I first started investing in individual stocks, I didn't fully appreciate how difficult the sell side can be. The parameters and reasoning you set out here -- especially the advice simply to know before buying what will cause you to sell -- are so helpful. Thanks.
    23 Jan 2013, 06:46 AM Reply Like
  • rnsmth
    , contributor
    Comments (3599) | Send Message
    Very nice!! Thanks
    23 Jan 2013, 08:39 AM Reply Like
  • redwinelover1
    , contributor
    Comments (3) | Send Message
    A big thanks for hlelping me get my DG portfolio up and running.
    keep on blogging my friend. I owe you a few cold ones.
    23 Jan 2013, 09:45 AM Reply Like
  • Big Island Bum
    , contributor
    Comments (547) | Send Message
    Great work chowder. As I read your list of situations when you consider selling, I was mentally checking them off my list until I got to:


    9. Systemic risk, entire market falling


    the only thing that came to mind was it must be a typo. I was relieved to read that you ignore systematic risk. Nice head fake.


    Looking forward to your next blog.
    23 Jan 2013, 11:51 AM Reply Like
  • Lewislnc
    , contributor
    Comments (54) | Send Message
    Thank you Chowder this helps, we all you a beer party! The Chowder Beer Fest 2013
    23 Jan 2013, 12:21 PM Reply Like
  • Winning Formula
    , contributor
    Comments (1224) | Send Message
    Excellent Chowder! This is one of the best articles I have read. Thank you for sharing.
    23 Jan 2013, 07:59 PM Reply Like
  • raykrv6a
    , contributor
    Comments (3665) | Send Message
    Thanks Chowder. Reading your posts and others helps stay the course.


    I did take profits for overweight positions off the table today. I just don't like space shuttle moves up on no real news. Going to see what happens here and look for fair value.
    24 Jan 2013, 03:02 AM Reply Like
  • Chowder
    , contributor
    Comments (15531) | Send Message
    Author’s reply » What did you sell?
    24 Jan 2013, 03:08 AM Reply Like
  • raykrv6a
    , contributor
    Comments (3665) | Send Message
    Recent sells: BP, ETP, WNR, COP
    COP was assigned Friday and bought back.
    24 Jan 2013, 10:39 AM Reply Like
  • ccroot
    , contributor
    Comments (77) | Send Message
    Excellent article. I have been asking the sell question of several people and I like your answer. I owned TEF and sold it after the dividend was suspended. I agonized over the sell and delayed , watching the share price continue its fall before selling. I have been thinking about sell decisions and plan on sticking to them in the future.
    24 Jan 2013, 07:52 PM Reply Like
  • kolpin
    , contributor
    Comments (1384) | Send Message
    great instablog chowder...thanks for your commonsense advice.


    did you ever consider selling MCD last spring? I know that a few DG investors thought it overvalued at the time and subsequently sold, even though it increases dividends and has solid earnings year after year. It's the type of stock I would've had trouble identifying as a possible sell candidate. Same with DRI more recently...I never would've guessed that its stock price would plunge. did you feel that either were overvalued at the time and did you ever consider selling?
    26 Jan 2013, 01:46 AM Reply Like
  • Ben Dean
    , contributor
    Comments (18) | Send Message
    Kolpin, I'm taking a closer look at DRI after the recent price drop. The latest report shows that earnings missed the mark. Is this a short-term hurdle that management can overcome or is it indicative of an underlying weakness in the business? DRI currently has a 4.3% yield and a double digit (CGAR). It looks attractive at current levels and I may initiate a half position next week.


    Chowder, thanks for tackling a difficult topic and sharing your decision making process. I'm relatively new to this and it's only a matter of time before investors face the prospect of selling a position that no longer cooperates with their portfolio goals. Long MCD
    27 Jan 2013, 12:08 AM Reply Like
  • Robert Allan Schwartz
    , contributor
    Comments (21305) | Send Message
    "DRI currently has a 4.3% yield and a double digit (CAGR)."


    I agree, those are reasons to buy, especially now, when DRI is "on sale". :-)




    Long DRI
    27 Jan 2013, 05:28 PM Reply Like
  • rnsmth
    , contributor
    Comments (3599) | Send Message
    I am not there on DRI yet, but watching and studying it
    27 Jan 2013, 05:34 PM Reply Like
  • Chowder
    , contributor
    Comments (15531) | Send Message
    Author’s reply » No, I never considered selling MCD. In fact, I added to it. Once I'm in a position, I monitor the dividend and the dividend growth. I pay very little attention to share price. In fact, I didn't know MCD was down 12% last year until about a week ago when someone pointed it out to me.


    All I knew was that the income I received from MCD was up close to 14% last year.


    There is no way I'm selling an asset that grew my income by 14%, even if it is overvalued. I'm not interested in market timing.


    I can double my income every 5 years at that pace and when you compound that over time, Mama Mia!
    26 Jan 2013, 07:45 AM Reply Like
  • PendragonY
    , contributor
    Comments (11821) | Send Message
    I pretty much care about the price of a stock at only 2 times, when I buy it and when I sell it. In between those times, it doesn't matter because I use other criteria to determine if I am going to stay in the position, increase it or trim it.
    6 Feb 2013, 10:42 AM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (4480) | Send Message
    Excellent article - thank you chowder!
    Let me comment on Mergers. and Spinoffs. I mostly trust management of companies I own. If they adsorb or erect a business, I hope they make a good decision and keep stocks. I use Winnie-the-Pooh principle “Don't underestimate the value of doing nothing" with my equity positions.
    27 Jan 2013, 01:24 AM Reply Like
  • Chowder
    , contributor
    Comments (15531) | Send Message
    Author’s reply » SDS, you bring up a good point. Sometimes it is best to do nothing with regard to Mergers and Spinoffs. I think one must take it on a case by case basis.


    Holding COP certainly benefited me by holding. COP has continued higher, while paying the dividend, and the PSX shares earned a very handsome profit for me.


    I wouldn't have purchased PSX through my normal stock selection process, so I decided to take those profits and redeploy them into a company that did pass my stock selection process.


    The EXC merger with CEG has turned into a disaster. EXC may turn it around and become an excellent company to own, but it depends on where you are and where you've been with EXC.


    At the point I sold my shares in EXC, it would have had to increase 200% to return to their all-time high. How long can one expect a utility to grow 200% in total return?


    In retrospect, under the concept of trying to learn from your mistakes, my mistake was in not selling on the merger news.


    Utility companies are different from most companies in that they don't have the growth prospects that a COP or a MCD have.


    In researching how utility companies have performed so well over the long run, it is in their steady eddie performance. Skip the steady part and that performance declines exponentially over the intermediate term, which hinders the long term performance expectations.


    I saw the same thing happen with PGN when I owned them. Their steady eddie performance was stunted by the merger news, the dividend was frozen, and the capital gains started to erode the longer it took for the merger to be completed.


    If there is a better prospect available, I think it is better to sell a utility on the merger news, purchase the better prospect, even if it's not in the utility sector, and come back to the utility at a later time for consideration.


    Since my main priority is income replacement, the income my portfolio throws off must always be moving forward. I can't afford to hold companies that stall that forward progress, especially when you can come back to it after things settle down.


    There are many ways one can play mergers and spinoffs, it always comes down to what it is you are looking to achieve.


    Thanks for your comments.
    27 Jan 2013, 12:49 PM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (4480) | Send Message
    Hi Chowder
    a) I agree that "one must take it on a case by case basis." and think it applicable to other situations. Formally I'd NOT buy PSX at split day (no dividend history) but I was "granted" PSX shares and decided to keep until company will have some record to decide upon it.
    b) I didn't own or consider EXC, so I didn't follow their story.
    c) "eddie performance" Sorry it is not in my vocabluary and dictionary: What does eddie mean? Can you rephrase?
    28 Jan 2013, 01:25 AM Reply Like
  • Chowder
    , contributor
    Comments (15531) | Send Message
    Author’s reply » Steady eddie is steady as she goes. Just plugging along.
    28 Jan 2013, 07:16 AM Reply Like
  • raykrv6a
    , contributor
    Comments (3665) | Send Message
    I just reviewed EXC yesterday. Only have 100 shares and up 2.93%. Don't think I will loose money on it. Can EXC totally muck it up enough from here? Obviously EXC needs to reduce expenses, so how do they do it ASAP. Revenue growth is probably limited.
    27 Jan 2013, 12:55 PM Reply Like
  • Chowder
    , contributor
    Comments (15531) | Send Message
    Author’s reply » Ray, based on your starting point, you're in better shape than most EXC share owners. ... Ha!
    27 Jan 2013, 01:01 PM Reply Like
  • raykrv6a
    , contributor
    Comments (3665) | Send Message
    Haha. I've had my own damage control challenges. Only down 90 bucks now on BBY. Jeez I hate damage control.
    28 Jan 2013, 07:34 PM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (4480) | Send Message


    I thought a bit more - IMO it is better to re-group some your factors by dividend change rate (DCR) as


    3. Dividend eliminated (DCR= -100%).
    1. Dividend cut (-100% < DCR <0)
    2. Dividend frozen (i.e DCR=0)
    10. Declining dividend growth (DCR>0).


    R.A.S. have analyzed bumpiness in DCR and it seems that after periods when d(DCR)/dt<0 quite often periods with d(DCR)/dt>0 occurs (here t is time and d is derivative). So I'd not do anything at d(DCR)/dt<0 esp. if my YoC is high.


    IMO it was smart to freeze div. after 2008 because credit crisis (it was very hard to get credit in a bank, so I'd keep as much cash as possible in my pocket but pay stable dividend).


    Well, I'm in minority but NOT any cut should trigger sell signal (, even NOT any dividend omission is terrible ( Of course, such behavior is probably possible with wide portfolio (100+ stocks) when each position (and DCR) is a small portion of an investor wealth.


    27 Jan 2013, 12:56 PM Reply Like
  • SkipK
    , contributor
    Comments (1549) | Send Message
    terrific article. I agree with everything. very reluctantly, I've begun selling some positions due to "overvaluation". I just sold PCL, NVS, WAG, BAX and MMM. I was crying like a baby. intend to keep selling, slowly, as the market goes higher.
    7 Feb 2013, 05:55 PM Reply Like
  • PendragonY
    , contributor
    Comments (11821) | Send Message
    Are you closing those positions or just trimming them SkipK?
    7 Feb 2013, 06:32 PM Reply Like
  • SkipK
    , contributor
    Comments (1549) | Send Message
    Hi Pendragon,


    I closed them all. On larger positions, I sell half, and then half again as prices go up. all four holdings were 200 or less shares each so not worth the drama.
    8 Feb 2013, 06:34 PM Reply Like
  • IgnisFatuus
    , contributor
    Comments (2879) | Send Message
    Chowder, this is one of the 5 best articles I have read. I will print it out and place it in my research binder for easy reference.
    Thanks so much!
    14 Feb 2013, 09:11 AM Reply Like
  • bitly
    , contributor
    Comments (4) | Send Message
    Chowder. Thanks for your many interesting comments and articles.
    My question has slightly to do with selling, not that I plan to though. As the tax season approaches I found different sell-settings in my td ameritrade account such as FIFO and LIFO. Do you have any opinions on what setting a DGI should sell. I assume that if parts of a position have to be sold, may it be for living or restructuring the portfolio, it should be last-in-first-out so that the positions that have been bought first, and have a higher yield, will be kept. Right?
    5 Mar 2013, 10:37 PM Reply Like
  • PendragonY
    , contributor
    Comments (11821) | Send Message
    bitly, all the shares in a position have the same yield, no matter when they were bought. FIFO and LIFO is only applicable to taxes paid.
    5 Mar 2013, 10:57 PM Reply Like
  • AgAuMoney
    , contributor
    Comments (4635) | Send Message
    When I sell a position, I like to specify the lot(s) to sell rather than using either LIFO or FIFO.


    I usually like to sell the most expensive shares first for a lower capital gain. Unless I have more losses I can offset, then I like to sell less expensive shares so I am holding less capital gain.


    I prefer to donate to charity the shares that have the most cap gains. That way I can deduct the entire value, the charity gets the entire value, and nobody pays taxes on the gain.
    5 Mar 2013, 11:11 PM Reply Like
  • Doctor Dividend
    , contributor
    Comments (430) | Send Message


    Pendragon And AgAu are both correct. All shares have the same current yield. You are holding on to the yield on cost like it matters. It just means you made a wise investing decision compared to those initial dollars invested. Nothing more, nothing less.


    As Ag referenced, you want to sell the shares that show losses. I too have TD and you should be able to look at everything via tax lots. Sell the ones that show you have a loss to offset other shares that you may have a gain to end up as close to zero dollars in capital gains as possible. And of course, giving to charities is noble as well.


    7 Mar 2013, 02:31 PM Reply Like
  • Cheesecake7
    , contributor
    Comments (131) | Send Message
    I am in the "horns of a dilemma". I bought NAT recently at around its 200 day moving average which it hit recently. I did not know that a shelf offering would be made to purchase more tankers until after I got in. It has now dropped to around 9.60. I don't want to sell at this time. I bought it for the long term hoping that somehow it will "right itself". It still offers a dividend. Have you been in this position before? How do you handle this in your Chowder rules?
    Also, I have PSX and I understand they may be starting another business and set it up like an MLP. Is there a rule about what to do when a company starts another business that they will make money on and funnel their growth to the parent company which in turn offers a dividend. I know you said you hold COP and sold PSX for a profit. So, how would you handle these kinds of things like this? Mergers etc might also fall along these lines but specifically when a company starts a new business, is that a time to sell?
    6 Apr 2013, 03:15 PM Reply Like
  • Chowder
    , contributor
    Comments (15531) | Send Message
    Author’s reply » NAT isn't a company I would purchase. Since I wouldn't purchase it, I don't have a rule for selling it.


    I do own companies that come out with shelf offerings, so I suppose it depends on what the money is going to be used for, and if it's going to help increase their cash flow and earnings or not.


    I don't know enough about the tanker business to make that determination.


    I own MLP's which come out with share offerings from time to time, but they already have secured long term leases before they do, so I don't worry about the short term drop in share price. Same thing with companies like Realty Income (O). They only buy businesses which already have tenants.


    You'll need to dig a little with tankers and see how the structure works.


    When you have a company like PSX, which has a short history since the spin off, it;s tough to know whether their adventurous plans are in the best interest of the investor or not. It times like this where I rely on analyst reports.


    Analysts catch a lot of grief, but I believe that's for their buy, sell or hold predictions, not their analysis of a business. Their analysis is all I'm concerned about. I could care less about their calls.


    If still in doubt, I sell off part of my shares, if not all of them until I have that certainty.
    6 Apr 2013, 04:43 PM Reply Like
  • Cheesecake7
    , contributor
    Comments (131) | Send Message
    Thank you kindly. I only recently found this site and your blog. So, needless to say, I am at a loss. But, in this case there is no where to look but up!!
    6 Apr 2013, 05:32 PM Reply Like
  • rnsmth
    , contributor
    Comments (3599) | Send Message
    I have a WAG position. I bought it on a dip that took the yield a smidgen over 3% (and said what a good boy am I). Dividend growth rates for 1, 3, 5 and 10 years are between 21 and 26%.


    Due to the rising share price (up 35%), current yield is down to around 2.3%. I could sell or trim and buy a higher yield (but lower divvy growth rate), or I could hold.


    But, I remember my delight when I was able to buy a proven grower at that yield. Reckon I lean towards waiting for the next dividend increase announcement.


    What would you guys do?
    10 Apr 2013, 09:33 AM Reply Like
  • PendragonY
    , contributor
    Comments (11821) | Send Message


    I am holding on to WAG and I got it at a yield of 3.34%. But in looking at it, I have decided to trim it and take my profits and put it into a higher yielding stock that doesn't have a full position. BCE I think.
    10 Apr 2013, 01:39 PM Reply Like
  • rnsmth
    , contributor
    Comments (3599) | Send Message
    I have a full position in BCE. WAG will be a learner for me. I do not have any rules in place for what I do with a runner - unlike cases of dividend slowing tremendously, being cut or frozen. I'll fall back to yield on cost for the time being, though some folks seem to discount that. I know I could increase my income - but WAG was really bought for pay raises - so I guess if the pay raises keep coming at those good levels.......


    Anyway, that is where I am in the learning cycle
    10 Apr 2013, 01:48 PM Reply Like
  • Chowder
    , contributor
    Comments (15531) | Send Message
    Author’s reply » Ron, as posted elsewhere, I don't own WAG, but If I did, I'd hold on to it with the dividend growth as high as it is, regardless of the yield at this time. The yield may be dropping but you are being compensated with capital gains and incredible dividend growth which more than makes up for current yield, in my opinion.


    If the dividend growth were down in the mid single digits, then I'd consider taking some profits. I use a 2% yield as my guideline. I sold VFC and MKC once the yields dropped below 2% and I had some nice gains in them since I initially purchased around a 3.5% yield. If the dividend growth were as consistently high as WAG, I would still be holding those positions, but it wasn't.


    I'll hold a lower yielding company, that has decent capital gains as long as the dividend growth is in double digits, hence my holding in CL for example.
    10 Apr 2013, 04:14 PM Reply Like
  • rnsmth
    , contributor
    Comments (3599) | Send Message
    I believe that is what I will do in regard to WAG.


    Thanks for the advice
    10 Apr 2013, 07:22 PM Reply Like
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