UnThreaded | Threaded | Whole Thread (21) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: culcha Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 41634  
Subject: Re: A learning curve Date: 9/11/2012 7:47 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
Sometimes good companies that pay steady, rising, and predictable dividends see their stock prices increase substantially. The stock price goes up, the dividend yield goes down. Of course, this doesn't affect your income from those dividends, but it often presents opportunities elsewhere for you to increase your income from dividends. In other words: sell the winner with its now diminished dividend yield if you can find a relative bargain that is of modest value and has a meaningfully higher dividend yield than the stock you are selling.

As a real world example, imagine you bought Wal-Mart for its dividend yield at $45 a share and over a couple of years it rose to $73 a share, which it has. If you sell your Wal-Mart shares you can take your profits and now buy shares in a company whose dividend is yielding considerably more than Wal-Mart's is at the current stock price.


Wal-Mart is an interesting example, I actually bought some when I was less focused on dividends. But look at their average dividend yield from 2000 to 2011 (according to Valueline):
4%, .5%, .5%, .6%, .9%, 1.2%, 1.4%, 1.8%, 1.7%, 2.1%, 2.3%, 2.7%.
Recently, with the price surge, this yield has dropped a a bit -- down to around 2.15% During most of these years though the stock was dead money. The dividend payment, however, is more than 6 times what it used to be (and it's still rising). So now, in a way I'm more interested than before -- when I actually bought it!

I have indeed thought about selling for just the reason you've mentioned. I think I can find more productive places to put the money. (SYY? CL?? PG??) So I might make a move. I'm really thinking about this one.

OTOH, now that the sleeping giant has awakened, then, granted that everything else has been increasing, (sales, cash flow, book value, dividends) -- maybe it has some more surging to do. Certainly if it surges above the middle line on Mike Klein's chart, I'd be ready to head for greener pastures.

culcha
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (21) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

BMW METHOD EVENTS

The 2009 BMW Method Conference has been cancelled, due to minimum attendance numbers not being met. We hope to continue the annual BMW Method Conference tradition next fall.

Learn about the first four conferences on the BMW Method Website.

The BMW Method FAQ

BMW Method Website
Annual Conference Videos and Other Resources & Services
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement