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My Total Income Strategy
06/28/2013 5:00 am EST
MoneyShow's Jim Jubak explains here why he waited to sell the French oil stock, even though the storm clouds were approaching, and how it turned out.
On May 31, http://jubakpicks.com/2013/05/31/sell-stock-pick-total-out-of-my-dividend-portfolio-but-not-quite-yet/I wrote that I would sell shares of Total (TOT) out of my Dividend Income portfolio, but not quite yet. (The sell decision was based on the downward trend in oil prices, and the fact that Total was in a capital-spending phase that wouldn't help cash flow until 2014.)
I decided to wait to sell until the company paid its next dividend on June 24. (The stock went ex-dividend on June 24, and the dividend was scheduled to be paid on June 27 to shareholders of record.)
I got a number of comments suggesting that I should sell immediately, since the market seemed to be headed for a drop (absolutely right, as it turned out), as well as others noting that stock prices drop by the amount of the dividend payout after the payout, so why hang around?
However, because this is my Dividend Income portfolio, I chose to hold on to collect my cash, since generating income is a big part of the goal of this portfolio
So how did my decision to wait to sell work?
The shares closed at $49.85 on May 31. After the bounce of the last few days, they closed on June 27 at $48.48. The dividend payout today is 59 euro cents, or 77 cents at today's exchange rate. By waiting to sell, I lost 60 cents a share.
The gain on these shares was 3.24% from my purchase price on May 28, 2010. At the time of purchase, the stock paid a yield of 6.5%.
Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. For a full list of the stocks in the fund as of the end of March, see the fund's portfolio here.
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