Lock in gains and move the capital to higher yielding stocks.
In this post I write about the 2011 Dividend Machine Portfolio.
The 2011 portfolio has done well by all my measures.
Several stocks have appreciated significantly and their yields are less than I require for income that comes from stocks. These are obviously good stocks but I would not buy them today if I used only my Dividend Machine criteria. Now it is time to determine what to do with the winners…Buy, Sell, Hold, Hedge with a call?
Buy, Sell, Hold or Hedge with a call.
Let’s cut to the chase. Listed below and in the table below are the stocks from the 2011 Dividend Machine Portfolio that I would buy, sell or hold. The stocks I analyzed have a gain of 60% and a yield of less than 3%. I have not included any “spin off” stocks such as ABBV or PSX.
Sell ATO due to an anemic dividend growth rate of 3.28%. With a yield of 2.82% you need to supplement your income by about 1% per year by selling covered calls. ATO calls are available but not plentiful. These two income facts justify a sell on ATO.
Sell CAG anemic yield, anemic dividend growth and no calls to make up the difference. Take your gains.
Hold ITW, dividend growth is good at 5.13%. Yield is weak at 2.1% but calls are available to boost that yield. ITW is a hold.
Hold MSA, good dividend growth at 5.6% but not stellar. No calls to make up for 2.48% dividend yield. Hold but watch the dividend growth.
Hold NOC, No calls to make up for a really weak dividend of 1.85% yet you cannot ignore a dividend growth of 14.04%. NOC is a hold
Hold RPM no calls to make up for a yield of 2.22% the marginal dividend increases over five years of 5.36% make RPM a tepid hold. Follow the dividend increases.
Hold TRV this stock is a solid hold. Calls are available to augment the 2.30% yield but the dividend appreciation rate of 13.88% make TRV as solid hold. You would have to invest in another stock that grows your income by nearly 14% per year to make it worthwhile to take gains.
Sell UTMD. This is an overpriced stock with a low yield, a low dividend growth rate, and no calls. Take the money.
Hold WSO is a hold it has no calls and yield is 2.18% but in a tax move, WSO pre-paid five years of dividends so the yield should continue to improve as the 6.9% dividend growth rate suggests.
My Buy Sell and Hold stocks are in the table below.