Monday, February 8, 2016

COP very painful dividend cut

February 8, 2016

Conoco Phillips, symbol COP leads the way on the negative side.   Huge dividend cut.  COP will pay $.25 a share on March 1, 2016.  COP will be ex-dividend on February 11, 2016.    COP's previous dividend was $.73 per share.

For stocks like this I had hoped to build shares through dividend reinvestment.   A dividend cut is needed to preserve the safety of the principle invested in COP.   I will continue to hold as I think it is too late to sell.  I will continue to reinvest the meager dividend.  

Some attractive calls are available to boost your income and make up for the dividend cut.  In this case you need to select a strike price much higher than your basis so make sure you do not have your COP called away and suffer a capital loss while you wait for the market to turn around.  Keep your expiration dates a short as possible.

The table below illustrates a call available today that is risky when you look at the potential capital loss but encouraging for income.

Challenging times for income investors.  Do not panic.  Work your portfolio with a bias toward income.

M* TheMoneyMadam