Why Price Decline Often Equals Dividends Cancelled

The question of retaining profits on quality dividend companies through the selling of a position seems to counter the whole point of dividend investing. After all, aren’t you supposed to allow the dividends to compound? In a small way, we described one approach and our rationale for selling quality companies after small gains in this article: Our Primary Concern: Retaining Profits.However, there is another way to view the rationale behind selling a dividend stock after a “fair profit.” In the early years of his Dow Theory Letters, Richard Russell would often cite a Robert Rhea quote about the impact of a stock decline. Rhea would say: Buying in bear markets is merely gambling and not very good gambling at that. Why not have cash instead of investments in bear markets? Why insist that one cannot afford to forego investment income when one day’s price shrinkage may cancel several years’... Read more