Natural Selection In Dividend Portfolios

Investors should purchase stocks with the intention to hold on to them forever. They should spend time analyzing the stocks to purchase, fine tuning their strategies and diversifying their portfolios properly. However they should realize that things and conditions change. Sometimes the best decision investors could do is sell their stocks when changes occur. As a result, even a portfolio of carefully selected wide moat companies could have big turnover over a time period of several decades. Nevertheless, it is important to try and select only the best dividend stocks after a rigorous screening on such lists as the dividend achievers or the dividend champions. Investors do have to remain nimble and on top of things, as any changes could lead to portfolio turnover over time. The changes that could occur include buyouts, dividend cuts, spin offs and changes in the business environment. I highlighted several conditions which would make me to sell my dividend stocks in this article. Many prominent dividend stocks could be attractive buyout targets for larger rivals or by companies which are looking to diversify into a new line of business. Shareholders usually receive a big premium which ensures that almost everyone makes a profit in the process. This doesn't take into consideration the fact that a growing company might deliver much higher total returns if it stayed independent. Recent examples of buyout include the acquisition of Dividend Aristocrats Anheuser-Busch in 2008 by Inbev (BUD). At the time the company which controlled almost half of the US beer market had a dividend record of 32 years of consecutive dividend increases. Other examples of successful dividend growth stocks bought our include the Quaker Oats acquisitions by PepsiCo (PEP) in 2001 as well as Berkshire Hathaway's (BRK-B) acquisition of GEICO in 1996. Investors who received stock in the acquirer had to evaluate whether they should keep it or sell it. Investors who received cash had to find other attractively valued replacements for their dividend portfolio. The opposite of buyouts is spin offs, which is the creation of an independent company through the sale or distribution of new shares of an existing business/division of a parent company.12... Read more