What do you hope to gain by your investment? Are you looking for capital gain, income or a combination of both? I often buy companies for their increasing dividend payments. The capital gain is nice, but if I never sell the stock, then I do not get this.
When a company I buy for dividends lower their dividends, then I have a decision to make. Should I sell? Should I buy more? Or, should I hold on to what I have? I bought TransCanada Corp (TSX-TRP) in 2000 when they lowered their dividend. I had been looking at the company for some time, but I had not bought it. However, they got slammed so hard, and I thought unduly, for reducing their dividend, I felt it was a good time to buy. I also felt that management was making the right decision for long term viability of the company.
I have Manulife stock (TSX-MFC) when they lowered their dividend. I, of course, reviewed the stock at that point. What I decided to do was just to hold what I had. I did not think that it presented a good buying opportunity as I did not think that the stock price unduly suffered from this move. The stock price was lowered and the company was punished for the move, but it did not seem to have been punished much.
The one cardinal rule of investing is to never make an investment that will not let you sleep at night. Another rule is to not invest money into stocks if you need that money within the next 5 years. The 5 year rule also applies to buying bonds. The good thing about bonds is that they have a maturity date. If the bond you buy matures when you need your money, then it is appropriate to buy a bond.
On my Investment Talk blog I am today writing about CCL Industries Inc. (TSX-CCL.B, OTC-CCDBF). Today, I am discussing if the stock is a good price and what analysts are saying. To read about this stock go here....
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.