blackbyrd2 (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
blackbyrd2) wrote2009-09-16 08:39 pm
blackbyrd2) wrote2009-09-16 08:39 pm
(no subject)
So, in an attempt to recreate what was lost yesterday;
I bought shares of BBT back in March of this year, for around $16 or $17 a share.
This is a solid bank, large, and with sound lending principles. It minimized the number of derivatives it dealt in, and when the stress test was demanded by the Fed, this bank is one of the 9 or ten that didn't have to raise more capital under federal direction. They were paying around 8 or 9% at the time in dividends, and had been increasing them annually for decades.
So, about a month after I bought them, and shortly after my first dividend payment, they reduced their dividend drastically, and issued a bunch of common stock, diluting the equity. They did this because they wanted to pay back the TARP money they'd taken, because of all the restrictions on the loan. There was a news article which tipped me to it the morning they decided to do this, and at the time, the stock was selling for around 27 and change. So, this was a no-brainer for me. I sold off (probably around 25+ by the time I got to it, although it hasn't dropped much below 21 since then) took my profit and invested in another company.
So, as you can see, Rule 1 is critical.
Now, I mentioned in the last post that the first part of that performance equation shouldn't matter, and to a certain degree that's true. If your stock bounces up and down like a yoyo, it doesn't really matter, because until you sell, those losses or gains are not realized. What matters, with the way I do this, is the yield, which is a factor of how much you paid and what the dividend is.
However, if you buy quality stock, in companies which have been not only not reducing, but growing their dividends annually for a number of years, there is a certain amount of built-in security involved. Or at least it helps reduce the emotional impact from market fluctuations.
For instance, one of the stocks I picked up is CenturyTel (CTL),(now CenturyLink since they bought Embarq a few months ago,) which is one of the larger telecoms in the US. I bought the shares at around 28, and it's currently up around 32, which, considering it moves slowly when it does move, is a substantial buffer zone in case of crashes. I collect 9.3% on my invested money, and the stock keeps climbing, slowly, but surely. Unless they do an Enron, I'll have plenty of time to scoot out from underneath if they ever suffer a serious setback, or opt to reduce their dividend.
So, while the only time the quality of your investment matters is when you sell, it's very nice to select quality products so that a sudden crash doesn't cause you tons of stress, and so that you have that flexibility to get out without a major loss of funds when the quality of the dividend starts failing.
So lets call that Rule 2: Invest in quality, solid companies with a history of increasing dividends.
I had hoped for access to my bank account while posting this so I could be more precise with prices, but internet connectivity at the hotel is currently being a pain. And yes, failure of Teh Internets is not a pleasant thing when Rule 1 is beating at the door of your brain. Fortunately, there are always alternatives, and nighttime access from the hotel is not critical, as there's little action going on after the market closes.
This is a rather unsatisfying and pale rendition of the original post, but that's how it goes.
I bought shares of BBT back in March of this year, for around $16 or $17 a share.
This is a solid bank, large, and with sound lending principles. It minimized the number of derivatives it dealt in, and when the stress test was demanded by the Fed, this bank is one of the 9 or ten that didn't have to raise more capital under federal direction. They were paying around 8 or 9% at the time in dividends, and had been increasing them annually for decades.
So, about a month after I bought them, and shortly after my first dividend payment, they reduced their dividend drastically, and issued a bunch of common stock, diluting the equity. They did this because they wanted to pay back the TARP money they'd taken, because of all the restrictions on the loan. There was a news article which tipped me to it the morning they decided to do this, and at the time, the stock was selling for around 27 and change. So, this was a no-brainer for me. I sold off (probably around 25+ by the time I got to it, although it hasn't dropped much below 21 since then) took my profit and invested in another company.
So, as you can see, Rule 1 is critical.
Now, I mentioned in the last post that the first part of that performance equation shouldn't matter, and to a certain degree that's true. If your stock bounces up and down like a yoyo, it doesn't really matter, because until you sell, those losses or gains are not realized. What matters, with the way I do this, is the yield, which is a factor of how much you paid and what the dividend is.
However, if you buy quality stock, in companies which have been not only not reducing, but growing their dividends annually for a number of years, there is a certain amount of built-in security involved. Or at least it helps reduce the emotional impact from market fluctuations.
For instance, one of the stocks I picked up is CenturyTel (CTL),(now CenturyLink since they bought Embarq a few months ago,) which is one of the larger telecoms in the US. I bought the shares at around 28, and it's currently up around 32, which, considering it moves slowly when it does move, is a substantial buffer zone in case of crashes. I collect 9.3% on my invested money, and the stock keeps climbing, slowly, but surely. Unless they do an Enron, I'll have plenty of time to scoot out from underneath if they ever suffer a serious setback, or opt to reduce their dividend.
So, while the only time the quality of your investment matters is when you sell, it's very nice to select quality products so that a sudden crash doesn't cause you tons of stress, and so that you have that flexibility to get out without a major loss of funds when the quality of the dividend starts failing.
So lets call that Rule 2: Invest in quality, solid companies with a history of increasing dividends.
I had hoped for access to my bank account while posting this so I could be more precise with prices, but internet connectivity at the hotel is currently being a pain. And yes, failure of Teh Internets is not a pleasant thing when Rule 1 is beating at the door of your brain. Fortunately, there are always alternatives, and nighttime access from the hotel is not critical, as there's little action going on after the market closes.
This is a rather unsatisfying and pale rendition of the original post, but that's how it goes.