My son has a portfolio of 20 stocks. Among his stocks he had both Reitmans (Canada) Ltd. (TSX-RET.A, OTC-RTMAF) and TransAlta Corp (TSX-TA, NYSE-TAC). Reitmans cut their dividend around 75% in 2014 and TransAlta also cut their dividends around 86% between 2014 and 2016.
My son is in the process of building a portfolio of dividend growth stocks. What the above did to his portfolio was to make it pause in terms of dividend growth a couple of times in 2014 and 2016. Why I point this out is that making a mistake or having a stock cut its dividends is not a disaster.
The thing is that if you invest in stocks, no matter how well you do your homework, some are at least going to go through hard times. Some will cut their dividends. Then you have to decide if the stock is worthwhile holding on to.
For example, TransCanada Corp (TSX-TRP, NYSE-TRP) which is currently thought of as a great stock cut their dividends in 1999 by almost 38%. Bottom of the dividend were reached in 2000 and dividends started to increase again in 2001. It took almost 7 years for the dividends to get back to their old level.
On my other blog I wrote yesterday about Johnson and Johnson (NYSE-JNJ)... learn more. Tomorrow, I will write about IBI Group Inc. (TSX-IBG, OTC-IBIBF)... learn more on Wednesday, November 23, 2016 around 5 pm.
Also, on my book blog I have put a review of the book The Memory Illusion by Dr. Julia Shaw learn more...
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would you hold on to TA and wait for a recovery or move on to something more stable?
ReplyDeleteI just wanted to point out with this article that just because a stock get into problems on even a small portfolio, it does not have to be a disaster. These things happen. When they happen you have to decide if you want to keep the stock or sell and move on.
DeleteI also have TA in my portfolio and I have kept it. I believe recovery will take a while. It is interesting that my trading account has done better than my RRSP account. With my trading account I have held on to stocks through thick and thin, mainly because I did not want to pay tax on a sale whereas in my RRSP I would sell stuff more readily. There are theories about accounts with few trades over the long term do better than ones with lots of trades.