My position in Phillips 66 was liquidated at $40.10. These were shares received from the ConocoPhillips spinoff a few months ago. I'd note that I will still receive the first ever PSX dividend since it went ex last month. Overall I managed about a 26% total return gain based on the adjusted cost basis from the spinoff. This includes the upcoming dividend payment (excludes past COP payments). This sale will reduce my annual income by $14.40 which isn't a big deal since Phillips 66 was by far my smallest holding and income producer.
Like I was saying in the previous post, PSX was cut loose because it's yield fell below 2% and management has stated they are targeting a low dividend growth rate of only 5%. When one of my stocks falls to a low current yield, I will always consider a sale. If I have reason to believe the future DGR will be high it could be a reason to continue holding. It will vary stock to stock and is subject to market conditions. In general I do not like yields less than 2% since it slows down the compounding process.
I do not have a replacement company in mind at the moment, but the proceeds will eventually be invested at a higher yield. I still think PSX has a bright future; it will be relegated to my watch list for now.
Not a bad move IMO. The only question is, where to reinvest the money. May make sense for a pullback in the market.
ReplyDeleteI don't mind waiting a bit to redeploy the cash. I approach investing as a marathon, not a sprint. Although it would be nice to pull off a Usain Bolt and retire tomorrow :)
DeleteI think you provided good reasons for selling the stock. It should be easy to find a replacement stock that yields more than 2%, but to find one that is trading at an attractive valuation is likely a more difficult task at the moment.
ReplyDeleteIndeed. I'm still not convinced the stock market should be this high and seemingly make gains daily. If I was forced to buy something right now, I'd go with GIS or OMI.
DeleteI've thought about this scenario before. If I was to receive shares in a non- or low-dividend-paying stock due to a merger, spinoff, or other corporate action, I would be tempted to sell covered calls on it at a price at which I would be comfortable selling it. In that way I'm creating my own monthly dividends up until the point it is liquidated or the yield increases.
ReplyDeleteStill, there is nothing wrong with liquidating immediately and using the proceeds for a higher-yielding investment.
PSX has gone up a bit since I sold it which is ok. I still stand behind my reasons plus it's not a company I would buy more of. Yes covered calls is a great way to sell shares, but you'd have to own 100 shares to do it! In the future I will consider implementing that strategy. Thanks for your input!
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