Setting up Sell Guidelines for my Dividend Account

I have been wrestling with the idea of whether I am actually a “dividend growth investor” versus a value investor who prefers his first stock screen to be whether a particular equity has been paying a dividend for 25+ years?  While I think need to discuss it further with myself I think it boils down to the fact that I am a value investor that prefers to receive a piece of the company while Mr. Market catches up to some great metrics.

I don’t think this new found desire to sell something changes that I Love Dividend Paying stockslike really love stocks who have increased their dividends every year through at least multiple recessions (and maybe a depression).  However, my stock screens (and corresponding gut) feels like I am a value investor:

  • P/E Below 20
  • P/E Below industry peers
  • Operating Margin above industry peers
  • P/B below 4 (or industry peers)
  • Payout ratio below 60%

Currently, it feels like I am stuck in the middle between two different theories of investing and both make sense to me! Maybe these feelings are a by-product of sitting on what may be a top of a ridiculously hot market.  Notwithstanding, I think it may be time to remove some of those unrealized gains off the table.  As will be evident in my first sale variable the two shall never meet and my purchase screen (while up for improvements) won’t be changing.  .

When I am Going to Sell My Long Term Dividend Investments

 

  • There is an unrealized gain
  • I have owned the stock at least 12 months
  • P/E above 20
  • P/E is significantly higher than 5 year trailing P/E (in terms of percentage not whole number)
  • Graham Number is significantly lower than current price

Once I determine whether the equity meets all these tests I will turn to the news and chart.  Again, I am not married to any investment idea, and as such, I would love to hear what others think!

 

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