I Sold a Portion of a Position in my Dividend Growth Portfolio

by Evan

I have gone back and forth in the past about whether I should ever consider selling any piece of my dividend investment portfolio.  The 30 or so comments are more valuable than the actual post! They include those who have been in the Dividend Growth Investment world before it had a name.

The post was based on two divergent opinions by DGI and DividendMonk.  DGI based his decision on the underlying business (to an extent) while DividendMonk was much more into checking out metrics.  I always thought I would fall in the middle.  But, I’ll be the first to admit that I didn’t adhere to DGI‘s opinion which stated that,

My underlying idea is that if nothing has changed, then why bother selling?

Instead, I opted to do nothing and continue with the ostrich technique only selling when there was a dividend cut (only happened once in the few years this account has existed).

So what changed?

Why I Sold a Portion of my MCY Position

As I watched some of holdings become a larger portion of the portfolio I started to really think about Dividend Monk‘s point,

I’m willing to sell an investment if it’s overvalued, which fundamentally means that the sum of dividend yield and EPS/DPS growth is no longer attractive. Selling means taxes, fees, time, etc, so there has to be a significant gain to be made by selling to make it worthwhile rather than little portfolio tweaks here and there. So in practice, I follow a path of very low portfolio turnover.

So I took at look at my 3 or 4 largest holdings (in terms of percentage of the portfolio not in terms of absolute dollars since the account just isn’t that big).  Specifically, I was trying to determine why aren’t they are on my current watchlist?  I came across MCY:


So while I don’t think the underlying business changed the P/E skyrocketed to 30+, the Operating Margin is at 2.9% compared to its industry’s 13.9%!  i would never have bought a stock like this so why continue to hold it?

I had three lots of 8 to 10 shares that fell under long term capital gains, the rest were short.  As such I sold 24 of my 51.599 shares leading to a capture of 20%+ gain.  It brought the holding down to a low single digit.  It also cleared up some capital to purchase my latest undervalued dividend growth stock the day after!

Why I Didn’t Sell my Entire Position?

As DGI pointed out I don’t believe the underlying business changed all that much as such I am happy to own a little piece and collect dividends for decades to come.  I may have been more likely to sell the entire position had this portfolio been in a non-taxable account.

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1 comment

Nathan November 22, 2013 - 10:18 pm

so, it’s quite possible that now you’re dealing with “house money”, since you sold part of a position that was over-valued. Perfect…there isn’t a magic formula; just vigilance and playing the wind-shifts. I’m still learning how to do it.


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