Quote:
Originally Posted by Vortech404
Hey Greg,
Let's say COP or CVX or whoever cuts thier
Dividend. Do you sell?
PS nice raise from MO.
John
|
Great question John!
You never "want" to be in a stock that cuts it's dividend.... things have gone from bad to worse in that case - as companies never want to cut their dividend. They only do so to stop the hemorrhaging. Having said that.... Chevron (CVX) would most likely cut their dividend or their stock buy back or both well before Conoco Philips (COP). Chevron would / does have a classic double edge sword going in that they're a driller/explorer (UPSTREAM) and a refiner and retailer (DOWNSTREAM). The margins on refining/retailing can't hold up to the losses of the crude decline (cash machine). They also have huge DEBT service. Their return on average assets has taken a substantial decline... and their margin is only 1.65% as of last "report".... compare that to COP who's balance sheet is actually "worse" -- but they're primarily a crude production / oil field operator. The management there has already come out and made public statements about protecting the dividend. That's a good thing!
Selling is about taking GAINS -- or protecting gains.... once you have LOSSES -- then you either wait it out - or buy more to average down. This is why we invoke the 5% rule. No single holding - even if it went to zero - should hurt you too badly. Either way -- I wouldn't worry about HOLDING CVX or COP. That's the other golden rule -- buy GREAT companies - so you're not worried about them for the long haul.