Lance ---
Your question is legitimate and real --- and I suffer from this in a couple investments (oils) as well....
There will never be a "right" answer to the dilemma. Here's the metric (mental masturbation) I use.... "how long will it take me in income - to cover the loss" and does it have any chance of closing that gap during that particular time span?
So let's say I have a 50K paper loss (remember - it's never a loss until you make it a loss!).... but the shares pay me 22K dividend.... so figure 2+ years of income to get even. Will the shares have ANY chance of recovery --- or is the company so broken it hasn't a chance.
Who knows? It's just a risk you take.... and what you REALLY HOPE -- is that they don't cut the dividend --- and THERE IS WHERE YOU HAVE TO LOOK AT THE PARTICULARS OF THEIR BUSINESS. Are they hemorrhaging cash - top line and bottom line suck? Or are they doing okay in a bad industry?
There are VALUE TRAPS -- where the relative dividend looks very appealing -- but the reason the dividend % is "high" is because the stock has sunk.... What we need to understand is WHY the stock is in the tank.
So ---- many times I'll cut my shares by 25% at a time (my is all taxable - so I offset gains (sales) with losses...) and that gives me time to wait and see what's happening. In the meantime I'm still collecting the dividend --- but I'm also cutting my "odds" of getting killed even more (no different than taking a huge gain!).
This is where I say ----- it's easy when everything is going up, up, up..... This is when it pays to look a lot deeper in to the holding.... What's the dividend payout as a percentage (ratio) to earnings.... What is the company saying about it's future going forward (they're obligated to say if they suck!).... is it a secular decline (oil) or is it bad operations (GE)....
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