Year End Stock Sales

I decided to clear out some stocks at the end of this year; all are (very) minor positions acquired through corporate takeovers. Read on to see which stocks didn’t make the grade.

South32 (SOUHY)

South32 (SOUHY) is a mining company formed by a spinoff from BHP Billiton (BBL). I received 3.85 ADR shares because I owned BBL shares when the company was formed.

Since the position was so small ($13), I didn’t immediately sell, but I decided to sell this month due to the general decline in the commodities market. I’m still keeping BBL for the long-term. The brokerage commission is nearly half the value of the share.

Halyard Health

Halyard Health (HYH) is another company I owned due to a spinoff, in this case the parent company was Kimberly Clark (KMB). I owned a total of 0.58 shares worth $19!

Like South32, Halyard health is too new to pay any dividends and while I could wait for some future time when it might start paying; I’d rather sell and move on. I’m still holding onto KMB as part of my portfolio.

Albermarle (ALB)

I acquired 3 Albermarle (ALB) shares when they acquired Rockwood Holdings (ROC), along with a cash component for each ROC share. The company is also a dividend contender with 21 years of dividend growth with around 2% yield at current prices.

I want to reduce the weighting of the basic materials sector going forward and since I only held a small amount of the stock, I decided to sell and received $136 in return. This leaves BBL, DOW, APD and BMS in the Basic Materials sector in my portfolio.

Tax implications

There shouldn’t be much relief on my taxes from these sales; the amounts involved aren’t significant enough. But typically loses when you sell investments can be offset again any capital gains if you’ve not bought the same (or similar) investment 30 days either side of the sale.

Lessons learned

One of the problems with long-term holdings of individual stocks is that companies can be bought, merged or split up. This happened to three companies out of the 44 stocks that I owned in the space of about three years. Depending on the circumstances the dividend may even be reduced or cut.

Next year it’s a similar story. DOW, EMR and PFE have all announced significant changes this year which should be realized next year; DOW will be merging with DuPont and plans to split into three companies eventually; EMR will be spinning off its Network Power division and PFE is merging with Allergan.

Of those three, the DOW merger is possibly more concerning from a dividend standpoint; DOW only has a 6-year history and DuPoint only 3; so is there a strong incentive to maintain higher dividends going forward?

The PFE merger gives the company access to offshore cash reserves which could be used to return shareholder value in the form of higher dividends. And EMR prides itself on its dividend increase history so I’m also more confident that the dividend will increase, if only a little, as a result of spinning off a less profitable part of the company.

So we’ll see what happens next year, but I remain content to continue relying more on the Vanguard High Dividend Yield Index (VHDYX) fund over individual stocks for my dividend income.

 

Quote of the Day

We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.

0 thoughts on “Year End Stock Sales”

    1. Hi DGJ,

      Yes I didn’t want to sell at first either because of that but I figured I had three options:

      1) Do nothing, i.e. keep the stock on the assumption that it’ll experience huge capital gain because its prospects are so great. However without adding new shares, brokerage fees will almost always be a high percentage of your holding.

      2) Buy more of the stock (assuming you believe it’s a good investment).

      3) Sell the stock despite the high proportion of brokerage fees.

      I went with option 3) as I don’t think 1) is really an option and I’m not confident in 2) in the shorter term. Even if the sale had been commission-free, the additional $7 wouldn’t really make much difference as far as going towards a new purchase.

      Congrats on meeting your dividend target for the year!

      Best wishes,
      -DL

  1. Thanks for sharing your recent sells. I too have HYH and will hold on to those shares for now. Kind of sucks they don’t pay any dividends but the amount I own is so small I’ll just hold on. Always nice to get a spin off that also pays a dividend. Kind of a downer when you get one that doesn’t.

    1. Hi DH,
      Originally I felt the same as you and I wasn’t going to sell it but over time I’ve convinced myself to sell it since it’s not a dividend paying stock. I like the healthcare sector for dividends as a whole too.

      I’ll probably be wanting to buy it in 5 years time when it’s paying an increasing dividend and much more expensive than now. But since my holding amount was so small there’s really not much chance any growth could really influence either income or market value.

      Wishing you a healthy and wealthy 2016!
      -DL

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