Buying large/huge companies when they reduce their dividend...

C

Cabin111

I'll lay it out there and would like to hear your thoughts.

I'll just rattle off a ton of companies as an example; Exxon, Walmart, Chase, Visa, Procter and Gamble, A T & T, Duke Energy, ADM. It seem that when a large (mature) company reduces their dividend, they believe it is not wise to keep the higher dividend for years to come. They need the capital and must adjust for those many years. But does that always mean they will never come back and start increasing their dividend in a few years?

When you see a reduction (GE) it can mean that the company is in BIG trouble...Yeah, I get it. But companies that reduce their dividend (A T & T, Duke Energy) could do it because the government allows people to not pay their bills on time. Maybe delay many months before they have to pay. So the reduction or elimination of a dividend (for awhile) may not mean the company is not fundamentally strong. If the stock price drops (reduced dividend), might this be a signal to buy?? This could be a buy and hold opportunity...What don't I see?? How can you see trouble vs cyclical??
 
explain to me something, if a company reduces the dividend because of current situation (i.e. people not paying bills) the company is not fundamentally weak NOW but could become fundamentally weak soon if the situation persists. remember how many companies are debt ridden, you only need a hiccup and that's it. that's why default ratios are expected to soar. Obviously dividends can come and go... but before they come back... companies must be in really good shape again (current and expected future). you don't want to cut dividend twice. right now, imo, dividend is a mirage. I don't feel safe investing in corporate bonds... forget about div stocks that sit way further in the capital structure. so either you feel valuation is way cheap... but with covid and the next 1-2yrs I'm not going to make decisions based on "dividends".
 
Just picked this off the internet...

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwjj7_v749fqAhVHba0KHVDJCV0QFjAAegQIBBAB&url=https://www.kiplinger.com/slideshow/investing/t018-s001-15-dividend-cuts-and-suspensions-coronavirus/index.html&usg=AOvVaw2VqvNmxPkNdVLcOMiRIRMz

The two that look interesting are Boeing and Wells Fargo. The others are giant ?? Those two might be good examples...Not going anywhere. But, are they buy and holds or wait a few years till the COVID-19 has herd immunity? Buy while others are bailing...
 
DaveV said:
I think the complete opposite. Buy companies that have recently increased their dividends despite the pandemic. The company must be really doing well now to not consider preserving all their cash.

https://www.marketbeat.com/dividends/increases/
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But we love a bargain! We buy things on sale, not when they increase prices, we love to bottom fish. :D

That was me, a few years ago, bought GE....

@Cabin111, I think for every winner you pick you may also pick a couple of losers. I was going to buy BA in March, then I remembered GE and decided not to, so I bought ABBV instead.
 
Cabin111 said:
I'll lay it out there and would like to hear your thoughts.

I'll just rattle off a ton of companies as an example; Exxon, Walmart, Chase, Visa, Procter and Gamble, A T & T, Duke Energy, ADM. It seem that when a large (mature) company reduces their dividend, they believe it is not wise to keep the higher dividend for years to come. They need the capital and must adjust for those many years. But does that always mean they will never come back and start increasing their dividend in a few years?

When you see a reduction (GE) it can mean that the company is in BIG trouble...Yeah, I get it. But companies that reduce their dividend (A T & T, Duke Energy) could do it because the government allows people to not pay their bills on time. Maybe delay many months before they have to pay. So the reduction or elimination of a dividend (for awhile) may not mean the company is not fundamentally strong. If the stock price drops (reduced dividend), might this be a signal to buy?? This could be a buy and hold opportunity...What don't I see?? How can you see trouble vs cyclical??
More...
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Well recently I missed a SPY related dividend, because I did not buy in time !! But actualy I did better[dividend was about 2%] + did better with out it even though I was upset..As far as , IBD founder ,said its to slow grow + never buy a co for dividend/GE.
XOM. WMT, SPY,QQQ have trended so much better than GE;
if $6.66 was the bottom + most likely not;
I would not buy ge…………………………………………………………………………..
 
The question is how long to hold and when to sell?

How many stocks would you hold? When would you rebalance your portfolio?

Would it beat a strategy like the Dow Dogs where you choose companies based on dividend returns.
 
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