It is easy to be captivated with a top performer. Everyone loves a winner. During the 80's and 90's when Jack Welch was Chairman and CEO of General Electric (GE) the company ran like a well-oiled machine. It routinely beat the street's expectations and the ever-increasing stock price reflected its performance. I once said that if I could only buy one stock for the rest of my life, it would be GE.
Then there's the first-love arrow; that first stock that you bought. For some reason there is often an emotional attachment for the first of anything. Some business owners frame the first dollar they earn, while some investors have a hard time letting go of the first stock they purchased, especially if the stock performed well for an extended period of time. For me it wasn't the first stock I purchased (I can't even remember what it was), but instead it was the first stock I purchased for its dividend that held a special place. That stock was a REIT, First Industrial Realty Trust Inc. (FR).
So what happened? Both GE and FR cut their dividends and I immediately sold them. To achieve our long-term investing goals we must remove emotion from the equation. It is a recipe for disaster when we make investing decisions based on a past relationship with a stock that is contrary to the current fact pattern.
That is not to say I am not fond of certain stocks. For example, I currently like or admire these dividend stocks:
Texas Instruments Inc. (TXN) is one of the world's largest manufacturers of semiconductors, this company also produces scientific calculator products and DLP products for TVs and video projectors. The company has paid a cash dividend to shareholders every year since 1962 and has increased its dividend payments for 16 consecutive years. Yield: 2.8%
Genuine Parts Co. (GPC) Genuine Parts Co. is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products. The company has paid a cash dividend to shareholders every year since 1948 and has increased its dividend payments for 63 consecutive years. Yield: 3.2%
3M Co. (MMM) provides enhanced product functionality in electronics, health care, industrial, consumer, office, telecommunications, safety & security and other markets via coatings, sealants, adhesives and other chemical additives. The company has paid a cash dividend to shareholders every year since 1916 and has increased its dividend payments for 61 consecutive years. Yield: 3.5%
Exxon Mobil Corp. (XOM), formed through the merger of Exxon and Mobil in late 1999, is the world's largest publicly owned integrated oil company. The company has paid a cash dividend to shareholders every year since 1882 and has increased its dividend payments for 37 consecutive years. Yields: 5.2%
However, if any of the above stocks ever cut their dividends or their business fundamentals changed, I would immediately sell them. It is important to remind ourselves that we should love people and use stocks, not the other way around. A strong love for people will help you through troubled times, while a strong love for things, including dividend stocks, could invite troubled times.
Full Disclosure: Long TXN, GPC, MMM, XOM,
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