Thursday, October 18, 2012

Dividend Mantra's Recent Sell - Total (TOT)

I don't sell stocks often. Any regular readers of this blog know that. I don't try to time the market and I don't trade in and out of positions. Ever since I firmly adopted a dividend growth strategy for the long-term I have planned on holding every position forever unless dividends are cut or held static, or if fundamentals drastically change.

However, there was a small period of about four months when I was actively investing in the stock market before I fully committed to the dividend growth strategy. This was in early 2010. The good thing is that it didn't take me very long to realize that DG investing is a solid long-term strategy and I didn't make too many mistakes before using this strategy as the foundation for my long-term wealth building plan.

One of my earlier non-DG strategy purchases was buying 45 shares of Total S.A. (TOT) on 6/9/10 for $46.25 per share. This is not actually a dividend growth stock, and that's my primary reason for selling it. At the time I didn't fully know what I was doing. I did know that the Deepwater Horizon disaster in the Gulf was upon us at that time and oil stocks were cheap. So, I purchased both XOM and TOT at that time. I have since sold my XOM holdings. 

TOT has held its dividend static since 2008, paying out an annual dividend of 2.28 Euros per share. This really goes against the dividend growth strategy. In hindsight, I should have sold this stock a while ago. However, it's been cheap for a long time and hasn't really appreciated much, except for some spikes here and there, since I purchased it. It currently sports a 7.95 P/E ratio, one of the lowest in the industry. But, I have to stick to my guns and I finally unloaded what is a stock that doesn't truly belong in my portfolio.

I sold all 45 shares of TOT on 10/9/12 for $49.40 per share. You can make an argument that I sold an undervalued stock in a heated stock market, and that's probably true. Certainly, I wasn't short on cash or in need of capital. The stock just doesn't fit my strategy and it's really as simple as that. 

I received a total of $275.46 in dividends from my investment in Total S.A. (TOT) during my ownership period. I'll also receive a dividend from TOT on 10/18/12, but I'm not sure of the exact amount based on exchange rates. It should be approximately $32.00, before factoring in foreign taxes withheld. So, factoring in everything my total return on my TOT investment was 20.8%. Not bad considering I wasn't fully involved in my current strategy. I'll take the money and run, and I'm reinvesting that capital into companies I have a firmer commitment and conviction on. My return factors in all transaction costs and ADR fees, but does not factor in taxes.

This purchase will reduce my annual dividend total by $131.85 based on the current exchange rates. 

I now have 28 positions in my portfolio after this transaction.

I'll update my Freedom Fund in early November to reflect the sale.

I've already used the capital from this sale to make a purchase into a dividend growth stock. I'll be talking about that purchase in the near future! Stay tuned.

Full disclosure: None.
Thanks for reading.

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