It’s very rare for me to actually sell one of my holdings, especially one that was not a speculative play and has a history of increasing dividends. However, I made three trades that I believe will benefit my portfolio.
So Tuesday NSC raised the dividend only 4% and reported earnings below expectations. A 4% raise isn’t bad but it’s a lot lower than I expect for a company with a dividend yield of only 2.7%. NSC has also increased dividends twice yearly since 2010 expect for this year. So considering they didn’t raise the dividend in January and it was a smaller increase for the second half of the year, I decided to trim my position. This also gets my position back to a normal weight and I can add another stock that has higher dividend growth potential with a lower current weight.
My last purchase of NSC was last November when I bought 37 shares @ $60.29/share. I ended up selling $2k worth (28 shares) Wednesday @ $73/share. I profited about $364 not counting dividends collected. I actually was scrambling Tuesday to get an order in before the closing bell but was too late. I should have placed a market order for Wednesday morning but I decided to think about it a little more. After thinking about it I decided I would sell off $2k in shares since they were already a little overweight and use the proceeds to buy $2k worth of TGH which is also an industrial but pays a higher dividend. TGH was also a very low weighting and was due for another purchase. The price of TGH had also come down close to my cost basis which makes the choice even easier.
I still view NSC as a long-term holding so I also just sold a $75 March ’14 Put @ 6.50 collecting $650 in premiums. I’ll be able to pick up 100 shares of NSC at a price of $68.50/share which would yield greater than 3%.
By selling 28 shares I lost $58.24 in yearly dividends. However, by buying 56 shares of TGH I added $103.04 to my yearly total for a net gain of $44.80. I’ve also set myself up to add more shares of NSC should the price keep falling.