It’s the start of a brand-new week. The stock market was going to open up again today. Over the weekend, I was doing research on which stocks I might want to buy. And then whack. National Oilwell Varco (NOV) goes and cuts its dividend. And not a little one either. Even a 50% cut would leave us with 3.4% dividend. Noooo, they had to go and cut it by 89%. Now their dividend is only 0.7%. That is just mean. There goes my plan of buying more stocks today. “Everybody has a plan until they get punched in the mouth.” (Mike Tyson)
We want to own our stocks for a long time. Decades if we can. Do we reach our goal? Looking back, we only bought National Oilwell Varco (NOV) 38 days ago. A decade is about 3,653 days. Ok, so not even close. This is my first sale, so I still have all of my other stocks.
So what happened? I was looking through the headlines in my news feed to see if anything interesting happened. It did not take long to see the words “Dividend Cut.” Well, that sucks, I though. Opened the article, and there it was staring me in the face. 89% dividend cut. I went on some other news feeds to make sure that is was correct. It was. I look at my broker account; we are trading over 6% down. Overall, we are down 21%. What do we do, what?
First Dividend Stock Sale
Remember, “No one ever made a dime panicking.” (Jim Cramer). So what did we do, we sold the entire position. You sold your whole position over one day’s events, isn’t that panicking? That does sound like it, doesn’t it? But we only had a small position. We did not buy or sell anything else. We made a bad choice on 1 stock. This was not a great dividend stock, at least not today. So we sold 1 company. I still have all of the others. Good thing today was an up day in the stock market, or the stock could have falling faster.
Supplier to Oil
However, we should review why we bought it. We bought them as a supplier to the oil and natural gas industry and their high yield. We thought that being a supplier would allow them to ride out the downturn in oil better and get paid to wait. While we still see them as a good supplier and company, they did cut their dividend by a lot. This was a high risk high reward stock. High reward was the large dividend. High risk that it was likely to be cut. We like buying stocks on sale to collect dividends. If the reason it went on sale was because of a massive dividend cut, then our reason for owning them went away. We decided we did not want to create a new thesis/reason to hold onto the stock, because we were wrong. The dividend was cut. “Well when events change, I change my mind. What do you do?” (Paul Samuelson).
There is also a strong chance that the dividend yield was what was keeping the share price at $27. Without that, the share price could also fall a lot in the coming weeks. Who knows, maybe we will buy it back at a much cheaper price.
As the say, sometimes your first loss is your best loss. Time to find something else. Do you think it was a good idea to sell them on the dividend cut? put your thoughts below in the comment section.