In 2016, we had many victories in investing. We are earning a lot of dividends, increased our passive income, and had stock price appreciation. But not everything was rosy. Here are my biggest dividend stock mistakes in 2016.
Was is a Mistake?
What is success and what is a mistake. Our goal is to buy dividend stocks with increasing dividends. So, our mistakes will be defined as any stock getting a dividend cut.
Why not use the word failure? “I have not failed. I’ve just found 10,000 ways that won’t work” (Thomas Edison). Failure is a state of mind. I have not made any failures. I just made mistakes that I need to improve upon.
National Oilwell Varco (NOV)
We purchased National Oilwell Varco (NOV) because of weakness in oil prices. We guess that a supplier to the oil industry could outlast the weakness. After all, oil companies still need to spend money to keep their oil equipment working. They had a nice dividend and we knew the dividend was high risk, which we knowingly accepted. Turns out the high-risk dividend pick was wrong. They announced an 89% dividend cut. We sold all of our shares and moved on. Read our 1st Dividend Stock Sale of NOV.
Williams Companies (WMB)
Williams Companies (WMB) had a 12.8% dividend yield. We assumed the dividend was safe with cashflow. We guessed that the merger between Williams Companies (WMB) and Energy Transfer (ETE) was not going to happen, protecting the dividend. However, before the merger was even decided, I read that the dividend would be cut whether the merger went through or not. Because a dividend cut was going to happen either way, we sold all of our shares. This was a high-risk dividend stock with a high dividend yield, and we got this energy company wrong also. Here is the WMB sale we did.
HCP (HCP) was a high dividend yield Dividend Aristocrat REIT. We like Aristocrats, REITs, and high yield dividend stocks. Seemed like a great combination. Plus, they were in health care, and with the trend of an aging population, this felt like a good trend for the future. HCP (HCP) was doing a spinoff of QCP to remove the worst assets they had from their balance sheets. They said the spinoff could make decisions to fix the asset that would be unavailable to the bigger HCP (HCP) company. With the spinoff, they cut the dividend. I had to sell HCP (HCP) for other personnel reasons before I found out about this dividend cut out. However, they still cut their dividend making me wrong. This means that they will/should lose their dividend aristocrats status.
Biggest Dividend Stock Mistakes in 2016
What did we learn from our mistakes? Oil crashing was one of the big part of the market correction. We should have guessed that the 2 oil stocks that the dividend cuts were likely, and we did recognize that at the time. Many other oil stocks cut their dividend, but my stocks were just slower in doing it. Although, the safer larger oil companies like Exxon Mobil (XOM) did not cut. But they were high risk, high reward. With HCP, with them being a dividend aristocrat REIT, this would have been hard to guess.
We are glad we are keeping track of our stock trades on this site. Now, I have a fantastic record of my dividend stocks picks. I can see what I did good and what I did wrong.
Overall, even with this couple mistake, I had a lot of successes. My new learning is to be extra careful of the sector that is causing the market decline. Oil was crashing, and oil companies were forced to cut dividends. We are glad we sold this the stocks when we did. “Your first loss is your best loss.” (Jim Cramer) We sold our losing dividend stocks and focused on finding more winners.
What was your biggest dividend stock mistakes in 2016? Have you reviewed your investments so you can improve? Please feel free to share in the comment section below.
Discloser: ETE, HCP, NOV, WMB, XOM – We do not own shares.