Dividends4Life: Be Extra Vigilant With Your Long-Term Dividend Stocks

A lot of investing errors can be traced to the lurking influence of emotion on our investment decisions, and one area where investors can be particularly susceptible to emotion is when it comes to taking an objective look at an investment that has delivered very nice long-term returns for an investor. If Coca-Cola (KO) dividends helped pay to send your kid to college or if you sold off a block of appreciated IBM (IBM) stock to make a down payment for a house, it could be difficult identifying a point at which it could possibly come time to sell.

It seems obvious enough to say, but no stock should be above scrutiny. However, applying theory to reality can be difficult when a particular stock has made you a lot of money in your lifetime, particularly if it is a large-cap stock that has traditionally been gilded with "blue-chip status" among the investing public. In particular, I would be wary anytime a blue-chip company takes on its own financing division. If done well, it can be a nice way to augment profits. But taken to excess, it could even take down an iconic American industrial company. The best way to monitor a long-term blue chip stock is to keep a steady eye on changes in the company's sources of profits for signs that the risk profile may be changing.

Source: Seeking Alpha

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