Dividends4Life: It Was An Odd Odyssey

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It Was An Odd Odyssey

Posted by D4L | Wednesday, February 13, 2008 | | 4 comments »

Snake-bit, Jinxed. Murphy's Law, et al. Our language is full of terms to describe bad fortune and things that continue to go wrong. Ironically, I couldn't think of a lot of descriptive words or phrases to described a series events when things just went right. This post is about the latter.

The last two days we have looked at JNJ and yesterday I revealed that I initiated a position in the stock last week, but I'm getting ahead of myself, let me start from the beginning.

Residential construction has taken it on the chin for the last few years. Beginning early last year, I began watching D.R. Horton (DHI), the largest U.S. home-builder, looking for a good entry point. DHI had a phenomenal dividend record after being flat in 1998. Its dividend growth had been no less than 20% per year since 1999.

On 11/12/2007 I initiated a position in DHI at $12.31, near its 12-month low. Based on the above, I used funds designated for dividend investing, but I really was looking at it as a value play. On 12/12/2007, I doubled my position.

As I do each year end, I reviewed the stocks I held, their performance and why I held them. DHI was not a stock I really felt great about, but I opted to continue holding it even though it had now fell to around $11. I do not watch my investments on a daily basis, so I forgot about DHI.

Last week I noticed they announced a flat dividend for the 6th quarter in a row. Then I began to question whether this was really a good dividend investment so I checked the price. To my amazement, it was well over $16 - I was up over 25% in absolute terms. Not wanting to lose this gain, I entered a stop loss at $16, which would preserve a gain at a little over 20%. By the end of the day the stop loss had executed resulting in a 21.5% gain (175.5% annualized).

Now that I had cash in my account, the question was "what to buy?" There are a handful of top tier stocks that I am always looking for an entry point. JNJ was one of those stocks. As noted in yesterday's post, I came to the conclusion this was a good time to initiate a position in JNJ. I used approximately 40% of the proceeds to purchase JNJ with the remaining 60% split between two REITs.

Having so many things fall the right way did make for an odd odyssey. Lest I grow high-minded, there is balance in the universe - all three stocks have since fell. :)

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  1. D // February 13, 2008 at 8:33 AM

    During volatile conditions like now, you get the urge to time the market. Heck if you are successful at finding stocks that go up 25% for a 15% risk then go for it ;-)
    If you haven't sold though, your gain would have been much smaller..
    But as Buffet would say, you should look at stocks as a business, not for price movements. You wouldn't buy Coca Cola simply because it increased by 10%. you would buy it because you know that it is a solid company with good future ahead.

  2. Anonymous // February 13, 2008 at 8:02 PM

    Dividend Growth: I don't have the time or the stomach to be a market timer. In this case, I was fortunate enough to exit at a premium a stock that, in hind-sight, I should have never bought.

    Best Wishes,

  3. MG (moneygardener) // February 13, 2008 at 8:53 PM

    Nicely done on DR Horton...

  4. Noel Larson // February 13, 2008 at 11:56 PM

    Bad pun alert:

    You're not the only one that sold a home builder and needed to buy a Band-Aide :)

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