When to Sell High Yield Stocks

Dividend stocks have managed to outperform non-dividend stocks since 1972. In addition to that, elite dividend indexes such as the Dividend Aristocrats and Dividend Achievers have also managed to outperform the market for almost two decades. Many companies have managed to grow earnings sufficiently enough in order to be able to create a long record of consecutive annual dividend raises. Some investors however are worried, that the last two decades worth of dividend investing data is an aberration, and as a result should not be included in one’s investment decisions.

Choosing companies which have a history of at least a decade of dividend increases won’t hurt either – companies which generate excess cash flows after reinvesting to sustain and expand the business and share the money with shareholders in the form of dividends are rare but valuable species in today’s market. Things will change over time, and as a result investors would likely have some turnover in their portfolios. While Johnson & Johnson (NYSE: JNJ) might stop raising dividends a few years from now, it might still be at least a hold for long-term investors. My main sell rule is to sell when the dividend is cut.

Source: InvestorPlace

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