Your favorite dividend stock just chopped its payout – should you sell? It depends. Believe it or not, some dividend cuts are actually wildly bullish signals. They mark the bad news being officially “priced in” as shares soon embark on a furious contrarian rally. Other payout cuts, however, are red flags begging you to sell before you lose even more money. They are truly a white flag of financial distress that shows the firm failed at its sole responsibility to shareholders – to get the dividend paid.
We’ll discuss post-cut strategies in a moment, including specifics on recent dividend disappointments from the likes of American Capital Agency Corp (AGNC), Potash Corporation of Saskatchewan (USA) (POT), Williams Companies Inc (WMB) and the iShares US Preferred Stock ETF (PFF). Should they be sold now, or held in hopes of a relief rally?
Source: InvestorPlace
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