On January 3o, 2006 I bought a stock that was, until recently, a Dividend Achiever. When I bought the stock it was selling for $16.21. At the time, the stock was yielding a little over 5% annually. My only consideration for selling the stock ,as with all Dividend Achievers, was if the company reduced or cut the dividend payment.
Fast forward to April 17, 2009. Today the stock has closed at a price of $9.50. Under normal circumstance this would be calculated as a loss of 41.39%. However, due to the dividend payments over the given period of time the total loss ended up being only 17.84%. All of this occurred during the single worst uncorrected down move in stock market history.
Given the current market conditions, the company has been forced to cut its dividend payment by 33%. The company might be taking the appropriate action at the right time, however the dividend cut means that I will no longer be able to hold this stock.
The key concept that should be gained from this demonstration is the fact that even in the worst of times, a company that has a consistent policy of dividend increases will be better able to sustain your capital through hard times. Had I not selected this (former) Dividend Achiever I would have been out the 41.39%. Instead, I walk away with a relatively marginal loss considering the price and date that I started my investment. This should be the lesson to all investors about practicality and importance of dividends. Touc.
