Friday, September 26, 2014

Recent Sell: SNP

Sep 26, 2014: Sold 31 shares of SNP at $90.21 per share.

On Wednesday I sold my CHL shares and today I'm following that up by selling all my shares of China Petroleum & Chemical Corp (SNP). In this post, I'll explain why I'm parting ways with SNP, though the main reason for selling is the same as in the case of CHL!

As a dividend growth investor, I like to maintain and grow dividend income over time. If a stock I hold in DivGro gets a dividend cut, I'm no longer interested in keeping it. Instead, I'll sell my shares and look for a substitute. As I mentioned yesterday, I dislike selling DivGro holdings, but I dislike dividend cuts even more!

Dividend Cut

On Tuesday, David Fish reported on overdue dividend increases for stocks in his CCC list. He mentioned that both CHL and SNP would be cut from the CCC list because they had cut their dividends in foreign currency terms.

SNP's dividend payment history is presented in the following graph:

The 2012 dividend was accompanied by a 13:10 stock split. The total dividend income for 2013 was 0.24 RMB, compared with 0.30 RMB paid in fiscal 2012 – this represents a 20% dividend cut.

Impact on DivGro

SNP is an Energy sector stock. Currently, DivGro is substantially overweight in the energy sector, so this sale helps to improve DivGro's sector diversification.

I now have enough cash for two $2,500 buys, so I'll be looking for dividend growth candidates next week. Perhaps I'll wait for my end-of-month deposit to clear, in which case there will be an opportunity to buy three new holdings!

DivGro now has 33 holdings. By adding three more, I'll meet my goal of having 36 holdings by year's end.

Trading Summary

Oct 18, 2013
 Bought 31 shares of SNP at $80.51 per share:
Sep 26, 2014
Sold 31 shares of SNP at $90.21 per share:
Capital gains:

Dividends received:

Trading expense fees:

Net profit:

With a net profit of $365.02 $405.13 on an initial investment of $2,498.81 and a holding period of 344 days, SNP earned an annualized return on investment (ROI) of 13.76% 17.21%.

Please note: Today is SNP's ex-dividend date, so I'm expecting a dividend payment soon. When that happens, I'll update the trading summary and ROI calculation above Updated 13 October 2014.

31 shares of SNP represent $107.45 of expected annual dividend income, which reduces DivGro's projected annual dividend income to $4,573.18.

Do you own shares of CHL or SNP? If so, are you keeping your shares despite the dividend cuts, or are you selling?


  1. As with CHL, I think you've made the right move here. It all comes down to dividend growth, and if that growth isn't happening, especially if the dividend is getting cut, than strong consideration must be made whether it makes sense owning it going forward.

    Looking forward to seeing where you will put your cash over the next week or two.

    1. Agreed. By selling CHL and SNP I'm not suggesting those stocks won't be good long term investments. But, I'm not interested in keeping them in DivGro, which has a dividend growth objective. I'd rather find replacement stocks that would ensure a growing stream of dividend income.

  2. I know we are all dividend growth investors and do not like when companies do not raise dividends let alone cut them. But you must always look at a total picture when deciding to sell a dividend stock. It's not a simple black/white decision that translates to automatic sells when a company cuts a dividend. If the overall business/industry is still sound and you believe in the future prospects you should consider keeping dividend cutters at times. Like I said, look at a whole picture not just one factor such as a dividend cut. Several years ago, several companies I owned cut their dividends but I still believed in all of them and held on and even added to my positions. I held on to my GE, IR and WFC after they all cut and today I'm happy I did. All started increasing dividends in recent years, have seen tremendous share price appreciation and one, (IR) even completed a spin off of ALLE that also pays me a dividend. While a cut is a red flag, it is definitely not a sole reason to sell a stock.

    1. Thanks for your comment, DivHut! I appreciate your point of view. I agree that a dividend cut in itself should not constitute an automatic sell. There may be reasons behind a cut that needs to be understood. In the case of SNP and CHL, however, I found it really hard to convince myself of the future prospects of these companies and, in particular, their plans with regards to dividend growth. I read the latest financial reports (translated) of both companies. Information was terse, at best. Is this cut temporary? Do they foresee a recovery in the next few years? Can we look forward to earnings growth instead, with a hope of future dividend increases? In the case of GE, IR and WFC, as you pointed out, all started increasing their dividends again. Were you just hoping that they would? Or were you confident that they would recover quickly after the financial crisis and start paying/increasing dividends again? I presume you would not have invested more without some confidence in an eventual recovery. Finally, there are many great dividend growth stocks available, certainly more than I can afford to buy. Why hang onto the shares of a company that cuts their dividend, while many others continue to pay and increase their dividends?


Contact Form


Email *

Message *

Follow by Email