Sunday, February 2, 2020

Another Recent Sell

Recently, I closed two of the weaker positions in my DivGro portfolio, Nestlé SA (NSRGY) and Stanley Black & Decker (SWK), In my view, these positions are unlikely to deliver annualized returns of at least 8% going forward.

NSRGY and SWK are both high-quality stocks, based on their quality scores of 25 and 20, respectively. But I'm looking to improve DivGro's growth prospects by favoring stocks with higher dividend growth rates [DGRs], and NSRGY and SWK just didn't make the cut anymore.

I've identified another stock with questionable growth prospects, at least in the near term. The stock has a quality score of 21 and a favorable Chowder Number [CDN], but serious headwinds will affect the stock for the foreseeable future. This article provides details.

I Grounded Boeing (BA)

In March 2019, aviation authorities around the world grounded the Boeing 737 MAX passenger airliner after two new airplanes crashed within five months, killing all 346 people on board. In December 2019, Boeing fired its CEO over his mismanagement of the crisis.

Boeing lost nearly 200 orders from airlines for the MAX, paused production of the aircraft until regulators clear the airliner to fly again, and reversed a policy to now recommend flight simulator training for MAX pilots. Unfortunately, the company faces many more challenges in 2020 and beyond. The grounding is costing Boeing $18.6 billion so far, including money set aside to deal with future issues.

It appears that BA decided to freeze its dividend for the time being — or, at least, the company broke an established pattern of dividend increases:

Even if this turns out to be a dividend freeze, that wouldn't be a good enough reason to close the position. I've held on to positions before, even after a dividend freeze. But BA's headwinds are strong and I'd like to see evidence of a solid turnaround before I'll consider reinvestment. Besides, there are plenty of opportunities (even in this toppy market) without the associated risk that BA presents. 

Trade Summary (BA)

I bought 30 shares of BA in three batches starting in October 2018 and sold all my shares on 27 January. Here is a summary of my trades and dividends received, along with a net profit analysis:

Bought 10 shares of BA at $345.50 per share:
 Dividend on 10 shares at $1.71 per share:
Bought 10 shares of BA at $320.10 per share:
 Dividend on 20 shares at $2.055 per share:
 Dividend on 20 shares at $2.055 per share:
Bought 10 shares of BA at $334.62 per share:
 Dividend on 30 shares at $2.055 per share:
 Dividend on 30 shares at $2.055 per share:
2020-01-27Sold 30 shares of BA at $318.80 per share:$9,564.00

Capital Loss:

Dividends Received:

Net Loss: $228.80

I made a net loss of 2.2% on the original amount invested, which is a loss of 2.3% annualized.

Selling these shares reduced DivGro's projected annual dividend income by $246.60.

Concluding Remarks

Selling shares for a loss is never fun, but I'm looking to reinvest the returns in companies with a less gloomy outlook and whose dividends are not frozen. As mentioned, BA's headwinds are strong and I'll wait for evidence of a turnaround before looking to invest again.

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