Not long ago, I said:
Late last year, I read an article by a fellow investor (whose strategy I generally agree with) who talked about trimming some of your winning dividend stocks (ie, those which had seen steep capital appreciation) in order to then reinvest those profits into other dividend payers which are a better value. He went on and on about how this can help bolster your dividend income in the long run, and it made sense... even though this was a concept which I had never intended to employ. "What the hell," I told myself. "Maybe I'll try it just once." I sold three of my shares of CINF, and spent that money buying two more shares of IBM. (At that time, the 3 CINF sold for the same total price as the 2 IBM shares cost--it was a lateral move financially.) This swap gained me an additional ~$1.50 in dividends each quarter--not earth shaking, but I just wanted to try this new philosophy and see how things went.
I am kicking myself for this move.
The more I think about this, the more I realize I have
no reason to be kicking myself over this move. My
primary goal for this account is to create passive dividend income; capital appreciation is a secondary goal at best. If the above move increases the dividend income, then it is a positive thing.
Lately I have been noticing that CINF has continued to go up in share price... steeply. For that matter, so has AFL. This has caused both dividend yields to come down significantly since the time I bought them, meaning these stocks could be seen as overpriced and not on sale like they were when I bought them.
Being a Roth IRA, I am extremely limited in the amount of money I can contribute to this account... but I am free to re-arrange my holdings and use any capital gains to my advantage. Doing some quick math, I realized that if I liquidate my entire positions in CINF and AFL, I would have enough funds to replace them with full positions in two better-valued companies, increasing my dividend income,
plus I could buy a full position in yet another company, even further increasing my income. This seemed like a solid plan, so yesterday morning I spent some time putting it into action. After selling off all my CINF and AFL shares, I spent a grand each on UNM (another financial company I've been eyeing) and STOR (a REIT I've wanted to buy for a while now). Looking over my entire account, I used the remaining funds to fill out my holding in ED to a full-size (~$1000) portion, plus I bought one more share of VZ to do the same.
With my last couple hundred bucks, I decided to dip my toe into the energy sector. I kinda worry about all the energy companies, but there are some guys online who build a compelling case for the future of a select few of these companies, including OKE. I figured I could afford to 'gamble' $200 and bought four shares. We'll see how this one does over time.