I made an important financial move with my recent sell of SRLP (Sprague Resources). This was something on my mind the last few months actually. I decided to re-balance my portfolio a bit. The last time I did something like this was back in January 2018. Back then, however, I sold my stock for a gain and spread the proceeds across other purchases. Ultimately, I ended up with more dividends then prior to my 2018 re-balance. This time, however, I decided to take a bit of a hit. I took the hit in a realized loss and a temporary loss in forward dividend income. Nevertheless, I am quite optimistic this will all turn our very well.
Early this week I sold 400 shares of SRLP at $17.10 per share. I didn’t sell the stock completely, thus I still have 175 shares. SRLP was a dividend titan in my portfolio. In fact, I owned SRLP since 2015 and have received total $5,468 in dividend income from them over those years. Just this May, I received $383.81 from SRLP. Sprague paid an increasing dividend until the 2nd half of 2018 and their dividend has been frozen since. The stock has also been quite volatile in 2019 shedding much of its value as the company goes through some turbulence (the company is very seasonal and weather dependent).
All companies do go through rough times and the stock can be violate at times. I most cases I see this as an opportunity to buy more. But as I have been thinking the past few months and have experienced before in the past, a volatile dividend titan facing headwinds can end badly. Normally, I wouldn’t mind it so much, but SRLP produces a large amount of my portfolio’s dividend income. SRLP was responsible for 15.8% of my portfolio’s dividend income. I bought SRLP at a time when I was still inexperienced at dividend investing. And while I don’t regret it, today I know I would never put so much in a single stock (especially one that was brand new and had no dividend history).
I have spent the last 2 years diversifying my portfolio. Over those 2 years, I went from owning 12 stocks at the starting of this website to now owning 24 stocks. I watched as SRLP when from producing over 20% of my dividend income to below 16% as other dividend stocks were added. While SRLP is a great company, percentage wise I don’t want so much of my dividend income caught up in it.
So, what was the damage? I sold 400 shares of the stock for a realized loss of $3,841.15. Of course, if you look at it another way, since I earned $5,468 in dividends from the stock over the years, I do end up with a net gain of $1,627. Speaking of dividends, that was where the real hit was. My recent sell shaved $1,068 of dividend income off my portfolio from my forward annual dividend income.
Ouch, right? But I am not panicked by this. I see this as only temporary. I am planning to recover most of that lost dividend income this summer. After all, the sell left me with over $6,800 to buy new stock and/or add to my current positions elsewhere. Also, at the start of July I will have over $2000 accumulated dividend income in my account. In addition, the money I saved each month from my working income including my recent pay raise will add up to another $4000 to invest. Overall, I will be looking at nearly $14,000 in cash to invest this summer.
I am looking to make up the full amount (or maybe even surpass) the dividends lost sometime in the fourth quarter of the year. Either way, what this does change is the timing of crossing the $10K milestone. It will not happen this year. I will have to push that milestone back to the first quarter of 2020 (or at most, the second quarter of 2020). That is the new time-frame for that milestone. Ultimately, I am looking at a goal of not having any 1 stock producing more than 10% of my dividend income. For some, that is still way too much. But I am conformable with that and I know as I continue to diversify my holdings, all of my stocks will be far below that 10% mark.
So, what do you think? It is rare that I sell a stock, but sometimes you have to prune the tree or re-balance things out. This summer will be interesting with new buys and opportunities. I am looking forward to it! How about the rest of you? Do you plan to re-balance your portfolio? Have you done it already? Can you feel things heating up this summer? Let me know in the comments below!
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