Acerca de D.
En unas semanas podremos ver en qué ha quedado la cosa.
“I suppose it’s panic time for some, a “damn” moment for others, and certainly a scatter situation to find a replacement for others. Jubilation for anyone who trimmed or sold D in the recent weeks or months. In some cases that would be justified.
I don’t see this as a doomsday action as of now, there still needs to be more clarity going forward, but from where I sit, taking a short term dividend cut does not justify a move on my part. If anything, depending on whether D drops enough in price, it will be a buying opportunity for me.
There are those who thought D overpaid for the SCANA acquisition. The amount of debt actually lowered their dividend safety number if folks can recall. Others were upset over D lowering the dividend increase projections to 2.5% in the coming years. Starting next year they are projecting 6% annual dividend increases. That’s a positive from my perspective.
I actually see several positives coming from this as long as I am willing to endure a little uncertainty and a short term dividend cut.
People wanted D to deleverage the amount of debt they have. This move helps in doing that. There is $5.7 billion in debt that will be retired. … Isn’t that a good thing?
D is also going to start buying back shares with the other $3 billion from the sale of their gas storage business, and with less shares available in the market, the lower their dividend payout goes as they plan on lowering their payout ratio to 65% from 86%. … Another good thing? I think so.
One of the biggest risks to utilities is their power merchant business which causes them to wander away from their regulated business. It’s the regulated part of utilities that provides their strength as good long term investments, and I know this is a good thing.
A year and a half ago I stated that the owner of this portfolio needed $100K per year in dividend income to live comfortably in retirement. I also stated my objective was to get it up to $200K per year, and that has been achieved. I received a good bit of push-back on that strategy with people asking why it was necessary to have so much more income when it wasn’t needed. Well, this year has shown why.
Due to the fact that I built an income margin of safety, 100% above what is needed, I don’t have to react to every dividend freeze, cut or suspension. It’s not going to have an impact on quality of life. I can now sit tight, get some more information, and allow it to play out before I make any decisions as to whether I should trim, hold tight, or add more shares. I don’t need to make any knee jerk reaction decisions.
There are those who aren’t on schedule, or haven’t achieved their required income number yet, and it may be in their best interest to make a move. I don’t know, I don’t know their personal situation.
I can’t speak for others who read this comment, I can only speak for myself. I see D coming out of this stronger than they are today unless new information comes to light that would indicate otherwise.
So that’s where I stand. I encourage others to do what they think is best for them.
Where your focus is on the dividend, I have always said my focus is on the company story. Often times a company has to take a step back in order to take two steps forward. This is why I don’t have all of my money in one company.
And I don’t count myself as the typical dividend investor. The typical dividend investor is too focused on every company meeting some expectation they have of it. I focus on the portfolio as a whole, knowing that I will have to go through ups and downs with companies.
D after the dividend cut will still be yielding more than WEC, NEE and XEL, all companies that I own. So from a dollars and cents point of view, I will still be receiving more dividend income from D than I am with the other 3 companies. I can live with that.
As I said in my comment above, others need to do what they think is best for them. You know what you need to do for you, so do it.”