Lately it’s seemed like the flurry of dividend cuts we saw earlier in the year has slowed. Then today, Eastman Kodak came out and said its losses more than tripled in the first quarter of 2009.
The firm said it would be trimming executive pay, forcing employees to take an unpaid week off, and suspending the semiannual dividend.
When you consider the daunting transition that Kodak has been trying to undertake, it’s easy to see why the company is struggling. And poor economic conditions are making matters worse.
The shares have been battered, and with the dividend cut, I don’t see much incentive for anyone to continue holding the stock. Not when there are plenty of other companies out there holding up far better during this decline and keeping their shareholder payments intact.
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I have a general question about using dividend paying stocks for investments. Do you advise using stop loss orders to protect from losses of value that would either exceed the benefit of the dividend or indicate that the stock had entered a long-term downtrend?
Nilus Mattive Reply:
February 18th, 2010 at 7:58 AM
Great question. The answer is: “It depends.” On what? Your goals and the specific stock.
For example, I have used stop losses in Dividend Superstars to good effect on some more aggressive positions that were mainly capital appreciation plays. On the other hand, if I had put stop losses on every single stock in the portfolio, we would have had zero holdnigs during the meltdown. Some would say that’s a good thing … but I disagree if the goal is stable income and long-term appreciation potential. And so far, based on our performance, holding those core income shares has paid off.