I recently wrote a lengthy update about my portfolio and more, in which I mentioned JD Sports had announced their best results ever. So why have I taken the decision to sell my shares in this stock, if they have such great results?
Well, basically JD Sports do not really fit in with my goals. Now, I must actually clarify this because if you have read my goals page, you are probably thinking ‘what has JD Sports got to do with those goals?’. Well, technically, it doesn’t really have anything to do with my goals. However, I have methods of achieving those goals which are not documented on the page, so I thought I might explain a few of them here.
Dividends and Cashflow Management
We had a goal to earn £125 in dividends, which we will crush since we changed the way we save and invest our money – we will probably receive well over £200 from dividends this year in my NISA account. Formerly, we put our regular savings into separate pots, e.g. ‘car’ and then withdrew from them as and when we needed to, such as when the car insurance was due. However, we realised that this was very time-consuming and very inefficient, as money was coming and going at certain points during the year, and not earning much in interest.
So we decided to put the regular monthly savings pots into the stock market instead, specifically, stable, dividend-paying, and somewhat boring dividend stocks. This means that we will be able to earn the dividends and then sell shares if we need to withdraw money for an annual purchase. But we are also keeping higher balances in our current accounts to smooth out any bumps. Plus, we have our credit cards, which things like car insurance can be paid on, thus helping us to earn more interest and/or dividends until the credit card is due to be paid in 56 days’ time.
JD Sports is a dividend growing company, but it is beyond the realms of value now, since the share price has gone up so much since I bought it last year. It has appreciated more than 50% in less than a year, which quite a lot to say the least! It is a kind of mental trigger for me, that if a FTSE 350 stock appreciates that much in such a short amount of time, then it might be time to move on. The other factor influencing my sale is that JD Sports are a bit stingy with their dividend increases. I would prefer to invest in companies who are going to grow the dividend by a higher amount, especially given the fact that JD Sports just had their best year ever, and still only managed a small increase.
Which Stocks to Buy Now?
I am probably going to go for the boring National Grid and Unilever with the money from the JD Sports sale. They have both had a little volatility in their prices recently, especially for Unilever as it is down a few % since I last bought it. National Grid has been fluctuating, possibly due to the election, but it has since returned to below £9 per share, which is back into my target range.
I am generally aiming for stocks that pay 4% or more, although I do have several that don’t pay such a high dividend yield such as Unilever. I am also considering various Investment Trusts, although many of the really big ones have significant holdings in tobacco companies, which I do not want to actively invest in.
Which stocks are you planning to buy or sell this month?
JD Sports has certainly gone a bit bonkers recently. I bought them in 2011 and have already had to cut the position in half once to avoid it dominating my other holdings. And I’m about to do that again.
I know what you mean about stingy dividends. The company is growing like a weed but dividend growth is wafer thin. Still, the massive capital gains are a nice alternative form of compensation!
I’m still holding but if the shares keep going up like this I’ll be selling as well because the price will be headed for la-la land.
I agree with weenie. Well done for selling. It is much harder than a purchase even when you are showing a profit!
National Grid and Unilever certainly do still look good at current prices. Unilever, Diageo, National Grid and BAE Systems all looked tempting to me before I bought AstraZeneca.
I did not realise that you were so averse to investing in tobacco. Lucky there is a huge array of other companies to pick from! How about Finsbury Growth & Income Trust? Not a massive yield but an excellent trust with reasonable fees.
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Thanks D². I am also thinking about Diageo, but as we mentioned before, I bought it so cheap last year, that I am loathe to buy it again this year at much higher prices.
Finsbury is on my list of trusts to investigate actually, I know the manager has an excellent record and an excellent strategy
Cheers
I know the feeling. Have to get in the mindset of seeing beyond the current share prices and previous purchase prices and just look at the current valuation. After all, a stonking value should not stop you topping up at excellent value! I find that very hard to do at the moment. For example, my holding in Old Mutual was very cheap but now–despite being good value–I find it hard to convince myself to top up!
Yes, Finsbury looks like a nice compromise all round. A very good manager who is well regarded, a nice balance between growth and income and a solid yield and comparatively low fees.
When you look at the top 10 holdings. No tobacco and some really very nice looking long-term hold companies. I find it quite refreshing to see such a different Top 10 and one I would be very happy to put together myself!
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I know, I know. I just think that there are other companies that I can add which are less expensive but of course it’s all about the valuation. If something is on a 30% discount and you buy it, it’s a bargain. If you see it next year at a 20% discount, it’s still on sale!
Exactly. It is something I am trying to work on. I try to think: “I bought Britvic for 747p recently and was happy with it. Why would I not have topped up at this price if I had originally bought some at 647p? There is no logical reason.” Still have not won that battle yet! I suspect that comes with time!
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Selling is much harder than buying so well done on coming to the conclusion that the shares didn’t fit in with your goals and then doing something about it! More money to go for some of those shares on your watchlist, as well as the usual NG and Unilever?
Hmm…I see what you mean about the big ITs and their tobacco investments – as it’s not something that concerns me, I never really noticed. Perhaps you could check out the more specialised ITs, eg property, pharmaceuticals, small companies etc
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Hey Weenie,
thanks for your thoughts. Selling a stock is really hard, I don’t actually like to do it, but I have been gradually trying to get rid of stocks that didn’t really fit my goals or investing needs. I am also considering selling Sainsbury’s, but not yet. They are going to cut the next dividend payment by a third. Not cool. But at least it’s not altogether eradicated like Tesco did with theirs. I am still a fan of Sainsbos but it’s perhaps not the best place for my money right now. I might hang on to it. I’ll have to make some calculations and figure out what I really want to do.
With regards to the Investment Trusts, what I have been doing is looking at the top ten holdings of each of the ones in which I’m interested. If they have tobacco in the top ten, then I rule them out. I thought that was a fair compromise.
Cheers