Im Selling My Stocks

Today I'm selling my stocks. Here is why.

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I'm selling off my stocks today which is something I haven't done since I've started investing. I think the stock market is an interesting mechanism for building wealth and becoming a millionaire. Unfortunately, I think the near to mid future is extremely uncertain and as a dividend investor, I want to make sure to protect my passive income by cutting as much risk as I possibly can.

JP Morgan recently announced that they’re only loaning money out to people with a 700 credit score and above, and you have to put 20% down, which will exclude most people trying to buy a home. I think this will trigger a housing crisis if all other lenders follow suit. On top of that, analysts are predicting the economy will go down 40% and in April alone, with the second quarter of the year they’re saying the economy will decline another 30% and they’re expecting to see 25 million people unemployed.

But underneath the facade, the fundamental truths about a company don’t lie. Some of the things I look at are: Earnings Payout Ratios, Free Cashflow, EPS or Earnings Per Share, Sales Growth, Return on Equity, and their Dividend Yields Safety Scores and history.

All of those things have taken a huge hit for nearly every company in the stock market and as a result, they’re doing their best to protect whatever cash flow or money they have, to keep themselves from completely going out of business. One of the ways they do this is by firing as many “non essential” people as possible, but another way they do this, is by cutting their dividends.

It’s a stark reminder that we are not contractually owed dividends, dividends can be cut if they are unsafe. Usually speaking though, a company’s LAST line of defense is to cut their dividend. They know by cutting their dividend their stock prices will fall very hard. Recently, I had that happen to me with the companies in my portfolio that I have with Robinhood.

I’m going to be selling 8 stocks that I think I could do better with in terms of where to put my money. I’m still going to be a long term investor, but here are my 8 future sales:

#1 - Chatham LODGING Trust - a REIT. Especially right now with lack of travel, and the entire hotel industry getting pummeled, I would rather put my money somewhere safe while we recover in the meantime. Based on my Yield on Cost of 6.67%, I will be losing roughly $211 of annual income.

#2 - The second company we’ll be selling today is GPS. Their earnings per payout ratio in the last 12 months was an unhealthy 112% of everything they made. That means they literally paid MORE money to shareholders than they actually made, and the only way to do that is either taking money from your cash reserves, OR use debt to pay shareholders like some of the energy stocks are doing right now.

#3 - Pebblebrook Trust Hotel, another REIT. Again, REITS are getting pummeled, similar reasons as CLDT. Looking at the big picture, they are unlikely to be profitable in the next 3 years. It also underperformed the REIT market as a whole , because it lost me -63.7%, while US REITS returned -11% in the same time.

#4 - SKT, Tanger Factory Outlet Centers, another REIT.

#5 - BP, an oil stock. With a safety score of only 30, that means it’s unsafe. They have a payout ratio of 413% of their income, they’re paying WELL in excess of 4 times what they make. Not a good sign of things to come.

#6 - CZNC Citizens and Northern which is a bank that has failed to grow it’s dividend last year with a flat EPS growth in the last 5 years.

#7 - DIN Brands Global, payout ratio is below 50%, sales growth has been 17% the last 2 years, operating margin above 16% which is good restaurants but the safety score is still pretty low at 33. Restaurants I feel are a pretty risky play at the moment and this one cut it's dividend in the last recession.

#8 - HBI which is Hanes Brands

That represents my future stock sales that will lose me roughly $712 of annual dividend income.

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