Contrary to what many people think about dividend investing, it is not just a buy and hold forever situation. Income producing stocks can stay in your portfolio for a long time, but they are not designed to be held blindly. The real challenge is knowing when persistence becomes a mistake.
Why does selling dividend stocks seem so difficult?
The common mentality is: “If it still pays me regularly, the company must be OK.” For many income investors, a company’s ability to cut checks trumps everything else. They become emotionally attached to stable income sources. But a steady payout alone does not prove that this business is worth pursuing. Here are five situations that suggest otherwise.
Situation #1: Dividend sustainability is at risk
A decline in free cash flow is a red flag. A company cannot easily reduce debt or reinvest in growth if its cash is tied up in maintaining dividend payments. When a business uses debt to fund its dividend,…
