Saturday, December 15, 2007

* You're Fired!

Mr. M as we have previously discussed, your recent performance has been less than expected for someone in your position, with your experience. I realize that you have been with the company for over 10 years and were an Achiever during that time, but your recent behavior is not something that can be tolerated in this organization and your qualifications no longer meet the criteria set forth in this position's job description. It is nothing personal, but I'm going to have to let you go. You will be escorted to your desk and be allowed to gather your personal effects, then escorted out of my portfolio!

On Monday of this week Washington Mutual (WM) announced that they were slashing their dividend. This was not totally unexpected, WM's mortgage business has suffered as a result of the sub-prime meltdown. I held a small position in WM when the announcement came out.

One of the more difficult decisions an investor has to make is when to sell? In this instance, it was not a difficult decision for me. As a income investor I expect the companies I invest in to increase their dividends each year. If times are tough and a company holds its dividend flat for one year, it will be evaluated based on expectations of future performance and I could decide to hold on to it for an additional year and then evaluate it again. However, I want no part of a company that cuts its dividend, as such, I sold my position in WM on Tuesday. It seems I am not the only person that feels this way, WM's price continued to fall during the week.

Full disclosure: At the time of this writing, I do not own shares of WM.

What rules do you consider when deciding to sell a stock?

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