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True to my dividend investing code, I have sold Pfizer after their recently announced 50% dividend cut to offset the purchase of Wyeth. Pfizer has been a stock that I have held for a long time, and held great faith in the company as a strong dividend growth company. However this changed quickly and the stock is no longer a component of my dividend portfolio.[ad#tdg-embedded]
As I do with every stock holding that I own does not work out the way I planned I thought back to why I was holding onto Pfizer. It was due to that dividend and the strong dividend growth over the years. However, now that I think about it more and more this dividend growth and high dividend yield clouded my judgement and did not allow me to look at the real facts. This was a company that was in a decline and it was threatening that it would only get worse with some key drugs coming off of patent. It seems that the only way out of this for Pfizer was the acquisition of Wyeth and the impact was the company could no longer afford their high dividend.
Should I have sold sooner – probably. My dividend code did not allow me to do so and in this case it hurt me. That is the risk with a buy and hold philosophy and a dividend growth strategy. This period of time (i.e. a real deep bear market) has been difficult for dividend investors as it puts into question our whole strategy. However, I am a long term investor and I thought that over time Pfizer would turn around and the market would recognise the strong dividend growth. Now that there is no more dividend growth, all that time has been lost on what turned out to be a crappy investment!