Sunday, 4 March 2012

Canfor Cuts Dividends

I was recently reminded of one of the key points to investing; keep a tab on what you're investing in! Turns out in early February, Canfor cut dividends 38%. The company didn't say why they were cutting dividends specifically, but repeatedly stated weakness in global pulp markets as a reason for its performance. 

Even with the cut I have a high 8% yield. However, my long-term plan is to hold stock of companies that will consistently increase their dividends. This is counterproductive so when an opportunity arises, I may have to let this one go. Luckily for me, I doubled down awhile back and because of that, I can sell my position and even get a nice capital gain from it. If I knew about this sooner (which I should have - no excuses there) then I could have kept an eye out to see where a nice exit point would be.

For now, I'll hold the position. The payout ratio isn't too high and it seems like the debt is covered so I still like the company; it may just be going through a rough patch because of an extended outage at one of the mills and lower pulp prices. I also admire the fact that they aren't afraid to cut dividends when they feel that they need to - rather than attempt to keep up a dividend that isn't affordable and in the end would become detrimental to the company. However, I won't hesitate to pull the trigger because Canfor doesn't seem to fit with my overall plan and I think sticking to that is important so it may be time to part ways.

-the Paperboy

No comments:

Post a Comment