Queue up Queen, because another one bites the dust in the Dapper Dividends individual stock holdings.
The quest for quality is real people, and LyondellBasell (LYB) is a goner!
It stinks to lose the 7% dividend yield on cost I had, but is that a reason to keep holding a business?
One of my biggest lessons as a dividend investor is forgetting about the dividend… Ok…I’m trying to forget about the dividend, but passive income is a helluva drug, right?!
We should focus on the company paying the dividend, or we could be in for a rude awakening.
It’s similar to buying something because it has a handsomely high dividend yield. Now cue Admiral Akbar, telling us, “It’s a trap!”
Is LyondellBasell a dividend trap? Probably not, but Nike has a higher ROCE, ROIC, and Dividend growth record, a much lower free cash flow payout ratio, and far lower debt, and LyondellBasell has a 61% lower total return over the last ten years.
Besides, I still have exposure to LyondellBasell from DFUSX and SCHD, the largest holder of LYB at 1.03% of the fund.
LYB also emerged from Chapter 11 bankruptcy in April 2010, which was a factor in my decision.
When we invest, there is ALWAYS opportunity cost. This means our money can be put elsewhere, earning a bigger and better return.
Of course, we could make a crappy decision and put it into something worse too. But the idea is that there are always other opportunities out there than what you own, for better or worse.
So, I decided to sell LYB to buy more Nike (NKE), a much higher-quality business that is more in control of its destiny.
LyondellBasell converts fossil fuels into plastic resins and petrochemicals, which eventually turn into food packaging, home furnishings, clothing, tires, automotive components, fertilizers, and more.
LYB’s products are in almost everything we use daily, but profits fluctuate widely because they depend on constantly changing oil and gas prices.
But if you’re a manufacturer that requires petrochemicals, do you care where you get them from? I think you’re looking for the most cost-effective supplier.
Nike can control its prices better because people love its brand, so it can keep making money more steadily.
While both companies pay dividends, Nike’s business is easier to understand and less risky for people who want their dividends to grow over time.
Are there any businesses you own that you’re considering parting with because they’re tied to a commodity that can dictate the company’s future revenues?
Hit reply and tell me about it. I’ll respond to every reply.😀
😁THANK YOU to everyone who responded to the last newsletter!!
Check out the portfolios and podcasts, or see what’s cooking on YouTube.
And now, here is this week’s portfolio activity.
Dividends Received ~$205.24
- Schwab U.S. Dividend ETF (SCHD) | $133.50
- Schwab U.S. Large-Cap Growth ETF (SCHG) | $1.60
- VICI Properties (VICI) | $70.14
Dividends Received Year to Date~
$4.065.21
Stocks Sold (AVERAGE)
- (54) AT&T (T) | $18.90
- 15 LyondellBasell (LYB) | $94.60
Stocks Bought (AVERAGE)
- 8 Agree Realty (ADC) | $61.78
- 1 Visa (V) | $264.70
- 1 Schwab U.S. Dividend ETF (SCHD) | $76.75
- 13 Nike (NKE) | $75.78
- 7 Starbucks (SBUX) | $76.61
- 18 VICI Properties (VICI) | $27.83
Notable Ex-Dividends This Week + SSD Score
- 7/8 Main Street Capital (MAIN), 5.63% | 62S
- 7/9 Mastercard (MA), 0.59% | 99VS
- 7/9 Dollar General (DG), 1.84% | 60BS
- 7/10 General Mills (GIS), 3.82% | 90VS
- 7/10 Toronto-Dominion Bank (TD), 5.38% | 70S
- 7/10 Verizon (VZ), 6.45% | 70S
- 7/10 AT&T (T), 5.91% | 60BS
- 7/12 Buckle (BKE), 3.86% | 50BS
🗣️Quote of the week🗣️
“You have to be careful with high-yielding equities because often, that’s indicative of an unhealthy company, and the market is telling us it doesn’t expect that dividend to be high for very long.”
-Steven Bavaria, author of The Income Factory, on the Investing Experts podcast.
🎦If you missed it, here is a big portfolio update…
Investing Newsletters You Might Like
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⚠️Seeking Alpha Premium SALE!
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🎶Random music from the Dapper Dividends jukebox🎶
Pink Floyd – On The Turning Away (LIVE)
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That said, have a WONDERFUL week, and I’ll see you in the next one.
