Last November, Resource Capital Corp. (NYSE:RSO) announced that it was going to cut its quarterly dividend from 42 cents to 5 cents (-88.1%). Because of this cut, my annual yield for RSO dropped from 9.58% to 1.14%. Ouch! With such a wretched dividend yield, RSO became a good candidate for selling off. Even if sold at a loss, cash from the sale could be applied to a better yielding stock.
On March 15th, I sold all 150 shares of RSO for $9.20 per share, which gave me $1380 of cash to buy more higher-yielding dividend stocks. Hindsight is always 20:20 and I realize that I really should have sold off RSO immediately when the dividend cut was announced, as the stock price plummeted from $12 to $8. But it was too late, so I just sat on RSO until its stock price rose. I would have waited longer, but I needed the cash and so I decided to sell in mid-March.
I HATE selling off an asset, which is another reason I waited so long to sell RSO. When a stock’s dividend yield is severely cut, then it’s time to evaluate the stock and decide whether it is better to keep it or to sell it off and reinvest in something better. In the case of RSO, it was obvious that selling it off would be the better choice given its abysmal dividend yield.