IFB170: Suspended Dividends, Industry Focus, eLetter Holdings

Announcer (00:02):

I love this podcast because it crushes your dreams of getting rich quick. They actually got me into reading stats for anything you’re tuned in to the Investing for Beginners podcast led by Andrew say there, and Dave step-by-step premium investing guidance for beginners. Your path to financial freedom starts now. All right, folks.

Dave (00:33):

All right, folks Well, welcome to the Investing for Beginners podcast tonight. We have episode 170, Andrew, and I am going to answer some great listener questions we get recently. So I will go ahead and start to read our first question. So I have Andrew; I know you have spoken about having hard rules about selling a company. And one of them is when they cut their dividend during COVID-19, some companies cut their dividend temporarily, but I’ve had a long history of dividend growth. Do you make an exception in this particular circumstance or stick to the rules?

A specific example is Disney’s great company, but they suspended their biannual dividend payout to combat the significant decrease in revenue. While this isn’t a sign, the company’s in trouble. Would you still hold on to such companies in this rare circumstance, respectfully? Matthew, what are your thoughts on that, Andrew?

Andrew (01:25):

Yeah, so I’ve had to deal with this quite personally, in the sense that, you know, you have varying degrees of how companies are dealing with their dividends during this crisis. We’re recording this now in the middle of September. And so you’ve seen a lot of initial fear that happened at the beginning. And then I’ll, it seems to me that there’s more confidence that’s been building since the crisis. You know, you have managements who are starting to provide guidance, feeling more comfortable with reinitiating dividends and things of that nature. So I tried, on the one hand, you want to take a case by case. On the other hand, you also want to understand that if you’re going to make rules hard rules like I did, where, you know, as an example, my, my hard rule is you sell on a D on a dividend cut, complete dividend cut. I also have another hard rule I sell on negative earnings. So those have been the two hard rules so far that I’ve stuck to in my investing life.

Andrew (02:31):

And I feel like it’s helped me make better-investing decisions. So now we have this gray area, right, where you have a company like Disney, or I have another retail company in my portfolio. And they also did a similar thing where they’ve even say that there’s not going to be a dividend. They said they’re going to delay their dividends. So, you know, you can trust that versus something like Southwest airlines. This was a company that I held through the pandemic. And once they announced that they were not paying the dividend, then I sold that company. So as Southwest, they had a situation where they took money from the federal government, the federal government said, okay,