I figured I would share this post as a person’s struggles/weaknesses are just as important as their success/strengths. This post is going to be about one of my weaknesses in regards to investing and that is chasing yield. Now I have to fully disclose almost every investing book I have red thus far warns against this yet why did I do it? Emotion, potential for increased portfolio value, easy/convenience, “it won’t happen to me syndrome”. I am sure I am not thinking of some of them but the previous mentioned items all do apply. My hope in writing this post is to provide another example of yield trap. And hope this post makes you take another look when looking at a high yielding stock.
Back in May of this year I stumbled across Corus Entertainment who’s ticker is CJR.B which at the time had a very juicy yield in the 10%+ range. Now being as how Shaw communications which is what Corus was spun out of in 1999 I regarded as a solid company I figured this would be no different. So I charged in to collect a couple months of great juicy dividends to then come across while on holidays some dreaded news that every dividend investor doesn’t like to read. Capital restructuring and dividends reduction. The stock took a hit on the announcement going from a mid $6 range to as low as $3.62 they changed from a monthly dividend payout to a quarterly and had cut the dividend as well. My initial thought was why didn’t I see this coming. But quickly remembered that nice big juicy dividend and a false sense of security and had not done my own homework and dug into the financials more and look at payout ratios and earnings growth. Had I done these things it would have been obvious to not initiate a position at that time.
I still hold my position in Corus as I feel given time the management team will turn it around, and they are wanting to bring long term success and pay down debt, and strengthen their balance sheets. But I can’t emphasize enough how much of a learning lesson this has been for me and want to share it with you all. It serves as a very sobering reminder don’t chase yield only do your homework regardless of company name, popularity etc.
I will be posting my updates here in the next little while regarding my 2018 dividend income so you will see those get posted soon also. As with any investing do your homework consult an advisor if you don’t feel comfortable doing it on your own.
Till next post take care GWF