This week, my portfolio had good news and bad news. The good news is that Canon paid their year end dividend. Since the exchange rate has fallen to about ¥100 to the dollar, the ¥60 dividend worked out to be 60¢ a share. Canon's dividend yield is about 2%, but based on my original cost basis, I'm earning closer to 3%. As long as Canon continues to raise its dividend, I will be happy to hold my shares.
The bad news was that TERI, the non-profit that First Marblehead uses to insure its loans, declared bankruptcy. Now I believe the bankruptcy is for technical, not fundamental reasons, and I think the effect on First Marblehead will be very little in the long run. But my position has been battered to a considerable degree and perhaps permanently. At the very least, the news makes an immediate recovery very difficult.
At no time have a felt that First Marblehead was a bad risk/reward proposition at the current price, so in one sense I don't feel I made a mistake. But I did ignore one of my fundamental sell signals: to get out when a dividend is cut or lowered. If I'd done that, I would have saved myself a lot of money and aggravation. Further, there will often be an opportunity to buy the shares back at a later date when I've had a chance to analyze the company independent of the dividend.
At the moment, this sell signal only applies to Canon and my token position in Alberto-Culver. Which reminds me: selling Alberto has easily been my most costly decision to date since it freed up cash to buy First Marblehead.
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