10-05-2016, 09:00 AM
(10-03-2016, 03:44 PM)Kerim Wrote: I don't subscribe to the theory that a DG investor should sell any holding that cuts its dividend. A dividend cut, whether small or large, is never good news, but whether to hold the stock is always going to be a case-by-case determination for me.
Same here. I've stuck with many businesses that have cut their dividends. When a company cuts their dividend, they tend to outperform after the initial shock (in my experience). They have higher retained earnings without the pressure to pay the cash out as dividends. These retained earnings can be kept on the balance sheet as cash, used to pay down debt, used to accelerate EPS growth by buying back shares, etc.